Paper [1] advances the INMA model to model the number of transactions in stocks in intra-day data. The conditional mean and variance properties are discussed and model extensions to include, e.g., explanatory variables are offered. Least squares and generalized method of moment estimators are presented. In a small Monte Carlo study a feasible least squares estimator comes out as the best choice. Empirically we find support for the use of long-lag moving average models in a Swedish stock series. There is evidence of asymmetric effects of news about prices on the number of transactions.
Paper [2] introduces a bivariate integer-valued moving average model (BINMA) and applies the BINMA model to the number of stock transactions in intra-day data. The BINMA model allows for both positive and negative correlations between the count data series. The study shows that the correlation between series in the BINMA model is always smaller than 1 in an absolute sense. The conditional mean, variance and covariance are given. Model extensions to include explanatory variables are suggested. Using the BINMA model for AstraZeneca and Ericsson B it is found that there is positive correlation between the stock transactions series. Empirically, we find support for the use of long-lag bivariate moving average models for the two series. Keywords: Count data; Intra-day; High frequency; Time series; Estimation; Long memory; Finance JEL: C13 C22 C25 C51 G12 G14 Date: 2005-04-20 URL: http://d.repec.org/n?u=RePEc:hhs:umnees:0656&r=all 140. Do Benefit Hikes Damage Job Finding? Evidence from Swedish Unemployment Insurance Reforms Bennmarker, Helge (Institute for Labour Market Policy Evaluation) Carling, Kenneth (Institute for Labour Market Policy Evaluation) Holmlund, Bertil (Department of Economics) In 2001 and 2002, Sweden introduced several unemployment insurance reforms. A major innovation in the first reform was the introduction of a two-tiered benefit structure for some unemployed individuals. This system involved supplementary compensation during the first 20 weeks of unemployment. The 2002 reform retained the two-tiered benefit structure but involved also substantial benefit hikes for spells exceeding 20 weeks. This paper examines how these reforms affected transitions from unemployment to employment. We take advantage of the fact that the reforms had quasi-experimental features where the “treatments” differed considerably among unemployed individuals. We find that the reforms had strikingly different effects on job finding among men and women. The two reforms in conjunction are estimated to have increased the expected duration of unemployment among men but to have decreased the duration of unemployment among women. The overall effect on the duration of unemployment is not statistically different from zero. However, the reforms reduced job finding among males who remained unemployed for more than 20 weeks. Keywords: Unemployment duration; Unemployment benefits JEL: J64 J65 Date: 2005-03-29 URL: http://d.repec.org/n?u=RePEc:hhs:uunewp:2005_015&r=all 141. Asymmetric Supply Function Equilibrium with Constant Marginal Costs Holmberg, Par (Department of Economics) In a real-time electric power auction, the bids of producers consist of committed supply as a function of price. The bids are submitted under uncertainty, before the demand by the Independent System Operator has been realized. In the Supply Function Equilibrium (SFE), every producer chooses the supply function maximizing his expected profit given his residual demand. I consider a uniform-price auction with a reservation price, where demand is inelastic and exceed the market capacity with a positive probability, and firms have identical constant marginal costs but asymmetric capacities. I show that under these conditions, there is a unique SFE, which is piece-wise symmetric. Keywords: supply function equilibrium; uniform-price auction; uniqueness; asymmetry; oligopoly; capacity constraint; wholesale electricity market JEL: C62 D43 D44 L11 L13 L94 Date: 2005-04-18 URL: http://d.repec.org/n?u=RePEc:hhs:uunewp:2005_016&r=all 142. Insider Trading: Hayek, Virtual Markets, and the Dog that Did Not Bark. Henry G. Manne This Essay briefly reexamines the great debates on the role of insider trading in the corporate system from the perspectives of efficiency of capital markets, harm to individual investors, and executive compensation. The focus is on the mystery of why trading by all kinds of insiders as well as knowledgeable outsiders was studiously ignored by the business and investment communities before the advent of insider trading regulation. It is hardly conceivable that officers, directors, and controlling shareholders would have remained totally silent in the face of widespread insider trading if they had seen the practice as being harmful to the company, to themselves, or to investors. By analogy with the famous article by Friedrich Hayek, The Use of Knowledge in Society, this Essay considers the problem of obtaining necessary information for managers of large corporate enterprises. The suggested analytical framework views the share price, sensitively impacted by informed trading, as a mechanism for timely transmission of valuable information to top managers and large shareholders. Informed trading in the stock market is also compared to “prediction” or “virtual” markets currently used by corporations and policymakers. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:icr:wpicer:07-2005&r=all 143. A Multivariate Jump-Driven Financial Asset Model. Elisa Luciano Wim Schoutens In this paper, we propose a multivariate model for nancial assets which incorporates jumps, skewness, kurtosis and stochastic volatility, and discuss its applications in the context of equity and credit risk. In the former case we describe the stochastic behavior of a series of stocks or indexes, in the latter we apply the model in a multi- rm, value-based default model. Starting from a independent Brownian world, we will introduce jumps and other deviations from normality, as well as non-Gaussian dependence, by the simple but very strong technique of stochastic time-changing. We work out the details in the case of a Gamma time-change, thus obtaining a multivariate Variance Gamma (VG) setting. We are able to characterize the model from an analytical point of view, by writing down the joint distribution function of the assets at any point in time and by studying their association via the copula technique. The model is also computationally friendly, since numerical results require a modest amount of time and the number of parameters grows linearly with the number of assets. The main feature of the model however is the fact that - opposite to other, non jointly Gaussian settings - its risk neutral dependence can be calibrated from univariate derivative prices. Examples from the equity and credit market show the goodness of fit attained. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:icr:wpmath:6-2005&r=all 144. Should Latin America Fear China? Eduardo A. Lora (Research Department, Inter-American Development Bank) This paper compares growth conditions in China and Latin America to assess fears that China will displace Latin America in the coming decades. China’s strengths include the size of the economy, macroeconomic stability, abundant low-cost labor, the rapid expansion of physical infrastructure, and the ability to innovate. China’s weaknesses, stemming from insufficient separation between market and State, include poor corporate governance, a fragile financial system and misallocation of savings. Both regions share important weaknesses: the rule of law is weak, corruption endemic and education is poor and very poorly distributed Keywords: China, Latin America, economic growth, investment climate JEL: E66 O57 P52 Date: 2004-10 URL: http://d.repec.org/n?u=RePEc:idb:wpaper:2000&r=all 145. The Electoral Consequences of the Washington Consensus Eduardo A. Lora (Research Department, Inter-American Development Bank) Mauricio Olivera (Research Department, Inter-American Development Bank) This paper assesses how electoral outcomes both in presidential and legislative elections in Latin America have been affected by the adoption of economic policies aimed at improving macroeconomic stability and easing the functioning of markets. The database includes 17 Latin American countries for the period 1985-2002, and a total of 66 presidential elections and 81 legislative elections. The set of testable hypotheses are derived from a literature review, and structured around the hypothesis of economic voting. It is found that (i) the incumbent's party is rewarded in presidential elections for reductions in the rate of inflation and in legislative elections for increases in the rate of growth; (ii) the more fragmented or the more ideologically polarized the party system, the higher the electoral pay-off of reductions of the inflation rate or increases in the rate of economic growth; (iii) the electorate cares not only for the economic outcomes but also for some of the policies: while the electorate seems to be blind to macroeconomic policies such as fiscal or exchange rate policies, it is adverse to pro-market policies, irrespective of their effects on growth or inflation; and (iv) the electorate is more tolerant to pro-market reforms when the incumbent's party has a more market-oriented ideology. These results suggest that reforming parties have paid a hefty price for the adoption of pro-market reforms, except when adopted in conjunction with stabilization policies in high-inflation economies. Keywords: Latin America, Washington Consensus, structural reforms, presidential elections, legislative elections, economic voting JEL: D72 D81 Date: 2004-10 URL: http://d.repec.org/n?u=RePEc:idb:wpaper:2001&r=all 146. Why So Small? Explaining the Size of Firms in Latin America Eduardo A. Lora (Research Department, Inter-American Development Bank) Ana Maria Herrera (Michigan State University - Department of Economics) On average, Latin American firms are small with respect to world patterns, both in terms of the quantity of assets they control and the amount of employment they generate. We examine data on firm size from developed and developing countries around the world to assess the influence on demand, supply and institutional factors on the size of the largest firms in each country. We find that, besides the size of the economy and the level of income per capita, the key determinants of the size of firms are trade openness, stock market capitalization and physical infrastructure. Our simulations suggest that if the gaps with respect to the best Latin American performer were closed in each of these three areas, firm size in the countries of the region would - on average - reach world patterns. Keywords: firm size, Latin America, openness, financial sector, infrastructure JEL: D23 G30 K40 L20 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:idb:wpaper:2002&r=all 147. Dynamic Psychological Games Pierpaolo Battigalli Martin Dufwenberg Building on recent work on dynamic interactive epistemology, we extend the analysis of extensive-form psychological games ( Geneakoplos, Pearce & Stacchetti, Games and Economic Behavior, 1989) to include conditional higher-order beliefs and enlarged domains of payoff functions. The approach allows modeling dynamic psychological effects (such as sequential reciprocity, psychological forward induction, and regret) that are ruled out when epistemic types are identified with hierarchies of initial beliefs. We define a notion of psychological sequential equilibrium, which generalizes the sequential equilibrium notion for traditional games, for which we prove existence under mild assumptions. Our framework also allows us to directly formulate assumptions about ‘dynamic’ rationality and interactive beliefs in order to explore strategic interaction without assuming that players beliefs are coordinated on an equilibrium. In particular, we provide an exploration of (extensive-form) rationalizability in psychological games. URL: http://d.repec.org/n?u=RePEc:igi:igierp:287&r=all 148. Bayesian Analysis of Treatment Effects in an Ordered Potential Outcomes Model Li, Mingliang Tobias, Justin We describe a new Bayesian estimation algorithm for fitting a binary treatment, ordered outcome selection model in a potential outcomes framework. We show how recent advances in simulation methods, namely data augmentation, the Gibbs sampler and the Metropolis-Hastings algorithm, can be used to fit this model efficiently, and also introduce a reparameterization to help accelerate the convergence of our posterior simulator. Several computational strategies which allow for non-Normality are also discussed. Conventional ``treatment effects'' such as the Average Treatment Effect (ATE), the effect of treatment on the treated ( TT) and the Local Average Treatment Effect (LATE) are derived for this specific model, and Bayesian strategies for calculating these treatment effects are introduced. Finally, we review how one can potentially learn (or at least bound) the non-identified cross-regime correlation parameter and use this learning to calculate (or bound) parameters of interest beyond mean treatment effects. Date: 2005-04-15 URL: http://d.repec.org/n?u=RePEc:isu:genres:12293&r=all 149. Analysis of Regional Economic Growth in the U.S. Midwest, An Monchuk, Daniel C. Miranowski, John Hayes, Dermot J. Babcock, Bruce A. In this paper we examine some of the economic forces that underlie economic growth at the county level. In an effort to describe a much more comprehensive regional economic growth model, we address a variety of different growth hypotheses by introducing a large number of growth related variables. When formulating our hypotheses and specifying our growth model we make liberal use of GIS (geographical information systems) mapping software to “paint” a picture of where growth spots exist. Our empirical estimation indicates that amenities, state and local tax burdens, population, amount of primary agriculture activity, and demographics have important impacts on economic growth. Date: 2005-04-15 URL: http://d.repec.org/n?u=RePEc:isu:genres:12294&r=all 150. Partial Identification of Treatment Effects in the Presence of Unobserved Treatments: The Case of Universal Health Insurance Kreider, Brent Hill, Steven C. We extend the nonparametric literature on partially identified probability distributions and use the framework to make inferences about relationships between health care utilization and insurance status in an environment of uncertainty about the accuracy of self-reported insurance data. Allowing for endogenous reporting error, we use information from the 1996 Medical Expenditure Panel Survey (MEPS) to study what can be learned about (a) the gap between the insured and uninsured in the use of health services and (b) the potential impact of universal insurance coverage on the use of services. We exploit outside information from insurance cards and follow-back interviews with employers, insurance companies, and medical providers to construct validation data for a nonrandom portion of the sample. We formally assess the identifying power of a variety of nonparametric assumptions that shrink identification regions compared with those provided in previous studies, such as Molinari’s (2002) treatment effect bounds under missing treatments. Under our strongest nonparametric assumptions, universal health insurance would increase the proportion of the population using health care in a month by no more than 2.5 percentage points for adults (an 11% increase) and by no more than 0.8 percentage points for children (a 4.8% increase). JEL: C1 I1 Date: 2005-04-17 URL: http://d.repec.org/n?u=RePEc:isu:genres:12296&r=all 151. Influence of the Premium Subsidy on Farmers’ Crop Insurance Coverage Decisions Babcock, Bruce A. Hart, Chad E. The Agricultural Risk Protection Act greatly increased the expected marginal net benefit of farmers buying high-coverage crop insurance policies by coupling premium subsidies to coverage level. This policy change, combined with cross-sectional variations in expected marginal net benefits of high-coverage policies, is used to estimate the role that premium subsidies play in farmers’ crop insurance decisions. We use county data for corn, soybeans, and wheat to estimate regression equations that are then used to obtain insight into two policy scenarios. We first estimate that eventual adoption of actuarially fair incremental premiums, combined with current coupled subsidies, would increase farmers’ purchase of high-coverage policies by almost 400 percent from 1998 levels across the three crops and two plans of insurance included in the analysis. We then estimate that a return to decoupled subsidies would decrease farmers’ high-coverage purchase decisions by an average of 36 percent. Keywords: Agricultural Risk Protection Act, crop insurance, premium subsidies. Date: 2005-04-18 URL: http://d.repec.org/n?u=RePEc:isu:genres:12297&r=all 152. Buying Local in Union County and Creston: An Economic Impact Assessment Swenson, David A. Many communities worry about sales leakages. This report helps to explain the potential local area economic impacts of buy local campaigns for both business purchases and for household purchases Date: 2005-04-19 URL: http://d.repec.org/n?u=RePEc:isu:genres:12298&r=all 153. Using Matched Employer-Employee Data to Study Labor Market Discrimination Judith Hellerstein (University of Maryland) David Neumark (Public Policy Institute of California and IZA Bonn) Wage gaps between individuals of difference races, sexes, and ethnicities have been documented and replicated extensively, and have generated a long history in labor economics research of empirical tests for labor market discrimination. The most widely- used approach to test for labor market discrimination is based on wage regressions estimated at the level of individual workers, with the estimate of discrimination inferred from the residual race, sex, or ethnic group differential in wages that remains unexplained after including a wide array of proxies for productivity. What is absent from the residual wage approach - and in our view leaves the approach vulnerable to being regarded as uninformative regarding discrimination - is any directly observable measure of productivity with which to adjust differentials in wages in trying to infer whether a particular group suffers from discrimination. The ideal solution would be individual-level productivity data that can be compared with wages. Any of the variables that differ across groups and are unobserved in the residual wage regression approach should affect wages and productivity equally, and hence not bias the test. However, such data are extremely rare, in large part because individual productivity is often unobservable and seldom measured. This chapter focuses on the use of matched employer-employee data sets to carry out a version of this ideal test, but at the establishment level. When these data sets permit the measurement of the demographic characteristics of establishments' workforces, as well as the estimation of production functions, they can be used to infer productivity differentials between workers in different groups. Comparisons of these productivity differentials with wage differentials then provide versions of the ideal test for discrimination at the establishment level. In addition to providing tests of discrimination, matched employer-employee data sets have proven useful in studying other questions that arise in the economics of discrimination, including measuring labor market segregation and assessing its consequences, and examining hypotheses or predictions that are central to economic models of discrimination. Keywords: labor market discrimination, matched employer-employee data JEL: J71 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1555&r=all 154. Product Market Competition, Returns to Skill and Wage Inequality Maria Guadalupe (Columbia University, CEPR and IZA Bonn) This paper shows that increasing product market competition can have a direct impact on the employment relationship and on wage inequality. I develop a simple model in which an increase in product market competition increases returns to skill through the effect of competition on the sensitivity of profits to cost reductions. I then show empirically that relative wages increase with competition using a large panel of United Kingdom workers with complete work histories. I identify the impact of competition on returns to skill in the panel, using two exogenous measures of competition provided by two quasi-natural experiments. Quantile regressions indicate that increased competition also raised returns to unobserved ability. Keywords: wage structure, returns to skill, product market competition JEL: J31 J33 L22 D21 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1556&r=all 155. Immigrants’ Responsiveness to Labor Market Conditions and Its Implications on Regional Disparities: Evidence from Spain Catalina Amuedo-Dorantes (San Diego State University) Sara de la Rica (Universidad del Pais Vasco and IZA Bonn) Using data from the Spanish Labor Force Survey (Encuesta de Poblacion Activa) from 1999 through 2004, we explore the role of regional employment opportunities in explaining the increasing immigrant flows of recent years despite the limited internal mobility on the part of natives. Subsequently, we investigate the policy question of whether immigration has helped reduced unemployment rate disparities across Spanish regions by attracting immigrant flows to regions offering better employment opportunities. Our results indicate that immigrants choose to reside in regions with larger employment rates and where their probability of finding a job is higher. In particular, and despite some differences depending on their origin, immigrants appear generally more responsive than their native counterparts to a higher likelihood of informal, self, or indefinite employment. More importantly, insofar the vast majority of immigrants locate in regions characterized by higher employment rates, immigration contributes to greasing the wheels of the Spanish labor market by narrowing regional unemployment rate disparities. Keywords: international migration, immigrant workers, immigrant location, immigrant responsiveness, labor market conditions, regional disparities JEL: J61 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1557&r=all 156. Low Pay, Higher Pay and Job Satisfaction within the European Union: Empirical Evidence from Fourteen Countries Luis Diaz-Serrano (National University of Ireland Maynooth, CREB and IZA Bonn) Jose A. Cabral Vieira (University of the Azores and CEEAplA) We examine differences in job satisfaction between low- and higher-paid workers within the European Union (EU). To do so The European Community Household Panel Data covering the period 1994- 2001 is used. Our results indicate that low paid workers report a lower level of job satisfaction when compared with their higher paid counterparts in most countries, except in the UK. This supports the idea that low-wage employment in these countries mainly comprises low quality. The results also indicate that gap in average job satisfaction between low- and higher-paid workers is markedly wider in the Southern European countries than in the rest of EU. Finally, there are significant differences in the determinants of job satisfaction across countries. It seems then that a homogeneous policy may be inappropriate to increase satisfaction, and hence labour productivity, in the EU as a whole. Hence, an improvement of the quality of the jobs in the EU may require different policies. In particular, in some countries such as the United Kingdom removing low employment, namely through regulation, may worsen the workers’ well-being, although in other cases such a policy may lead to a totally different outcome. Keywords: job satisfaction, job quality, low-wage employment JEL: J28 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1558&r=all 157. To Draft or Not to Draft? Efficiency, Generational Incidence, and Political Economy of Military Conscription Panu Poutvaara (CEBR, Copenhagen Business School, CESifo and IZA Bonn) Andreas Wagener (University of Vienna, CESifo and CEBR) We study the efficiency and distributional consequences of establishing and abolishing the draft in a dynamic model with overlapping generations, taking into account endogenous human capital formation as well as government budget constraints. The introduction of the draft initially benefits the older generation while harming the young and all future generations. Its Pareto- improving abolition requires levying age-dependent taxes on the young. These being infeasible, abolition of the draft would harm the old. The intergenerational incidence of the gains and losses from its introduction and abolition helps to explain the political allure of the draft. Keywords: draft, conscription, education, intergenerational fairness JEL: H20 H57 I21 D63 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1559&r=all 158. Are There Differences in the Health-Socioeconomic Status Relationship over the Life Cycle? Evidence from Germany Keith A. Bender (University of Wisconsin-Milwaukee) Steffen Habermalz (University of Nebraska at Kearney and IZA Bonn) Most research on the relationship between health and socioeconomic status (SES) controls for changing age or investigates the relationship for a particular age range. This paper, however, examines changes in the relationship across ages, as well as controls for potential endogeneity in the health-SES relationship. Using data from German Socio Economic Panel, we find that the health-SES relationship does vary across the life cycle and that endogeneity is an important influence on the relationship. We also find tentative evidence that universal access to health care reduces the impact of income on self- reported health satisfaction. Keywords: health, socioeconomic status, endogeneity, life cycle, Germany JEL: I0 I12 J0 J60 C13 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1560&r=all 159. Career Choice, Marriage-Timing,and the Attraction of Unequals Sylvain Dessy (Universite Laval, CIRPEE) Habiba Djebbari (Universite Laval, CIRPEE and IZA Bonn) Both men and women wish to have a family and a rewarding career. In this paper, we show that the under-representation of women in high-powered professions may reflect a coordination failure in young women’s marriage-timing decisions. Since investing in a highpowered career imposes time strain, it precludes early participation in the marriage market. Delayed participation in the marriage market has a higher cost for women than for men because women have shorter fecundity horizons. Marriage prospects of high-powered women depend on the marriage-timing decisions of younger women. Under these assumptions, we show that women’s marriage-timing decisions exhibit strategic complementarities. Coordination failures in women’s marriage-timing decisions lead to persisting gender differences in career choices. Yet, differential fecundity is only necessary, but not sufficient to obtain gender inequality in high-powered professions. We discuss social changes that solve the coordination failure while achieving a Pareto-improvement in the society at large. Keywords: marriage-timing, high-powered career, supermodular game, strategic complementarities, multiple equilibria, coordination failure JEL: J12 J16 J24 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1561&r=all 160. The Labour Market Effects of Alma Mater: Evidence from Italy Giorgio Brunello (University of Padova, CESifo and IZA Bonn) Lorenzo Cappellari (Catholic University of Milan, CESifo, CHILD and IZA Bonn) We use data from a nationally representative survey of Italian graduates to study whether Alma Mater matters for employment and earnings three years after graduation. We find that the attended college does matter, and that college related differences are substantial both among and within regions of the country. However, these differences are not large enough to trigger substantial mobility flows from poorly performing to better performing institutions. There is also evidence that going to a private university pays off at least in the early part of a career: the employment weighted college wage gains from going to a private college are close to 18 percent. Only part of this gain can be explained by the fact that private universities have lower pupil - teacher ratios than public institutions. Keywords: college education, Italy JEL: J24 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1562&r=all 161. Inter-Industry Wage Differentials and the Gender Wage Gap: Evidence from European Countries Brenda Gannon (Economic and Social Research Institute (ESRI)) Robert Plasman (Universite Libre de Bruxelles, DULBEA) Francois Rycx (Universite Libre de Bruxelles, DULBEA and IZA Bonn) Ilan Tojerow (Universite Libre de Bruxelles, DULBEA) This study analyses the interaction between inter-industry wage differentials and the gender wage gap in six European countries using a unique harmonised matched employer-employee data set, the 1995 European Structure of Earnings Survey. Findings show the existence of significant inter-industry wage differentials in all countries for both sexes. While their structure is quite similar for men and women and across countries, their dispersion is significantly larger in countries with decentralised bargaining. These differentials are significantly