Keywords: Economic History; Industrialisation; Industrial Policy; Trade Policy; Protectionism JEL: F13 N43 Date: 2005-05-03 URL: http://d.repec.org/n?u=RePEc:hhs:gunhis:0001&r=all 210. Estimation of threshold time series models using efficient jump MCMC Terence D.Agbeyegbe (Hunter College, CUNY) Elena Goldman (Lubin School of Business, Pace University) This paper shows how a Metropolis-Hastings algorithm with efficient jump can be constructed for the estimation of multiple threshold time series of the U.S. short term interest rates. The results show that interest rates are persistent in a lower regime and exhibit weak mean reversion in the upper regime. For model selection and specication several techniques are used such as marginal likelihood and information criteria, as well as estimation with and without truncation restrictions imposed on thresholds. Date: 2005 Date: 2005 URL: http://d.repec.org/n?u=RePEc:htr:hcecon:406&r=all 211. Bringing Macroeconomics into the Lab. Roberto Ricciuti This paper reviews experiments in macroeconomics, pointing out the theoretical justifications, the strengths and weaknesses of this approach. We identify two broad classes of experiments: general equilibrium and partial equilibrium experiments, and emphasize the idea of theory testing that is behind these. A large number of macroeconomic issues have been analyzed in the laboratory spanning from monetary economics to fiscal policy, from international trade and finance, to growth and macroeconomic imperfections. In a large number of cases results give support to the theories tested. We also highlight that experimental macroeconomics has increased the number of tools available to experimentalists. Keywords: Macroeconomics; experiments URL: http://d.repec.org/n?u=RePEc:icr:wpicer:26-2004&r=all 212. The Japanese Deflation: Has It Had Real Effects? Could It Have Been Avoided? Claudio Morana Has deflation contributed to the long lasting stagnation of the Japanese economy? Could the Bank of Japan have stopped deflation by implementing a more expansionary monetary policy? Our tentative answers are probably not to the first question, and probably yes to the second question. We find that the total cost of deflation over the period 1995-2003 has been close to a 1.1% rate of lost GDP. Yet, on the basis of statistical significance and robustness to specification choices, this evidence is not compelling. On the other hand, the estimated positive linkage between nominal base money growth and inflation is significant and robust, even given current economic conditions. However, in order to be inflationary, monetary policy should have been more expansionary than what actually observed, even since the launch of the quantitative easing in 2001. Keywords: deflation; monetary policy; Friedman's rule; Japan; generalised flexible least squares; time-varying parameter VAR; thick modelling JEL: C32 E50 URL: http://d.repec.org/n?u=RePEc:icr:wpicer:29-2004&r=all 213. Houthakker and Ville's contributions to demand theory: a new look at the debate on integrability conditions. Francois Gardes Pierre Garrouste Jean Ville gave, independently of Houthakker, and prior to him, a general one page proof of the integrability of demand functions in a revealed preference scheme. It happens that this essential contribution has been largely ignored in the literature. The comparison between Ville and Houthakker’s proofs makes room for discussing the assumptions necessary to encompass the discrete version of the acyclicity into a continuous version. URL: http://d.repec.org/n?u=RePEc:icr:wpicer:30-2004&r=all 214. The connections between the Austrian tradition and some of the recent developments relating to the economic analysis of institutions. Pierre Garrouste This paper has two aims. First, it studies the way the Austrian theory of institutions evolved from the main works of Menger. Second, and most significantly, it tries to justify the idea that the economic analysis of institutions was inspired more or less explicitly by Menger’s thesis but more generally by the Austrian intuitions and thesis. These intuitions and theses are however amended in order to make them more formalized as well as testable. Keywords: Menger; Austrian tradition; emergence of the institutions; economic analysis of institutions. JEL: B25 B3 D0 URL: http://d.repec.org/n?u=RePEc:icr:wpicer:31-2004&r=all 215. Alice is not missing Wonderland. The Eastward enlargement of the European Union. Miroslav Prokopijevic In this paper I will try to show that the EU enlargement from 2004 is not a good economic move for eight newcomers from Central and Eastern Europe (CEECs). It is unlikely that newcomers will get larger FDI, speed up their economic growth and catch up with richer EU countries, although this was broadly advertised both academically and by the EU “propaganda for happiness.” The EU subsidies, intended to offset accession costs, turn out to be useless if not damaging for acceding economies, because they change the structure of incentives. So, instead of being rewarded for accession, accession countries are going to be punished twice. Firstly, by lower FDI and a persisting GDP gap. Secondly, by getting subsidies which worsen the situation. CEECs would be better off staying outside the EU and continuing to improve economic freedom and the rule of law. But even after they have acceded, there is still some space for reasonable objectives of the CEECs, due to unintended consequences of the socialist enlargement design. Date: 2004 URL: http://d.repec.org/n?u=RePEc:icr:wpicer:32-2004&r=all 216. A note on stochastic survival probabilities and their calibration. Elisa Luciano Elena Vigna In this note we use doubly stochastic processes (or Cox processes) in order to model the evolution of the stochastic force of mortality of an individual aged x. These processes have been widely used in the credit risk literature in modelling the default arrival, and in this context have proved to be quite flexible and useful. We investigate the applicability of these processes in describing the individual's mortality, and provide a calibration to the Italian case. Results from the calibration are twofold. Firstly, the stochastic intensities seem to better capture the development of medicine and long term care which is under our daily observation. Secondly, when pricing insurance products such as life annuities, we observe a remarkable premium increase, although the expected residual lifetime is essentially unchanged. Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:icr:wpmath:1-2005&r=all 217. Quantile regression methods for recursive structural equation models Lingjie Ma Roger Koenker (Institute for Fiscal Studies and University of Illinois) Two classes of quantile regression estimation methods for the recursive structural equation models of Chesher (2003) are investigated. A class of weighted average derivative estimators based directly on the identification strategy of Chesher is contrasted with a new control variate estimation method. The latter imposes stronger restrictions achieving an asymptotic efficiency bound with respect to the former class. An application of the methods to the study of the effect of class size on the performance of Dutch primary school students shows that (i.) reductions in class size are beneficial for good students in language and for weaker students in mathematics, (ii) larger classes appear bene cial for weaker language students, and (iii.) the impact of class size on both mean and median performance is negligible. Date: 2004-02 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp01/04&r=all 218. Generalized empirical likelihood tests in time series models with potential identification failure Patrik Guggenberger Richard Smith (Institute for Fiscal Studies and University of Warwick) We introduce test statistics based on generalized empirical likelihood methods that can be used to test simple hypotheses involving the unknown parameter vector in moment condition time series models. The test statistics generalize those in Guggenberger and Smith (2005) from the i.i.d. to the time series context and are alternatives to those in Kleibergen (2001) and Otsu (2003). The main feature of these tests is that their empirical null rejection probabilities are not affected much by the strength or weakness of identification. More precisely, we show that the statistics are asymptotically distributed as chi—square under both classical asymptotic theory and weak instrument asymptotics of Stock and Wright (2000). A Monte Carlo study reveals that the finite—sample performance of the suggested tests is very competitive. Keywords: Generalized Empirical Likelihood, Nonlinear Moment Conditions, Similar Tests, Size Distortion, Weak Identification JEL: C12 C31 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp01/05&r=all 219. Necessary and sufficient conditions for latent separability Ian Crawford (Institute for Fiscal Studies and University of Surrey) This paper extends the nonparametric methods developed by Samuelson (1948), Houthakker (1950), Afriat (1973), Diewert (1973) and Varian (1982, 1983) to latently separable models. It presents necessary and sufficient empirical conditions under which data on the market behaviour of a price-taking consumer, and a hypothesised allocation across latent groups are nonparametrically consistent with latent separability (Gorman ( 1968, 1978), Blundell and Robin (2000)). It considers homothetic latent separability and weak separability as special cases. Date: 2004-02 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp02/04&r=all 220. Reform of unemployment compensation in Germany: a nonparametric bounds analysis using register data Simon Lee (Institute for Fiscal Studies and University College London) Ralf A. Wilke Economic theory suggests that an extension of the maximum length of entitlement for unemployment benefits increases the duration of unemployment. Empirical results for the reform of the unemployment compensation system in Germany during the 1980s are less clear. The analysis in this paper is motivated by the controversial empirical findings and by recent developments in econometrics for partial identification. We use extensive administrative data with the drawback that registered unemployment is not directly observed. For this reason we bound the reform effect on unemployment duration over different definitions of unemployment. By exploiting the richness of the data we use a nonparametric approach without imposing critical parametric model assumptions. We identify a systematic increase in unemployment duration in response to the reform in samples that amount to less than 15% of the unemployment spells for the treatment group. Keywords: unemployment duration, definition of unemployment, nonparametric JEL: C14 C41 J64 J65 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp02/05&r=all 221. Estimating average partial effects under conditional moment independence assumptions Jeffrey M. Wooldridge I show how to identify and estimate the average partial effect of explanatory variables in a model where unobserved heterogeneity interacts with the explanatory variables and may be unconditionally correlated with the explanatory variables. To identify the populationaveraged effects, I use extensions of ignorability assumptions that are used for estimating linear models with additive heterogeneity and for estimating average treatment effects. New stimators are obtained for estimating the unconditional average partial effect as well as the average partial effect conditional on functions of observed covariates. Date: 2004-03 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp03/04&r=all 222. Nonparametric estimation of nonadditive hedonic models James Heckman (Institute for Fiscal Studies and University of Chicago) Rosa Matzkin Lars Nesheim (Institute for Fiscal Studies) We analyze equilibria in hedonic economies and study conditions that lead to identification of structural preference parameters in hedonic economies with both additive and nonadditive marginal utility and marginal product functions. The latter class is more general, allows for heterogeneity in the curvature of consumer utility, and can result in conditions that lead to bunching. Such bunching has been largely ignored in the previous literature. We then present methods to estimate marginal utility and marginal product functions that are nonadditive in the unobservable random terms, using observations from a single hedonic equilibrium market. These methods are important when statistical tests reject additive specifications or when prior information suggests that consumer or firm heterogeneity in the curvature of utility or production functions is likely to be significant. We provide conditions under which these types of utility and production functions are nonparametrically identified, and we propose nonparametric estimators for them. The estimators are shown to be consistent and asymptotically normal. When the assumptions required to use single market methods are unjustified, we show how multimarket data can be used to estimate the structural functions. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp03/05&r=all 223. Higher order properties of GMM and generalised empirical likelihood estimators Whitney Newey (Institute for Fiscal Studies and Massachussets Institute of Technology) Richard Smith (Institute for Fiscal Studies and University of Warwick) In an effort to improve the small sample properties of generalized method of moments (GMM) estimators, a number of alternative estimators have been suggested. These include empirical likelihood (EL), continuous updating, and exponential tilting estimators. We show that these estimators share a common structure, being members of a class of generalized empirical likelihood (GEL) estimators. We use this structure to compare their higher order asymptotic properties. We find that GEL has no asymptotic bias due to correlation of the moment functions with their Jacobian, eliminating an important source of bias for GMM in models with endogeneity. We also find that EL has no asymptotic bias from estimating the optimal weight matrix, eliminating a further important source of bias for GMM in panel data models. We give bias corrected GMM and GEL estimators. We also show that bias corrected EL inherits the higher order property of maximum likelihood, that it is higher order asymptotically effcient relative to the other bias corrected estimators. JEL: C13 C30 Date: 2003-06 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp04/03&r=all 224. On the robustness of fixed effects and related estimators in correlated random coefficient panel data models. Jeffrey M. Wooldridge I show that a class of fixed effects estimators is reasonably robust for estimating the population-averaged slope coefficients in panel data models with individual-specific slopes, where the slopes are allowed to be correlated with the covariates. In addition to including the usual fixed effects estimator, the results apply to estimators that eliminate individual-specific trends. Further, asymptotic variance matrices are straightforward to estimate. I apply the results, and propose alternative estimators, to estimation of average treatment in a general class of unobserved effects models. Date: 2004-06 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp04/04&r=all 225. Ill-conditioned problems, Fisher information and weak instruments Giovanni Forchini Grant Hillier The existence of a uniformly consistent estimator for a particular parameter is well-known to depend on the uniform continuity of the functional that defines the parameter in terms of the model. Recently, Potscher (Econometrica, 70, pp 1035 - 1065) showed that estimator risk may be bounded below by a term that depends on the oscillation (osc) of the functional, thus making the connection between continuity and risk quite explicit. However, osc has no direct statistical interpretation. In this paper we slightly modify the definition of osc so that it reflects a (generalized) derivative (der) of the functional. We show that der can be directly related to the familiar statistical concepts of Fisher information and identification, and also to the condition numbers that are used to measure ‘distance from an ill-posed problem’ in other branches of applied mathematics. We begin the analysis assuming a fully parametric setting, but then generalize to the nonparametric case, where the inverse of the Fisher information matrix is replaced by the covariance matrix of the efficient influence function. The results are applied to a number of examples, including the structural equation model, spectral density estimation, and estimation of variance and precision. Keywords: Continuity, Derivative, Divergence, Fisher Information, Ill-conditioned problem, Ill-posed problem, Interest- functional, Oscillation, Precision Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp04/05&r=all 226. Asymptotic bias for GMM and GEL estimators with estimated nuisance parameters Whitney K. Newey Joaquim J. S. Ramalho Richard Smith (Institute for Fiscal Studies and University of Warwick) This papers studies and compares the asymptotic bias of GMM and generalized empirical likelihood (GEL) estimators in the presence of estimated nuisance parameters. We consider cases in which the nuisance parameter is estimated from independent and identical samples. A simulation experiment is conducted for covariance structure models. Empirical likelihood offers much reduced mean and median bias, root mean squared error and mean absolute error, as compared with two-step GMM and other GEL methods. Both analytical and bootstrap bias-adjusted two-step GMM estimators are compared. Analytical bias-adjustment appears to be a serious competitor to bootstrap methods in terms of finite sample bias, root mean squared error and mean absolute error. Finite sample variance seems to be little affected. JEL: C13 C30 Date: 2003-12 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp05/03&r=all 227. Inverse probability weighted estimation for general missing data problems Jeffrey M. Wooldridge I study inverse probability weighted M-estimation under a general missing data scheme. The cases covered that do not previously appear in the literature include M-estimation with missing data due to a censored survival time, propensity score estimation of the average treatment effect for linear exponential family quasi-log-likelihood functions, and variable probability sampling with observed retainment frequencies. I extend an important result known to hold in special cases: estimating the selection probabilities is generally more efficient than if the known selection probabilities could be used in estimation. For the treatment effect case, the setup allows for a simple characterization of a “double robustness” result due to Scharfstein, Rotnitzky, and Robins (1999): given appropriate choices for the conditional mean function and quasi-log- likelihood function, only one of the conditional mean or selection probability needs to be correctly specified in order to consistently estimate the average treatment effect. JEL: C13 C21 C23 Date: 2004-04 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp05/04&r=all 228. Nonparametric identification with discrete endogenous variables Andrew Chesher (Institute for Fiscal Studies and University College London) This paper provides weak conditions under which there is nonparametric interval identification of local features of a structural function which depends on a discrete endogenous variable and is nonseparable in a latent variate. The function may deliver values of a discrete or continuous outcome and instruments may be discrete valued. Application of the analog principle leads to quantile regression based interval estimators of values and partial differences of structural functions. The results are used to investigate the nonparametric identifying power of the quarter of birth instruments used by Angrist and Krueger (1991) in their study of the returns to schooling. Date: 2003-12 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp06/03&r=all 229. Nonparametric inference for unbalance time series data Oliver Linton (Institute for Fiscal Studies and London School of Economics) Estimation of heteroskedasticity and autocorrelation consistent covariance matrices (HACs) is a well established problem in time series. Results have been established under a variety of weak conditions on temporal dependence and heterogeneity that allow one to conduct inference on a variety of statistics, see Newey and West (1987), Hansen (1992), de Jong and Davidson (2000), and Robinson (2004). Indeed there is an extensive literature on automating these procedures starting with Andrews (1991). Alternative methods for conducting inference include the bootstrap for which there is also now a very active research program in time series especially, see Lahiri (2003) for an overview. One convenient method for time series is the subsampling approach of Politis, Romano, andWolf (1999). This method was used by Linton, Maasoumi, andWhang (2003) (henceforth LMW) in the context of testing for stochastic dominance. This paper is concerned with the practical problem of conducting inference in a vector time series setting when the data is unbalanced or incomplete. In this case, one can work only with the common sample, to which a standard HAC/bootstrap theory applies, but at the expense of throwing away data and perhaps losing effciency. An alternative is to use some sort of imputation method, but this requires additional modelling assumptions, which we would rather avoid.1 We show how the sampling theory changes and how to modify the resampling algorithms to accommodate the problem of missing data. We also discuss effciency and power. Unbalanced data of the type we consider are quite common in financial panel data, see for example Connor and Korajczyk (1993). These data also occur in cross-country studies. Date: 2004-04 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp06/04&r=all 230. Discrete choice non-response Esmerelda A. Ramalho Richard Smith (Institute for Fiscal Studies and University of Warwick) Missing values are endemic in the data sets available to econometricians. This paper suggests a unified likelihood-based approach to deal with several nonignorable missing data problems for discrete choice models. Our concern is when either the dependent variable is unobserved or situations when both dependent variable and covariates are missing for some sampling units. These cases are also considered when a supplementary random sample of observations on all covariates is available. A unified treatment of these various sampling structures is presented using a formulation of the nonresponse problems as a modification of choice-based sampling. Extensions appropriate for nonresponse are detailed of Imbens’ (1992) effcient generalized method of moments (GMM) estimator for choice-based samples. Simulation evidence reveals very promising results for the various GMM estimators proposed in this paper. JEL: C25 C51 Date: 2003-07 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp07/03&r=all 231. Nonparametric estimation of an additive quantile regression model Joel Horowitz (Institute for Fiscal Studies and Northwestern University) Simon Lee (Institute for Fiscal Studies and University College London) This paper is concerned with estimating the additive components of a nonparametric additive quantile regression model. We develop an estimator that is asymptotically normally distributed with a rate of convergence in probability of n-r/(2r+1) when the additive components are r-times continuously differentiable for some r = 2. This result holds regardless of the dimension of the covariates and, therefore, the new estimator has no curse of dimensionality. In addition, the estimator has an oracle property and is easily extended to a generalized additive quantile regression model with a link function. The numerical performance and usefulness of the estimator are illustrated by Monte Carlo experiments and an empirical example. Date: 2004-04 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp07/04&r=all 232. Generalized empirical likelihood estimators and tests under partial, weak and strong identification Patrik Buggenberger Richard Smith (Institute for Fiscal Studies and University of Warwick) The principal purpose of this paper is to describe the performance of generalized empirical likelihood (GEL) methods for time series instrumental variable models specified by nonlinear moment restrictions when identification may be weak. The paper makes two main contributions. Firstly, we show that all GEL estimators are first-order equivalent under weak identification. The GEL estimator under weak identification is inconsistent and has a nonstandard asymptotic distribution. Secondly, the paper proposes new GEL test statistics, which have chi-square asymptotic null distributions independent of the strength or weakness of identification. Consequently, unlike those for Wald and likelihood ratio statistics, the size of tests formed from these statistics is not distorted by the strength or weakness of iden- tification. Modified versions of the statistics are presented for tests of hypotheses on parameter subvectors when the parameters not under test are strongly identified. Monte Carlo results for the linear instrumental variable regression model suggest that tests based on these statistics have very good size properties even in the presence of conditional heteroskedasticity. The tests have competitive power properties, especially for thick tailed or asymmetric error distributions. JEL: C12 C31 Date: 2003-07 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp08/03&r=all 233. Endogeneity in quantile regression models: a control function approach Simon Lee (Institute for Fiscal Studies and University College London) This paper considers a linear triangular simultaneous equations model with conditional quantile restrictions. The paper adjusts for endogeneity by adopting a control function approach and presents a simple two-step estimator that exploits the partially linear structure of the model. The first step consists of estimation of the residuals of the reduced-form equation for the endogenous explanatory variable. The second step is series estimation of the primary equation with the reduced-form residual included nonparametrically as an additional explanatory variable. This paper imposes no functional form restrictions on the stochastic relationship between the reduced-form residual and the disturbance term in the primary equation conditional on observable explanatory variables. The paper presents regularity conditions for consistency and asymptotic normality of the two- step estimator. In addition, the paper provides some discussions on related estimation methods in the literature and on possible extensions and limitations of the estimation approach. Finally, the numerical performance and usefulness of the estimator are illustrated by the results of Monte Carlo experiments and two empirical examples, demand for fish and returns to schooling. Date: 2004-10 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp08/04&r=all 234. Pessimistic portfolio allocation and Choquet expected utility Gilbert W. Bassett Jr Roger Koenker (Institute for Fiscal Studies and University of Illinois) Gregory Kordas Recent developments in the theory of choice under uncertainty and risk yield a pessimistic decision theory that replaces the classical expected utility criterion with a Choquet expectation that accentuates the likelihood of the least favorable outcomes. A parallel theory has recently emerged in the literature on risk assessment. It is shown that a general form of pessimistic portfolio optimization based on the Choquet approach may be formulated as a problem of linear quantile regression. Date: 2004-06 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp09/04&r=all 235. Identification of sensitivity to variation in endogenous variables Andrew Chesher (Institute for Fiscal Studies and University College London) This lecture explores conditions under which there is identification of the impact on an outcome of exogenous variation in a variable which is endogenous when data are gathered. The starting point is the Cowles Commission linear simultaneous equations model. The parametric and additive error restrictions of that model are successively relaxed and modifications to covariation,order and rank conditions that maintain identifiability are presented. Eventually a just-identifying, non- falsifiable model permitting nonseparablity of latent vari-ates and devoid of parametric restrictions is obtained. The model requires the endogenous variable to be continuously distributed. It is shown that relaxing this restriction results in loss of point identification but set identification is possible if an additional covariation restriction is introduced. Relaxing other restrictions presents significant challenges. Date: 2004-07 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp10/04&r=all 236. Identification in additive error models with discrete endogenous variables Andrew Chesher (Institute for Fiscal Studies and University College London) In additive error models with a discrete endogenous variable identification cannot be achieved under a marginal covariation condition when the support of instruments is sparse relative to the support of the endogenous variable. An iterated covariation condition with a weak montonicity restriction is shown to have set identifying power. Date: 2004-09 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp11/04&r=all 237. The Bootstrap and the Edgeworth Correction for Semiparametric Averaged Derivatives Y. Nishiyama Peter Robinson (Institute for Fiscal Studies and London School of Economics) In a number of semiparametric models, smoothing seems necessary in order to obtain estimates of the parametric component which are asymptotically normal and converge at parametric rate. However, smoothing can inflate the error in the normal approximation, so that refined approximations are of interest, especially in sample sizes that are not enormous. We show that a bootstrap distribution achieves a valid Edgeworth correction in case of density-weighted averaged derivative estimates of semiparametric index models. Approaches to bias-reduction are discussed. We also develop a higher order expansion, to show that the bootstrap achieves a further reduction in size distortion in case of two-sided testing. The finite sample performance of the methods is investigated by means of Monte Carlo simulations froma Tobit model. JEL: C23 Date: 2004-10 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp12/04&r=all 238. Estimating panel data duration models with censored data Simon Lee (Institute for Fiscal Studies and University College London) This paper presents a method for estimating a class of panel data duration models, under which an unknown transformation of the duration variable is linearly related to the observed explanatory variables and the unobserved heterogeneity (or frailty) with completely known error distributions. This class of duration models includes a panel data proportional hazards model with fixed effects. The proposed estimator is shown to be n1/2- consistent and asymptotically normal with dependent right censoring. The paper provides some discussions on extending the estimator to the cases of longer panels, multiple states, and endogenous explanatory variables. Some Monte Carlo studies are carried out to illustrate the finite-sample performance of the new estimator. Date: 2003-09 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp13/03&r=all 239. On the identification of the effect of smoking on mortality Jerome Adda (Institute for Fiscal Studies and University College London) Valerie Lechene (Institute for Fiscal Studies and Wadham College, Oxford) This paper considers the identification of the effect of tobacco on mortality. If individuals select into smoking according to some unobserved health characteristic, then estimates of the effect of tobacco on health that do not account for this are biased. We show that using information on mortality, morbidity and smoking, it is possible to control for this selection effect and obtain consistent estimates of the effect of smoking on mortality. We implement our method on Swedish data. We show that there is selection into smoking, and considerable dispersion around the average effect, so that health policies that aim at decreasing smoking prevalence and quantities smoked might have less effect in terms of average number of years of life gained than previously estimated. We also empirically show that selection into smoking has increased over the last fifty years with the availability of information on the dangers of smoking, so that future studies comparing smokers and non smokers will spuriously reveal a worsening effect of tobacco on health if they fail to control for selection. Keywords: Health, Duration, Smoking, Selection, Mortality, Life Expectancy, Causality. JEL: I12 Date: 2004-02 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp13/04&r=all 240. Nonparametric estimation of homothetic and homothetically separable functions Arthur Lewbel (Institute for Fiscal Studies and Boston College) Oliver Linton (Institute for Fiscal Studies and London School of Economics) For vectors x and w, let r(x,w) be a function that can be nonparametrically estimated consistently and asymptotically normally. We provide consistent, asymptotically normal estimators for the functions g and h, where r(x,w) = h[g(x),w], g is linearly homogeneous and h is monotonic in g. This framework encompasses homothetic and homothetically separable functions. Such models reduce the curse of dimensionality, provide a natural generalization of linear index models, and are widely used in utility, production, and cost function applications. Extensions to related functional forms include a generalized partly linear model with unknown link function. We provide simulation evidence on the small sample performance of our estimator, and we apply our method to a Chinese production dataset. JEL: C14 C21 D24 Date: 2003-10 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp14/03&r=all 241. Testing a parametric model against a nonparametric alternative with identification through instrumental variables Joel Horowitz (Institute for Fiscal Studies and Northwestern University) This paper is concerned with inference about a function g that is identified by a conditional moment restriction involving instrumental variables. The paper presents a test of the hypothesis that g belongs to a finite-dimensional parametric family against a nonparametric alternative. The test does not require nonparametric estimation of g and is not subject to the illposed inverse problem of nonparametric instrumental variables estimation. Under mild conditions, the test is consistent against any alternative model and has asymptotic power advantages over existing tests. Moreover, it has power arbitrarily close to 1 uniformly over a class of alternatives whose distance from the null hypothesis is O(n-1/2), where n is the sample size. Date: 2004-09 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp14/04&r=all 242. Nonparametric IV estimation of shape-invariant Engel curves Richard Blundell (Institute for Fiscal Studies and University College