Ce papier analyse la forte variation chronologique dans les portefeuilles agreges americains. A cet effet, nous utilisons des descriptions flexibles des preferences et des opportunites d'investissement afin de deriver les allocations tactiques, myopes et strategiques. Ces regles sont ensuite comparees aux donnees dans le cadre d'une analyse statistique formelle. Nos principaux resultats revelent que i) les regles purement myopes ou tactiques sont rejetees, ii) les portefeuilles strategiques sont supportes et iii) les facteurs Fama-French sont ceux qui reproduisent le mieux les allocations empiriques. Keywords: factorial models of returns, myopic and strategic, non- expected utility, tactical portfolio allocations , modeles factoriels des rendements, myopes et strategiques, portefeuilles tactiques, utilite non esperee Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:cir:cirwor:2005s-07&r=all 11. The Origin of the Winner’s Curse: A Laboratory Study Gary Charness Dan Levin Date: 2005-03-15 URL: http://d.repec.org/n?u=RePEc:cla:levrem:666156000000000602&r=all 12. Investment Dynamics with Common and Private Values Dan Levin James Peck Date: 2005-03-15 URL: http://d.repec.org/n?u=RePEc:cla:levrem:666156000000000607&r=all 13. Who's Who in Networks. Wanted: the Key Player Coralio Ballester Antoni Calvo-Armengol Yves Zenou Date: 2005-03-10 URL: http://d.repec.org/n?u=RePEc:cla:najeco:666156000000000586&r=all 14. Robust Mechanism Design Dirk Bergemann Stephen Morris Date: 2005-03-10 URL: http://d.repec.org/n?u=RePEc:cla:najeco:666156000000000593&r=all 15. Wishful Thinking in Strategic Environments Muhamet Yildiz Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:cla:najeco:666156000000000598&r=all 16. Contracts, Fairness and Incentives Ernst Fehr Alexander Klein Klaus M Schmidt Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:cla:najeco:666156000000000626&r=all 17. The Canonical Type Space for Interdependent Preferences Faruk Gul Wolfgang Pesendorfer Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:cla:najeco:666156000000000635&r=all 18. Revealing Preferences for Fairness in Ultimatum Bargaining James Andreoni Marco Castillo Ragan Petrie Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:cla:najeco:666156000000000644&r=all 19. UPSTREAM HORIZONTAL MERGERS, BARGAINING, VERTICAL CONTRACTS Chrysovalantou Milliou Emmanuel Petrakis Contrary to the seminal paper of Horn and Wolinsky (1988), we demonstrate that upstream firms, which sell their products to competing downstream firms, do not always have incentives to merge horizontally. In particular, we show that when bargaining takes place over two-part tariffs, and not over wholesale prices, upstream firms prefer to act as independent suppliers rather than as a monopolist supplier. Moreover, we show that horizontal mergers can be procompetitive, even in the absence of efficiency gains. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:cte:werepe:we051507&r=all 20. Subcontracting and Vertical Integration in the Spanish Cotton Industry Joan R. Roses This paper examines changes in the organization of the Spanish cotton industry from 1720 to 1860 in its core region of Catalonia. As the Spanish cotton industry adopted the most modern technology and experienced the transition to the factory system, cotton spinning and weaving mills became increasingly vertically integrated. Asset specificity more than other factors explained this tendency towards vertical integration. The probability for a firm of being vertically integrated was higher among firms located in districts with high concentration ratios and rose with size and the use of modern machinery. Simultaneously, subcontracting predominated in other phases of production and distribution where transaction costs appears to be less important. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:cte:whrepe:wh051302&r=all 21. The human capital heterogeneity at the Russian labor market Borisov Gleb The study raises the problem of human capital heterogeneity at the Russian labor market caused by non-random distribution of unobservable skills across the population of a transition country. At the beginning of the transition, people who were grown up in different times or cultures have distinct moral norms, behavioral patterns, preferences and the knowledge. This results in the differences in unobservable abilities and earnings capacity of people. We argue that cohort, a pre-transition occupation, an urban place of birth, and nationality might serve as proxies for unobservable skills in the transition. The cohort effects were separated by two ways. According to the first one, the logarithm of the real wages index was used as a proxy for current period. The second one is based on an assumption on the form of age- earnings profiles in Russia. The estimation results reveal the significance of all the proxies for unobservable abilities and the robustness of estimates. At the same time, conditioning of the effects of cohort and pre-transition occupation on gender is discovered. Keywords: Russia, transition, labor market, human capital, heterogeneity, vintage effect, cohort effect, earnings function, identification problem JEL: J31 O15 P21 P27 Date: 2005-02-17 URL: http://d.repec.org/n?u=RePEc:eer:wpalle:01-151e&r=all 22. Achieving stability in heterogeneous societies: multi- jurisdictional structures, and redistribution policies Savvateev Alexey Consider a “linear world” populated by several agents. These agents’ locations are identified with optimal variety of a horizontally differentiated local public good. Agents are to be partitioned into several communities (hereafter, groups), and each group chooses a variety of public good to be produced and consumed by members of that group via the majority voting procedure. It is shown that a stable partition may fail to exist, where stability means that no potential group would like to secede and form a new community. At the same time, compensation schemes are proposed which guarantee the existence of a stable partition. Small societies are studied in detail, as well as certain special types of distributions of agents’ locations. Keywords: Russia, stability, partitions, redistribution, core of a cooperative game JEL: D70 H20 D73 Date: 2004-12-25 URL: http://d.repec.org/n?u=RePEc:eer:wpalle:04-13e&r=all 23. Determinants of unemployment duration in Ukraine Kupets Olga This paper presents first evidence on the determinants of unemployment duration in Ukraine between 1997 and 2003, using individual-level data from the first wave of the Ukrainian Longitudinal Monitoring Survey (ULMS -2003). It investigates the conditional probability of an individual leaving unemployment to employment or economic inactivity in any particular month of his spell out of work by estimating it in a discrete time independent competing risks framework with flexible baseline hazard rates and gamma-distributed unobserved heterogeneity. The results in all specifications indicate no significant effect of receiving unemployment benefits but significant negative effect of having income from casual activities, subsidiary farming, household income or pension on the hazard of re-employment. Multivariate analysis also suggests that policies to reduce long-term unemployment should focus on older workers, less educated individuals, residents of small towns and rural area in the regions with relatively high unemployment rates. Keywords: Ukraine, long-term unemployment, unemployment insurance, Ukraine, semiparametric duration analysis, flexible baseline hazard JEL: J64 J68 P23 Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:eer:wpalle:05-01e&r=all 24. Impact of joining the WTO on Ukrainian ferrous metallurgy Eremenko Igor Lisenkova Ekaterina The goal of our research is to study Ukraine’s accession to the WTO referring to one particular sector discussed most hotly in this context: metallurgy. Ukrainian metallurgy has two remarkable features: from one side, steel producers receive substantial subsidies; from the other side, Ukrainian metallurgical exports have been permanently brought under antidumping investigations. The purpose of this research is to study effects of both cases and find impact on metallurgy and total welfare. Results of partial equilibrium model shows that on balance the total gains for the Ukrainian economy are calculated to be above USD 343 million, or 1.1% of GDP, hence, in subsidies- antidumping duel there is no trade-off for Ukrainian economy. Keywords: Ukraine, metallurgy, WTO, antidumping, subsidization JEL: F13 F14 L61 H21 H25 Date: 2005-02-22 URL: http://d.repec.org/n?u=RePEc:eer:wpalle:05-02e&r=all 25. Models of supply functions competition with application to the network auctions Vasin Alexander Vasina Polina This paper studies different auctions of supply functions in a local market and a simple network market of a homogeneous good with two nodes and a fixed transmission loss per unit of the good. We study problems of existence, uniqueness and computation of Nash equilibria for these models. We also obtain the estimate of Nash equilibria deviation from the Walrasian equilibrium for each variant. We consider the problem of optimal auction organization from the point of view of the social welfare maximization. Keywords: Russia, supply function auction, Cournot, Vickrey, Russian electricity market JEL: D44 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:eer:wpalle:05-03e&r=all 26. China's Innovation System Reform and Growing Industry and Science Linkages Kazuyuki Motohashi Xiao Yun In this paper, linkages of S&T activities between industry and science are investigated in the context of innovation system reforms. A firm level dataset from S&T survey at National Bureau of Statistics (NBS) of PRC for about 22,000 manufacturing firms is used for econometrics analysis of firm's S&T outsourcing activities. In transition period of China's innovation system from 1996 to 2002, firm's S&T outsourcing activities have been increased significantly. In addition, positive association between basic research oriented firms and collaboration with science sector can be found. China's innovation system was suffered from Russian model, where S&T activities at public research institutes and production activities at state owned enterprises are completely separated. However, in transition period of innovation system reform toward network type one, we can find that some firms have gained their technological capability to collaborate with universities and PRIs. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:eti:dpaper:05011&r=all 27. The Role of Multinational Firms in International Trade: The Case of Japan Kozo Kiyota Shujiro Urata This paper examines the role of multinational firms in international trade, using firm-level panel data for Japanese firms between 1994 and 2000. Our results indicate that multinational firms dominate Japanese trade. In 2000, only 13.8 percent of Japanese firms were multinationals but they accounted for 95.1 and 85.4 percent of Japanese exports and imports, respectively. Multinational firms are found to have emerged from being exporters/importers. These results imply that firms do not make the choice of either exports or FDI, unlike the findings of previous studies. Rather, exporters make a decision on whether or not to undertake FDI. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:eti:dpaper:05012&r=all 28. Canada’s Low Business R&D Intensity: the Role of Industry Composition Aled ab Iorwerth This paper looks at the reasons for Canada’s low business research and development (R&D) intensity. R&D performance across OECD countries is examined, and a detailed decomposition is undertaken of differences between Canadian and U.S. R&D levels across industries. Canada’s low aggregate R&D performance hides high research intensities in some research-intensive industries. The smaller relative size of these industries, however, combined with low R&D intensity in the motor vehicle and service industries, account for the weak aggregate R&D performance in Canada.
L’auteur examine les raisons pour le faible niveau de l’intensite en recherche et developpement (R&D) dans le secteur prive au Canada. La performance en R&D dans les pays de l’OCDE est examinee et une decomposition detaillee est faite pour les differences entre les niveaux de R&D des industries aux Etats-Unis et au Canada. La faible performance agregee du Canada en R&D cache des intensites en recherche elevees aux seins de plusieurs industries qui utilisent la R&D de facon intensive. Cependant la plus petite taille relative de ces industries en plus d’intensite tres faible dans les industries des vehicules automobiles et des services enfreignent la performance globale en R&D au Canada. URL: http://d.repec.org/n?u=RePEc:fca:wpfnca:2005-03&r=all 29. Methods of Evaluating University Research Around the World Aled ab Iorwerth This paper looks at the increasing trend around the world to evaluate the quantity and quality of universities’ research output. Evaluations can provide a useful role in clarifying the performance of university research, and give incentives to increase research output and quality because of increased competition between institutions. Methods of evaluating university research output deployed across countries are discussed.
Il y a une tendance croissante dans le monde a evaluer la quantite et la qualite de la recherche universitaire. Les evaluations clarifient la performance des universites, et peuvent fournir des incitations a augmenter la qualite et la quantite de la recherche en augmentant la concurrence entre les institutions. L’auteur examine les differentes approches couramment utilisees dans le monde pour evaluer la recherche universitaire. URL: http://d.repec.org/n?u=RePEc:fca:wpfnca:2005-04&r=all 30. Machines and the Economics of Growth Aled ab Iorwerth This paper summarizes the literature on economic growth. This literature suggests that investment in machinery and equipment ( M&E) could foster economic growth. But, because of the need to cover the fixed costs of innovating, price is higher than the marginal cost and there will be underinvestment in M&E in a perfectly competitive economy. Further arguments based on public finance are also made about why there may be underinvestment in M&E.
L’auteur fait un sommaire de la litterature sur la croissance economique. Cette litterature suggere que l’investissement dans les machines et les equipements puisse augmenter le taux de croissance economique. Mais parce qu’il y a des couts fixes a innover, le prix des machines et equipements sera superieur a son cout marginal et donc, dans une economie parfaitement concurrentielle, il y aura sous- investissement. L’auteur mentionne egalement d’autres arguments, fondes sur la recherche en economie publique, qui abondent dans le sens d’un sous-investissement en machines et equipements dans une economie en concurrence parfaite. URL: http://d.repec.org/n?u=RePEc:fca:wpfnca:2005-05&r=all 31. The Role of Education vis-a-vis Job Experience in Explaining the Transitions to Employment in the Spanish Youth Labour Market Cristina Ferna URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2003-06&r=all 32. Inflation in open economies with complete markets Marco Celentani J. Ignacio Conde-Ruiz Klaus Desmet This paper uses an overlapping generations model to analyze monetary policy in a two-country model with asymmetric shocks. Agents insure against risk through the exchange of a complete set of real securities. Each central bank is able to commit to the contingent monetary policy rule that maximizes domestic welfare. In an attempt to improve their country's terms of trade of securities, central banks may choose to commit to costly inflation in favorable states of nature. In equilibrium the effects on the terms of trade wash out, leaving both countries worse off. Countries facing asymmetric shocks may therefore gain from monetary cooperation. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2004-12&r=all 33. Millian Efficiency with Endogenous Fertility J. Ignacio Conde-Ruiz Eduardo L. Gimenez Mikel Perez-Nievas This paper studies an extension of the notion of Pareto eciency, referred to as Millian eciency, to evaluate the performance of symmetric allocations in an overlapping generations setting with endogenous fertility. The criterium of Pareto dominance underlying the notion of Millian eciency is based exclusively on preferences of those agents who are actually born, and allows only for welfare comparisons of symmetric allocations (i.e, allocations in which all living individuals of the same generation take the same decisions). The main contributions of the paper are the following. First, we provide necessary (static) and sucient (dynamic) conditions to determine whether an allocation is Millian ecient or not, and we show that the sucient conditions for dynamic eciency oered by Cass (1972) and Balasko and Shell (1980) cannot be straightforward applied when fertility is endogenous. Second, we extend the two Fundamental Theorems of Welfare Economics to a framework with endogenous population by characterizing Millian ecient allocations as the equilibria of a decentralized price mechanism. Finally, we discuss alternative extensions of the Pareto criterium that strengthen the Millian notion. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2004-13&r=all 34. Non-Catastrophic Endogenous Growth and the Environmental Kuznets Curve J. Aznar-Marquez J. R. Ruiz-Tamarit The competitive equilibrium in an endogenous growth model is not Pareto-optimal nor environmentally sustainable in presence of pollution externalities, even if costly abatement activities are allowed to be endogenously decided. In this paper we introduce the possibility of an ecological catastrophe by imposing an upper- limit to the pollutants stock. We characterize the socially optimal solution and study sustainability of the long-run balanced growth path. We find that the rate of growth depends negatively on the weight of environmental cares in utility and positively on the population growth rate. The latter effect is stronger as higher is the weight of environment in the utility function. We also identify some policies the central planner could undertake looking to guarantee sustainability. An EKC is derived in the long term using the implications of the demographic transition for the rate of population growth, and the accompanying variation in the willingness to pay for environmental quality as the economy develops. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2004-15&r=all 35. Job Satisfaction in Europe Namkee Ahn Juan Ramon Garcia Job satisfaction is an important part of overall life satisfaction among the working age population. We examine Western Europeans’ overall job satisfaction and the satisfaction levels in several job domains using the European Community Household Panel Survey (1994-2001). With respect to overall job satisfaction, wage is important. Yet, some other factors show equally or more important effects. For example, health turns out to be a single most important determinant of overall job satisfaction. Job match quality, contract type and job status are also important. With respect to the relationship between overall and job domain satisfaction, work type comes out as the most important job domain in all countries, followed by pay, working condition and job security. In analyzing determinants of each job domain satisfaction, we find some interesting results. Female workers declare higher pay satisfaction but lower work hour satisfaction, which are consistent with the hypothesis of low aspiration and greater non-market responsibility among women. Good job matches increase satisfaction levels in all job domains, but in particular with respect to pay and work type. Local unemployment rate has no effects on overall job satisfaction, but it has significant effects in two job domains, job security and work hours. Those in countries or times of high unemployment declare much lower satisfaction with job security, while they declare higher satisfaction with hours of work. Finally, even after controlling many variables which are responsible, directly and indirectly, for overall and each job domain satisfaction, there still remain large country fixed effects. Given the same observed worker and job characteristics, Austrian, Danish and Irish workers declare substantially higher satisfaction in all job domains than the workers in the Mediterranean countries. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2004-16&r=all 36. The Effect of Immigration on the Employment Opportunities of Native-Born Workers: Some Evidence for Spain Raquel Carrasco Juan Ramon Garcia Ana Carolina Ortega Spain is one of the European countries where immigration flows during the last decade have increased noticeably. The Spanish labor market institutions and the Spanish immigration policy exhibit some peculiarities which may be relevant when analyzing the impact of immigration. This paper provides a first approximation to the labor market effects of immigrants in Spain during the second half of the 1990s, the period in which immigration flows to Spain have accelerated. By using alternative datasets, we estimate both the impact of legal and total immigration flows on the employment rates of native workers, with and without the implications of the occupational and geographical mobility of immigrants and native-born workers. Using different samples and estimation procedures, we have not found a significant negative effect of immigration on the employment rates of native workers. The corresponding estimated elasticity is around -0.17, when considering only legal immigrants, and is not significant when considering both legal and illegal immigrants URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2004-17&r=all 37. Demographic change, immigration, and the labour market: A European perspective Juan F. Jimeno After a long period of high unemployment, the EU is about to face a significant change in the demographic structure of its labour force, due to a reduction in fertility rates in the past, and increasing immigration flows. There is a long standing literature of empirical studies aiming at measuring the effects of cohort sizes and of immigration flows on employment and unemployment rates and on the wage profiles of several population groups. And there are some reasons to think that these effects depend on the institutions determining the functioning of the labour market. This paper argues that population ageing may produce a reduction of employment rates in the EU15 over the next two decades, as the share of the older workers in the labour force increase. Then it discusses the reasons why, despite this direct composition effects, there may be another indirect effects of changing composition of the labour supply on population specific employment and unemployment rates. Finally, it uses cross-country data to find how the interaction between the age composition of the labour force and the share of foreign workers in the labour force, on the one hand, and labour market institutions, on the other hand, contribute to explaining international differences in age and gender- specific employment and unemployment rates. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2004-18&r=all 38. Social interactions and the contemporaneous determinants of individuals’ weight Joan Costa-Font Joan Gil Obesity and overweight are central issues in the public health debate in most developed countries. In this debate, some of the socio-economic determinants of obesity and overweight are still relatively unexplored. This paper presents an empirical examination of the possible influence of social interactions on contemporaneous obesity and (over)underweight. We apply a joint estimation model for obesity and self-image to a sample for Spain taken from the European Union household panel for 1998. Our results suggest that obesity might be in part a social phenomenon connected to individuals’ social life URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2004-19&r=all 39. Endogenous Growth, Capital Utilization and Depreciation J. Aznar-Marquez J. R. Ruiz-Tamarit We study an extended version of the one-sector AK growth model introducing adjustment and maintenance costs. Agents are allowed to under-use the installed capital and to vary the depreciation rate. The model is analyzed using particular functional forms and is solved in closed-form. We find that adjustment and maintenance costs (e?- ciency) reduce (increases) investment, depreciation, capital utilization and the rate of growth; impatience reduces the rate of growth but increases depreciation and utilization, which are also negatively related to the rate of population growth; the rate of growth appears positively correlated with the depreciation rate and the rate of capital utilization. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2004-21&r=all 40. Structural Breaks in Volatility: Evidence from the OECD Real Exchange Rates Amalia Morales-Zumaquero Simon Sosvilla-Rivero This paper analyses whether volatility changes in the real exchange rates (RERs) of the OECD industrial countries are associated with a specific nominal exchange rate regime. To that end, we examine RER behaviour during the period 1960-2003, thereby covering both the Bretton Woods system of fixed exchange rates and the adoption of generalised floating exchange rates from 1973. We make use of an econometric methodology based on Hansen’s (1997) approximation to the p-values of the supreme, exponential and average statistics developed by Andrews (1993) and Andrews and Ploberger (1994). This methodology allows us to obtain a profile of p-values and to delimit periods of stability and instability in the variance of real exchange rates. For most countries in our sample, there is evidence in favour of the non- neutrality of the nominal exchange rate regime regarding real exchange rate volatility. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2004-22&r=all 41. Linkages in international stock markets: Evidence from a classification procedure Simon Sosvilla-Rivero Pedro N. Rodriguez In this paper we propose a new approach to evaluate the predictable components in stock indices using a boosting-based classification technique, and we use this method to examine causality among the three main stock market indices in the world during periods of large positive price changes. The empirical evidence seems to indicate that the Standard & Poors 500 index contains incremental information that is not present in either the FTSE 100 index or the Nikkei 225 index, and that could be used to enhance the predictability of the large positive returns in the three main stock market indices in the world. This in turn would suggest a causality relationship running from the Standard & Poors 500 index to both the FTSE 100 and the Nikkei 225 indices. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2004-23&r=all 42. Economic Inequality in Spain: The European Union Household Panel Dataset Santiago Budria Javier Diaz-Gimenez This article uses data from the 1998 European Union Household Panel to study economic inequality in Spain. It reports data on the Spanish distributions of income, labor income, and capital income, and on related features of inequality, such as age, employment status, educational attainment, and marital status. It also reports data on the income mobility of Spanish households. We find that income, earnings, and, very especially, capital income are very unequally distributed in Spain. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2004-24&r=all 43. Cross-skill Redistribution and the Tradeoff between Unemployment Benefits and Employment Protection Tito Boeri J. Ignacio Conde-Ruiz Vincenzo Galasso We document the presence of a trade-o. between unemployment benefits (UB) and employment protection legislation (EPL) in the provision of insurance against labor market risk. Di.erent countries’ locations along this trade-o. represent stable, hard to modify, politico-economic equilibria. We develop a model in which voters are required to cast a ballot over the strictness of EPL, the generosity of UBs and the amount of redistribution involved by the financing of unemployment Insurance. Agents are heterogeneous along two dimensions: employment status — insiders and outsiders — and skills — low and high. Unlike previous work on EPL, we model employment protection as an institution redistributing among insiders, notably in favour of the low-skill workers. A key implication of the model is that configurations with strict EPL and low UB should emerge in presence of compressed wage structures. Micro data on wage premia on educational attainments and on the strictness of EPL are in line with our results. We also find empirical support to the substantive assumptions of the model on the e.ects of EPL. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2004-26&r=all 44. Economic Consequences of Widowhood in Europe: Cross-country and Gender Differences Namkee Ahn We document in this paper, the economic consequences upon widowhood using both cross- section and panel data from European Community Household Panel. Main conclusions are as what follows. First, there is a large difference across country. The widowed persons in Greece and Portugal have lowest income, less than a half of that of Austrian widowed persons. Cross-country difference decreases somewhat if we consider household income net of housing costs due to higher home- ownership in low income countries. Second, income reduction upon widowhood is in general larger among widows than widowers. The gender difference is largest in Denmark, Spain, Austria and Finland, where widowers enjoy more than 30% higher income than widows. Third, the main culprit of gender difference in income situation of widowed persons is the pension regulation. As many widowed women depend on survivorship pension as their main income source and as the survivorship pension is much lower than old-age pension in most countries, widows suffer much larger income reduction than widowers with widowhood. As current elderly women and those in many coming years lived their working ages in a world where wives and mothers worked at home, raised children and did not work in the market, they will depend mostly on survivorship pension as their main income source. Consequently, their economic situation would not improve in the medium term unless pension regulations change to improve their economic situation URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2004-27&r=all 45. The Border Effect in Spain Salvador Gil-Pareja Rafael Llorca-Vivero Jose A. Martinez-Serrano Josep Oliver-Alonso This paper analyses the border effect in Spain over the period 1995-98 using a data set on intranational trade that is unique in Europe. The results indicate that, after controlling for market size and distance, Spanish regions trade around 21 times more with the rest of Spain than they do with OECD countries. Moreover, the size of the Spanish bias is lower in the case of the Spanish regions’ exports than in the case of imports. Finally, the border effect is not uniform across Spanish regions. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2004-28&r=all 46. The Evolution of Retirement J. Ignacio Conde-Ruiz Vincenzo Galasso Paola Profeta We provide a long term perspective on the individual retirement behavior and on the future of early retirement. In a cross- country sample, we find that total pension spending depends positively on the degree of early retirement and on the share of elderly in the population, which increase the proportion of retirees, but has hardly any effect on the per-capita pension benefits. We show that in a Markovian political economic theoretical framework, in which incentives to retire early are embedded, a political equilibrium is characterized by an increasing sequence of social security contribution rates converging to a steady state and early retirement. Comparative statics suggest that aging and productivity slow-downs lead to higher taxes and more early retirement. However, when income effects are factored in, the model suggests that periods of stagnation - characterized by decreasing labor income - may lead middle aged individuals to postpone retirement URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2005-03&r=all 47. A Residential Energy Demand System for Spain Xavier Labandeira Jose M. Labeaga Miguel Rodriguez Sharp price fluctuations and increasing environmental and distributional concerns, among other issues, have led to a renewed academic interest in energy demand. In this paper we estimate, for the first time in Spain, an energy demand system with household microdata. In doing so, we tackle several econometric and data problems that are generally recognized to bias parameter estimates. This is obviously relevant, as obtaining correct price and income responses is essential if they may be used for assessing the economic consequences of hypothetical or real changes. With this objective, we combine data sources for a long time period and choose a demand system with flexible income and price responses. We also estimate the model in different sub-samples to capture varying responses to energy price changes by households living in rural, intermediate and urban areas. This constitutes a first attempt in the literature and it proved to be a very successful choice. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2005-04&r=all 48. The real picture: Industry specific exchange rates for the euro area Simon Sosvilla-Rivero Sonia Pangusion The evolution of the exchange rate of the euro vis-a-vis the currencies of the trade partners have an effect on the Euro Area's industrial price indices and, therefore, in the economy as a whole. In general, when referring to the exchange rate as a variable that affects such indices and the competitiveness, the discussion is based upon the effective real exchange rate (i. e., the euro as an index weighted with the currencies of the Euro Area?s main trade partners, being the weights assigned to each currency the proportion of each trade partner on the total trade in the Euro Area). Nevertheless, the evolution of the exchange rate of the euro vis-a-vis the US dollar, the Japanese yen or the Chinese Yuan, to name a few, could have different effects on different products or industries, because the trade weight of USA, Japan or China also varies among products or industries. Therefore, although the importance of some countries in a specific industry could be very different to its wight in the aggregate index for the whole Euro Area, the effective exchange rater indices do not take into account such fact. The aim of this paper is to construct an industry-specific effective exchange rate aggregate that accounts for such differences, taking into account the main trade partners in each industry. URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2005-05&r=all 49. Demographic Uncertainty and Health Care Expenditure in Spain Namkee Ahn Juan Ramon Garcia Jose A. Herce Usual projections of health care expenditure combine age-sex profiles of health expenditure and scenarios of population projection. However, it has been shown repeatedly that both age- sex specific health expenditures and the population structures in the future are highly uncertain and most projections turned out wrong. Therefore, the projections based on the traditional approach are often unhelpful in evaluating future health care expenditures. In this project we try to improve upon the existing literature by incorporating uncertainties in population projection and future age-sex specific health expenditure. Combining the stochastic population projection with age-specific health expenditure we obtain probabilistic distributions of health expenditure. The median projection shows that public health expenditure will increase by about 40% during the next 47 years, that is, an average annual increase of 0.74%. There is a 10% chance that the expenditure will increase by more than 66% during the projection period, which corresponds to an annual increase of 1.1%. At the optimistic side the total public health expenditure will grow only by 17% (0.35% annual) with a 10% probability. The main part of the increase in total expenditure is driven by the increase in average per-capita expenditure due to ageing. The average per-capita expenditure increases by 33%, from 980 in 2004 to 1307 euros in 2050. If we assume that real per-capita public health expenditure increases by the same rate as per-capita GDP, the share of the public health expenditure in GDP will increase from 5% today to 6.7% in 2050, solely due to demographic change. One factor that could reduce the expenditure pressure in the future is that with decreasing mortality rate there will be fewer people in their last year of life. This, combined with the fact that a major part of health expenditure is driven by decedents, could reduce future health expenditure. Our estimation suggests that distinguishing hospital costs by survival status could reduce somewhat (by about 8%) total hospital expenditure in 2049 URL: http://d.repec.org/n?u=RePEc:fda:fdaddt:2005-07&r=all 50. Price-Cost Margins and Economic Integration: How Important is the Pro-Competitive Effect? Oscar Bajo-Rubio Carmen Diaz-Roldan Antonio G. Gomez-Plana URL: http://d.repec.org/n?u=RePEc:fda:fdaeee:04-02&r=all 51. Is the foreign capital leaving industrialized countries? The case of Spain Carlos M. Fernandez-Otheo Rafael Myro URL: http://d.repec.org/n?u=RePEc:fda:fdaeee:04-03&r=all 52. Some critics to the contagion correlation test Sarai Criado Nuevo URL: http://d.repec.org/n?u=RePEc:fda:fdaeee:05-01&r=all 53. Testing the BalassA-Samuelson hypothesis in two different groups of countries: OECD and Latin America Jose Garcia Solanes Fernando Torrejon Flores URL: http://d.repec.org/n?u=RePEc:fda:fdaeee:05-02&r=all 54. The measurement of gender wage discrimination: the distributional approach revisited Coral del Rio Otero Carlos Gradin Lago Olga Canto Sanchez URL: http://d.repec.org/n?u=RePEc:fda:fdaeee:192&r=all 55. Evolving Federations and Regional Public Deficits: Testing the Bailout Hypothesis in the Spanish Case Santiago Lago-Penas URL: http://d.repec.org/n?u=RePEc:fda:fdaeee:193&r=all 56. Reconciling female labor participation and motherhood: the effect of benefits for working mothers Rocio Sanchez-Mangas Virginia Sanchez-Marcos URL: http://d.repec.org/n?u=RePEc:fda:fdaeee:195&r=all 57. Microsimulating the Effects of Household Energy Price Changes in Spain Xavier Labandeira Jose M. Labeaga Miguel Rodriguez URL: http://d.repec.org/n?u=RePEc:fda:fdaeee:196&r=all 58. Cities and the internet: the end of distance? Jordi Pons-Novell Elisabet Viladecans-Marsal URL: http://d.repec.org/n?u=RePEc:fda:fdaeee:198&r=all 59. Does neighboring "industrial atmosphere" matter in industrial location?. Empirical evidence from Spanish municipalities. Angel Alanon Rafael Myro URL: http://d.repec.org/n?u=RePEc:fda:fdaeee:199&r=all 60. Trade and Infrastructure: evidences from the Andean Community Gina E. Acosta Rojas German Calfat Renato Galvao Flores Junior (EPGE/FGV) Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:fgv:epgewp:580&r=all 61. A Model of Corporate Liquidity Andrew Carverhill Ron Anderson AbstractWe study a continuous time model of a levered ?rm with ?xed assets generating a cash °ow which °uctuates with business conditions. Since external ?nance is costly, the ?rm holds a liquid (cash) reserve to help survive periods of poor business conditions. Holding liquid assets inside the ?rm is costly as some of the return on such assets is dissipated due to agency problems. We solve for the ?rms optimal dividend, share issuance, and liquid asset holding policies. The ?rm optimally targets a level of liquid assets which is a non-monotonic function of business conditions. In good times, the ?rm does not need a high liquidity reserve, but as conditions deteriorate, it will target higher reserve. In very poor conditions, the ?rm will declare bankruptcy, usually after it has depleted its liquidity reserve. Our model can predict liquidity holdings, leverage ratios, yield spreads, expecteddefault probabilities, expected loss given default and equity volatilities all in line with market experience. We apply the model to examine agency con°icts associated with the liquidity reserve, and some associated debt covenants. We see that a restrictive covenant applied to the liquidity reserve will often enhance the debt value as well as the equity value. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp529&r=all 62. Structural Change in the German Banking System? Andreas Hackethal Reinhard H. Schmidt Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:fra:franaf:147&r=all 63. Longitudinal variable selection by cross-validation in the case of many covariates Cantoni Eva Field Chris Mills Flemming Joanna Ronchetti Elvezio Longitudinal models are commonly used for studying data collected on individuals repeatedly through time. While there are now a variety of such models available (Marginal Models, Mixed Effects Models, etc.), far fewer options appear to exist for the closely related issue of variable selection. In addition, longitudinal data typically derive from medical or other large- scale studies where often large numbers of potential explanatory variables and hence even larger numbers of candidate models must be considered. Cross-validation is a popular method for variable selection based on the predictive ability of the model. Here, we propose a cross-validation Markov Chain Monte Carlo procedure as a general variable selection tool which avoids the need to visit all candidate models. Inclusion of a “one-standard error” rule provides users with a collection of good models as is often desired. We demonstrate the effectiveness of our procedure both in a simulation setting and in a real application. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:gen:geneem:2005.01&r=all 64. Bounded-Bias Robust Estimation in Generalized Linear Latent Variable Models Czellar Veronika Karolyi G. Andrew Ronchetti Elvezio We introduce Indirect Robust Generalized Method of Moments ( IRGMM), a new simulation-based estimation methodology, to modl short-term interest rate processes. The primary advantage of IRGMM relative to classical estimators of the continuous-time short-rate diffusion processes is thet it corrects both the errors due to discretization and the errors due to model misspecification. We apply this new approach to various monthly and weekly Eurocurrency interest rate series. Keywords: GMM and RGMM estimators, CKLS one factor model, indirect inference Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:gen:geneem:2005.02&r=all 65. Social welfare effects of tax-benefit reform under endogenous participation and unemployment van Baalen Brigitte Muller Tobias This paper analyzes the effects of tax-benefit reforms in a framework integrating endogenous labor supply and unemployment. There is a discrete distribution of individuals’ productivities and labor supply decisions are limited to the participation decision. Unemployment is modeled in a search and matching framework with individual wage bargaining. We adopt an ordinal approach to social welfare comparisons and explore numerically various reform policies. For Switzerland, a participation income is shown to be an “uncontroversial” tax reform, improving social welfare according to any social welfare criterion displaying inequality aversion. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:gen:geneem:2005.03&r=all 66. Poverty, Inequality and Health: À case study of Armenia Tamara Tonoyan (Armenian Medical Institute) The paper describes the issue of the impact of poverty and income inequality on the health of the population using Armenia as a case study. In the framework of this paper author provides an overview of research relating to inequalities in health to the disadvantage of the poor, and to changes in impoverishment and income inequality associated with payments for health care. After demonstrating the logic of the investigation, the paper recapitulates the information about results of reforms that do not appear to meet all the objectives of health care policy. The paper indicates that the gains in freedom have been accompanied by the losses of many basic economic and social services that the population had come to enjoy and expect. At the same time the success of reforms applied in Armenia is often evaluated against improvements in the health status of the population. Funding shortages often means that even vulnerable groups have to pay. Thus, the principle of equity with respect to financing and access is undermined. It is emphasized that reducing poverty and income inequality should be grounded in a pro-poor growth approach, i.e. for equality to be achieved economic growth in the development process should be deliberately adapted to the needs of the poor. The paper concludes that there is undoubtedly a large gap in our knowledge on how best to reach the poor in the health sector. In order to fill this gap, more work is needed along the lines of the above studies related to health sector inequalities and public policy. There is necessity to encourage the development of insurance companies, pension funds, and funds for public health care education, which have not yet been properly undertaken. Keywords: poverty, inequality, health, income distribution JEL: D63 I11 I12 I18 Date: 2005-02-01 URL: http://d.repec.org/n?u=RePEc:got:vwldps:124&r=all 67. Automatic Price Comparison Services: A global study Genath, Heiko Bruggemann, Tobias Breitner, Michael H. Price comparison services are being used by more and more internet users worldwide to compare prices of (online-)suppliers. The characteristics of price comparison services differ internationally. Not only are they different in the reference to their scope of work. Also with regard to the technical performance or the definition of the revenue concepts great differences have been assessed. In the course of this essay criteria for global price comparison services are elaborated which are then consulted in conclusion for the construction of development categories. After reviewing of a variety of international price comparison services it turns out that classic concepts don't suffice in assessing development standards. A new concept is established which serves the global market analysis for successful price comparison services and those striving for progress. 50 countries with altogether over 230 price comparison services are classified and prospects and potentials are worked out. Keywords: Price comparison services, comparison shopping, e- commerce, internet economy, information-based and knowledge-based society JEL: F00 M21 O50 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:han:dpaper:dp-313&r=all 68. Happy Birthday! You are Insured - Differences in Work Ethics Between Female and Male Workers Skogman Thoursie, Peter (FIEF) In this paper information on individual birth dates is used as a natural experiment when estimating potential cheating behavior within the Swedish sickness insurance program. In the psychological literature there are theories why men and women react differently to ethical situations. Results in this paper are in line with these theories. The results indicate that only younger male workers cheated which supports the idea that men have lower work ethics. But additional findings also suggest that younger male workers do have some shame since they reported sick to a significant less extent the week before they had their birthday. In fact the net change in reporting sick is zero. Keywords: Reporting sick; Cheating; Work ethics; Natural experiment JEL: J22 J29 Date: 2005-03-14 URL: http://d.repec.org/n?u=RePEc:hhs:fiefwp:0203&r=all 69. Is There Really an Inverted U-shaped Relation Between Competition and R&D? Poldahl, Andreas (FIEF) Gustavsson Tingvall, Patrik (FIEF) We test whether predictions of the Aghion and Howitt (2004) model are supported by firm level data. In particular, we analyze if there is an inverted U-shaped relation between competition and R&D. Results show that the inverted U-shaped relation is supported by the Herfindahl index but not by the price cost margin. Using the Herfindahl index results suggest that breaking up monopolies increases R&D while further increases in competition most likely leads to reduced R&D. Comparing different estimators, we find that time-series based estimators typically result in less clear-cut results, probably driven by a lack of time series variation in measures of competition. Keywords: R&D; Competition; Firm size; Spillovers JEL: D40 L10 L60 O30 Date: 2005-02-27 URL: http://d.repec.org/n?u=RePEc:hhs:fiefwp:0204&r=all 70. Tax avoidance and intra-family transfers Nordblom, Katarina (Department of Economics, School of Economics and Commercial Law, Goteborg University) Ohlsson, Henry (Department of Economics, Uppsala University) To what extent do people avoid taxes on intra-family transfers ( bequests and gifts), and how would integration (unification) of the different transfers taxes affect tax avoidance? These issues are important for families and their welfare, as well as for governments and their possibilities of raising revenue from transfer taxes. In this paper we study the effects of transfer taxes on altruistic parents' transfers to their children. Using a theoretical model we find that altruistic parents do not necessarily tax minimize. However, in some cases when they do, there is an infinitely large excess burden of a transfer tax. We also find that integration of transfer taxes reduces tax avoidance. All tax avoidance is eliminated with complete integration.
Keywords: tax avoidance; bequests; inheritances; inter vivos gifts; altruism JEL: D10 D64 D91 Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:hhs:gunwpe:0164&r=all 71. Are Vietnamese Farmers Concerned with their Relative Position in Society? Carlsson, Fredrik (Department of Economics, School of Economics and Commercial Law, Goteborg University) Nam, Pham Khanh (Faculty of Development Economics, University of Economics) Linde-Rahr, Martin (Department of Economics, School of Economics and Commercial Law, Goteborg University) Martinsson, Peter (Department of Economics, School of Economics and Commercial Law, Goteborg University) This paper examines the attitude towards relative position or status among rural households in Vietnam. On average, the respondents show weaker preferences for relative position than in comparable studies in Western countries. Possible explanations are the emphasis on the importance of equality and that villagers are very concerned with how the local community perceives their actions. We also investigate what influences the concern for relative position and find, among other things, that if anyone from the household is a member of the Peoples Committee then the respondent is more concerned with the relative position.
Keywords: Relative income; positionality; experiments; Vietnam; Asia JEL: C91 D63 Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:hhs:gunwpe:0165&r=all 72. Improving the SGP: Taxes and Delegation Rather than Fines Lindbeck, Assar (Institute for International Economic Studies, Stockholm University) Niepelt, Dirk (Institute for International Economic Studies, Stockholm University) We analyze motivations for, and possible alternatives to, the Stability and Growth Pact (SGP). With regard to the former, we identify domestic policy failures and various cross-country spillover effects; with regard to the latter, we contrast an "economic-theory" perspective on optimal corrective measures with the "legalistic" perspective adopted in the SGP.We discuss the advantages of replacing the Pact's rigid rules backed by fines with corrective taxes (as far as spillover effects are concerned) and procedural rules and limited delegation of fiscal powers (as far as domestic policy failures are concerned). This would not only enhance the efficiency of the Pact, but also render it easier to enforce. Keywords: Stability and Growth Pact; spillover effects; policy failures; Pigouvian taxes; policy delegation JEL: E63 F33 F42 H60 Date: 2004-12-14 URL: http://d.repec.org/n?u=RePEc:hhs:iiessp:0733&r=all 73. Time Consistency of Fiscal and Monetary Policy: A Solution Persson , Mats (Institute for International Economic Studies, Stockholm University) Persson , Torsten (Institute for International Economic Studies, Stockholm University) Svensson, Lars E.O. (Department of Economics, Princeton University) This paper demonstrates how time consistency of the Ramsey policy–the optimal fiscal and monetary policy under commitment–can be achieved. Each government should leave its successor with a unique maturity structure for the nominal and indexed debt, such that the marginal benefit of a surprise inflation exactly balances the marginal cost. Unlike in earlier papers on the topic, the result holds for quite a general Ramsey policy, including time varying polices with positive inflation and positive nominal interest rates. We compare our results with those in Persson, Persson, and Svensson (1987), Calvo and Obstfeld (1990), and Alvarez, Kehoe, and Neumeyer (2004). Keywords: time consistency; Ramsey policy; surprise inflation JEL: E31 E52 H21 Date: 2004-10-01 URL: http://d.repec.org/n?u=RePEc:hhs:iiessp:0734&r=all 74. Exposure-based Cash-Flow-at-Risk under Macroeconomic Uncertainty Andren, Niclas (Department of Business Administration) Jankensgard, Hakan (The Research Institute of Industrial Economics) Oxelheim, Lars (The Research Institute of Industrial Economics) In this paper we derive an exposure-based measure of Cash-Flow- at-Risk (CFaR). Existing approaches to calculating CFaR either only focus on cash flow conditional on market changes or neglect market-risk exposures entirely. We argue here that an essential first step in a risk-management program is to quantify cash-flow exposure to macroeconomic and market risk. This is the information relevant for corporate hedging. However, it is the total level of cash flow in relation to the firm’s capital needs that is the information relevant for decision-making. The firm’s overall CFaR is then calculated based on an assessment of corporate risk exposure. Keywords: Cash-Flow-at Risk; Corporate Hedging; Downside Risk; Risk Exposure; MUST-analysis; Value-at-Risk JEL: F23 G30 G32 M21 Date: 2005-03-14 URL: http://d.repec.org/n?u=RePEc:hhs:iuiwop:0635&r=all 75. Tacit Collusion and Capacity Withholding in Repeated Uniform Price Auctions Dechenaux, Emmanuel (Kent State University) Kovenock, Dan (Purdue University) This paper contributes to the study of tacit collusion by analyzing infinitely repeated multiunit uniform price auctions in a symmetric oligopoly with capacity constrained firms. Under both the Market Clearing and Maximum Accepted Price rules of determining the uniform price, we show that when each firm sets a price-quantity pair specifying the firm's minimum acceptable price and the maximum quantity the firm is willing to sell at this price, there exists a range of discount factors for which the monopoly outcome with equal sharing is sustainable in the uniform price auction, but not in the corresponding discriminatory auction. Moreover, capacity withholding may be necessary to sustain this outcome. We extend these results to the case where firms may set bids that are arbitrary step functions of price-quantity pairs with any finite number of price steps. Surprisingly, under the Maximum Accepted Price rule, firms need employ no more than two price steps to minimize the value of the discount factor above which the perfectly collusive outcome with equal sharing is sustainable on a stationary path. Under the Market Clearing Price rule, only one step is required. That is, within the class of step bidding functions with a finite number of steps, maximal collusion is attained with simple price- quantity strategies exhibiting capacity withholding. Keywords: Auction; Capacity; Collusion; Electricity Market; Supply Function JEL: D43 D44 L13 L41 L94 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:hhs:iuiwop:0636&r=all 76. On the Link between Exchange-Rate Regimes and Monetary- Policy Autonomy: The European Experience Forssbaeck, Jens (Institute of Economic Research) Oxelheim, Lars (The Research Institute of Industrial Economics) We investigate monetary-policy autonomy under different exchange- rate regimes in small, open European economies during the 1980s and 1990s. We find no systematic link between ex post monetary- policy autonomy and exchange rate regimes. This result is enforced for countries/periods with alternative nominal targets. Our interpretation of the results is that over the medium and long term following an ‘independent’ target for monetary policy, which does not deviate much from the targets of those countries to which one is closely financially integrated, is as constraining as locking the exchange rate to some particular level Keywords: Exchange Rate Regimes; Monetary Policy Autonomy; Capital Mobility JEL: E42 E52 F41 Date: 2005-03-15 URL: http://d.repec.org/n?u=RePEc:hhs:iuiwop:0637&r=all 77. Increasing Returns, Input-Output Linkages, and Technological Leapfrogging Gallo, Fredrik (Department of Economics, Lund University) Firms agglomerate in one region due to increasing returns, input- output linkages and transportation costs. In the de- industrialised region factor prices are lower and a new technology may be profitable to adopt in that region instead, inducing a change in the technological leadership. This paper shows that the risk of locking in to an old technology is monotonically increasing in the benefits of agglomeration. Greater incompatibility between technologies also increases the risk of rejecting potentially superior manufacturing processes. Keywords: agglomeration; lock-in; new economic geography; technological leapfrogging JEL: F12 F43 O33 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:hhs:lunewp:2005_022&r=all 78. Cournot Competition, Market Size Effects, and Agglomeration Gallo, Fredrik (Department of Economics, Lund University) We analyse a two-stage location-quantity game with many firms and two regions. We show that the firms will never agglomerate in the same location if transportation is costly between the regions. We also analyse the effects of differences in market size and economic integration on the allocation of industrial activity. For high levels of trade costs firms locate in different regions. Lowering the trade costs beyond a critical level triggers an agglomeration of industry in the larger region. This process of agglomeration is gradual in nature and trade costs have to be successively lowered for a full-scale agglomeration to take place. Keywords: agglomeration; cross-hauling; market size effects; spatial Cournot competition JEL: D43 F12 L13 R30 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:hhs:lunewp:2005_023&r=all 79. Credit Default Swaps and Equity Prices: The Itraxx CDS Index Market Bystrom, Hans N. E. (Department of Economics, Lund University) In this paper we provide some early evidence of a link between the iTraxx credit default swap (CDS) index market and the stock market. To our knowledge this is the first paper studying this relationship. Knowledge about the link between stock returns, stock return volatilities and CDS spreads is important not only for risk managers using credit default swaps for hedging purposes, but also to anyone trying to profit from arbitrage possibilities in the CDS market. For a sample of European sectoral iTraxx CDS indexes, correlations reveal a tendency for iTraxx CDS spreads to narrow when stock prices rise and vice versa. Furthermore, OLS regressions suggest that firm-specific information is embedded into stock prices before it is embedded into CDS spreads. Stock price volatility is also found to be significantly correlated with CDS spreads and the spreads are found to increase (decrease) with increasing (decreasing) stock price volatilities. Finally, we find significant autocorrelation in the iTraxx market. Keywords: credit default swap index; stock market index JEL: C20 G33 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:hhs:lunewp:2005_024&r=all 80. Estimation of an Adaptive Stock Market Model with Heterogeneous Agents Amilon, Henrik (European Central Bank) Standard economic models based on rational expectations and homogeneity have problems explaining the complex and volatile nature of financial markets. Recently, boundedly rational and heterogeneous agent models have been developed and simulated returns are found to exhibit various stylized facts, such as volatility clustering and fat tails. Here, we are interested in how well the proposed models can explain all the properties seen in real data, not just one or a few at a time. Hence, we do a proper estimation of some simple versions of such a model by the use of efficient method of moments and