and positively correlated with industry profitability. The magnitude of this correlation, however, is lower in countries with centralised and coordinated collective bargaining. Further results show that in all countries more than 80% of the gender wage gaps within industries are statistically significant. Yet, industries having the highest and the lowest gender wage gaps vary substantially across European countries. Finally, results indicate that industry effects explain between 0 and 29% of the overall gender wage gap. Keywords: gender wage gap, inter-industry wage differentials, Europe JEL: J16 J31 J71 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1563&r=all 162. Dual Employment Protection Legislation: A Framework for Analysis Juan J. Dolado (Universidad Carlos III de Madrid, CEPR and IZA Bonn) Marcel Jansen (Universidad Carlos III de Madrid and IZA Bonn) Juan F. Jimeno (Banco de Espana, CEPR and IZA Bonn) In many countries, Employment Protection Legislation (EPL) establishes different regulations for certain groups of workers who face more disadvantages in the labor market (young workers, women, unskilled workers, etc.) with the aim of improving their employability. Wellknown examples are the introduction of atypical employment contracts (e.g. temporary and determined- duration contracts) which ease firing restrictions for some, but not all, workers. This paper discusses the effects of EPL varying among workers of different skills on the level and composition of unemployment, job flows, productivity and welfare. By using an extension of Mortensen-Pissarides’ (1994) search model where heterogeneous workers compete for the same jobs, we are able to identify several key channels through which changing firing costs for some groups of workers affects hiring and firing of all workers and, hence, may have a different impact on aggregate labor market variables than reducing firing costs across the board. Some analytical and simulation results also show that these effects of differentiated firing costs by workers’ skills may be different depending upon the initial state of the labor market. Keywords: firing costs, unemployment, matching JEL: J64 J63 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1564&r=all 163. Mind the Gap: Unemployment in the New EU Regions Anna Maria Ferragina (CNR and University of Rome "Tor Vergata") Francesco Pastore (University of Naples II and IZA Bonn) The paper surveys the theoretical and empirical literature on regional unemployment during transition in Central and Eastern Europe. The focus is on Optimal Speed of Transition (OST) models and on comparison of them with the neoclassical tradition. In the typical neoclassical models, spatial differences essentially arise as a consequence of supply side constraints and institutional rigidities. Slow-growth, high-unemployment regions are those with backward economic structures and constraints on factors mobility contribute to making differences persistent. However, such explanations leave the question unanswered of how unemployment differences arise in the first place. Economic transition provides an excellent testing ground to answer this question. Prefiguring an empirical law, the OST literature finds that the high degree of labour turnover of high unemployment regions is associated with a high rate of industrial restructuring and, consequently, that low unemployment may be achieved by implementing transition more gradually. Moreover, international trade, FDI and various agglomeration factors help explain the success of capital cities compared to peripheral towns and rural areas in achieving low unemployment. Keywords: regional unemployment, structural change, labour turnover, optimal speed of transition, Central and Eastern Europe JEL: J6 P2 R1 R23 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1565&r=all 164. The Effects of Living Wage Laws: Evidence from Failed and Derailed Living Wage Campaigns Scott Adams (University of Wisconsin-Milwaukee) David Neumark (Public Policy Institute of California and IZA Bonn) Living wage campaigns have succeeded in about 100 jurisdictions in the United States but have also been unsuccessful in numerous cities. These unsuccessful campaigns provide a better control group or counterfactual for estimating the effects of living wage laws than the broader set of all cities without a law, and also permit the separate estimation of the effects of living wage laws and living wage campaigns. We find that living wage laws raise wages of low-wage workers but reduce employment among the least- skilled, especially when the laws cover business assistance recipients or are accompanied by similar laws in nearby cities. Keywords: living wages, wages, employment JEL: J28 J38 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1566&r=all 165. Household Access to Microcredit and Child Work in Rural Malawi Gautam Hazarika (University of Texas at Brownsville and IZA Bonn) Sudipta Sarangi (Louisiana State University) This paper examines the effect of household access to microcredit upon work by seven to eleven year old children in rural Malawi. Given that microcredit organizations foster household enterprises wherein much child labor is engaged, this paper aims to discover whether access to microcredit might increase work by children. It is found that household access to microcredit, measured in a novel manner as self-assessed credit limits at microcredit organizations, raises the probability of child work in households with sample mean values of land ownership and number of retail sales enterprises. It appears this is due to children having to take up more domestic chores as adults are busied in household enterprises following improved access to microcredit. Keywords: child labor, microcredit JEL: J22 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1567&r=all 166. Trade Policy and Illegal Immigration Subhayu Bandyopadhyay (West Virginia University and IZA Bonn) Ryo Takashima (West Virginia University) We use a version of the Meade model to consider the effects of interdependent import tariffs in the presence illegal immigration. First, we consider the small union case and derive the Nash tariff equilibrium for two potential members of a Preferential Trade Agreement (PTA). We analyze conditions under which a movement from the Nash equilibrium to complete intrabloc tariff elimination (FTA) is likely to be welfare augmenting. The paper also considers how reduction of the external tariff may impact the Nash equilibrium tariffs of the potential bloc members. The analysis is extended to the large union case to consider the conditions under which terms of trade of bloc members improve with respect to the non-member nation(s) Keywords: preferential trade agreement, illegal immigration, optimal tariff JEL: F11 F22 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1568&r=all 167. The Establishment-Size Wage Premium: Evidence from European Countries Thierry Lallemand (Free University of Brussels, DULBEA and Centre de Comptabilite, Planning et Controle) Robert Plasman (Free University of Brussels and DULBEA) Francois Rycx (Free University of Brussels, DULBEA and IZA Bonn) This study examines the magnitude and determinants of the establishment-size wage premium in five European countries using a unique harmonised matched employer-employee data set. Findings show the existence of a significant positive wage premium in all countries, even when controlling for labour quality, working conditions, monitoring, sectoral and regional effects, bargaining institutions, job stability, and concentration of skilled workers. In crossnational perspective, results support the existence of an inverse relationship between the size wage gap and the degree of corporatism. Final results indicate that the size wage premium is generally larger in the manufacturing sector and for blue- collar workers. Keywords: establishment-size and wages, matched employer- employee data, Europe JEL: J31 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1569&r=all 168. Minimum Wage or Negative Income Tax: Why Skilled Workers May Favor Wage Rigidities Maya Bacache-Beauvallet (CEPREMAP, ENS Paris-Jourdan) Etienne Lehmann (ERMES, University of Paris 2 and IZA Bonn) This article studies the political choice over the extent and the means of income redistribution between high and low skilled workers. Redistributive tools encompass fiscal transfers with negative income tax and minimum wage. Using fiscal instruments only is assumed optimal. We show that high skilled workers may favor a second-best minimum wage requirement. This is because minimum wage increases unemployment, hence the marginal cost of redistribution is higher which gives a pretext for high skilled workers to moderate low skilled workers claim for income redistribution. Keywords: unemployment, political economics, income redistribution, minimum wage JEL: D78 E24 H23 J38 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1570&r=all 169. The Benefits of Separating Early Retirees from the Unemployed: Simulation Results for Belgian Wage Earners Raphael Desmet (Federal Planning Bureau, Brussels) Alain Jousten (Universite of Liege, CEPR and IZA Bonn) Sergio Perelman (University of Liege) The pool of early retirees is characterized by a large heterogeneity along several criteria. The present paper focuses on the key distinction between those in forced early retirement and those who retire early by individual choice. We start by estimating a retirement probit model for older workers in Belgium. Based on these estimates, we then perform micro-simulations relating to a hypothetical actuarial reform of a pension system, i.e., a reform imposing on average actuarial neutrality with respect to the time of retirement. We explore two scenarios, one where the entire population is subjected to the actuarial system, and one where a duly screened sub-sample of the unemployed is shielded against these actuarial adjustment factors, a group we call the truly unemployed. We evaluate the impact on the average retirement age, the pension budgets as well as indicators of redistribution within the group of the elderly. We find that the extra budgetary gain of exposing this subgroup to the full-blown reform is modest, while the distributional cost is rather high. Our results thus comfort the idea that the budgetary cost of a focused unemployment system are moderate, and that returning the unemployment insurance to its primary role might be a desirable strategy. Keywords: retirement, older worker, inequality JEL: H31 I3 J14 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1571&r=all 170. Two-Sided Search, Heterogeneous Skills and Labor Market Performance Samuel Danthine (Universite du Quebec a Montreal, CIRPEE and IZA Bonn) entrepreneurial skills is proposed. It is possible to characterize both the competitive equilibrium and the optimal solution numerically. The competitive equilibrium is shown to be suboptimal. Less-skilled workers and firms are too selective, not matching with their comparable counterparts. High-types, on the other hand, are not selective enough. The model shows promise as a tool for evaluating the effects of labor policies (and other changes in the economy) on the composition of unemployment and on unemployment duration, as well as on wage distributions. The effect of introducing a simple unemployment insurance scheme is then twofold. First, it increases unemployment by allowing a greater proportion of low types not to match, which decreases output. Second, it decreases mismatch, which has a positive effect on output. It is possible to have a positive effect of unemployment insurance on productivity and find the optimal level of unemployment insurance. Finally, it is shown that assuming risk-neutral workers in this model is not innocuous. Keywords: two-sided search, heterogeneity, unemployment, unemployment insurance, risk aversion JEL: J63 J65 J31 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1572&r=all 171. "It Wasn’t Me, It Was Them!" Social Influence in Risky Behavior by Adolescents Andrew E. Clark (PSE (joint research unit CNRS-EHESS-ENPC- ENS), CNRS and IZA Bonn) Youenn Loheac (FLAVIC (INRA-Dijon and ENESAD) and TEAM ( University of Paris I Pantheon-Sorbonne and CNRS)) Many years of concerted policy effort in Western countries has not prevented young people from experimenting with cigarettes, alcohol and marijuana. One potential explanation is that social interactions make consumption "sticky". We use detailed panel data from the Add Health survey to examine risky behavior (the consumption of tobacco, alcohol and marijuana) by American adolescents. We find that, even controlling for school fixed effects, these behaviors are correlated with lagged peer group behavior. Peer group effects are strongest for alcohol use, and young males are more influential than young females. Last, we present some evidence of non-linearities in social interactions. Keywords: social interactions, smoking, drinking JEL: C23 D12 Z13 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1573&r=all 172. Child Poverty and Changes in Child Poverty in Rich Countries Since 1990 Wen-Hao Chen (Statistics Canada) Miles Corak (UNICEF Innocenti Research Centre and IZA Bonn) This paper documents levels and changes in child poverty rates in 12 OECD countries using data from the Luxembourg Income Study project, and focusing upon an analysis of the reasons for changes over the 1990s. The objective is to uncover the relative role of income transfers from the state in determining the magnitude and direction of change in child poverty rates, holding other demographic and labour market factors constant. As such the paper offers a cross-country overview of child poverty, changes in child poverty, and the impact of public policy in North America and Europe. Keywords: poverty, children, social policy JEL: I30 I32 I38 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1574&r=all 173. Pathways to Early Retirement in Denmark, 1984-2000 Mona Larsen (Danish National Institute of Social Research, Aarhus School of Business and Graduate School for Integration, Production and Welfare) Peder J. Pedersen (University of Aarhus, Danish National Institute of Social Research and IZA Bonn) This paper describes and analyses the pathways to early retirement in Denmark. The analyses are based on a 10 per cent panel sample of the population 45-66 years old followed from 1984 onwards. We use a multinomial logit approach to analyse the characteristics of individuals that retire through each pathway compared to those remaining in the labour force. The transition from work to retirement is complex and far from the conventional idea of exit typically occurring from a job at the official pension age. Eight pathways from work to an early retirement program are identified. One group of pathways is transitions directly from employment corresponding to 75 per cent of all transitions in the sample period. The great majority of these transitions occur to an early retirement program. A second group consists of pathways dominated by unemployment insurance benefits UIB) covering 20 per cent. The remaining 5 per cent of the transitions occur through pathways dominated by benefit programs reflecting a low attachment to the labour force in the period prior to retirement. Overall, availability and/or generosity of retirement programs are important for early retirement through the employment and UIB dominated pathways. For early retirement through other pathways, however, personal characteristics seem to be at least as important as retirement programs. Keywords: retirement, pathways, panel data JEL: J14 J26 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1575&r=all 174. Where Are the Babies? Labor Market Conditions and Fertility in Europe Alicia Adsera (University of Chicago, University of Illinois at Chicago and IZA Bonn) Cross-country differences in both the age at first birth and fertility are substantial in Europe. The paper uses the European Community Household Panel 1994-2000 to investigate the relationship between unemployment of both women (and their spouses) with the timing and number of children. Maternity postponement is acute in countries with high and persistent unemployment since the mid 1980s. Moreover, the paper examines how fertility varies, for a similar level of unemployment, as a function of country-specific institutional arrangements. Wide access to part-time and to permanent positions (such as those in the public sector) is correlated with faster transitions to births. Short-term contracts are associated with delayed fertility instead. Keywords: fertility, unemployment, public sector, part-time, short-term contracts, maternity benefits JEL: J13 J2 J6 H3 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1576&r=all 175. Employment-Contingent Health Insurance, Illness and Labor Supply of Women: Evidence from Married Women with Breast Cancer Cathy J. Bradley (Virginia Commonwealth University) David Neumark (Public Policy Institute of California and IZA Bonn) Zhehui Luo (Michigan State University) Heather L. Bednarek (St. Louis University) We examine the effects of employment-contingent health insurance on married women’s labor supply following a health shock. First, we develop a theoretical model that examines the effects of employment-contingent health insurance on the labor supply response to a health shock, to clarify under what conditions employment-contingent health insurance is likely to dampen the labor supply response. Second, we empirically evaluate this relationship using primary data. The results from our analysis find that – as the model suggests is likely – health shocks decrease labor supply to a greater extent among women insured by their spouse’s policy than among women with health insurance through their own employer. Employmentcontingent health insurance appears to create incentives to remain working and to work at a greater intensity when faced with a serious illness. Keywords: health insurance, health shock, cancer, labor supply JEL: I12 J22 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1577&r=all 176. Measurement of Globalization and Its Variations Among Countries, Regions and Over Time Amit K. Bhandari (University of Kalyani) Almas Heshmati (MTT Economic Research, Seoul National University and IZA Bonn) The process of globalization is an international economic order which has led to the progressive integration of the world economy through the pulling the barrier of trade and greater mobility of factors of production. In addition the technological innovation also provides impetus to the progressive integration of the nations. The elements of globalization include free movement of goods and services, flow of capital, movement of labor and the transfer of technology. Many transition and developing countries through liberalization and increased openness to trade have benefited from the process. Apart from the economic benefits, globalization also indicates the flow of ideas, norms, information and peoples. There is a large heterogeneity in the degree of globalization over time and across countries and regions of the World, as well as within countries. The present study is an attempt to measure globalization by using both parametric and non-parametric approaches. The data cover a wide range of industrialized, transition and developing countries on the basis of their international integration. We identify the factors influencing globalization among the countries in the form of economic integration, personal contact, technology and political engagement. We isolate the contribution of the factors by quantifying the individual factor contribution to the overall integration. Finally, we investigate the links between globalization and labor market in India manufacturing industry. Keywords: globalization, economic integration, composite index, manufacturing, India JEL: C43 F15 L60 O50 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1578&r=all 177. Principles and Practicalities for Measuring Child Poverty in the Rich Countries Miles Corak (UNICEF Innocenti Research Centre and IZA Bonn) This paper has three objectives. The first is to discuss the major issues involved in defining and measuring child poverty. The choices that must be made are clarified, and a set of six principles to serve as a guide for public policy are stated. The second objective is to take stock of child poverty and changes in child poverty in the majority of OECD countries since about 1990 when the Convention on the Rights of the Child came into force. Finally, the third objective is to formulate a number of suggestions for the setting of credible targets for the elimination of child poverty in the rich countries. This involves a method for embodying the ideal of children having priority on social resources into a particular set of child poverty reduction targets, it involves the development of appropriate and timely information sources, and finally it involves the clarification of feasible targets that may vary across the OECD. Keywords: poverty, children, social policy JEL: I30 I32 I38 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1579&r=all 178. US Politics and World Bank IDA-Lending Thomas Barnebeck Andersen (Institute of Economics, University of Copenhagen) Henrik Hansen (Institute of Economics, University of Copenhagen) Thomas Markussen (Institute of Economics, University of Copenhagen) This paper studies the role of US political factors in the allocation of World Bank concessional lending, where US political interests are proxied by voting similarity in the United Nations General Assembly on issues identified as important by the US Department of State. In contrast to previous studies we find that the US exerted a significant influence on IDA lending during the period 1993 - 2000. We demonstrate that the influence was both statistically as well as economically significant. Finally, we demonstrate that our result is robust with respect to the omission of the IDA Country Performance Rating index. Keywords: aid; World Bank; US political influence JEL: F34 F35 O19 Date: 2004-08 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:kud:kuiedp:0506&r=all 179. Learning and Dynamic Comparative Advantage: Lessons from Austria's Postwar Pattern of Growth for Eastern Europe Dalia, Marin This paper looks at Austria's pattern of development and its lessons for Eastern Europe. Austria's development path is characterized by two features. In the post-war era Austria was among the countries with the fastest convergence rate. At the same time Austria's movement up the technological ladder was slow compared to other European countries. The paper uses insights from recent dynamic theories of trade to explain these two stylized facts. It is argued that resource endowments, international knowledge spillovers, learning, and government policy have contributed to Austria's post war growth and the evolution of its pattern of trade over time. The paper looks at two lessons for Eastern Europe. First, Austria as a possible economic case for a gradual approach to economic reform. Second, in light of the Austrian experience a recent industrial and trade policy proposal for Eastern Europe is discussed. JEL: P2 O3 O1 F1 URL: http://d.repec.org/n?u=RePEc:lmu:muenec:589&r=all 180. The Economics of Child Trafficking (Part II) Sylvain E. Dessy Flaubert Mbiekop Stephane Pallage The trafficking of children is a thriving business. In this paper, we highlight key economic characteristics of this business. We show that the fight against child trafficking is far from trivial and that supply-side policies have very limited effect unless preceded by attacks on the demand side. Successful policies involve international cooperation on both fronts. We work within a model of a source country to highlight the necessary ingredients of a successful international cooperation towards the elimination of child trafficking. Keywords: Child trafficking, worst forms of child labor, international coordination JEL: J82 O15 O19 Date: 2005 URL: http://d.repec.org/n?u=RePEc:lvl:lacicr:0509&r=all 181. Art economics: a new approach Aldo SPRANZI This paper presents a new concept of art economics, here understo od as an economics of the diffusion of artistic knowledge. Our th esis is that, in order to solve problems linked to public funding of the arts and to the efficiency of the culture industry, the e conomist has to set foot on the terrain of aesthetics and, with c omplete autonomy, has to build for himself a set of aesthetic var iables to be applied to an industrial economic model. This impli es that the art economist has to concern himself with art, which, paradoxically, contrasts markedly with the present economic trad ition. The legitimation of the aesthetic variables selected occu rs empirically, with reference to specific works of art, which th e economist is able to evaluate by relying simply on his competen ce as an art consumer. Art economics, thus understood, has there fore a marked consumerist connotation. The art economist is a def ender of art- consumer rights, which are presently trampled on by the inefficiency of the culture industry. This working paper for ms part of the forthcoming publication: A. SPRANZI, Economics of the Arts. A New Approach to Art Economics, Unicopli-CUESP, Milano ( cuesp@galactica.it). Keywords: ART ECONOMICS, CULTURE ECONOMICS, CULTURE INDUSTRY, ART MARKETING URL: http://d.repec.org/n?u=RePEc:mil:wpdepa:2005-07&r=all 182. La tutela del risparmio dopo i casi Argentina e Parmalat Arnaldo MAURI According to Italian Constitution of 1947, household savings are to be protected, but this provision has been long neglected by le gislation and governments. Inflation, unfair taxation, expropriat ions without just compensation and financial scandals have repeat edly and heavily affected the wealth of Italian households during half of a century. The paper deals with recent failures in super vision of financial markets and focuses on two defaults: Argentin a and Parmalat. In both cases financial instruments, largely dist ributed among Italian savers by retail banks, had been issued abr oad and this feature has hampered action of supervisory authoriti es. Italian small savers have been the most hit by Argentina’s cr isis: 450,000 in number and total amount equals 1.5% of GDP. The reasons for such an involvement are to be found in the still sur viving myth of Argentina, as a rich country, land of immigration and of easy life. Many Italian families are still in touch with r elatives in this country and almost 40% of Argentinians have It alian ancestors. Probably because of the same myth, the major rat ing agencies had assigned over-generous ratings to the Argentine sovereign debt, as they did later with Parmalat bonds, and have d eceived the market in downgrading the risks involved. Internation al banks assisting these issues, on their side, were not so much concerned with over-borrowing both by Argentina and Parmalat. Eve ntually the main liability of the two defaults and frauds lies th e debtors themselves. Argentinian populist governments, fishing f or consensus and stubborn in their lax fiscal policy, instead of printing money as they used to do before, once hard peg had been adopted, issued bonds to finance large deficits. It is well know n that extent of loss for the savers depends upon inability and/o r unwillingness of the borrower to repay debts and, in the Argent ina case, both of these reasons may be mentioned. In the default of Parmalat, instead, frauds and financial misreporting by manage ment as well as loose control by certified auditing firms have be en detected. The paper concludes by analysing tools to be assigne d to domestic supervisory authorities, changes in corporate gover nance to be introduced and administrative as well as criminal pen alties to be enhanced by the new law on saving protection, now un der discussion at the Italian parliament. Deterrence measures aga inst international defaults and frauds, particularly in the case of sovereign debts, have to be adopted, however, at global level. Keywords: Default, savings, corporate governance URL: http://d.repec.org/n?u=RePEc:mil:wpdepa:2005-08&r=all 183. Dynamiques de pauvrete en milieu rural malgache Claire Gondard-Delcroix (CED, IFReDE/GRES, Universite Montesquieu-Bordeaux IV) Apres des decennies de recul du PIB par habitant a Madagascar, les annees 1990 ont renoue avec la croissance. Cependant, les repercussions en milieu rural, notamment en ce qui concerne la pauvrete, restent mal connues. L’article se propose donc d’etudier les dynamiques rurales de la pauvrete a Madagascar. Pour ce faire, deux types d’analyses complementaires sont developpes : il s’agit, en premier lieu, de mener une comparaison temporelle des indicateurs monetaires de pauvrete ; en second lieu, un accent particulier est mis sur l’identification des formes dynamiques de la pauvrete ( pauvrete chronique et pauvrete transitoire) et de leurs determinants sur la base de donnees de panel. Il s’avere que les evolutions de la pauvrete en milieu rural sont assez largement deconnectees des tendances macroeconomiques nationales (mis a part pour l’annee 2002). Elles sont en outre differenciees d’une zone rurale a l’autre. Il apparait ainsi que les evolutions de la pauvrete s’expliquent majoritairement par la survenance de chocs positifs ou negatifs localises, soulignant la precarite des conditions de vie des menages ruraux. Par ailleurs, l’analyse des formes de pauvrete, bien qu’elle confirme des specificites locales marquees dans la predominance