London) Xiaohong Chen Dennis Kristensen This paper concerns the identification and estimation of a shape- invariant Engel curve system with endogenous total expenditure. The shape-invariant specification involves a common shift parameter for each demographic group in a pooled system of Engel curves. Our focus is on the identification and estimation of both the nonparametric shape of the Engel curve and the parametric specification of the demographic scaling parameters. We present a new identification condition, closely related to the concept of bounded completeness in statistics. The estimation procedure applies the sieve minimum distance estimation of conditional moment restrictions allowing for endogeneity. We establish a new root mean squared convergence rate for the nonparametric IV regression when the endogenous regressor has unbounded support. Root-n asymptotic normality and semiparametric efficiency of the parametric components are also given under a set of ‘low- level’ sufficient conditions. Monte Carlo simulations shed lights on the choice of smoothing parameters and demonstrate that the sieve IV estimator performs well. An application is made to the estimation of Engel curves using the UK Family Expenditure Survey and shows the importance of adjusting for endogeneity in terms of both the curvature and demographic parameters of systems of Engel curves. Date: 2003-10 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp15/03&r=all 243. A nonparametric test of exogeneity Richard Blundell (Institute for Fiscal Studies and University College London) Joel Horowitz (Institute for Fiscal Studies and Northwestern University) This paper is concerned with inference about a function g that is identified by a conditional moment restriction involving instrumental variables. The function is nonparametric. It satisfies mild regularity conditions but is otherwise unknown. The paper presents test of the hypothesis that g is the mean of a random variable Y conditional on a covariate X . The need to test this hypothesis arises frequently in economics. The test does not require nonparametric instrumental-variables (IV) estimation of g and is not subject to the ill-posed inverse problem that nonparametric IV estimation entails. The test is consistent whenever g differs from the conditional mean function of Y on a set of non-zero probability. Moreover, the power of the test is arbitrarily close to 1 uniformly over a set of functions g whose distance from the conditional mean function is O(n-1/2), where is the sample size. Keywords: Hypothesis test, instrumental variables, specification testing, consistent testing Date: 2004-12 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp15/04&r=all 244. Why the apple doesn't fall far: understanding intergenerational transmission of human capital Sandra E. Black Paul J. Devereux Kjell G. Salvanes Parents with higher education levels have children with higher education levels. However, is this because parental education actually changes the outcomes of children, suggesting an important spillover of education policies, or is it merely that more able individuals who have higher education also have more able children? This paper proposes to answer this question by using a unique dataset from Norway. Using the reform of the education system that was implemented in different municipalities at different times in the 1960s as an instrument for parental education, we find little evidence of a causal relationship between parents’ education and children’s education, despite significant OLS relationships. We find 2SLS estimates that are consistently lower than the OLS estimates with the only statistically significant effect being a positive relationship between mother's education and son's education. These findings suggest that the high correlations between parents’ and children’s education are due primarily to family characteristics and inherited ability and not education spillovers. JEL: I21 J13 J24 Date: 2003-10 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp16/03&r=all 245. Spatial design matrices and associated quadratic forms: structure and properties Grant Hillier Federico Martellosio The paper provides significant simplifications and extensions of results obtained by Gorsich, Genton, and Strang (J. Multivariate Anal. 80 (2002) 138) on the structure of spatial design matrices. These are the matrices implicitly defined by quadratic forms that arise naturally in modelling intrinsically stationary and isotropic spatial processes. We give concise structural formulae for these matrices, and simple generating functions for them. The generating functions provide formulae for the cumulants of the quadratic forms of interest when the process is Gaussian, second- order stationary and isotropic. We use these to study the statistical properties of the associated quadratic forms, in particular those of the classical variogram estimator, under several assumptions about the actual variogram. Keywords: Cumulant, Intrinsically Stationary Process, Kronecker Date: 2004-12 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp16/04&r=all 246. Jackknife and analytical bias reduction for nonlinear panel models Jinyong Hahn Whitney Newey (Institute for Fiscal Studies and Massachussets Institute of Technology) Fixed effects estimators of panel models can be severely biased because of the well-known incidental parameters problem. We show that this bias can be reduced by using a panel jackknife or an analytical bias correction motivated by large T. We give bias corrections for averages over the fixed effects, as well as model parameters. We find large bias reductions from using these approaches in examples. We consider asymptotics where T grows with n, as an approximation to the properties of the estimators in econometric applications. We show that if T grows at the same rate as n the fixed effects estimator is asymptotically biased, so that asymptotic confidence intervals are incorrect, but that they are correct for the panel jackknife. We show T growing faster than n1/3 suffices for correctness of the analytic correction, a property we also conjecture for the jackknife. Date: 2003-10 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp17/03&r=all 247. Automatic positive semi-definite HAC covariance matrix and GMM estimation Richard Smith (Institute for Fiscal Studies and University of Warwick) This paper proposes a new class of HAC covariance matrix estimators. The standard HAC estimation method re-weights estimators of the autocovariances. Here we initially smooth the data observations themselves using kernel function based weights. The resultant HAC covariance matrix estimator is the normalised outer product of the smoothed random vectors and is therefore automatically positive semi-definite. A corresponding efficient GMM criterion may also be defined as a quadratic form in the smoothed moment indicators whose normalised minimand provides a test statistic for the over-identifying moment conditions. Keywords: GMM, HAC Covariance Matrix Estimation, Overidentifying Moments JEL: C13 C30 Date: 2004-12 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp17/04&r=all 248. Modified whittle estimation of multilateral spatial models Peter Robinson (Institute for Fiscal Studies and London School of Economics) J. Vidal Sanz We consider the estimation of parametric models for stationary spatial or spatio-temporal data on a d-dimensional lattice, for d = 2. The achievement of asymptotic efficiency under Gaussianity, and asymptotic normality more generally, with standard convergence rate, faces two obstacles. One is the 'edge effect', which worsens with increasing d. The other is the difficulty of computing a continuous-frequency form of Whittle estimate or a time domain Gaussian maximum likelihood estimate, especially in case of multilateral models, due mainly to the Jacobian term. An extension of the discrete-frequency Whittle estimate from the time series literature deals conveniently with the latter problem, but when subjected to a standard device for avoiding the edge effect has disastrous asymptotic performance, along with finite sample numerical drawbacks, the objective function lacking a minimum-distance interpretation and losing any global convexity properties. We overcome these problems by first optimizing a standard, guaranteed non-negative, discrete-frequency, Whittle function, without edge-effect correction, providing an estimate with a slow convergence rate, then improving this by a sequence of computationally convenient approximate Newton iterations using a modified, almost-unbiased periodogram, the desired asymptotic properties being achieved after finitely many steps. A Monte Carlo study of finite sample behaviour is included. The asymptotic regime allows increase in both directions, unlike the usual random fields formulation, with the central limit theorem established after re-ordering as a triangular array. When the data are non-Gaussian, the asymptotic variances of all parameter estimates are likely to be affected, and we provide a consistent, non-negative definite, estimate of the asymptotic variance matrix. Keywords: Spatial data, multilateral models, Whittle estimation, Date: 2003-11 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp18/03&r=all 249. Nonparametric methods for the characteristic model Laura Blow (Institute for Fiscal Studies) Martin Browning (Institute for Fiscal Studies and University of Copenhagen) Ian Crawford (Institute for Fiscal Studies and University of Surrey) Characteristics models have been found to be useful in many areas of economics. However, their empirical implementation tends to rely heavily on functional form assumptions. In this paper we develop a revealed preference-based nonparametric approach to characteristics models. We derive the minimal necessary and sufficient empirical conditions under which data on the market behaviour of individual, heterogeneous, pricetaking consumers are nonparametrically consistent with the consumer characteristics model. Where these conditions hold, we show how information may be recovered on individual consumer’s marginal valuations of product attributes. In some cases marginal valuations are point identi- fied and in other cases we can only recover bounds. Where the conditions fail we highlight the role which the introduction of unobserved product attributes can play in rationalising the data. We implement these ideas using consumer panel data on the Danish milk market. Keywords: Product characteristics, revealed preference JEL: C43 D11 Date: 2004-12 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp18/04&r=all 250. Nonparametric identification under discrete variation Andrew Chesher (Institute for Fiscal Studies and University College London) This paper provides weak conditions under which there is nonparametric interval identification of local features of a structural function which depends on a discrete endogenous variable and is nonseparable in a latent variate. The function may deliver values of a discrete or continuous outcome and instruments may be discrete valued. Application of the analog principle leads to quantile regression based interval estimators of values and partial differences of structural functions. The results are used to investigate the nonparametric identifying power of the quarter of birth instruments used by Angrist and Krueger (1991) in their study of the returns to schooling. Date: 2003-12 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp19/03&r=all 251. GEL Criteria for Moment Condition Models Richard Smith (Institute for Fiscal Studies and University of Warwick) GEL methods which generalize and extend previous contributions are defined and analysed for moment condition models specified in terms of weakly dependent data. These procedures offer alternative one-step estimators and tests that are asymptotically equivalent to their efficient two-step GMM counterparts. The basis for GEL estimation is via a smoothed version of the moment indicators using kernel function weights which incorporate a bandwidth parameter. Examples for the choice of bandwidth parameter and kernel function are provided. Efficient moment estimators based on implied probabilities derived from the GEL method are proposed, a special case of which is estimation of the stationary distribution of the data. The paper also presents a unified set of test statistics for over-identifying moment restrictions and combinations of parametric and moment restriction hypotheses. Keywords: GMM, Generalized Empirical Likelihood, Efficient Moment Estimation, JEL: C13 C30 Date: 2004-12 URL: http://d.repec.org/n?u=RePEc:ifs:cemmap:wp19/04&r=all 252. Retail productivity Rachel Griffith (Institute for Fiscal Studies) Heike Harmgart (Institute for Fiscal Studies and University College London) Recent attention has focused on the UK’s productivity gap in the retail sector. Figure 1 shows an estimate of labour productivity in retail across countries, using output per hour worked. The UK lies well behind the US, France and Germany. Reynolds at al (2005) contribute to this debate by providing a discussion of the literature, along side interviews with several UK and US retail firms. The conclusions of their paper are that, while there are many measurement issues, most of the evidence points to the fact that, on average, productivity in this sector in the UK is low and has grown slowly over recent years when compared to the US. They rightly point out that a more thorough understanding of what drives productivity in the retail sector requires a better understanding of the 'complex mix of urban characteristics, consumer preferences and competitive rivalries'. In this article we discuss some of the main issues involved in the measurement of productivity in retail, how these problems can be tackled, and we consider the interpretation of these statistics. We then discuss new work using microdata on the UK supermarket industry and conclude with a short discussion of where future research needs to look to answer the important policy questions around why the UK’s productivity performance remains low in this important sector. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:ifs:ifsewp:05/07&r=all 253. Long-term effects of a mandatory multistage program: the New Deal for young people in the UK Giacomo De Giorgi The New Deal For Young People is the major welfare-to-work program in the UK. It is a mandatory multistage policy targeted at the 18-24 year old unemployed. This paper investigates the effectiveness of the program in terms of enhancing the (re) employment probability of participant males. I exploit the eligibility rule to identify a suitable counterfactual relying upon a simple regression discontinuity design. By exploiting such a discontinuity I am able to non parametrically identify (Hahn et al., 2001) a local average treatment effect (LATE). While relying upon the non parametric local linear regression method I am able to push forward such a parameter to a "global" dimension, implicitly adding parametric structure. No evidence of possible general equilibrium as well as substitution effects is found by a co- hort specific approach (before and after the program). The main result is that the program enhances employability by about 6- 7%. Keywords: Labour market policy evaluation, regression discontinuity, non parametric JEL: J18 J23 J38 C14 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:ifs:ifsewp:05/08&r=all 254. Indeterminacy, Underground Activities and Tax Evasion Francesco Busato Bruno Chiarini Enrico Marchetti This paper introduces underground activities and tax evasion into a one sector dynamic general equilibrium model with external effects. The model presents a novel mechanism driving the self- fulfilling prophecies, which is triggered by the reallocation of resources to the underground sector to avoid the excess tax burden. This mechanism differs from the customary one, and it is complementary to it. In addition, the explicit introduction of an even tiny) underground sector allows to reduce aggregate degree of increasing returns required for indeterminacy, and for having well behaved input demand schedules (in the sense they slope down) URL: http://d.repec.org/n?u=RePEc:igi:igierp:289&r=all 255. Robust Monetary Policy in a Small Open Economy Kai Leitemo Ulf Soderstrom This paper studies how a central bank’s preference for robustness against model misspecification affects the design of monetary policy in a New-Keynesian model of a small open economy. Due to the simple model structure, we are able to solve analytically for the optimal robust policy rule, and we separately analyze the effects of robustness against misspecification concerning the determination of inflation, output and the exchange rate. We show that an increased central bank preference for robustness makes monetary policy respond more aggressively or more cautiously to shocks, depending on the type of shock and the source of misspecification. URL: http://d.repec.org/n?u=RePEc:igi:igierp:290&r=all 256. Career Drivers of New-age Employees: Implications for Organisational Reward and Employee Development Systems Singh Manjari The paper conceptualises the linkages among individual career drivers, psychological contracts, and organisational reward and employee development systems. The model also incorporates employee reward preferences and skill-acquisition drivers. The career drivers, reward preferences, and skill-acquisition drivers of 104 software professionals in India were empirically examined. Our findings indicate that organisational reward and employee development systems need to be linked to employees’ expectations that are based on their career aspirations and preferences, and also that these systems need to have the flexibility to incorporate employee diversity. Keywords: Career, psychological contract, reward, employee development Date: 2005-04-26 URL: http://d.repec.org/n?u=RePEc:iim:iimawp:2005-04-04&r=all 257. Organizational Citizenship Performance in Non-Governmental Organizations: Development of a Scale Kumar Rajiv Past two decades have seen increasing research in the broad area of beneficial non-task employee behaviors. Several concepts have been proposed to capture such behaviors, like organizational citizenship behavior (OCB), prosocial behavior, organizational spontaneity, extra-role behavior, contextual performance, etc. But “contextual performance” (labeled here as organizational citizenship performance, meaning behaviors that support the organizational, social and psychological environment in which the technical core, i.e., task performance, must function) has emerged as the best specified concept (Organ, 1997). Despite the emphasis by scholars on the twin needs of construct validity and developing culture-specific measures for concepts like OCB, progress is lacking in this direction. This study aims to fill this gap. The research design involved three broad stages: item generation, scale development and assessment of scale’s psychometric properties (reliability and validity). Fulltime and paid employees of several NGOs participated in data collection. The emerging scale shows satisfactory psychometric properties. It is expected that this scale would be useful for research as well as practice. Besides bridging the research gaps mentioned above, NGOs can use it to measure organizational citizenship performance. With some modifications, this scale is expected to be useful for other Indian organizations as well. Date: 2005-04-26 URL: http://d.repec.org/n?u=RePEc:iim:iimawp:2005-04-05&r=all 258. Mediating Effects in the Relationship between 360-Degree Feedback and Employee Performance Rai Himanshu Singh Manjari 360-degree feedback has been linked to several positive outcomes like improved performance, better interpersonal communication, smoother work relationships, etc. The paper empirically examines the mediating effects in the relationship between 360-degree feedback and employee performance with a sample of executives ( N=198) working in four organisations in Western India. The results show that interpersonal communication and quality of working life have a complete mediating effect. Leader member exchange quality and perceived organisational support were found to have a partial but significant mediating effect. An elementary form of an integrated model, which includes all the four mediating variables and their inter-relationships, has been developed conceptually. This model is examined and built up empirically using structural equation modelling. Keywords: 360-degree feedback, employee performance, mediating effects, structural equation modelling Date: 2005-04-30 URL: http://d.repec.org/n?u=RePEc:iim:iimawp:2005-04-06&r=all 259. Revisiting Appraisal Politics from Assessors’ Perspective Dhiman Amit Singh Manjari Past research on performance appraisal focusing on assessor’s ability to assess accurately has not made much progress because practitioners have not adopted most of the recommendations. One of the arguments has been that enhancing assessor’s ability to is useless unless s/he intends to appraise accurately. The focus of this paper is to understand assessor’s intention to appraise performance and it draws from political view of organisation, which considers assessor as a politician and proposes that certain contextual factors cause assessor’s to adopt goals other than accuracy. Specifically, it is proposed that, instrumentality of outcomes, ambiguity in the process/ policies, and accountability pressures shape the assessor’s perception of appraisal politics, which determine assessor’s intention to achieve specific goals through appraisal. Accountability research reveals that only specific accountability conditions have favourable affect on decision. While procedural accountability reduces assessor’s perception of appraisal politics, the outcome accountability will increase this perception and affect appraisal accuracy. Date: 2005-04-30 URL: http://d.repec.org/n?u=RePEc:iim:iimawp:2005-04-07&r=all 260. Fiscal situation in Maharashtra an assessment, A critique, and some policy suggestions Abhay Pethe (Mumbai University) Mala Lalvani (Mumbai University) This paper-focusing on Maharashtra-is part of a broader programme that is trying to understand the fiscal problems being faced at the level of state governments. This paper provides a brief overview of the economic environment in Maharashtra including the socio-economic development of the state as a backdrop. Within this context, we assess and analyse the fiscal situation in Maharashtra, which forms the main thrust of this paper. This is done in two ways, one, by examining its relative performance vis-…-vis other major states of the Indian union and two, by looking at its temporal performance over a ten year period. Fiscal indiscipline on the expenditure front, large interest payments, additional borrowing to meet current expenditures are all sins that the GoM is found to have been guilty of. The power sector has been discussed as a bottleneck to growth of Maharashtra's economy thereby adding to the fiscal woes of the state. EGS, Cotton Monopoly Scheme and sugar cooperative have also been touched upon. For the reform package to be comprehensive, we would like to see policy measures being initiated at three levelspolicies at the level of the state, which are financial and administrative in the main; policies that the central government must pursue in its dealing with the states; and the third type that are overarching in a sense that they concern the governments at all levels and have to do with capacity building as well as having pragmatic regulatory framework in place. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:ind:nipfwp:28&r=all 261. Measurement of environmental efficiency and productivity: A cross country analysis Surender Kumar (National Institute of Public Finance and Policy) Madhu Khanna (University of Illinois) This paper measures environmental efficiency (EE) and environmental productivity (EP) and analyses differences in these across countries. It explores the macroeconomic factors that could explain these differences and whether these differences can be explained by income levels and by the degree of openness in these countries. The EE index is found to be almost steady over the period 1971-92 for the annex-I countries, while its value is declining for non-annex-I countries over this period. The EP index increased over this period in both groups of countries. In the annex-I countries, EE exhibits an inverted `U' shape with respect to per capita income while it is `U' shaped for the non- annex-I countries. This study also finds that while the EP index increases with income in annex-I countries it is decreasing in the non-annex-I countries. The degree of openness has a significant negative impact on EE and EP in both groups of countries. Keywords: Environmental efficiency, Environmental productivity, Distance function, Per capita income, Openness Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:ind:nipfwp:29&r=all 262. Input Specificity and Location Jose Pedro Pontes In a two-region economy, two upstream firms supply an input to two consumer goods firms. For two different location patterns ( site specificity and co-location of the suppliers), the firms play a three-stage game: the input suppliers select transport rates; then they choose outputs; finally the buyers select quantities of the consumer good. It is concluded that the site specificity of the input leads to a high transport cost and to its specialized adaptation to the needs of the local user. Keywords: Technological Choice; Spatial Oligopoly; Vertically- linked Industries. JEL: D43 R12 URL: http://d.repec.org/n?u=RePEc:ise:isegwp:wp12005&r=all 263. Distribution of aggregate income in Portugal from 1995 to 2000 within a SAM (Social Accounting Matrix) framework. Modeling the household sector Susana Santos Aggregated Social Accounting Matrices (SAMs) will be constructed for the Portuguese economy from 1995 to 2000, based on the country’s national accounts statistics. The economic flows associated with households, enterprises, government and other institutions will be analysed, as well as their evolution, whilst accounting multipliers will be calculated to facilitate the study of the effects resulting from changes in household income. Therefore, SAMs are modelled and structural path analysis will be used for the decomposition of the calculated multipliers. At the end, the general guidelines will be established for following the study of income distribution and poverty in Portugal. Keywords: Social Accounting Matrix; Income distribution. JEL: D57 H31 O52 URL: http://d.repec.org/n?u=RePEc:ise:isegwp:wp122004&r=all 264. What Level of Education Matters Most for Growth? Evidence from Portugal Miguel St. Aubyn Joao Pereira We decompose an annual average years of schooling series for Portugal into different schooling levels series. By estimating a number of vector autoregressions, we provide measures of aggregate and disaggregate economic growth impacts of different education levels. Increasing education at all levels except tertiary have a significant effect on growth. Investment in education does not significantly crowd out physical investment and average years of schooling semi-elasticities have comparable magnitude across primary and secondary levels. Keywords: Economic growth; education; human capital; Portugal. JEL: I21 O40 URL: http://d.repec.org/n?u=RePEc:ise:isegwp:wp132004&r=all 265. The Dynamics of Growth and Distribution in a Spatially Heterogeneous World Paulo Brito This paper tries to reconcile growth and geographical economics by dealing directly with capital accumulation through time and space and by seeing growth convergence and spatial agglomeration as jointly generated by dynamic processes displaying pattern formation. It presents a centralized economy in which a Bergson- Samuelson- Millian central planner finds a flow of optimal distributions of consumption, subject to a spatial-temporal capital accumulation budget constraint. The main conclusions are: first, if the behavioral parameters are symmetric, but there is an asymmetric distribution of the capital stock, then the long run asymptotic distribution will be spatially homogeneous; second, if there is homogeneous distribution of the capital stock, but there is an asymmetric shock in any parameter, then the economy will converge towards a spatially heterogeneous asymptotic state; third, spatially heterogeneous asymptotic states will only emerge exogenously, not endogenously; fourth, the spatial propagation mechanism can give birth, when the production function is close to linear, to a Turing instability, which implies that for some parameter values, a conditionally stable spacetime distribution should display spatial pattern formation. Keywords: Optimal growth and distribution; Spatial growth; Optimal control of partial differential equations; Traveling waves; Fourier transforms; Turing instability. JEL: C6 D9 E1 R1 URL: http://d.repec.org/n?u=RePEc:ise:isegwp:wp142004&r=all 266. Integration of CEECs into EU Markets: Structural Change and Convergence Maria Paula Fontoura Nuno Crespo The Central and Eastern European Countries (CEECs) have gone through a dramatic process of industrial restructuring in which the Europe Agreements have played a major role. Using detailed statistics, we analyse the transformation of CEECs’ export structures and whether it led to structural convergence with the remaining EU members. We also analyse structural transformation within sectors in terms of quality ranges. The results show that, in general terms, CEECs have converged both at inter and intra- sectoral levels towards pre-existing EU members. We discuss whether further restructuring and relocation of CEECs’ industrial patterns are probable in the aftermath of EU membership. Keywords: Central and Eastern European Countries; Europe Agreements; Export Structure; Structural Change; Structural Convergence. JEL: F10 F15 URL: http://d.repec.org/n?u=RePEc:ise:isegwp:wp152004&r=all 267. Environmental Regulation and Technological Innovation with Spillovers Samiran Banerjee Joao E. Gata We present a two-period dynamic model of standard setting under asymmetric information to model the attempts by the Califormia Air Resources Board (CARB) in getting car manufacturers to comply with its phase-in of stringent emissions standards. After CARB chooses an initial emissions standard that ?rms are required to comply with, automakers respond by choosing R&D investment and production levels which provide CARB an imperfect signal whether they are more or less capable of complying with the standard. CARB resets the environmental standard and the ?rms once again choose research and production levels. Firms are Cournot duopolists in the product market and can choose to do research noncooperatively or cooperatively in the presence of spillovers. We show that ?rms will behave strategically and underinvest in research both under competitive and cooperative R&D, though the level of underinvestment — the ratchet effect — is greater under cooperative R&D when spillovers are large. We uncover a fundamental con?ict between the incentives of ?rms to do cooperative research and social welfare: that ?rms will want to engage in cooperative (resp. noncooperative) R&D only when spillovers are low (resp. high) while social welfare is greater under noncooperative (resp. cooperative) research. Keywords: Car emissions; dynamic technology-forcing regulation; selfregulation; pre-commitment; cooperative R&D; ratchet effect. JEL: L5 O3 URL: http://d.repec.org/n?u=RePEc:ise:isegwp:wp162004&r=all 268. Public Services Efficiency Provision in Italian Regions: a Non-Parametric Analysis Antonio Afonso Carla Scaglioni We measure the performance of public spending in Italian regions regarding the provision of public services, by constructing a so- called total regional performance indicator for strategic sectors such as general administration, energy, water and sewage, solid waste, and transports for 2001. This composite indicator is then the output measure selected to assess expenditure efficiency for the Italian regions, using the non-parametric DEA approach. The computation of efficiency scores allows to rank the regions and to detect some room for improvement in terms of efficiency gains at the regional level. Keywords: technical efficiency; DEA; regional expenditure; Italy. JEL: C14 H42 H72 R50 URL: http://d.repec.org/n?u=RePEc:ise:isegwp:wp22005&r=all 269. Fiscal Consolidations in the Central and Eastern European Countries Antonio Afonso Christiane Nickel Philipp Rother We study fiscal consolidations in the Central and Eastern European countries and what determines the probability of their success. We define consolidation events as substantive improvements in fiscal balances adjusting for the impact of cyclical effects. We use Logit models for the period 1991–2003 to assess the determinants of the success of a fiscal adjustment. The results seem to suggest that for these countries expenditure based consolidations have tended to be more successful. By contrast, revenue based consolidations have a tendency to be less successful. Keywords: fiscal policy; fiscal episodes; Central and Eastern Europe; Logit models. JEL: C25 E62 H62 URL: http://d.repec.org/n?u=RePEc:ise:isegwp:wp32005&r=all 270. Is the Taylor Rule Missing? A Statistical Investigation Bunzel, Helle Enders, Walter We conduct a fairly thorough statistical analysis of the empirical foundations for the existence of a Taylor rule. Inflation, the output gap and the federal funds rate appear to be non-stationary variables that are not cointegrated. Although this lack of cointegration could be caused by missing variables or structural breaks, we are unable to ‘salvage’ the rule using several plausible candidate variables and break dates. We also investigate the possibility that the Taylor rule should be modeled as a non-linear relationship. We find that a simple threshold model makes significant progress towards rectifying some of the shortcomings of the standard model. JEL: E0 Date: 2005-05-01 URL: http://d.repec.org/n?u=RePEc:isu:genres:12301&r=all 271. Profiting from the Cattle Cycle: Alternative Cow Herd Investment Strategies Lawrence, John D. Beef cowherds are capital-intensive enterprises and should be viewed as other capital investments. Beef cowherd owners can benefit from incorporating price signals into their heifer retention decisions. Date: 2005-05-04 URL: http://d.repec.org/n?u=RePEc:isu:genres:12302&r=all 272. Knowledge and Creative Destruction over the Industry Life Cycle - The Case of the German Automobile Industry Uwe Cantner (University of Jena, Faculty of Economics) Kristina Dre?ler (University of Jena, Faculty of Economics) Jens J. Kruger (University of Jena, Faculty of Economics) This paper investigates how the survival of firms over the industry life cycle is affected by different kinds of knowledge, namely post-entry experience, pre-entry experience, and knowledge acquired by innovative activity. Therefore, a statistical survival analysis is performed for the German automobile industry over the period 1886- 1939 which applies a new approach that links instrumental variable estimation with the Cox regression. The main results are that all three knowledge components exert a significantly positive effect on the survival of firms. Furthermore, innovative