maximum likelihood and compare the results to real data and more traditional econometric models. We discover two main findings. First, the similarities with observed data found in earlier simulations rely crucially on a somewhat unrealistic modeling of the noise term. Second, when the stochastic is more properly introduced we find that the models are able to generate some stylized facts, but that the fit generally is quite poor. Keywords: Efficient method of moments; heterogeneous expectations; bounded rationality; evolutionary dynamics; adaptive beliefs JEL: C13 C15 C32 C51 G12 Date: 2005-01-01 URL: http://d.repec.org/n?u=RePEc:hhs:rbnkwp:0177&r=all 81. Some Further Evidence on Interest-Rate Smoothing: The Role of Measurement Errors in the Output Gap Apel, Mikael (Monetary Policy Department, Central Bank of Sweden) Jansson, Per (Monetary Policy Department, Central Bank of Sweden) It has been suggested that interest-rate smoothing may be partly explained by an omitted variable that relates to conditions in financial markets. We propose an alternative interpretation that suggests that it relates to measurement errors in the output gap. Keywords: Interest-rate smoothing; Measurement errors; Output gap JEL: E43 E44 E52 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:hhs:rbnkwp:0178&r=all 82. Bayesian Estimation of an Open Economy DSGE Model with Incomplete Pass-Through Adolfson, Malin (Research Department, Central Bank of Sweden) Laseen, Stefan (Monetary Policy Department, Central Bank of Sweden) Linde, Jesper (Research Department, Central Bank of Sweden) Villani, Mattias (Research Department, Central Bank of Sweden) In this paper we develop a dynamic stochastic general equilibrium (DSGE) model for an open economy, and estimate it on Euro area data using Bayesian estimation techniques. The model incorporates several open economy features, as well as a number of nominal and real frictions that have proven to be important for the empirical fit of closed economy models. The paper offers: i) a theoretical development of the standard DSGE model into an open economy setting, ii) Bayesian estimation of the model, including assesments of the relative importance of various shocks and frictions for explaining the dynamic development of an open economy, and iii) an evaluation of the model's empirical properties using standard validation methods. Keywords: DSGE model; Open economy; Monetary Policy; Bayesian Inference; Business cycle JEL: C11 E40 E47 E52 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:hhs:rbnkwp:0179&r=all 83. Are Constant Interest Rate Forecasts Modest Interventions? Evidence from an Estimated Open Economy DSGE Model of the Euro Area Adolfson, Malin (Research Department, Central Bank of Sweden) Laseen, Stefan (Monetary Policy Department, Central Bank of Sweden) Linde, Jesper (Research Department, Central Bank of Sweden) Villani, Mattias (Research Department, Central Bank of Sweden) This paper uses an estimated open economy DSGE model to examine if constant interest forecasts one and two years ahead can be regarded as modest policy interventions during the period 1993Q4- 2002Q4. An intervention is here defined to be modest if it does not trigger the agents to revise their expectations about the inflation targeting policy. Using univariate modesty statistics, we show that the modesty of the policy interventions depends on the assumptions about the uncertainty in the future shock realizations. In 1998Q4-2002Q4, the two year constant interest rate projections turn out immodest when assuming uncertainty only about monetary policy shocks during the conditioning period. However, allowing non-policy shocks to influence the forecasts makes the interventions more modest, at least one year ahead. Using a multivariate statistic, however, which takes the joint effects of the policy interventions into consideration, we find that the conditional policy shifts all projections beyond what is plausible in the latter part of the sample (1998Q4-2002Q4), and thereby affects the expectations formation of the agents. Consequently, the constant interest rate assumption has arguably led to conditional forecasts at the two year horizon that cannot be considered economically meaningful during this period. Keywords: Forecasting; Monetary policy; Open economy DSGE model; Policy interventions; Bayesian inference JEL: C11 C53 E47 E52 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:hhs:rbnkwp:0180&r=all 84. Inference in Vector Autoregressive Models with an Informative Prior on the Steady State Villani, Mattias (Research Department, Central Bank of Sweden) Vector autoregressions have steadily gained in popularity since their introduction in econometrics 25 years ago. A drawback of the otherwise fairly well developed methodology is the inability to incorporate prior beliefs regarding the system's steady state in a satisfactory way. Such prior information are typically readily available and may be crucial for forecasts at long horizons. This paper develops easily implemented numerical simulation algorithms for analyzing stationary and cointegrated VARs in a parametrization where prior beliefs on the steady state may be adequately incorporated. The analysis is illustrated on macroeconomic data for the Euro area. Keywords: Cointegration; Bayesian inference; Forecasting; Unconditional mean; VARs JEL: C11 C32 C53 E50 Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:hhs:rbnkwp:0181&r=all 85. The Determinants of Credit Default Swap Premia Ericsson, Jan (McGill University) Jacobs, Kris (McGill University) Oviedo-Helfenberger, Rodolfo (McGill University) Using a new dataset of bid and offer quotes for credit default swaps, we investigate the relationship between theoretical determinants of default risk and actual market premia using linear regression. These theoretical determinants are firm leverage, volatility and the riskless interest rate. We find that estimated coefficients for these variables are consistent with theory and that the estimates are highly significant both statistically and economically. The explanatory power of the theoretical variables for levels of default swap premia is approximately 60%. The explanatory power for the differences in the premia is approximately 23%. Volatility and leverage by themselves also have substantial explanatory power for credit default swap premia. A principal component analysis of the residuals and the premia shows that there is only weak evidence for a residual common factor and also suggests that the theoretical variables explain a significant amount of the variation in the data. We therefore conclude that leverage, volatility and the riskfree rate are important determinants of credit default swap premia, as predicted by theory. Keywords: Credit default swap; Credit risk; Structural model; Leverage; Volatility JEL: G12 Date: 2004-09-15 URL: http://d.repec.org/n?u=RePEc:hhs:sifrwp:0032&r=all 86. Environmental Policy and Product Specialization Aronsson, Thomas (Department of Economics, Umea University) Persson, Lars (Department of Economics, Umea University) Sjogren, Tomas (Department of Economics, Umea University) This paper characterizes income and commodity taxation as the outcome of a noncooperative Nash game in a two-country economy where one of the countries produces an environmentally clean good, while the other produces a dirty good. Among the results, it is shown that the commodity tax on the dirty good implemented by each country does not contain any term that directly serves to correct for the external effect. Instead, the country producing the dirty good internalizes part of the domestic external effect by choosing a relatively high marginal income tax rate. Keywords: Trade and Environment; Optimal Taxation; Externalities. JEL: F18 H21 H23 Date: 2005-03-15 URL: http://d.repec.org/n?u=RePEc:hhs:umnees:0653&r=all 87. Ethnic Enclaves and Welfare Cultures – Quasi-experimental Evidence Aslund, Olof (Institute for Labour Market Policy Evaluation) Fredriksson, Peter (Department of Economics) We examine peer effects in welfare use among immigrants to Sweden by exploiting a governmental refugee placement policy. We distinguish between the quantity of contacts — the number of individuals of the same ethnicity — and the quality of contacts – welfare use among members of the ethnic group. OLS regressions suggest that both these factors are positively related to individual welfare use. Instrumental variables estimations yield the conclusion that only the quality of contacts matter. An increase of the fraction of the ethnic group on welfare by 10 percent raises the individual probability of welfare use by almost percent. Keywords: Immigrants; Welfare use; Ethnic concentration; Welfare cultures JEL: I38 J15 Date: 2005-02-08 URL: http://d.repec.org/n?u=RePEc:hhs:uunewp:2005_009&r=all 88. Exchange Rates and Asymmetric Shocks in Small Open Economies Alexius, Annika (Department of Economics) Post, Erik (Department of Economics) If floating exchange rates stabilize shocks rather than create shocks, a country that joins a monetary union or fixes its exchange rate looses a stabilizing mechanism. We use a first difference structural VAR on trade weighted macroeconomic data to study the role of floating exchange rates for five "small open economies" with inflation targets. By including both domestic and foreign variables and using a combination of long and short-run restrictions, we identify asymmetric shocks more carefully than previous studies. Only in Sweden and Canada does the nominal exchange rate appreciate significantly in response to asymmetric demand shocks and depreciate to asymmetric supply shocks. Most exchange rate movements are caused by speculation and are not responses to fundamental shocks. However, these exchange rate shocks have negligible effects on output and inflation. Our findings indicate that exchange rates are neither stabilizing nor destabilizing but may be loosely characterized as disconnected from the rest of the economy. Keywords: Exchange rates; asymmetric shocks; structural VAR JEL: F31 Date: 2005-03-15 URL: http://d.repec.org/n?u=RePEc:hhs:uunewp:2005_010&r=all 89. Nonprofit/For-Profit Status and Earning Differentials in the Japanese At-home Elderly Care Industry: Evidence from Micro- level Data on Home Helpers and Staff Nurses Haruko Noguchi Satoshi Shimizutani In April 2000, Japan embarked on a reform of its health care market. Along with the introduction of the long-term care insurance scheme, the government for the first time allowed for- profit operators to compete head-on with non-profit operators in the provision of at-home care services. Taking advantage of a unique and rich micro-level survey, this study is the first to examine wage differentials between the nonprofit and the for- profit sector in Japan's nursing care industry, concentrating on home helpers and staff nurses. Controlling for nonrandom unobserved selection biases, our results show that a nonprofit wage premium exists. This finding supports the hypothesis that nonprofit providers operate under non-distributional constraints. Keywords: Japanese long-term care insurance, long-term care, nursing home, home helpers, staff nurses, nonprofit wage premium, quality of care, Heckman's two-stage approach JEL: I11 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d04-76&r=all 90. A Test for Autocorrelation in Dynamic Panel Data Models Hosung Jung This paper presents an autocorrelation test that is applicable to dynamic panel data models with serially correlated errors. Our residual-based GMM t-test (hereafter: t-test) differs from the m2 and Sargan's over-identifying restriction (hereafter: Sargan test) in Arellano and Bond (1991), both of which are based on residuals from the first-difference equation. It is a significance test which is applied after estimating a dynamic model by the instrumental variable (IV) method and is directly applicable to any other consistently estimated residual. Two interesting points are found: the test depends only on the consistency of the first-step estimation, not on its efficiency; and the test is applicable to both forms of serial correlation (i. e., AR(1) or MA(1)). Monte Carlo simulations are also performed to study the practical performance of these three tests, the m2, the Sargan and the t-test for models with first-order auto- regressive AR(1) and first-order moving-average MA(1) serial correlation. The m2 and Sargan test statistics appear to accept too often in small samples even when the autocorrelation coefficient approaches unity in the AR(1) disturbance. Overall, our residual based t-test has considerably more power than the m2 test or the Sargan test. Keywords: Dynamic panel data, Residual based GMM t-test, m2 and Sargan tests Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d04-77&r=all 91. Is Learning by Migrating in Megalopolis Really Important? Tomohiro Machikita This paper examines learning by migrating effects on the productivity of migrants who move to the "megalopolis" from rural areas utilizing the Thailand Labor Force Survey Data. The main contribution of this paper is to develop a simple framework to empirically test for self-selection on the migration decision and learning by migrating. The role of the characteristics of the urban labour market is also examined. In conclusion, we find self- selection effects test (1) positive among new migrants from rural area (i.e. "new entrants" to the urban labour market); and (2) negative among new migrants who move to rural areas (i.e. "new exits" from the urban labour market). These results suggest a natural selection (survival of the fittest) mechanism exists in the urban labour market. Keywords: Self-selection, Learning by migrating, Survival of the fittest, Natural Experiment JEL: D83 J61 R23 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d04-78&r=all 92. Career Crisis? The Impacts of Financial Shock on Entry-Level Labour Market: Experimental Evidences from Thailand in 1997 Tomohiro Machikita Identifying the conditions of entry-level labour market on employment and wages is difficult because there is non- separability of match qualities from firm specific demand shock at the period of transition from school to work. We utilize Thailand's financial crisis in 1997 as a natural experiment which exogenously shifts labour demand temporally. This model provides three testable hypotheses: (1) entry-level labour market tightens after crisis; (2) disadvantage of newly entrants at the period after crisis decreases overtime; (3) senior or highly educated worker's job and wages are secured. Convincing evidences from Thailand Labor Force Survey support our empirical predictions. Keywords: Crisis, Entry-Level Labour market, Treatment Effects JEL: C21 D83 J63 J64 R23 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d04-79&r=all 93. Why Are Latin Americans so Unhappy about Reforms? Ugo Panizza (Research Department, Inter-American Development Bank) Monica Yanez (Research Department, Inter-American Development Bank) This paper uses opinion surveys to document discontent with the pro-market reforms implemented by most Latin American countries during the 1990s. The paper also explores four possible sets of explanations for this discontent: (i) a general drift of the populace’s political views to the left; (ii) an increase in political activism by those who oppose reforms; (iii) a decline in the people’s trust of political actors; and (iv) the economic crisis. The paper’s principal finding is that the macroeconomic situation plays an important role in explaining the dissatisfaction with the reform process. Keywords: Political economy; Reforms; Crisis; Latin America JEL: P16 O54 Date: 2004-01 URL: http://d.repec.org/n?u=RePEc:idb:wpaper:1004&r=all 94. Reform Fatigue: Symptoms, Reasons, and Implications Ugo Panizza (Research Department, Inter-American Development Bank) Eduardo Lora (Research Department, Inter-American Development Bank) Myriam Quispe-Agnoli (Research Department, Atlanta Fed) Missing abstract. Date: 2004-05 URL: http://d.repec.org/n?u=RePEc:idb:wpaper:1005&r=all 95. Monetary Policies and Fiscal Policies in Emerging Markets Ugo Panizza (Research Department, Inter-American Development Bank) This paper surveys possible monetary policy options for emerging market countries. As the paper does not seek to enter into the fix versus flex debate, it only considers monetary policy options for countries with a flexible exchange rate. After making the point that the conduct of monetary policy requires a nominal anchor and surveying different types of nominal anchors, the paper suggests that most academics and policymakers agree on the fact that inflation targeting should be the nominal anchor of choice. Hence, the paper describes the main characteristics of an inflation targeting regime and discusses its applicability to emerging market countries. Next, the paper recognizes the necessity of coordination between fiscal and monetary policy and points out that, in order to conduct countercyclical fiscal policies, emerging market countries need to build fiscal institutions that allow accumulating surpluses during periods of economic expansion. The paper concludes by studying the applicability of inflation targeting to Egypt and finds mixed support for this option. Keywords: Monetary Policy, Fiscal Policy, Inflation targeting, Egypt Date: 2004-12 URL: http://d.repec.org/n?u=RePEc:idb:wpaper:1006&r=all 96. Fiscal Sustainability in Emerging Market Countries with an Application to Ecuador Ugo Panizza (Research Department, Inter-American Development Bank) Alejandro Izquierdo (Research Department, Inter-American Development Bank) Carlos Diaz-Alvarado (Research Department, Inter-American Development Bank) This paper surveys the recent literature on fiscal sustainability with particular focus on emerging market countries. It discusses the main elements that differentiate emerging market countries from industrial countries and then discusses how probabilistic models can help to evaluate fiscal sustainability in an uncertain environment. Based on this discussion, the paper uses Ecuador to illustrate an application of the probabilistic model, and of the framework to evaluate the impact of shocks to current account financing on sustainability. Keywords: Fiscal Sustainability, Debt, Default, Sudden Stop, Emerging Markets, Ecuador JEL: E62 O23 Date: 2004-08 URL: http://d.repec.org/n?u=RePEc:idb:wpaper:1009&r=all 97. Inflation and Labor Market Flexibility: The Squeaky Wheel Gets the Grease Ugo Panizza (Research Department, Inter-American Development Bank) Ana Maria Loboguerrero (Research Department, Inter-American Development Bank) Inflation can “grease” the wheels of the labor market by relaxing downward wage rigidity but it can also increase uncertainty and have a negative “sand” effect. This paper studies the grease effect of inflation by looking at whether the interaction between inflation and labor market regulations affects how employment responds to changes in output. The results show that in industrial countries with highly regulated labor markets, the grease effect of inflation dominates the sand effect. In the case of developing countries, we rarely find a significant effect of inflation or labor market regulations and provide evidence indicating that this could be due to the presence of a large informal sector and limited enforcement of de jure labor market regulations. Keywords: Employment; Unemployment; Flexibility; Inflation; Deflation; Job Security JEL: E24 E31 E52 Date: 2003-08 URL: http://d.repec.org/n?u=RePEc:idb:wpaper:1010&r=all 98. Should the Government be in the Banking Business? The Role of State-Owned and Development Banks Ugo Panizza (Research Department, Inter-American Development Bank) Eduardo Levy-Yeyati (Universidad Torcuato Di Tella) Alejandro Micco (Research Department, Inter-American Development Bank) Missing abstract. Date: 2004-03 URL: http://d.repec.org/n?u=RePEc:idb:wpaper:1014&r=all 99. A Comparison of Direct and Iterated Multistep AR Methods for Forecasting Macroeconomic Time Series Massimiliano Marcellino James Stock Mark Watson “Iterated” multiperiod ahead time series forecasts are made using a one-period ahead model, iterated forward for the desired number of periods, whereas “direct” forecasts are made using a horizon-specific estimated model, where the dependent variable is the multi-period ahead value being forecasted. Which approach is better is an empirical matter: in theory, iterated forecasts are more efficient if correctly specified, but direct forecasts are more robust to model misspecification. This paper compares empirical iterated and direct forecasts from linear univariate and bivariate models by applying simulated out-of-sample methods to 171 U.S. monthly macroeconomic time series spanning 1959 – 2002. The iterated forecasts typically outperform the direct forecasts, particularly if the models can select long lag specifications. The relative performance of the iterated forecasts improves with the forecast horizon. URL: http://d.repec.org/n?u=RePEc:igi:igierp:285&r=all 100. Leading Indicators: What Have We Learned? Massimiliano Marcellino We provide a summary updated guide for the construction, use and evaluation of leading indicators, and an assessment of the most relevant recent developments in this field of economic forecasting. To begin with, we analyze the problem of selecting a target coincident variable for the leading indicators, which requires coincident indicator selection, construction of composite coincident indexes, choice of filtering methods, and business cycle dating procedures to transform the continous target into a binary expansion/recession indicator. Next, we deal with criteria for choosing good leading indicators, and simple non-model based methods to combine them into composite indexes. Then, we examine models and methods to transform the leading indicators into forecasts of the target variable. Finally, we consider the evaluation of the resulting leading indicator based forecasts, and review the recent literature on the forecasting performance of leading indicators. URL: http://d.repec.org/n?u=RePEc:igi:igierp:286&r=all 101. Incentives for Developers’ Contributions and Product Performance Metrics in Open Source Development: An Empirical Exploration Haruvy Ernan Wu Fang Chakravarty Sujoy In open source software development, users rather than paid developers engage in innovation and development without the direct involvement of manufacturers. This paradigm cannot be explained by the two traditional models of innovation, the private investment model and the collective action model. Neither model in itself can explain the phenomenon of the open source model or its success. In order to bridge the gap between existing models and the open source phenomenon, we analyze data from a web survey of 160 open source developers. First, we investigate the motives affecting the individual developer’s contributions by comparing and contrasting the incentives from both the traditional private investment and collective action models. Second, we demonstrate that there is a common ground between the private and collective models where private returns and social considerations can coexist. Third, we explore the effect of incentives on the output of innovation—final product performance. The results show that the motivations for individual developer’s contributions are quite different from the incentives that affect product performance. Keywords: Open Source Software, Incentives, Altruism, Developers’ Contributions, Software Performance Date: 2005-03-10 URL: http://d.repec.org/n?u=RePEc:iim:iimawp:2005-03-04&r=all 102. Carbon Sequestration in Agricultural Soils: Discounting for Uncertainty Kurkalova, Lyubov The study presents a conceptual model of an aggregator who selectively pays farmers for altering farming practices in exchange for carbon offsets that the change in practices generates. Under the assumption that the offsets are stochastic and that the aggregator maximizes the sum of the offsets from the purchase that he/she can rightfully claim with a specified level of confidence subject to a budget constraint, we investigate the optimal discounting of expected carbon offsets. We use the model to estimate empirically the optimal discounting levels and costs for a hypothetical carbon purchasing project in the Upper Iowa River Basin. Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:isu:genres:12262&r=all 103. The Effects of Welfare-to-Work Program Activities on Labor Market Outcomes Dyke, Andrew (University of North Carolina-Chapel Hill) Heinrich, Carolyn J. (LaFollette School of Public Affairs, University of Wisconsin-Madison) Mueser, Peter R. (University of Missouri-Columbia and IZA Bonn) Troske, Kenneth R. (University of Missouri-Columbia and IZA Bonn) Studies examining the effectiveness of welfare-to-work programs present findings that are mixed and sometimes at odds, in part due to research design, data, and methodological limitations of the studies. We aim to substantially improve on past approaches to estimate program effectiveness by using administrative data on welfare recipients in Missouri and North Carolina to obtain separate estimates of the effects of participating in sub- programs of each state's welfare-to-work program. Using data on all women who entered welfare between the second quarter of 1997 and fourth quarter of 1999 in these states, we follow recipients for sixteen quarters and model their quarterly earnings as a function of demographic characteristics, prior welfare and work experience, the specific types of welfare-to-work programs in which they participate, and time since participation. We focus primarily on three types of subprograms–assessment, job readiness and job search assistance, and more intensive programs designed to augment human capital skills–and use a variety of methods that allow us to compare how common assumptions influence results. In general, we find that the impacts of program participation are negative in the quarters immediately following participation but improve over time, in most cases turning positive in the second year after participation. The results also show that more intensive training is associated with greater initial earnings losses but also greater earnings gains in the long run. Keywords: evaluation, training, sub-programs, welfare JEL: J31 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1520&r=all 104. Interfirm Mobility, Wages, and the Returns to Seniority and Experience in the U.S. Buchinsky, Moshe (UCLA,CREST-INSEE and NBER) Fougere, Denis (CNRS, CREST-INSEE, CEPR and IZA Bonn) Kramarz, Francis (CREST-INSEE, CEPR and IZA Bonn) Tchernis, Rusty (Indiana University) Much of the research in labor economics during the 1980s and the early 1990s was devoted to the analysis of changes in the wage structure across many of the world’s economies. Only recently, has research turned to the analysis of mobility in its various guises. From the life cycle perspective, decreased wage mobility and increased job instability, makes the phenomenon of increasing wage inequality more severe than it appears to be at first sight. In general, workers’ wages may change through two channels: (a) return to their firm-specific human capital (seniority); or (b) inter-firm wage mobility. Our theoretical model gives rise to three equations: (1) a participation equation; (2) a wage equation; and (3) an interfirm mobility equation. In this model the wage equation is estimated simultaneously with the two decision equations. We use the Panel Study of Income Dynamics ( PSID) to estimate the model for three education groups. Our main finding is that returns to seniority are quite high for all education groups. On the other hand, the returns to experience appear to be similar to those previously found in the literature. Keywords: wage mobility, interfirm mobility, returns to seniority, panel data, Markov Chain Monte Carlo methods JEL: C11 C15 J31 J63 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1521&r=all 105. Nascent and Infant Entrepreneurs in Germany: Evidence from the Regional Entrepreneurship Monitor (REM) Wagner, Joachim (University of Lueneburg and IZA Bonn) 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, Germany JEL: J23 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1522&r=all 106. Downward Wage Rigidity and Labour Mobility Corneli?en, Thomas (University of Hannover) Hubler, Olaf (University of Hannover and IZA Bonn) Using data from the German Socio-Economic Panel (GSOEP) effects of being individually affected by downward wage rigidity on layoffs, quits and intra-firm mobility are investigated. We measure the individual extent of wage rigidity within a structural empirical model that allows us to estimate the notional wage growth which is about 1.4 % on average over the whole period. Wage growth is swept up by 3.3 % through wage rigidity and 62 % of the work force are in the real rigid regime. We find negative effects of wage sweep-up on quits, layoffs and promotions. This is consistent with a core-periphery view of the labour force, where a core work force is at the same time protected from layoffs and from wage cuts, whereas a peripheral work force provides a buffer for adjustment and suffers from both flexible wages and more insecure jobs. Reducing promotions for high wage sweep-up workers seems to be strategy of employers to circumvent wage rigidity. This suggests that it is not a pay policy chosen by the employer, but that it is imposed upon the employer through bargaining power. However, decreased promotion opportunities do not seem to fully outweigh the benefit of generous wage growth. Keywords: wage rigidity, wage sweep up, job mobility, quits, layoffs, promotions JEL: J31 J63 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1523&r=all 107. Measuring Organizational Capital in the New Economy Black, Sandra E. (UCLA, NBER and IZA Bonn) Lynch, Lisa M. (Tufts University, NBER and IZA Bonn) A growing body of literature over the past decade suggests that a firm’s organizational structure/capital can contribute in significant ways to the productive capacity of a firm. But, as with other intangible assets, there is no consensus definition of what this organizational capital is, how to measure it, or how to best quantify its contribution to output (either current or future). We try to address this gap in the literature by proposing a definition of organizational capital based on recent empirical work on the impact of organizational