d’une forme de pauvrete plutot que l’autre, met egalement en exergue l’influence majeure des dotations en actifs ( particulierement la dotation terrienne) et des moyens de protection vis-a-vis des aleas (diversification des activites et capital social notamment). After decades of decline of the GDP per capita in Madagascar, it increases at the end of the 1990’s. However, the effects on poverty, especially in rural Madagascar, are poorly documented. This paper proposes to study dynamic rural poverty in Madagascar following two types of complementary analyses: firstly, by carrying out a temporal comparison of poverty indicators; then, by identifying chronic poverty and transitory poverty and their determinants on the basis of panel data. We show that poverty evolution in rural Madagascar is rather disconnected from the national macroeconomic tendencies ( aside for the year 2002). Moreover, they are differentiated from one rural zone to another. It appears that poverty evolution is mainly explained by localised shocks, emphasising the vulnerability of rural livelihoods. In addition, although the analysis of chronic and transitory poverty confirms local specificities, it also puts forward the major influence of shocks and protection with respect to risk. (Full text in french) JEL: I32 R20 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:mon:ceddtr:111&r=all 184. Firm Size Dynamics in the Aggregate Economy Esteban Rossi-Hansberg Mark L.J. Wright Why do firm growth and exit rates decline with size? What determines the size distribution of firms? This paper presents a theory of firm dynamics that simultaneously rationalizes the basic facts on firm growth, exit, and size distributions. The theory emphasizes the accumulation of industry specific human capital in response to industry specific productivity shocks. The theory implies that firm growth and exit rates should decline faster with size, and the size distribution should have thinner tails, in sectors that use human capital less intensively, or correspondingly, physical capital more intensively. In line with the theory, we document substantial sectoral heterogeneity in US firm dynamics and firm size distributions, which is well explained by variation in physical capital intensities. JEL: E2 D2 L2 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11261&r=all 185. Urban Structure and Growth Esteban Rossi-Hansberg Mark L.J. Wright Most economic activity occurs in cities. This creates a tension between local increasing returns, implied by the existence of cities, and aggregate constant returns, implied by balanced growth. To address this tension, we develop a theory of economic growth in an urban environment. We show that the urban structure is the margin that eliminates local increasing returns to yield constant returns to scale in the aggregate, which is sufficient to deliver balanced growth. In a multi-sector economy with specific factors and productivity shocks, the same mechanism leads to a city size distribution that is well described by a power distribution with coefficient one: Zipf's Law. Under certain assumptions our theory produces Zipf's Law exactly. More generally, it produces the systematic deviations from Zipf's Law observed in the data, including the under-representation of small cities and the absence of very large ones. In general, the model identifies the standard deviation of industry productivity shocks as the key parameter determining dispersion in the city size distribution. We present evidence that the relationship between the dispersion of city sizes and the variance of productivity shocks is consistent with the data. JEL: E0 O4 R0 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11262&r=all 186. Treatment Effect Bounds: An Application to Swan-Ganz Catheterization Jay Bhattacharya Azeem Shaikh Edward Vytlacil We implement alternative bounding strategies to reanalyze data from the observational study by Connors et al. (1996) on the impact of Swan-Ganz catheterization on mortality outcomes. We implement both traditional bounds, which exploit access to an instrumental variable but impose no other assumptions (Manski, 1990), and the new bounds of Shaikh and Vytlacil (2004), which impose additional relatively mild nonparametric structural assumptions. Both of these approaches require an instrumental variable that shifts the probability of catheterization, but that does not alter mortality risks. We propose and justify using indicators of weekday admission as an instrumental variable in this context. We find that, while the traditional instrumental variable bounds are almost entirely uninformative in our application, the Shaikh and Vytlacil (2004) bounds often produce a clear answer - catheterization reduces mortality at 7 days, and increases it at 30 days and after. Our findings suggest an explanation for the fact that many ICU doctors are deeply committed to the use of the Swan-Ganz catheter. Since most ICU patients leave the ICU well before 30 days after admission have elapsed, ICU doctors never observe the increase in mortality. They do, however, observe the decline in mortality at 7 days. JEL: C1 I1 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11263&r=all 187. An Alternative Test of Racial Prejudice in Motor Vehicle Searches: Theory and Evidence Shamena Anwar Hanming Fang We propose a simple model of trooper behavior to design empirical tests for whether troopers of different races are monolithic in their search behavior, and whether they exhibit relative racial prejudice in motor vehicle searches. Our test of relative racial prejudice provides a partial solution to the well- known infra-marginality and omitted variables problems associated with outcome tests. When applied to a unique data set from Florida, our tests soundly reject the hypothesis that troopers of different races are monolithic in their search behavior, but fail to reject the hypothesis that troopers of different races do not exhibit relative racial prejudice. JEL: J7 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11264&r=all 188. The Evolution of Precedent Nicola Gannaioli Andrei Shleifer We evaluate Richard Posner's famous hypothesis that common law converges to efficient legal rules using a model of precedent setting by appellate judges. Following legal realists, we assume that judicial decisions are subject to personal biases, and that changing precedent is costly to judges. We consider separately the evolution of precedent under judicial overruling of previous decisions, as well as under distinguishing cases based on new material dimensions. Convergence to efficient legal rules occurs only under very special circumstances, but the evolution of precedent over time is on average beneficial under more plausible conditions. JEL: K13 K4 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11265&r=all 189. British Investment Overseas 1870-1913: A Modern Portfolio Theory Approach William N. Goetzmann Andrey Ukhov Many scholars have asked whether British investors benefited from overseas investment investing in the 19th century and whether this export of capital had negative effects. We re-visit the issue using modern portfolio theory. We examine the set of investment opportunities available to British investors, the developments in information transmission technology, and advances in financial and investment theory at the time. We use mean- variance optimization techniques ot take into account the risk and return characteristics of domestic and international investments available to a British investor, and to quantify the beneifts from international diversification. Evidence suggests that capital export was a consequence of both the opportunity and the understanding of diversification. foreign assets offered higher rates of return, but equally important, they offered significant diversification benefits. Even when--by setting expected return on each foreign asset class equal to that of the corresponding UK asset class--we put foreign assets at a disadvantage, we find that it was rational for a British investor to include foreign debts and equity in the portfolio. JEL: F0 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11266&r=all 190. Tax Structure in Developing Countries: Many Puzzles and a Possible Explanation Roger Gordon Wei Li Tax policies seen in developing countries are puzzling on many dimensions. To begin with, revenue/GDP is surprisingly small compared with that in developed economies. Taxes on labor income play a minor role. Taxes on consumption are important, but effective tax rates vary dramatically by firm, with many firms avoiding taxes entirely by operating through cash in the informal economy and others facing very high liabilities. Taxes on capital are an important source of revenue, as are tariffs and seignorage, all contrary to the theoretical literature. In this paper, we argue that all of these aspects of policy may be sensible responses if a government is able in practice to collect taxes only from those firms that make use of the financial sector. Through use of the financial sector, firms generate a paper trail, facilitating tax enforcement. The threat of disintermediation then limits how much can be collected in taxes. Taxes can most easily be collected from the firms most dependent on the financial sector, presumably capital-intensive firms. Given the resulting differential tax rates by sector, other policies would sensibly be used to offset these tax distortions. Tariff protection for capital-intensive firms is one. Inflation, imposing a tax on the cash economy is another. JEL: H21 O23 O17 F23 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11267&r=all 191. Culture: An Empirical Investigation of Beliefs, Work, and Fertility Raquel Fernandez Alessandra Fogli We study the effect of culture on important economic outcomes by using the 1970 Census to examine the work and fertility behavior of women 30-40 years old, born in the U.S., but whose parents were born elsewhere. We use past female labor force participation and total fertility rates from the country of ancestry as our cultural proxies. These variables should capture, in addition to past economic and institutional conditions, the beliefs commonly held about the role of women in society, i.e. culture. Given the different time and place, only the beliefs embodied in the cultural proxies should be potentially relevant to women's behavior in the US in 1970. We show that these cultural proxies have positive and significant explanatory power for individual work and fertility outcomes, even after controlling for possible indirect effects of culture (e.g., education and spousal characteristics). We examine alternative hypotheses for these positive correlations and show that neither unobserved human capital nor networks are likely to be responsible. We also show that the effect of these cultural proxies is amplified the greater is the tendency for ethnic groups to cluster in the same neighborhoods. JEL: J13 J21 Z10 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11268&r=all 192. Protection for Sale with Imperfect Rent Capturing Giovanni Facchini Johannes Van Biesebroeck Gerald Willmann Structurally estimating the Grossman and Helpman (1994) model using coverage ratios that include non-tariff barriers leads to biased parameter estimates. We develop a "protection for sale" theoretical framework consistent with the data, by explicitly allowing for non-tariff barriers. Introducing partial rent capturing we obtain a testable specification which finds support in the data. Our results suggest that average rent capturing is in the order of 72-75 percent. JEL: F13 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11269&r=all 193. Overconfidence vs. Market Efficiency in the National Football League Cade Massey Richard Thaler A question of increasing interest to researchers in a variety of fields is whether the incentives and experience present in many "real world" settings mitigate judgment and decision-making biases. To investigate this question, we analyze the decision making of National Football League teams during their annual player draft. This is a domain in which incentives are exceedingly high and the opportunities for learning rich. It is also a domain in which multiple psychological factors suggest teams may overvalue the "right to choose" in the draft -- non- regressive predictions, overconfidence, the winner%u2019s curse and false consensus all suggest a bias in this direction. Using archival data on draft-day trades, player performance and compensation, we compare the market value of draft picks with the historical value of drafted players. We find that top draft picks are overvalued in a manner that is inconsistent with rational expectations and efficient markets and consistent with psychological research. JEL: F21 J3 G1 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11270&r=all 194. Betting on Death and Capital Markets in Retirement: A Shortfall Risk Analysis of Life Annuities Ivica Dus Raimond Maurer Olivia S. Mitchell Retirees must draw down their accumulated assets in an orderly fashion, so as not to exhaust their funds too soon. We compare alternative phased withdrawal strategies to a life annuity benchmark using German data; one particular phased withdrawal rule seems attractive, as it offers relatively low expected shortfall risk, good expected payouts for the retiree during his life, and some bequest potential; results are similar for the US case. Delayed annuitization may also appeal, as it offers higher expected benefits with lower expected shortfalls. Requiring unisex mortality tables in annuity pric-ing raises women's risks under a phased withdrawal program. JEL: G22 G23 J26 J32 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11271&r=all 195. Effective Exchange Rate Classifications and Growth Justin M. Dubas Byung-Joo Lee Nelson C. Mark We propose an econometric procedure for obtaining de facto exchange rate regime classifications which we apply to study the relationship between exchange rate regimes and economic growth. Our classification method models the de jure regimes as outcomes of a multinomial logit choice problem conditional on the volatility of a country's effective exchange rate, a bilateral exchange rate and international reserves. An `effective' de facto exchange rate regime classification is then obtained by assigning country-year observations to the regime with the highest predictive probability obtained from the estimation problem. An econometric investigation into the relationship between exchange rate regimes and GDP growth finds that growth is higher under stable currency-value regimes. Significant asymmetric effects on country growth from not doing what is said are found for nonindustrialized countries. Countries that exhibit `fear of floating' experience significantly higher growth. JEL: F30 F31 F41 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11272&r=all 196. Pork for Policy: Executive and Legislative Exchange in Brazil Lee J. Alston Bernardo Mueller The Brazilian Constitution of 1988 gave relatively strong powers to the President. We model and test Executive-Legislative relations in Brazil and demonstrate that Presidents have used pork as a political currency to exchange for votes on policy reforms. In particular Presidents Cardoso and Lula have used pork to exchange for amendments to the Constitution. Without policy reforms Brazil would have had greater difficulty meeting their debt obligations. The logic for the exchange of pork for policy reform is that Presidents typically have greater electoral incentives than members of Congress to care about economic growth, economic opportunity, income equality and price stabilization. Members of Congress generally care more about redistributing gains to their constituents. Given the differences in preferences and the relative powers of each, the Legislative and Executive benefit by exploiting the gains from trade. JEL: D73 D72 D23 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11273&r=all 197. Issues in Korean Trade 1999: Trends, Disputes and Trade Policy Junsok Yang (Korea Institute for International Economic Policy) Hong-Youl Kim (Korea Institute for International Economic Policy) This paper is a survey of some of the important issues in Korean trade during 1999. 1999 was an important year in Korean trade for several reasons. In 1999, Korea began its recovery from the Asian financial crisis, with its GDP growing by more than 10%. Much of the growth, especially in the latter half of the year, was due to a healthy export sector. Korea's exports to all major regions rose greatly. Korea's imports also rose greatly, but imports from some regions, such as Asian and North America, grew more quickly than imports from other regions such as Europe. The growth in exports was driven by such goods as semiconductors and automobiles. On the import side, growth of imports was driven by increases in the imports of capital good due to Korea's recovery from the financial crisis and the recession which followed. Such growth in exports could not help but generate trade disputes between Korea and its trading partners, most notably the United States. While the bilateral trade disputes were not as serious as they had been in the 1980s, there were some notable issues in 1999, particularly with regard to steel, semiconductors, pharmaceuticals and movies. While many of these trade dispute issues were being dealt with bilaterally between Korea and various complainant countries, the world was rapidly moving toward establishing common multilateral rules on trade, and 1999 was an important year in the multilateral trade arena as well. On November 30, 1999, the WTO Ministerial Conference was held in Seattle. The conference was to signal the beginning of a new round of trade negotiations designed to futher liberalize trade, as well as introduce multilateral rules with respect to several "new issues". However, because of disagreements among member countries, the negotiations were suspended and except for certain "built-in agenda" issues, the negotiations will not resume until the members can attain a wider agreement on various issues concerning the new round negotiations. Korea submitted 12 official position papers to the WTO on various topics concerning the new round. These topics include agriculture, services, the anti-dumping agreement, market access for industrial goods, trade and investment, trade and competition policy, and transparency in government procurement. Keywords: international trade, governance, WTO, new round negotiations, Korea, trade policy Date: 2004-04 URL: http://d.repec.org/n?u=RePEc:eab:tradew:135&r=all 198. Intra-industry Trade and Productivity Structure Application of a Cournot- Ricardian Model Intra-industry Trade and Productivity Structure Application of a Cournot-Ricardian Model E. Young Song (Korea Institute for International Economic Policy) Chan-Hyun Sohn (Korea Institute for International Economic Policy) This paper extends the reciprocal dumping model of trade to a general equilibrium theory. We merge the Cournnotian model of Brander (1981) with the Ricardian model of Dornbusch, Fischer and Samuelson (1977). In this Cournot-Ricardian model, we find that the share of intra-industry trade in total trade increases with a similarity between trading partners, where the similarity is measured in terms of the industrial distribution of labor productivities. Thus our model provides another micro-foundation to the general finding that the share of intra-industry trade is hight when the trading partners are at similar levels of development. We also put this new model to a test. Using the data on trade and productivity, we find that the industrial distribution of labor productivites has significant explanatory power over the variations of intra-industry trade across country- pairs. This new variable seems to perform as well as the more popular variable, such as factor proportion, in explaining the share of the intra-industry trade. Keywords: intra-industry trade, Cournot competition, homogenous products, labor productivity, labour productivity JEL: F11 F12 Date: 2003-12 URL: http://d.repec.org/n?u=RePEc:eab:tradew:144&r=all 199. Income Distribution, Intra-industry Trade and Foreign Direct Investment in East Asia Chan-Hyun Sohn (Korea Institute for International Economic Policy) Zhaoyong Zhang (Korea Institute for International Economic Policy) The purpose of this paper is to empirically investigate how intra-industry trade is linked to cross-country income difference and foreign direct investment. We distinguish intra-industry trade as either horizontally or vertically differentiated, using bilateral exports and imports data for Japan and the rest of the East Asian countries at the 5-digir SITC during 1990 to 2000. Our empirical results show that the income difference has a negative relationship with the share of horizontal IIT, but a significant positive with vertical IIT. This finding answers to the sign changes in the previous empirics, including Hummels and Levinsohn 1995). Our resutls also show that cross-country foreign direct investment has a positive relationship with the share of horizontal intra-industry trade, and a negative relationshiops with the share of vertically differentiated trade. The findings have an important implication for the agglomeration effect of FDI on intra-industry trade. Keywords: intra-industry trade, fdi, horizontal/vertical differentiation, East Asia, Korea JEL: F12 F14 URL: http://d.repec.org/n?u=RePEc:eab:tradew:146&r=all 200. The ASEAN +3 Trading Bloc Yum K. Kwan (City university of Hong Kong) Larry D. Qiu (Hong Kong University of Science and Technology) The ASEAN +3 proposal has attracted attention in Asia and the world. We argue that a free trade agreement (FTA) for ASEAN +3 is beneficial to all member countries due to three factors (i) existing and expected vertical foreign direct investment linkage between Japan/ Korea and ASEAN member countries, (ii) high expected growth rate of the Chinese economy, and (iii) the economic diversity among members of ASEAN +3 group. Keywords: ASEAN, ASEAN +3, trading bloc, free trade agreement, FTA, direct invesment, Japan, Korea, China Date: 2003-07 URL: http://d.repec.org/n?u=RePEc:eab:tradew:196&r=all 201. Competitiveness and Efficiency of the Forest Product Industry in Indonesia Haryo Aswicahyono (Department of Economics, Centre for Strategic and International Studies) This paper provides an assessment on policy and structural changes in the Indonesian woodbased industries. The author shows that the tremendous growth of production and exports has been made possible through heavy subsidies, resulting in inefficiencies in harvesting and production. Subsidies created an incentive to delay the use of cost- and wood-saving technology. Constant market share analysis revealed that competitiveness of forest product exports declined during the period 1993-2003, and could only be partially compensated by an increased shift towards pulp and paper exports. Indonesia is losing competitiveness in slow growing industries like wood products, especially plywood. Further restructuring of the forest product industry in favor of pulp and paper industry with proper environmental management is the right policy direction, but there are also concerns that the huge demand for wood by the industry is already exceeding sustainable harvest levels. Keywords: Indonesia, forestry, competitiveness, trade. Date: 2004-02 URL: http://d.repec.org/n?u=RePEc:eab:tradew:51&r=all 202. The Evolution and Upgrading of Indonesia’s Industry Haryo Aswicahyono (Department of Economics, Centre for Strategic and International Studies) Tubagus Feridhanusetyawan (Department of Economics, Centre for Strategic and International Studies) This paper presents an overview of Indonesia’s rapid economic development, by focusing on the changing patterns of trade and industrial structure, the changing trade and industrial policies, and the process of industrial upgrading. It analyzes the process of industrialization, including the policy deficits and challenges, and discusses the strategy to facilitate further industrial upgrading in future. Keywords: Indonesia, trade, industrial upgrading, industrialisation policy Date: 2004-01 URL: http://d.repec.org/n?u=RePEc:eab:tradew:52&r=all 203. Towards a U.S.-Indonesia Free Trade Agreement Hadi Soesastro (Department of Economics, Centre for Strategic and International Studies) This paper examines the main issues in designing a FTA between Indonesia and the United States. The first section briefly examines current trade relations and issues between Indonesia and the United States. It also addresses the strategic and economic impact of a possible FTA between Indonesia and the United States for Indonesia. The second section examines elements of a possible Indonesia-United States FTA with a view on similar agreements concluded between Singapore and the United States and between Thailand and Australia. The third and concluding section discusses the kind of preparations needed on the Indonesia side to successfully negotiate a FTA with the United States. Keywords: Indonesia, United States, free trade agreement Date: 2004-05 URL: http://d.repec.org/n?u=RePEc:eab:tradew:75&r=all 204. The impact of ageing on demand, factor markets and growth Joaquim Oliveira Martins Frederic Gonand Pablo Antolin Christine de la Maisonneuve Kwang-Yeol Yoo This paper examines the channels through which ageing will shape the main economic factors that in turn affect potential growth; identifies current policy settings that may in fact amplify the adverse impact of demographic trends; and sets out policy reforms that will work to temper the effects of ageing on growth. The paper begins with a brief discussion of demographic issues. The analysis first focuses on the impact of these trends on the future level and structure of consumption, which may affect aggregate saving and the structure of the economy, respectively. Then, it explores the main channels through which ageing affects the supply side of the economy following a production function approach: capital markets, labour markets and productivity. The empirical analysis focuses on a subset of large OECD countries with differing ageing patterns and generosity of pension systems. Using a simple general equilibrium overlapping generations model and considering alternative reform scenarios, some illustrative simulations are presented decomposing the effects of ageing on potential GDP per capita growth and economic convergence within OECD countries.
Effets du vieillissement srur la demande, les marches des facteurs de production et la croissance
Cette etude examine les canaux par lesquels levieillissement de la population est susceptible d'affecter l'economie et la croissance potentielle. Elle identifie les dispositifs actuels qui pourraient amplifier les effets negatifs induits par les tendances demographiques et analyse les reformes pouvant limiter ces effets. L'etude commence par une breve discussion relative aux evolutions demographiques. Leur effet sur le niveau et la structure de la consommation est ensuite analyse, ainsi que leur impact sur le niveau d'epargne agrege et la structure de l'economie. L'effet sur l'offre est analyse suivant une approche de type fonction de production: marches des capitaux, du travail et productivite. L'analyse empirique se concentre sur un sous-ensemble de grands pays de l'OCDE qui different par leurs profils de vieillissement et par la generosite de leurs systemes de pension. Utilisant un modele simple d'equilibre general avec des generations imbriquees et des scenarios alternatifs de reforme, l'etude presente des simulations illustrant l'impact du vieillissement sur le PIB potentiel par tete et la convergence economique entre pays de l'OCDE. Keywords: Ageing populations; longevity; overlapping generation model; pension reforms; employability; old workers; economic convergence JEL: C68 D91 G10 J11 J26 Date: 2005-03-29 URL: http://d.repec.org/n?u=RePEc:oed:oecdec:41x&r=all 205. Product market competition and economic performance in Canada Maria Maher Jay Shaffer This paper examines the strength of product market competition and economic performance in Canada and discusses way in which the institutional framework governing competition policy could be improved. Competitive forces are comparatively strong and administrative and economic regulations inhibiting competition are amongst the lowest in the OECD countries. However, Canada’s regulated conduct doctrine exempts anti competitive behaviour when required by regulation, and thus significant parts of the economy remain shielded from the competition law. This is a particular problem with provincial government regulation. Restrictions on internal trade also continue to exist, and implementation of the Agreement on Internal Trade is less effective than it could be. More attention needs to be focussed on removing those regulations that restrain competition, particularly in professional services. In network industries, competition has largely been absent in the electricity sector. While it is widely recognised that reforms are necessary, those undertaken in the past have mainly been aimed at bringing in private sector investment, while avoiding full competition in generation and in retail markets. Canada has more significant restrictions on foreign ownership than almost any other OECD country, notably in airlines, telecommunications and broadcasting, and their removal could improve performance in these sectors.