activity is able to compensate for lacking pre-entry or post-entry experience, completely in accord with Schumpeterian creative destruction. Keywords: firm survival, patents, innovation, automobile industry, hazard rates JEL: L10 L62 O33 C41 Date: 2005-04-30 URL: http://d.repec.org/n?u=RePEc:jen:jenasw:2005-05&r=all 273. Untangling the Quality of Governance from the Level of Income: Are Sub-Saharan African Countries Governed Well? Erich Gundlach Susanne Hartmann We consider whether Sub-Saharan African (SSA) countries are mainly poor because they are governed worse than other countries, as suggested by recent studies on the supremacy of institutions. Our empirical results show that the supremacy of institutions does not hold. SSA countries appear to face very specific development problems. Given their geographic and economic constraints, we conclude that SSA countries are on average not governed worse than other comparable countries. Our finding supports the basic argument of a recent UN report (UN Millennium Project 2005). However, we find that the UN report is based on empirical evidence that appears to imply the supremacy of institutions. Keywords: Development, institutions, disease ecology, Sub- Saharan Africa JEL: O1 O4 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:kie:kieliw:1241&r=all 274. Do Multinational Enterprises Contribute to Convergence or Divergence? A Disaggregated Analysis of US FDI David Mayer-Foulkes Peter Nunnenkamp It is a widely held belief that foreign direct investment (FDI) has a positive effect on economic growth. We test this hypothesis by performing convergence regressions derived from a model of endogenous technological change. We estimate the rate of growth in per-capita income, relative to the per-capita income of the United States, in terms of US FDI, human development, financial development, and trade. We apply a panel approach, instrumenting for explanatory variables and correcting for correlated errors by clustering by countries. The heterogeneity of FDI is taken into account by considering various FDI-related activities – in addition to the conventionally used FDI stocks and flows. Furthermore, we draw on industry-specific FDI data, rather than exclusively on aggregated data. Our empirical analysis puts into question the currently prevailing euphoria about FDI as a means to induce economic catching-up processes of developing countries. We conclude that the central challenge facing policymakers is not to attract FDI, but to improve the local conditions required to benefit from the widely perceived unique advantages of FDI. In addition, our findings support the proposition that FDI stocks do not adequately reflect FDI-related economic activities. Keywords: foreign direct investment, heterogeneity of FDI, growth effects, convergence regressions JEL: F23 O40 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:kie:kieliw:1242&r=all 275. Openness, Institutions and Financial Development Siong Hook Law Panicos Demetriades Using cross-country and dynamic panel data techniques on 43 developing countries during 1980 - 2000, we provide evidence which suggests that financial development is enhanced when a country's borders are simultaneously open to both capital flows and trade. Our findings also suggest that institutional quality is a statistically significant independent determinant of financial development. Our findings are robust to alternative measures of financial and trade openness, as well as estimation method and sample period. Keywords: Capital inflows; trade openness; financial development and dynamic panel data analysis JEL: G2 O11 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:lec:leecon:05/8&r=all 276. Heterogeneity within Communities: A Stochastic Model with Tenure Choice Ortalo-Magne, Francois Rady, Sven Standard explanations for the income heterogeneity within neighborhoods rely on differences of preferences across households and heterogeneity of the housing stock. We propose an alternative and complementary explanation. We construct a stochastic equilibrium sorting model where (1) income is the sole dimension of household heterogeneity, (2) households form state- contingent housing location plans that may involve moves over their lifetimes, (3) households choose whether to own or rent depending on the housing expenditure risk associated with each tenure mode, and (4) there is a probability that newcomer households move in and compete for homes with native households. Income mixing within neighborhood arises for two reasons. First, allowing natives to form state-contingent housing location plans breaks the indivisibility of housing consumption implicit in the literature where households choose their location once and for all. Second, natives can insure themselves against rent fluctuations by buying their home prior to the realization of the population shock; newcomers cannot. As a result, poorer natives stay in the more desirable communities and only richer newcomers move in these communities. Evidence from U.S. metropolitan areas supports the effects predicted by the model. JEL: R21 R12 D31 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:lmu:muenec:594&r=all 277. The Poverty of Growth with Interdependent Utility Functions Salamon, Peter Komlos, John We argue that with interdependent utility functions growth can lead to a decline in total welfare of a society if the gains from growth are sufficiently unequally distributed in the presence of negative externalities, i.e., envy. JEL: O00 D64 D63 D62 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:lmu:muenec:619&r=all 278. Testing Explanations of Preference Reversal: a Model Yves Alarie Georges Dionne When Cubitt, Munro and Starmer (2004) presented their new experimental investigation of preference reversal, they pointed out that their test results cannot be explained by any of the best-known explanations proposed by economists and psychologists. In this paper we propose a model based on lotteries qualities to explain these new test results. Keywords: Standard preference reversal, counter preference reversal, choice task, money valuation task, probability valuation task, lottery, test JEL: D80 Date: 2005 URL: http://d.repec.org/n?u=RePEc:lvl:lacicr:0510&r=all 279. Learning and the Welfare Implications of Changing Inflation Targets Kevin Moran This paper computes the welfare consequences, for a representative agent, of a shift in the inflation target of monetary authorities. The welfare computations are conducted first by comparing the two steady states that the different inflation targets entail, and next by accounting for the transition from one steady-state to the next. Further, the paper allows this transition to be characterized by incomplete information, under which private agents learn about the inflation target shift using Bayesian updating. The analysis is repeated in a variety of model parameterizations, to test the robustness of the results. We find that the welfare benefits of reducing the target rate of inflation from 2% initially to 0% may at first appear to be significant. When measured by comparing steady states, these benefits are worth up to 0.5% of steady-state consumption. However, accounting for the transition towards the new, low inflation steady state significantly reduces the computed benefits, by at least one half. Keywords: Inflation targeting, welfare benefits of lower inflation, new keynesian model JEL: E31 E52 E58 Date: 2005 URL: http://d.repec.org/n?u=RePEc:lvl:lacicr:0511&r=all 280. The Analytics of Segmented Labor Markets P R Agenor This paper provides an analytical overview of models of segmented urban labor markets in developing countries. It begins by reviewing the characteristics of the labor market in these countries, including institutions and regulations that may lead to segmentation. The wage and employment e?ects of imperfect labor mobility between the formal and informal sectors are then illustrated with a simple graphical analysis. Formal models of urban wage formation are discussed next, and a two-sector shirking model with segmented urban labor markets is presented. The model is used to analyze the impact of an increase in the minimum wage on unskilled unemployment. Date: 2005 URL: http://d.repec.org/n?u=RePEc:man:cgbcrp:52&r=all 281. Public Expenditures, Bureaucratic Corruption and Economic Development K Blackburn N Bose M E Haque This paper presents a dynamic general equilibrium analysis of public sector corruption and economic growth. In an economy with government intervention and capital accumulation, state-appointed bureaucrats are charged with the responsibility for procuring public goods which contribute to productive efficiency. Corruption arises because of an opportunity for bureaucrats to appropriate public funds by misinforming the government about the cost and quality of public goods provision. The incentive for each bureaucrat to do this depends on economy-wide outcomes which, in turn, depend on the behaviour of all bureaucrats. We establish the existence of multiple development regimes, together with the possibility of multiple, frequency-dependent equilibria. The predictions of our analysis accord strongly with recent empirical evidence on the causes and consequences of corruption in public office. Date: 2005 URL: http://d.repec.org/n?u=RePEc:man:cgbcrp:53&r=all 282. Do Individual Accounts Postpone Retirement: Evidence from Chile Estelle James (Urban Institute) Alejandra Cox Edwards (California State University) Postponing retirement will become increasingly important as a means to increase the labor force, its output and old age security, as populations age. Recent research has focused on incentives stemming from the social security system that influence the worker’s decision to retire. Defined benefit systems (both public and private) often contain penalties for postponing access to pensions or continuing to work while receiving a pension. In contrast, the tight link between contributions and accumulations and the actuarial conversion of accumulations into pensions in privately managed defined contribution systems may lead workers to postpone pensions or to continue working after withdrawals begin. The experience of Chile, which implemented its new system in 1982, offers an opportunity to test if the change in incentives has indeed produced the expected change in retirement behavior. Using probit analysis of household survey data from 1960 to 2002, we estimate the impact of the pension reform on the probability of 1) becoming a pensioner and 2) dropping out of the labor force, for older workers. We find strong effects of the new system on both propensities, in the aggregate and at the individual level after controlling for individual and macro-economic variables. In particular, restricted access to early pensions and the exemption of pensioners from the pension payroll tax appear to exert a powerful effect on labor force participation rates. Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:mrr:papers:wp098&r=all 283. Estimating Life—Cycle Parameters from Consumption Behavior at Retirement” John Laitner (University of Michigan) Dan Silverman (University of Michigan) Using pseudo-panel data, we estimate the structural parameters of a life—cycle consumption model with discrete labor supply choice. A focus of our analysis is the abrupt drop in consumption upon retirement for a typical household. The literature sometimes refers to the drop, which in the U.S. Consumer Expenditure Survey we estimate to be approximately 16%, as the “retirement—consumption puzzle.” Although a downward step in consumption at retirement contradicts predictions from life—cycle models with additively separable consumption and leisure, or with continuous work-hour options, a consumption jump is consistent with a setup having nonseparable preferences over consumption and leisure and requiring discrete work choices. This paper specifies a life—cycle model with these latter two elements, and it uses the empirical magnitude of the drop in consumption at retirement to provide an advantageous method of identifying structural parameters–most importantly, the intertemporal elasticity of substitution. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:mrr:papers:wp099&r=all 284. Knowledge and Preference in Reporting Financial Information Honggao Cao (University of Michigan) Daniel H. Hill (University of Michigan) This article models respondent behavior in a financial survey with a framework explicitly integrating a respondent’s knowledge of and willingness to reveal his or her financial status. Whether a respondent provides a valid answer, a “don’t know”, or a “refusal” to a financial question depends on the interaction of his or her financial knowledge and preferences regarding revealing the knowledge. Using asset response and nonresponse data from the Health and Retirement Study (2000), we found that knowledge and preferences play interrelated roles in reporting financial information, that a respondent’s age, gender, education, and race and ethnicity are important predictors of respondent behavior, and that race and ethnicity affect a respondent behavior only via their influence on preferences, while gender only via its influence on knowledge. We also found strong heterogeneity in respondents’ financial knowledge and their willingness to reveal the knowledge. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:mrr:papers:wp100&r=all 285. Determinants of Sovereign Ratings: A Comparsion of Case- Based Reasoning and Ordered Probit Approaches Emawtee Bissoondoyal-Bheenick Robert Brooks Angela Y.N.Yip The paper compares two alternative techniques for the modelling of the determinants of sovereign ratings, specifically, ordered probit and case-based reasoning. Despite the differences in approach the two alternative modelling approaches produce similar results in terms of which variables are significant and forecast accuracy. This suggests that either approach can be used, and that there is some robustness in the results. As regards significant variables, both models find that a proxy for technological development, specifically, mobile phone use, is the most important variable. Apart from the technology proxy, a range of conventional macroeconomic variables are found to be significant, in particular GDP and inflation. The models are then used to produce forecasts for 2002 and for a set of unrated countries. The forecast comparison indicates the critical role played by the technology proxy variable in the modelling. Keywords: Sovereign Ratings, Ordered Response Models, Case-Based Reasoning JEL: G15 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:msh:ebswps:2005-9&r=all 286. Regional Specialization In The European Union Roberto Ezcurra (Departamento de Economia-UPNA) Carlos Gil (Departamento de Economia-UPNA) Manuel Rapun (Departamento de Economia-UPNA) This paper examines productive specialization in the regions of the European Union over the period 1977 to 1999 using the information provided by various methodological instruments. The results obtained reveal a process of convergence in regional productive structures during the twenty-three years considered. This has been due to the behavior of regions with high levels of specialization at the start of the period, whose productive structures have tended to shift towards the European average over time. The analysis carried out also highlights the major role played by regional size, level of development and geographical location in explaining specialization in the European context. Finally, the empirical evidence provided suggests that changes in regional productive structures are closely linked to the evolution of the spatial distribution of per capita income in the European Union. Keywords: Specialization, economic activity, regions, European Union. JEL: F15 R11 R12 URL: http://d.repec.org/n?u=RePEc:nav:ecupna:'0404'&r=all 287. Using Bayesian Techniques To Build Up An Inconsistency Free Health Status Index Juan M. Cabases (Departamento de Economia-UPNA) Eduardo Sanchez (Departamento de Economia-UPNA) 1- To obtain a set of values of health states of the EQ-5D based on self-related health VAS using linear and non- linear models Bayesian techniques. 2 - To analyse “logical consistency” in different models and to derive a model free from logical inconsistencies. 3 - To analyse and compare results of several models when using a priori sources of information. We apply the usual models and transformations of these, in order to attain logical consistency of the value set. Models proposed are: linear model (1); linear with dummy variables (2) and two models with a logistic structure with different distributions of the coefficients to be estimated (3 and 4). For two of these models new dummies are added in order to obtain logical consistency (2B and 4B). We propose a modelling to guarantee consistency of values of the EQ-5D health states that may be applied to suitable samples at apparently low cost of fit. This model is nonlinear, has distribution Gamma in the coefficients and specific dummy variables. The introduction of priors may reduce the cost of forcing logical consistency. Classification-JEL: Keywords: Bayesian analysis; EQ-5D; Logical inconsistency. URL: http://d.repec.org/n?u=RePEc:nav:ecupna:'0405'&r=all 288. Minimal Books Of Rationales Jose Apesteguia (Departamento de Economia-UPNA) Miguel A. Ballester (Departamento de Economia-UPNA) Kalai, Rubinstein, and Spiegler (2002) propose the rationalization of choice functions that violate the “independence of irrelevant alternatives” axiom through a collection (book) of linear orders (rationales). In this paper we present an algorithm which, for any choice function, gives (i) the minimal number of rationales that rationalizes the choice function, (ii) the composition of such rationales, and (iii) information on how choice problems are related to rationales. As in the classical case, this renders the information given by a choice function completely equivalent to that given by a minimal book of rationales. We also study the structure of several choice procedures that are prominent in the literature. Keywords: Rationalization, Independence of irrelevant alternatives, Order partition, Computational effort. URL: http://d.repec.org/n?u=RePEc:nav:ecupna:'0501'&r=all 289. Structural Equations, Treatment Effects and Econometric Policy Evaluation James J. Heckman Edward Vytlacil This paper uses the marginal treatment effect (MTE) to unify the nonparametric literature on treatment effects with the econometric literature on structural estimation using a nonparametric analog of a policy invariant parameter; to generate a variety of treatment effects from a common semiparametric functional form; to organize the literature on alternative estimators; and to explore what policy questions commonly used estimators in the treatment effect literature answer. A fundamental asymmetry intrinsic to the method of instrumental variables is noted. Recent advances in IV estimation allow for heterogeneity in responses but not in choices, and the method breaks down when both choice and response equations are heterogeneous in a general way. JEL: C1 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberte:0306&r=all 290. On the Renminbi: The Choice between Adjustment under a Fixed Exchange Rate and Adjustment under a Flexible Rate Jeffrey Frankel Fixed and flexible exchange rates each have advantages, and a country has the right to choose the regime suited to its circumstances. Nevertheless, several arguments support the view that the de facto dollar peg may now have outlived its usefulness for China. (1) China's economy is on the overheating side of internal balance, and appreciation would help easy inflationary pressure. (2) Although foreign exchange reserves are a useful shield against currency crises, by now China's current level is fully adequate, and US treasury securities do not pay a high return. (3) It becomes increasingly difficult to sterilize the inflow over time, exacerbating inflation. (4) Although external balance could be achieved by expenditure reduction, e.g., by raising interest rates, the existence of two policy goals ( external balance and internal balance) in general requires the use of two independent policy instruments (e.g., the real exchange rate and the interest rate). (5) A large economy like China can achieve adjustment in the real exchange rate via flexibility in the nominal exchange rate more easily than via price flexibility. (6) The experience of other emerging markets points toward exiting from a peg when times are good and the currency is strong, rather than waiting until times are bad and the currency is under attack. (7) From a longer-run perspective, prices of goods and services in China are low -- not just low relative to the United States (.23), but also low by the standards of a Balassa-Samuelson relationship estimated across countries (which predicts .36). In this specific sense, the yuan was undervalued by approximately 35% in 2000, and is by at least as much today. The paper finds that, typically across countries, such gaps are corrected halfway, on average, over the subsequent decade. These seven arguments for increased exchange rate flexibility need not imply a free float. China is a good counter- example to the popular "corners hypothesis" prohibition on intermediate exchange rate regimes. JEL: F0 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11274&r=all 291. Politics and Economics in Weak and Strong States Daron Acemoglu While much research in political economy points out the benefits of "limited government," political scientists have long emphasized the problems created in many less developed nations by "weak states," which lack the power to tax and regulate the economy and to withstand the political and social challenges from non-state actors. I construct a model in which the state apparatus is controlled by a self-interested ruler, who tries to divert resources for his own consumption, but who can also invest in socially productive public goods. Both weak and strong states create distortions. When the state is excessively strong, the ruler imposes such high taxes that economic activity is stifled. When the state is excessively weak, the ruler anticipates that he will not be able to extract rents in the future and underinvests in public goods. I show that the same conclusion applies in the analysis of both the economic power of the state (i.e., its ability to raise taxes) and its political power (i.e., its ability to remain entrenched from the citizens). I also discuss how under certain circumstances, a different type of equilibrium, which I refer to as "consensually-strong state equilibrium," can emerge whereby the state is politically weak but is allowed to impose high taxes as long as a sufficient fraction of the proceeds are invested in public goods. The consensually-strong state might best correspond to the state in OECD countries where taxes are high despite significant control by the society over the government. JEL: P16 H10 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11275&r=all 292. Taylor Rules, McCallum Rules and the Term Structure of Interest Rates Michael Gallmeyer Burton Hollifield Stanley E. Zin Recent empirical research shows that a reasonable characterization of federal-funds-rate targeting behavior is that the change in the target rate depends on the maturity structure of interest rates and exhibits little dependence on lagged target rates. See, for example, Cochrane and Piazzesi (2002). The result echoes the policy rule used by McCallum (1994) to rationalize the empirical failure of the `expectations hypothesis' applied to the term- structure of interest rates. That is, rather than forward rates acting as unbiased predictors of future short rates, the historical evidence suggests that the correlation between forward rates and future short rates is surprisingly low. McCallum showed that a desire by the monetary authority to adjust short rates in response to exogenous shocks to the term premiums imbedded in long rates (i.e. "yield-curve smoothing"), along with a desire for smoothing interest rates across time, can generate term structures that account for the puzzling regression results of Fama and Bliss (1987). McCallum also clearly pointed out that this reduced-form approach to the policy rule, although naturally forward looking, needed to be studied further in the context of other response functions such as the now standard Taylor (1993) rule. We explore both the robustness of McCallum's result to endogenous models of the term premium and also its connections to the Taylor Rule. We model the term premium endogenously using two different models in the class of affine term structure models studied in Duffie and Kan (1996): a stochastic volatility model and a stochastic price-of- risk model. We then solve for equilibrium term structures in environments in which interest rate targeting follows a rule such as the one suggested by McCallum (i.e., the "McCallum Rule"). We demonstrate that McCallum's original result generalizes in a natural way to this broader class of models. To understand the connection to the Taylor Rule, we then consider two structural macroeconomic models which have reduced forms that correspond to the two affine models and provide a macroeconomic interpretation of abstract state variables (as in Ang and Piazzesi (2003)). Moreover, such structural models allow us to interpret the parameters of the term-structure model in terms of the parameters governing preferences, technologies, and policy rules. We show how a monetary policy rule will manifest itself in the equilibrium asset-pricing kernel and, hence, the equilibrium term structure. We then show how this policy can be implemented with an interest- rate targeting rule. This provides us with a set of restrictions under which the Taylor and McCallum Rules are equivalent in the sense if implementing the same monetary policy. We conclude with some numerical examples that explore the quantitative link between these two models of monetary policy. JEL: G0 G1 E4 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11276&r=all 293. Boys Named Sue: Disruptive Children and their Peers David N. Figlio This paper proposes an unusual identification strategy to estimate the effects of disruptive students on peer behavior and academic outcomes. I suggest that boys with names most commonly given to girls may be more prone to misbehavior as they get older. This paper utilizes data on names, classroom assignment, behavior problems and student test scores from a large Florida school district in the school years spanning 1996-97 through 1999- 2000 to directly study the relationship between behavior and peer outcomes. I find that boys with female-sounding names tend to misbehave disproportionately upon entry to middle school, as compared to other boys and to their previous (relative) behavior patterns. In addition, I find that behavior problems, instrumented with the distribution of boys' names in the class, are associated with increased peer disciplinary problems and reduced peer test scores, indicating that disruptive behavior of students has negative ramifications for their peers. JEL: I2 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11277&r=all 294. Work and Leisure in the U.S. and Europe: Why So Different? Alberto Alesina Edward L. Glaeser Bruce Sacerdote Americans average 25.1 working hours per person in working age per week, but the Germans average 18.6 hours. The average American works 46.2 weeks per year, while the French average 40 weeks per year. Why do western Europeans work so much less than Americans? Recent work argues that these differences result from higher European tax rates, but the vast empirical labor supply literature suggests that tax rates can explain only a small amount of the differences in hours between the U.S. and Europe. Another popular view is that these differences are explained by long-standing European "culture," but Europeans worked more than Americans as late as the 1960s. In this paper, we argue that European labor market regulations, advocated by unions in declining European industries who argued "work less, work all" explain the bulk of the difference between the U.S. and Europe. These policies do not seem to have increased employment, but they may have had a more society-wide influence on leisure patterns because of a social multiplier where the returns to leisure increase as more people are taking longer vacations. JEL: J3 E0 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11278&r=all 295. The Impact of Family Income on Child Achievement Gordon B. Dahl Lance Lochner Understanding the consequences of growing up poor for a child's well-being is an important research question, but one that is difficult to answer due to the potential endogeneity of family income. Past estimates of the effect of family income on child development have often been plagued by omitted variable bias and measurement error. In this paper, we use a fixed effect instrumental variables strategy to estimate the causal effect of income on children's math and reading achievement. Our primary source of identification comes from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20%, or approximately $2,100. Using a panel of over 6,000 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity and endogenous transitory income shocks as well as measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises math test scores by 2.1% and reading test scores by 3.6% of a standard deviation. The results are even stronger when looking at children from disadvantaged families who are affected most by the large changes in the EITC, and are robust to a variety of alternative specifications. JEL: I3 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11279&r=all 296. Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches Mitchell A. Petersen In both corporate finance and asset pricing empirical work, researchers are often confronted with panel data. In these data sets, the residuals may be correlated across firms and across time, and OLS standard errors can be biased. Historically, the two literatures have used different solutions to this problem. Corporate finance has relied on Rogers standard errors, while asset pricing has used the Fama-MacBeth procedure to estimate standard errors. This paper will examine the different methods used in the literature and explain when the different methods yield the same (and correct) standard errors and when they diverge. The intent is to provide intuition as to why the different approaches sometimes give different answers and give researchers guidance for their use. JEL: G1 G3 C1 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11280&r=all 297. The Evolution of the Mexican-Born Workforce in the United States George J. Borjas Lawrence F. Katz This paper examines the evolution of the Mexican-born workforce in the United States using data drawn from the decennial U.S. Census throughout the entire 20th century. It is well known that there has been a rapid rise in Mexican immigration to the United States in recent years. Interestingly, the share of Mexican immigrants in the U.S. workforce declined steadily beginning in the 1920s before beginning to rise in the 1960s. It was not until 1980 that the relative number of Mexican immigrants in the U.S. workforce was at the 1920 level. The paper examines the trends in the relative skills and economic performance of Mexican immigrants, and contrasts this evolution with that experienced by other immigrants arriving in the United States during the period. The paper also examines the costs and benefits of this influx by examining how the Mexican influx has altered economic opportunities in the most affected labor markets and by discussing how the relative prices of goods and services produced by Mexican immigrants may have changed over time. JEL: J1 J6 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11281&r=all 298. Rockonomics: The Economics of Popular Music Marie Connolly Alan B. Krueger This paper considers economic issues and trends in the rock and roll industry, broadly defined. The analysis focuses on concert revenues, the main source of performers ' income. Issues considered include: price measurement; concert price acceleration in the 1990s; the increased concentration of revenue among performers; reasons for the secondary ticket market; methods for ranking performers; copyright protection; and technological change. JEL: Z1 L82 O34 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11282&r=all 299. Conditional Policies in General Equilibrium Kala Krishna Obtaining lower generalized system of preferences (GSP) tariffs requires meeting costly Rules of Origin (ROOs). Growing coffee in the shade is more costly, but yields a price premium. This paper analyzes the effects of such restrictions in a general equilibrium setting and shows that such policies may have unanticipated effects. It is shown that in a world with capital mobility, the GSP could result in capital outflows rather than inflows and consumer preferences for shade grown coffee end up hurting labor in developing countries. Even small subsidies that are contingent on the use of domestic intermediates can result in specialization in the targeted good. Value added contingent policies can easily lead to multiple equilibria despite the absence of externalities or market imperfections. JEL: F13 F15 F16 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11283&r=all 300. Contracts, Holdup, and Legal Intervention Steven Shavell This article develops the point that the problems associated with contractual holdup may justify legal intervention in theory, and the article relates this conclusion to legal intervention in practice. Contractual holdup is considered for both fresh contracts and for modifications of contracts. The law can in principle alleviate the incentive and risk-bearing problems due to holdup in two ways. One approach is for the law simply to void agreements made in certain circumstances, since that will remove the prospect of profit from holdup. This policy may be desirable when the events that permit holdup are engineered, for these events would not have been instigated if they would not have resulted in enforceable contracts. When situations of need are not engineered (bad weather puts a ship in jeopardy), flat voiding of contracts is undesirable, since contracts for aid in situations of need (to tow a ship) are often socially beneficial. In these circumstances, the policy of controlling the contract price is preferable, as that policy can reduce the problems of holdup but still allow contracts to be made. Both types of legal intervention in contracts and their modifications -- voiding without regard to price and control of price -- are used by courts to counter problems of pronounced holdup. Also, various price control regulations appear to serve the same objective, at least in part, for instance maximum price ordinances for car towing services, emergency price regulations, and the historically important rule of laesio enormis of the Middle Ages. JEL: D8 K12 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11284&r=all 301. Understanding and Comparing Factor-Based Forecasts Jean Boivin Serena Ng Forecasting using `diffusion indices' has received a good deal of attention in recent years. The idea is to use the