capital on firm productivity and workers’ wages. We then discuss in detail how organizational capital has been measured and the measurement issues that face those trying to understand the extent of organizational capital in an economy. Keywords: human capital, productivity JEL: J2 D2 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1524&r=all 108. Wage Inequality in Post-Reform Mexico Airola, Jim (Naval Postgraduate School) Juhn, Chinhui (University of Houston and IZA Bonn) Using the Mexican Household Income and Expenditure Survey (ENIGH) covering 1984-2000 we analyze wages and employment in Mexico after trade liberalization and domestic reforms. We find that wage inequality and returns to post-secondary schooling increased rapidly during 1984-1994 but stabilized since that period. The end of inequality growth was due to a severe macroeconomic crisis which adversely impacted the better educated, an increase in education levels at the end of the 1990s, and a slowdown in skill demand in the latter half of the 1990s. Between-industry shifts, consistent with trade-based explanations, account for a part of the increase in skill demand during 1984-1994, but these types of movements actually reduced the demand for skill in the latter part of the 1990s. The equalizing impact of trade was offset by within-industry demand shifts which continued to favor more educated workers. The Mexican experience in the 1990s suggests that market-oriented reforms have a sharp initial impact on inequality which dissipates over time. However, the opening of the economy to trade, foreign capital, and global markets also leads to a more long-run increase in the demand for skill. Keywords: wage inequality, reforms, skill demand JEL: J31 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1525&r=all 109. Equilibrium Evaluation of Active Labor Market Programmes Enhancing Matching Effectiveness Van der Linden, Bruno (Fonds National de la Recherche Scientifique, Universite Catholique de Louvain and IZA Bonn) This paper evaluates counselling programmes in an equilibrium matching model where workers are heterogeneous in skill levels. Job search effort, labour demand and wages are endogenous. When wages are bargained over, raising the effectiveness of or the access to counselling programmes pushes wages upwards and leads to lower search effort among nonparticipants. The effects of increasing the access of the low-skilled are evaluated numerically by enlarging successively the set of endogenous behaviours. Induced effects outweigh substantial positive micro effects on low-skilled employment when all `margins' are taken into account. The inter-temporal utility of the low-skilled nevertheless increases because search effort declines. On the contrary, when the net wage of the low-skilled is a fixed proportion of the one bargained by the high-skilled, raising the access to counselling programmes has small positive effects on all criteria. Keywords: active programmes, labour market policies, evaluation, equilibrium search JEL: J63 J64 J65 J68 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1526&r=all 110. Aligning Ambition and Incentives Koch, Alexander K. (Royal Holloway, University of London and IZA Bonn) Peyrache, Eloic (HEC School of Management, Paris) In many economic situations several principals contract with the same agents sequentially. Asymmetric learning about agents' abilities provides the first principal with an informational advantage and has profound implications for the design of incentive contracts. We show that the principal always strategically distorts information revelation to future principals about the ability of her agents. The second main result is that she can limit her search for optimal incentive schemes to the class of relative performance contracts that cannot be replicated by contracts based on individual performance only. This provides a new rationale for the optimality of such compensation schemes. Keywords: relative performance contracts, reputation, asymmetric learning JEL: D82 J33 L14 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1527&r=all 111. A Portrait of Child Poverty in Germany Corak, Miles (UNICEF Innocenti Research Centre and IZA Bonn) Fertig, Michael (RWI Essen and IZA Bonn) Tamm, Marcus (RWI Essen and Ruhr University of Bochum) This paper offers a descriptive portrait of income poverty among children in Germany between the early 1980s and 2001, with a focus on developments since unification in 1991. Data from the German Socio-Economic Panel are used to estimate poverty rates, rates of entry to and exit from poverty, and the duration of time spent in and out of poverty. The analysis focuses upon comparisons between East and West Germany, by family structure, and citizenship status. Child poverty rates have drifted upward since 1991, and have been increasing more than the rates for the overall population since the mid-1990s. In part these changes are due to increasing poverty among children from households headed by noncitizens. Children in single parent households are by all measures at considerable risk of living in poverty. There are also substantial differences in the incidence of child poverty and its dynamics between East and West Germany. Keywords: poverty dynamics, poverty duration, immigrant households JEL: I32 I38 J13 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1528&r=all 112. Why Are Jobs Designed the Way They Are? Zoghi, Cindy (U.S. Bureau of Labor Statistics) Levenson, Alec (University of Southern California) Gibbs, Michael (University of Chicago GSB and IZA Bonn) In this paper we study job design. Will an organization plan precisely how the job is to be done ex ante, or ask workers to determine the process as they go? We first model this decision and predict complementarity between these job attributes: multitasking, discretion, skills, and interdependence of tasks. We argue that characteristics of the firm and industry (e.g., product and technology, organizational change) can explain observed patterns and trends in job design. We then use novel data on these job attributes to examine these issues. As predicted, job designs tend to be ‘coherent’ across these characteristics within the same job. Job designs also tend to follow similar patterns across jobs in the same firm, and especially in the same establishment: when one job is optimized ex ante, others are more likely to be also. There is some evidence that firms may segregate different types of job designs across different establishments. Keywords: job design, organization design, specialization, job enrichment, intrinsic motivation JEL: M5 M50 J2 J24 L23 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1529&r=all 113. What Drives Business Cycles in a SmallOpen Economy with a Fixed Exchange Rate? Niels Arne Dam (Institute of Economics, University of Copenhagen) Jesper Gregers Linaa (Institute of Economics, University of Copenhagen) We decompose the Danish business cycle into ten structural shocks using an open-economy DSGE model with infrequent determination of prices and wages which we estimate with Bayesian techniques. Consistent with the Danish monetary policy regime, we formulate an imperfect peg on the foreign exchange rate and analyse the resulting monetary transmission mechanism. We find that the Danish business cycle is dominated by stochastic movements in the labour supply in the long term, while demand shocks play a major role in the short term. Remarkably, the role of technology is negligible, and foreign factors only contribute little to the Danish business cycle, especially in the long term. With respect to the estimation, we generally find believable estimates although the degree of price stickiness is remarkably high. Keywords: open economy, peg, business cycles, Bayesian estimation JEL: E3 E4 F4 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:kud:epruwp:05-02&r=all 114. The Return to Foreign Aid Carl-Johan Dalgaard (Institute of Economics, University of Copenhagen) Henrik Hansen (Institute of Economics, University of Copenhagen) This paper investigates the marginal productivity of investment in the world’s poorest economies. The aim is to estimate the return on investments financed by foreign aid as well as by domestic resource mobilization, using crosscountry aggregate data. In practice the return on both investment categories can be expected to vary considerably across countries and time. As a consequence we develop a correlated random coefficients approach to the issue at hand, which allows us to estimate the average aggregate rate of return on “aid investments” and “domestic investments”. Across a wide array of estimators our principal finding is remarkably robust; the average aggregate gross return on “aid investments” falls in a 20-30 percent range, roughly the same as the return on investments funded by other sources than aid. This finding is well in accord with micro estimates of the economic return to aid. Keywords: productivity, foreign aid, random coefficients, panel data JEL: O47 F35 C23 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:kud:kuiedp:0504&r=all 115. Globalization and Complementary Policies: Poverty Impacts in Rural Zambia Jorge F. Balat Guido Porto In this paper, we have two main objectives: to investigate the links between globalization and poverty observed in Zambia during the 1990s, and to explore the poverty impacts of non-traditional export growth. We look at consumption and income effects separately. On the consumption side, we study the maize marketing reforms and the elimination of maize subsidies. We find that complementary policies matter: the introduction of competition policies at the milling industry acted as a cushion that benefited consumers but the restriction on maize imports by small- scale mills hurt them. On the income side, we study agricultural export growth to estimate income gains from international trade. The gains are associated with market agriculture activities (such as growing cotton, tobacco, hybrid maize) and rural labor markets and wages. We find that by expanding trade opportunities Zambian households would earn significantly higher income. Securing these higher levels of well-being requires complementary policies, like the provision of infrastructure, credit, and extension services. JEL: I32 Q12 Q17 Q18 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11175&r=all 116. The Effect of the 1998 Master Settlement on Prenatal Smoking Douglas E. Levy Ellen Meara The Master Settlement Agreement (MSA) between the major tobacco companies and 46 states created an abrupt 45 cent (21%) increase in cigarette prices in November, 1998. Earlier estimates of the elasticity of prenatal smoking implied that the price rise would reduce prenatal cigarette smoking by 7% to 21%. Using birth records on 10 million U.S. births between January 1996 and February 2000, we examined the change in smoking during pregnancy and conditional smoking intensity in response to the MSA. Overall, adjusting for secular trends in smoking, prenatal smoking declined much less than predicted in response to the MSA. JEL: I12 I18 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11176&r=all 117. Reading, Writing and Raisinets: Are School Finances Contributing to Children's Obesity? Patricia M. Anderson Kristin F. Butcher The proportion of adolescents in the United States who are obese has nearly tripled over the last two decades. At the same time, schools, often citing financial pressures, have given students greater access to "junk" foods, using proceeds from the sales to fund school programs. We examine whether schools under financial pressure are more likely to adopt potentially unhealthful food policies. We find that a 10 percentage point increase in the probability of access to junk food leads to about a one percent increase in students' body mass index (BMI). However, this average effect is entirely driven by adolescents who have an overweight parent, for whom the effect of such food policies is much larger (2.2%). This suggests that those adolescents who have a genetic or family susceptibility to obesity are most affected by the school food environment. A rough calculation suggests that the increase in availability of junk foods in schools can account for about one-fifth of the increase in average BMI among adolescents over the last decade. JEL: I1 I2 J1 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11177&r=all 118. Are Asset Price Guarantees Useful for Perventing Sudden Stops?: A Quantitative Investigation of the Globalization Hazard-Moral Hazard Tradeoff Ceyhun Bora Durdu Enrique G. Mendoza The globalization hazard hypothesis maintains that the current account reversals and asset price collapses observed during 'Sudden Stops' are caused by global capital market frictions. A policy implication of this view is that Sudden Stops can be prevented by offering global investors price guarantees on emerging markets assets. These guarantees, however, introduce a moral hazard incentive for global investors, thus creating a tradeoff by which price guarantees weaken globalization hazard but strengthen international moral hazard. This paper studies the quantitative implications of this tradeoff using a dynamic stochastic equilibrium asset-pricing model. Without guarantees, distortions induced by margin calls and trading costs cause Sudden Stops driven by Fisher's debt-deflation mechanism. Price guarantees prevent this deflation by introducing a distortion that props up foreign demand for assets. Non-state-contingent guarantees contain Sudden Stops but they are executed often and induce persistent asset overvaluation. Guarantees offered only in high-debt states are executed rarely and prevent Sudden Stops without persistent asset overvaluation. If the elasticity of foreign asset demand is low, price guarantees can still contain Sudden Stops but domestic agents obtain smaller welfare gains at Sudden Stop states and suffer welfare losses on average in the stochastic steady state. JEL: F41 F32 E44 D52 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11178&r=all 119. Out-of-Pocket Health Spending Between Low- and High-Income Populations: Who is at Risk of Having High Financial Burdens? Yu-Chu Shen Joshua McFeeters We examined characteristics of people with little, moderate, and high burden of out-of-pocket health spending separately for low- income (below 200% of Federal Poverty Line) and higher-income populations. We find that public insurance appears to offer the best financial protection against high out-of-pocket burden. People with private non-group coverage, regardless of their income levels, have the highest risk of being exposed to high out- of-pocket burden. Low-income adults with employer-sponsored insurance are also more likely to be in high burden group than the low-income uninsured adults. For higher-income families, having a family member in fair or poor health is another significant risk factor to increase the likelihood of high out-of- pocket burden. Increasing presence of HMO and Federally Qualified Health Centers appear to have lowered the odds of being in the high-burden category relative to low-burden category, especially for the low-income group. JEL: I1 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11179&r=all 120. Uninsured Idiosyncratic Investment Risk and Aggregate Saving George-Marios Angeletos This paper augments the neoclassical growth model to study the macroeconomic effects of idiosyncratic investment risk. The general equilibrium is solved in closed form under standard assumptions for preferences and technologies. A simple condition is identified for incomplete markets to result in both a lower interest rate and a lower capital stock in the steady state: the elasticity of intertemporal substitution must be higher than the income share of capital. For plausible calibrations of the model, the reduction in the steady-state levels of aggregate savings and income relative to complete markets is quantitatively significant. Finally, cyclical variation in private investment risks is shown to amplify the transitional dynamics. JEL: D52 E13 E32 G11 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11180&r=all 121. Socio-economic Impact of Nanoscale Science: Initial Results and NanoBank Lynne G. Zucker Michael R. Darby Research on the nanoscale has revolutionized areas of science and has begun to have an impact on, and be impacted by, society and economy. We are capturing early traces of these processes in NanoBank, a large scale, multi-year project to provide a public data resource which will link individuals and organizations involved in creating and using nano S&T across a number of activities including publishing, patenting, research funding, and commercial financing, innovation and production. We report preliminary results from our work in progress. Nanotechnology is on a similar trajectory to biotechnology in terms of patents and publication, already accounting for over 2.5% of scientific articles and 0.7% of patents. Joint university-firm research is widespread and increasing. Regional agglomeration is also evident in both science and commercial applications, with the main clusters of firm entry by both new and pre-existing firms forming around major research universities publishing in nanoscience. Nanoscience has been highly concentrated in the United States, a few European countries, and Japan, but China has recently passed Japan in total articles per year and is beginning to have a significant number of highly-cited articles. JEL: O31 L63 L65 M13 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11181&r=all 122. Cohort Turnover and Productivity: The July Phenomenon in Teaching Hospitals Robert S. Huckman Jason Barro The impact of labor turnover on productivity has received a great deal of attention in the literature on organizations. We consider the impact of cohort turnover %u2013 the simultaneous exit of a large number of experienced employees and a similarly sized entry of new workers %u2013 on productivity in the context of teaching hospitals. In particular, we examine the impact of the annual July turnover of house staff (i.e., residents and fellows) in American teaching hospitals on levels of resource utilization (measured by risk-adjusted length of hospital stay) and quality (measured by risk-adjusted mortality rates). Using patient-level data from roughly 700 hospitals per year over the period from 1993 to 2001, we compare monthly trends in length of stay and mortality for teaching hospitals to those for non- teaching hospitals, which, by definition, do not experience systematic turnover in July. We find that the annual house-staff turnover results in increased resource utilization (i.e., higher risk-adjusted length of hospital stay) for both minor and major teaching hospitals and decreased quality (i.e., higher risk- adjusted mortality rates) for major teaching hospitals. Further, these effects with respect to mortality are not monotonically increasing in a hospital%u2019%u2019s reliance on residents for the provision of care. In fact, the most-intensive teaching hospitals manage to avoid significant effects on mortality following this turnover. We provide a preliminary examination of the roles of supervision and worker ability in explaining the ability of the most-intensive teaching hospitals to reduce turnover%u2019%u2019s negative effect on performance. JEL: I1 J0 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11182&r=all 123. Employment Efficiency and Sticky Wages: Evidence from Flows in the Labor Market Robert E. Hall I consider three views of the labor market. In the first, wages are flexible and employment follows the principle of bilateral efficiency. Workers never lose their jobs because of sticky wages. In the second view, wages are sticky and inefficient layoffs do occur. In the third, wages are also sticky, but employment governance is efficient. I show that the behavior of flows in the labor market strongly favors the third view. In the modern U.S. economy, recessions do not begin with a burst of layoffs. Unemployment rises because jobs are hard to find, not because an unusual number of people are thrown into unemployment. JEL: E24 E32 J64 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11183&r=all 124. Outsourcing Price Decisions: Evidence from U.S. 9802 Imports Deborah Swenson This paper studies U.S. overseas assembly imports to identify whether factors related to information or search costs appear to condition outsourcing decisions. The data for 1991-2000 show that U.S. overseas assembly imports were characterized by incomplete pass-through of production and trade costs to import prices, though products assembled in more highly educated countries passed-through a much larger portion of their cost changes. In addition, the price of outsourcing imports responded to competing suppliers' prices, with the largest responses occurring for products in capital-intense industries. These differential price responses suggest that information issues play an important role in the mediation of outsourcing relationships. JEL: F1 F2 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11184&r=all 125. Optimal Taxation with Endogenous Insurance Markets Mikhail Golosov Aleh Tsyvinski We study optimal tax policy in a dynamic private information economy with endogenous private markets. We characterize efficient allocations and competitive equilibria. A standard assumption in the literature is that trades are observable by all agents. We show that in such an environment the competitive equilibrium is efficient. The only effect of government interventions is crowding out of private insurance. We then relax the assumption of observability of consumption and consider an environment with unobservable trades in competitive markets. We show that efficient allocations have the property that the marginal product of capital is different from the market interest rate associated with unobservable trades. In any competitive equilibrium without taxation, the marginal product of capital and the market interest rate are equated, so that competitive equilibria are not efficient. Taxation of capital income can be welfare-improving because such taxation introduces a wedge between market interest rates and the marginal product of capital and allows agents to obtain better insurance in private markets. Finally, we use plausibly calibrated numerical examples to compute optimal taxes and welfare gains and compare results to an economy with a restricted set of tax instruments, and to an economy with observable trades. JEL: E62 H21 H23 H53 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11185&r=all 126. Integrating Industry and National Economic Accounts: First Steps and Future Improvements Ann M. Lawson Brian C. Moyer Sumiye Okubo Mark A. Planting The integration of the annual I-O accounts with the GDP-by- industry accounts is the most recent in a series of improvements to the industry accounts provided by the BEA in recent years. BEA prepares two sets of national industry accounts: The I-O accounts, which consist of the benchmark I-O accounts and the annual I-O accounts, and the GDPby- industry accounts. Both the I-O accounts and the GDP-by-industry accounts present measures of gross output, intermediate inputs, and value added by industry. However, in the past, they were inconsistent because of the use of different methodologies, classification frameworks, and source data. The integration of these accounts eliminated these inconsistencies and improved the accuracy of both sets of accounts. The integration of the annual industry accounts represents a major advance in the timeliness, accuracy, and consistency of these accounts, and is a result of significant improvements in BEA%u2019s estimating methods. The paper describes the new methodology, and the future steps required to integrate the industry accounts with the NIPAs. The new methodology combines source data between the two industry accounts to improve accuracy; it prepares the newly integrated accounts within an I-O framework that balances and reconciles industry production with commodity usage. Moreover, the new methodology allows the acceleration of the release of the annual I-O accounts by 2 years and for the first time, provides a consistent time series of annual I-O accounts. Three appendices are provided: A description of the probability-based method to rank source data by quality; a description of the new balancing produced for producing the annual I-O accounts; and a description of the computation method used to estimate chaintype price and quantity indexes in the GDP- by-industry accounts. JEL: C13 C67 C81 E1 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11187&r=all 127. Volatility Forecasting Torben G. Andersen Tim Bollerslev Peter F. Chirstoffersen Francis X. Diebold Volatility has been one of the most active and successful areas of research in time series econometrics and economic forecasting in recent decades. This chapter provides a selective survey of the most important theoretical developments and empirical insights to emerge from this burgeoning literature, with a distinct focus on forecasting applications. Volatility is inherently latent, and Section 1 begins with a brief intuitive account of various key volatility concepts. Section 2 then discusses a series of different economic situations in which volatility plays a crucial role, ranging from the use of volatility forecasts in portfolio allocation to density forecasting in risk management. Sections 3, 4 and 5 present a variety of alternative procedures for univariate volatility modeling and forecasting based on the GARCH, stochastic volatility and realized volatility paradigms, respectively. Section 6 extends the discussion to the multivariate problem of forecasting conditional covariances and correlations, and Section 7 discusses volatility forecast evaluation methods in both univariate and multivariate cases. Section 8 concludes briefly. JEL: C1 G1 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11188&r=all 128. Strategic Bargaining Behavior, Self-Serving Biases, and the Role of Expert Agents: An Empirical Study of Final-Offer Arbitration Orley Ashenfelter Gordon B. Dahl In this paper we study the complete evolution of a final-offer arbitration system used in New Jersey with data we have systematically collected over the 18-year life of the program. Covering the wages of police officers and firefighters, this system provides virtually a laboratory setting for the study of strategic interaction. Our empirical analysis provides convincing evidence that, left alone, the parties do not construct and present their offers as successfully as when they retain expert agents to assist them. In principle, expert agents may be helpful to the parties for two different reasons: (a) they may move the arbitrator to favor their position independently of the facts, or b) they may help eliminate inefficiencies in the conduct of strategic behavior. In this paper we construct a model where the agent may influence outcomes independent of the facts, but where the agent may also improve the outcomes of the process by moderating any self-serving biases or over-confidence that may have led to impasse in the first instance. Our data indicate that expert agents may well have had an important role in moderating self-serving biases early in the history of the system, but that the parties have slowly evolved to a non-cooperative equilibrium where the use of third-party agents has become nearly universal and where agents are used primarily to move the fact finder's decisions. JEL: J5 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11189&r=all 129. Special Purpose Vehicles and Securitization Gary Gorton Nicholas Souleles Firms can finance themselves on- or off-balance sheet. Off- balance sheet financing involves transferring assets to "special purpose vehicles" (SPVs), following accounting and regulatory rules that circumscribe relations between the sponsoring firm and the SPVs. SPVs are carefully designed to avoid bankruptcy. If the firm's bankruptcy costs are high, off-balance sheet financing can be advantageous, especially for sponsoring firms that are risky. In a repeated SPV game, firms can "commit" to subsidize or "bail out" their SPVs when the SPV would otherwise not honor its debt commitments. Investors in SPVs know that, despite legal and accounting restrictions to the contrary, SPV sponsors can bail out their SPVs if there is the need. We find evidence consistent with these predictions using data on credit card securitizations. JEL: G3 G2 E5 K2 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11190&r=all 130. Self-Fulfilling Currency Crises: The Role of Interest Rates Christian Hellwig Arijit Mukherji Aleh Tsyvinski We develop a stylized currency crises model with heterogeneous information among investors and endogenous determination of interest rates in a noisy rational expectations equilibrium. Our model captures three key features of interest rates: the opportunity cost of attacking the currency responds to the investors' behavior; the domestic interest rate may influence the central bank's preferences for a fixed exchange rate; and the domestic interest rate serves as a public signal which aggregates private information about fundamentals. We explore the payoff and informational channels through which interest rates determine devaluation outcomes, and examine the implications for equilibrium selection by global games methods. Our main conclusion is that multiplicity is not an artifact of common knowledge. In particular, we show that multiplicity emerges robustly, either when a devaluation is triggered by the cost of high domestic interest rates as in Obstfeld (1996), or when a devaluation is triggered by the central bank's loss of foreign reserves as in Obstfeld (1986), provided that the domestic asset supply is sufficiently elastic in the interest rate and shocks to the domestic bond supply are sufficiently small. JEL: E43 E44 E58 F30 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11191&r=all 131. Hospital Ownership Mix Efficiency in the US: An Exploratory Study Rexford E. Santerre John A. Vernon This paper offers an empirical test of ownership mix efficiency in the U.S. hospital services industry. The test compares the benefits of quality assurance with the costs from the attenuation of property rights that result from an increased presence of nonprofit organizations. The empirical results suggest that too many