Concurrence sur les marches de produits et performance economique au Canada
Ce document examine la puissance de la concurrence dans les marches de produits et de la performance economique au Canada. Il envisage aussi les moyens par lesquels pourrait etre ameliore le cadre institutionnel qui gouverne les politiques de la concurrence. La vigueur des forces concurrentielles est comparativement elevee au Canada et les regulations inhibant la concurrence sont parmi les plus faibles de la zone de l’OCDE. Cependant, le code canadien de conduite reglemente exonere les comportements anticoncurrentiels lorsqu’ils sont couverts par une reglementation, de sorte que certains pans importants de l’economie restent non couverts par le droit de la concurrence. Ce probleme est particulierement aigu dans le cas des reglementations sous autorites provinciales. Des restrictions continuent de limiter les echanges provinciaux, et la mise en ?uvre de l’Accord sur le commerce interieur est moins effective qu’elle pourrait l’etre. Il conviendrait de chercher plus activement a supprimer les reglementations qui freinent la concurrence dans les professions liberales. Dans les industries de reseaux, la concurrence a ete pratiquement absente dans le secteur de l’electricite. S’il existe un large consensus sur la necessite de reformes, celles qui ont ete entreprises par le passe ont eu pour objectif principal d’encourager l’investissement du secteur prive, tout en evitant l’ouverture integrale a la concurrence de secteurs comme la production d’electricite et la vente au detail. Le Canada connait aussi un plus grand nombre de restrictions significatives concernant les interets etrangers que presque tous les autres pays de l’OCDE, notamment dans les domaines du transport aerien, des telecommunications et de la telediffusion. Leur elimination pourrait stimuler les performances dans ces secteurs. Keywords: Canada; market structure; competition; productivity and growth; antitrust law; regulatory policies; network industries JEL: K21 K23 L11 L16 L40 L43 O51 Date: 2005-03-30 URL: http://d.repec.org/n?u=RePEc:oed:oecdec:421&r=all 206. Product market competition and economic performance in the Netherlands Maria Maher Michael Wise This paper assesses what role product market competition and reforms may have played in the performance of the Dutch economy over the past decade, and discusses what further product market reforms might contribute to enhancing growth. In general, competitive pressures appear to be relatively strong in the Netherlands, particularly in the traded goods sector. Competition in product markets has been strengthened through the creation of a competition authority (NMa) and the Competition, Deregulation and Legislative Quality project (MDW). A planned reduction in the administrative burden will also help to strengthen competition, by reducing barriers to business start-ups and the expansion of small businesses, as well as lowering business costs. However, competitive pressures and productivity growth are weaker in the Dutch services sector. Planning restrictions are inhibiting competition and productivity growth in the retail sector and there is considerable scope to eliminate practices that restrict competition in professional services, even though both are relatively liberalised in the Netherlands. Reforms in electricity, gas and telecoms are recent and market power on the part of incumbent firms remains a concern. Competitive pressures in these industries could be increased by enhancing the powers of the regulators and eliminating barriers to entry.
Concurrence sur les marches de produits et performances economiques aux Pays- Bas
Ce document evalue le role que la concurrence sur les marches de produits et les reformes ont pu jouer dans les performances de l’economie neerlandaise cette derniere decennie et debat sur l’action qui pourrait etre menee pour ameliorer la croissance. D’une facon generale, les pressions concurrentielles paraissent relativement fortes aux Pays-Bas en particulier dans les secteurs des biens echanges. La concurrence sur les marches de produits a ete renforcee grace a la mise en place d’une autorite de la concurrence ( la NMa) et au projet "Concurrence, dereglementation et qualite de la reglementation" (MDW). L’allegement prevu des charges administratives contribuera egalement a renforcer la concurrence en reduisant les obstacles a la creation d’entreprises et a l’expansion des petites entreprises, tout en diminuant les couts des activites industrielles ou commerciales. Toutefois, la concurrence et la productivite du travail sont plus faibles dans le secteur des services. Les regles d’urbanisme entravent la concurrence et la croissance de la productivite dans le commerce de detail et de vastes possibilites s’offrent d’eliminer les pratiques qui restreignent la concurrence dans les services professionnels, meme si ces activites sont relativement liberalisees aux Pays- Bas. Les reformes dans les secteurs de l’electricite, du gaz et des telecommunications sont recentes et le pouvoir de marche des operateurs historiques demeure problematique. La concurrence dans ces secteurs pourrait etre intensifier, en augmentant les prerogatives des autorites de regulation et en eliminant les barrieres a l’entree. Keywords: Netherlands; market structure; competition; productivity and growth; antitrust law; regulatory policies; network industries JEL: K21 K23 L11 L16 L40 L43 O51 Date: 2005-03-31 URL: http://d.repec.org/n?u=RePEc:oed:oecdec:422&r=all 207. Education attainment in Brazil: the experience of FUNDEF Luiz de Mello Mombert Hoppe For many years, Brazil lagged behind other middle-income countries in terms of school enrolment rates. But since 1998 policies have aimed at bridging this gap, in particular, with the implementation of FUNDEF, a fund for financing sub-national spending on primary and lower-secondary education. Using state- and municipality-level data during 1991-2002, this paper shows that FUNDEF played a key role in the increase in enrolment rates over the period, particularly in small municipalities, which rely more heavily on transfers from higher levels of government as a source of revenue. These findings underscore the importance of FUNDEF in eliminating supply constraints to the improvement of education attainment. Enrolment rates are now nearly universal for primary and lower-secondary education. Emphasis should therefore be placed on policies to improve the quality of services and to remove supply constraints to the expansion of enrolment in upper-secondary and tertiary education.
Les taux d'inscription scolaire au Bresil: l'experience de FUNDEF
Pendant de nombreuses annees, les taux d'inscription scolaire au Bresil sont restes derriere ceux des pays a revenu moyen. Mais depuis 1998 des politiques ont vise a reduire cet ecart, en particulier, avec la mise en place de FUNDEF, un fonds pour financer la depense de l'education du primaire et du premier cycle du secondaire au niveau local. En utilisant des donnees au niveau des etats et des municipalites de 1991 a 2002, cet article montre que FUNDEF a joue un role majeur dans l'augmentation des taux d'inscription au cours de la periode, en particulier dans les petites municipalites, qui dependent plus fortement des transferts a partir des niveaux plus eleves d’administration comme source de revenu. Ces resultats soulignent l'importance de FUNDEF en eliminant les contraintes d’offre liees a l'amelioration des resultats d'education. Les taux d'inscription sont maintenant presque universels pour l'education du primaire et du premier cycle du secondaire. L'accent devrait donc etre mis sur des politiques pour ameliorer la qualite des services et pour enlever des contraintes d’offre sur l'expansion de l'inscription dans l'enseignement du deuxieme cycle du secondaire et du tertiaire. Keywords: Brazil; education; school enrolment; decentralisation JEL: H52 H72 H77 Date: 2005-04-04 URL: http://d.repec.org/n?u=RePEc:oed:oecdec:424&r=all 208. Enhancing Brazil's regulatory framework for network industries: the case of electricity, oil and gas, and water and sanitation Edmar Almeida Nanno Mulder This paper assesses Brazil’s regulatory framework and agencies for several network industries (electricity, oil and gas, and water and sanitation). Private investment can be encouraged by tackling regulatory uncertainty in many areas. To this end, recent initiatives include a new regulatory model for the electricity sector, and new draft legislation on the role and structure of the regulatory agencies (currently in Congress). The overall approach to regulatory reform in network industries, particularly in electricity, is well thought out but the risk of regulatory failure should not be underestimated. Implementation will be the ultimate test of reform in this area. In natural gas, the dominance of Petrobras, the national oil company, throughout the industry has often been perceived as an obstacle to its development. Private investment in water and sanitation is constrained by a lack of clarity over the assignment of regulatory powers across different levels of government. These reforms are consistent with the government’s agenda for growth, focusing on meeting the challenge of improving the business environment. This Working Paper relates to the 2005 OECD Economic Survey of Brazil (www.oecd.org/eco/surveys/brazil).
Ameliorer le cadre reglementaire des industries de reseau au Bresil: le cas de l'electricite, du petrole et du gaz, et de l'eau et de l'assainissement
Cet article evalue le cadre reglementaire ainsi que les agences regulatrices pour plusieurs industries de reseau (electricite, petrole et gaz, eau et assainissement). L’investissement prive pourrait etre encourage en reduisant l’incertitude reglementaire dans plusieurs domaines. A ce propos, des initiatives recentes incluent un nouveau modele reglementaire pour le secteur de l’electricite et un projet de loi sur le role et la structure des agences regulatrices (actuellement au Congres). L’approche generale retenue en ce qui concerne la reforme de la reglementation dans les industries de reseau, notamment dans le secteur de l’electricite, est judicieuse, mais le risque de defaillance de la reglementation ne doit pas etre sous- estime. C’est au stade de sa mise en ?uvre que la reforme dans ce domaine sera mise a l’epreuve. Pour ce qui est du gaz naturel, la position dominante de la societe petroliere nationale Petrobras dans l’ensemble du secteur a souvent ete percue comme un obstacle au developpement de celui-ci. L’investissement prive dans les secteurs de l’eau et de l’assainissement se heurte a un manque de clarte dans la repartition des pouvoirs de reglementation entre les differents niveaux d’administration. Ces reformes se situent dans la lignee du programme de croissance du gouvernement, en mettant l’accent sur l’amelioration de l’environnement des entreprises. Ce document de travail se rapporte a l'Etude economique de l'OCDE du Bresil, 2005 (www.oecd. org/eco/etudes/bresil). Keywords: Brazil; regulation; regulatory agencies; economics of regulation; electricity; oil; gas; pipelines; water utilities; sanitation; Government Policy (Energy) JEL: K23 L51 L94 L95 O54 Q48 Date: 2005-04-08 URL: http://d.repec.org/n?u=RePEc:oed:oecdec:425&r=all 209. Estimating a fiscal reaction function: the case of debt sustainability in Brazil Luiz de Mello This paper reviews recent trends in fiscal performance in Brazil, estimates fiscal reaction functions for the consolidated public sector and different levels of government, and tests for the sustainability of the public debt dynamics. The empirical analysis, based on monthly data for the period 1995-2004, suggests that all levels of government react strongly to changes in indebtedness by adjusting their primary budget surplus targets. In addition, the central government appears to follow a spend- and-tax policy: changes in revenue are affected strongly by expenditure, with about two-thirds of changes in primary spending being offset through higher revenue over the long term. Institutions are also found to matter for fiscal sustainability. The responsiveness of sub-national fiscal stance to indebtedness, as well as that of central government revenue to changes in primary spending, appears to have strengthened after 1998, when ceilings on indebtedness were introduced.
Estimation des fonctions de reaction budgetaire: la soutenabilite de la dynamique de la dette publique au Bresil
Cet article examine
les tendances recentes des performances budgetaires au Bresil,
estime les fonctions de reaction budgetaire pour le secteur
public consolide et les differents niveaux d'administration, et
teste la soutenabilite de la dynamique de la dette publique.
L'analyse empirique, basee sur des donnees mensuelles pour la
periode 1995-2004, suggere que tous les niveaux
d'administration reagissent fortement aux changements de
l'endettement en ajustant leurs cibles d'excedent budgetaire
primaire. En outre, l'administration centrale semble suivre une
politique de " depenses suivi d'impot ": les changements de
revenu sont affectes fortement par les depenses, avec environ
deux tiers des changements de la depense primaire etant
compensee par un plus haut revenu sur le long terme. Les
institutions budgetaires sont egalement importantes en matiere
de soutenabilite budgetaire. La reaction des administrations
locales a l'endettement, ainsi que celle du revenu de
l'administration centrale aux changements de la depense primaire,
semble s'etre renforce apres 1998, quand des plafonds sur
l'endettement ont ete introduits.
Keywords: Brazil; fiscal reaction function; debt sustainability;
fiscal rules
JEL: E62 H62 H63
Date: 2005-04-01
URL: http://d.repec.org/n?u=RePEc:oed:oecdec:423&r=all
210. Poverty Nutrition Trap in Rural India
Raghbendra Jha
Raghav Gaiha
Anurag Sharma
The contribution of the present paper is threefold. First, we
formally test whether the effect of calorie deprivation on wages
is more significant/higher for the lower quantiles of workers. In
the extant literature this is established through non-linear
terms in the wage equation. A more satisfactory method of doing
this is through quantile regressions. Second, the quantile
regression approach helps us identify the exact group for which
the poverty-nutrition trap holds. The extant literature is unable
to establish whether there are systematic differences across
different quintiles in the response of productivity/wages to
nutrition. The present paper addresses this lacuna. Third, we are
able to establish a critical wage level for which the PNT trap
hypothesis holds. For wages higher than this the hypothesis does
not hold. We then argue that this value of the wage rate should
set a floor for any minimum wage for agricultural labourers.
Keywords: nutrition, calories, wages, poverty trap, labourers
Length (pages): 33
JEL: I I I J
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:pas:papers:2005-02&r=all
211. FOOD POLICY AND POVERTY IN INDONESIA: A GENERAL EQUILIBRIUM
ANALYSIS
Peter Warr
Indonesia is the world’s largest importer of its staple food,
rice. Since the economic crisis of 1998, rice import policy has
become increasingly protectionist and since early 2004, imports
have been banned. This paper uses a general equilibrium model of
the Indonesian economy to analyze the effects of an import ban on
rice, including its effects on poverty. The analysis recognizes 1,
000 individual households. The results indicate that the rice
import ban raises poverty incidence by a little less than one per
cent of the population. Poverty rises in both rural and urban
areas. Among farmers, only the richest gain.
Keywords: poverty; general equilibrium; rice imports; trade
policy. Length (pages): 36
JEL: Q18 F13 C68 O53
Date: 2005-03
URL: http://d.repec.org/n?u=RePEc:pas:papers:2005-03&r=all
212. Roads and Poverty in Rural Laos
Peter Warr
The relationship between poverty incidence and road development
is analyzed in this paper, in the context of rural Laos. The
results indicate that improving road access is an effective way
of reducing rural poverty. Between 1997-98 and 2002-03, rural
poverty incidence in Laos declined by 9.5 per cent. The results
suggest that about 13 per cent of this decline can be attributed
to improved road access to areas already having dry season access.
There is now a high return to providing dry weather access to
the most isolated households of Laos – those with no road
access at all.
Keywords: poverty incidence; rural roads; Lao PDR. Length (pages)
34
JEL: H53 I32 O53 R41
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:pas:papers:2005-04&r=all
213. FDI and Trade in Portugal: a gravity analysis
Ana Paula Africano (CEMPRE, Faculdade de Economia,
Universidade do Porto)
Manuela Magalhaes (IPCA e Faculdade de Economia,
Universidade do Porto)
This study investigates the relation between the stock of
foreign direct investment (FDI) and the geographical pattern of
trade flows in the Portuguese economy. The gravity model is
applied to bilateral trade between Portugal and OECD countries
plus Brazil from 1998 to 2000. The stock of inward FDI is
positively related to trade suggesting the existence of
complementary between the two. This effect is stronger on exports
than on imports resulting in a positive impact on trade balance.
It is also found that the stock of outward FDI has no significant
relation either with Portuguese exports or imports. Finally, FDI
helps to explain the above “normal” exports to the EU and the
below “normal” imports from Candidate Countries.
Keywords: International Trade, Foreign Direct Investment,
Gravity Model.
JEL: F1 F4
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:por:fepwps:174&r=all
214. Coarse Contingencies
Larry Epstein (University of Rochester)
Massimo Marinacci (Dipartimento di Statistica e Matematica
Applicata, Universita di Torino, Italy)
The paper considers an agent who must choose an action today
under uncertainty about the consequence of any chosen action but
without having in mind a complete list of all the contingencies
that could influence outcomes. She conceives of some relevant (
subjective) contingencies but she is aware that these
contingencies are coarse - they leave out some details that may
affect outcomes. Though she may not be able to describe these
finer details, she is aware that they exist and this may affect
her behavior.
Keywords: uncertainty, coarse contingencies, unforeseen
contingencies, subjective states, flexibility, ambiguity
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:roc:rocher:514&r=all
215. Environmental Awareness and Happiness
Ada Ferrer-i-Carbonell (Amsterdam Institute for Advanced
Labour Studies & Faculty of Economics and Econometrics (
SCHOLAR), University of Amsterdam, The Netherlands)
John M. Gowdy (Department of Economics, Rensselaer
Polytechnic Institute, Troy NY 12180-3590, USA)
The focus of this paper is on the relationship between an
individual's environmental attitudes (or awareness) and well-
being. We use an ordered probit model to examine the relationship
between individual measures of subjective well-being and
environmental attitudes regarding ozone pollution and species
extinction. Using data from the British Household Panel Survey we
find a negative correlation between well-being and concern about
ozone pollution and a positive correlation between well-being and
concern about species extinction. These relationships hold when
explanatory variables are included indicating whether or not the
person lives in a polluted environment and whether or not the
person engages in outdoor leisure activities. These relationships
also hold when we control for individual psychological traits.
Our results are an important step in clarifying some of the
subtleties of the relationship between environmental quality and
well-being. This research area is important in addressing the
related issues of sustainability and environmental policy design.
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:rpi:rpiwpe:0503&r=all
216. A DECOMPOSITION-BASED HEURISTIC FOR THE RESOURCE-
CONSTRAINED PROJECT SCHEDULING PROBLEM
D. DEBELS
M. VANHOUCKE
In the last few decades the resource-constrained project
scheduling problem has become a popular problem type in
operations research. However, due to its strongly NP-hard status,
the effectiveness of exact optimisation procedures is restricted
to relatively small instances. In this paper we present a new
genetic algorithm (GA) for this problem, able to provide near-
optimal heuristic solutions. This GA procedure has been extended
by a so-called decomposition-based heuristic (DBH) which
iteratively solves subparts of the project. We present
computational experiments on two datasets. The first benchmark
set is used to illustrate the contribution of both the GA and the
DBH. The second set is used to compare the results with current
state-of-the-art heuristics, and to show that the procedure is
capable of producing consistently good results for challenging
instances of the resource-constrained project scheduling problem.
We illustrate that GA is currently the best performing RCPSP meta-
heuristic, and that the DBH further improves the performance of
the GA
Keywords: project scheduling; genetic algorithms; decomposition
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:rug:rugwps:05/293&r=all
217. A Bi-Population Based Genetic Algorithm for the Resource-
Constrained Project Scheduling Problem
D. DEBELS
M. VANHOUCKE
The resource-constrained project scheduling problem (RCPSP) is
one of the most challenging problems in project scheduling.
During the last couple of years many heuristic procedures have
been developed for this problem, but still these procedures often
fail in finding near-optimal solutions for more challenging
problem instances. In this paper, we present a new genetic
algorithm (GA) that, in contrast of a conventional GA, makes use
of two separate populations. This bi-population genetic algorithm
BPGA) operates on both a population of left-justified schedules
and a population of right-justified schedules in order to fully
exploit the features of the iterative forward/backward local
search scheduling technique. Comparative computational results
reveal that this procedure can be considered as today’s best
performing RCPSP heuristic.
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:rug:rugwps:05/294&r=all
218. NETWORK PERSPECTIVE ON STAKEHOLDER MANAGEMENT: FACILITATING
ENTREPRENEURS IN THE DISCOVERY OF OPPORTUNITIES
W. VANDEKERCKHOVE
N. A. DENTCHEV
The problem of opportunity discovery is central in the
entrepreneurial activity. Cognitive limitations determine the
search and the analysis of information, and as a consequence
constrain the identification for opportunities. Moreover, typical
personal characteristics – locus of control, need for
independence, and need for achievement – suggest that
entrepreneurs would take a central position in their stakeholder
environments and as a consequence fail to adapt the complexity of
stakeholder relationships in their entrepreneurial activity. We
approach this problem from a network perspective on stakeholder
management. We propose a heuristic of stakeholder analysis, which
requires two mappings of the entrepreneurial constituents. The
first mapping focuses on current interactions between the
entrepreneur and his/her stakeholders, while the second focuses
on a specific issue and the stakeholders that constitute it. In
effect, such a stakeholder analysis requires entrepreneurs to use
the complexity of stakeholder relations in order to breach their
cognitive limitations and thus facilitate them in the discovery
of new opportunities. This has clear implications for the ethics
and the activity of entrepreneurs, as we will argue.
Keywords: business ethics, entrepreneurship, network perspective,
opportunity identification, stakeholder management
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:rug:rugwps:05/295&r=all
219. Institutional Origin and Resource Endowments to Science-
Based Entrepreneurial Firms: A European Exploration
N. MORAY
B. CLARYSSE
This paper addresses theoretical and empirical gaps in the
relationships between the nature of institutional origin, firm
resources and growth in the context of spinning off ventures from
public research organisations (PROs). Institutional origin is
considered a two dimensional construct consisting of the
formality of technology transfer and the research specificity of
a PRO. In this perspective, these variables are hypothesised to
predict the resource endowments of science-based entrepreneurial
firms. Additionally, given the widespread attention from
academics and policy makers to IP based science-based
entrepreneurial firms, the formality of technology transfer is
expected to be associated with growth. Empirical tests of
hypotheses derived from this view are based on data from 184
science-based entrepreneurial firms, representing 48 public
research organisations. Multivariate analysis of variance shows
that institutional origin predicts firm resources, showing
significance levels for start capital. An ordinal interaction
effect shows that companies established with a formal transfer of
technology start with higher resource levels, and even more so
when started from a PRO with a specific research base. This
suggests that specific PROs are more selective in the projects
they consider eligible for spin off incubation and creation. Next
to this, two-stage regression analysis indicates that the
formality of technology transfer has a single direct effect on
growth in employees and capital, independent of the start capital
of the firm, pointing to the intrinsic advantage of having
protected intellectual property formally transferred to the
science-based entrepreneurial firm at the onset of the business
activities.
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:rug:rugwps:05/296&r=all
220. How do Early Stage High Technology Investors Select Their
Investments?
B. CLARYSSE
M. KNOCKAERT
A. LOCKETT
This study examines the selection behaviour of 68 European early
stage high tech VCs. In particular, we examine whether or not
these VCs exhibit heterogeneity in their selection behaviour. To
examine these issues we employ a conjoint analysis methodology.
Our results indicate that VCs exhibit substantial heterogeneity
in investment selection behaviour. Employing a cluster analysis
three types of investors emerge: those who focus on technology,
those who focus on finance and those who focus on people. We then
examine the drivers of these differences, being the sectoral
focus, the sources of funds and the human capital of the
investment manager.
Date: 2005-03
URL: http://d.repec.org/n?u=RePEc:rug:rugwps:05/297&r=all
221. Constrained optimization of data-mining problems to improve
model performance: A direct-marketing application
A. PRINZIE
D. VAN DEN POEL
Although most data mining (DM) models are complex and general in
nature, the implementation of such models in specific
environments us often subject to practical constraints (e.g.
budget constraints) or thresholds (e.g. only mail to customers
with an expected profit higher than the investment cost).
Typically, the DM model is calibrated neglecting those
constraints/thresholds. If the implementation
constraints/thresholds are known in advance, this indirect
approach delivers a sub-optimal model performance. Adopting a
direct approach, i.e. estimating a DM model in knowledge of the
constraints/thresholds, improves model performance as the model
is optimized for the given implementation environment. We
illustrate the relevance of this constrained optimization of DM
models on a direct-marketing case, i.e., in the field of customer
relationship management. We optimize an individual-level response
model for specific mailing-depths (i.e. the percentage of
customers of the house list that actually receives a mail given
the mailing budget constraint) and compare its predictive
performance with that of a traditional response model neglecting
the mailing depth during estimation. The results are in favor of
the constrained-optimization approach.