common factors estimated from a large panel of data to help forecast the series of interest. This paper assesses the extent to which the forecasts are influenced by (i) how the factors are estimated, and/or (ii) how the forecasts are formulated. We find that for simple data generating processes and when the dynamic structure of the data is known, no one method stands out to be systematically good or bad. All five methods considered have rather similar properties, though some methods are better in long horizon forecasts, especially when the number of time series observations is small. However, when the dynamic structure is unknown and for more complex dynamics and error structures such as the ones encountered in practice, one method stands out to have smaller forecast errors. This method forecasts the series of interest directly, rather than the common and idiosyncratic components separately, and it leaves the dynamics of the factors unspecified. By imposing fewer constraints, and having to estimate a smaller number of auxiliary parameters, the method appears to be less vulnerable to misspecification, leading to improved forecasts. JEL: E37 E47 C3 C53 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11285&r=all 302. Labour Market Institutions Without Blinders: The Debate over Flexibility and Labour Market Performance Richard B. Freeman The debate over the influence of labour market flexibility on performance is unlikely to be settled by additional studies using aggregate data and making cross-country comparisons. While this approach holds little promise, micro-analysis of workers and firms and increased use of experimental methods represent a path forward. Steps along this path could help end the current 'lawyer's case' empiricism in which priors dominate evidence. JEL: J0 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11286&r=all 303. Lucky Stores, Gambling, and Addiction: Empirical Evidence from State Lottery Sales Jonathan Guryan Melissa S. Kearney There is a large body of literature in both psychology and economics documenting mistaken perceptions of randomness. In this paper we demonstrate that people appear to believe that "lightning will strike twice" when it comes to lottery jackpots. First, we show that in the week following the sale of a winning ticket, retailers that sell a winning jackpot ticket experience relative increases in game-specific ticket sales of between 12 and 38 percent, with the sales response increasing in the size of the jackpot. In addition, the increase in sales experienced by the winning vendor increases with the proportion of the local population comprised of high school dropouts, elderly adults, and households receiving public assistance. We further show that this increase in retail-game sales initially reflects an increase in total sales at the retail and zip code level. Second, we show that the increase in sales is persistent at the winning retailer. However, the data no not provide clear evidence that the increase in sales at the zip code level is persistent. It thus appears that in the long run, consumers are persistent in their habit of buying lottery tickets at the "lucky" store; however, as the shock to total gambling dissipates, there is no evidence that lottery gambling itself is habit forming or addictive. JEL: H3 H8 D8 L83 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11287&r=all 304. My Policies or Yours: Have OECD Agricultural Policies Affected Incomes in Developing Countries? Nava Ashraf Margaret McMillan Alix Peterson Zwane This paper seeks to understand the impact of rich-country agricultural support policies on the poor. Using non-parametric analysis we establish the fact that the majority of poor countries are currently net food importers and have been for the past thirty years. Using a a cross-country regression framework we measure the overall impact of agricultural support policies in rich countries on average income per capita in poor countries. We find some evidence that OECD support polices are positively correlated with average incomes in food-importing countries and negatively correlated with average incomes in food-exporting countries. Using the national employment and household consumption and expenditure surveys from Mexico for the period 1991-2000, we examine the implications of a reduction in the price corn on Mexico's corn farmers. We find that the poorest corn farmers in Mexico are net consumers of corn and have been largely unaffected by changes in the price of corn. Middle income corn farmers saw their real income from corn farming fall by more than fifty percent. The real income of the largest corn farmers increased by fourty percent. JEL: F0 O0 Q0 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11289&r=all 305. Social Security Programs and Retirement around the World: Fiscal Implications, Introduction and Summary Jonathan Gruber David Wise This is the introduction to and summary of Phase III of an international research project to study the relationship between social security provisions and retirement. The project relies on the work of a large group of economists in 12 countries who conduct the analysis for each of their countries. The first phase described the retirement incentives inherent in plan provisions and documented the strong relationship across countries between social security incentives to retire and the proportion of older persons out of the labor force. The second phase illustrated the large effects that changing plan provisions would have on the labor force participation of older workers. This third phase shows the consequent fiscal implications that extending labor force participation would have on net program costs -- reduced government social security benefit payments less increased government tax revenues. The findings are conveyed by simulating the implications of illustrative reforms. One reform increases benefit eligibility ages by three years. Another illustrative reform reduces actuarially benefits received before the normal retirement age. A common reform prescribes the same provisions in each country. The financial implications of the illustrative reforms are very large in many instances, often as much as 20 to 40 percent of current program costs. The savings amount to as much a 1 percent or more of country GDP. The results make clear that reforms like those considered in this volume can have very large fiscal implications for the cost of social security benefits as well as for government revenues engendered by changes in the labor force participation of older workers. JEL: F0 H0 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11290&r=all 306. Branch Banking, Bank Competition, and Financial Stability Mark Carlson Kris James Mitchener It is often argued that branching stabilizes banking systems by facilitating diversification of bank portfolios; however, previous empirical research on the Great Depression offers mixed support for this view. Analyses using state-level data find that states allowing branch banking had lower failure rates, while those examining individual banks find that branch banks were more likely to fail. We argue that an alternative hypothesis can reconcile these seemingly disparate findings. Using data on national banks from the 1920s and 1930s, we show that branch banking increases competition and forces weak banks to exit the banking system. This consolidation strengthens the system as a whole without necessarily strengthening the branch banks themselves. Our empirical results suggest that the effects that branching had on competition were quantitatively more important than geographical diversification for bank stability in the 1920s and 1930s. JEL: G21 N22 E44 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11291&r=all 307. Contractibility and the Design of Research Agreements Josh Lerner Ulrike Malmendier We analyze how variations in contractibility affect the design of contracts in the context of biotechnology research agreements. A major concern of firms financing biotechnology research is that the R&D firms might use the funding to subsidize other projects or substitute one project for another. We develop a model based on the property-rights theory of the firm that allows for researchers in the R&D firms to pursue multiple projects. When research activities are non-verifiable, we show that it is optimal for the financing company to obtain the option right to terminate the research agreement while maintaining broad property rights to the terminated project. The option right induces the biotechnology firm researchers not to deviate from the proposed research activities. The contract prevents opportunistic exercise of the termination right by conditioning payments on the termination of the agreement. We test the model empirically using a new data set on 584 biotechnology research agreements. We find that the assignment of termination and broad intellectual property rights to the financing firm occurs in contractually difficult environments in which there is no specifiable lead product candidate. We also analyze how the contractual design varies with the R&D firm's financial constraints and research capacities and with the type of financing firm. The additional empirical results allow us to distinguish the property-rights explanation from alternative stories, based on uncertainty and asymmetric information about the project quality or research abilities. JEL: D23 L14 L24 O31 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11292&r=all 308. A Quantitative Model of Sudden Stops and External Liquidity Management Ricardo Caballero Stavros Panageas Emerging market economies, which have much of their growth ahead of them, run persistent current account deficits in order to smooth consumption intertemporally. The counterpart of these deficits is their dependence on capital inflows, which can suddenly stop. In this paper we develop and estimate a quantifiable model of sudden stops and use it to study practical mechanisms to insure emerging markets against them. We first assess the standard practice of protecting the current account through the accumulation of international reserves and conclude that, even when optimally managed, this mechanism is expensive and incomplete. External insurance, on the other hand, is hard to obtain because sudden stops often come together with distress in emerging market investors themselves (the most natural insurers). Thus, one needs to find global (non-emerging-market-specific) assets that are correlated to sudden stops. We show an example of such an asset based on the S&P 500's implied volatility index. If added to these countries portfolios, it would significantly enhance their sudden stop risk-management strategies. In our simulations, the median gain in terms of reserves available at the time of sudden stop is around 30 percent. Moreover, in instances where the level of non-contingent reserves is low, the median gain is close to 300 percent. We also find that as countries manage to reduce the size of the sudden stops that afflict them, they should reduce their stock of reserves and significantly increase their share of contingent reserves. The main insights of the paper extend to external liquidity and liability management more generally. JEL: E2 E3 F3 F4 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11293&r=all 309. Why Do Public Firms Issue Private and Public Securities? Armando Gomes Gordon Phillips We examine a comprehensive set of private and public security issuance decisions by publicly traded companies. We study private and public issues of debt, convertibles and common equity securities - a total of 6 different security-market choices. The market for public firms issuing private securities is large. Of the over 13,000 issues we examine, more than half are in the private market. We find that asymmetric information and moral hazard problems play a large role in the public versus private market choice and the security type choice. Our findings show that asymmetric information impacts security choice in a particular pattern: Conditional on issuing in the public market we find a pecking order of security issuance holds, firms with higher measures of asymmetric information are less likely to issue equity. We find a reversal of this pecking order in the private market, firms with higher measures of asymmetric information are more likely to issue equity and convertibles. Second, we find risk and investment opportunities are important in determining which security type a firm issues. Firms with high risk, low profitability and good investment opportunities are more likely to choose equity and convertibles and to issue privately. The results support models of security issuance where private securities give investors more incentives to produce information and monitor the firm. JEL: G0 G2 G3 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11294&r=all 310. Is the Melting Pot Still Hot? Explaining the Resurgence of Immigrant Segregation David M. Cutler Edward L. Glaeser Jacob L. Vigdor This paper uses decennial Census data to examine trends in immigrant segregation in the United States between 1910 and 2000. Immigrant segregation declined in the first half of the century, but has been rising over the past few decades. Analysis of restricted access 1990 Census microdata suggests that this rise would be even more striking if the native-born children of immigrants could be consistently excluded from the analysis. We analyze longitudinal variation in immigrant segregation, as well as housing price patterns across metropolitan areas, to test four hypotheses of immigrant segregation. Immigration itself has surged in recent decades, but the tendency for newly arrived immigrants to be younger and of lower socioeconomic status explains very little of the recent rise in immigrant segregation. We also find little evidence of increased nativism in the housing market. Evidence instead points to changes in urban form, manifested in particular as native-driven suburbanization and the decline of public transit as a transportation mode, as a central explanation for the new immigrant segregation. JEL: J1 N3 R0 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11295&r=all 311. A Global View of Economic Growth Jaume Ventura This paper integrates in a unified and tractable framework some of the key insights of the field of international trade and economic growth. It examines a sequence of theoretical models that share a common description of technology and preferences but differ on their assumptions about trade frictions. By comparing the predictions of these models against each other, it is possible to identify a variety of channels through which trade affects the evolution of world income and its geographical distribution. By comparing the predictions of these models against the data, it is also possible to construct coherent explanations of income differences and long-run trends in economic growth. JEL: F10 F15 F40 F43 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11296&r=all 312. The Time-Series Properties of Aggregate Consumption: Implications for the Costs of Fluctuation Ricardo Reis While this is typically ignored, the properties of the stochastic process followed by aggregate consumption a.ect the estimates of the costs of fluctuations. This paper pursues two approaches to modelling aggregate consumption dynamics and to measuring how much society dislikes fluctuations, one statistical and one economic. The statistical approach estimates the properties of consumption and calculates the cost of having consumption fluctuating around its mean growth. The paper finds that the persistence of consumption is a crucial determinant of these costs and that the high persistence in the data severely distorts conventional measures. It shows how to compute valid estimates and confidence intervals. The economic approach uses a calibrated model of optimal consumption and measures the costs of eliminating income shocks. This uncovers a further cost of uncertainty, through its impact on precautionary savings and investment. The two approaches lead to costs of fluctuations that are higher than the common wisdom, between 0.5% and 5% of per capita consumption. JEL: E32 E21 E60 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11297&r=all 313. From the Webbs to the Web: The Contribution of the Internet to Reviving Union Fortunes Richard B. Freeman This paper shows that in the 2000s unions in the UK and US made innovative use of the Internet to deliver union services and move toward open source unions better suited for the modern world than traditional union structures. In contrast to analysts who see unions as being on an inexorable path of decline, I argue that these innovations are changing unions from institutions of the Webbs to institutions of the Web, which will improve their effectiveness and revive their role as the key worker organization in capitalism. JEL: J0 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11298&r=all 314. A Review of the Empirical Literature on FDI Determinants Bruce A. Blonigen This paper surveys the recent burgeoning literature that empirically examines the foreign direct investment (FDI) decisions of multinational enterprises (MNEs) and the resulting aggregate location of FDI across the world. The contribution of the paper is to evaluate what we can say with relative confidence about FDI as a profession, given the evidence, and what we cannot have much confidence in at this point. Suggestions are made for future research directions. JEL: F21 F23 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11299&r=all 315. The Life-Cycle Personal Accounts Proposal for Social Security: A Review Robert J. Shiller The life-cycle accounts proposal for Social Security reform has been justified by its proponents using a number of different arguments, but these arguments generally involve the assumption of a high likelihood of good returns on the accounts. A simulation is undertaken to estimate the probability distribution of returns in the accounts based on long-term historical experience. U.S. stock market, bond market and money market data 1871-2004 are used for the analysis. Assuming that future returns behave like historical data, it is found that a baseline personal account portfolio after offset will be negative 32% of the time on the retirement date. The median internal rate of return in this case is 3.4 percent, just above the amount necessary for holders of the accounts to break even. However, the U.S. stock market has been unusually successful historically by world standards. It would be better if we adjust the historical data to reduce the assumed average stock market return for the simulation. When this is done so that the return matches the median stock market return of 15 countries 1900-2000 as reported by Dimson et al. [2002], the baseline personal account is found to be negative 71% of the time on the date of retirement and the median internal rate of return is 2.6 percent. JEL: H55 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11300&r=all 316. Net Capital Flows and Productivty: Evidence from U.S. States Sebnem Kalemli-Ozcan Ariell Reshef Bent Sorensen Oved Yosha We study net capital flows between U.S. states. We present a simple neoclassical model in which total factor productivity (TFP) varies across states and over time and where capital freely moves across state borders. In this framework capital flows to states that experience a relative increase in TFP thus creating net cross-state capital ownership positions. Net ownership positions converge to zero over time in the absence of further TFP movements. While TFP can not be directly observed, we can identify states with high TFP growth as states with high output growth. By comparing the level of personal income to output, we construct indicators of net capital flows into a state. We then examine empirically if the level of net capital flows between states following relative movements in TFP corresponds to the predictions of the model and whether net ownership positions tend to converge to zero. Our empirical results imply large flows of capital between states; for example, we find that a state with annual per capita output growth 1 percent higher than the average state over 10 years would attract capital in the amount of $9,900 per capita over those 10 years. These magnitudes are in close agreement with the predictions of the model. We conclude that frictions associated with borders are likely to be the main explanation for "low" international capital flows. JEL: F21 F41 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11301&r=all 317. Parental Educational Investment and Children's Academic Risk: Estimates of the Impact of Sibship Size and Birth Order from Exogenous Variations in Fertility Dalton Conley Rebecca Glauber The stylized fact that individuals who come from families with more children are disadvantaged in the schooling process has been one of the most robust effects in human capital and stratification research over the last few decades. For example, Featherman and Hauser (1978: 242-243) estimate that each additional brother or sister costs respondents on the order of a fifth of a year of schooling. However, more recent analyses suggest that the detrimental effects of sibship size on children's educational achievement might be spurious. We extend these recent analyses of spuriousness versus causality using a different method and a different set of outcome measures. We suggest an instrumental variable approach to estimate the effect of sibship size on children's private school attendance and on their likelihood of being held back in school. Specifically, we deploy the sex-mix instrument used by Angrist and Evans (1998). Analyses of educational data from the 1990 PUMS five percent sample reveal that children from larger families are less likely to attend private school and are more likely to be held back in school. Our estimates are smaller than traditional OLS estimates, but are nevertheless greater than zero. Most interesting is the fact that the effect of sibship size is uniformly strongest for latter-born children and zero for first born children. JEL: I0 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11302&r=all 318. The Incidence of the Healthcare Costs of Obesity Jay Bhattacharya M. Kate Bundorf The incidence of obesity has increased dramatically in the U.S. Obese individuals tend to be sicker and spend more on health care, raising the question of who bears the incidence of obesity- related health care costs. This question is particularly interesting among those with group coverage through an employer given the lack of explicit risk adjustment of individual health insurance premiums in the group market. In this paper, we examine the incidence of the healthcare costs of obesity among full time workers. We find that the incremental healthcare costs associated with obesity are passed on to obese workers with employer- sponsored health insurance in the form of lower cash wages. Obese workers in firms without employer-sponsored insurance do not have a wage offset relative to their non-obese counterparts. Our estimate of the wage offset exceeds estimates of the expected incremental health care costs of these individuals for obese women, but not for men. We find that a substantial part of the lower wages among obese women attributed to labor market discrimination can be explained by the higher health insurance premiums required to cover them. JEL: I1 J7 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11303&r=all 319. Employment-Contingent Health Insurance, Illness, and Labor Supply of Women: Evidence from Married Women with Breast Cancer Cathy J. Bradley David Neumark Zhehui Luo Heather L. Bednarek We examine the effects of employment-contingent health insurance on married women's labor supply following a health shock. First, we develop a theoretical model that examines the effects of employment-contingent health insurance on the labor supply response to a health shock, to clarify under what conditions employment-contingent health insurance is likely to dampen the labor supply response. Second, we empirically evaluate this relationship using primary data. The results from our analysis find that -- as the model suggests is likely -- health shocks decrease labor supply to a greater extent among women insured by their spouse's policy than among women with health insurance through their own employer. Employment-contingent health insurance appears to create incentives to remain working and to work at a greater intensity when faced with a serious illness. JEL: I12 J22 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11304&r=all 320. Crises in Emerging Market Economies: A Global Perspective Guillermo A. Calvo The paper argues that global financial factors played an important role in the capital-inflow episode in Emerging Market economies (EMs), during the early part of the 1990s, and clearly in the Sudden Stop (of capital inflows) crises that took place after the 1998 Russian crisis. Moreover, the paper shows that recovery after crises that exhibit large output loss (more than 5 percent of GDP from peak to trough) occurs in a Phoenix-like fashion: little credit or investment is required. These results strongly suggest that: (1) deep financial crises can be prevented or at least largely alleviated and (2) global institutions and arrangements should be high on the policy agenda. The paper then discusses an Emerging Market Fund (EMF) charged with the task of lowering the incidence of contagion in EM bond prices. In addition, the paper analyzes domestic policies and concludes that they are critical and important in making EMs less vulnerable to shocks but are unlikely to succeed in fully shielding these economies from global financial shocks if not supported by arrangements like the EMF. Finally, two sections of the paper are devoted to discussing some current issues regarding applicable theory and econometrics. JEL: F31 F32 F34 F41 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11305&r=all 321. The Chinese Approach to Capital Inflows: Patterns and Possible Explanations Eswar Prasad Shang-Jin Wei In this paper, we adopt a cross-country perspective to examine the evolution of capital flows into China, both in terms of volumes and composition. China's inflows have generally been dominated by foreign direct investment (FDI), a pattern that appears to be favorable in light of the recent literature on the experiences of developing countries with financial globalization. We provide a detailed documentation of the evolution of China's capital controls, a proximate determinant of the pattern of capital inflows. We also discuss a number of other intriguing hypotheses that attempt to capture the "deeper" causes underlying China's approach to capital flows. In particular, we argue that some popular mercantilist-type arguments are inconsistent with the facts. We also analyze the recent rapid rise of China's international reserves and discuss its implications. Contrary to some popular perceptions, the dramatic surge in foreign exchange reserves since 2001 is mainly attributable to non-FDI capital inflows, rather than current account surpluses or FDI. JEL: F2 F3 F4 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11306&r=all 322. Measuring the Implications of Sales and Consumer Inventory Behavior Igal Hendel Aviv Nevo Temporary price reductions (sales) are common for many goods and naturally result in large increases in the quantity sold. Demand estimation based on temporary price reductions may mis-measure the long run responsiveness to prices. In this paper we quantify the extent of the problem and assess its economic implications. We structurally estimate a dynamic model of consumer choice using two years of scanner data on the purchasing behavior of a panel of households. The results suggest that static demand estimates, which neglect dynamics: (i) overestimate own price elasticities by 30 percent; (ii) underestimate cross-price elasticities to other products by up to a factor of 5; and (iii) overestimate the substitution to the no purchase, or outside option, by over 200 percent. JEL: G0 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11307&r=all 323. The Great Escape: A Review Essay on Fogel's 'The Escape from Hunger and Premature Death, 1700-2100' Angus Deaton In this essay, I review Robert Fogel's The Escape from Hunger and Premature Death, 1700-2100 which is concerned with the past, present, and future of human health. Fogel's work places great emphasis on nutrition, not only for the history of health, but for explaining aspects of current health, not only in comparing poor and rich countries, but in thinking about rich countries now and in the future. I discuss Fogel's analysis alongside alternative interpretations that place greater emphasis on the historical role of public health, and on the current and future role of improvements in medical technology. JEL: I1 N3 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11308&r=all 324. The Amplification of Unemployment Fluctuations through Self- Selection Robert E. Hall Unemployment arises from frictions in the matching of job- seekers and employers. The level of resources that employers devote to evaluating applicants for jobs is a key factor in the magnitude of the frictions. Unemployment will be low if employers can review applicants cheaply. The cost of evaluation per hire depends on the fraction of applicants who are qualified for the job. Applicants may be better informed about their qualifications than are employers. If incentives induce self-selection by job- seekers, so that they apply mainly for jobs where they are qualified, friction and thus unemployment will be low. Self- selection is strongest in markets where unemployment is low and jobs are easy to find. Because of this positive feedback, the equilibrium in a market with self-selection is fragile -- unemployment is sensitive to its determinants. Self-selection provides a mechanism for amplification of small changes in the determinants of unemployment. JEL: E24 E32 J64 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11186&r=all 325. Advanced Purchase Commitments for a Malaria Vaccine: Estimating Costs and Effectiveness Ernst R. Berndt Rachel Glennerster Michael R. Kremer Jean Lee Ruth Levine Georg Weizsacker Heidi Williams To overcome the problem of insufficient research and development R&D) on vaccines for diseases concentrated in low-income countries, sponsors could commit to purchase viable vaccines if and when they are developed. One or more sponsors would commit to a minimum price that would be paid per person immunized for an eligible product, up to a certain number of individuals immunized. For additional purchases, the price would eventually drop to short-run marginal cost. If no suitable product were developed, no payments would be made. We estimate the offer size which would make the revenues from R&D investments on a malaria vaccine similar to revenues realized from investments in typical existing commercial pharmaceutical products, as well as the degree to which various contract models and assumptions would affect the cost-effectiveness of such a commitment for the case of a malaria vaccine. Under conservative assumptions, we document that the intervention would be highly cost-effective from a public health perspective. Sensitivity analyses suggest most characteristics of a hypothetical malaria vaccine would have little effect on the cost-effectiveness, but that the duration of protection against malaria conferred by a vaccine strongly affects potential cost- effectiveness. Readers can conduct their own sensitivity analyses employing a web-based spreadsheet tool. JEL: I18 O19 O31 O38 Date: 2005-05 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11288&r=all 326. Intra-Industry Trade and Business Cycles in ASEAN Carlos Cortinhas (Universidade do Minho - NIPE) Recently, a new resolve for both increased economic integration and monetary and exchange rate cooperation has started to emerge in ASEAN, especially since the 1997- 1998 Asian financial crisis. According to the optimum currency area theory, the degree of trade integration is one most important criterion for joining a currency union. The large increase in intra-ASEAN trade in recent years naturally raises the question of whether the ASEAN countries are becoming better prepared to form a currency union. This paper sets to test whether the recorded increase in intra- ASEAN trade is leading the ASEAN members to closer economic integration and thus to better satisfy the criteria for a common currency. Two separate models are estimated for that purpose. First, a variation of the model of Frankel and Rose (1997) was estimated for the ASEAN members. As the results were not very significant, a new methodology that uses the whole sample period data instead of dividing the data into sub-periods was conducted. The results with our own model were very significant and robust when four of the ASEAN5 countries were considered, and showed a clear positive correlation between intra-industry trade and business cycle synchronization in ASEAN. This result has important implications for the prospects of the creation of a common currency in the region. Keywords: Intra-Industry Trade; Business Cycle Harmonization; Economic Integration; Asean. JEL: F15 F33 E42 Date: 2005 URL: http://d.repec.org/n?u=RePEc:nip:nipewp:7/2005&r=all 327. Consumption, (Dis) Aggregate Wealth and Asset Returns Ricardo M. Sousa (Universidade do Minho - NIPE) In this work, we analyse the importance of disaggregation of wealth into main components (financial and housing wealth). We show, from the consumer?s intertemporal budget constraint, that the residuals of the trend relationship among consumption, financial wealth, housing wealth and labor income (summarized by the variable cday) should help to predict U.K quarterly asset returns, and to provide better forecasts than a variable like cay from Lettan and Ludvigson (2001), which considers aggregate wealth instead. Using a sample for the U.K. for the period 1975: Q1 - 2003:Q4, we also find that: (i) financial wealth effects are significantly different from housing wealth efects; (ii) changes in financial wealth are mainly transitory, while changes in housing wealth are better understood as permanent; (iii) the relationship among consumption, (dis)aggregate wealth and labor income was relatively stable over time; (iv) consumption doesn?t react asymmetrically to positive and negative financial (or housing) wealth shocks. Keywords: financial wealth, housing wealth, consumption, expected returns. JEL: E21 E44 D12 Date: 2005 URL: http://d.repec.org/n?u=RePEc:nip:nipewp:9/2005&r=all 328. The impact of structural policies on trade-related adjustment and the shift to services Per Mathis Kongsrud Isabelle Wanner What policy reforms are most urgently needed to remove obstacles to output and employment growth in service sectors and to enhance economies' ability to adjust to structural change as a result of changing trade patterns? This paper reviews the impact of the structural policy framework conditions on the development of the service sector and economies' adjustment capacities. The paper builds on and summarises a vast body of previous work and briefly reviews policy recommendations given to countries in various surveillance processes in the OECD.