not-for-profit and public hospitals may exist in the typical market area of the U.S. The policy implication is that more quality of care per dollar might be obtained by attracting a greater percentage of for-profit hospitals into some market areas. This conclusion, however, is tempered with several caveats. We discuss these and also make recommendations for further research. JEL: I1 L3 L2 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11192&r=all 132. Financial Markets and the Real Economy John Cochrane I survey work on the intersection between macroeconomics and finance. The challenge is to find the right measure of marginal utility of wealth, or "bad times" so that we can understand average return premia distilled in finance "factors" as compensation for assets' tendency to pay off badly in "bad times. " I survey the equity premium, consumption-based models, general equilibrium models, and labor income/idiosyncratic risk approaches to this question. JEL: G1 E3 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11193&r=all 133. Testing, Crime and Punishment David N. Figlio The recent passage of the No Child Left Behind Act of 2001 solidified a national trend toward increased student testing for the purpose of evaluating public schools. This new environment for schools provides strong incentives for schools to alter the ways in which they deliver educational services. This paper investigates whether schools may employ discipline for misbehavior as a tool to bolster aggregate test performance. To do so, this paper utilizes an extraordinary dataset constructed from the school district administrative records of a subset of the school districts in Florida during the four years surrounding the introduction of a high-stakes testing regime. It compare the suspensions of students involved in each of the 41,803 incidents in which two students were suspended and where prior year test scores for both students are observed. While schools always tend to assign harsher punishments to low-performing students than to high-performing students throughout the year, this gap grows substantially during the testing window. Moreover, this testing window-related gap is only observed for students in testing grades. In summary, schools apparent act on the incentive to re- shape the testing pool through selective discipline in response to accountability pressures. JEL: I2 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11194&r=all 134. Names, Expectations and the Black-White Test Score Gap David N. Figlio This paper investigates the question of whether teachers treat children differentially on the basis of factors other than observed ability, and whether this differential treatment in turn translates into differences in student outcomes. I suggest that teachers may use a child's name as a signal of unobserved parental contributions to that child's education, and expect less from children with names that "sound" like they were given by uneducated parents. These names, empirically, are given most frequently by Blacks, but they are also given by White and Hispanic parents as well. I utilize a detailed dataset from a large Florida school district to directly test the hypothesis that teachers and school administrators expect less on average of children with names associated with low socio-economic status, and these diminished expectations in turn lead to reduced student cognitive performance. Comparing pairs of siblings, I find that teachers tend to treat children differently depending on their names, and that these same patterns apparently translate into large differences in test scores. JEL: I2 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11195&r=all 135. Corporate Taxation and Bilateral FDI with Threshold Barriers Assaf Razin Yona Rubinstein Efraim Sadka The paper brings out the special mechanism through which taxes influence bilateral FDI, when investment decisions are two-fold in the presence of fixed setup flows costs. For each pair of source-host countries, there is a set of factors determining whether aggregate FDI flows will occur at all, and a different set of factors determimnig the volume of FDI flows (provided that they occur). We demonstrate that the notion that the mere international tax differetials are a key factor behind the direction and magnitude of FDI flows is too simple. We argue that the source country tax rate works primarely on the selection process, whereas the host-country tax rate affect mainly the magnitude of the FDI, once they occur. We analyze international panel data with 24 OECD countries over the period 1981-1998 by the Heckman selection method to bring evidence in support of this argument. JEL: F3 H2 F1 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11196&r=all 136. Do Firms Go Public to Raise Capital? Woojin Kim Michael Weisbach This paper considers the question of whether raising capital is an important reason why firms go public. Using a sample of 16,958 initial public offerings from 38 countries between 1990 and 2003, we consider differences between firms that sell new, primary shares to the public, and existing secondary shares that previously belonged to insiders. Our results suggest that the sale of primary shares is correlated with a number of factors associated with the firm's demand for capital. In particular, issuance of primary shares is correlated with higher increases of investment, higher repayment of debt and increases in cash, and more subsequent capital-raising through seasoned equity offers. Since 79% of all capital raised through IPOs in our sample is from the sale of primary shares, we conclude that capital-raising is an important motive in the going-public decision. JEL: G3 F3 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11197&r=all 137. The IMF in a World of Private Capital Markets Barry Eichengreen Kenneth Kletzer Ashoka Mody The IMF attempts to stabilize private capital flows to emerging markets by providing public monitoring and emergency finance. In analyzing its role we contrast cases where banks and bondholders do the lending. Banks have a natural advantage in monitoring and creditor coordination, while bonds have superior risk sharing characteristics. Consistent with this assumption, banks reduce spreads as they obtain more information through repeat transactions with borrowers. By comparison, repeat borrowing has little influence in bond markets, where publicly-available information dominates. But spreads on bonds are lower when they are issued in conjunction with IMF-supported programs, as if the existence of a program conveyed positive information to bondholders. The influence of IMF monitoring in bond markets is especially pronounced for countries vulnerable to liquidity crises. JEL: F0 F2 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11198&r=all 138. Slow Passthrough Around the World: A New Import for Developing Countries? Jeffrey A. Frankel David C. Parsley Shang-Jin Wei Developing countries traditionally exhibit passthrough of exchange rate changes that is greater and more rapid than high- income countries, but have experienced a rapid downward trend in recent years in the degree of short-run passthrough, and in the adjustment speed. As a consequence, slow and incomplete passthrough is no longer exclusively a luxury of industrial countries. Using a new data set %uF818 prices of eight narrowly defined brand commodities, observed in 76 countries %uF818 we find empirical support for some of the factors that have been hypothesized in the literature, but not for others. Significant determinants of the passthrough coefficient include per capita incomes, bilateral distance, tariffs, country size, wages, long- term inflation, and long-term exchange rate variability. Some of these factors changed during the 1990s. Part (and only part) of the downward trend in passthrough to imported goods prices, and in turn to competitors%u2019 prices and the CPI, can be explained by changes in the monetary environment. Real wages also work to reduce passthrough to competitors%u2019 prices and the CPI, confirming the hypothesized role of distribution and retail costs in pricing to market. Rising distribution costs, due perhaps to the Balassa-Samuelson-Baumol effect, could contribute to the decline in the passthrough coefficient in some developing countries. JEL: F3 F4 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11199&r=all 139. UEFA Euro 2004 Tourism Impact Analysis Jose Cadima Ribeiro Jose Viseu Cristina Rodrigues Tania Delalande (Universidade do Minho - NIPE) The purpose of this paper is exactly to approximate the tourism economic impact of the UEFA Euro 2004 in Portugal. The survey concentrates on the immediate, direct and short-term additional revenue brought into one region by the foreign sport event spectators. One innovating aspect of this paper is the direct data collection on the foreign visitors spending, contouring simulation and forecast problems. Results show an immediate short- term return investment costs generated an immediate and short- term revenue of less than one tenth of the investment costs and overall revenue leakage (or income export) of nearly 325% (50,142 million Euro) of the revenue within the defined regional spatial circuit. Keywords: UEFA Euro 2004, tourism impact of major sport events, sport event tourism. JEL: C42 R11 L83 O18 Date: 2004 URL: http://d.repec.org/n?u=RePEc:nip:nipewp:14/2004&r=all 140. Elasticities of Regional and Local Administrations Expenditures - the Portuguese case Paulo Reis Mourao (Universidade do Minho - NIPE) This work analyses the evolution of real public expenditures of local and regional administrations (LRA), in Portugsl, in the period after the Second World War. It also aims to estimate the elasticities associated to determinants, which explain the found growth. As most relevant results, it is focused that real public espenditures of LRA did not increase in a constant way - the most significant period of growth was between 1974 and 1990. A long- term relation was found among real public expenditures of LRA ( as a proportion of real Gross National Product), the Number of Employees in Public Administration, the Number of Unemployed and Public Revenues. These results are consistent with the bureaucracy being a source of discouragement referring to the decentralized public expenditures. Keywords: Public Expenditures; Cointegration; Decentralization JEL: H50 H54 H72 C13 Date: 2005 URL: http://d.repec.org/n?u=RePEc:nip:nipewp:5/2005&r=all 141. Corruption, Decentralization and Yardstick Competition Christopher J. Ellis (University of Oregon) Oguzhan C. Dincer (Massey University) Several empirical studies have found a negative relationship between corruption and the decentralization of the powers to tax and spend. In this paper we explain this phenomenon using a model of Yardstick Competition. Further, using data on government corruption in US states, we provide some new evidence that supports the theoretical findings. Keywords: Corruption, decentralization, yardstick competition JEL: H20 H29 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:ore:uoecwp:2005-5&r=all 142. Land Fragmentation and its Implications for Productivity: Evidence from Southern India Raghbendra Jha Hari K. Nagarajan Subbarayan Prasanna Keywords: Length (pages): 37 Date: 2005 URL: http://d.repec.org/n?u=RePEc:pas:asarcc:2005-01&r=all 143. Social Change Jeremy Greenwood (University of Rochester) Nezih Guner (Pennsylvania State University) Social norms are influenced by the technological environment that a society faces. Behavioral modes reflect purposive decision making by individuals, given the environment they live in. Thus, as technology changes, so might social norms. There were big changes in social norms during the 20th century, especially in sexual mores. In 1900 only six percent of unwed women engaged in premarital sex. Now, three quarters do. It is argued here that this was the result of technological improvement in contraceptives, which lowered the cost of premarital sex. The evolution from an abstinent to a promiscuous society is studied using an equilibrium matching model. Keywords: Social change; the sexual revolution; technological progress in contraceptives; bilateral search. JEL: E1 J1 O3 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:roc:ecavga:9&r=all 144. Ownership Change, Productivity, and Human Capital: New Evidence from Matched Employer-Employee Data in Swedish Manufacturing Donald S. Siegel (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA) Kenneth L. Simons (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA) Tomas Lindstrom (National Institute of Economic Research, Box 3116, SE-103 62 Stockholm, Sweden) Empirical studies of the impact of changes in ownership of manufacturing plants on productivity (e.g., Lichtenberg and Siegel (1987, 1990a, 1990b), McGuckin and Nguyen (1995, 2001), and Maksimovic and Phillips (2001)) have provided limited evidence on how such transactions affect investment in human capital and have been based strictly on U.S. and U.K. data. We attempt to fill these gaps, based on an analysis of matched employer-employee data from over 19,000 Swedish manufacturing plants for the years 1985-1998. The sample covers virtually the entire population of manufacturing plants with 20 or more employees and a probability-based sample of smaller plants. We assess whether there are differential effects on productivity and human capital for different types of ownership changes, such as partial and full acquisitions and divestitures, and related and unrelated acquisitions. Our results suggest that ownership change results in an increase in relative productivity. We also find that plants involved in these transactions experience increases in average employee age, experience, and the percentage of employees with a college education. Ownership change also leads to an increase in wages and a reduction in the percentage of female workers. All of these patterns emerge most strongly for full acquisitions and divestitures and unrelated acquisitions. JEL: G34 D24 C81 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:rpi:rpiwpe:0502&r=all 145. Regional Mismatch and Unemployment: Theory and Evidence from Italy, 1977-1998 Marco Manacorda,Barbara Petrongolo (Dept. of Economics Queen Mary; Dept. of Economics London School of Economics; University of London; CEP and STICERD,London School of Economics) This paper describes the functioning of a two-region economy characterized by asymmetric wage-setting. Labor market tightness in one region (the leading-region) affects wages in the whole economy. IN equilibrium, net labor demand shifts towards the leading region raise unemployment in the rest of the economy and leave regional wages unchanged, causing an increase in aggregate unemployment. This model has some success in explaining the evolution of regional unemployment rates in Italy during the period 1977-1998. Based on SHIW micro data on earnings and ISTAT data on unemployment rates we find strong evidence that wages in Italy only respond to labor market tightness in the North. We estimate that around one third of the increase in aggregate unemployment in Italy can be explained by regional mismatch, mainly due to an excess labor supply growth in the South. Keywords: Regional imbalances, Wage curve, Unemployment. JEL: E24 J23 J31 URL: http://d.repec.org/n?u=RePEc:sal:celpdp:90&r=all 146. Regulating Financial Conglomerates Xavier Freixas Gyongyi Loranth Alan D. Morrison We investigate the optimal regulation of financial conglomerates which combine a bank and a non-bank financial institution. The conglomerate’s risk-taking incentives depend upon the level of market discipline it faces, which in turn is determined by the conglomerate’s liability structure. We examine optimal capital requirements for standalone institutions, for integrated financial conglomerates, and for financial conglomerates that are structured as holding companies. For a given risk profile, integrated conglomerates have a lower probability of failure than either their standalone or decentralised equivalent. However, when risk profiles are endogenously selected conglomeration may extend the reach of the deposit insurance safety net and hence provide incentives for increased risk-taking. As a result, integrated conglomerates may optimally attract higher capital requirements. In contrast, decentralised conglomerates are able to hold assets in the socially most efficient place. Their optimal capital requirements encourage this. Hence, the practice of "regulatory arbitrage", or of transferring assets from one balance sheet to another, is welfare-increasing. We discuss the policy implications of our finding in the context not only of the present debate on the regulation of financial conglomerates but also in the light of existing US bank holding company regulation. JEL: G21 G22 G28 Date: 2005 URL: http://d.repec.org/n?u=RePEc:sbs:wpsefe:2005fe03&r=all 147. Wealth and Portfolio Composition Dimitrios Christelis (University of Salerno and CSEF) Tullio Jappelli (University of Salerno, CSEF and CEPR) Mario Padula (University of Salerno and CSEF) This paper provides basic statistics on household total wealth, financial assets, and financial assets composition of the elderly as key indicators of the well-being and quality of life of the elderly. Median total wealth varies much less than median financial wealth across countries. As for financial asset ownership, the chapter focuses on bonds, stocks, mutual funds and life-insurance policies and documents the polarization between Nordic and Mediterranean countries. The elderly tend to invest more in stocks and to have a more diversified portfolio in Northern and Central Europe than in the South. The chapter also offers insights about the relation between financial risk exposure and age and the time that the elderly spend managing their financial assets. Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:sef:csefwp:132&r=all 148. Optimal Auditing Standards Giovanni Immordino (Universita di Salerno and CSEF) Marco Pagano (Universita di Napoli "Federico II", CSEF and CEPR) We study regulation of the auditing profession in a model where audit quality is unobservable and enforcing regulation is costly. The optimal audit standard falls short of the first-best audit quality, and is increasing in the economy’s wealth, in the riskiness of firms and in the amount of funding they seek. The model can encompass collusion between clients and auditors, arising from the joint provision of auditing and consulting services: deflecting collusion requires less ambitious standards. The optimal audit standard depends also on the corporate governance of client firms: audit standards and corporate governance are complements. Finally, banning the provision of consulting services by auditors eliminates collusion but may not be optimal in the presence of economies of scope. Keywords: Auditing standards, enforcement, opinion shopping. JEL: G28 K22 M42 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:sef:csefwp:133&r=all 149. FDI, Allocation of Talents and Differences in Regulation Giovanni Pica (University of Southampton, University of Salerno and CSEF) Jose V. Rodriguez Mora (Universitat Pompeu Fabra, CREA, CEPR, CES-ifo and IZA) This paper presents evidence on the effect of countries proximity in regulation on bilateral FDI flows. By exploiting the OECD International Direct Investment Statistics and data on nationwide regulation levels, we find a significant negative effect of the absolute value of the difference between countries indexes of regulation on the associated bilateral flows of FDIs, controlling for each country regulation level. Motivated by this evidence, we build a model where agents are heterogeneous and differ in their abilities to be entrepreneurs or workers. Entrepreneurs may engage in FDIs, which entails incurring additional fixed costs, one of which is the cost of learning the foreign regulation. In this framework, more similar regulations foster FDI, raise wages, output and productivity. The increase in productivity is the consequence of very efficient foreign entrepreneurs driving out of the market inefficient local firms, improving the allocation of talent in the economy as a whole. Keywords: Multinational Firms, Heterogeneous Agents, Policy Harmonization JEL: E61 F23 F41 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:sef:csefwp:134&r=all 150. The Effects of Employment Protection on the Italian Labour Market Adriana Kugler adkugler@uh.edu (University of Houston, Universitat Pompeu Fabra, NBER, CEPR and IZA) Giovanni Pica (University of Southampton, University of Salerno and CSEF) This paper uses the Italian Social Security employer-employee panel to study the effect of a reform that introduced a cost for unjust dismissals only for firms below 15 employees, while leaving firing costs unchanged for bigger firms. We find that the increase in dismissal costs decreased accessions and separations in small relative to big firms, the more so in sectors with higher employment volatility. Moreover, the reform reduced firms’ entry rates while increasing the exit rate. We also find evidence that higher EPL flattened employment policies over the cycle Keywords: Costs of Unjust Dismissals, European Unemployment, Firms’ Entry and Exit, Employment Volatility JEL: E24 J63 J65 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:sef:csefwp:135&r=all 151. Labour Market Seasonality in Canada: Trends and Policy Implications Andrew Sharpe Jeremy Smith The objective of this paper is to examine labour market seasonality in Canada over the past three decades in order to shed light on what policies might be best suited to address seasonal economies. The main findings are as follows. The seasonality of the Canadian economy has declined since 1976 according to a wide range of output and labour market variables. However, since 1996 unemployment rate seasonality has increased. Seasonality – both in employment and the unemployment rate – is much higher for the young than for older workers and much higher for men than for women. Canada’s level of employment seasonality was more than three times higher than that in the United States in 2003. However, unemployment rate seasonality was perhaps surprisingly the same in the two countries. Relative to OECD countries, Canada has average unemployment rate seasonality, but very high employment seasonality. Atlantic Canada has higher levels of employment and unemployment rate seasonality than the other provinces reflecting a greater importance of primary industries and greater propensity of employers to hire part-year workers. Seasonal unemployment represents a much more important public policy issue than seasonal employment. The basic problem is an underlying lack of employment opportunities in rural and remote areas where seasonal unemployment is concentrated, not seasonal unemployment itself. An economic development strategy that ensures that all persons who want full year work can obtain it must be the most important element in any attempt to reduce seasonal unemployment. But such a strategy might need to be supplemented, at least in the short-to-medium term, by out- migration, particularly in very high unemployment regions, and incentives for firms to transform seasonal work into full-year work, or at least into near full-year work. Since unrestricted benefits for seasonal EI repeaters will not reduce seasonal unemployment, a strong case can be made that long-term income support for the seasonally unemployed is not in the long-run in the best interest of the beneficiaries, high unemployment regions, and the country, although reducing such benefits is politically difficult. Keywords: seasonality, seasonal employment, seasonal unemployment, unemployment, Atlantic Canada, Canada JEL: E24 J23 J65 R58 O51 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:sls:resrep:0501&r=all 152. Measuring the Impact of Research on Well-being: A Survey of Indicators of Well-being Andrew Sharpe Jeremy Smith The main objective of this report is to conduct a survey and assessment of various indicators used by organizations, both in Canada and abroad, to measure attributes and the well-being of society at the economic, health, environmental, social, and cultural levels. The compilation includes a combination of quantitative and qualitative and objective and subjective indicators or measures. The report is divided into five major parts. The first part provides a brief overview of Canada’s research effort. The second part, by far the longest section, surveys a large number of sets of indicators and composite measures that have been developed to quantify well-being in Canada, in the United States, in OECD countries, and at the international level. The third section develops a preliminary framework for measuring the impact of research on well-being. The fourth section discusses briefly the role of indicators in public policy initiatives to improve the well-being of Canadians. The fifth and final section outlines directions for further work. The report concludes that it is entirely feasible to assess the impact of research investments in Canada on various dimensions of well-being. But it is important to specify what particular research investments and what dimensions of well-being are of interest given the many types of research investments and well- being dimensions as well as the complex interrelationships between research and well-being. Keywords: Well-being, Wellbeing, Well Being, Indicators, Indexes, Indices, Methodology, Economic Well-being, Economic, Social, Societal, Labour Market, Environmental, Research, R&D, Research and Development JEL: C82 C81 I31 I32 Z13 O30 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:sls:resrep:0502&r=all 153. The Performance of Panel Unit Root and Stationarity Tests: Results from a Large Scale Simulation Study Jaroslava Hlouskova Martin Wagner This paper presents results concerning the size and power of first generation panel unit root and stationarity tests obtained from a large scale simulation study, with in total about 290 million test statistics computed. The tests developed in the following papers are included: Levin, Lin and Chu (2002), Harris and Tzavalis (1999), Breitung (2000), Im, Pesaran and Shin (1997 and 2003), Maddala and Wu (1999), Hadri (2000) and Hadri and Larsson (2002). Our simulation set-up is designed to address i.a. the following issues. First, we assess the performance as a function of the time and the cross-section dimension. Second, we analyze the impact of positive MA roots on the test performance. Third, we investigate the power of the panel unit root tests (and the size of the stationarity tests) for a variety of first order autoregressive coefficients. Fourth, we consider both of the two usual specifications of deterministic variables in the unit root literature Keywords: Panel Unit Root Test; Panel Stationarity Test; Size; Power; Simulation Study JEL: C12 C15 C23 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:ube:dpvwib:dp0503&r=all 154. A Recursive Thick Frontier Approach To Estimating Production Efficiency Rien Wagenvoort (European Investment Bank, Luxembourg) Paul Schure (Department of Economics, University of Northern B.C.) We introduce a new panel data estimation technique for cost and production functions: the Recursive Thick Frontier Approach (RTFA) RTFA has two advantages over existing thick frontier methods. First, technical inefficiency is allowed to be dependent on the explanatory variables of the frontier model. Secondly, no distributional assumptions are imposed on the inefficiency component of the error term. We show by means of simulation experiments that RTFA can outperform the popular stochastic frontier approach (SFA) and the “within” OLS estimator for realistic parameterisations of the productivity model. Keywords: Technical Efficiency, Efficiency Measurement, Frontier Production Functions, Recursive Thick Frontier Approach JEL: C15 C23 C50 D2 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:vic:vicewp:0503&r=all 155. Attributing Returns and Optimising United States Swaps Portfolios Using an Intertemporally-Consistent and Arbitrage- Free Model of the Yield Curve Leo Krippner (AMP Capital Investors) This paper uses the volatility-adjusted orthonormalised Laguerre polynomial model of the yield curve (the VAO model) from Krippner 2005), an intertemporally-consistent and arbitrage-free version of the popular Nelson and Siegel (1987) model, to develop a multi- dimensional yield-curve-based risk framework for fixed interest portfolios. The VAO model is also used to identify relative value i.e. potential excess returns) from the universe of securities that define the yield curve. In combination, these risk and return elements provide an intuitive framework for attributing portfolio returns ex-post, and for optimising portfolios ex-ante. The empirical applications are to six years of daily United States interest rate swap data. The first application shows that the main sources of fixed interest portfolio risk (i.e. unanticipated variability in ex-post returns) are first-order ( ‘duration’) effects from stochastic shifts in the level and shape of the yield curve; second-order (‘convexity’) effects and other contributions are immaterial. The second application shows that fixed interest portfolios optimised ex-ante using the VAO model risk/relative framework significantly outperform a naive evenly-weighted benchmark over time. Keywords: yield curve; term structure; fixed interest securities; portfolio optimisation; interest rate swaps JEL: E43 G11 G12 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:wai:econwp:05/03&r=all 156. Foreign Direct Investment and the Business Environment in Developing Countries: the Impact of Bilateral Investment Treaties Jennifer Tobin Susan Rose-Ackerman Bilateral Investment Treaty’s effects on FDI and the domestic business environment remain unexplored despite the proliferation of treaties over the past several years. This paper asks whether BITs stimulate FDI flows to host countries, and if the treaties have any impact on the environment for domestic private investment. We find a weak relationship between BITs and FDI. However, for risky countries, BITs attract greater amounts of FDI. We also find a weak relationship between BITs and the domestic investment environment. Thus, while BITs may not alter the domestic investment environment, they also may not be fulfilling their primary objective. Date: 2003-06-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2003-587&r=all 157. Instability in Exchange Rates of the World Leading Currencies: Implications of a Spatial Competition Model among Central Banks Dirk Engelmann Jan Hanousek Evzen Kocenda We use a spatial competition based model in a two-stage game setup to assess whether equilibrium in exchange rates among the leading currencies is attainable. We show that a stable equilibrium can be reached in the case of two leading currencies, but not in the case of three. In our model, central banks of leading currencies attract, through the workings of their objective and policy, small currencies that tie with leading currencies via exchange rate regimes. This can be thought of as a competition to link smaller currencies to a leading currency that is motivated by the fact that such a tie greatly reduces volatility within such an informal “currency area”. Our theoretical findings are supported by empirical evidence. Since firms, traders, and countries currently recognize three leading currencies and their economic behavior reflects this, we may expect disagreement on overvaluation or undervaluation of certain currencies to continue. Keywords: exchange rates, exchange rate regimes, central bank policy, monetary union, spatial competition JEL: C72 E42 E58 N20 O23 Date: 2004-06-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-686&r=all 158. Financial Sector Returns and Creditor Moral Hazard: Evidence from Indonesia, Korea, and Thailand Jian Tong Chenggang Xu This paper introduces a framework of investor behavior in which investors form their expectations regarding the credibility of a prospective IMF program in reforming the financial sector characterized by domestic implicit guarantees. We examine the changes in financial sector returns in response to IMF-related news such as announcements of program negotiations and approval to infer investor perception regarding the Fund support associated with the program. We test the implications of our framework based on the East Asian crisis of the late 1990s. Using daily financial sector returns from Indonesia, Korea, and Thailand, we find that news of program negotiations and approval increases financial sector returns in Indonesia and Korea. The findings are consistent with investor perception that negotiated IMF programs are non-credible due to expected continuation of domestic implicit guarantees during the future Fund Keywords: Moral Hazard, the IMF, Asian crisis, Financial markets JEL: F32 F33 F34 G15 Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-687&r=all 159. WHAT CAUSES BANK ASSET SUBSTITUTION IN KAZAKHSTAN? EXPLAINING CURRENCY SUBSTITUTION IN A TRANSITION ECONOMY Sharon Eicher Dollarization comes in several forms. The type that this paper examines is asset substitution, when savers hold dollar assets in bank accounts, instead of local currency. It is limited to the transition economy of Kazakhstan. This paper estimates demand for dollar accounts and shows that avoidance of inflation risk, rather than avoidance of exchange rate devaluation of savings, is the most important in explaining dollarization. This result is unexpected. This study examines data from Kazakhstan. Kazakhstan is seen as having a strong banking system and a healthy economy for a former Soviet Republic. It is seen as one of the most market-oriented, FSU countries. However, Kazakhstan also has a large demand for a means of storing savings in dollars, rather than in the local currency. This is particularly curious, when the local currency is appreciating relative to the U.S. dollar. This demand in less prosperous FSU countries is likely to be even greater. The paper combines data and statistical methods with anecdotal information in order to improve our understanding of a paradoxical occurrence. Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-688&r=all 160. Diverging Paths: Transition in the Presence of the Informal Sector Maxim Bouev This work suggests a development of the seminal model of transition from plan to market economy by Aghion and Blanchard ( 1994). We introduce an informal sector to show that its presence can generate qualitatively di?erent steady states, to which the economy converges in the end of transition. Two types of transitional dynamics are considered, and it is argued that they can help explain di?erences in evolution of formal and informal output exhibited, on the one hand, by East European countries and, on the other hand, by the former Soviet Union republics such as Russia or Ukraine. Keywords: optimal speed of transition, informal economy, search models JEL: J41 J42 J64 O17 P29 Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-689&r=all 161. Executive Compensation, Firm Performance, and State Ownership in China: Evidence from New Panel Data* Takao Kato Cheryl Long This paper provides the first systematic evidence on compensation for executives of firms listed in China’s emerging stock market (currently the eighth largest of the world with market capitalization of over $550 billion). Specifically, using comprehensive financial and accounting data on China’s listed firms from 1998 to 2002 (data modeled after Compustat and CRSP in the U.S.), augmented by unique data on executive compensation, we find for the first time statistically significant sensitivities and elasticities of annual cash compensation (salary and bonus) for top executives with respect to shareholder value in China. The size of the estimated sensitivities imply that a 1000 RMB increase in shareholder value yields a 0.020 RMB to 0.053 RMB increase in annual cash compensation, whereas the size of the estimated elasticities suggest that a 10 percent increase in shareholder value results in 3.7 to 4.0 percent increase in annual cash compensation for top executives. The estimated sensitivities and elasticities of cash compensation for top executives in China’s listed firms are greater than what has been reported for Japan and the U.S. However, we also find that state ownership of China’s listed firms is weakening executive pay-performance link and thus possibly making China’s listed firms less effective in solving the agency problem. As such, ownership restructuring may be needed for the “shareholding experiment” to fully succeed in transforming China’s emerging listed firms to efficient modernized corporations and for the overall successful economic transition of China. Finally, we find that sales growth is significantly linked to executive compensation and that Chinese executives are penalized for making negative profit although they are neither penalized for declining profit nor rewarded for rising profit insofar as it is positive. Keywords: transition economies, China, executive compensation, firm performance, corporate governance, and ownership structure. JEL: P31 P34 M52 M12 G30 G15 J33 O53 Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-690&r=all 162. Impact of Cross-listing on Local Stock Returns: Case of Russian ADRs Elena Smirnova The paper examines the impact of American Depositary Receipt ( ADR) listings on the return of the underlying Russian stocks. The contribution of this paper is twofold. First, it looks at a new sample of ADRs issued by Russian companies. Second, the technique used to estimate the market model is different from the previous studies. The returns are modeled to follow GARCH process, as opposed to the regular OLS procedure, which assumes homoscedasticity in residual returns. Average abnormal returns and cumulative average abnormal returns are calculated for the [- 25, +25] event window, with the ADR listing date being the event date. The results indicate a significant negative abnormal local market return on an ADR listing day. The return volatilities after the listing are compared to those before the listing. Eleven out of sixteen companies experienced increased volatility of local returns after the cross-listing. Keywords: finance, Russia, international cross-listings, ADRs Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-691&r=all 163. Credibility and adjustment: gold standards versus currency boards Jean Baptiste Desquilbet Nikolay Nenovsky It is often maintained that currency boards (CBs) and gold standards (GSs) are alike in that they are stringent monetary rules, the two basic features of which are high credibility of monetary authorities and the existence of automatic adjustment ( non discretionary) mechanism. This article includes a comparative analysis of these two types of regimes both from the perspective of the sources and mechanisms of generating confidence and credibility, and the elements of operation of the automatic adjustment mechanism. Confidence under the GS is endogenously driven, whereas it is exogenously determined under the CB. CB is a much more asymmetric regime than GS (the adjustment is much to the detriment of peripheral countries) although asymmetry is a typical feature of any monetary regime. The lack of credibility is typical for peripheral countries and cannot be overcome completely even by “hard” monetary regimes. Keywords: monetary regime, gold standards, and currency boards JEL: E42 Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-692&r=all 164. Money Market Liquidity under Currency Board – Empirical Investigations for Bulgaria Petar Chobanov Nikolay Nenovsky Over the last years the efficiency and existence of an automatic adjustment mechanism of currency boards are in the centre of economic discussions. This study is intended to provide an empirical analysis of the volume and interest rate of unsecured overnight deposits at Bulgarian interbank market. Three empirical models are developed in order to explain the behaviour of demand, supply and interest rates. The impact of reserve requirements, operations connected with government budget, transactions in reserve currency (Euro) and some seasonal factors is discussed. The developments of interest rates and volumes are well captured by the employed variables and their statistically significant signs coincide with the theoretical literature. Keywords: money market, currency board, Bulgaria JEL: E4 E5 Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-693&r=all 165. Volatile Interest Rates, Volatile Crime Rates: A new argument for interest-rate smoothing Garett Jones Ali M. Kutan Good monetary policy requires estimates of all of its effects: monetary policy impacts traditional economic variables such as output, unemployment rates, and inflation. But does monetary policy influence crime rates? By extending the vector autoregression literature, we derive estimates of the dynamic effect of higher interest rates on crime rates. Higher interest rates have socially and statistically significant positive effects on rates of theft and knife robberies, while effects on rates of burglary and assault are smaller and statistically insignificant. Higher interest rates have no effect on homicide rates. We conclude that monetary policy influences the rate of economically-motivated crimes. Keywords: crime, monetary policy, vector autoregressive models ( VARs) JEL: E5 C3 Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-694&r=all 166. The Unanticipated Effects of Insider Trading Regulation Art Durnev Amrita S. Nain Using a sample of 2,827 firms from 21 countries we examine whether insider trading laws achieve the primary objective for which they are introduced – protecting uninformed investors from private information-based trading. We find that when control is concentrated in the hands of a large shareholder, insider trading regulation is less effective in reducing private information-based trading if investor protection is poor. We suggest that controlling shareholders who are banned from trading may resort to covert expropriation of firm resources, creating more information asymmetry and thereby encouraging private information trading by informed outsiders. Consistent with this, we find evidence that when the rights of controlling shareholders are high, insider trading restrictions are associated with greater earnings opacity. Keywords: Insider Trading Regulation, Ownership, Private Information Trading, Earnings Opacity JEL: G15 G14 G38 Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-695&r=all 167. Firm Ownership and Internal Labor Practices in a Transition Economy: An Exploration of Worker Skill Acquisition in Vietnam Jed Friedman One feature common to many post-socialist transition economies is a relatively compressed wage structure in the state owned sector. We conjecture that this compressed wage structure creates weak incentives for work effort and worker skill acquisition and thus presents adverse consequences for the entire transition economy if a substantial portion of the labor force works in the state sector. We explore firm wage incentives and worker training, as well as other labor practices and outcomes, in a transition setting with matched firm and worker data collected in one of the largest provinces of Vietnam – Ho Chi Minh City. The Vietnamese state sector exhibits a compressed wage distribution in relation to foreign invested privately owned firms. State wage practices stress tenure over worker productivity and their wage policies result in flatter wage – experience profiles and lower returns to education. The state work force is in greater need for formal training, a need that is, in part, met through direct government financing. In spite of the opportunities for government financed training and at least partly due to inefficient worker incentives, state firms, by certain measures, exhibit lower levels of labor productivity. The private sector comparison group to state firms for all of these findings is foreign owned firms. The internal labor practices of foreign firms are more consistent with a view of profit-maximizing firms operating with no political constraints. This is not the case for Vietnamese de novo private firms that exhibit much more idiosyncratic behavior and whose labor practices are often indistinguishable from state firms. The exact reasons for this remain a topic of ongoing research yet we conjecture that various private sector constraints, including limited access to formal capital, play an important role. Keywords: Vietnam, within-firm incentives, labor productivity, transition JEL: P31 J31 Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-696&r=all 168. Russian Cities in Transition: The Impact of Market Forces in the 1990s Ira N. Gang Robert C. Stuart This paper analyses Russian city growth during the command and transition eras. Our main focus is on understanding the extent to which market forces are replacing command forces, and the resulting changes in Russian city growth patterns. We examine net migration rates for a sample of 171 medium and large cities for the period 1960 through 2002. We conclude that while the declining net migration rate was reversed during the first half of the 1990s, restrictions continued to matter during the early years of transition in the sense that net migration rates were lower in the restricted than in the unrestricted cities. This pattern seemingly came to an end in the late 1990s. Keywords: cities; city growth; migration; Russia; urbanization JEL: J6 P20 R23 Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-697&r=all 169. ECOLOGY AND VIOLENCE: THE ENVIRONMENTAL DIMENSIONS OF WAR Timothy L. Fort Cindy A. Schipani Research reported by Thomas Homer-Dixon characterizes five social effects that can significantly increase the likelihood of violence in the emerging world, effects that are far deeper than can be controlled by security forces: (1) constrained agricultural production, often in ecologically marginal regions; ( 2) constrained economic productivity, mainly affecting people who are highly dependent on environmental resources and who are ecologically and economically marginal; (3) migration of these affected people in search of better lives; (4) greater segmentation of society, usually along existing ethnic cleavages; and (5) disruption of institutions, especially the state.1 These kinds of social effects create tensions that can erupt in violent expression. It is difficult to envision how additional security forces will solve the embedded social problems that link violence with economic, social, ethnic, and even religious frustrations. This manuscript seeks to address these concerns. Part I elaborates ways in which these issues of violence manifest themselves in a globalized economy. Part II discusses the business implications of these tensions and suggests a way in which business can be a mediating actor to lessen these tensions. Part III concludes with a suggestion for a recharacterization of the corporation in a way to sensitize it to the ecological- mindedness necessary to address the potential issues of violence in societies. We propose sustainable peace as an aim to which businesses should orient their actions both for reasons of the good of avoiding the activities that contribute to the spilling of blood as well as for the good of sustainable economic enterprises, which are fostered by stable, peaceful relationships. Thus, business must do what it does best and address economic development, even in terms of the extraction of natural resources. But it must also be attentive to the rights of others, to the development of community and meaning, and to stop violence when it is likely. Given the dangers ecological stresses pose for the planet, it is hard to think of a more compelling reason to reorient business behavior. Keywords: environmental law; peace; social responsibility; corporate governance JEL: K22 K23 M14 Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-698&r=all 170. SELF-SELECTION AND EARNINGS DURING VOLATILE TRANSITION Ralitza Dimova Ira N. Gang Using Bulgarian Integrated Household Surveys for 1995, 1997 and 2001 this paper explores determinants of labor force status – not working, public sector employment, private sector employment and self-employment – and earnings for each of the three employment sectors. We find that while skilled labor’s pattern of reallocation into the public sector remains roughly the same over time, the inflow of highly educated laborers into the private sector and selfemployment increases. These changes coincide with the erosion of the returns to observed skills in the private sector and self-employment, while the public sector continues to reward all types of education at higher than the elementary level. Keywords: employment selection, earnings, Bulgaria JEL: J21 J23 J31 Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-699&r=all 171. Minimum Wages, Inequality and Globalization T.H. Gindling Katherine Terrell This paper contributes to our understanding of the impact of institutions on incomes of workers in developing countries by rigorously addressing the question as to whether changes in minimum wages can change the inequality of the distribution of earnings. More specifically, we analyze whether changes in Costa Rica’s complex institution of multiple minimum wages in the 1980s and 1990s acted as a countervailing force to the unequalizing effect of globalization. Using annual data on workers from the 1987-1997 household surveys, it is shown that changes in the legal minimum wages did indeed have an effect on wage inequality and that these changes would not have been captured using the simple interpretation of minimum wages found in much of the literature. Keywords: minimum wages, employment, wages, Costa Rica JEL: J23 J31 J38 Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-700&r=all 172. The Effects of Multiple Minimum Wages Throughout the Labor Market T.H. Gindling Katherine Terrell This paper investigates the effects of legal minimum wages on wages, employment, hours worked and monthly earnings among workers covered by minimum wage legislation as well as those for whom it does not apply (the uncovered sector) in Costa Rica. This country’s large uncovered sector and complex minimum wage policy, which has for decades set numerous wages throughout the wage distribution, provide a stimulating counterpoint to the U.S. framework for the analysis of the impact of minimum wages. We find that legal minimum wages have a significant positive effect on the wages of workers in the covered sector (with an elasticity of 0.10) but no effect on wages of workers in the uncovered sector. We also find that a 10% increase in minimum wages lowers employment in the covered sector by 1.09% and decreases the average number of hours worked of those who remain in the covered sector by about 0.6%. Finally, we show that despite the wide range of minimum wages, the largest impact on the wages and employment of covered sector workers is in the lower half of the distribution. Keywords: minimum wages, employment, wages, Costa Rica JEL: J23 J31 J38 Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-701&r=all 173. What Makes Small Firms Grow? Finance, Human Capital, Technical Assistance, and the Business Environment in Romania J. David Brown John S. Earle Dana Lup Although the development of a new private sector is generally considered crucial to economic transition, there has been rather little empirical research on the determinants of startup firm growth. This paper uses panel data techniques to analyze a survey of 297 new small enterprises in Romania containing detailed information from the startup date through 2001. We find strong evidence that access to external credit increases the growth of both employment and sales. Taxes appear to constrain growth. The data suggest that entrepreneurial skills have little independent effect on growth, once demand conditions are taken into account, and there is only weak evidence for the effectiveness of technical assistance, and only when it is provided by foreign partners. A wide variety of alternative measures of the business environment (contract enforcement, property rights, and corruption) are tested, but none are found to have any clear association with firm growth. Keywords: Small Firms, Entrepreneurship, Microfinance, Business Environment, Romania JEL: M13 O16 O19 P26 Date: 2004-05-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-702&r=all 174. Returns to Skills and the Speed of Reforms: Evidence from Central and Eastern Europe, China, and Russia Belton M. Fleisher Klara Sabirianova Peter Xiaojun Wang We explore the pace of increase in returns to schooling during the transition from planning to market over time across a number of Central and Eastern European countries, Russia, and China. We use metadata from 33 studies of 10 transition economies covering a period from 1975 through 2002. Our empirical model is an attempt to account for cross-section and over-time variation in rates of return as a function of the timing, speed, and volatility of reform processes as well as estimation methods used and sample characteristics. Our principal aim is to investigate the relative strength of two hypotheses: (1) the speed of economic transformation from planning to market represent the relaxation of legal, regulatory, and institutional constraints on wage-setting behavior, leading directly to adjustment returns to schooling to market rates; 2) the rapid increase in returns to schooling during the early reform period reflects the ability of highly-educated individuals to respond to changing opportunities in a disequilibrium situation. We find that both the speed of reforms and the degree of economic disequilibrium as reflected in macroeconomic volatility help to explain cross-country differences in the time paths of the returns to schooling. We report the systematic effects of sample characteristics, estimation methods, and model specifications on estimated returns to schooling. Keywords: returns to schooling, skills, speed of reforms, meta- analysis, transition, Central and Eastern Europe, China, Russia. JEL: J31 J24 O15 P2 P3 P5 Date: 2004-06-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-703&r=all 175. Returns to Schooling in China Under Planning and Reform Belton M. Fleisher Xiaojun Wang We estimate returns to schooling using a retrospective work history survey covering more than 4,000 workers over the period 1950 to 1994, with particular emphasis to the returns to schooling for workers who attended institutes of higher education and who graduated from college. We find evidence that schooling returns declined throughout the period leading up to the Cultural Revolution (CR), with returns for workers who did not attend college becoming negligible. Returns to those with some college education remained positive, but low compared to other countries. Consistent with other studies, we find that returns to schooling did not recover from their CR low until the 1990s. Increases in the return to schooling during the transition following the CR were not associated directly with workers changing jobs or with taking “new-economy” jobs but appear to have occurred for most workers across all ownership categories. Workers most likely to leave jobs in the traditional ownership sector for jobs in the private or jointventure categories were those who entered the labor force prior to 1967. We do not find evidence supporting other studies’ finding that schooling returns for college graduates increased more than for workers with lower levels of schooling attainment. Keywords: returns to schooling, skills, China JEL: J31 J24 O15 Date: 2004-06-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-704&r=all 176. Beliefs about Exchange-Rate Stability: Survey Evidence From the Currency Board in Bulgaria Neven T. Valev John A. Carlson We use unique survey data from Bulgaria’s currency board to examine the reasons for persistent incomplete credibility of a financial stabilization regime. Although it produced remarkably positive effects in terms of sustained low inflation since 1997, the currency board has not achieved full credibility. This is not uncommon in other less-developed countries with fixed exchange rate regimes. Our results reveal that incomplete credibility is explained primarily by concerns about external economic shocks and the persistent high unemployment in the country. Past experiences with high inflation do not rank among the top reasons to expect financial instability in the future. Keywords: Credibility, Currency Boards, Financial Stabilization Programs JEL: E5 F3 Date: 2004-06-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-705&r=all 177. Economic Reform in Tanzania and Vietnam: A Comparative Commentary Brian Van Arkadie Do Duc Dinh The economic reforms in Tanzania and Vietnam represent the two typical cases of transition economies in Asia and Africa, particularrly the transformation of the two developing economies from the planned to the market mechanism. In this paper, the two authors, Brian - a British economist and Dinh - a Vietnamese economist, have, basing on a comparative approach, enquired into various economic and social aspects of the economic reforms in the two countries, including the demographic transition, the change in population growth, the investment in human capital, the growth of GDP, the structural sransformation, the linkage between gricultural growth, rural development, food production and poverty alleviation, the reform in the industrial sector and the state enterprises, the change of ownership , the role of the State, the capital formation, the role of the domestic savings, foreign aid, investment and trade, the gains and losses from globalisation, with an aim to find the answer to the question why in the two cases, Tanzania seemed to follow the donors’ guidance better than Vietnam, but achieved smaller successes? Keywords: Reform vesus Renovation; Fast Liberalisation vs Step- by-Step Transformation; Privatisation vs Equitisation; Multi-Sector Ownership vs Private Ownership Bias; Industrialisation vs Agriculture-Driven Growth; Active State vs Passive State. JEL: E6 F41 F43 H11 N10 N15 N17 O11 O53 O55 O57 P52 Date: 2004-06-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-706&r=all 178. Determinants of Employment Growth at MNEs: Evidence from Egypt, India, South Africa and Vietnam Sumon Kumar Bhaumik Klaus Meyer Saul Estrin Foreign investors are expected to contribute to economic development through a variety of channels. However, many foreign investment operations are small, and almost insignificant in their impact on the local environment. An important indication of the potential contribution of foreign investors is thus their employment growth. Employees working for, and trained by, a multinational enterprise may become carriers of new technology and business practices. The more employees receive access to new knowledge, the more they in turn may spread the knowledge across the economy, for instance by setting up their own businesses. In this paper, we make a first step in investigating the determinants of this important mediating variable, employment growth. For a dataset covering four diverse emerging economies, we find that wholly-owned FDI operations have higher employment growth, while local industry characteristics moderate the growth effect. Keywords: MNE, employment growth, control, institutions, FDI policy JEL: O13 O33 J21 F23 Date: 2004-07-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-707&r=all 179. CONTRACT VIOLATIONS, NEIGHBORHOOD EFFECTS, AND WAGE ARREARS IN RUSSIA John S. Earle Klara Sabirianova Peter We present a model of neighborhood effects in wage payment delays. Positive feedback arises because each employer’s arrears affect the late payment costs faced by other firms in the same local labor market, resulting in a strategic complementarity in the practice. The model is estimated on panel data for workers and firms in Russia, facilitating identification through the use of a rich set of covariates and fixed effects for employees, employers, and local labor markets. We also exploit a policy intervention affecting public sector workers that provides an instrumental variable to estimate the endogenous reaction in the non-public sector. Consistently across specifications, the estimated reaction function displays strongly positive neighborhood effects, and the estimates of four feedback loops – operating through worker quits, effort, strikes, and legal penalties – imply that costs of delays are attenuated by neighborhood arrears. We also study a nonlinear case exhibiting two stable equilibria: a “punctual payment equilibrium” and a “late payment equilibrium.” The estimates imply that the theoretical conditions