Keywords: constrained optimization, data mining, direct
marketing, customer relationship management, targeting
Date: 2005-03
URL: http://d.repec.org/n?u=RePEc:rug:rugwps:05/298&r=all
222. Investigating the post-complaint period by means of
survival analysis
B. LARIVIERE
D. VAN DEN POEL
Firms increasingly view each contact with their customers as an
opportunity that needs to be managed. The primary purpose of this
article is to gain a better understanding of the customers’
post-complaint period. Specific focus is placed on the impact of
effective complaint handling on actual customer behavior
throughout the time, whereas previous research has mainly focused
on time-invariant or intentional measures. Survival analysis
techniques are used to investigate the longitudinal behavior of
complainants after their problem recovery. The proportionality
assumption is tested for each explanatory variable under
investigation. In addition, the impact for each variable is
estimated by means of survival forests. Survival forests enable
us to explore the evolution over time of the effects of the
covariates under investigation. As such, the impact of each
explanatory variable is allowed to change when the experiment
evolves over time, in contrast to “proportional” models that
restrict these estimates to be stationary. Our research is
performed in the context of a financial services provider and
analyzes the post-complaint periods of 2,326 customers. Our
findings indicate that (i) it is interesting to consider
complainants since they represent a typical and rather active
customer segment, (ii) furthermore, it is beneficiary to invest
in complaint handling, since these investments are likely to
influence customers’ future behavior and (iii) survival forests
are a helpful tool to investigate the impact of complaint
handling on future customer behavior, since its components
provide evidence of changing effects over time.
Keywords: Data mining, customer relationship management,
consumer complaint behavior, actual customer behavior,
proportionality, survival forests.
Date: 2005-03
URL: http://d.repec.org/n?u=RePEc:rug:rugwps:05/299&r=all
223. Impact of Support Services on End-users’ Satisfaction
D. VANDAELE
P. GEMMEL
Research paper
Purpose
Despite the increased outsourcing
of support services and their growing impact on the business
industry, academic research on support services is not extensive.
The purpose of this study is to examine the impact of support
services on the satisfaction of end-users – i.e. customers of
the service organization purchasing the support services.
Design
Our research includes the visibility of support
services to end-users and the importance attached by them, to
investigate their impact on end-users’ satisfaction.
Findings
First, our research indicates that visible support
services considered important by end-users are more critical to
the purchasing organization than initially considered. Second,
the performance of the support services supplier has a
significant impact on the end-users’ satisfaction with the
business service delivered by the service organization. Research
implications
Future research is needed to further explore
the area of criticality of support services and their impact on
end-users’ satisfaction and to establish a measurement scale
for customer satisfaction in B2B services. Practical implications
Support services can be critical to the purchasing
organization. Therefore, the selection of an outsourcing partner
should include more aspects than just price; the opinion of the
endusers can be an additional selection criterion. Value of the
paper
This paper brings the concept of customer satisfaction
into the field of B2B services. Moreover, this study contributes
to the research field of support services by investigating their
importance to the purchasing organization and by relating them to
the end-users’ satisfaction. to be stationary. Our research is
performed in the context of a financial services provider and
analyzes the post-complaint periods of 2,326 customers. Our
findings indicate that (i) it is interesting to consider
complainants since they represent a typical and rather active
customer segment, (ii) furthermore, it is beneficiary to invest
in complaint handling, since these investments are likely to
influence customers’ future behavior and (iii) survival forests
are a helpful tool to investigate the impact of complaint
handling on future customer behavior, since its components
provide evidence of changing effects over time.
Keywords: Support Services, Outsourcing, Business services,
Customer Satisfaction
Date: 2005-03
URL: http://d.repec.org/n?u=RePEc:rug:rugwps:05/300&r=all
224. "The Effects of the Bank of Japan's Zero Interest Rate
Commitment and Quantitative Monetary Easing on the Yield
Curve: A Macro-Finance Approach"
Nobuyuki Oda (Monetary Affairs Department, Bank of Japan)
Kazuo Ueda (Faculty of Economics, University of Tokyo)
This paper provides an empirical investigation of monetary
policy in Japan in the zero interest rate environment that has
held sway since 1999. In particular, we focus on the effects of
the zero interest rate commitment and of quantitative monetary
easing on mediumto long-term interest rates in Japan. In the
study we apply a version of the macro-finance approach, involving
a combination of estimation of a structural macro-model and
calibration of time-variant parameters to the yield curve
observed in the market. This enables us to decompose interest
rates into expectations and risk premium components and
simultaneously to extract the market's perception of the Bank of
Japan's (BOJ's) willingness to carry on its zero interest rate
policy. In the analysis we make clear the counterfactual policy
that would have been practiced in the absence of the actual
policies followed by the BOJ since 1999. From this analysis, we
tentatively conclude that the BOJ's monetary policy since 1999
has functioned mainly through the zero interest rate commitment,
which has led to declines in medium- to long-term interest rates.
We also find some evidence that, up until the end of 2003,
raising the reserve target may have been perceived as a signal
indicating the BOJ's accommodative policy stance although the
size of the effect is not large. The portfolio rebalancing effect
- either by the BOJ's supplying ample liquidity or by its
purchases of long-term government bonds -- has not been found to
be significant.
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:tky:fseres:2005cf336&r=all
225. "An Analysis of Shareholders' Lists for 60 Cotton Spinning
Companies in 1898" (in Japanese)
Tsuneo Suzuki (Department of Economics, Gakushuin University)
Yoichi Kobayakawa (Department of Management, College of
Business, Administration and Information Science, Chubu
University)
Kazuo Wada (Faculty of Economics, University of Tokyo)
The cotton spinning companies played an important role in
Japanese economic development during the Meiji era. Setting up
these businesses required large capital investments. Who financed
these companies? More concretely, who were their shareholders?
This paper aims to identify shareholders' characteristics at 60
cotton spinning companies in 1898. In order to do this, we have
created a database of all shareholders in these companies in 1898,
as well as a database of all merchants and industrialists listed
in the National Directory of Commerce and Industry (1898 edition).
Our main findings are as follows: 1) Most of the shares were
owned by people who lived outside the Tokyo or Osaka areas, in
the local areas where a company was established. 2) The income
level of most shareholders was mainly in the range of 500 - 2000
yen. The role of those with very high incomes as shareholder
should not be overemphasized.
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:tky:jseres:2005cj129&r=all
226. Cantor Type Attractors in Stochastic Growth Models.
Mitra, Tapan
Privileggi, Fabio
We study a one-sector stochastic optimal growth model where
production is affected by a shock taking one of two values. Such
exogenous shock may enter multiplicatively or additively. A
result is presented which provides sufficient conditions to
ensure that the attractor of the iterated function system (IFS)
representing the optimal policy, is a generalized topological
Cantor set. To indicate the role of the strict monotonicity
condition on the IFS in this result, examples of attractors,
which are not of the Cantor type, are constructed with iterated
function systems, whose maps are contractions and satisfy a no
overlap property.
JEL: C61 O41
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:uca:ucapdv:43&r=all
227. Optimal provision of public goods under imperfect
intergovernmental competition
Ponzano, Ferruccio
The aim of this paper is to develop a model that includes two
tiers of government providing public goods with the same tax base
to finance them. Their rent is related to the level of
competition. Citizens maximize their own utility starting from
these different levels of competition. Therefore, they can decide
to turn down the governments to induce them to behave efficiently.
Moreover, governments can choose whether to accept the behaviour
urged by citizens or to maximize their rent for a single period
of office and consequently lose the next elections.
JEL: H11 H21 H71 H77
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:uca:ucapdv:44&r=all
228. Tax system and tax reforms in India
Bernardi, Luigi
Fraschini, Angela
This paper is part of a wider research on South-East Asia
countries’ taxation carried on under the supervision of. V.
Tanzi. India is a federal republic and a big, highly populated
and poor country, which however since some years has entered the
catching up stage of development and shows impressive rates of
GDP growth. General Government budget is structurally imbalanced
and public debt stays high. Public spending (about 25 percent of
GDP) is mainly devoted to general services, defense, and the
support of economic activities, rather than to public health and
welfare programs. Total fiscal pressure (about 17 percent of GDP)
is in line with per capita GDP and is shared evenly enough
between central and states governments. The structure of the tax
system is not much beyond the Musgravian “early stage”. A
complex structure of taxes on goods and services is largely the
main heading of the tax system and it is difficultly moving
towards a VAT-kind structure. Direct taxes still are in an infant
state, both as weight as well as structure. Import duties remain
at not negligible levels. Social contributions are entirely
lacking. A tax system of a country like India unavoidably raises
more than one problem: foremost among these problems appear to be
a too large dominance of a complex and obsolete indirect taxation
and the fiscal relations among government layers. The road to
updating and improving the Indian tax system has been entered
since the early 1990s, but the reform is still largely to be
accomplished. Introducing VAT – so successfully adopted in
other developing countries – is the most striking but not the
only example.
JEL: H20 H24 H25 H29
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:uca:ucapdv:45&r=all
229. A Simple Model of Credit Rationing with Information
Externalities
AKM Rezaul Hossain (University of Connecticut)
Credit-rationing model similar to Stiglitz and Weiss [1981] is
combined with the information externality model of Lang and
Nakamura [1993] to examine the properties of mortgage markets
characterized by both adverse selection and information
externalities. In a credit-rationing model, additional
information increases lenders ability to distinguish risks, which
leads to increased supply of credit. According to Lang and
Nakamura, larger supply of credit leads to additional market
activities and therefore, greater information. The combination of
these two propositions leads to a general equilibrium model. This
paper describes properties of this general equilibrium model. The
paper provides another sufficient condition in which credit
rationing falls with information. In that, external information
improves the accuracy of equity-risk assessments of properties,
which reduces credit rationing. Contrary to intuition, this
increased accuracy raises the mortgage interest rate. This allows
clarifying the trade offs associated with reduced credit
rationing and the quality of applicant pool.
Keywords: Credit rationing, Information Externalities, Adverse
selection, Mortgage underwriting.
JEL: C62 R31 R51
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:uct:uconnp:2005-11&r=all
230. GLOBALIZATION, NEOLOBERALISM AND LABOUR
Irfan ul Haque
The paper discusses the issue of globalization from the
perspective of employment and labour. It argues that it is the
ideological basis of policy prescriptions advanced in support of
globalization, rather than the increasing global interdependence,
that is the real source of controversy and anxiety over
globalization. The paper discusses the impact of the neoliberal
policies on economic growth, employment, and income distribution,
and examines the issue of labour market rigidities from the
perspective of industrial as well as developing countries. It
argues that developing countries face conflicting pressures: the
new liberal policies prescribe liberalization of labour markets,
while the organized labour in the industrial countries is pushing
for higher labour standards in developing countries. The paper
concludes with a section containing ideas on how the process of
globalization may be humanized, so that the gains from the growth
in incomes and trade are more widely shared within as well as
across countries in an increasingly interdependent world.
Date: 2004
URL: http://d.repec.org/n?u=RePEc:unc:dispap:173&r=all
231. INDUSTRIALIZATION IN DEVELOPING COUNTRIES: SOME EVIDENCE
FROM A NEW ECONOMIC GEOGRAPHY PERSPECTIVE
Jorg MAYER
The paper draws broad predictions from the developmental
elements of new economic geography models and subjects them to
empirical scrutiny. Industrial activity has spread from developed
to geographically close developing countries in sectors that are
intensive in immobile primary factors and not too heavily
dependent on linkages with other firms. Only developing countries
with an already established industrial base achieved
industrialization in other sectors. The sizable change in both
the size and structure of manufactured exports from developing
countries has not been associated with corresponding changes in
manufacturing value added. To benefit more from relocating
industrial activities, developing countries need to create the
critical mass of linkages that provide pecuniary externalities to
industrial firms.
Date: 2004
URL: http://d.repec.org/n?u=RePEc:unc:dispap:174&r=all
232. WHO IS THE MASTER? WHO IS THE SERVANT? MARKET OR GOVERNMENT?
AN ALTERNATIVE APPROACH: TOWARDS A COORDINATION SYSTEM
S.M. SHAFAEDDIN
The main purpose of this paper is to discuss the limitations of
the market and the risks of government failure, and to present an
alternative approach on coordination of economic activities by
introducing the concept of “coordination system”. In such a
system, economic activities are coordinated by market, firms and
government requiring the availability of “non-price factors”
such as infrastructure, institutions and organizations. This
approach is practical, country specific and dynamic. It is
practical because it is based on the realities of the world
economy and the situations of developing countries. It is country
specific because the relative role of each coordination mechanism
– market, government and enterprises – changes from one
country to another, depending on their level of development and
other socio-economic characteristics. It is dynamic because in
each country the relative role of each mechanism changes over
time during the course of economic development of the country.
Date: 2004
URL: http://d.repec.org/n?u=RePEc:unc:dispap:175&r=all
233. NOT TOTALLY NAKED: TEXTILES AND CLOTHING TRADE IN A QUOTA
FREE ENVIRONMENT
Jorg MAYER
The impact of ATC-termination on the rise in China’s market
share in global textiles and clothing trade is likely to be lower
than often suggested by CGE models because the models (i) neglect
the industry structure and sourcing strategies of buyers; (ii)
take insufficient account of current patterns of tariff
protection, preference schemes, and rules-of-origin regulations
that allow managing textiles and clothing trade after ATC-
termination; (iii) assume smooth and overly rapid responses to
changes in the trading environment particularly in quota-imposing
developed countries; and (iv) ignore that achieving China’s
development objectives requires structural change towards
production and exports of manufactures that are more skill-
intensive than clothing.
Date: 2004
URL: http://d.repec.org/n?u=RePEc:unc:dispap:176&r=all
234. Spatial Price Differences in China: Estimates and
Implications
Loren BRANDT (University of Toronto)
Carsten A HOLZ (Hong Kong University of Science & Technology)
Prices differ across space: from province to province, from
rural (or urban) areas in one province to rural (or urban) areas
in another province, and from rural to urban areas within one
province. Systematic differences in prices across a range of
goods and services in different localities imply regional
differences in the costs of living. If high- income provinces
also have high costs of living, and low-income provinces have low
costs of living, the use of nominal income measures in explaining
such economic outcomes as inequality can lead to
misinterpretations. Income should be adjusted for costs of living.
We are interested in the sign and magnitude of the adjustments
needed, their changes over time, and their impact on economic
outcomes in China. In this article, we construct a set of (rural,
urban, total) provincial- level spatial price deflators for the
years 1984-2002 that can be used to obtain provincial-level
income measures adjusted for purchasing power. We provide
illustrations of the significant effect of ignoring spatial price
differences in the analysis of China's economy.
JEL: O18 D63 D3
Date: 2005-04-21
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0504010&r=all
235. New Capital Estimates for China
Carsten A. Holz (Hong Kong University of Science &
Technology)
Data on physical capital are an indispensable part of economic
growth and efficiency studies. In the case of China, fixed asset
time series are usually derived either by aggregating gross fixed
capital formation data over time, net of depreciation, or by
correcting the limited official fixed asset data available. These
procedures, to varying degrees, ignore that (i) gross fixed
capital formation does not equal investment, (ii) investment does
not equal the value of fixed assets newly created through
investment, (iii) depreciation is an accounting measure that has
no impact on changes in the production capacity of fixed assets, (
iv) official fixed asset data, where available, incorporate
significant revaluations in the 1990s, and (v) the variable 'net
fixed assets,' frequently used in the literature, is an
inappropriate measure of fixed assets for the purpose of growth
or efficiency studies. This paper derives economy-wide fixed
asset values for 1954-2002, correcting for these shortcomings. It
also uses the so far unexplored method of combining economy-wide
depreciation data (in the income approach to the calculation of
gross domestic product) with an economy-wide depreciation rate to
directly yield economy-wide fixed assets. The fixed asset time
series derived here are contrasted with each other as well as
with those presented in the literature. The reliability of the
different series is evaluated, leading to the recommendation of a
specific choice of fixed asset time series.
Keywords: Capital, fixed assets, investment, national income
accounting, production function estimations,
measurement of economic growth, Chinese statistics
JEL: C80 D24 O47 P23 P24
Date: 2005-04-21
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0504011&r=all
236. China's Reform Period Economic Growth: Why Angus Maddison
Got It Wrong and What That Means
Carsten A. Holz (Hong Kong University of Science &
Technology)
China's economic growth statistics of the late 1990s have
repeatedly been questioned. Angus Maddison in a 1998 OECD study
goes further in that he revised China's official average annual
real growth rate for the first seventeen years of economic reform,
1978 through 1995, downward by 2.39 percentage points per year.
His study is the most thorough criticism of Chinese official
statistics to date, and the one with the largest impact on the
data. By 1995, the revisions imply 150% less output, in 1978
terms, than the official data do. Angus Maddison's revisions were
subsequently incorporated into the Penn World Tables; the
findings of countless cross-country studies are therefore
affected by Angus Maddison's growth estimates for China. This
paper examines Angus Maddison's revisions to official data and
finds them invalid. Angus Maddison's growth estimates for China
in the reform period constitute no alternative to the official
data.
JEL: O4 P27 O53 C82
Date: 2005-04-21
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0504012&r=all
237. OIL AND GAS MARKETS IN THE UK: EVIDENCE FOR FROM A
COINTEGRATING APPROACH
Theodore Panagiotidis (Loughborough University)
Emilie Rutledge (Durham University)
The paper examines the relationship between UK wholesale gas
prices and the Brent oil price over the period 1996-2003. Tests
for Unit Roots and Cointegration are carried out and it is
discovered that a long run equilibrium relationship between UK
gas and oil prices predates the opening of the UK-Mainland Europe
Inter-connector. Following a recursive methodology (Hansen &
Johansen 1999), it was found that the cointegrating relationship
is present throughout the sample period. However, the long run
solutions seem to be more volatile. Evidence is provided that the
short run relationship is linear and impulse response functions
are used to examine the effects that a shock in oil would have on
gas.
Keywords: oil, gas, cointegration, nonparametric cointegration,
recursive trace test, error correction, impulse response
JEL: C22 C52 O13 Q43
Date: 2005-04-15
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0504004&r=all
238. Using the correlation dimension to detect non-linear
dynamics: Evidence from the Athens Stock Exchange
David Chappell (Sheffield University)
Theodore Panagiotidis (Loughborough University)
The standardised residuals from GARCH models fitted to three
stock indices of the Athens Stock Exchange are examined for
evidence of chaotic behaviour. In each case the correlation
dimension is calculated for a range of embedding dimensions. The
results do not support the hypothesis of chaotic behaviour; it
appears that each set of residuals is iid.
Keywords: Non-linear Dynamics, Stock Indices, Chaos, Correlation
Dimension
JEL: C1 C2 C3 C4 C5 C8
Date: 2005-04-15
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0504005&r=all
239. Another Look at the Identification of Dynamic Discrete
Decision Processes
Victor Aguirregabiria (Boston University)
This paper presents an econometric approach to estimate the
behavioral effects of counterfactual policy experiments in the
context of dynamic decision models where the current utility
function and the distribution of unobservables are
nonparametrically specified. Previous studies have shown that the
identification of the current utility function in dynamic
decision models requires of stronger assumptions than in static
decision models. We show in this paper that knowledge of the
current utility function (or of a 'normalized' utility function)
is not necessary to identify counterfactual choice probabilities
in dynamic models. To identify these counterfactuals we need the
probability distribution of the unobservables and the difference
between the present value of choosing always the same alternative
and the present value of deviating one period from this strategy.
We show that both functions are identified from the factual
choice probabilities under similar conditions as in static
decision models. Based on this result we propose a nonparametric
procedure to estimate the behavioral effects of counterfactual
experiments in dynamic decision models. We apply this method to
evaluate the effects of an investment subsidy program in the
context of a model of machine replacement.
Keywords: Dynamic discrete decision processes; Nonparametric
Identification; Counterfactual experiments.
JEL: C13 C25
Date: 2005-04-19
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0504006&r=all
240. AN EMPIRICAL STUDY OF RETURN-VOLUME RELATIONSHIP FOR INDIAN
MARKET
Mahesh Kumar Tambi (ICFAI institute for Management Teachers)
Generally there is a common belief that returns and trading
activities have a strong positive relationship. This paper
analyzes return-volume relationship in Indian context, both in
contemporaneous as well as lead- lag. Initial screening of
returns and trading activity data shows some idiosyncratic aspect
of Indian market although a positive return- activity
relationship is acknowledged. This study also documents the
dissimilarity in relationship for positive and negative changes
in prices. As regards lead-lag relationship, this paper finds
strong evidence of volume causing returns than vice-versa.
Keywords: Trading volume, Price change, contemporaneous
relationship, lead-lag relationship, systematic
irregularities, ARIMA filtering, Haugh test, Granger
Sims Causality
JEL: G
Date: 2005-04-15
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504013&r=all
241. INTEGRATION OF FINANCIAL MARKETS
Mahesh Kumar Tambi (ICFAI Institute for Management Teachers)
Paper analyzes the degree of integration of Indian stock market
with other developing and developed nations’ stock markets
using various techniques of cointegration like Engle Granger two
stage method, Johansen cointegration method, VAR-ECM, Principle-
Component Analysis and Impulse-response analysis.
Keywords: Financial markets Integration, Johansen test, VAR-ECM,
Engle- Granger Two stage method, Developed nations,
Developing Nations.
JEL: G
Date: 2005-04-15
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504014&r=all
242. Estimation of continuous-time interest rate models: a
nonparametric approach
Orazio Di Miscia (Banca Intesa)
This paper presents a general, nonlinear model for term
structure interest rate. The approach is the same of Stanton (
1997) but it has been extended to a multifactor model. The novel
aspect is that rather than choosing the functional specification
of the model, the process is generated from the data using
approximation methods for multifactor continuous-time Markov
processes. In applying this technique to the short and long end
of the term structure for a general two-factor diffusion process
for interest rates is possible to find some interesting
nonlinearity in the interest rate data that are not considered in
almost all parametric specifications of term structure interest
rate model of the financial literature.
Keywords: continuous-time models, nonparametric estimation,
multi-factor interest rate model
JEL: G
Date: 2005-04-19
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504015&r=all
243. Nonparametric estimation of diffusion process: a closer look
Orazio Di Miscia (Banca Intesa)
A Monte Carlo simulation is performed to investigate the finite
sample properties of a nonparametric estimator, based on
discretely sampled observations of continuous-time Ito diffusion
process. Chapman and Pearson (2000) studies finite-sample
properties of the nonparametric estimator of Ayt-Sahalia (1996)
and Stanton (1997) and they find that nonlinearity of the short
rate drift is not a robust stylized fact but it’s an artifacts
of the estimation procedure. This paper examine the finite sample
properties of a different nonparametric estimator within the
Stanton (1997)’s framework.
Keywords: ewp-mac/050417
JEL: G
Date: 2005-04-19
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504016&r=all
244. Term structure of interest models: concept and estimation
problem in a continuous-time setting
Orazio Di Miscia (Banca Intesa)
Continuous-time models have a large range of applications. They
have been used for a long time to model phenomena evolving
randomly and continuously in time. However, data are essentially
always recorded at discrete points in time only and this is one
of the main source of difficulties when the researcher is
interested about their estimation. This paper review some of the
estimation problems and focus the attention about the link
between continuous-time stochastic process and the estimation of
term structure interest rate.
Keywords: sde, discretization error
JEL: G
Date: 2005-04-19
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504017&r=all
245. Globalisation and the National Market
Rahul Shastri (National Akademi of Development)
Globalisation is likely adversely impact the traditional classes.
It also threatens to destroy national market, from which stems
the bargaining power of the traditional classes.In spite of this,
the paper suggests that the response to globalisation in India
has necessarily to be discordant. It argues that the state will
be unable to oppose globalisation due to the strategic need for
economic growth, new technology, military knowhow, and ultimately
the survival of India as a nation. Hence the society must protect
itself from globalisation, independently of the positions of the
Indian state. The paper argues that class actions will primarily
protect the special interests of different classes, but may fail
to protect the national market. Yet, since the national market is
the basis of the independence of the national classes, it needs
to be protected at all costs. For this, a socio-cultural
mobilisation to protect the national market is required. The
struggle to conserve cultural barriers to the national market is
a common struggle of all national classes. However, this struggle
can be informed by a knowledge of the labour content of different
items sold to the consumers. Protection of the national market
from globalisation is urgent, and its loss may put the Indian
people at the mercy of forces beyond their national borders and
political control.