Les effets des politiques structurelles sur l'ajustement relatif aux echanges et au changement dans le secteur de services
Quelles sont les
reformes les plus urgentes pour remedier aux obstacles a la
croissance de la production et de l'emploi dans les services et
pour faire en sorte que les economies soient mieux a meme de
s'ajuster au changement structurel resultant de l'evolution des
profils d'echanges? Ce document fait le point sur l'impact de la
politique structurelle dans le developpement du secteur des
services et de la capacite d'ajustement des economies. Il
s'appuie sur un grand nombre de travaux anterieurs dont il fait
la synthese et resume brievement les recommandations
formulees a l'intention des pays dans le cadre des divers
mecanismes de surveillance a l'OCDE.
Keywords: structural policies; regulation; international trade;
service sector developments; labour mobility
JEL: F16 F4 J6
Date: 2005-04-18
URL: http://d.repec.org/n?u=RePEc:oed:oecdec:427&r=all
329. Land Fragmentation and its Implications for Productivity:
Evidence from Southern India
Kompal Sinha
The present paper investigates the nutrition demand pattern for
rural households in India. The non-parametric approach of
quantile regression is applied to characterize the entire
distribution of calorie consumption. This technique has an
advantage over the traditional ordinary least square technique.
It relaxes the assumption of a constant effect of the explanatory
variables over the entire distribution of the dependent variable.
These effects are allowed to vary over the entire distribution of
dependent variable i.e., in this case the distribution of calorie
consumption. The results show that indeed, the responsiveness of
calorie consumption to various factors differs across different
levels of calorie consumption. A comparison of the quantile
regression results with OLS results suggests conclusions and
policy suggestions based on OLS results are unlikely to be ideal.
Some further light is also shed on the debate on calorie income
elasticity as the magnitude is observed to be different for the
undernourished and the over nourished households.
Keywords: Length (pages): 55
Date: 2005
URL: http://d.repec.org/n?u=RePEc:pas:asarcc:2005-02&r=all
330. Integrated graphical framework accounting for the nature
and the speed of the learning process: an application to
MNEs strategies of internationalisation of production and
R&D investment
Mario Alexandre Silva (Faculdade de Economia, Universidade
do Porto)
Aurora A. C. Teixeira (CEMPRE, Faculdade de Economia,
Universidade do Porto)
Existing illustrations of the learning phenomenon either stress
the relationship between flows and stocks, neglecting the
chronological time variable, or the speed of knowledge
accumulation along time, neglecting the nature of the underlying
learning process. In this paper we present a graphical depiction
stressing, in an explicit way, both the nature of interplay
between flows and stocks and the intensity of the learning
process. The four-quadrant graphs that we develop overcome
considerable simplification in literature by deriving, by
construction, a measure of dynamic gains of knowledge following
the interplay of stock of scientific and technological knowledge
and the flow of effort in R&D. This scheme is then applied to
study the internationalisation of production and R&D, which are
strategies followed by multinational firms. Two types of
innovation – process innovation and product innovation – are
therefore studied constructing, in each case, an industry
performance measure adequately indexed to the cumulated knowledge
stock at a given moment in time. In any case, the dynamic
efficiency measure adopted naturally takes into account both the
absolute changes in the technology indexes and the time delays to
reach them, which are properly discounted. Regarding
multinationals strategies - internationalisation of production
and R&D investment -, we begin with the question of finding a new
location for using a now well developed production technology,
and then deal with the problem of selecting a region of
excellence in research to take gains of concentration advantages
and local externalities.
Keywords: Learning; knowledge; technology; R&D; MNEs
JEL: O31 O32 F23
Date: 2005-05
URL: http://d.repec.org/n?u=RePEc:por:fepwps:175&r=all
331. The Impact of Monetary Policy on the Exchange Rate: A Study
Using Intraday Data
Jonathan Kearns (Reserve Bank of Australia)
Phil Manners (Reserve Bank of Australia)
This paper uses intraday data to estimate the effect of changes
in monetary policy on the exchange rate. We use an event study
with carefully selected sample periods for four countries (
Australia, Canada, New Zealand and the United Kingdom) to ensure
that the change in monetary policy is exogenous to the exchange
rate. Intraday data allow us to use a short event window, which
improves the accuracy of estimates, and demonstrates that the
change in policy is rapidly incorporated into the exchange rate.
On average, an unanticipated tightening of 25 basis points is
found to appreciate the exchange rate by around 0.35 per cent,
with estimates for the individual countries ranging from ?–?
of a per cent. The estimation indicates that monetary policy
changes account for only a small part of the observed variability
of exchange rates in these countries. We also find that changes
in monetary policy have substantially different effects on the
exchange rate depending on how they alter expectations regarding
future policy. Surprises that cause expectations of future policy
to be revised by the full amount of the surprise are found to
have a larger impact on the exchange rate (around 0.4 per cent)
than surprises that only bring forward an anticipated change in
policy and do not change expectations of future policy (around 0.
2 per cent).
Keywords: exchange rates; monetary policy; intraday data
JEL: F31 G14
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:rba:rbardp:rdp2005-02&r=all
332. Coarse Contingencies
Larry Epstein (University of Rochester)
Massimo Marinacci (Dipartimento di Statistica e Matematica
Applicata, Universita di Torino, Italy)
The paper considers an agent who must choose an action today
under uncertainty about the consequence of any chosen action but
without having in mind a complete list of all the contingencies
that could influence outcomes. She conceives of some relevant (
subjective) contingencies but she is aware that these
contingencies are coarse - they leave out some details that may
affect outcomes. Though she may not be able to describe these
finer details, she is aware that they exist and this may affect
her behavior.
Keywords: uncertainty, coarse contingencies, unforeseen
contingencies, subjective states, flexibility, ambiguity
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:roc:rocher:515&r=all
333. Welfare Effects of Social Security Reforms Across Europe :
the Case of France and Italy
Raquel Fonseca (CSEF, University of Salerno)
Thepthida Sopraseuth (EPEE, University of Evry and CEPREMAP)
This paper uses a calibrated life cycle model to quantify the
distributional effects of Social Security reforms. We focus only
on two countries: Italy and France because they adopted two
different strategies to cope with aging. While France marginally
modified its defined pension plan, Italy switched from a defined
pension plan to a contributive system. We find both reforms
redistributes welfare unevenly: high skilled workers are the
primary winners of the French reform and self employed
individuals, especially unskilled workers, are the losers under
the new Italian Social Security arrangement.
Date: 2005-04-01
URL: http://d.repec.org/n?u=RePEc:sef:csefwp:138&r=all
334. Wage Differentials, Discrimination and Efficiency
Shouyong Shi
In this paper I construct a search model of a large labor market
in which workers are heterogeneous in productivity and (
homogeneous) firms post wages and a ranking of workers to direct
workers' search. I establish the following results. First, the
wage differential is negatively related to productivity when the
productivity differential is small, while a positive relationship
emerges when the productivity differential is large. Second, as
the productivity differential decreases to zero, the reverse wage
differential increases and so it remains strictly positive in the
limit. Third, high-productivity workers are not discriminated
against even when they have a lower wage, because they always
have a higher priority in employment and higher expected wage
than low-productivity workers. Fourth, the equilibrium is
socially efficient, and so the wage differential and the ranking
are part of the efficient mechanism. Finally, I provide numerical
examples to illustrate the wage distribution.
Keywords: Search; Wage Differential; Discrimination
JEL: J3 J6 J7
URL: http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-189&r=all
335. The Variability of Velocity of Money in a Search Model
Weimin Wang
Shouyong Shi
We construct a dynamic equilibrium model where there is costly
search in the goods market and the labor market. Incorporating
shocks to money growth and productivity, we calibrate the model
to the US time series data to examine the model's quantitative
predictions on aggregate variables and, in particular, on the
variability of consumption velocity of money. Despite the fact
that money is the only asset, the model captures most of the
variability of velocity in the data. It also generates realistic
predictions on the moments of other variables and provides
peresistent propagation of the shocks. The model generates these
results largely because costly search gives an important role to
the extensive margin of trade.
JEL: E40 E30 D83
URL: http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-190&r=all
336. Money, Price Dispersion and Welfare
Brian Peterson
Shouyong Shi
We introduce heterogeneous preferences into a tractable model of
monetary search to generate price dispersion, and then examine
the effects of money growth on price dispersion and welfare. With
buyers' search intensity fixed, we find that money growth
increases the range of (real) prices and lowers welfare as agents
shift more of their consumption to less desirable goods. When
buyers' search intensity is endogenous, multiple equilibria are
possible. In the equilibrium with the highest welfare level,
money growth reduces welfare and increases the range of prices,
while having ambiguous effects on search intensity. However,
there can be a welfare-inferior equilibrium in which an increase
in money growth increases search intensity, increases welfare,
and reduces the range of prices.
Keywords: Price dispersion; Search; Efficiency
JEL: E31 D60
URL: http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-191&r=all
337. Descentralizacion, integracion y policentrismo en
Barcelona
Ivan Muniz Olivera (Departament d'Economia Aplicada,
Universitat Autonoma de Barcelona)
Miguel Angel Garcia Lopez (Departament d'Economia Aplicada,
Universitat Autonoma de Barcelona)
En este trabajo se identifican los subcentros de empleo de la
Region Metropolitana de Barcelona utilizando diferentes
criterios. Una vez catalogados en funcion de su naturaleza, esto
es, subcentros surgidos de la integracion y de la
descentralizacion, se contrasta si su impacto sobre la densidad
de poblacion depende de su origen. Los resultados obtenidos
confirman un mayor impacto de los subcentros integrados en
comparacion con los descentralizados, amplificada, a su vez, por
el hecho de que los primeros estan mas lejos del CBD y
presentan una mayor autocontencion en el mercado de trabajo.
Keywords: Descentralizacion del empleo, policentrismo,
integracion metropolitana
JEL: R12 R14
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:uab:wprdea:wpdea0505&r=all
338. Descentralizacion del empleo: ?compactacion
policentrica o dispersion? El caso de la region
metropolitana de Barcelona 1986-1996
Ivan Muniz Olivera (Departament d'Economia Aplicada,
Universitat Autonoma de Barcelona)
Miguel Angel Garcia Lopez (Departament d'Economia Aplicada,
Universitat Autonoma de Barcelona)
La Region Metropolitana de Barcelona (RMB) ha sido
caracterizada en repetidas ocasiones como un sistema urbano de
tipo policentrico. Este trabajo pretende corroborar esta
afirmacion haciendo uso de una metodologia que permite
identificar los subcentros de empleo y valorar el grado de
policentrismo de la RMB en 1986 y 1996. Los resultados obtenidos
en los dos anos confirman la existencia y extension del
policentrismo.
Keywords: Subcentros de empleo, identificacion,
descentralizacion, dispersion, compactacion,
policentrismo
JEL: R12 R14
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:uab:wprdea:wpdea0506&r=all
339. ANALISIS DE LAS EMISIONES DE CO2 Y SUS FACTORES
EXPLICATIVOS EN LAS DIFERENTES AREAS DEL MUNDO
Vicent Alcantara Escolano (Departament d'Economia Aplicada,
Universitat Autonoma de Barcelona)
Emilio Padilla Rosa (Departament d'Economia Aplicada,
Universitat Autonoma de Barcelona)
En el presente articulo se analiza la evolucion de las
emisiones de CO2 –el principal gas de efecto invernadero– en
las diferentes areas del mundo, prestando mayor atencion a lo
ocurrido en la Union Europea y Espana. El analisis se centra
especialmente en lo sucedido desde 1990, ano de referencia en el
protocolo de Kioto para la gran mayoria de paises. Se
investigan tambien los principales factores determinantes de las
emisiones y su evolucion utilizando el analisis de los factores
de la identidad de Kaya. El analisis permite explicar las
grandes diferencias que se dan entre unas zonas y otras y las
distintas variaciones que se ha
Keywords: diferencias entre regiones, evolucion de emisiones,
identidad de Kaya, protocolo de Kioto.
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:uab:wprdea:wpdea0507&r=all
340. Endogenous population subgroups: the best population
partition and optimal number of groups
Ambra Poggi (Departament d'Economia Aplicada, Universitat
Autonoma de Barcelona)
The aim of this paper is to suggest a method to find
endogenously the points that group the individuals of a given
distribution in k clusters, where k is endogenously determined.
These points are the cut-points. Thus, we need to determine a
partition of the N individuals into a number k of groups, in such
way that individuals in the same group are as alike as possible,
but as distinct as possible from individuals in other groups.
This method can be applied to endogenously identify k groups in
income distributions: possible applications can be poverty
Keywords: stopping rule, optimal grouping, Gini index
JEL: I32 D30 C10
Date: 2005-05
URL: http://d.repec.org/n?u=RePEc:uab:wprdea:wpdea0508&r=all
341. El impacto espacial de las economias de aglomeracion y su
efecto sobre la estructura urbana.El caso de la industria en
Barcelona, 1986-1996
Miguel Angel Garcia Lopez (Departament d'Economia Aplicada,
Universitat Autonoma de Barcelona)
Ivan Muniz Olivera (Departament d'Economia Aplicada,
Universitat Autonoma de Barcelona)
Este trabajo trata sobre el papel de la accesibilidad espacial a
las economias de aglomeracion en el cambio de la estructura
espacial del empleo industrial para el caso de la Region
Metropolitana de Barcelona (RMB). Utilizando como indicador de
cambios en la estructura espacial del empleo el crecimiento de la
densidad bruta del empleo municipal entre 1986 y 1996 para siete
subsectores industriales, se explora el impacto espacial de las
economias de aglomeracion que operan a escala local –el
municipio y tres areas de 5, 8 y 12 kilometros que rodean al
propio municipio-, aquellas que emergen del CBD y de los
principales subcentros especializados de la region, y las
economias de red asociadas al total de puestos de trabajo de la
region cuyo acceso depende de la distancia respecto a las
principales infraestructuras de transporte.
Keywords: economias de aglomeracion, crecimiento empleo
industrial, localizacion intrametropolitana,
estructura espacial
JEL: R11 R12 R14 R30 L60
Date: 2005-05
URL: http://d.repec.org/n?u=RePEc:uab:wprdea:wpdea0509&r=all
342. The Tale of Two research Communities: The Diffusion of
Research on Productive Efficiency
Finn R. Forsund
Nikias Sarafoglou
The field of theoretical and applied efficiency analysis is
pursued both by economists and people from operational research
and management science. Each group tends to cite a different
paper as the seminal one. Recent availability of extensive
electronically accessible databases of journal articles makes
studies of the diffusion of papers through citations possible.
Research strands inspired by the seminal paper within economics
are identified and followed by citation analysis during the 20
year period before the operations research paper was published.
The first decade of the operations research paper is studied in a
similar way and emerging differences in diffusion patterns are
pointed out. Main factors influencing citations apart from the
quality of the research contribution are reputation of journal,
reputation of author, number of close followers; colleagues,
“cadres of proteges”, Ph.D. students, and extent of network
“invisible college”). Such factors are revealed by the
citing papers. In spite of increasing cross contacts between
economics and operations research the last decades co-citation
analysis reveals a relative constant tendency to stick to “own
camp” references.
Keywords: Farrell efficiency measures, data envelopment analysis,
DEA, bibliometry
JEL: B21 D24
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:usi:wpaper:446&r=all
343. IMF concern for reputation and conditional lending failure:
theory and empirics
Silvia Marchesi
Laura Sabani
The IMF is entrusted with the twofold task of enforcing
conditionality and deciding whether or not to continue financial
assistance. In this paper we examine the implications on IMF
lending behaviour of the existence of uncertainty about its
ability to monitor governments’ actions and to enforce
conditionality. It is shown that the existence of an even small
degree of uncertainty about the IMF ability as a monitor
generates incentives for the IMF to take actions to protect its
reputation as a good monitor. In turn, this desire for reputation
distorts IMF incentive to interrupt financial assistance, i.e.
programmes will be interrupted less often than it would be
socially desirable. We have empirically investigated whether IMF
disbursements are affected by the IMF own share of debt, which is
taken as an indicator of the length of the relationship between a
country and the IMF. The longer their relationship, the stronger
IMF reputation will be affected in case it ultimately decides to
interrupt the lending. Our results show that a higher IMF debt
share does increase IMF disbursements.
Keywords: IMF programmes, conditionality, incomplete information,
reputation, dynamic panel
JEL: C23 D82 F34 N2
Date: 2005-02
URL: http://d.repec.org/n?u=RePEc:usi:wpaper:447&r=all
344. Legislature and Constituency Size in Italian Regions:
Forecasting the Effects of a Reform
Nadia Fiorino
Roberto Ricciuti
In this paper we analyze the effect of different legislature and
constituency size on per capita regional expenditure in Italy.
According to the theory, legislature size has an indefinite
effect on government spending because logrolling and transaction
costs may have canceling effects. In turn, smaller constituency
size is predicted to decrease government spending, because of
homogeneity of interests and low monitoring costs. We find a
large and significantly positive effect of the number of
legislators and a negative effect for constituency size. We use
these findings to forecast the effects of the increase in the
number of legislators that are occurring in some regions
Keywords: Legislature size, constituency size, regional
expenditure
JEL: H72 H73
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:usi:wpaper:448&r=all
345. A Hardware Generator of Multi-point Distributed Random
Numbers for Monte Carlo Simulation
Nicola Bruti-Liberati (School of Finance and Economics,
University of Technology, Sydney)
Filippo Martini (Faculty of Information Technology,
University of Technology, Sydney)
Massimo Piccardi (Faculty of Information Technology,
University of Technology, Sydney)
Eckhard Platen (School of Finance and Economics, University
of Technology, Sydney)
Monte Carlo simulation of weak approximations of stochastic
differential equations constitutes an intensive computational
task. In applications such as finance, for instance, to achieve
"real time" execution, as often required, one needs highly
efficient implementations of the multi-point distributed random
number generator underlying the simulations. In this paper a fast
and flexible dedicated hardware solution on a field programmable
gate array is presented. A comparative performance analysis
between a software-only and the proposed hardware solution
demonstrates that the hardware solution is bottleneck-free,
retains the flexibility of the software solution and
significantly increases the computational efficiency. Moreover,
simulations in applications such as economics, insurance, physics,
population dynamics, epidemiology, structural mechanics,
chemistry and biotechnology can benefit from the obtained speedup.
Keywords: random number generators; random bit generators;
hardware implementation; field programmable gate arrays
FPGAs); Monte Carlo simulation; weak Taylor schemes;
multi-point distributed random variables
JEL: G10 G13
Date: 2005-04-01
URL: http://d.repec.org/n?u=RePEc:uts:rpaper:156&r=all
346. On the Strong Approximation of Jump-Diffusion Processes
Nicola Bruti-Liberati (School of Finance and Economics,
University of Technology, Sydney)
Eckhard Platen (School of Finance and Economics, University
of Technology, Sydney)
In financial modelling, filtering and other areas the underlying
dynamics are often specified via stochastic differential
equations (SDEs) of jump-di®usion type. The class of jump-
diffusion SDEs that admits explicit solutions is rather limited.
Consequently, there is a need for the systematic use of discrete
time approximations in corresponding simulations. This paper
presents a survey and new results on strong numerical schemes for
SDEs of jump-di®usion type. These are relevant for scenario
analysis, filtering and hedge simulation in finance. It provides
a convergence theorem for the construction of strong
approximations of any given order of convergence for SDEs driven
by Wiener processes and Poisson random measures. The paper covers
also derivative free, drift-implicit and jump adapted strong
approximations. For the commutative case particular schemes are
obtained. Finally, a numerical study on the accuracy of several
strong schemes is presented.
Keywords: jump-diffusion processes; stochastic Taylor expansion;
discrete time approximation; simulation; strong
convergence
JEL: G10 G13
Date: 2005-04-01
URL: http://d.repec.org/n?u=RePEc:uts:rpaper:157&r=all
347. The Foreign Property Rule: A Cost-Benefit Analysis
David Burgess (University of Western Ontario)
Joel Fried (University of Western Ontario)
The foreign property rule (FPR) requires that no more than 30%
of the assets held in tax deferred retirement savings accounts be
foreign property. The FPR is supposed to increase the value of
the dollar and reduce its volatility and decrease the cost of
capital and promote investment in Canada as well as decrease the
extent of inequality inherent in these plans. On the basis of
evidence from the easing of this regulation from 20% to 30% over
the period 2001-2002 we find that it accomplishes none of these
objectives. There was no measurable impact on the exchange rate
predicted from the Bank of Canada's forecasting equation; the
capital outflow from the change amounted to no more than 2 days
trade in the forex market over the period 2000/01; Canada's
equity markets did significantly better internationally while the
FPR was eased than in the prior two-year period. Finally, closer
inspection reveals that the rule exacerbates income inequality by
imposing the largest costs on lower middle-income groups. We
estimate that the increase in the FPR from 20% to 30% increased
Canadians expected income by between 500 million and one billion
dollars annually by permitting greater portfolio diversification.
The complete removal of the FPR would increase income by an
estimated additional 1.5 billion to 3 billion dollars annually.
Keywords: capital controls; pension regulation; private pension
plans
JEL: F31 G23 G28 L51
Date: 2004
URL: http://d.repec.org/n?u=RePEc:uwo:epuwoc:20049&r=all
348. Price Index Convergence Among Provinces and Cities of
Canada: 1978 - 2001"
Ajit Dayanandan (Department of Economics, University of
Northern B.C.)
Mukesh Ralhan (Department of Economics, University of
Victoria)
We study the convergence of price indices for Canadian provinces
and cities for the period 1978-2001 for (a) ten provinces and
nine commodity/price groups; and (b) fifteen cities a cross
Canada and four commodity/price groups using panel unit root
tests. The empirical results reject the unit root hypothesis for
price data across provinces and cities. The estimated rate of
convergence in Canada is comparatively faster than the rates for
similar studies reported for U.S. c ities. The empirical results
also reveal a relatively faster rate of convergence during the
post-inflation targeting period (1991-2001), than earlier.
Keywords: Intra-national PPP, Panel unit root, Canada, CPI, Half-
life
JEL: E31 F41
Date: 2005-05-05
URL: http://d.repec.org/n?u=RePEc:vic:vicewp:0504&r=all
349. An Application of Clustering Analysis to International
Private Indebtedness
Monteiro Andre (Gavea Investimentos)
Carneiro Dionisio (PUC- RIO)
Pedreira Carlos (PUC-RIO)
This paper presents a procedure for clustering analysis that
combines Kohone’s Self organizing Feature Map (SOFM) and
statistical schemes. The idea is to cluster the data in two
stages: run SOFM and then minimize the segmentation dispersion.
The advantages of proposed procedure will be illustrated through
a synthetic experiment and a real macroeconomic problem. The
procedure is then used to explore the relationship between
private indebtedness and some macroeconomic variables commonly
used to measure macroeconomic performance. The experiences of
thirty-nine countries in the early nineties are analyzed. The
procedure outperformed others clustering techniques in the job of
identifying consistent groups of countries from the economic and
statistical viewpoints. It found out similarities in different
countries concerning their respective levels of private
indebtedness when added to well accepted parameters to measure
macroeconomic performance.
Keywords: Vector quantization, Clustering, Self-Organizing
Feature Map,Macroeconomic Performance, Private
Indebtedness.
JEL: C8
Date: 2005-05-04
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpco:0505001&r=all
350. Child Poverty in Vietnam: Using Adult Equivalence Scales to
Estimate Income-Poverty for Different Age Groups
Howard White (Institute of Development Studies)
Estimates of child poverty are based on the percentage of
children living in poor households, which ignores the issue of
intrahousehold allocation. It is commonly argued that the fact
that data are collected at the household level means it is not
possible to report figures relating to the number of children
living in poverty. Yet analysts using income and expenditure data
routinely make adjustments to these data which implicitly tell us
exactly how much of household expenditure is going on each child.
These adjustments are the use of adult equivalence scales. These
scales give child consumption as a proportion of that of an adult
male, and hence can be used to calculate child consumption shares.
These scales may be estimated econometrically, and are hence
based on intra-household allocation patterns for the households
under study. Moreover, the scales can be estimated separately for
different sub-samples of the population, allowing estimates of
child poverty rates for different groups; for example how child
poverty differs between boys and girls or for different ethnic
groups. This paper presents such estimates in the case of Vietnam.
Keywords: Children, poverty measurement, Vietnam, household
survey data
JEL: O P
Date: 2005-04-29
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0504016&r=all
351. Comparative Perspectives on Child poverty: a review of
poverty measures
Howard White (Institute of Development Studies)
Andrew Masters (Institute of Development Studies)
Jennifer Leavy (Institute of Development Studies)
Child poverty matters directly as children constitute a large
share of the population and indirectly for future individual and
national well- being. Developed country measures of child poverty
are dominated by income-poverty, although health and education
are often included. But these are not necessarily the most direct
measures of the things that matter to children. Moreover, a
broader range of factors than material well-being matter for
child development; family and community play an important role.
The conclusion is that social and psychological variables are an
important component of child welfare. Can such a conclusion be
extended to developing countries? It might be thought not, since
the dictates of a focus on absolute poverty imply concern with
fundamentals such as malnutrition, illiteracy and premature death
and the things which cause these outcomes. But such a view is
short-sighted. Child development concerns are at least as
important in developing countries as developed ones (if less well
understood). Hence approaches to child welfare in developing
countries (both measurement and policy) should also adopt a broad-
based approach which embraces diverse aspects of the quality of a
child’s life, including child rights.