for multiple equilibria under symmetric local labor market competition are satisfied in our data. Keywords: wage arrears, contract violation, neighborhood effect, social interactions, multiple equilibria, network externality, strategic complementarity, transition, Russia. JEL: A12 B52 J30 K42 L14 O17 P31 P37 Date: 2004-07-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-708&r=all 180. The Stability and Growth Pact from the Perspective Of the New Member States Gabor Orban Gyorgy Szapary The purpose of this paper is to examine the fiscal characteristics of the new members in the light of the requirements of the SGP and the criticisms levelled against the Pact and to see in what ways their initial conditions differ from those faced by the current euro zone countries in the run-up to the adoption of the euro. Overall, because of the lower debt levels and greater yield convergence already achieved, the new members will be able to rely less on gains from yield convergence than the current euro zone members were able to do. EU accession will also have a negative net impact on the budgets of the new members in the early years of membership. We also look at the cyclical sensitivities of the budgets and find that in the new members the smoothing capacity of the automatic stabilizers might be weaker than in the current euro zone members. Beyond these general characteristics, we also emphasize that there are large differences in the starting fiscal positions of the new members. Some of the policy implications of our findings are discussed. Keywords: EU enlargement, fiscal policy, fiscal rules, Stability and Growth Pact JEL: E61 H6 H87 Date: 2004-07-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-709&r=all 181. Firms’ Price Markups and Returns to Scale in Imperfect Markets: Bulgaria and Hungary Rumen Dobrinsky Gabor Korosi Nikolay Markov Laszlo Halpern Under perfect competition and constant returns to scale, firms producing homogeneous products set their prices at their marginal costs which also equal their average costs. However, the departure from these standard assumptions has important implications with respects to the derived theoretical results and the validity of the related empirical analysis. In particular, monopolistic firms will charge a markup over their marginal costs. We show that firms’ markups tend to be directly associated with the employed production technology, more specifically with their returns to scale. Accordingly, we analyze the implications for the markup ratios from the incidence of non-constant returns to scale. We present quantitative results illustrating the effect of the returns to scale index on the firms’ price markups, as well as the relationship between the two indicators, on the basis of firm-level data for Bulgarian and Hungarian manufacturing firms. Keywords: markup pricing, market imperfections, return to scale, Bulgaria, Hungary JEL: C23 D21 D24 Date: 2004-07-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-710&r=all 182. INTEREST GROUPS, VETO POINTS AND ELECTRICITY INFRASTRUCTURE DEPLOYMENT Witold J. Henisz Bennet A. Zelner In this paper we examine the effects of interest group pressure and the structure of political institutions on infrastructure deployment by state-owned electric utilities in a panel of 78 countries during the period 1970 – 1994. We consider two factors that jointly influence the rate of infrastructure deployment: (1) the extent to which the consumer base consists of industrial consumers, which are capable of exerting discipline on political actors whose competing incentives are to construct economically inefficient “white elephants” to satisfy the demands of concentrated geographic interests, labor unions and construction firms; and (2) veto points in formal policymaking structures that constrain political actors, thereby reducing these actors’ sensitivity to interest group demands. A higher fraction of industrial customers provides political actors with stronger incentives for discipline, reducing the deployment of white elephants and thus the infrastructure growth rate, ceteris paribus. Veto points reduce political actors’ sensitivity to interest group demands in general and thus moderate the relationship between industrial interest group pressure and the rate of infrastructure deployment. Keywords: Electricity, Institutional Environment, Investment, Regulation, interest group, state owned enterprise JEL: L94 L32 F21 Date: 2004-07-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-711&r=all 183. Votes and Vetoes: The Political Determinants of Commercial Openness Witold J. Henisz Edward D. Mansfield Societal theories of trade policy stress the importance of domestic interest groups, whereas statist theories focus on the effects of domestic institutions. Debates over the relative merits of these approaches have been fierce, but little systematic empirical research has been brought to bear on the relative merits of these theories. In this paper, we argue that, while societal and statist factors are generally regarded as having independent and competing effects, it is more fruitful to view the influence of each type of factor as conditional on the other. As societal explanations contend, deteriorating macroeconomic conditions are a potent source of protectionist pressures. The extent to which such conditions reduce commercial openness, however, depends centrally on the domestic institutions through which societal pressures must filter to influence policy. Two institutional features stand out. First, in states marked by greater fragmentation and more “veto points,” it is harder to change existing policies because any number of actors can block such change. Consequently, we expect the effects of macroeconomic conditions on trade policy to be weaker in fragmented states than in those characterized by a highly centralized national government. Second, we expect both fragmentation and the societal pressures stemming from the economy to have a more potent impact on trade policy in democracies than in other regimes, since the electoral constraints facing democratic leaders force them to respond to demands made by key segments of society. The results of our statistical tests covering more than one hundred countries during the period from 1980 to 2000 strongly support these arguments. Keywords: Protectionism, openness, veto players, veto points, positive political theory, unemployment, trade JEL: F13 P16 P26 Date: 2004-07-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-712&r=all 184. International Coercion, Emulation and Policy Diffusion: Market-Oriented Infrastructure Reforms, 1977-1999 Witold J. Henisz Bennet A. Zelner Mauro F. Guillen Why do some countries adopt market-oriented reforms such as deregulation, privatization and liberalization of competition in their infrastructure industries while others do not? Why did the pace of adoption accelerate in the 1990s? Building on neo- institutional theory in sociology, we argue that the domestic adoption of market-oriented reforms is strongly influenced by international pressures of coercion and emulation. We find robust support for these arguments with an event-history analysis of the determinants of reform in the telecommunications and electricity sectors of as many as 205 countries and territories between 1977 and 1999. Our results also suggest that the coercive effect of multilateral lending from the IMF, the World Bank or Regional Development Banks is increasing over time, a finding that is consistent with anecdotal evidence that multilateral organizations have broadened the scope of the “conditionality” terms specifying market-oriented reforms imposed on borrowing countries. We discuss the possibility that, by pressuring countries into policy reform, cross-national coercion and emulation may not produce ideal outcomes. Keywords: Privatization, deregulation, liberalization, infrastructure, International Monetary Fund (IMF), World Bank, Multileral Institutions, Development, Reform, Globalization, Adoption, International JEL: O19 F02 F42 H11 L33 L96 L94 N70 P16 C41 Date: 2004-07-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-713&r=all 185. Languages in the European Union: The Quest for Equality and its Cost Jan Fidrmuc Victor Ginsburgh The European Union has recently expanded from 15 to 25 countries. In line with this enlargement, the list of official EU languages has grown from 11 to 20. Currently, the EU extends equal treatment to all member countries’ official languages by providing translations for documents and interpreting services for meetings and sessions of the European Parliament. This, however, is costly, especially when recognizing that many Europeans speak one of the procedural languages of the EU, English, French or German, either as their native language or as a foreign language. We compute disenfranchisement rates that would result from using only the three procedural languages for all EU business, and marginal costs per disenfranchised person associated with providing translations and interpreting into the remaining 17 languages. The marginal costs are shown to vary substantially across the different languages, raising important questions about the economic efficiency of equal treatment for all languages. We argue that an efficient solution would be to decentralize the provision of translations. Keywords: Languages, Disenfranchisement, European Union, Cost and benefit analysis JEL: D70 O52 Z13 Date: 2004-07-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-715&r=all 186. The Evolution of Cross-Region Price Distribution in Russia Konstantin Gluschenko The behavior of the entire cross-section distribution of prices in Russian regions is analyzed from 1992 through 2000, using non- parametric techniques. The cost of a staples basket is used as a price representative. Price dispersion measured as the standard deviation of prices is found to be diminishing since about 1994; and the shape of the cross-region distribution of prices tends to be more regular over time. To characterize intra-distribution mobility, a transition probability function (stochastic kernel) is estimated. It is also used to derive a long-run limit of the price distribution. Overall, the results suggest that, excluding a few years following the price liberalization, price convergence has been happening among Russian regions. Keywords: price convergence, price dispersion, distribution dynamics, market integration, Russia JEL: P22 R10 R15 Date: 2004-07-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-716&r=all 187. Wage Determination Under Communism and In Transition: Evidence from Central Europe Swati Basu Saul Estrin Jan Svejnar Using large firm-level data sets from the Czech Republic, Slovakia, Poland and Hungary, we show that the wage behavior of firms changed considerably as these economies launched their transitions to a market system. We find evidence of worker sharing in their enterprise rents and losses at the end of the communist period in some economies and within a year after the launching of the transition, we find rent sharing in all of them. Using the Czech and Slovak data we show that the state-owned enterprises (SOEs) that existed under communism and survived allow for less worker rent-sharing than other firms. We also test for the presence of a wage curve and with the exception of Slovakia we do not find a significant association between local unemployment and wages. Finally, we do not find significant effects of firm ownership on wages. Date: 2004-08-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-717&r=all 188. The emergence of large shareholders in mass privatized firms: Evidence from Poland and the Czech Republic Irena Grosfeld Iraj Hashi Mass privatization offers a particularly suitable framework to study the change in ownership concentration as the extent of change is unusual for a stable market economy. Focusing on two different mass privatization schemes in two transition economies, Poland and the Czech Republic, we find that despite important differences in the design of the two programmes and despite different quality of legal and regulatory framework, ownership structure in the two countries has rapidly evolved and the emerging ownership patterns are remarkably similar. This suggests that private benefits of control are large and the quality of investor protection regime is low in both countries. However, looking at the relationship between the change in ownership concentration and firm performance, we find an interesting difference between the two countries: in the Czech Republic the increase in ownership concentration seems to be less likely in poorly performing firms while in Poland the quality of past performance does not affect investors' willingness to increase their holdings. This effect may be interpreted in the light of the theory stressing the importance of the quality of investors' protection. It could be argued that if Czech investors are more risk averse and more concerned with diversification this is largely due to the weakness of the legal protection they face. Keywords: ownership concentration, mass privatisation, corporate governance, transition JEL: G3 L2 P3 P5 Date: 2004-08-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-718&r=all 189. Returns to Schooling in Russia and Ukraine: A Semiparametric Approach to Cross-Country Comparative Analysis Yuriy Gorodnichenko Klara Sabirianova Peter n Russia and Ukraine (1985-2002). There has been an increase in returns to schooling in both countries but the increase is much bigger in Russia than in Ukraine. The intriguing question is why returns to schooling in Russia and Ukraine diverged so much over the transition period while the skill composition of employment did not. Our approach in analyzing the sources of cross-country differences in returns to schooling is to compare the Mincerian earnings functions between the two countries and then to employ decomposition techniques. Using semiparametric methods, we construct counterfactual wage distributions for university and secondary school graduates for Ukraine using the distributions of Russian characteristics, returns to characteristics, and unobservables. This allows us to decompose differences in returns to schooling between the two countries due to differences in the labor market returns (price effect), differences in unobservables residual effect), and differences in the labor force composition composition effect). We conclude that of these three effects the price effect makes a major contribution to the observed differences in the returns to schooling. Keywords: returns to schooling, earnings function, semiparametric approach, decomposition, counterfactual, cross-country analysis, retrospective data, transition, Russia, Ukraine JEL: C14 I20 J31 O15 O57 P50 Date: 2004-08-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-719&r=all 190. An Analysis of Gender Wage Differentials in Russia from 1996-2002 Rita Hansberry This paper examined the male-female differentials in hourly earnings in Russia from 1996 to 2002. The gender wage gap did not alter significantly in the earlier years, a period characterized by economic instability, but as the economy recovered, the differential in earnings increased initially. This trend reversed in 2002 and while the gender wage gap in mean earnings fell to its previous level the differential increased at the lower percentiles. Throughout all years, most of the gender wage differential is accounted for by differences in rewards rather than differences in observable characteristics. Occupational segregation continues to be a salient feature of the labor market with women clustered in professional, clerical and service occupations while men are more predominantly employed in blue- collar jobs. Keywords: Russia, economic transition, gender wage gap, occupational segregation JEL: J16 J31 P31 Date: 2004-09-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-720&r=all 191. Distance to the Efficiency Frontier and FDI Spillovers Klara Sabirianova Peter Jan Svejnar Katherine Terrell We establish that domestically owned firms in two alternative models of emerging market economies, the Czech Republic and Russia, have not been converging to the technological frontier set by foreign owned firms. In both countries, the distance of domestic firms to the frontier grew (in all parts of the distribution) from 1992-1994 to 1995-1997 and did not change from 1995-1997 to 1998-2000. However, the distance to the frontier is orders of magnitude greater in Russia than in the Czech Republic throughout 1992-2000. We also find in both countries that domestic firms in industries with a greater share of foreign firms are falling behind more than domestic firms in industries with a smaller foreign presence. However, in the Czech Republic this “negative spillover” effect is diminished over time, whereas in Russia it continues to cause domestic firms to fall further behind. On the other hand, we find in both countries that foreign firms experience positive spillovers from other foreign firms operating in the same product market. This evidence on the dynamics of efficiency is consistent with the view that economies firms) need to be more technologically advanced and open to competition in order to be able to gain from foreign presence. Keywords: foreign direct investment, productivity, convergence, frontier, knowledge spillovers, Czech Republic, Russia. JEL: C33 D20 F23 G32 L20 O33 Date: 2004-09-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-721&r=all 192. Russia from Bust to Boom: Oil, Politics or the Ruble? Bruno Merlevede Koen Schoors Bas van Aarle This paper develops and estimates a small macroeconomic model of the Russian economy. The model is tailored to analyze the impact of the oil price, the exchange rate, and political stability on economic performance. The model does very well in explaining Russia’s economic history in the period 1995-2002. We then use the model to simulate two sets of scenarios, one with various oil price scenarios and one with various adverse shocks. The simulations suggest that the Russian economy is still very vulnerable to oil price swings, and that these swings have asymmetric effects. Indeed the cost of a downward swing of oil prices seems to be larger than the benefit of an upward swing. We also find that the aggregate effects of an oil price collapse are comparable to these of renewed political instability. Although their propagation mechanism is quite different, both adverse shocks do have a similar effect on real GDP. A real exchange rate appreciation on the other hand has relatively mild effects on real GDP. All in all, it is suggested that Russia should reduce its vulnerability to adverse oil price shocks and maintain political stability. Keywords: Russia, Macroeconomic Modeling, Macroeconomic stabilization JEL: C70 E17 E58 E63 Date: 2004-10-01 URL: http://d.repec.org/n?u=RePEc:wdi:papers:2004-722&r=all 193. A Measure of Distance for the Unit Root Hypothesis Patrick Marsh This paper proposes and analyses a measure of distance for the unit root hypothesis tested against stochastic stationarity. It applies over a family of distributions, for any sample size, for any specification of deterministic components and under additional autocorrelation, here parameterised by a finite order moving-average. The measure is shown to obey a set of inequalities involving the measures of distance of Gibbs and Su ( 2002) which are also extended to include power. It is also shown to be a convex function of both the degree of a time polynomial regressors and the moving average parameters. Thus it is minimisable with respect to either. Implicitly, therefore, we find that linear trends and innovations having a moving average negative unit root will necessarily make power small. In the context of the Nelson and Plosser (1982) data, the distance is used to measure the impact that specification of the deterministic trend has on our ability to make unit root inferences. For certain series it highlights how imposition of a linear trend can lead to estimated models indistinguishable from unit root processes while freely estimating the degree of the trend yields a model very different in character. URL: http://d.repec.org/n?u=RePEc:yor:yorken:05/02&r=all 194. Generalists and Specialists, Ability and Earnings Sang-Hyop Lee (Department of Economics, University of Hawaii at Manoa) The comparative advantage model developed in this paper predicts generalists enjoy a higher rate of return to their overall abilities than specialists, but they must also bear a penalty due to any imbalance in abilities. The predictions are tested using test scores data from the NLSY. The results show that individuals with balanced test scores across subjects are more likely to choose jobs in managerial, sales, and clerical occupations. In these occupations, individuals with more balanced test scores receive substantially higher earnings than those with unbalanced test scores. In contrast, individuals with highly unbalanced test scores are more likely to choose jobs in professional, craft, and operator occupations, although the extent of imbalance does not significantly affect earnings in these occupations. Keywords: heterogeneous ability, occupational choice, cognitive skills, test scores JEL: J23 J24 J31 Date: 2005 URL: http://d.repec.org/n?u=RePEc:hai:wpaper:200502&r=all 195. Inefficient Trade Patterns: Excessive Trade, Cross-Hauling, and Dumping Benjamin Eden (Department of Economics, Vanderbilt University and The University of Haifa) I study an example of a competitive environment in which trade occurs in a sequential manner. In this example, a country with a stable demand may suffer from trade with a country with unstable demand, there may be too much trade, a country may import and export the same good in the same period (cross-hauling) and dumping may occur. The assumption about the timing of delivery is critical for our results. When delivery occurs before trade ( delivery to stocks) trade improves welfare, there is dumping but no cross-hauling. When delivery occurs after trade (delivery to order), trade may reduce welfare, cross-hauling may occur but dumping does not occur. Keywords: Cross-hauling, dumping, excessive trade, sequential trade JEL: F10 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:van:wpaper:0503&r=all 196. The Labor Market for New Agricultural and Resource Economics Ph.D.s Wendy A. Stock (Department of Agricultural Economics and Economics, Montana State University) John J. Siegfried (Vanderbilt University and American Economic Association) This paper describes the characteristics and labor market experiences of new agricultural and natural resource (ANR) economics Ph.D.s, based on surveys of graduates in 1996-97 and 2001-02. An average of 185 new Ph.D.s in ANR economics were awarded in each of these years. Among these, an average of 27 percent were earned by women, and 36 percent were earned by U.S. citizens. The median graduate took 5.2 years to earn the Ph.D. Ninety-five percent of the graduates were employed. About half of the jobs were in academe, with the remainder divided roughly equally among government, international or research organizations, and business, industry, and consulting. The median salary of new ANR economics Ph.D.s holding full-time jobs in the U.S. was $62, 500 in 2002, up from $47,500 five years earlier. Ninety-one percent of the respondents reported that they like their job fairly well. Those who do less research and more service are more likely to be dissatisfied with their jobs. Overall, 85 percent of the new ANR economics Ph.D.s reported that had they known at matriculation what they know after graduation, they still would have pursued a Ph.D. Keywords: Agricultural and natural resource economists, market for agricultural economists, salaries of agricultural economists JEL: A11 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:van:wpaper:0504&r=all 197. An Analysis of the Impact of Multiple Environmental Goods on House Prices Katherine Kiel (Department of Economics, College of the Holy Cross) Michael Williams (Department of Economics, College of the Holy Cross) It seems an established empirical fact that Superfund sites lower local property values. Two recent literature reviews ( Farber, 1998, Boyle and Kiel, 2001) report that published academic papers on the topic verify that point. The EPA’s approach assumes that all sites negatively impact property values, and that the impact is similar for all sites. This paper examines 74 National Priorities List (NPL) sites in 13 U.S. counties in order to test these two implicit assumptions. Following the hedonic approach of Kiel (1995) and Kiel and McClain (1995), we find that some sites have the expected negative impact, while other sites have either no impact or a positive impact on local property values. We also consider the possibility of ‘stigma’ from sites by looking at those sites that have been cleaned during our sample period and find that some sites do appear to suffer from stigma, while others do not. We then use a meta-analysis approach to examine what factors affect the likelihood and extent of a decrease in property values near the sites. We find that larger sites in areas with fewer blue-collar workers are more likely to have the expected negative impact on local house prices. Keywords: Environment, Superfund, Hedonic regressions, meta- analysis, property values JEL: Q51 Q53 Q58 R21 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:hcx:wpaper:0505&r=all 198. Equality of opportunity and other equity principles in the context of developing countries Denis Cogneau (DIAL, IRD, Paris) I propose a personal reading of some theories of social justice at a moment when the issue of equality or equity appears to be back on the ‘development agenda’. Nowadays the term equity tends to be most often associated with the equality of opportunity principle. After having briefly summarized the equality of opportunity standpoint, I review the two main criticisms that have been addressed to it inside the economic literature: the right-wing meritocratic criticism on the one hand, and the left-wing egalitarian criticism on the other. I supplement these internal criticisms with a sociological or anthropological standpoint that advocates for a more pluralist definition of justice and gives a central role to the competition between elites for legitimacy. I argue that despite its indubitable potency (even for issues like international inequalities between countries), the equality of opportunity principle is incomplete and that some meritocratic principles and some equalization of outcomes should enter into play when thinking about social justice in a given real society. Moreover, a socially relevant conception of justice should take into account cultural variations in the definition of fairness. A universalist definition of justice is better preserved when the issue of tyranny and separation of powers is considered at both the social and political levels. _________________________________ Je propose une lecture personnelle de quelques theories de la justice sociale au moment ou la question de l’egalite ou de l’equite semble etre revenue sur l’agenda du developpement. De nos jours le terme equite semble etre le plus souvent associe au principe d’egalite des chances. Apres un court resume du point de vue de l’egalite des chances, je passe en revue les deux critiques principales qui lui ont ete adressees au sein de la litterature economique : la critique meritocratique de droite d’un cote, et la critique egalitariste de gauche de l’autre. J’ajoute a ces deux critiques internes un point de vue historique et sociologique qui prone une definition pluraliste de la justice et fait jouer un role central a la competition des elites pour la legitimite. J’argumente que malgre son indubitable puissance (meme dans le domaine des inegalites internationales entre pays), le principe d’egalite des chances est incomplet et que des principes meritocratiques et d’egalisation des resultats doivent entrer en jeu lorsqu’on reflechit a la justice sociale dans une societe reellement existante. De plus, une conception de la justice socialement pertinente doit prendre en compte les variations culturelles dans la definition du juste. Une definition universaliste de la justice est mieux preservee lorsque la question de la tyrannie et de la separation des pouvoirs est consideree, a la fois sur le plan social et sur le plan politique. Keywords: Distributive Justice, Inequality, Equality of Opportunity, Meritocracy, Political Economy, Development, Equity, Separation of Powers, Justice distributive, Inegalite, Egalite des chances, Meritocratie, Economie politique, Developpement, Equite, Separation des pouvoirs. JEL: A13 D63 O15 P50 Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:dia:wpaper:dt200501&r=all 199. What Do Male Nonworkers Do? Jay Stewart (U.S. Bureau of Labor Statistics) Although male nonworkers have become a larger fraction of the population since the late 1960s, labor economists know very little about them. Using data from several sources--the March CPS, the National Longitudinal Survey of Youth, and the 1992-94 University of Maryland Time Diary Study--this paper fills that void. The picture that emerges is that there is a small cadre of marginal workers who often do not work for periods of a year or more and tend to work relatively few weeks in the years that they do work. The vast majority of nonworking men (men who do not work at all during the year) receive unearned income from at least one source, and the amount of unearned income received varies significantly by reason for not working. Family members provide an important alternative source of support for nonworking men who have little or no unearned income of their own. For the most part, these nonworking men are not substituting nonmarket work for market work. Most of the time that is freed up by not working is spent in leisure activities and sleep. Keywords: male nonworkers, time use, unearned income JEL: J11 J22 Date: 2004-04 URL: http://d.repec.org/n?u=RePEc:bls:wpaper:ec040010&r=all 200. Gross Job Flows over the Past Two Business Cycles: Not all 'Recoveries' are Created Equal R. Jason Faberman (U.S. Bureau of Labor Statistics) I compare the behavior of job creation and job destruction over the past two economic downturns. Both periods have brief but sharp rises in job destruction followed by flat net job growth. The dynamics underlying these slow