Keywords: Globalisation, National Market, Capital, Labour,
Culture, Labour Theory of Value, Karl Marx
JEL: A F3
Date: 2005-04-15
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0504001&r=all
246. India and the Challenge of New Technology
Rahul Amolak Shastri (National Akademi of Development)
This paper tries to look at how India should prepare to meet the
challenges of the ongoing scientific and technological revolution,
and the forces of globalisation that propel it forward. At least
three major technological revolutions seem to be ongoing: the bio-
tech, the info- tech and the energy revolutions. Whereas the bio-
tech revolution holds the promise of curtailing chemical
pollution, it can break the delicate ecological balance of nature.
It also threatens the employment of farmers who constitute a
major part of the work force of India. The info-tech revolution
threatens the power of all handlers of information: subordinate
executives, bureaucrats, clerks and teachers. Moreover, it can
easily pave the way for automation of mechanical work. This too
has the potential of disturbing the employability of a large part
of India's work force. The ultimate direction of the energy
revolution would seem to be renewable sources such as solar and
water power. This may crack the contradiction between the
unlimited wants of man and the limited capacity of mother earth.
All the three technological revolutions come packaged with
globalisation. The hegemony of American and European capital over
globalisation has led to opposition to the technological race
within the developing world in general and within India in
particular. This paper argues that India has to join the global
race for new technology, in order to survive as a nation.
Furthermore, it is suggested that it should join early to gain
bargaining power. Finally, joining the technological race can
also help protect India's environment. Since new technology and
globalisation come together, India has to take both. However, it
must globalise with national interests. Two primary features that
need to be protected in the process of globalising are protecting
national control over information, and promoting employment while
globalising the economy. Increases in labour productivity can
lead to cut backs in employment. In a labour surplus country like
India, such improvements in efficiency can be unnecessary. A
'necessary' or appropriate increase in efficiency may be defined
as a productivity improvement that increases production and
employment in other organisations more than it cuts back
employment within a given organisation. Globalisation must only
be permitted with necessary improvements in efficiency. The
defense of national interests in the process of globalisation
cannot be left to political processes. They have to be supported
by a heightened national consciousness of producers and consumers.
This will translate into better quality, cost effectiveness, and
productivity on the supply side, and a stronger national market
on the demand side. The process of raising national consciousness
is a necessarily long term and slow device, since social
consciousness is a tough nut to crack.
Keywords: Globalisation, technical revolution, bio-tech
revolution, info-tech revolution, technical progress,
economic nationalism, efficiency, employment
JEL: A F1 F2 N
Date: 2005-04-18
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0504002&r=all
247. Explaining the Real Exchange Rate during Sudden Stops and
Tranquil Periods
Akiko Terada-hagiwara (Asian Development Bank)
This paper untangles the causes behind real exchange rate
devaluation events with particular attention paid to the Sudden
Stop of capital flows. By utilizing cumulative impulse response
function and variance decomposition analysis, we argue that there
is the asymmetric response across Sudden Stop and tranquil times.
Further comparison across the Sudden Stop in the 80s (gdebt
crisish) and 90s (gSudden Stop crisish), however, reveals that
the Sudden Stop disturbance has become more prominent in
explaining the real exchange rate disturbance in Sudden Stop
crisis of the 1990s rather than debt crisis of the 1980s.
Keywords: Exchange rate depreciation, Capital flows, Sudden Stop,
Asia, and Latin America
JEL: F31 F32 F41
Date: 2005-04-20
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpif:0504006&r=all
248. Sequential International Joint-Ventures and the Option to
Choose
Elmar Lukas (Universitat Paderborn)
The purpose of this study is to formalize the optimal choice of
market entry strategy for an individual multinational enterprise (
MNE) from a dynamic perspective. It is argued that incorporating
a suitable treatment of irreversibility, uncertainty and
flexibility related to a MNEs investment decision gives further
insights to the expansion, dissolvement, and optimal timing of
international ventures (IJVs). The evolutionary process of the
value of the foreign direct investment can be interpreted as a
compound complex chooser option. The results suggest that
uncertainty, size of equity share and future
investment/divestment opportunities play an important role when
it comes to transit from export to the first phase of the foreign
direct investment commitment. The paper underscores the
importance of modeling the dynamics of market entry and helps
refine the application of real options in the alliance context by
providing a closed-form solution in continuous time to value the
overall strategic flexibility.
Keywords: Foreign direct investment, multinational enterprise,
sequential investments, entry mode, international joint
venture, real options
JEL: D43 F23 L13 P31
Date: 2005-04-21
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpif:0504007&r=all
249. Exchange Rate Regimes and Pro-Poor Growth
Rolf Maier
This paper extends the ongoing discussion on optimal exchange
rate regimes to the issue of pro-poor growth. To analyze
empirically the poverty effects of exchange rate regimes, we
estimate the distribution effects of different exchange rate
arrangements on the poorest 20 and 20 to 40 percent. In addition,
we test the total effect, i.e. the distribution and growth effect,
to capture potential trade-offs between poverty effects through
overall economic growth and distribution. To analyze this
question, we collect an irregular and unbalanced panel of time-
series cross-country data on the first and second quintile share
from 76 countries and use two recently proposed de facto exchange
rate regime classifications, Levy-Yeyati/Sturzenegger (2002) and
Reinhart/Rogoff (2003). To cover econometric issues, cross-
country variation and dynamic aspects of within-country changes
of the income of the poor, we apply two econometric
specifications, a growth equation and a system GMM estimation. We
estimate the poverty effects of different exchange rate regimes
for all countries and, separately, developing and industrial
countries due to considerable differences in economic structure,
access to international capital markets and soundness of domestic
financial systems. Empirical findings vary considerably with
respect to three aspects. First, findings for the Levy-
Yeyati/Sturzenegger (2002) and Reinhart/Rogoff (2003)
classification differ significantly with respect to similar
exchange rate categories. Thus the classification process of
exchange rate regimes affects critically the policy conclusions.
Second, statistically significant exchange rate regimes in the
Reinhart/Rogoff (2003) classification impact positively on the
poor in developing countries, but negatively on the poor in
industrial countries. Thus exchange rate regimes affect very
differently the poor in developing and industrial countries in
the Reinhart/Rogoff (2003) classification. Third, statistical
significance of exchange rate regimes in the system GMM approach
differs considerably for adjusted and unadjusted income
inequality measures. Due to these varying and only weakly robust
empirical findings, a concise policy recommendation with respect
to poverty-reducing exchange rate regimes is difficult.
Nevertheless, positive effects of intermediate regimes of the
Reinhart/Rogoff (2003) classification in developing countries
should be emphasized, showing at least a tendency to not negative
and possible positive effects of intermediate regimes on the
poorest 40 percent in developing countries.
Keywords: Pro-Poor Growth, Exchange Rate Regimes
JEL: F3 F4
Date: 2005-04-21
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpif:0504008&r=all
250. Manufacturing Growth and Liberalisation in India (1960-1999)
A Demand Side Analysis
Rahul Shastri (National Akademi of Development)
The trend in manufacturing has not shifted post-91.
Liberalisation shares in the high trend phase in manufacturing,
that was ushered in after 1981, which continued even after 1991.
Liberalisation however, seems to have changed the structure of
demand responses of manufacturing output. In contrast to pre-
liberalisation years, after 1991, manufacturing growth seems to
have become highly sensitive to growth in personal consumption
expenditure. After 1991, a one percentage point increase in
personal consumption expenditure seems to change manufacturing
growth by nearly 2 percentage points! Liberalisation also seems
to have increased the responsiveness of manufacturing growth to
fluctuations in growth of gross capital formation and exports.
However, the increase in responsiveness to changes in export
growth is not statistically significant.
Keywords: Liberalisation, Indian Manufacturing, Demand-side
analysis, personal consumption, exports, Keynesian
Economics
JEL: A E L N
Date: 2005-04-15
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0504018&r=all
251. Platform Competition and Broadband Uptake: Theory and
Empirical Evidence from the European Union
Walter Distaso (Department of Economics, University of
Exeter, UK)
Paolo Lupi (Autorita per le garanzie nelle comunicazioni -
AGCOM, Italy)
Fabio M. Manenti (Dip. Scienze Economiche 'M. Fanno',
Universita di Padova, Italy)
Broadband access provides users with high speed, always-on
connectivity to the Internet. Due to its superiority, broadband
is seen as the way for consumers and firms to exploit the great
potentials of new applications. This has generated a policy
debate on how to stimulate adoption of broadband technology. One
of the most disputed issues is about competition policies: these
may be intended to promote competition in the Digital Subscriber
Line (DSL) segment of the market (intra- platform competition),
or to stimulate entry into the market for alternative platforms
such as cable access or fiber optics (inter- platform competition)
Using a model of oligopoly competition between differentiated
products, our paper explicitly studies the effect of inter and
intra platform competition on the diffusion of broadband access.
The implications of the model are then tested using data from 14
European countries. The econometric evidence confirms the results
of the theoretical model and indicates that while inter-platform
competition drives broadband adoption, competition in the market
for DSL services does not play a significant role. The results
also confirm that lower unbundling prices stimulate broadband
uptake.
Keywords: Broadband, inter-platform and intra-platform
competition, local loop unbundling
JEL: L86 L96
Date: 2005-04-18
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0504019&r=all
252. Declining Share of Wages in Organised Indian Industry (1973-
97): A Kaleckian Perspective
Rahul Shastri (National Akademi of Development)
Ramana Murthy (NALSAR)
The share of wages in organised Indian industry declined
considerably between 1973 and 1997. The end to end drop was 19
per cent, and the wage share fell from 51.7 per cent to 32.8 per
cent. In proportionate terms, the decline in wage share was
between 30-40 per cent. The period of analysis divides into two
phases. In the first phase of fifteen years (1973-87), wage share
declined by 5? percentage points, while the fall accelerated
after 1987, and the decline from 1987-97 was by 13? percentage
points. If it is possible to identify the period 1987-97 with the
period of liberalisation, it may be inferred that 70 per cent of
the decline in the wage share was during the period of
liberalisation. The period of liberalisation has witnessed an
acceleration in the decline of the wage share. Faster growth of
low-wage-share industries was responsible for a substantial part
of the decline the share of labour. More than 1/3 of the total
decrease in the wage share (1973-97) was due to the faster growth
of low wage-share industries. Growing importance of low wage-
share industries was the sole reason for the decline in wage
share between 1973-87. After 1987, the relative growth of low
wage-share industries contributed only 9 per cent of the fall in
the aggregate wage share. In the period as a whole, the decline
in wage share at the individual industry level contributed at
least half (9? percentage points) of the total decline in the
aggregate wage share. In the first period, 1973-87, the industry
level wage shares actually rose. However, in the second period,
the industry level shares have been falling rapidly. They fell by
12.3 percentage points against the total decline of 13.5
percentage points in the wage share in this period. Thus, the
decline in industry level wage shares contributed more than 90
per cent of the total decline in wage share in the second period (
1987-97). If this period may be called the period of
liberalisation, it may said that wage shares fell drastically at
individual industry levels during liberalisation. For the period
as a whole, the decline in industry level wage share was entirely
due to the rise in material/wage (m/w) ratio. Constant
composition mark-up remained the same end to end between 1973- 97.
This study also examines the reasons for the consistent rise in
m/w ratio and finds it to be due to technical change. Almost the
entire increase in the m/w ratio was due to the rise in the
material used per employee. This index rose from 100 to 380 over
the period. Most of the increased material used found its way
into greater output. Thus, O/L (index) rose from 100 to 346 over
the time period. A small fraction of the rise in the material
intensity per employee went into a rise in the material output
ratio, whose index rose from 100 to 110. Thus, the study reveals
a drastic decline in the aggregate share of wages between 1973-
97. This decrease came about as a result of a faster growth of
low wage share industries over the period, as well as a rise in
the material intensity per employee in the production process.
Thus changes in output mix and technical change were responsible
for the 19 percentage point drop in the share of wages. Mark-ups
played no role in the decline in the period as a whole.
Keywords: markups, material-wage ratio, technical change, output
mix, wage share, distribution of income, Indian industry
JEL: L E J D1 D4
Date: 2005-04-19
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0504020&r=all
253. Railroad Restructuring in Russia and Central and Eastern
Europe: One Solution for All Problems?*
Russell Pittman (Antitrust Division, US Department of
Justice)
Sergei Guriev (New Economic School)
Guido Friebel (University of Toulouse)
Anna Tomova (University of Zilina)
Elizaveta Cheviakhova (Boston College)
Railways restructuring takes place under very different
circumstances and with very different goals in Western Europe,
Central and Eastern Europe, and Russia. Observed improvements in
productivity associated with vertical access and vertical
separation in Western Europe are not certain to be replicated
following similar restructuring in transition economies,
especially if one takes account of the much higher shadow price
on government subsidies in the latter. This paper describes in
detail the current and proposed reforms in the railways of
Central and Eastern Europe and Russia, analyzes the likely
outcomes of reforms in the special economic, regulatory, and
legal environments of these countries, and presents an
alternative proposal for restructuring in Russia.
Keywords: railway, restructuring, Russia, Central and Eastern
Europe, transition, vertical separation
JEL: L
Date: 2005-04-20
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0504021&r=all
254. MEASURING WILLINGNESS-TO-PAY IN DISCRETE CHOICE MODELS WITH
SEMI- PARAMETRIC TECHNIQUES
Pablo M Garcia (Centro de Estudios para la Produccion)
It is usual to estimate willingness-to-pay in discrete choice
models through Logit models –or their expanded versions-.
Nevertheless, these models have very restrictive distributional
assumptions. This paper is intended to examine the above
mentioned issue and to propose an alternative estimation using
semi-parametric techniques (through Simple Index Models).
Furthermore, this paper introduces an empirical application of
willingness-to-pay for improved subway travel times in the City
of Buenos Aires.
Keywords: Discrete Choice models, Econometrics, Transportation
JEL: L
Date: 2005-04-21
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0504022&r=all
255. Exports and Productivity: A Survey of the Evidence fro Firm
Level Data
Joachim Wagner (University of Lueneburg)
While the role of exports in promoting growth in general, and
productivity in particular, has been investigated empirically
using aggregate data for countries and industries for a long time,
only recently have comprehensive longitudinal data at the firm
level been used to look at the extent and causes of productivity
differentials between exporters and their counterparts which sell
on the domestic market only. This papers surveys the empirical
strategies applied, and the results produced, in 45
microeconometric studies with data from 33 countries that were
published between 1995 and 2004. Details aside, exporters are
found to be more productive than non-exporters, and the more
productive firms self-select into export markets, while exporting
does not necessarily improve productivity.
Keywords: Exports, Productivity, Firm level data, survey
JEL: F14 D21
Date: 2005-04-20
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpit:0504005&r=all
256. Exports, Foreign Direct Investment, and Productivity:
Evidence from German Firm Level Data
Joachim Wagner (University of Lueneburg)
This paper presents the first empirical test with German
establishment level data of a hypothesis derived by Helpman,
Melitz and Yeaple in a model that explains the decision of
heterogeneous firms to serve foreign markets either trough
exports or foreign direct investment: only the more productive
firms choose to serve the foreign markets, and the most
productive among this group will further choose to serve these
markets via foreign direct investments. Using a non-parametric
test for first order stochastic dominance it is shown that, in
line with this hypothesis, the productivity distribution of
foreign direct investors dominates that of exporters, which in
turn dominates that of national market suppliers.
Keywords: Exports, Foreign Direct Investment, Productivity, Firm
level data, Germany, Heterogeneous firms
JEL: F14 F23 D21
Date: 2005-04-20
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpit:0504006&r=all
257. Self-reported Work Disability in the US and The Netherlands
Arie Kapteyn (RAND Corporation)
James P. Smith (RAND Corporation)
Arthur van Soest (RAND Corporation & Tilburg University)
Self-reported work disability is analyzed in the US and The
Netherlands. The raw data show that Dutch respondents much more
often report that they have a work limiting health problem than
respondents in the US. The difference remains when controlling
for demographic characteristics and observed onsets of health
problems. Respondent evaluations of work limitations of
hypothetical persons described in vignettes are used to identify
the extent to which the differences in self-reports between
countries or socio-economic groups are due to systematic
variation in the response scales. A model that assumes the same
response scales for different health domains is compared with a
model that allows for domain specific response scales. Results of
both models suggest that about half of the difference between the
self-reported rates of work disability in the US and The
Netherlands can be explained by response scale differences.
Keywords: Work limiting disability, Vignettes, Reporting bias
JEL: J
Date: 2005-04-15
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpla:0504006&r=all
258. Labor Market Conditions, Political Events and Palestinian
Suicide Bombings
Edward A. Sayre (Agnes Scott College)
Objectives. This paper analyzes the relationship between
Palestinian suicide bombings and economic and political
conditions from 1993 to 2001. Labor market conditions could
affect the number of terror attacks because when the economy
worsens, the opportunity cost of engaging in suicide terrorism
decreases. An alternative explanation is that suicide bombings
are responses to changes in the political environment. Methods.
Count data regression models are employed to explore the relative
importance of economic and political factors in determining the
frequency of suicide bombings. Results. Economic conditions
explain some of the occurrence of suicide bombings from 1993 to
2001, and some political events are also strongly correlated with
bombings. Conclusions. The results imply that the roots of
suicide bombing may lie in the unfulilled economic promises of
the Oslo peace process, but specific acts by Israelis are a
proximite cause of the attacks.
Keywords: West Bank, Gaza, terrorism, unemployment, Palestinian
JEL: J
Date: 2005-04-19
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpla:0504007&r=all
259. Elusive effects of unemployment on happiness
Petri Bockerman (Labour Institute for Economic Research)
Pekka Ilmakunnas (Helsinki School of Economics)
This paper explores the connection between unemployment and
subjective well-being in Finland by using cross-sections for the
years 1990, 1996 and 2000 from World Values Surveys. An
unprecedented increase in the national unemployment rate (from 3
to 17 per cent) did not produce a drop in the mean level of
subjective well-being. Experiencing unemployment personally
reduces life satisfaction, but does not have a significant effect
on happiness in ordered logit estimation. However, generalized
ordered logit estimation reveals that being unemployed has a
negative effect on happiness at lower happiness scores, but no
significant effect at high happiness levels.
Keywords: happiness, unhappiness, life satisfaction, unemployment
JEL: C30 J28 J31
Date: 2005-04-19
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpla:0504008&r=all
260. Who bear the burden of wage cuts? Evidence from Finland
during the 1990s
Petri Bockerman (Labour Institute for Economic Research)
Seppo Laaksonen (University of Tampere & University of
Helsinki)
Jari Vainiomaki (University of Tampere)
This paper explores the incidence of nominal and real wage cuts
in the Finnish private sector during the 1990s. Centralized wage
freezes together with a positive inflation rate produced real
wage cuts for a large proportion of workers during the worst
recession years of the early 1990s. In this sense, centralized
bargaining shaped the adjustment. The results from micro data
reveal that the full-time workers have had a lower likelihood of
wage cuts compared with part-time workers. Declines in wages have
also been more common in small plants. In addition, there is an
important transitory component in wage cuts.
Keywords: micro-level, wages, adjustment
JEL: J31
Date: 2005-04-19
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpla:0504009&r=all
261. Nascent and infant entrepreneurs in Germany. Evidence from
the Regional Entrepreneurship Monitor (REM)
Joachim Wagner (University of Lueneburg)
Based on data from a recent representative survey of the adult
population in Germany this paper documents that the patterns of
variables influencing nascent and infant entrepreneurship are
quite similar and broadly in line with our theoretical priors –
both types of entrepreneurship are fostered by the width of
experience and a role model in the family, and hindered by risk
aversion, while being male is a supporting factor. Results of
this study using cross section data are in line with conclusions
from longitudinal studies for other countries finding that
between one in two and one in three nascent entrepreneurs become
infant entrepreneurs, and that observed individual
characteristics – with the important exception of former
experience as an employee in the industry of the new venture -
tend to play a minor role only in differentiating who starts and
who gives up.
Keywords: Nascent Entrepreneurs, Infant Entrepreneurs, Regional
Entrepreneurship Monitor, REM, Germany
JEL: J23
Date: 2005-04-20
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpla:0504010&r=all
262. INDIAN TAKEOVER CODE IN SEARCH OF EXCELLENCE (A CASE STUDY
APPROACH)
Mahesh Kumar Tambi (ICFAI Institute for Management Teachers)
M&A and Takeovers are the powerful ways to achieve corporate
growth, but because of their complex nature, to protect the
interest of all the parties, curb the malpractices and to
facilitate orderly development these activities are regulated by
a takeover code in most part of the world. In India after
liberalization Govt. started to regulate these activities by
introducing a takeover code. This code has gone through various
major and minor changes since then to respond the challenges it
faced during implementation and also to overcome its shortcomings.
My study is an attempt to discover what challenges it faced and
what changes were incorporated in the code over the period of
time. Whether these successive changes are leading Indian
takeover code in a proper direction, also what are the major
shortcomings of the code at present. What are the critical issues,
which need immediate attention to make it more effective. In the
paper I tried to explain these challenges by quoting major
controversial takeover battles after 1990s.
Keywords: Indian Takeover Code, Threshold limit, Conditional
Offer, Cripping facility, Trigger point, Negotiated
offer, Bail-out takeover
JEL: E
Date: 2005-04-15
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0504021&r=all
263. MONETARY UNIONS: THE POLICY COORDINATION ISSUE
Giovanni Di Bartolomeo (Public Economics Department,
University of Rome La Sapienza)
Jacob Engwerda (Department of Econometrics, Tilburg
University)
Joseph Plasmans (Faculty of Applied Economics UFSIA-RUCA,
University of Antwerp)
Bas van Aarle (Faculty of Economics LICOS, Catholic
University of Leuven)
In this paper we build a three-country dynamic model of a
monetary union (MU), where we focus on how coalitions among
policy-makers are formed and what are their effects on the
stabilization of output and price. Some preliminary results based
on numerical simulations are provided.
Keywords: Macroeconomic stabilization, coalitions, LQ
differential games.
JEL: E
Date: 2005-04-16
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0504023&r=all
264. FISCAL-MONETARY POLICY COORDINATION AND DEBT MANAGEMENT: A
TWO STAGE DYNAMIC ANALYSIS
Giovanni Di Bartolomeo (UNIVERSITA DEGLI STUDI DI ROMA
“LA SAPIENZA”)
Debora Di Gioacchino (UNIVERSITA DEGLI STUDI DI ROMA “LA
SAPIENZA”)
This paper studies the interaction between two autonomous
policymakers, the central bank and the government, in managing
public debt as the result of a two-stage game. In the first stage
the institutional regime is established. This determines the
equilibrium solution to be applied in the second stage, in which
a differential game is played between the two policymakers. It is
shown that, if the policymakers can communicate before the game
is played, (multiple-equilibrium) coordination problems can be
solved by using the concept of correlated equilibrium. Unlike
Nash equilibrium, which only allows for individualistic and
independent behaviour, a correlated equilibrium allows for
Keywords: monetary and fiscal policies, differential games,
correlated equilibrium.