Keywords: Children, poverty measurement, child poverty
JEL: O P
Date: 2005-04-29
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0504017&r=all
352. Wealth Heterogeneity and Escape from the Poverty-
Environment Trap
Masako Ikefuji (Osaka University)
Ryo Horii (Osaka University)
A mutual link between poverty and environmental degradation is
examined in an overlapping generations model with environmental
externality, human capital, and credit constraints. Environmental
quality affects labor productivity and thus wealth dynamics,
whereas wealth distribution determines the degree to which agents
rely upon natural resources and therefore the evolution of
environmental quality. This interaction creates a `poverty-
environment trap,' where a deteriorated environment lowers income,
which in turn accelerates environmental degradation. We show
that greater wealth heterogeneity is the key to escaping the
poverty-environment trap, although it has negative effects both
on the environment and output when not in the trap.
Keywords: Poverty trap, Environmental degradation, Wealth
distribution, Human capital.
JEL: O11 O13 O15
Date: 2005-05-02
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0505001&r=all
353. Long-term and Short-term dynamics of the Economic System
according to Method of System Potential.
Grigorii Pushnoi (International Bogdanov Institute)
The new method of system dynamics, Method of System Potential (
MSP), is applied for examination of long-term and short-term
dynamics of Economic System. According to MSP two ways of long-
term development of a system exist: (1) cyclical and (2)
noncyclical dynamics of efficiency index of a system is possible.
The cyclical type of development is based on periodical renewal
of a system while the noncyclical way means that the system
stagnate. Innovative processes are intensively stimulated in
first-type systems (with cyclical dynamics) while the second-type
systems needs the special pressing instance for promotion of
innovations. The systems with cyclical dynamics tend to fix and
sustain the separate existence of its constituents since the
collapse into united wholeness leads to fall of 'potential' of a
system (part ownership system). The constituents of systems with
noncyclical dynamics tend to amalgamate into united wholeness
since it leads to the increment of 'potential' of system.
Hypothesis that these two qualitatively different ways of
development correspond to West and East ways of evolution is
discussed. MSP-cyclical dynamics of economic system gives some
quantitative version of N.Kaldor' (1940) model. Interrelation
between MSP business cycle model and N.Kaldor' model is discussed.
Keywords: Kaldor' model; cusp catastrophe; East and West; long-
term dynamics; deep structure; economic system;
business cycle; stagnation; investment and saving
functions.
JEL: O
Date: 2005-05-02
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0505002&r=all
354. Combining the Quantitative and Qualitative Approaches to
Poverty Measurement and Analysis
Howard White (Institute of Development Studies)
This paper highlights the key characteristics of the
quantitative and qualitative approaches to poverty measurement
and analysis, examines the strengths and weaknesses of each
approach, and analyzes the potential for combining the two
approaches in analytical work on poverty. The main conclusion of
this paper is that sole reliance on either only the quantitative
approach or only the qualitative approach in measuring and
analyzing poverty is often likely to be less desirable than
combining the two approaches. This is because there are limits to
a purely quantitative approach as well as a purely qualitative
approach to poverty measurement and analysis. Each approach has
an appropriate time and place, but in most cases both approaches
will generally be required to address different aspects of a
problem and to answer questions which the other approach cannot
answer as well or cannot answer at all. The need to combine the
two approaches in analytical work on poverty cannot be
overemphasized. There are three key ways to combine the
quantitative and qualitative approaches: (i) integrating
methodologies; (ii) confirming, refuting, enriching, and
explaining the findings of one approach with those of the other;
and (iii) merging the findings of the two approaches into one set
of policy recommendations. Some ways in which the integration of
methodologies can be achieved are: using quantitative survey data
to determine the individuals/communities to be studied through
the qualitative approach; using the quantitative survey to design
the interview guide of the qualitative survey; using qualitative
work to determine stratification of the quantitative sample;
using qualitative work to determine the design of the
quantitative survey questionnaire; using qualitative work to
pretest the quantitative survey questionnaire; and/or using
qualitative analyses to refine the poverty index. 'Confirming' or
'refuting' are achieved by verifying quantitative results through
the qualitative approach. 'Enriching' is achieved by using
qualitative work to identify issues or obtain information on
variables not obtained by quantitative surveys. 'Examining'
refers to generating hypothesis from qualitative work for testing
through the quantitative approach. 'Explaining' involves using
qualitative work to understand unanticipated results from
quantitative data. In principle, each of these mechanisms may
operate in either direction -- from qualitative to quantitative
approaches or vice versa. 'Merging' involves analyzing the
information provided both by the quantitative approach as well as
the qualitative approach to derive one set of policy
recommendations. The quantitative and qualitative approaches are
being increasingly combined in analytical work on poverty, but
there remains scope for further strengthening the links between
them.
Keywords: Poverty, qualitative approaches, mixed methods, PRA
JEL: O P
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0505003&r=all
355. INFRASTRUCTURAL v. SUPERSTRUCTURAL EFFECTS OF INSTITUTIONS
ON INCOME DETERMINATION ACROSS U.S. NATIVE AMERICAN ECONOMIES
Voxi Heinrich S Amavilah (REEPS & Glendale College)
Institutions either promote or constrain economic performance,
but which part of institutions does so, and why do economies
sharing similar institutions sometimes perform differently? This
paper applies a novel model that is capable of separating
infrastructural and superstructural effects of institutions on
aggregate and average income using a cross- section of 84 U.S.
Native American economies (USNAEs). It finds that aggregate and
average incomes for these economies depend mainly on the
accumulation of physical resources. However, resources and
resource productivity are necessary but insufficient determinants
of income for institutional reasons. Infrastructures that aid
human capital formation are inadequate so that even when the
local superstructure is generally accepting of external
technology, the impact of human capital on income (performance)
remains modest. It appears that infrastructural and
superstructural aspects of institutions are competitive rather
than complementary, thereby weakening the Nelson-Phelps channel
for transmitting external technology into USNAEs.
Keywords: infrastructural and superstructural constraints,
institutions, human capital, U.S. Native American
economies
JEL: O15 O57 R30 D24 C31 P47 O51
Date: 2005-05-04
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0505004&r=all
356. An interdisciplinary study of information systems:
Christopher Alexander and IS failure.
Chris Kimble (University of York)
William Selby (British Telecom)
This paper describes work carried out at the University of York;
its contents do not represent the views or opinions of BT. It
provides an example of how insights into the field of IS can be
gained by looking at it from the perspective of other academic
disciplines. Based on the idea that physical and virtual office
spaces exist to serve parallel organisational requirements, it is
argued that designers of information systems (IS) should be able
to learn from the experience of architects in order to improve
their methods and redefine their objectives. Firstly, the work of
Christopher Alexander is reviewed to show how his work on
architectural patterns has been of value to the designers object-
oriented systems. Secondly, similarities in the literature
between notions of failure in architecture and IS design are
identified. These are then examined through interviews with
practitioners to establish the relevance of the approach. Finally,
the area that Alexander described as ‘the quality without a
name’ is highlighted as a topic for further research.
Keywords: Information Systems, Patterns, Virtual Office,
Christopher Alexander
JEL: O3 O32
Date: 2005-05-04
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0505006&r=all
357. Intrinsic Motivation in Open Source Software Development
Jurgen Bitzer (Free University Berlin Department of
Economics & Institute for East European Studies)
Wolfram Schrettl (Free University Berlin Department of
Economics & Institute for East European Studies)
Philipp J.H. Schroder (Aarhus School of Business)
This papers sheds light on the puzzling evidence that even
though open source software (OSS) is a public good, it is
developed for free by highly qualified, young and motivated
individuals, and evolves at a rapid pace. We show that once OSS
development is understood as the private provision of a public
good, these features emerge quite naturally. We adapt a dynamic
private-provision-of-public-goods model to reflect key aspects of
the OSS phenomenon. In particular, instead of relying on
extrinsic motives (e.g. signaling) the present model is driven by
intrinsic motives of OSS programmers, such as user- programmers,
play value or 'homo ludens' payoff, and gift culture benefits.
Such intrinsic motives feature extensively in the wider OSS
literature and contribute new insights to the economic analysis.
Keywords: open source software, public goods, homo ludens, war
of attrition
JEL: L86 H41 L31
Date: 2005-05-04
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0505007&r=all
358. CRISES & CRASHES: ARGENTINA 1885 – 2003
Osvaldo Meloni (Universidad Nacional de Tucuman, Argentina)
Ana Maria Cerro (Universidad Nacional de Tucuman,
Argentina)
This paper is aimed at studying the determinants of currency
crises suffered by Argentina from 1885 to 2003, on one hand, and
at characterizing each particular currency crisis, on the other
hand. Firstly, we identify crises episodes throughout the
Argentine history. We apply the Eichengreen, Rose and Wyplosz (
1994) methodology to sort crises from non-crises periods, and we
distinguish among deep crises (crashes), mild crises and minor
turbulences. Secondly, we look for regularities and common
factors throughout history. We report the two- sample Kolmogorv-
Smirnov test of equality of distributions and the Kruskal-Wallis
test of equality of population. We complemented it by estimating
a logit model including a set of variables chosen from the
prescriptions of the existing currency crises theories. Thirdly,
following Kaminsky (2003) we perform regression tree analysis to
classify crises and crashes into different varieties proposed by
the theories at stake. We use fifteen financial and macroeconomic
variables suggested by the empirical literature. It is found that
fiscal imbalances were always present, which is consistent with
the predictions of the first generation speculative attack models.
All three methods used to characterize currency crises in
Argentina show the importance of the fiscal side. Adverse foreign
factors had also a key role in explaining crises. Finally, in
most of the crises, regularities in the behavior of macroeconomic
variables can be detected.
Keywords: currency crises - Argentina - regression tree analysis
JEL: E3 N20
Date: 2005-05-04
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0505001&r=all
359. Does Format of Pricing Contract Matter?
Teck-Hua Ho (Univeristy of California, Berkeley)
Juanjuan Zhang (University of California, Berkeley)
The use of linear wholesale price contract has long been
recognized as a threat to achieving channel effciency. Many
formats of nonlinear pricing contract have been proposed to
achieve vertical channel coordination. Examples include two-part
tariff and quantity discount. A two-part tariff charges the
downstream party a fixed fee for participation and a uniform unit
price. A quantity discount contract does not include a fixed fee
and charges a lower unit price for each additional unit. Extant
economic theories predict these contracts, when chosen optimally,
to be revenue and division equivalent in that they all restore
full channel effciency and give the same surplus to the upstream
party assuming constant relative bargaining power. We conduct a
laboratory experiment to test the empirical equivalence of the
two pricing formats. Surprisingly, both pricing formats fail to
coordinate the channel even in a well-controlled market
environment with subjects motivated by significant monetary
incentives. The observed channl effciencies were significantly
lower than 100%. In fact, they are statistically no better than
that of the linear wholesale price contract. Revenue equivalence
fails because the quantity discount scheme achieves a higher
channel effciency than the two-part tariff. Also, division
equivalence does not hold because the quantity discount scheme
accords a higher surplus to the upstream party than the two-part
tariff. To account for the observed empirical regularities, we
allow the downstream party to have a reference-dependent utility
in which the upfront fixed fee is framed as loss andn the
subsequent contribution margin as gain. The proposed model nests
the standard economic model as a special case with a loss
aversion coeffcient of 1.0. The estimated loss aversion
coeffcient is 1.6, thereby rejecting the standard model. We rule
out other plausible explanations such as parties having fairness
concerns and non-linear risk attitudes.
Keywords: Pricing Format, Two-Part Tariff, Quantity Discount,
Channel Efficiency, Double Marginalization, Reference-
Dependent Utility, Experimental Economics, Behavioral
Economics
JEL: C1 C2 C3 C4 C5 C8
Date: 2005-04-29
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0504008&r=all
360. Does Telecommuting Reduce Vehicle-miles Traveled? An
Aggregate Time Series Analysis for the U. S.
Sangho Choo (University of California, Davis)
Patricia L. Mokhtarian (University of California, Davis)
Ilan Salomon (Hebrew University of Jerusalem)
This study examines the impact of telecommuting on passenger
vehicle- miles traveled (VMT) through a multivariate time series
analysis of aggregate nationwide data spanning 1966-1999 for all
variables except telecommuting, and 1988-1998 for telecommuting.
The analysis was conducted in two stages. In the first stage, VMT
1966-1999) was modeled as a function of conventional variables
representing economic activity, transportation price,
transportation supply and socio-demographics. In the second stage,
the residuals of the first stage (1988-1998) were modeled as a
function of the number of telecommuters. We also assessed the
change in annual VMT per telecommuter as well as VMT per
telecommuting occasion, for 1998. The models suggest that
telecommuting reduces VMT, with 94% confidence. Together with
independent external evidence, the results suggest a reduction in
annual VMT on the order of 0.8% or less. Even with impacts that
small, when informally compared to similar reductions in VMT due
to public transit ridership, telecommuting appears to be far more
cost-effective in terms of public sector expenditures.
Keywords: aggregate analysis, telecommuting, teleworking, time
series analysis, vehicle-miles traveled (VMT)
modeling/forecasting
JEL: C1 C2 C3 C4 C5 C8
Date: 2005-05-05
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0505001&r=all
361. When Curiosity Kills the Profits: an Experimental
Examination
Julian Jamison (University of California, Berkeley & San
Francisco)
Dean S. Karlan (Princeton University)
Economic theory predicts that in a first-price auction with
equal and observable valuations, bidders earn zero profits.
Theory also predicts that if valuations are not common knowledge,
then since it is weakly dominated to bid your valuation, bidders
will bid less and earn positive profits. Hence, rational players
in an auction game should prefer less public information. We are
perhaps more used to seeing these results in the equivalent
Bertrand setting. In our experimental auction, we find that
individuals without information on each other's valuations earn
more profits than those with common knowledge. Then, given a
choice between the two sets of rules, half the individuals still
preferred to have the public information. We discuss possible
explanations, including ambiguity aversion.
Keywords: First-price auctions, experiments, value of
information, common knowledge, ambiguity aversion,
Bertrand, public information
JEL: C91 D44 D80
Date: 2005-05-05
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0505001&r=all
362. What can we see from Investment Simulation based on
Generalized (m,2)-Zipf law?
Hokky Situngkir (Bandung Fe Institute)
Yohanes Surya (Surya Research International)
The paper revisits the investment simulation based on strategies
exhibited by Generalized (m,2)-Zipf law to present an interesting
characterization of the wildness in financial time series. The
investigations of dominant strategies on each specific time
series shows that longer words dominant in larger time scale
exhibit shorter dominant ones in smaller time scale and vice
versa. Moreover, denoting the term wildness based on persistence
over short term trend and memory represented by particular length
of words, we can see how wild historical fluctuations over time
series data coped with the Zipf strategies.
Keywords: Generalized (m,2)-Zipf law, time series, fluctuations,
investment.
JEL: G
Date: 2005-04-29
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504022&r=all
363. Fifty years of Research on Accuracy of Capital Expenditure
Project Estimates: A Review of the Findings and their
Validity.
Stefan Linder (WHU, Vallendar Germany)
Capital budgeting research has traditionally focused on ever
improving the methods used for evaluating projects. Since it
seems futile to use sophisticated evaluation techniques if their
input data – that is, estimates of cash inflows and outflows
– are of inferior quality, it is justifiable to call this focus
into question by exploring forecasting accuracy. In order to do
so, the article analyzes the empirical findings on estimation
error gathered in 35 studies published between 1954 and 2002. As
the review shows, over-optimism seems to be a relevant problem in
capital expenditure project forecasting. This calls the
traditional research focus into question. More research effort
targeted at the misestimation bias in capital budgeting and at
ways to improve forecasting accuracy seems necessary.
Keywords: Capital budgeting, Capital Expenditures, Estimation
Accuracy, Forecasting, Post-Audit.
JEL: G
Date: 2005-04-30
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504023&r=all
364. An empirical analysis of structural models of corporate
debt pricing
Joao C. A. Teixeira (Lancaster University Management School)
This paper tests empirically the performance of three structural
models of corporate bond pricing, namely Merton (1974), Leland (
1994) and Fan and Sundaresan (2000). While the first two models
overestimate bond prices, the Fan and Sundaresan model reveals an
extremely good performance. When considering the prediction of
credit spreads, the three models under-estimate market spreads
but, again, Fan and Sundaresan has a better performance. We find
rating, maturity and asset volatility effects in the prediction
power, as the models under-estimate less the spreads of riskier
firms and of bonds with better rating quality and longer maturity.
Moreover, our results reveal the existence of a new industry
effect. Spread errors are systematically related to some bond-
and firm-specific variables, as well as term structure variables.
Keywords: structural models, corporate debt valuation, empirical
credit spreads
JEL: G12 G13
Date: 2005-05-01
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0505001&r=all
365. Credit Rationing in a Basic Agent-Based Model
Guido Fioretti (University of Bologna)
A simple agent-based model of business units lending money to
one another is sufficient to understand on what conditions
avalanches of bankruptcies may arise. The model highlights the
consequences of specialisation into money lending as well as the
impact of preferential lending relations.
Keywords: Financial Fragility, Avalanches of Bankruptcies, Agent-
Based Models
JEL: G
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0505002&r=all
366. Long Memory Options: LM Evidence and Simulations
Sutthisit Jamdee (Kent State University)
Cornelis A. Los (Kent State University)
This paper demonstrates the impact of the observed financial
market persistence or long term memory on European option
valuation by simple simulation. Many empirical researchers have
observed the non-Fickian degrees of persistence or long memory in
the financial markets different from the Fickian neutral
independence (i.i.d.) of the returns innovations assumption of
Black-Scholes' geometric Brownian motion assumption. Moreover,
Elliott and van der Hoek (2003) provide a theoretical framework
for incorporating these findings into the Black- Scholes risk-
neutral valuation framework. This paper provides the first
graphical demonstration why and how such long term memory
phenomena change European option values and provides thereby a
basis for informed long term memory arbitrage. By using a simple
mono-fractal Fractional Brownian motion, it is easy to
incorporate the various degrees of persistence into the Black-
Scholes pricing formula. Long memory options are of considerable
importance in corporate remuneration packages, since stock
options are written on a company's own shares for long expiration
periods. It makes a significant difference in the valuation when
an option is 'blue' or when it is 'red.' For a proper valuation
of such stock options, the degrees of persistence of the
companies' share markets must be precisely measured and properly
incorporated in the warrant valuation, otherwise substantial
pricing errors may result.
Keywords: Options, Long Memory, Persistence, Hurst Exponent,
Identification, Simulation, Executive Remuneration
JEL: G14 G15 G33 C14
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0505003&r=all
367. An Exploration of Asset Returns in a Production Economy
with Relative Habits
Santiago Budria (University of Madeira & CEEAplA)
This paper explores asset returns in a production economy with
habit forming households. I show that a model with capital
adjustment costs and relative habits is consistent with salient
financial facts, such as the equity premium, the market price of
risk, and the riskfree interest rate. These predictions are not
at odds with good business cycle predictions. In the model
economy investment is strongly procyclical and more volatile than
output, which in turn is more volatile than consumption. Moreover,
consumption growth is positively autocorrelated and negatively (
positively) correlated with future (past) stock returns.
Keywords: Equity premium, Business cycles, Habit persistence.
JEL: G12 E22
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0505004&r=all
368. Option Strategies with linear programming
Christos Papahristodoulou (Malardalen University, School of
Business)
In practice, all option strategies are decided in advance, given
the investor’s belief of the stock price. In this paper,
instead of deciding in advance the most appropriate hedging
option strategy, an LP problem is formulated, by considering all
significant Greek parameters of the Black-Scholes formula, such
as delta, gamma, theta, rho and kappa. The optimal strategy to
select will be simply decided by the solution of that model. The
LP model is applied to Ericsson’s call and puts options.
Keywords: Finance, option portfolios, Linear programming
JEL: G
Date: 2005-05-04
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0505005&r=all
369. Optimal portfolios using linear programming models
Christos Papahristodoulou (Malardalen University, School of
Business)
Erik Dotzauer (Malardalen University, Department of
Mathematics)
The classical Quadratic Programming (QP) formulation of the well-
known portfolio selection problem has traditionally been regarded
as cumbersome and time consuming. This paper formulates two
additional models, (i) maximin, and (ii) minimization of mean
absolute deviation. Data from 67 securities over 48 months are
used to examine to what extent all three formulations provide
similar portfolios. As expected, the maximin formulation yields
the highest return and risk, while the QP formulation provides
the lowest risk and return, which also creates the efficient
frontier. The minimization of mean absolute deviation is close to
the QP formulation. When the expected returns are confronted with
the true ones at the end of a six months period, the maximin
portfolios seem to be the most robust of all.
Keywords: Finance, linear programming, investment analysis, risk
analysis
JEL: G
Date: 2005-05-04
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0505006&r=all
370. On Log-Periodic Crashes
Raul Matsushita (University of Brasilia)
Iram Gleria (Federal University of Alagoas)
Annibal Figueiredo (University of Brasilia)
Sergio Da Silva (Federal University of Santa Catarina)
JEL: G
Date: 2005-05-04
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0505007&r=all
371. Comparative Statics with Never Increasing Correspondences
Sunanda Roy (Drake University)
Tarun Sabarwal (University of Texas at Austin)
This paper studies models where the correspondences (or
functions) under consideration are never increasing (or weakly
decreasing) in endogenous variables, and weakly increasing in
exogenous parameters. Such models include games where endogenous
variables are strategic substitutes for each other, and includes
cases where additionally, some (but not all) endogenous variables
are strategic complements. It is shown that the equilibrium set
in such models is a non-empty, complete lattice, if, and only if,
there is a unique equilibrium. Indeed, for a given parameter
value, a pair of distinct equilibria are never comparable.
Moreover, generalizing an existing result, it is shown that when
a parameter increases, no new equilibrium is smaller than any old
equilibrium. Furthermore, when functions under consideration are
weakly decreasing in endogenous variables, a sufficient condition
is presented that guarantees existence of increasing equilibria
at a new parameter value.
Keywords: Monotone comparative statics, Non-increasing functions,
Never increasing correspondences, strategic substitutes
JEL: C60 C72 C61 C62
Date: 2005-05-04
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0505001&r=all
372. Formation of Collective Decision-Making Units: Stability
and a Solution
Fan-chin Kung (Academia Sinica)
We study how individuals divide themselves into coalitions and
choose a public alternative for each coalition. When preferences
have consecutive support and coalition feasible sets are
positively population- responsive, the proposed consecutive
benevolence solution generates allocations belonging to the
coalition structure core and that are also Tiebout equilibria.
However, when each coalition follows a single-valued collective
decision rule, the coalition structure core may be empty. Our
results show that if individual preferences are, in a sense,
similar and if members can be as well off when a coalition
enlarges, then a stable formation of collective decision-making
units can be guaranteed. A predetermined decision rule makes
coalitions less stable.
JEL: C62 C71 D71
Date: 2005-05-05
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0505002&r=all
373. Human Capital and Income across U.S. Native American
Reservations and Trust Lands
Voxi Heinrich S Amavilah (REEPS & Glendale College)
The current research emphasis on institutions as key
determinants of economic performance has uncovered important
questions for further research. For example, if institutions are
central to economic performance, then what explains observed
differences in performance across parts of one economy sharing
similar institutions? This paper suggests that two broad aspects
of institutions are involved - infrastructure and superstructure.
It develops and then applies a simple model to 50 U.S.
reservation economies to assess how the two aspects affect income.
The results show that resources and resource productivity are
necessary but insufficient determinants of income in reservation
economies. Human capital is a constraint for two institutional
reasons. First, infrastructures for fostering human capital are
either inadequate or inappropriate. Second, the local
superstructure seems resistant to existing infrastructures that
were supposed to enhance human capital formation. Since
infrastructural and superstructural aspects of institutions are
competitive rather than complementary, the Nelson- Phelps channel
for transmitting external technology into USRATLs appears clogged
up.
Keywords: Income constraints, infrastructure, superstructure,
institutions, human capital, Native American
reservation economies
JEL: O51 O15 R30 F43 D24 C31
Date: 2005-05-04
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpge:0505001&r=all
374. Third-Currency Effects in a Tri-Polar Model of Foreign
Exchange
Martin Melecky (School of Economics, University of New South
Wales)
This paper investigates possible contribution of third-currency
effects to exchange rate movements. It reopens the subject of
currency substitution and examines whether the third-currency
effects change when the third-currency is a complement as opposed
to when it is a substitute for currencies appearing in a
bilateral exchange rate quote. The analysis and tests are carried
out within a simple macro-econometric model with one common
permanent component driving the system of bilateral exchange
rates for the US dollar, the Japanese yen and the euro.
Keywords: Exchange Rate Modeling, Currency Substitution, Third-
currency Effects
JEL: F31 F36 F42
Date: 2005-04-29
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpif:0504011&r=all
375. Are Pound and Euro the Same Currency?
Raul Matsushita (University of Brasilia)
Andre Santos (Federal University of Santa Catarina)
Iram Gleria (Federal University of Alagoas)
Annibal Figueiredo (University of Brasilia)
Sergio Da Silva (Federal University of Santa Catarina)
JEL: G
Date: 2005-05-04
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpif:0505002&r=all
376. The Revived Bretton Woods System seen from the Benches -
Lessons for Europe from a Three-Asset-Portfolio Model
Sebastian Dullien (Financial Times Deutschland)
The paper develops a three-asset-portfolio model to analyse
consequences of foreign exchange market operations by Asian
central banks on the exchange rates between euro, dollar and yen.
Both an analytical as well as a graphical solution is presented.
It is found that -- contrary to public belief -- the purchase of
dollar assets by Asian central banks strengthens the dollar
against both euro and yen. A diversification of Asian central
bank reserves from dollar into euro would weaken the dollar
against both other currencies. Thus, such a diversification would
be incompatible with Asian currency pegs. However, it is shown
that Asian central banks could alter their relative portfolio
composition while keeping the peg intact if they would shift from
intervening against the dollar into intervening against the euro.
Keywords: foreign exchange interventions, exchange rates,
revived Bretton-Woods-System
JEL: F31
Date: 2005-05-05
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpif:0505003&r=all
377. International Financial Adjustment
Pierre-Olivier Gourinchas (Economics Department, University
of California, Berkeley)
Helene Rey (Department of Economics & Woodrow Wilson
School,, Princeton University)
The paper proposes a unified framework to study the dynamics of
net foreign assets and exchange rate movements. We show that
deteriorations in a country's net exports or net foreign asset
position have to be matched either by future net export growth (
trade adjustment channel) or by future increases in the returns
of the net foreign asset portfolio (hitherto unexplored financial
adjustment channel). Using a newly constructed data set on US
gross foreign positions, we find that stabilizing valuation
effects contribute as much as 31% of the external adjustment. Our
theory also has asset pricing implications. Deviations from trend
of the ratio of net exports to net foreign assets predict net
foreign asset portfolio returns one quarter to two years ahead
and net exports at longer horizons. The exchange rate affects the
trade balance and the valuation of net foreign assets. It is
forecastable in and out of sample at one quarter and beyond. A
one standard deviation decrease of the ratio of net exports to
net foreign assets predicts an annualized 4% depreciation of the
exchange rate over the next quarter.