recoveries differ drastically. In 1991-92, job destruction is slow to decline. In 2001, job creation falls dramatically and remains persistently low through 2003. I find this trend qualitatively similar in both manufacturing and service industries. I also find that neither a structural shift of jobs across industries nor increased trade liberalization is a consistent explanation for the recent lack of growth. Instead, the evidence suggests that a large drop in business investment may explain the decline in job creation. Keywords: job reallocation, business cycles, employment fluctuations JEL: E24 E32 Date: 2004-06 URL: http://d.repec.org/n?u=RePEc:bls:wpaper:ec040020&r=all 201. Which Workers Gain from Computer Use? Sabrina Wulff Pabilonia (U.S. Bureau of Labor Statistics) Cindy Zoghi (U.S. Bureau of Labor Statistics) Workers who use computers earn more than those who do not. Is this a productivity effect or merely selection? Using the Canadian Workplace and Employee Survey, we control for selection and find a wage premium of 3.8% for the average worker upon adopting a computer. This premium, however, obscures important differences in returns to computer adoption across education and occupation groups. We find that long-run returns to computer use are over 5% for most workers. Differences between short-run and long-run returns may suggest that workers share training costs through sacrificed wages. Keywords: Computers, training, technological change JEL: J31 O30 Date: 2004-06 URL: http://d.repec.org/n?u=RePEc:bls:wpaper:ec040030&r=all 202. Parental Transfers, Student Achievement, and the Labor Supply of College Students Kalenkoski, Charlene Marie (Ohio University) Sabrina Wulff Pabilonia (U.S. Bureau of Labor Statistics) College students may participate in market work to finance their college educations. Using data from the NLSY97, three hypotheses are tested. First, smaller parental transfers lead to more hours worked while in school. Second, an increase in the net price of schooling leads to an increase in hours worked. Finally, an increase in hours worked leads to a decrease in a student's GPA. The results indicate that the number of hours a student works per week is unaffected by the schooling-related financial variables and that the number of hours worked per week does not affect a student's GPA. Keywords: schooling, educational finance, grades, college students JEL: J22 D1 Date: 2004-07 URL: http://d.repec.org/n?u=RePEc:bls:wpaper:ec040040&r=all 203. Developing a New Poverty Line for the USA: Are There Lessons for India? Thesia I. Garner (U.S. Bureau of Labor Statistics) Kathleen Short (U.S. Census Bureau) This paper reviews a procedure that is being followed in the United States of America (USA) to experimentally test and evaluate recommendations made for redefining poverty measurement in that country. The recommendations were made in 1995 by the US National Academy of Sciences (NAS) Panel on poverty measurement. In this paper these recommendations are reviewed and the impact of implementing the recommendations on measures of inequality and poverty are examined. In conclusion, a discussion concerning possible lessons for India is provided. The recommended poverty measure (based on new measures of thresholds and resources) is examined in terms of its impact on inequality statistics, as well as poverty statistics, and results are compared to similar statistics based on the official measure. The standard Gini index, and three generalized entropy inequality measures are used to examine inequality. For the poverty analysis simple head count ratios, poverty gaps, and Foster-Greer-Thorbecke poverty measures are computed. Data from the 1991 U.S. Consumer Expenditure Survey CE) Interview are used to produce the thresholds, and data from the 1992 through 1997 Current Population Survey (CPS), and in some analyzes, the 1991 panel of the Survey of Income and Program Participation (SIPP), are used to define resources. The proposed measure produces a distribution of resources that is, in general, more equal than is the distribution of official income. The poverty analysis reveals that changes in the poverty rates based on the official and the experimental measures are similar over time. However, poverty as measured by the NAS measure is greater than official poverty. The experimental poverty measure yields a poverty population that looks slightly more like the total U.S. population in terms of various demographic and socioeconomic characteristics than does the current official measure. Geographically adjusting the thresholds results in greater equality and lower poverty rates than when non-adjusted thresholds are used. With regard to India, poverty measurement is likely not to be based on income and expenditures primarily. Alternative measures based on other needs and resources are reviewed. However, regardless of the measure used, systematic evaluations of the measure are necessary and the USA model may be one to consider in this evaluation process. Keywords: poverty, Consumer Expenditure Survey, India JEL: D12 F0 I32 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:bls:wpaper:ec050040&r=all 204. Personal Assessments of Minimum Income and Expenses: What Do They Tell Us about 'Minimum Living' Thresholds and Equivalence Scales? Thesia I. Garner (U.S. Bureau of Labor Statistics) Kathleen Short (U.S. Census Bureau) Subjective minimum income (MIQ) and minimum spending (MSQ) are the study focus. Basic Needs Module (1995) data from the U.S. Survey of Income and Program Participation are analyzed. A regression intersection approach is used to estimate household thresholds. MIQ thresholds are higher than MSQ thresholds. Both are higher than U.S. official poverty thresholds, and thresholds based on a National Academy of Sciences (NAS) methodology. Subjective threshold based equivalence scales imply greater economies of scale than those in the other two measures but are similar to behavioral scales. This finding suggests that families make trade-offs to meet their minimum needs. Keywords: well-being, sufficiency, poverty, expenditures, SIPP JEL: D12 I31 I32 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:bls:wpaper:ec050050&r=all 205. A Comparison of Income, Expenditures, and Home Market Value Distributions Using Luxembourg Income Study Data from the 1990's Eva Sierminska (Luxembourg Income Study) Thesia I. Garner (U.S. Bureau of Labor Statistics) The purpose of this paper is to review recent data made available through the Luxembourg Income Study (LIS) that include expenditures and asset valuations. The LIS data are augmented with comparable data from the U.S. Consumer Expenditure Survey. The surveys with expenditure data are reviewed in terms of collection units and variable definitions. Inequality statistics are produced and compared using income, expenditures, and market value of owned home. Rankings of countries by income and expenditure inequality are similar but not the same across the countries studied. Suggestions are made for the LIS to improve the expenditure data available following the COICOPS framework. Keywords: Distributional analysis, household expenditure surveys, Luxembourg Income Study JEL: D3 D6 D12 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:bls:wpaper:ec050060&r=all 206. Economic Well-Being Based on Income, Consumer Expenditures and Personal Assessments of Minimal Needs Thesia I. Garner (U.S. Bureau of Labor Statistics) Kathleen Short (U.S. Census Bureau) Responses to minimum income and minimum spending questions are used to produce economic well-being thresholds. Thresholds are estimated using a regression framework. Regression coefficients are based on U.S. Survey of Income and Program Participation ( SIPP) data and then applied to U.S. Consumer Expenditure Survey ( CE) data. Three different resource measures are compared to the estimated thresholds. The first resource measure is total before- tax money income, and the other two are expenditure based. The first of these two refers to expenditure outlays and the second to outlays adjusted for the value of the service flow of owner- occupied housing (rental equivalence). The income comparison is based on SIPP data while the outlays comparisons are based on CE data. Results using official poverty thresholds are shown for comparison. This is among the earliest work in the U.S. in which expenditure outlays have been used for economic well-being determinations in combination with personal assessments, and the first time rental equivalence has been used in such an exercise. Comparisons of expenditures for various bundles of commodities are compared to the CE derived thresholds to provide insight concerning what might be considered minimum or basic. Results reveal that CE and SIPP MIQ thresholds are higher than MSQ thresholds, and resulting poverty rates are also higher with the MIQ. CE-based MSQ thresholds are not statistically different from average expenditure outlays for food, apparel, and shelter and utilities for primary residences. When reported rental equivalences for primary residences that are owner occupied are substituted for out-of-pocket shelter expenditures, single elderly are less likely to be as badly off as they would be with a strict outlays approach in defining resources. Keywords: well-being, sufficiency, poverty, income, expenditures, Consumer Expenditure Survey, Survey of Income and Program Participation JEL: D12 I31 I32 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:bls:wpaper:ec050070&r=all 207. Individual Powers and Social Consent: An Axiomatic Approach Biung-Ghi Ju (Department of Economics, The University of Kansas) We formalize a notion of conditionally decisive powers of which the exercise depends on social consent. Decisive powers, or the so-called libertarian rights, are examples and much weaker forms of powers are covered by our notion. Main results provide an axiomatic characterization for existence of a system of powers and its uniqueness as well as characterizations of various families of rules represented by systems of powers. In particular, we show that a rule satisfies monotonicity, independence, and symmetric linkage (person i and i??s issues should be treated symmetrically to person j and j??s issues for at least one linkage between issues and persons) if and only if there is a system of powers representing the rule and that the system is unique up to a natural equivalence relation. Considering a domain of simple preference relations (trichotomous or dichotomous preferences), we show that a rule satisfies Pareto efficiency, independence, and symmetry (the symmetric treatment condition in a model with an exogenous linkage between issues and persons) if and only if it is represented by a ?°quasi-plurality system of powers?±. For the exercise of a power under a quasi-plurality system, at least either a majority (or (n + 1)/2) consent or a 50% (or (n ? 1)/2) consent is needed. Keywords: Powers; Consent; Libertarian Rights; Monotonicity; Independence; Symmetric linkage; Symmetry; Pareto efficiency; Plurality JEL: D70 D71 D72 Date: 2005-03 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:kan:wpaper:200508&r=all 208. A Characterization of Plurality-Like Rules Based on Non- Manipulability, Restricted Efficiency, and Anonymity Biung-Ghi Ju (Department of Economics, The University of Kansas) A society needs to decide which issues (laws, public projects, public facilities, etc.) in an agenda to accept. The decision can be any subset of the agenda but must reflect the preferences of its members, which are assumed to be ?°separable weak orderings?±. We characterize a family of ?°plurality-like?± rules based on strategy-proofness, restricted efficiency, anonymity, and two weak axioms pertaining to the variable agenda feature of our model, called dummy independence and division indifference. We also characterize a wide spectrum of rules dropping anonymity or restricted efficiency. Keywords: Plurality, Strategy-proofness, Efficiency, Restricted efficiency, Anonymity, Division indifference, Separable preferences JEL: D70 D71 Date: 2005-03 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:kan:wpaper:200509&r=all 209. External and Fiscal Sustainability of the Czech Economy: A Quick Look Through the IMF’s Night-Vision Goggles Ales Bulir URL: http://d.repec.org/n?u=RePEc:cnb:rpnrpn:42004&r=all 210. Beyond Balassa - Samuelson: Real Appreciation in Tradables in Transition Countries Martin Cincibuch Jiri Podpiera Using the simple arbitrage model, we decompose real appreciation in tradables in three Central European countries between the pricing-to-market component (disparity) and the local relative price component (substitution ratio). Appreciation is only partially explained by local relative prices. The rest is absorbed by disparity, depending on the size of the no-arbitrage band. The observed disparity fluctuates in a wider band for differentiated products than for a commodity like goods. URL: http://d.repec.org/n?u=RePEc:cnb:wpaper:92004&r=all 211. The Value and Costs of Modularity: A Cognitive Perspective Stefano Brusoni (CESPRI and CRORA, Bocconi University) Luigi Marengo (Universita di Teramo) Andre Prencipe (Universita G. D’Annunzio di Pescara, and SPRU, University of Sussex) Marco Valente (Universita dell’Aquila, and DRUID, Aalborg Univ) This paper discusses the issue of modularity from a problem- solving perspective. Modularity is in fact a decomposition heuristic, through which a complex problem is decomposed into independent or quasi-independent sub-problems. By means of a model of problem decomposition, this paper studies the trade-offs of modularity: on the one hand finer modules increase the speed of search, but on the other hand they usually determine lock-in into sub-optimal solutions. How effectively to balance this trade- off depends upon the problem environment and its complexity and volatility: we show that in stationary and complex environments there exists an evolutionary advantage to over-modularization, while in highly volatile – though “simple” – en- vironments, contrary to usual wisdom, modular search is inefficient. The empirical relevance of our findings is discussed, especially with reference to the literature on system integration. Keywords: modularity, problem solving, complex systems JEL: O3 Date: 2004-08-30 URL: http://d.repec.org/n?u=RePEc:sru:ssewps:123&r=all 212. Are 'soft' policy instruments effective? The link between environmental management systems and the environmental performance of companies Julia Hertin (SPRU, University of Sussex) Frans Berkhout (SPRU, University of Sussex) Marcus Wagner (2Centre for Sustainability Management, University of Luneberg) Daniel Tyteca (Universite Catholique de Louvain, Institut d'Administration et de Gestion) Based on the analysis of a large dataset on the environmental performance of European companies in selected industrial sectors, the paper examines the question of whether the presence of an environmental management system (EMS) has a positive impact on the ecoefficiency of companies. It begins with a review of current evidence about the link between EMS and environmental performance, finding that despite much research into EMS there is still very little quantitative research on their actual environmental outcome. The second part of the paper uses three different statistical methods to assess whether companies and production sites with EMS perform better than those without and whether performance improves after an EMS has been introduced. Identifying only a weak link between EMS and eco-efficiency, the authors propose a number of possible explanations and warn against an overly-positive view of EMS as an autonomous driver of environmental performance. Keywords: environmental management systems, environmental performance, eco-efficiency JEL: Q5 Date: 2004-09-01 URL: http://d.repec.org/n?u=RePEc:sru:ssewps:124&r=all 213. Product entry in a fast growing industry: the LAN switch market Roberto Fontana (CESPRI, Bocconi University, Milan) Lionel Nesta (SPRU, University of Sussex) We provide empirical evidence on market positioning by firms, in terms of market niche, distance from technological frontier and dispersion. We focus on the switch industry, a sub-market of the Local Area Network industry, in the nineties. Market positioning is a function of the type of firms (incumbents versus entrants), market size and contestability and firm competencies. We find that incumbents specialise in high-end segments and disperse their product in a larger spectrum of the market. Instead, entrants focus on specific market niches. Market size, market contestability and firm competencies are also important determinants of product location. Keywords: switch industry, markets, competition, firm capabilities, product entry JEL: L11 L63 Date: 2004-10-10 URL: http://d.repec.org/n?u=RePEc:sru:ssewps:126&r=all 214. Labour productivity, ICT and regions: The revival of Italian “dualism”? Simona Iammarino (SPRU, University of Sussex) Cecilia Jona-Lasini (Italian National Institute of Statistics (ISTAT), Rome, Italy) Susanna Mantegazza (Italian National Institute of Statistics ISTAT), Rome, Italy) Among the reasons underlying the slow economic convergence of some regions towards the national and the European Union average, the strong gap in technological endowment and innovation capacity has been indicated as one of the most important factors. The requirements of the current ‘knowledge-based economy’ and the contribution of Information and Communication Technology (ICT) to socio-economic change are very likely to have a significant impact upon regional differentials in the European Union. So far, however, it is rather unclear whether the new paradigm will spur greater socio-economic cohesion or, on the contrary, stronger territorial polarisation. This paper looks at the distribution of ICT-producing small and medium enterprises in Italy, comparing structural variables – in particular spatial and sectoral dimensions - with labour productivity levels. Ultimately, the objective is to shed some light on the role that ICT-producing firms might play with respect to regional gaps in the Italian economy, traditionally characterised by geographical polarisation and imbalances which are among the most striking in the “Europe of regions”. The first result of our analysis (carried out by using experimental micro data) is that a linkage seems to emerge between high labour productivity and the IT industry. This is in line with the insights of the economic theory of technical change, suggesting that IT-producing sectors are those where gains in productivity are by far the most evident. As expected, the geographical location of firms accounts for a good deal when looking at labour productivity levels across sectors, casting some concern on the development perspectives of the Italian regional divide. Keywords: regional development, Italy, Information and Communication Technology (ICT), small and medium enterprises, productivity JEL: R11 L63 Date: 2004-11-10 URL: http://d.repec.org/n?u=RePEc:sru:ssewps:127&r=all 215. Does internationalisation of technology determine technological diversification in large firms? Christian Le Bas (Centre Walras, University of Lyon II) Pari Patel (SPRU, University of Sussex) The purpose of the paper is to examine the relationship between technological diversification and internationalisation of technology for large multinational firms, operating at the world technological frontier. More precisely we address the question as to whether internationalisation determines diversification. The analysis is based on a rich database of the European patenting activity of 345 large multinational firms with the highest levels of patenting over two periods of time (1988-1990 and 1994-1996). The relationship is tested using a variety of different regression models. The results show that for the sample as a whole there is no statistically significant relationship between technological diversification and internationalisation of technology. However when the sample is disaggregated according to the predominant internationalisation strategy adopted by a firm, we find a statistically significant relationship. Our results show that in a cross-section of firms adopting a homebase- augmenting strategy, internationalisation determines the level of diversification. Thus amongst such large firms a higher level of internationalisation of technology is associated with a greater level of diversification. Keywords: multinational firms, technological diversification, internationalisation of technology, patenting JEL: O32 Date: 2005-01-10 URL: http://d.repec.org/n?u=RePEc:sru:ssewps:128&r=all 216. Exploiting the Oil-GDP Effect to Support Renewables Deployment Shimon Awerbuch (SPRU, University of Sussex) Raphael Sauter (SPRU, University of Sussex) The empirical evidence from a growing body of academic literature clearly suggests that oil price increases and volatility dampen macroeconomic growth by raising inflation and unemployment and by depressing the value of financial and other assets. Surprisingly, this issue seems to have received little attention from energy policy makers. In percentage terms, the Oil- GDP effect is relatively small, producing losses in the order of 05% of GDP for a 10% oil price increase. In absolute terms however, even a 10% oil price rise. and oil has risen at least 50% in the last year alone. produces GDP losses that, could they have been averted, would significantly offset the cost of increased RE deployment. While we focus on renewables, the GDP offset applies equally to energy efficiency, DSM and nuclear and other non-fossil technologies. This paper draws on the empirical Oil-GDP literature, which we summarize, to show that by displacing gas and oil, renewable energy investments can help nations avoid costly macroeconomic losses produced by the Oil-GDP effect. We show that a 10% increase in RE share avoids GDP losses in the range of $29.$53 billion in the US and the EU ($49.$90 billion for OECD). These avoided losses offset one-fifth of the RE investment needs projected by the EREC and half the OECD investment projected by a G-8 Task Force. For the US, the figures further suggest that each additional kW of renewables, on average, avoids $250.$450 in GDP losses, a figure that varies across technologies as a function of annual capacity factors. We approximate that the offset is worth $200/kW for wind and solar and $800/kW for geothermal and biomass (and probably nuclear). The societal valuation of non-fossil alternatives needs to reflect the avoided GDP losses, whose benefit is not fully captured by private investors. This said, we fully recognize that wealth created in this manner does not directly form a pool of public funds that is easily earmarked for renewables support. Finally, the Oil-GDP relationship has important implications for correctly estimating direct electricity generating cost for conventional and renewable alternatives and for developing more useful energy security and diversity concepts. We also address these issues. Keywords: Oil price shocks, oil price volatility, Oil-GDP effects, renewable energy, RES-E targets, financial beta risk, funding renewables JEL: Q4 E2 Date: 2005-01-13 URL: http://d.repec.org/n?u=RePEc:sru:ssewps:129&r=all 217. Intellectual Property and Inter-organizational Collaborative Networks: Navigating the Maze Puay Tang (SPRU, University of Sussex) Jordi Molas-Gallart (SPRU, University of Sussex) Intellectual Property (IP) is a key intangible asset influencing corporate performance and its management is increasingly recognized as a central element of corporate strategy. This article is concerned with the management of IP in inter-firm collaborative projects mediated through the use of advanced IT tools. Here, groups of firms, often competitors, and sometimes their customer organizations, collaborate in the design, development, manufacture and maintenance of complex products, exchanging large amounts of proprietary technical data through IT tools. How can organizations exploit the capabilities offered by these tools without increasing the vulnerability of IP assets to misappropriation, unauthorized use or leakage? We explore the case of the UK defence market, where an extensive set of formal contractual tools is being developed to support IP management in collaborative projects. Through an in-depth study of IP management practice in UK defence projects we analyse the extent to which contractual tools can combine with technical solutions to provide answers to the problems posed by IP management in complex, long-term collaborative projects. We conclude that contractual and technical tools must be underpinned by managerial changes bringing together functions that remain separated in most large corporations: Information Technology management, legal and commercial departments. Keywords: Intellectual Property management; Information Technology; Shared Data Environments; inter- organisational networks; defence sector; collaborative projects. IPR JEL: O34 L86 Date: 2005-02-01 URL: http://d.repec.org/n?u=RePEc:sru:ssewps:130&r=all 218. To Know is to Be: Three Perspectives on the Codification of Knowledge Mike Bartholomaei (SPRU, University of Sussex) This paper presents three perspectives on the codification of knowledge. These perspectives are formed by recent contributions in the fields of economics, business and management studies and of a group of writers who have a ‘relational’ perspective from the field of organisational behaviour. A comparison of these differing views highlights not only epistemological boundaries between different approaches but can also lead to the novel approach to studying knowledge codification presented in this paper. This approach is based on the knowledge topography of Cowan et al. (2000). This paper also develops a research approach for examining the situated intricacies of knowledge sharing in group activities as a means for identifying opportunities for knowledge codification in settings where, so far, only tacit knowledge has been seen as the major focus. Such research may enable us to bridge the dichotomy of explicit versus tacit knowledge and the three perspectives on knowledge codification presented. Moreover, in-depth case studies on the possibilities for knowledge codification can advance both the academic and practical debate. (Cowan, R., David, P.A. and Foray, D. (2000) ‘The explicit economics of knowledge codification and tacitness’, Industrial and Corporate Change, 9(2), 211-254.) Keywords: Knowledge Codification, Knowledge Perspectives, Situated Study JEL: O3 D8 Date: 2005-03-09 URL: http://d.repec.org/n?u=RePEc:sru:ssewps:131&r=all 219. Stabilization via Currency Board Jutta Maute (Universitat Hohenheim) The breakdown of the Argentine currency board in early 2002 produced a number of obituaries that often quite rashly declared the country’s monetary constitution since 1991 the main responsible for its recent near-catastrophic economic collapse. Contrary to such rather one-sided negative ascriptions to the currency board system, the intention of this paper is to give a comprehensive and balanced description of the currency board model in theory, as well as to name its functioning conditions under today’s economic and political conditions prevailing in developing and transforming countries. It will become clear that the success of a currency board in terms of lasting stabilization of an economy not only depends on its initial design (e.g. the choice of the anchor currency, of the exchange rate, the legal and institutional fixings) but also on an ongoing process of economic and institutional reform that extends from a general macroeconomic and especially public sector streamlining to banking sector reforms, product and labour market deregulation, and to a general realignment of the economy towards exportorientation and international competitiveness. The extent to which these reforms are tackled and completed decides over the degree to which the economy is able to absorb real shocks without incurring high economic and social adaptation costs, hence over the degree to which a country is able to benefit from the currency board’s strengths without falling victim to its potentially severe weaknesses. Along with some basic reflections about the concept and motivation of modern currency boards, sections 1-3 give a brief overview over the historical background of the currency board idea as well as of its implementation. Section 4 focuses on the constitutional elements of a currency board, while section 5 provides the core of the discussion of pros and cons of currency boards, depicting the system’s strengths and weaknesses as well as the conditions under which they materialize. Section 6 will discuss under which circumstances a currency board is a good choice for a country, and ask whether less strict stabilization policies might be able to deliver the hoped-for benefits less costly. Some problems related to the questions of duration and termination of currency boards are addressed in section 7. Finally, section 8 will give a brief exposition of the idea of dual currency boards as a theoretical extension of the currency board model which promises to eliminate one of the biggest immanent threats to a currency board. Keywords: New Economic Geography, Foreign Direct Investment, Multinational Enterprises JEL: E5 URL: http://d.repec.org/n?u=RePEc:old:wpaper:y:2004:i:18:p:1-90&r=all 220. Spatial Decisions of Multinational Enterprises and their Effect on Local Firms Dirk H. Ehnts (Universitat Oldenburg) Since the 1980s empirical research has been conducted on the in- fluence of MNEs on local firms. The spillovers predicted by growth theory models used in the research designs have not been found. The main result is the importance of increased competition for the productivity of local firms. When FDI flows expanded rapidly in the 1990s, it became clear that MNEs play an important role in international technology transfer. However, growth theory models are limited in that market structures and firms cannot be modeled explicitly. The New Economic Geography (NEG) is better equipped to handle these issues. Instead of spillovers it relies on linkages. Therefore, new insights might be gained by basing empirical research on a NEG model and looking for linkages among firms. Keywords: New Economic Geography, Foreign Direct Investment, Multinational Enterprises JEL: F2 URL: http://d.repec.org/n?u=RePEc:old:wpaper:y:2004:i:20:p:1-27&r=all