JEL: C73 E58 F33 F42
Date: 2005-04-16
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0504024&r=all
265. CENTRAL BANKS AND INFORMATION ROVIDED O THE PRIVATE SECTOR
Giovanni Di Bartolomeo (UNIVERSITA DEGLI STUDI DI ROMA
“LA SAPIENZA”)
Enrico Marchetti (UNIVERSITA DEGLI STUDI DI ROMA “LA
SAPIENZA”)
This paper examines the information provided to the private
sector by central anks. By using the principal component analysis,
we investigated the variance of the procedural rules followed by
nine major central banks about information reatments. We
investigate problems related to the information coming from the
entral banks by focusing on the quantity and quality perspectives
and highlight the methodological complexity of the investigation.
We find that a synthetic uantitative index of transparency is not
enough to represent the phenomenon ince it can result misleading
in understanding the behavior of institutionally different
central banks associated with the same index values.
Keywords: Central bank transparency, principal components,
monetary policy.
JEL: E52 E58
Date: 2005-04-16
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0504025&r=all
266. NON-NEUTRALITY OF MONETARY POLICY IN POLICY GAMES
Giovanni Di Bartolomeo (UNIVERSITA DEGLI STUDI DI ROMA
“LA SAPIENZA”)
Nicola Acocella (UNIVERSITA DEGLI STUDI DI ROMA “LA
SAPIENZA”)
The main aim of this article is to investigate the sources of
non- neutrality in policy games involving one or more trade
unions. We use a simple set up in order to clearly expose the
basic mechanisms that also work in more complex frameworks. We
show that there are common roots in the nonneutrality results so
far obtained in apparently different contexts as, e.g., an
inflation-averse union playing against the government; a union
sharing some other common objective with a policy maker; or when
more than one union interacts with monopolistic competitors in
the goods market and a policymaker. We finally show that there
are other cases where the nonneutrality result can arise.
Keywords: neutrality, money, unions, policy game.
JEL: E00 E52 J51
Date: 2005-04-16
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0504026&r=all
267. Gross National Happiness as an Answer to the Easterlin
Paradox?
Rafael Di Tella (Harvard Business School)
Robert MacCulloch (Imperial College London)
The Easterlin Paradox refers to the fact that happiness data are
typically stationary in spite of considerable increases in income.
This amounts to a rejection of the hypothesis that current
income is the only argument in the utility function. One possible
answer is that human development involves more than current
income (e.g., as argued by the UN). We find that the happiness
responses of almost 400,000 people living in the OECD during 1975-
97 are positively correlated with absolute income, the generosity
of the welfare state and (weakly) with life expectancy; it is
negatively correlated with the average number of hours worked,
measures of environmental degradation (SOx emissions), crime,
openness to trade, inflation and unemployment; all after
controlling for country and year dummies. The estimated effects
separate across groups in a manner that appears broadly plausible
e.g., the rich suffer environmental degradation more than the
poor). Based on their actual change, the biggest contributors to
happiness in our sample have been the increase in income and the
increase in life expectancy. Our accounting exercise suggests
that the unexplained trend in happiness is even bigger than would
be predicted if income was the only argument in the utility
function. In other words, introducing omitted variables worsens
the income-without-happiness paradox.
Keywords: income, subjective well-being, quality of life
JEL: D63 H00 I31 O00 Q3
Date: 2005-04-18
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0504027&r=all
268. Multiple Critiques of Woodford’s Model of a Cashless
Economy
David Eagle (Eastern Washington University)
Woodford’s (2003) model of a cashless economy is the basis for
his book Interest and Prices. Since Woodford assumes complete
markets, this paper explicitly includes state-contingent
securities with either temporary money or a cash-in-advance
constraint to analyze Woodford’s logic. This analysis finds
four logical problems with Woodford’s analysis: (1)
Woodford’s assumption that his solution is bounded is
inappropriate. (2) Any finite version of Woodford’s model is
incomplete. (3) Woodford’s central bank does not control
nominal interest rates. (4) Woodford argument that interest rates
determine prices and that prices affect the interest rate is
circular and hence invalid.
Keywords: cashless economy, monetary economics, pegging interest
rates, central banking
JEL: E52 E42 E58 E44 E31
Date: 2005-04-19
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0504028&r=all
269. Some Novel Implications of Replacemnt and Scrapping
Georgios Bitros (Athens University of Economics & Business)
The emphasis of capital theory in recent decades has moved away
from the implications of useful life as an important economic
variable and has turned on the microeconomic and macroeconomic
consequences of investment irreversibilities. Thus the voluminous
literature that has developed ignores the marked difference be-
tween replacement and scrapping and glosses over their
significant implications for microeconomic and aggregate dynamics.
This paper highlights the gains in explana-tory power that
result when useful life, replacement and scrapping are placed in
the center of the analysis. It does so by considering an economy
with two representative firms that differ only in that the one
applies replacement and the other scrapping. Among other
interesting findings, at the microeconomic level it turns out
that the de-mand for replacement investment is not invariant with
respect to the type of capital policy being applied, whereas at
the macroeconomic level it is shown that we cannot obtain
consistent aggregates of capital stock and replacement investment.
Keywords: Capital, investment, service life, replacement,
scrapping
JEL: E22
Date: 2005-04-21
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0504029&r=all
270. A cross sectional analysis of ship maintenance expenses
Georgios Bitros (Athens University of Economics & Business)
Manolis Kavussanos (Athens University of Economics &
Business)
This paper introduces an econometric model to explain the
determinants of expenditure in ship maintenance and repair. The
data refer to 112 vessels of different types that operated in
1999 and were collected from ten Greek ship owning and management
companies. On the meth-odological plain the best functional form
is obtained when estimating a semi log- linear model. As expected
from theory, the empirical results show that maintenance
expenditure is positively related to utilization, age, and size.
In addition the effect of age is found to be stronger on vessels
younger than 20 years. This may be due to the fact that vessels
less than 20 years old can be sold more easily in the second-hand
market, whereas older vessels have a shorter lifetime and are
also constrained by safety regulations. Therefore, ship owners
are more reluctant to spend more once the vessel passes its 4th
and especially its 5th special survey. To trace the effect of
company poli-cies we included in the model company dummy
variables. We found that such effects are present particularly
when stores expenses are estimated separately. In turn, this
suggested that company policies have still some control on
maintenance expenses. Another result is that the elasticities of
maintenance expenses with respect to utilization, age, and size
at least in 1999 were uniformly less than one, thus revealing the
existence of significant economies of scale. And still another
result is that the type of ship, the flag, the classification and
even the yard where maintenance takes place are significant
determinants of the respective outlays.
Keywords: ship maintenance expenses, utilization
JEL: E
Date: 2005-04-21
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0504030&r=all
271. External Debt and Pro-Poor Growth
Rolf Maier
To reveal effects and consequences of high indebtedness on
income poverty, this paper explores empirically a linear and non-
linear impact of external debt on pro-poor growth in developing
and transitional countries. To examine this hypothesis, we test
the distribution effect of external debt to GDP, external debt to
exports, and debt services to exports on the poorest 20 and 20 to
40 percent in a cross-country approach. In addition, we estimate
the total effect, i.e. the distribution and growth effect, to
analyse potential trade-offs between the impact of unsustainable
external debt levels on poverty through overall economic growth
and via distribution. To test the poverty effects, we collect an
irregular and unbalanced panel of time-series cross-country data
on the first and second quintile of 58 developing and
transitional countries for the period 1970 – 1999. We apply two
econometric specifications, a growth equation and a system GMM
estimation, to cover econometric issues, cross-country variation
and dynamic aspects of within-country changes of the income of
the poor. Empirical findings of the impact of the debt indicators
on pro-poor growth have to be interpreted carefully due to
inconsistent results of the sensitivity analyses. Thus results do
not indicate an optimal external debt level with respect to
pro–poor growth. On the contrary, higher external debt levels
are associated with negative effects on the level of the income
of the poorest 40 percent without exhibiting any significant
effects on the growth rates. Thus concise policy recommendations
with respect to debt sustainability levels and debt relief are
difficult. A cautious conclusion would be that debt relief may
affect the poor positively, but seems not to be a sufficient
policy instrument for improved growth rates of the income of the
poorest 40 percent. This policy proposal would be in line with
calls for more poverty-targeted capital inflows, as even total
debt relief would release only insufficient resources for poverty
reducing activities. With this interpretation, however, we
abstract from political economy and bad governance issues which
may prevent poverty reducing debt relief initiatives.
JEL: E
Date: 2005-04-21
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0504031&r=all
272. Mathematics and Economics: Use, Misuse, or Abuse? From
Walrasian Deductivism to Demaria's Hypothetical Inferences
Francesco Boldizzoni (Universita Bocconi)
Arnaldo Canziani (Universita di Brescia)
The development of a mechanistic analytical approach – since
mid-19th century to WWI, and beyond – is a well-known story in
European economic thought, the story of Cournot, Jevons, Walras,
Edgeworth, Pareto, and many others. We could refer to this
tradition as “mathematical deductivism”, i.e. the use of
mathematics as a demonstrative tool, which implies plenty of
axioms and theorems, generally connected to maximizing behaviours.
But along the 20th century, both the diffusion of more
sophisticated mathematics and ‘political’ circumstances –
mainly the Keynesian claim to build workable theories – opened
a new phase, the “mathematical descriptivism”: mathematics
started to be used to give form to the economic matter, and to
satisfy the simplest requirements of economic policy as well.
Contrary to these vulgatae, a third use of mathematics could be
anyway suggested, the approach based on “multiple
indeterminations”. Within such a framework, economic dynamics
is treated in more and more flexible ways by n degrees of freedom,
so reflecting the stochastic complexity of the economic reality.
To carry out this task, the paper goes through the work of three
Italian pioneers of the 20th century (Demaria, Brambilla, De
Finetti) analyzing the interactions between social exogenous
variables and their endogenous effects.
JEL: B23 B40 C00 C60
Date: 2005-04-16
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpmh:0504003&r=all
273. The impact of coordination and information on transport
procurement
Xavier Brusset (Universite Catholique de Louvain)
Transport cost is second in importance after production cost in
industry. It is the purpose of the present paper to study the
impact of information sharing and contractual instruments between
a supply chain and its transport suppliers. After reviewing the
literature, we propose a model to measure the benefits in terms
of transport cost and standard deviation of transport cost. We
evaluate three scenarios over one period reiterated for a shipper
carrier two-echelon model with a mix of long- term and short-term
procurement strategies: perfect information, asymmetric
information and private information at one level of the supply
chain. We evaluate the transfer in rent between carrier and
shipper according to the information known and give some insights
on optimal contract parameters.
Keywords: Supply chain management, coordination, contracts,
information sharing, game theory, mechanisms
JEL: D1 D2 D3 D4
Date: 2005-04-21
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpmi:0504007&r=all
274. Poverty and Inequality in Rural Assam An Indicative Study
of Seven Villages in Udalguri Subdivision, Assam (India)
SK Mishra (Department of Economics, North Eastern Hill
University, Shillong India)
Prasen Daimari (Department of Economics, North Eastern Hill
University, Shillong India)
This study is based on primary data collected from randomly
chosen 182 households inhabiting seven sample villages in the
Udalguri subdivision, Assam (india). It indicates that at least
35.85 percent of the population (and 33.52 percent of households)
in the sample villages is below poverty line (at Rs. 400 per
capita per month). On the other hand, no more than 39.5 percent
of the people (and 37.36 percent households) is likely to stand
under the poverty line (at Rs. 425 per capita per month). The
observed values of Gini index in the sample villages are
considerably high. In the first five villages the Gini index is
41.84 while in the last two villages it is 48.69. Overall the
value of Gini index in the sample villages is 44.31. The prime
reasons of poverty are excessive dependence on primary sector,
disguised unemployment, poor development of marketing facilities,
connectivity and power supply, poor agricultural productivity,
absence of any significant manufacturing activities, etc
resulting into an hourglass shaped occupational distribution.
Keywords: Poverty, Inequality, Rural economy, Assam, India,
Primary data
JEL: D31 D63 I32 Q12 Q15
Date: 2005-04-18
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpot:0504007&r=all
275. CONSERVATION OF NON-RENEWABLE RESOURCES IN INDIA
Rahul Shastri (National Akademi of Development)
Prabha Panth (Osmania University)
Aubrey Moss (Osmania University)
This study finds that the consumption of minerals and oil
reserves of India has grown several times faster than the GNP.
This has reduced the estimated reserves of several Non-renewable
Resources (NRRs), whose estimated life spans in India vary from 9
to 47 years. It uses the Liontief Input Output tables to
decompose the gross demand for NRRs, and finds that private
consumption expenditure is responsible for nearly half of their
demand, followed by investment (28%), and exports (12%). However,
the NRR intensity per rupee of expenditure is twice as high in
investments and exports when compared to private consumption.
Imports meet about half of the demand for NRRs in the Indian
Economy. Direct imports of NRRs which were about 28% of total
imports in 1989-90, satisfied about 35% of the total demand for
NRRs in the Indian Economy. Other imports had an NRR content
which met about 11% of the total NRR demand. In general, the NRR
intensity of non-NRR imports is much higher than the NRR
intensity of exports, indicating that India's foreign trade
conserves Non-renewable resources on the whole. Looking at the
different industrial sectors, it is found that the demand for
NRRs is highly skewed, with about half of the total demand for
NRRs being accounted for by three sectors, and 86% of the NRR
demand being due to only nine sectors. Any strategy aiming to
conserve non-renewable resources should concentrate on these
sectors. Consumption expenditure in about 20 sectors of
consumption was more NRR intensive (per rupee spent at 1989- 90
prices) than others. Likewise, exports in about 11 sectors were
more NRR intensive than the average. An economic strategy to
conserve non- renewable resources would do well to attempt to
reallocate expenditures and exports away from these sectors to
other sectors that are less NRR intensive.
Keywords: non-renewable resources, conservation, Liontief Input
Output Tables, exponential reserve index, Indian
economic growth, life span, Liontief Inverse, limits to
growth
JEL: P Q Z C6 D5 D9
Date: 2005-04-18
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpot:0504008&r=all
276. THE SPANISH PENSION SYSTEM: ISSUES OF INTRODUCING NOTIONAL
DEFINED CONTRIBUTION ACCOUNTS
CARLOS VIDAL-MELIA (University of Valencia Spain)
INMACULADA DOMINGUEZ-FABIAN (University of Extremadura
Spain)
There are two aims to this paper: firstly, to provide an
objective technical assessment of the current situation of the
contributory pension system in Spain and its prospects for the
future, and secondly, to look at the issues surrounding the
introduction of a system of notional defined contribution
accounts. To this end we explain the basic elements upon which
the current system is based and show its main indicators, then
set out some of its fundamental problems. Following this we look
at the most relevant research work, where forecasts can be found
that will give us a clear idea of the system's financial
sustainability. Finally we put forward an argument as to why a
notional accounts system could be a valid alternative for
reforming the current system, and suggest which formula or group
of formulas would best fit the profile of contributor-beneficiary
risk and what the transition process would be
Keywords: Retirement, Pay-as-you-go, Internal Rate of Return (
IRR), Financial sustainability.
JEL: H55 J26
Date: 2005-04-18
URL: http://d.repec.org/n?u=RePEc:wpa:wuwppe:0504006&r=all
277. Enterprise, Growth and Inequality in the Rural Economy of
Assam : A Study of Seven Villages in Udalguri Subdivision
Prasen Daimari (Dept. of Economics, NEHU, Shillong)
SK Mishra (Department of Economics, North Eastern Hill
University, Shillong India)
Based on the primary data collected from 182 rural households
from seven villages (five of which are inhabited by indigenous
population and the rest two are inhabited by immigrants Muslim
population from Bangladesh) this study aims at knowing if
cultural variables make a difference to economic performance of
these households. We find that the households of two groups of
villages (Group-1 consisting indigenous population and Group-2
consisting the immigrants from Bangladesh) can be discriminated
among themselves on the criteria of farming efforts (the inputs
they apply to agriculture and the output they raise on the land)
as well as the sources of income harnessed by them. The
inhabitants of Group-2 villages, once they have enough land to
cultivate, practise commercial agriculture for the market to earn
higher income, but the inhabitants of the Group-1 villages still
continue with the traditional agriculture, chiefly with an
objective to sustenance, in spite of having enough land to
cultivate. The land resources make little difference to economic
achievements across the two groups of villages. In short, the
farmers of Group-2 villages, whenever feasible, are enterprising.
Secondly, most of the farmers in Group-2 villages apply family
labour for supervision, management and marketing of the produce.
To work on farms they hire labourers abundantly available in the
village itself and in other villages around. Thirdly, many
households in the Group-1 villages derive income from service and
orchards (which characterizes an extensive use of land). On the
other hand, most of the households of the Group-2 villages (who
own land) use land intensively. Fourthly, many inhabitants of
Group-2 villages, in spite of being economically well off, are
thrifty. They save to invest or to tide over the adversities and
eventualities. Inhabitants of Group-1 villages spend less owing
to the paucity of resources. But whenever the resources permit,
they do spend lavishly. As a matter of fact, their expenses on
festivities are significant. On the other hand, the inhabitants
of the Group-2 villages are frugal. Lastly, there is a more acute
inequality in income distribution in the Group-2 villages than in
the Group-1 villages. This inequality is the result of
agricultural growth that has come to a few resourceful and
enterprising farmers in the Group-2 villages. Agricultural
development often results into enhancement of inequality. It is
not scale neutral, nor does it preserve the original distribution
of productive resources in its. By altering the original
distribution of productive resources in favour of the more
enterprising and the more rich, growth accentuates inequality.
This tendency has been observed in the Group-2 villages.
Keywords: Assam, India, cultural variables, economic performance,
farming, rural economy
JEL: D31 D63 I32 Q12 Q15
Date: 2005-04-21
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpur:0504004&r=all
278. Una Aproximacion Microeconometrica a los Determinantes de
la Eleccion del Modo de Transporte. (A Microeconometric
Approach to the Determinants of Travel Mode Choice)
Pablo M Garcia (Centro de Estudios para la Produccion)
The transportation system is a fundamental component of the
urban economic development, with its generating feature of
negative supply externalities standing out (and, as a result, of
the satisfied demand for some kind of this supply’s structure)
related to congestion and environmental pollution. In this
context, the paper studies customers’ reaction in light of
changes in the relative prices, to thus evaluate the effect of
different political measures. For that reason, a discrete choice
model has been designed which reflects the election of travel
mode used by commuters around the city of Buenos Aires.
Keywords: Transportation system, discrete choice models,
econometrics, urban economics.
JEL: C5 L9
Date: 2005-04-21
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpur:0504005&r=all
279. What Price Compromise? Testing a Possibly Surprising
Impliction of Nash Bargaining Theory
John Bone
John Hey
John Suckling
This paper provides a very simple experimental test of a
prediction of Nash Bargaining Theory that seems counterintuitive.
The context is a simple bargaining problem between two players
who have to agree a choice from three alternatives. One
alternative favors one player and a second favors the other. The
third is a fair compromise, but is excluded as an agreed choice
by Nash Bargaining Theory. Our experimental results show that
agreement on this third outcome occurs rather often. So the Nash
theory is not well-supported by our evidence, although neither is
a Strategic explanation of the data. The Nash-precluded outcome
appeals because of its compromise nature; indeed, players are
prepared to pay a price which is (according to the Nash theory)
irrationally high, in order to reach a fair compromise.
URL: http://d.repec.org/n?u=RePEc:yor:yorken:05/05&r=all
280. Are People in Groups More Farsighted than Individuals?
John Bone
John Hey
John Suckling
A dynamic decision making experiment recently conducted on
individuals suggested that people may look ahead but seem either
unable or unwilling to predict their own future behaviour. In
order to distinguish between these two possibilities, we repeated
the experiment with pairs of individuals. The experiment
consisted of two decision nodes (interleaved with two chance
nodes), with one of the pair choosing at the first decision node
and the second of the pair choosing at the second. Given the
structure of the experiment, it was simple for the first player
to predict the decisions of the second player. Nevertheless, the
decisions of the first player indicate strongly that the first
player does not in fact do so. It seems that people are unwilling
to predict not only their own future behaviour but also the
future behaviour of others.
Keywords: Planning; prediction; dynamic decision making; pairs;
individuals
JEL: C91 C92 D81 C61
URL: http://d.repec.org/n?u=RePEc:yor:yorken:05/06&r=all
281. Portfolio Diversification, Proximity Investment and City
Agglomeration
WILLIAM N. GOETZMANN (Yale School of Management -
International Center for Finance)
MASSIMO MASSA (INSEAD - Department of Finance)
ANDREI SIMONOV (Stockholm School of Economics - Department
of Finance)
We study the puzzle of portfolio underdiversification and
proximity investment from a novel perspective, linking it to the
process of urbanization. We find that urban portfolios are more
focused - i.e., less diversified and more concentrated in \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\'close\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\' stocks.
We explain it in terms of the process of \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\'professi
onal specialization\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\' that characterizes urban environments. We test this
against a number of alternative theories: financial
sophistication, social competition and hedging non-financial risk.
We show that the very same factors behind the drive to city
agglomeration also affect both the degree of portfolio
diversification and proximity investing by influencing investor
information and risk.
JEL: G11 G14
Date: 2005-04-14
URL: http://d.repec.org/n?u=RePEc:ysm:somwrk:ysm452&r=all
282. Short-Sales in Global Perspective
WILLIAM N. GOETZMANN (Yale School of Management -
International Center for Finance)
ARTURO BRIS (Yale School of Management)
NING ZHU (University of California, Davis - Graduate School
of Management)
Short-selling differs significantly around the world, and
practice depends not only on regulatory structure but upon costs
and tax considerations. Our survey of world markets suggests that,
while as much as 93 percent of the world\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
's equity market by capitalization is shortable, there are
particular regions of the world where it is difficult to take a
short position. These include several countries in Southeast Asia
and South America. When dual listings in markets allowing short-
sales are considered, the capitalization that is potentially
shortable increases to 96 percent. In this paper, we examine what
factors in the global equity universe are not shortable and
consider the implications for long-short strategies tied to
global indices and futures instruments. We find important periods
when an index of non-shortable securities is a major determinant
of the global equity portfolio. We ask whether short-sales
constraints are binding on global index arbitrage.
Date: 2005-04-14
URL: http://d.repec.org/n?u=RePEc:ysm:somwrk:ysm453&r=all
283. Why Do Individual Investors Hold Under-Diversified
Portfolios?
WILLIAM N. GOETZMANN (Yale School of Management -
International Center for Finance)
ALOK KUMAR (University of Notre Dame - Department of Finance)
This study examines the diversification decisions of more than
60,000 individual investors during a six year period (1991-96) in
recent U.S. capital market history. The majority of investors in
our sample are under-diversified and the extent of under-
diversification is more severe in retirement accounts. Investors\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\' personal characteristics, their stock preferences, and
their behavioral biases jointly influence their diversification
choices. Younger, lower-income (less wealthy), and relatively
less sophisticated investors and those who follow price trends,
prefer local (familiar) stocks, and exhibit over-confidence hold
relatively less diversified portfolios. Under-diversified
investors exhibit strong style and industry preferences and they
also prefer more volatile and positively skewed stocks.