Keywords: Meese-Rogoff, external adjustment, net foreign assets,
valuation effects, exchange rates
JEL: F31 F32
Date: 2005-05-05
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpif:0505004&r=all
378. Economists Examine File-Sharing and Music Sales
Stan J. Liebowitz (University of Texas at Dallas)
The decline in sales of music CDs and the recording industry’s
attempts to reverse the decline have been much in the news over
the last few years. Since this decline began at the same time
that file-sharing became popular, and since file-sharing would be
expected to lead to a decline in sales, file-sharing is the
leading candidate among possible causes of this decline. At the
center of the file-sharing debate is the empirical issue of
whether or not file-sharing decreases sales. In this paper I
examine the different empirical methodologies that have been
chosen by economists studying this issue. The studies use
different methodologies but nevertheless find, almost unanimously,
that file- sharing has led to a serious decline in record sales,
except for one highly publicized study that reaches very
different, and in my opinion, highly implausible conclusions.
Keywords: mp3, filesharing, music, downloading, napster
JEL: L
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0505001&r=all
379. Un Enfoque de Teoria de Juegos del Sistema Privado de
Pensiones Peruano
Nikita Cespedes (Central Bank of Peru)
El docuemnto se dedica al estudio del comportamiento de las AFP
del Sistema Privado de Pensiones peruano. El trabajo utiliza el
marco de analisis de la teoria de juegos repetidos y aspectos
complementarios de la teoria de la colusion implicita para
aproximar el comportamiento de los agentes involucrados en este
mercado. Se considera que el producto transado es el servicio de
administracion y custodia de los fondos de pensiones, el
producto tiene una demanda unitaria y se muestra que es
homogeneo entre empresas que ofrecen el servicio -las
caracteristicas del sistema legal y regulatorio habrian
influido sobre este resultado-. El resultado del juego que se
describe en el trabajo es no competitivo pero racional y optimo
desde el punto de vista de las administradoras de pensiones, los
precios son superiores a similares sistemas de pensiones
existentes en otros paises y estos han seguido, casi
simultaneamente, una tendencia creciente y marcada basicamente
por cambios regulatorios (normas legales) y no por mecanismos
competitivos. Se sugieren tambien algunas medidas tendientes a
relajar la estructura no competitiva de este mercado: cerrar el
Sistema Nacional de Pensiones(SPP) a nuevos afiliados, fijar la
pension minima en el SPP, agilizar los traspasas de afiliados
entre administradoras, introducir los fondos de diferente riesgo,
etc.
Keywords: Organizacion Industrial, Teoria de Juegos, Colusion
Implicita
JEL: J4 L16 L51
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0505002&r=all
380. Fundamental dimensions of U.S. trade policy
alok k. bohara (u. new mexico)
alejandro islas camargo (itam, mexico)
theresa grijalva (weber state u.)
kishore gawande (texas a&m)
How many dimensions adequately characterize voting on U.S. trade
policy? How are these dimensions to be interpreted? This paper
seeks those answers in the context of voting on the landmark 1988
Omnibus Trade and Competitiveness Act. The paper takes steps
beyond the existing literature. First, using a factor analytic
approach, the dimension issue is examined to determine whether
subsets of roll call votes on trade policy are correlated. A
factor-analytic result allows the use of a limited number of
votes for this purpose. Second, a structural model with latent
variables is used to find what economic and political factors
comprise these dimensions. The study yields two main findings.
More than one dimension determines voting in the Senate, with the
main dimension driven by economic interest, not ideology.
Although two dimensions are required to fully account for House
voting, one dimension dominates. That dimension is driven
primarily by party. Based on reported evidence, and a growing
consensus in the congressional studies literature, this finding
is attributed to interest-based leadership that evolves in order
to solve collective action problems faced by individual
legislators.
Keywords: Dimensionality; Roll call voting; Omnibus Trade Act;
Interest; Ideology
JEL: F1 F2
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpit:0505001&r=all
381. Trade Barriers As Bargaining Outcomes
kishore gawande (texas a&m)
hui li (eastern illinois u.)
Whether bilateral trade barrier data conform with the Grossman-
Helpman (1995) model’s predictions about “trade talks” is
examined in this article. A simple form of the prediction from
the model is tested. Bilateral US-Japan and US-EU data from the
1990s are employed. The results are the first in the literature.
Keywords: Trade talks equilibrium; Nontariff barriers;
JEL: F13 Q18 D72
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpit:0505002&r=all
382. The impact of FDI on industry performance
Jurgen Bitzer (Free University Berlin Department of
Economics & Institute for East European Studies)
Holger Gorg (Centre for Research on Globalisation &
Economic Policy, School of Economics, University of
Nottingham)
This paper investigates the productivity effects of inward and
outward foreign direct investment using industry and country
level data for 17 OECD countries. The paper relates to a large
recent literature on productivity spillovers from inward FDI,
however, we also consider the relationship between productivity
and outward FDI in the same estimation. Our results show that
there are, on average, productivity benefits from inward FDI,
although we can identify a number of countries which, on
aggregate, do not appear to benefit in terms of productivity. On
the other hand, a country's stock of outward FDI is, on average,
negatively related to productivity. However, again there is
substantial heterogeneity in the effect across OECD countries.
Keywords: Foreign direct investment, inward FDI, outward FDI,
productivity, spillovers
JEL: F23
Date: 2005-05-04
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpit:0505003&r=all
383. Exchange Rate Determination from Monetary Fundamentals: an
Aggregation Theoretic Approach
William Barnett (University of Kansas)
Chang Ho Kwag (POSCO Research Institute)
We incorporate aggregation and index number theory into monetary
models of exchange rate determination in a manner that is
internally consistent with money market equilibrium. Divisia
monetary aggregates and user-cost concepts are used for money
supply and opportunity-cost variables in the monetary models. We
estimate a flexible price monetary model, a sticky price monetary
model, and the Hooper and Morton (1982) model for the US
dollar/UK pound exchange rate. We compare forecast results using
mean square error, direction of change, and Diebold-Mariano
statistics. We find that models with Divisia indexes are better
than the random walk assumption in explaining the exchange rate
fluctuations. Our results are consistent with the relevant theory
and the 'Barnett critique.'
Keywords: Exchange rate, forecasts, vector error correction,
aggregation theory, index number theory, Divisia index
number
JEL: E
Date: 2005-05-05
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpit:0505004&r=all
384. Purchasing power parity: an empirical study of three EMU
countries
Antonio Portugal Duarte (Faculty of Economics - University
of Coimbra & GEMF)
We apply Purchasing Power Parity (PPP) theory to the analysis of
long- run equilibrium in the foreign exchange market. We study
the case of Portugal vis-a-vis Germany and Spain, and the case
of Spain vis-a-vis Germany, in the period 1960-1990. The
empirical analysis was based on unit-root testing (using ADF
tests) and Johansen’s methodology for the study of co-
integration. We worked with linear long-run relationships based
exclusively on PPP, as well as with long-run relations that also
allowed for the effect of interest rates. In a situation in which
PPP does not hold, one could think that on account of some
“natural reason” agents believe that, as time goes by, the
dominant currency, which is also the reference currency of the
EMS (the German Mark), will appreciate. We concluded, on the
contrary, that the weaker currencies were the ones that with the
passing of time appreciated in real terms. The fact that PPP
theory was applied to two southern European countries deserves a
special mention, because it may serve as an example for other
countries that come to be in a position similar to that of
Portugal and Spain before their adhered to the European Union.
Keywords: Purchasing Power Parity, Unit Roots, EMU, Economic
Integration and Co-integration
JEL: F31 F41 C32 G15 C51
Date: 2005-05-05
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpit:0505005&r=all
385. Economic Inequality in Spain: The European Union Household
Panel Dataset
Santiago Budria (University of Madeira & CEEAplA)
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 in Spain.
Keywords: Inequality, Income distribution, Labour earnings
distribution, Capital income distribution
JEL: J
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpla:0505001&r=all
386. Family background and schooling outcomes before and during
the
Mihails Hazans (Baltic International Centre for Economic
Policy Studies BICEPS)
Olga Rastrigina (CEU)
Ija Trapeznikova (North- Western University)
Parental education is found to have a strong positive effect on
propensity to enroll in and complete secondary and tertiary
education, both in Soviet times and during transition, but
mother’s education effect have been weakening. A human capital
gap between titular ethnicities and Russian speaking minorities
has emerged in all three countries and remains significant after
controlling for parental education. In Estonia and Latvia, ethnic
gap in secondary enrollment reinforces inequality of human
capital distribution between ethnicities. The unexplained ethnic
gap in tertiary attainment has been declining in Lithuania (
despite absence of Russian language higher education) but
widening in Latvia.
Keywords: Parental education; ethnic minorities; transition
JEL: J24 J15 P51
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpla:0505002&r=all
387. Why Love Matters - A Dynamic Model of Marriage and Divorce
Valerio Filoso (University of Naples)
Current literature on marriage breakup assumes that divorce only
occurs because of mismatch in the marriage market. We question
this framework arguing that payoff from marital partnerships is
not entirely fixed by marriage market, but depends on effort put
by spouses into the growth of their relationship. A search model
of marriage and divorce is developed under the assumption that
marriage requires accruing specific marital capital at the
expenses of private consumption, and each period spouses have the
choice of leaving current marriage or investing in it. We obtain
a decision rule linking prospective increase in marital capital,
distribution of types in the population, and temporal discounting.
We find that wealthy agents on average wait longer before
getting married, while positive shocks to income may increase the
likelihood of divorce. Finally, when marital capital is a public
good between spouses, we find noncooperative Nash contributions
increasing in income and decreasing in the probability of divorce.
Keywords: Marriage, Search, Divorce, Impatience, Marriage-
specific Capital, Bargaining between Spouses.
JEL: J12 D13
Date: 2005-05-04
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpla:0505003&r=all
388. An Economic Analysis of Co-Parenting Choices: Single Parent,
Visiting Father, Cohabitation, Marriage
Ronald Mincy (Columbia University)
Shoshana Grossbard (San Diego State University)
Chien-Chung Huang (Rutgers University)
This paper sheds light on the determinants of choice between
four co- parenting arrangements: father absence, father’s non-
residential visitations, cohabitation, and marriage. In our
theoretical framework, we use an adaptation of Becker’s Demand
& Supply (D&S) model of marriage and a hierarchy of co-parenting
arrangements--ranked in terms of degree of fathers’ involvement
in the lives of mother or child--as an observable price measure
for women’s work as mothers. We predict effects on co-parenting
choice of factors such as welfare benefits, sex ratios, income,
black versus white, or education, and black/white differences in
these effects. We test our predictions with data from the Fragile
Families and Child-Wellbeing Survey. Our findings include (1) the
larger the grant amount in the state where the mother resides,
the more it is likely that fathers will have some contact with
their children, and the more it is likely that fathers will
cohabit with the mothers; (2) fathers who have more children with
other women are less likely to have contact with a given
woman’s children, but this discouraging effect of men’s other
children is smaller for blacks than for whites; and (3)
employment in the last year reduces the likelihood that a white
mother is married to her child’s father, while increasing that
likelihood among black mothers.
JEL: J
Date: 2005-05-05
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpla:0505004&r=all
389. Agency Problems in Law Enforcement: Theory and Application
to the U.S. Coast Guard
kishore gawande (texas A&M)
alok k. bohara (u. new mexico)
We study two issues in the enforcement of public law. The first
is whether the system of inspections and penalties set by the
regulator is effective. The second is whether a better system of
inspections and penalties can be designed, given the
institutional constraints under which the regulator must function.
We study these issues in the context of oil spill prevention
activities of the U.S. Coast Guard (USCG), the agency entrusted
with the enforcement of maritime pollution laws. A theoretically
optimal contract that mixes penalties based on the amount of
pollution ex post with penalties based on the extent of non-
compliance ex ante is derived. The effectiveness of USCG
inspections and penalties in reducing oil spills is then
econometrically studied using micro-level data on a panel of US
flag tank vessels. Whether the optimal penalty can potentially
improve the effectiveness of compliance inspections in reducing
oil spills is examined in the light of the empirical results and
recent developments in the economics and public management
literature on effective incentive contracting. Among our findings
is the potential for combining unilateral incentive-based methods
with cooperative methods based on reciprocity in order to solve
the complex problem of law enforcement.
Keywords: Violations; Optimal Penalty; Micro-Panel Data; Oil
Spills; Public Policy.
JEL: K
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwple:0505001&r=all
390. Economists’ Topsy-Turvy View of Piracy
Stan Liebowitz (University of Texas at Dallas)
Although it was once considered inevitable that unauthorized
copying would harm copyright owners, it is now understood that
this is not necessarily the case. The concept of indirect
appropriability played an important role in shaping this newer
understanding. In recent years, however, many economists seem to
have taken the message from this new understanding too far,
seeing gains to the copyright owners from unauthorized copying in
every nook and cranny of the economy, when in reality the
instances of such gains are likely to be rather limited. The
current literature on this subject, which consists mainly of
theoretical models, seems to be badly out of kilter. In this
paper I attempt to explain some of the problems and try to
provide the outlines of what I believe to be a more balanced and
nuanced view of copying. It emphasizes the importance of
examining various institutional and behavioral details of
individual markets, which are often overlooked by researchers.
Keywords: copyright, indirect appropriability, copying, mp3,
downloads
JEL: K
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwple:0505002&r=all
391. SEVENTEEN FAMOUS ECONOMISTS WEIGH IN ON COPYRIGHT: THE ROLE
OF THEORY, EMPIRICS, AND NETWORK EFFECTS
Stan J. Liebowitz (University of Texas at Dallas)
Stephen E. Margolis (North Carolina State University)
In 2002, seventeen economists including five Nobel Laureates
presented an amicus curiae brief discussing the economics of
copyright extension in support of the petitioners in Eldred v.
Ashcroft. The economists’ amicus brief was unusual in several
respects, not least in that it brought together a group of
economists almost as notable for its diversity of opinion (
spanning the ideological spectrum from Kenneth Arrow to Milton
Friedman) as for its academic distinction. When such a
distinguished and broad panel of economists readers would have
every reason to believe that the arguments set forth in this
document are sound down to the smallest details. Yet this is not
the case. Scholars in the fields of law and economics will
continue to address the economics of copyright duration in the
foreseeable future, so it is important that they understand the
imperfections in the economists’ brief. This Article provides a
counterweight to the amicus brief, identifying some points the
economists ignored, clarifying some discussions they did not
quite get right, and providing data that runs counter to some
assumptions they made.
Keywords: Eldred, coypright, sonny bono, lessig
JEL: K
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwple:0505003&r=all
392. The Effects of Heterogeneity in Price Setting on Price and
Inflation Inertia
Carlos Viana de Carvalho (Princeton University)
This paper analyzes the implications of heterogeneity in price
setting for both price and inflation inertia. Standard models
based on Taylor- or Calvo-style price setting usually assume ex-
ante identical firms, while Calvo's approach implies only ex-post
heterogeneity. While it is known that these models have different
implications in terms of the dynamic effects of monetary shocks,
the role of heterogeneity has not yet been properly explored. In
a simple framework, this paper provides analytical results which
suggest that ex-ante heterogeneity should have a role in models
which attempt to understand the persistence of real effects of
monetary shocks.
Keywords: heterogeneity, price-setting, inflation persistence
JEL: E
Date: 2005-04-30
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0504038&r=all
393. Debt-Deflation: Concepts, and a Stylised Model
Goetz von Peter (Bank for International Settlements)
This paper proposes a model of how agents adjust their asset
holdings in response to losses in general equilibrium. By
emphasising the relation between deflation and financial distress,
we capture some original features of the early debt-deflation
literature, such as distress selling, instability, and endogenous
monetary contraction. The agents affected by a shock sell off
assets to prevent their debt from crowding out consumption. But
their distress-selling causes a decline in equilibrium prices,
and the resulting losses elicit reactions by all agents. This
activates several channels of debt-deflation. Yet we show that
this process remains stable, even in the presence of large shocks,
high indebtedness, and wide-spread default. What keeps the asset
market stable is the presence of agents without prior debt or
losses, who borrow to exploit the expected asset price recovery.
By contrast, debt-deflation becomes unstable when agents try to
contain their indebtedness, or when a credit crunch interferes
with the accommodation necessary for stability.
Keywords: Debt-Deflation, Leverage, Refinancing, Losses,
Financial Distress, Distress Selling, Asset Prices,
Credit, Inside Money.
JEL: E31 E51 G33 G21 G18
Date: 2005-05-02
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0505001&r=all
394. MODEL OF INFLATION PROCESSES IN THE REPUBLIC OF BELARUS
Valery Chernookiy
This paper discusses the econometric model of inflation
processes in the Republic of Belarus which makes it possible to
explain major factors determining the dynamics of the GDP
deflator, consumer price index and producer price index during
the period 1994 - 2003. For estimation of the model the author
used the statistical tools of nonstationary time series
econometrics: cointegration analysis and error-correction models.
The model has good statistical properties, it demonstrates
stability of the coefficients and enables one to conduct analysis
of the various choices in the field of monetary and foreign
exchange policies, as well as in the area of labour remuneration,
prices and tariffs.
Keywords: inflation, GDP deflator, consumer price index,
producer price index, Belarus, cointegration
JEL: E31 C32 P24
Date: 2005-05-02
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0505002&r=all
395. Argentina and Inflation Targeting. ?Can it be implemented?
Some considerations regarding the Brazilian Experience-
juancarlos soldanodeheza
Countries use different type of “anchors” with who intend to
make the agents expectations to converge to a specified level of
inflation. Those anchors could be either based on the exchange
rate or some kind of monetary policy. Modern trend is to use
Inflation Targeting rather than the traditional monetary
aggregates. Countries that adopt Inflation Targeting could be
classified as EIT (Eclectic Inflation Targeters), FFIT (Full
Fledge Inflation Targeters) and ITL (Inflation Targeting Light).
Argentina, if it walks through an IT regime, would be a very
particular case, since there is no background that a country in
default, with its financial system almost destroyed and a very
low degree of credibility on its institutions, have had the
capability of successfully implemented this kind of policies. A
first issue that should be considered to adopt this monetary
regime is to obtain a level of fiscal equilibrium that will allow
the agents to believe in the long term solvency of the country. A
second issue is reconstruction of credibility of the agents in
the monetary authority, in such a way that its analysis would
tend to a convergence of expectations and minimize doubts on the
reasons the Central Bank should make interventions in the market.
A third issue is the creation of an area of economic studies in
the Central Bank that will allow the monetary authority to
analyze the transmition mechanisms of monetary policy to prices.
A fourth issue is renegotiating the public services contracts in
which the definition of a new model for adjusting tariffs could
be a good idea to avoid linking them to price indexes, but to
link them to the cost structure of the companies, due to their
impact on the structure of the price indexes usually used as
reference for IT. A last issue that cannot be forgiven is that
the argentine economy is, in fact, partially dollarized, because
currency used for major transactions is US dollar, and also
operate, at least with a majority of sectors linked to goods
production, a foreign currency standard (US dollar price
adjustment) in commercial contracts. The first three issues show
us that Argentina seems to be very far of implementing a FFIT
policy and with some difficulties to be considered an ITL. It
seems that it does not seem an advantage to make public yet the
new anchor to avoid consequences of a hypothetically change of
system. The fourth issue introduces the need of a difficult and
complex negotiation on public services prices in terms of its
technical aspects that also has an extreme political
sensitiveness. Finally, the last issue shows that it could be
necessary to introduce into the predictive models an a la Peru
bias, where the economy works under a heavily dollarized
component, which is quite more superior than what it happens in
Brazil.
JEL: E
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0505003&r=all
396. Does Foreign Direct Investment Transfer Technology Across
Borders? A Reexamination
Jurgen Bitzer (Free University Berlin Department of
Economics & Institute for East European Studies)
Monika Kerekes (Free University Berlin Department of
Economics & Institute for East European Studies)
Reexamining foreign direct investment (FDI) as a potential
channel for knowledge diffusion -- based on industry data from
seventeen OECD countries during the period 1973-2000 -- we find
that FDI-receiving countries benefit strongly from FDI-related
knowledge spillovers. We do not find evidence for positive FDI-
related technology sourcing effects. Instead, our results suggest
that outward FDI might have negative effects on the output of the
FDI-sending country.
Keywords: foreign direct investment, knowledge spillovers
JEL: F21 O33 O47 E23
Date: 2005-05-04
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpma:0505004&r=all
397. The Disutility of International Debt: Analytical Results
and Methodological Implications
Greg Hannsgen (The Levy Economics Institute)
In dealing with the problematic relationship of morality to
rational choice theory, neoclassical economists since Lionel
Robbins have often argued that they can incorporate moral values
into consumer theory by putting those values into the utility
function. This paper tests the viability of such an approach in
the context of international finance. The moral value at stake is
autonomy, which may be lost when borrowers must submit to the
edicts of international financial institutions. When such a value
is inserted into the utility function of a small economy, the
growth rate of consumption and the level of investment change.
Furthermore, potential borrowers may lose their ability to
credibly commit to paying back loans, resulting in a complete
absence of borrowing where it might otherwise take place. The
author argues that while this model illustrates the possibility
of analyzing a noneconomic value (sovereignty) through rational
choice theory, it also shows that standard methods of empirical
inference, policy evaluation, and welfare analysis may fail in
such a situation. To answer questions that mix morality and
economics, economists must seek tools other than conventional
rational choice theory.
Keywords: : Values, Lionel Robbins, international debt,
methodology
JEL: B
Date: 2005-05-02
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpmh:0505001&r=all
398. Brand and Price Advertising in Online Markets
Michael Baye (Indiana University)
John Morgan (Haas School of Business & Department of
Economics)
We model a homogeneous product environment where identical e-
retailers endogenously engage in both brand advertising (to
create loyal customers) and price advertising (to attract
'shoppers'). Our analysis allows for 'cross-channel' effects;
indeed, we show that price advertising is a substitute for brand
advertising. In contrast to models where loyalty is exogenous,
these cross-channel effects lead to a continuum of symmetric
equilibria; however, the set of equilibria converges to a unique
equilibrium as the number of potential e-retailers grows
arbitrarily large. Price dispersion is a key feature of all of
these equilibria, including the limit equilibrium. While each
firm finds it optimal to advertise its brand in an attempt to
'grow' its base of loyal customers, in equilibrium, branding (1)
reduces firm profits, (2) increases prices paid by loyals and
shoppers, and (3) adversely affects gatekeepers operating price
comparison sites. Branding also tightens the range of prices and
reduces the value of the price information provided by a
comparison site. Using data from a price comparison site, we test
several predictions of the model.
Keywords: Price dispersion
JEL: D4 D8 M3 L13
Date: 2005-04-29
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpmi:0504009&r=all
399. Commodity Price Insurance:A Keynesian Idea Revisited
John Bower (Oxford Institute for Energy Studies)
Nawal Kamel (Oxford Institute for Energy Studies)
Keynes proposed that a ‘Commod Control’ agency be created
after the Second World War to stabilise spot prices of key
internationally traded commodities by systematically buying and
selling physical buffer stocks. In this paper, the creation of a
new Global Commodity Insurer (GCI) is discussed that would
operate an international Commodity Price Insurance (CPI) scheme
with the objective of protecting national government revenues,
spending and investment against the adverse impact of short- term
deviations in commodity prices, and especially oil prices, from
their long-run equilibrium level. Crude oil is the core commodity
in this scheme because energy represents 50% of world commodity
exports, and oil price shocks have historically had a significant
macroeconomic impact. In effect the GCI would develop a new
international market, which is currently missing, designed to
protect governments against the risk of declines in their fiscal
revenue, and increases in the level of claims on that income
especially from social programmes, brought about by short-term
commodity price shocks. GCI would take advantage of the rapid
growth of trading in derivative securities in the global capital
market since the 1980s by selling CPI insurance contracts
tailored to the specific commodity price exposure faced by
national government, and offsetting the resulting price risk with
a portfolio of derivative contracts of five-year or longer
maturities, supplied by banks, insurers, reinsurers, investment
institutions, and commodity trading companies, with investment
grade credit ratings. The difference between the CPI and a buffer
stock or export/import control scheme is that it would mitigate
the macro-economic shocks posed by commodity price volatility,
but not attempt to control commodity prices. The cost of the CPI
scheme is estimated by simulating 5-year commodity price paths
using a standard log price mean reverting model parameterised
from an econometric analysis of commodity price time series.
Keywords: Commodity Price Insurance
JEL: F3 Q43
Date: 2005-04-29
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpot:0504012&r=all
400. Do welfare maximising water utilities maximise welfare
under common carriage?
Urs Meister (University of Zurich)
Due to the increasing discussion about liberalisation in the
piped water industry municipal authorities in several European
countries consider modifications of their water utilities’
structure such as legal constitution, business objectives or
private participation. The purpose of this paper is to evaluate
the extent to which it is socially optimal to compose water
utilities as welfare or profit maximising companies when assuming
the introduction of competition in the market based on common
carriage – as applied in England and Wales. Using a game
theoretic model of mixed oligopolies that contains water markets
specificities we show that welfare tends to be higher in a regime,
where utilities are instructed to maximise profits rather than
welfare.
Keywords: Water, Networks, Corporate Governance, Mixed Oligopoly
JEL: L95 L43 D21 Q25
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpot:0505001&r=all
401. EVOLUTION OF THE ECONOMIC RESULTS AND THE STRUCTURE OF
FARMS: AN ANALYSIS THROUGH THE BOOK-KEEPING DATA IN CENTRAL
AND NORTHERN ITALY
Maurizio Canavari (Alma Mater Studiorum-Universita di
Bologna)
Rino GHELFI (Alma Mater Studiorum-Universita di Bologna)
Maurizio MERLO (Universita di Padova)
Sergio RIVAROLI (Alma Mater Studiorum-Universita di Bologna)
Danio SARTI (Consiglio Nazionale delle Ricerche)
The latest orientations of the CAP have had remarkable and wide-
spread effects on the whole agri-food sector. It has deeply
influenced the entrepreneurs' choices, with reference both to the
production techniques and to the business organization. The
changes have had inevitable reflexes on the economic results of
the firms, thus determining adaptations regarding both the
structure and the amount of inputs. In this paper, an analysis of
the book-keeping results of agricultural enterprises of Northern
and Central Italy is carried out. We try to underline and analyze
the evolution of the economic results and the main structural and
organizational elements in the firms. The accountancy data of a
group of firms located in the Veneto, Emilia-Romagna and Tuscany
regions, referred to the period 1994-2000, are taken into
consideration. These firms seems to adequately represent the main
type of farming: field crops, fruit-growing, wine-growing,
husbandry. The study is aimed at underlining the influence of the
EU payments on the profitability and the changes in the value
distribution between the various input suppliers.