Furthermore, we find some evidence to support the asymmetric
information hypothesis for under diversification. In contrast, we
find that factors such as small portfolio size, transaction costs,
and search costs are unlikely determinants of investors\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\' diversification choices. The unexpectedly high
idiosyncratic risk in investors\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\' portfolios results in a welfare loss.
JEL: G11 G12
Date: 2005-04-14
URL: http://d.repec.org/n?u=RePEc:ysm:somwrk:ysm454&r=all
284. Will History Rhyme? The Past as Financial Future
WILLIAM N. GOETZMANN (Yale School of Management -
International Center for Finance)
History demonstrates that global capital markets can contract as
well as expand. A long-term view of finance suggests that we
should prepare for periodic segmentation as well as integration
of markets in the 21st Century. Anti-capitalist ideologies have
historically been the vectors of attack on the cross-border flow
of capital, however the fundamental cause may actually be
domestic hostility towards foreign ownership and control. The
roots of the conflict between domestic interests and foreign
investors may be inherent in global equilibrium models. In a
frictionless capital market, foreigners will always own a greater
proportion of a small economy\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\
\\\\'s assets. By the same token, domestic investors in small
economies will always seek to export most of their capital. This
equilibrium is at odds with a stable condition of national
ownership and control of assets.
JEL: N23 N24 F3
Date: 2005-04-14
URL: http://d.repec.org/n?u=RePEc:ysm:somwrk:ysm455&r=all
285. Measurement Theory and the Foundations of Utilitarianism
John A. Weymark (Department of Economics, Vanderbilt
University)
This article reconsiders the Harsanyi--Sen debate concerning
whether Harsanyi is justified in interpreting his Aggregation and
Impartial Observer Theorems as providing axiomatizations of
utilitarianism. Sen's criticism and its formalization by Weymark
are based on the claim that von Neumann--Morgenstern utility
theory is ordinal, whereas Harsanyi's utilitarian conclusions
require cardinal utility. Proposals for overcoming Sen's
objection that appeal to formal measurement theory are considered.
It is argued that one of these proposals due to Broome and Risse
rightly points to a feature of expected utility theory that was
ignored by Sen and Weymark, but that this proposal does not
provide a normatively compelling justification for cardinal
utility. The other proposal due to Broome is shown to make use of
a strength of preference relation in addition to the axioms of
expected utility theory.
Keywords: Expected utility, measurement theory, utilitarianism,
Harsanyi, von Neumann, Morgenstern
JEL: D63 D71 D81
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:van:wpaper:0507&r=all
286. The Buffer-Stock Model and the Marginal Propensity to
Consume. A Panel-Data Study of the U.S. States.
Bent E. Sorensen (Department of Economics, University of
Houston)
Maria Jose Luengo-Prado (Northeastern University)
We simulate a buffer-stock model of consumption, explicitly
aggregate over consumers, and estimate (aggregate) state-level
marginal propensities to consume out of current and lagged income
using simulated data generated by the model. We calculate the
predicted marginal effects of changing state-specific persistence
of income shocks, uncertainty of statespecific output, and
individual-level risk. Next, we estimate marginal propensities
for U.S. states using panel-data methods. We find effects of
persistence that clearly correspond to the predictions of the
model and while the effect of state-level uncertainty cannot be
determined precisely, indicators of individual-level uncertainty
have strong effects consistent with the model. Overall, the
buffer-stock model clearly helps explain differences in consumer
behavior across states.
Keywords: Buffer-stock, Consumption, Precautionary saving.
JEL: E21
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:hou:wpaper:2005-02&r=all
287. U.S. Banking Deregulation, Small Businesses,and Interstate
Insurance of Personal Income
Bent E. Sorensen (Department of Economics, University of
Houston)
Yuliya Demyanyk (Department of Economics, University of
Houston)
Charlotte Ostergaard (Norwegian School of Management and
Norges Bank)
We estimate the effects of deregulation of U.S. banking
restrictions on the amount of interstate personal income
insurance during the period 1970–2001. Interstate income
insurance occurs when personal income reacts less than one-to-one
to state-specific shocks to output. We find that income insurance
improved after banking deregulation, and that this effect is
larger in states where small businesses are more important. We
further show that the impact of deregulation is stronger for
proprietors’ income than for wage income. Our explanation of
this result centers on the role of banks as a prime source of
small business finance and on the close intertwining of the
personal and busi- ness finances of small business owners. Our
analysis casts light on the real effects of bank deregulation, on
the insurance function of banks, and on the integration of bank
markets.
Keywords: Financial deregulation, integration of bank markets,
interstate risk shar-ing, small business finance.
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:hou:wpaper:2005-03&r=all
288. Net Capital Flows and Productivity: Evidence from U.S.
States
Sebnem Kalemli-Ozcan (Department of Economics, University of
Houston)
Bent E. Sorensen (Department of Economics, University of
Houston)
Ariell Reshef (New York University)
Oved Yosha
We study net capital flows between U.S. states. We present a
simple neoclassical model in which total factor productivity (TFP)
varies across states and over time and where capital freely
moves across state borders. In this framework capital flows to
states that experience a relative increase in TFP thus creating
net cross-state capital ownership positions. Net ownership
positions converge to zero over time in the absence of further
TFP movements. While TFP can not be directly observed, we can
identify states with high TFP growth as states with high output
growth. By comparing the level of personal income to output, we
construct indicators of net capital flows into a state. We then
examine empirically if the level of net capital flows between
states following relative movements in TFP corresponds to the
predictions of the model and whether net ownership positions tend
to converge to zero. Our empirical results imply large flows of
capital between states; for example, we find that a state with
annual per capita output growth 1 percent higher than the average
state over 10 years would attract capital in the amount of $9,900
per capita over those 10 years. These magnitudes are in close
agreement with the predictions of the model. We conclude that
frictions associated with borders are likely to be the main
explanation for “low” international capital flows.
Keywords: regional net capital flows, ownership, dividend income,
historical income, net factor income.
JEL: F21 F41
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:hou:wpaper:2005-04&r=all
289. E-POLCA to control multi-product, multi-machine job shops
Vandaele N.
Claerhout D.
van Nieuwenhuyse I.
We propose a supporting framework for the material control
system Paired-cell Overlapping Loops of Cards with Authorization (
POLCA), which combines the advantages of push systems and pull
systems. In our load based version of the POLCA control system,
we rely on a multiproduct, multi-machine queueing network to
determine release authorizations and allowed workloads. We report
on our experiences in a metal shop, taken from Spicer Off-Highway
Products Division, part of Dana Corporation. They are
implementing an E-POLCA system in a paperless -cardless-
environment.
Date: 2005-03
URL: http://d.repec.org/n?u=RePEc:ant:wpaper:2005007&r=all
290. INTERTEMPORALLY NON-SEPARABLE MONETARYASSET RISK ADJUSTMENT
AND AGGREGATION
William Barnett (Department of Economics, The University of
Kansas)
Shu Wu (Department of Economics, The University of Kansas)
Modern aggregation theory and index number theory were
introduced into monetary economics by Barnett (1980). The widely
used Divisia monetary aggregates were based upon that paper. A
key result upon which the rest of the theory depended was
Barnett??s derivation of the user-cost price of monetary assets.
To make that critical part of Barnett??s results available
prior to publication of that paper in the Journal of Econometrics,
Barnett repeated that proof two years earlier in Economics
Letters. Both papers have become seminal to the subsequent
literature on monetary asset quantity and user cost aggregation.
The extension of that literature to risk with intertemporally non-
separable preferences now has become available in a working paper
by Barnett and Wu (2004), and that paper will appear in volume 1,
number 1 of the new journal, Annals of Finance. We are making
available the key results from that paper below, without the
proofs, which will be available in the longer paper.
Keywords: User costs, Monetary Aggregation, Risk, Pricing kernel,
CAPM
JEL: E41 G12 C43 C22
Date: 2004-06
Date: 2004-06
URL: http://d.repec.org/n?u=RePEc:kan:wpaper:200405&r=all
291. AN INTERVIEW WITH FRANCO MODIGLIANI
William Barnett (Department of Economics, The University of
Kansas)
Robert Solow (MIT)
Date: 2004-06
Date: 2004-06
URL: http://d.repec.org/n?u=RePEc:kan:wpaper:200407&r=all
292. SINGULARITY BIFURCATIONS
Yijun He (Department of Economics , Washington State
University)
William Barnett (Department of Economics, The University of
Kansas)
equation models represent an important class of macroeconomic
systems. Our ongoing research (He and Barnett (2003)) on the
Leeper and Sims (1994) Euler equations macroeconometric model is
revealing the existence of singularity-induced bifurcations, when
the model??s parameters are within a confidence region about
the parameter estimates. Although known to engineers, singularity
bifurcation has not previously been seen in the economics
literature. Knowledge of the nature of singularity-induced
bifurcations is likely to become important in understanding the
dynamics of modern macroeconometric models. This paper explains
singularity-induced bifurcation, its nature, and its
identification and contrasts this class of bifurcations with the
more common forms of bifurcation we have previously encountered
within the parameter space of the Bergstrom and Wymer (1976)
continuous time macroeconometric model of the UK economy. (See, e.
g., Barnett and He (1999, 2002)).
Date: 2004-10
Date: 2004-10
URL: http://d.repec.org/n?u=RePEc:kan:wpaper:200412&r=all
293. Multilateral Aggregation-Theoretic Monetary Aggregation
over Heterogeneous Countries
William Barnett (Department of Economics, The University of
Kansas)
We derive fundamental new theory for measuring monetary service
flows aggregated over countries within a multicountry economic
union. We develop three increasingly restrictive approaches: (1)
the heterogeneous agents approach, (2) the multilateral
representative agent approach, and (3) the unilateral
representative agent approach. Our heterogeneous agents approach
contains our multilateral representative agent approach as a
special case. These results are being used by the European
Central Bank in the construction of its Divisia monetary
aggregates database, with convergence from the most general to
the more restrictive approaches expected as economic convergence
within the euro area proceeds. Our theory is equally as relevant
to other economic unions, with or without a common currency. We
use a stochastic approach to aggregation across countries over
heterogeneous representative agents. Our theory permits
monitoring the effects of policy at the aggregate level over a
multicountry economic union, while also monitoring the
distribution effects of policy among the countries of the
multicountry area. The resulting index number theory assures
internal consistency of the data construction methodology with
the theory used in applications of the data in modeling and
policy.
Keywords: Monetary Aggregation, Aggregation over Countries,
Heterogeneous Agents, Multilateral Aggregation, EMU.
JEL: C43 C82 E41 E51 F31
Date: 2004-11
Date: 2004-11
URL: http://d.repec.org/n?u=RePEc:kan:wpaper:200413&r=all
294. Global Production Networks and Industrial Upgrading in
China: The Case in Electronics Contract Manufacturing.
Boy Luethje (Institut fuer Sozialforschung, Universitaet
Frankfurt, Germany)
The paper analyzes the networks of U.S. and Taiwan based
electronics contract manufacturers in South China, today the
world?s most important location for low-cost mass production in
the electronics industry. Based on extensive empirical research,
the paper traces the production sites, the organization of
manufacturing, and the workforce policies of contract
manufacturers in the region, and discusses perspectives and
limits of industrial upgrading, especially with regard to the
role of labor. In theoretical terms, the author attempts to
integrate an analysis of "global flagship networks" with concepts
of industrial sociology.
Date: 2004-10
URL: http://d.repec.org/n?u=RePEc:ewc:wpaper:wp74&r=all
295. Fiscal Rules and Macroeconomic Stability
Rafael Domenech (Institute of International Economics,
University of Valencia)
Javier Andres
In this paper we analyze the impact of fiscal rules on the
effectiveness of fiscal policy as a macroeconomic stabilizing
instrument. First, we review the available evidence on the
effects of fiscal policy to affect output in the short run and
real interest rates and investment and growth in the long run,
and we show how the use of fiscal rules has proved useful in
restraining debt and deficits. Secondly, we discuss if debt
consolidation rules trade off higher output instability in
exchange for lower deficits, using three alternative
representations of the intertemporal substitution mechanism in a
SDGE framework. Our main conclusion is that both the impact of
discretionary fiscal policy and the strength of automatic
stabilizers are largely unaffected by the 'tightness' of these
rules. Therefore, there is nothing in the design of fiscal rules
aimed at preventing huge and long-lasting deviations of debt from
the steady state level, which makes them an impediment to fiscal
policy carrying out its job as a significant stabilizing policy
instrument.
Keywords: fiscal rules,output volatility,automatic stabilizers
JEL: E32 E52 E63
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:iei:wpaper:0501&r=all
296. On- and off-farm labor decisions by slash-and-burn farmers
in Yucatan (Mexico)
Unai Pascual (Department of Land Economy, University of
Cambridge)
Edward Barbier (Department of Economics and Finance,
University of Wyoming)
The availability of basic assets influences peasants’ economic
behavior, their livelihood diversification strategies and their
responses to land degradation. In addition, when pressed by
economic hardships households can also expected to work more than
better off ones. Whether this implies more or less on- or off-
farm labor supply is an empirical question. This in turn can have
an asymmetric effect on poverty traps and the extent of forest
clearing under slash-and-burn farming. This paper examines the
determinants of labor allocation among forest based shifting
cultivating households in two communities from Yucatan (Mexico).
The effects of wage rates and structural socio-economic factors
are tested for both farming household heads and other family
members and their implications discussed. While the former seems
to be bound by structural factors, the latter are very sensitive
to labor market signals and show a negative elasticity to off-
farm labor supply. This calls for providing specialized training
and education programs to increase human and social capital for
household heads in order to reduce pressure on forest land and to
assist households to avoid poverty traps arising from the
predicted falling wage rates due to post-NAFTA liberalization of
rural labor markets.
Date: 2005-02
Date: 1998-01
URL: http://d.repec.org/n?u=RePEc:lnd:wpaper:062005&r=all
297. Ammonia Abatement Strategies in Livestock Production: A
Case Study of a Poultry Installation
Angus, A.J (Institute of Water and Environment, Cranfield
University at Silsoe, Bedford, MK45 4DT, UK)
Ian Hodge (Department of Land Economy, University of
Cambridge, Cambridge, CB3 9EP, UK)
This study uses a linear programming approach to compare the
potential effectiveness of uniform rules (under the Integrated
Pollution Prevention and Control Directive) and a landscape-scale
based policy for reducing ammonia (NH3) emissions and their
related impacts from a case study poultry installation. The model
incorporates a variety of potential NH3 abatement techniques. It
also incorporates the first application of a spatial model of the
diffusion of environmental impacts from NH3 emissions. This
models N deposition at a nearby nature reserve. The model finds
that the uniform rules proposed under the Integrated Pollution
Prevention and Control Directive are likely to be ineffective in
certain contexts and that a landscape-scale approach is more
suitable for reducing N deposition from livestock production
units in environmentally sensitive locations. However, the
adjustments required are associated with large reductions in net
margin. This reflects the limited range of cost-effective NH3
abatement techniques available. An alternative cost-effective
abatement technique could be to maintain a spatial buffer between
poultry production and sensitive receptors.
Keywords: Ammonia, Integrated Pollution Prevention and Control,
Broiler installations
Date: 2005-04
Date: 1998-01
URL: http://d.repec.org/n?u=RePEc:lnd:wpaper:012005&r=all
298. Sustainable Use and Management of Crop Genetic Resources:
Landraces on Hungarian Small Farms
Ekin Birol (Homerton College and Department of Land Economy,
University of Cambridge, Cambridge, UK)
Melinda Smeale (International Food Policy Research Institute,
Washington DC, USA and International Plant Genetic
Resources Institute, Rome, Italy)
Crop genetic resources are natural assets that are necessary for
future crop improvement. In isolated, marginal production
environments where markets function imperfectly, farm families
depend on them directly for food. In recognition of their
importance, international agreements such as the Convention on
Biological Diversity and the International Treaty on Plant
Genetic Resources for Food and Agriculture encourage national
governments to support their sustainable use and management, on
farms and in gene bank collections. Hungary is a signatory to
these international agreements. The aim of this study is to
contribute research-based information to support the design of
efficient and equitable conservation programmes for socially
valuable crop landraces still found on small farms in Hungary.
Landrace cultivation and richness is predicted with a Poisson
hurdle model applied to data from a statistical survey of 323
households in three pilot conservation sites. Poorer, larger farm
families with older decision-makers, who are more isolated from
market infrastructure, are more likely to grow landraces and
maintain greater landrace richness. Those managing smaller farms
with lower quality soils and less irrigation have higher
predicted probabilities of growing landraces. Findings suggest
that the development of market infrastructure may contribute to
abandonment of landraces, although specialised markets for high-
quality products merit further investigation. Where economic
development opportunities remain limited, supporting the
continued management of crop genetic resources on farms could
have positive equity implications and address other social goals,
although the full cost and benefit implications of relevant
policy instruments would need to be assessed in the context of
Hungary’s national agri-environmental programme.
Keywords: crop genetic resources, landraces, farm household
model, Poisson Hurdle model, sustainable use and
management,
Date: 2005-02
Date: 1998-01
URL: http://d.repec.org/n?u=RePEc:lnd:wpaper:022005&r=all
299. The Interaction of Working and Speculative Commodity Stocks
Carter, C.A (Department of Agricultural and Resource
Economics, University of California, Davis, USA)
Cesar L. Revoredo Giha (Department of Land Economy,
University of Cambridge, UK)
This paper models the interaction of working (also called
pipeline) and speculative commodity stocks. We model working
inventories (i.e., raw material inventories carried by processors)
based on Ramey's (1989) model of inventories as factors of
production, which allows us to represent storage under inter-
temporal price backwardation, observed in commodity markets. We
incorporate both speculative and working stocks in a simple model
to analyze the interaction and to simulate the relationship
between inter-temporal commodity price spreads and stocks. Our
model replicates common price patters found in commodity markets.
Keywords: Commodity Markets, Inventories, Competitive Storage,
Processing
Date: 2005-02
Date: 1998-01
URL: http://d.repec.org/n?u=RePEc:lnd:wpaper:032005&r=all
300. UK Sugar Beet Farm Productivity under Different Reform
Scenarios: A Farm Level Analysis
Alan W. Renwick (Land Economy Research Group, Scottish
Agricultural College, UK)
Cesar L. Revoredo Giha (Department of Land Economy,
University of Cambridge)
Mark A. Reader (Department of Land Economy, University of
Cambridge)
The purpose of this paper is to study the effect that the
imminent reform in the European Union (EU) sugar regime may have
on farm productivity in the United Kingdom (UK). We perform the
analysis on a sample of sugar beet farms representative of all
the UK sugar beet regions. To estimate the changes in
productivity, we estimate a multi-output cost function
representing the cropping part of the farm, which is the
component that would be mostly affected by the sugar beet reform.
We use this cost function to compute the new allocation of
outputs and inputs after the changes in the sugar beet quota and
price support. This are subsequently used to compute measures of
total factor productivity. Our results show slight decreases in
the productivity at the individual farm level under both quota
and price support reduction. However, when considering the
aggregate level, the reduction in the price support shows
significant increases in productivity, in contrast to the results
obtained from a reduction in quota.
Keywords: EU sugar reform; UK agriculture; UK sugar beet
production; Multi-output cost function; Total factor
productivity
Date: 2005-02
Date: 1998-01
URL: http://d.repec.org/n?u=RePEc:lnd:wpaper:042005&r=all
301. Bureaucratic Corruption and Mass Media
Suphachol Suphachalasai (Department of Land Economy,
University of Cambridge)
This paper investigates the relationship between a bureaucracy
and mass media industry, and its implications to corruption. We
develop a bureaucratic model of corruption with mass media. A
representative profit maximizing media firm seeks for corruption
news to be printed and sold. Channels through which competition
in media industry and press freedom affect equilibrium corruption
in a bureaucracy are modeled. Different degrees of media freedom
and competition affect production and employment decisions of
media firms, and this in turn affects the effectiveness of media
in monitoring corruption. Competition and freedom in media sector
also have an influence on bureaucratic structure and consequently
on equilibrium corruption. We find that the degree of competition
in media market plays a significant role in controlling
corruption. Freedom of media also reduces corruption. Empirical
results support these findings. Media competition appears to be a
more important tool to combat corruption than press freedom. The
corruption problem in Italy could be reduced to the level
experienced by France if the competitiveness of its media
industry was to be improved to the same level as that of United
Kingdom.
Keywords: Corruption, Bureaucracy, Mass Media
Date: 2005-02
Date: 1998-01
URL: http://d.repec.org/n?u=RePEc:lnd:wpaper:052005&r=all
302. Analysis of the Impact on UK Sugar Production Efficiency of
Reforming the EU Sugar Regime
Alan W. Renwick (Land Economy Research Group, Scottish
Agricultural College, UK)
Cesar L. Revoredo Giha (Department of Land Economy,
University of Cambridge)
The purpose of the paper is examining the potential implications
for the UK sugar beet sector of the EU sugar regime reform.
Although the reform has yet to be formalised, the initial
proposals centre on price and quota cuts. Using panel data from
the Farm Business Survey for England, the paper estimates two
cost functions: one for the sugar enterprise and another for the
cropping part of the farm (i.e., excludes any livestock
enterprise) and use them to analyse the impacts on profitability
and costs of three possible reform scenarios: a 25 per cent cut
in UK quota, a 25 per cent cut in price, a 40 per cent cut in
price. The results show that the largest gains in terms of
economic efficiency would be achieved under the 40 per cent price
cut; however, the models suggest that this would also lead to the
greatest reduction in production if the fixed costs of producing
sugar were not adjusted.
Keywords: EU sugar reform; UK agriculture; UK sugar beet
production; Multi-output cost function.
Date: 2005-02
Date: 1998-01
URL: http://d.repec.org/n?u=RePEc:lnd:wpaper:072005&r=all
303. Using a choice experiment to estimate the non-use values of
wetlands: The case of Cheimaditida wetland in Greece
Ekin Birol (Homerton College and Department of Land Economy,
University of Cambridge, Cambridge, UK)
Katia Karousakis (Department of Economics, University
College London, London, UK)
Phoebe Koundouri (Department of Economics, Reading
University, Reading, UK)
Despite wetlands being amongst the Earth's most productive
ecosystems, they have been degraded and lost at an unprecedented
rate globally, especially throughout the last century. In
recognition of the importance of the crucial ecological functions
and economic benefits they provide, international efforts, such
as the Ramsar Convention, and European Union level efforts, such
as the Water Framework Directive (2000/60/EC), are now in place
to ensure conservation, sustainable management and improvement of
the remaining wetlands. This paper aims to assist policy makers
in formulating efficient, effective and sustainable wetland
conservation and management policies by providing them with the
results of a valuation study using the Cheimaditida wetland in
Greece as a case study. A choice experiment is employed to
estimate the benefits of the non-use values of the Cheimaditida
wetland that accrue to the Greek public. Results from this choice
experiment reveal that there are positive and significant non-use
values of this wetland for whose conservation the public is
willing to pay. These results can be combined with private use
values of wetlands, and weighed against the costs of alternative
wetland management scenarios in order to carry out a
comprehensive cost benefit analysis. Thus they can aid in the
design of socially optimal policies for conservation and
sustainable management of the Cheimaditida wetland, with
implications for other wetlands in Greece and the rest of Europe.
Keywords: Choice experiment, non-use values, wetlands,
conditional logit model, random parameter logit mode
Date: 2005-02
Date: 1998-01
URL: http://d.repec.org/n?u=RePEc:lnd:wpaper:082005&r=all