JEL: P Q Z
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpot:0505002&r=all
402. INVESTIGATING PREFERENCES FOR ENVIRONMENT FRIENDLY
PRODUCTION
Riccardo SCARPA (Alma Mater Studiorum-Universita di Bologna)
Fiorenza SPALATRO (Alma Mater Studiorum-Universita di
Bologna)
Maurizio CANAVARI (Alma Mater Studiorum-Universita di
Bologna)
This paper reports some preliminary results on a mixed logit
random utility analysis of conjoint data from costumers'
preferences over agricultural products. The data are collected
via a telematic sample representative of Italian households. The
survey instrument was implemented via a computer supported system.
A multivariate normal full correlation structure is imposed in
the mixed logit estimation and the implications of such a taste
structure are examined.
JEL: P Q Z
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpot:0505003&r=all
403. FUNCTIONAL FOODS IN THE EUROPEAN UNION: AN OVERVIEW OF THE
SECTOR'S MAIN ISSUES
Alessandra CASTELLINI (Alma Mater Studiorum-Universita di
Bologna)
Maurizio Canavari (Alma Mater Studiorum-Universita di
Bologna)
Carlo Pirazzoli (Alma Mater Studiorum-Universita di Bologna)
In Europe the demand of functional foods varies remarkably from
country to country, on the basis of the alimentary traditions,
the enforced legislation and the different cultural heritage that
people have acquired. The opportunities of expansion on the
market seem to be quite favorable and the interest of the
consumers is rather high. But the diffusion of these products in
the community area is slowed down by some obstacles. One of main
ones is the lack of an official law-recognized definition for
these references, necessary in order to clearly assign these
products to the food sector rather than to the pharmaceutical one.
In a such situation, we note that nowadays it is impossible to
carry out a complete survey of this world, due to the lack of
homogeneous and trustworthy statistical data and to the confused
definition of the sector. In fact, every country adopts his own
national legislation and includes in this class different
products. The variable meaning assumed by the term “functional
food” in the EU member states, can also hinder the free trade
even within the EU boundaries. In fact, pursuing the safeguard of
human health, each partner can block the admission of a product,
even if it comes from an other EU member country. This lack of
clarity at the production phase is reflected in a difficult
control at the consumption phase. The disinformation of the trade
operators and, consequently, of the consumers can involve some
risks for these last ones due to not only to the deficiency of
benefits, using functional foods, but also possible damages to
the health. Ambiguous definition and gaps of knowledge about the
composition and the effects of these products, in fact, can
interfere with an aware choice of purchase and an organized
development of the sector.
JEL: Q13 Q18 L65 L66
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpot:0505004&r=all
404. EVALUATION OF QUALITY ASSURANCE SYSTEMS IN THE AGRI-FOOD
SECTOR
Maurizio Canavari (Alma Mater Studiorum-Universita di
Bologna)
Domenico Regazzi (Alma Mater Studiorum-Universita di
Bologna)
Roberta Spadoni (Alma Mater Studiorum-Universita di Bologna)
The 'quality issue' in the agri-food sector has been gaining
importance over the past few years. Firms are continually
searching for techniques and tools which permit production of
goods that meet as many as possible of the characteristics
demanded by the market. Quality assurance methods and techniques
can provide a useful tool for approaching evolving markets in the
correct way. This paper focuses on a survey conducted in certain
sub-sectors (fruit and vegetable, meal and pasta, wine) and is
specifically restricted to the Emilia-Romagna region. The survey
found that there is extensive awareness of and widespread
interest in quality systems. However, the objective of initiating
a pattern of renewal which incorporates quality systems has not
yet been widely attained. The survey also highlighted a certain
absence of the 'quality culture' necessary for correctly
addressing these issues. The second part of this paper focuses on
the economic analysis of the costs related to quality systems (QS)
Its aim is to apply a method for collecting data on activities
and resources, and to analyse the results. The importance of QS-
related costs is evident if we are to consider it an investment,
entailing the deployment of management effort and funds, and
yielding a set of benefits in return. Case study analyses were
conducted utilising an original classification scheme. From the
initial results it is possible to identify the principal cost
categories. The method adopted could be useful for firms wishing
to monitor their QS.
JEL: P Q Z
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpot:0505005&r=all
405. Globalization, Domestic Politics and Social Spending in
Latin
Robert R. Kaufman (Rutgers University)
Alex Segura-Ubiergo (International Monetary Fund)
This paper analyzes the impact of globalization on social
spending in Latin America. It shows that trade integration has a
consistently negative effect on social security expenditures, and
that this effect is compounded by higher integration into capital
markets. The importance of political institutions is also key.
Popularly-based governments tend to increase social security
transfers, which reach a relatively small but politically
powerful constituency in the formal sector. By contrast, the
change to democracy increases education and health spending,
which reaches a larger segment of the population.
Keywords: globalization, social spending, fiscal discipline,
Latin America, trade openness, social policy
JEL: D6 D7 H
Date: 2005-04-30
URL: http://d.repec.org/n?u=RePEc:wpa:wuwppe:0504009&r=all
406. Rebuilding Fiscal Institutions in Post-Conflict Countries
Sanjeev Gupta (International Monetary Fund)
Shamsuddin Tareq (International Monetary Fund)
Benedict Clements (International Monetary Fund)
Alex Segura-Ubiergo (International Monetary Fund)
Rina Bhattacharya (International Monetary Fund)
This paper reviews the key challenges in rebuilding fiscal
institutions in post-conflict countries. Based on IMF technical
assistance advice, it proposes a three-step framework for the
creation or re-establishment of well-functioning public finance
institutions: (i) creating a proper legal framework for fiscal
management, (ii) establishing a central fiscal authority, and (
iii) designing appropriate tax policies while simultaneously
creating simple tax administration and expenditure management
arrangements.
Keywords: post-conflict, fiscal instutions, public expenditure
management, tax administration
JEL: D6 D7 H
Date: 2005-04-30
URL: http://d.repec.org/n?u=RePEc:wpa:wuwppe:0504010&r=all
407. Social Spending in IMF-supported Programs
Ricardo Martin (World Bank)
Alex Segura-Ubiergo (International Monetary Fund)
This paper analyzes the impact of IMF-supported programs on
health and education spending in a large time-series cross-
section sample of countries. Using an ARIMA model to model time
dynamics and instrumental variables to correct for the well-known
endogeneity of IMF-supported programs, the paper finds, contrary
to the conventional wisdom, that health and education do not
decline in the presence of an IMF-supported program. However,
this does not necessarily mean that the poor are protected from
the costs of economic adjustment.
Keywords: social spending, IMF-supported programs, health,
education
JEL: D6 D7 H
Date: 2005-04-30
URL: http://d.repec.org/n?u=RePEc:wpa:wuwppe:0504011&r=all
408. Tax Burden and the Mismeasurement of State Tax Policy
W. Robert Reed (Department of Economics, University of
Oklahoma)
Cynthia L. Rogers (Department of Economics, University of
Oklahoma)
Tax Burden, defined as the ratio of total tax revenues over
personal income, is prominently used to summarize state tax
policy. We analyze the empirical relationship between changes in
Tax Burden and changes in state tax policy from 1987 to 2000 –
as measured by states’ own forecasts of the revenue impacts of
tax legislation – and find that Tax Burden contains substantial
measurement error. We explain this result by decomposing Tax
Burden changes into three components: (1) changes in state tax
policy, (2) income-induced changes in revenue that are unrelated
to state tax policy, and (3) other factors that do not measure
state tax policy. We empirically demonstrate the statistical
significance of the second component, highlighting important
consequences for studies that estimate the impact of taxes on
economic growth.
Keywords: Tax Policy, Fiscal Policy, Tax Burden, State Economic
Development, Tax Rates
JEL: E62 H20 H71 R11
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwppe:0505001&r=all
409. Governance and Performance: Theory-Based Evidence from US
Coast Guard Inspections
maurice moffett (baylor college of medicine)
alok k. bohara (u. new mexico)
kishore gawande (texas a&m u.)
Given three stylized facts about the US Coast Guard (USCG),
namely, soft penalties for safety violations, low incidence of
penalties relative to the number of violations, and substantial
resources devoted to inspections of vessels, this paper seeks (i)
a theoretical lens to view USCG activities and (ii) an empirical
assessment of whether those activities improve performance.
Harrington’s (1988) model is motivated by these stylized facts
about US regulation in general, and provides a solution via
targeting of good and poor performers. The model generates
hypotheses about optimal regulation in the context of pollution
prevention activities of the USCG. An organization-level panel
data set consisting of thousands of US flag tank barges is
constructed to test those hypotheses. A count model that controls
for vessel heterogeneity yields mixed evidence. If USCG
inspections are considered exogenous variables (as the theory
presumes), they appear to prevent pollution spills. But if
inspections are endogenous and respond to previous spills then
correcting for endogeneity reverses the earlier result. In
addition, violations are found to be good predictors of pollution
occurrences, suggesting that inspections are not as effective as
they could be. Targeting as in Harrington’s model therefore
appears to be incomplete, and the findings suggest that more
complete targeting could increase performance. An interesting
finding is that stronger penalties could increase performance.
Keywords: Harrington model; Inspections; Penalties; Oil Spills;
USCG;
JEL: D6 D7 H
Date: 2005-05-03
URL: http://d.repec.org/n?u=RePEc:wpa:wuwppe:0505002&r=all
410. Price risk management instruments in agricultural and other
unstable markets
Jean-Marc Boussard (INRA - MONA Paris, France)
Most economists congregate on the idea that commodity price
instability should be reduced. Since at least one century a
variety of instruments have been designed to that end, without
much success, especially for agricultural commodities. The
failure might be a consequence of the fact that most policies
have neglected the reason for price fluctuations. Commodity price
fluctuations are endogenous, caused by the market equilibrium
local dynamic instability. It means that any measure relying on
the “law of large numbers” is likely to be inoperative. In
addition, because, in agriculture, the production function is
homogenous and of degree one, any effective stabilisation leads
to over production. Only production quotas can cope with these
difficulties. They may be designed in such a way as to maintain
the essential feature of market equilibrium, i.e. marginal cost
equating price.
Keywords: Crop insurance agriculture commodity price
stabilisation
JEL: L16 G22 O13 Q13 Q14 Q28
Date: 2005-05-05
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpri:0505001&r=all
411. A Study on Structure of the Economy of Udalguri Sub-
Division, Assam (India)
Prasen Daimari (Department of Economics, North Eastern Hill
University, Shillong India)
SK Mishra (Department of Economics, North Eastern Hill
University, Shillong India)
In this study we make an attempt to visualize the structure of
the economy of Udalguri Subdivision of Assam, India. The
structure of an economy comprises the characteristic features of
and the interrelationships among its constituent parts and
subsystems. These characteristic features and interrelationships
typify the economy and give to it a style, an appearance and
individuality of its own. In our study area, we find only a weak
interrelationship among various sectors of the economy. The urban
sector has little impact on the productive system, mainly due to
poor infrastructure. Conspicuous and ceremonial expenditure is
substantial, specially in the villages inhabited by indigenous
people vis-a-vis the villages inhabited by immigrant people from
Bangladesh. The economy is subsistence driven and productive
resources are underutilized. Marginal productivity of labour is
near- zero and productivity of land provides only subsistence.
Poverty keeps consumption and savings low. Capital formation in
the rural sector is negligible. Especially, the indigenous
farmers are less enterprising vis-a-vis the immigrant farmers.
Overall, the economy is in the trap of low-level equilibrium.
Keywords: India, Assam, Udalguri, structure, rural economy,
poverty, inequality, cultural variables, determinants,
sectoral distribution, income
JEL: D31 D61 I32 Q12 Q15
Date: 2005-04-29
URL: http://d.repec.org/n?u=RePEc:wpa:wuwpur:0504011&r=all
412. Unmet Labour Demand in Europe - Chances for Immigrants?
Talat Mahmood
Sara Geerdes
Klaus Schomann
This paper examines the chances for immigrants on the European
job market. The data represents a one percent sample of the
German population of the Micro census for the years 1998, 2000
and 2003 and Eurostat Labour Force Survey data. The issue
addressed is how the academic and occupational level of education
participation in education), labour participation, professional
status, unemployment rate, income, female labour participation
and atypical occupation (structure of employment) of the
foreigners differ from the native population. We find that
foreigners in EU countries are more likely to be unemployed and
are often in lower segments of the labour market. European
comparisons of the labour market situation shows that the
acknowledgment of foreign degrees, discrimination, supporting
measures and the labour market policy have to be taken into
account, as well as the (country-specific) human capital,
language skills and the immigrants’ participation in education.
ZUSAMMENFASSUNG - (Arbeitsplatzangebot in Europa -
Chancen fur Immigranten?)
Mithilfe des Mikrozensus 1998,
2000 und 2000 und dem Eurostat Labour Force Survey werden die
Moglichkeiten fur Immigranten auf dem europaischen
Arbeitsmarkt untersucht. Es wird das akademische und berufliche
Ausbildungsniveau (Bildungsbeteiligung), die Erwerbsbeteiligung,
die Stellung im Beruf, die Arbeitslosenrate, das Einkommen, die
Frauenerwerbsquote und atypische Beschaftigung (
Beschaftigungsstruktur) von Einheimischen und Migranten
verglichen. Es zeigt sich, dass EU Auslander eher arbeitslos
sind und sich eher in niedrigeren Segmenten des Arbeitsmarkts
befinden. Der europaische Vergleich der Arbeitsmarktsituation
Mithilfe des Mikrozensus 1998, 2000 und 2000 und dem Eurostat
Labour Force Survey werden die Moglichkeiten fur Immigranten
auf dem europaischen Arbeitsmarkt untersucht. Es wird das
akademische und berufliche Ausbildungsniveau (Bildungsbeteiligung)
die Erwerbsbeteiligung, die Stellung im Beruf, die
Arbeitslosenrate, das Einkommen, die Frauenerwerbsquote und
atypische Beschaftigung (Beschaftigungsstruktur) von
Einheimischen und Migranten verglichen. Es zeigt sich, dass EU
Auslander eher arbeitslos sind und sich eher in niedrigeren
Segmenten des Arbeitsmarkts befinden. Der europaische Vergleich
der Arbeitsmarktsituation zeigt, dass sowohl die Anerkennung
auslandischer Bildungsabschlusse, Diskriminierung, die
Hilfsmanahmen und die Arbeitsmarktpolitik als auch das (
landesspezifische) Humankapital, Sprachkenntnisse und die
Bildungsbeteiligung zu berucksichtigen sind, zeigt, dass sowohl
die Anerkennung auslandischer Bildungsabschlusse,
Diskriminierung, die Hilfsmanahmen und die Arbeitsmarktpolitik
als auch das (landesspezifische) Humankapital, Sprachkenntnisse
und die Bildungsbeteiligung zu berucksichtigen sind.
Keywords: International migration, European job market,
Immigrants
JEL: C35 F22 J61
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:wzb:wzebiv:spii2005-07&r=all
413. Housing Debt, Employment Risk and Consumption
Viola Angelini
Peter Simmons
We consider the interaction between the risk of unemployment,
random house prices, consumption and savings. A critical decision
is that of refinancing house purchase, up to 100% mortgages are
possible. There is also a fixed transaction cost of refinancing.
In a CARA framework we derive the value function for a finite
horizon, the policy of refinance and the consumption function.
Either there is a maximum mortgage or a zero mortgage depending
on interest rates, house prices and the transaction cost. The
consumption function is linear in wealth and in the uncertainty
caused by employment status and house prices of the future. Since
there is either 100% or 0% equity withdrawal, consumption jumps
when there is refinancing.
Keywords: Precautionary savings; employment risk; mortgages;
housing
JEL: D11 D14 E21
URL: http://d.repec.org/n?u=RePEc:yor:yorken:05/07&r=all
414. The Interregional Incidence of Public Budgets in
Federations: Measurement Issues, Evidence from Canada, and
Policy Relevance
Francois Vaillancourt (Departement de sciences ecomiques,
Universite de Montreal)
Richard M. Bird (Rotman School of Management, University of
Toronto)
In this paper, we examine the issue of the incidence of central
government budgets in federal countries. In Section 1, we discuss
a number of reasons why the picture painted of reality by even
the best fiscal flow analysis is inevitably partial and hence
inherently flawed to an unknowable extent. Despite these cautions,
in Section 2 we review the evidence on the regional incidence of
federal budgets in Canada, considering both aggregate results and
some specific federal expenditure programs (e.g. equalization and
employment insurance), as well as some relevant issues (e.g. the
regional effect of some regulatory programs) not depicted in
fiscal flows. We find that the regional distributional patterns
revealed in this analysis are both robust to various reasonable
adjustments and relatively stable over time. Nonetheless, we
conclude in Section 3 that, while such studies are potentially
useful in terms of providing a base-line for assessing
performance in some respects, they cannot be used to demonstrate
that e.g. one region is paying (or receiving) 'too much' or 'too
little', let alone that there is a 'fiscal imbalance' that needs
to be corrected. Numbers are necessary, and good numbers are
better than bad ones; but they have to be interpreted carefully
and in context before drawing any policy conclusions.
Keywords: regional fiscal flows, regional incidence, fiscal
balance, Canada
JEL: H19 R51 P43
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:ttp:itpwps:0510&r=all
415. Economic Theories of Settlement Bargaining
Andrew F. Daughety (Department of Economics and Law School,
Vanderbilt University)
Jennifer F. Reinganum (Department of Economics and Law
School, Vanderbilt University)
We briefly review two basic models of settlement bargaining
based on concepts from information economics and game theory. We
then discuss how these models have been generalized to address
issues that arise when there are more than two litigants with
related cases. Linkages between cases can arise due to exogenous
factors such as correlated culpability or damages, or they can be
generated by discretionary choices on the part of the litigants
themselves or by legal doctrine and rules of procedure.
Keywords: Multiple litigants, externalities, asymmetric
information
JEL: K41 D82 C78
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:van:wpaper:0508&r=all
416. Strategic Basins of Attraction, the Farsighted Core, and
Network Formation Games
Frank H. Page, Jr. (Department of Finance, University of
Alabama)
Myrna H. Wooders (Department of Economics, Vanderbilt
University)
We make four main contributions to the theory of network
formation. (1) The problem of network formation with farsighted
agents can be formulated as an abstract network formation game. (
2) In any farsighted network formation game the feasible set of
networks contains a unique, finite, disjoint collection of
nonempty subsets having the property that each subset forms a
strategic basin of attraction. These basins of attraction contain
all the networks that are likely to emerge and persist if
individuals behave farsightedly in playing the network formation
game. (3) A von Neumann Morgenstern stable set of the farsighted
network formation game is constructed by selecting one network
>from each basin of attraction. We refer to any such von Neumann-
Morgenstern stable set as a farsighted basis. (4) The core of the
farsighted network formation game is constructed by selecting one
network >from each basin of attraction containing a single
network. We call this notion of the core, the farsighted core. We
conclude that the farsighted core is nonempty if and only if
there exists at least one farsighted basin of attraction
containing a single network. To relate our three
equilibrium and stability notions (basins of attraction,
farsighted basis, and farsighted core) to recent work by Jackson
and Wolinsky (1996), we define a notion of pairwise stability
similar to the Jackson-Wolinsky notion and we show that the
farsighted core is contained in the set of pairwise stable
networks. Finally, we introduce, via an example, competitive
contracting networks and highlight how the analysis of these
networks requires the new features of our network formation model.
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:van:wpaper:0509&r=all
417. Testing for a Unit Root against Transitional Autoregressive
Models
Joon Y. Park (Department of Economics, Rice University and
SKKU)
Mototsugu Shintani (Department of Economics, Vanderbilt
University)
This paper considers the test of a unit root in transitional
autoregressive models. In particular, we develop the asymptotic
theory of the inf-t test for the null hypothesis of a unit root
in a wide class of nonlinear autoregressive models having
parameters that are identified only under the alternative of
stationarity. Our framework is very general and allows for
virtually all potentially interesting models with the threshold,
discrete and smooth transition functions. The specifications of
shortrun dynamics used in the paper are also fully general, and
comparable to those used in the linear unit root models. Most
importantly, our asymptotics take it into consideration that the
parameter space has a random limit. This is an essential feature
of the unit root test in transitional autoregressive models,
which has been ignored in the literature. For this very general
class of transitional autoregressive models, we show that the inf-
t test has well-defined limit distribution depending only upon
the transition function and the limit parameter space. The
critical values of the test are provided for some of the commonly
used models under the conventional specification of the parameter
space. Our simulation study shows that the test has good size
with the power that is significantly higher than the usual ADF
test even for samples of relatively small sizes. We apply the
test to various economic time series and find strong evidence for
the rejection of random walks in favor of stationary transitional
autoregressive models.
Keywords: unit root test, threshold autoregressive models (TAR),
logistic and exponential smooth transition
autoregressive models (LSTAR and ESTAR)
JEL: C12 C16 C22
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:van:wpaper:0510&r=all
418. On Equilibrium in Pure Strategies in Games with Many Players
Edward Cartwright (Department of Economics, Keynes College,
University of Kent)
Myrna Wooders (Department of Economics, Vanderbilt
University)
Treating games of incomplete information with countable sets of
actions and types and finite but large player sets we demonstrate
that for every mixed strategy profile there is a pure strategy
profile that is 'epsilon-equivalent'. Our framework introduces
and exploits a distinction between crowding attributes of players
their external effects on others) and their taste attributes (
their payoff functions and any other attributes that are not
directly relevant to other players). The main assumption is a
'large game' property, dictating that the actions of relatively
small subsets of players cannot have large effects on the payoffs
of others Since it is well known that, even allowing mixed
strategies, with a countable set of actions a Nash equilibrium
may not exist, we provide an existence of equilibrium theorem.
The proof of existence relies on a relationship between the
'better reply security' property of Reny (1999) and a stronger
version of the large game property. Our purification theorem are
based on a new mathematical result, of independent interest,
applicable to countable strategy spaces.
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:van:wpaper:0511&r=all
419. On Purification of Equilibrium in Bayesian Games and Ex-
Post Nash Equilibrium
Edward Cartwright (Department of Economics, Keynes College,
University of Kent)
Myrna Wooders (Department of Economics, Vanderbilt
University)
Kalai (2002) demonstrates that in semi anonymous Bayesian games
with sufficiently many players any Bayesian equilibrium is
approximately ex-post Nash. In this paper we demonstrate that the
existence of an approximate expost Nash property implies a
purification result of the standard sort for the original
Bayesian game. We also provide an example showing that the bound
we obtain on the distance of a purified approximate equilibrium
from an exact equilibrium is tight.
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:van:wpaper:0512&r=all
420. The Economic Payoffs from Marine Reserves: Resource Rents
in a Stochastic Environment
R. Quentin Grafton
Tom Kompas
Pham Van Ha
The paper analyses the economic payoffs from marine reserves
using a stochastic optimal control model. The results show that
even if the reserve and harvested populations face the same
negative shocks, harvesting is optimal, the population is
persistent and with no uncertainty over current stock size, a
reserve can increase resource rents. Using actual fishery data we
demonstrate that the payoffs from a reserve, and also optimum
reserve size, increase the larger is the magnitude of the
negative shock, the greater its frequency, and the larger its
relative impact on the harvested population.
JEL: Q20 D81
Date: 2005
URL: http://d.repec.org/n?u=RePEc:idc:wpaper:idec05-3&r=all
421. Estimating process batch flow times in a two-stage
stochastic flowshop with overlapping operations
Vandaele N.
Van Nieuwenhuyse I.
This paper focuses on modelling the impact of lot splitting on
average process batch flow times, in a two-stage stochastic
flowshop. It is shown that the traditional queueing methodology
for estimating flow times cannot be directly applied to a system
with lot splitting, as the arrival process of sublots at the
second stage is not a renewal process. Consequently, an embedded
queueing model is developed in order to approximate the average
flow time of the flags through the system; from the flow time of
the flags, the flow time of process batches can then be derived.
The model turns out to yield very satisfactory results, and
provides a tool to quantify the reduction in flow time that can
be obtained by overlapping operations at different processing
stages. Moreover, it allows to model the trade-off between flow
time improvement and gap time occurrence by using it within the
scope of a cost model.
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:ant:wpaper:2005009&r=all
422. El analisis economico de los procesos de urbanizacion
Olga Alonso Villar (Universidade de Vigo)
Concentration of economic activity and, in particular,
concentration of population emerges as a relevant feature of this
century. The grave problems associated with large cities (urban
traffic congestion, pollution, crime, etc.) have made the study
of them an important topic. The first step to be taken in this
study is to determine which elements favor the agglomeration of
economic activity and which ones put a stop to it. In this paper
we present an overview of the principal models involved with
cities focusing in the most recent lines of research.
Keywords: Capital humano; Ciudades; Concentracion; Rendimientos
Crecientes
URL: http://d.repec.org/n?u=RePEc:edg:anecon:0004&r=all
423. Estao os Portugueses a ‘votar com os pes’? Alguma
evidencia empirica
Antonio Caleiro (Department of Economics, University of
Evora)
Como e sabido, os movimentos migratorios a escala regional
sao fruto de uma diversidade de factores. Sendo entendidos como
uma reaccao, por parte da populacao, a desvantagens (
inaceitaveis) de natureza economica apresentadas pela regiao
de origem, estes movimentos demograficos constituem um
importante exemplo da chamada ‘votacao com os pes’.
Claramente, a inexistencia (ou a mera ineficacia) de politicas
regionais que tenham como objectivo combater este fenomeno
acarreta a inevitavel desertificacao humana a qual, certamente,
constitui um crucial entrave ao desenvolvimento regional. Alias,
uma perspectiva, ainda que parcial, deste fenomeno demografico
admite ser esta, ela propria, a consequencia logica de
politicas de incidencia regional, as quais, sendo atendedoras
ao peso eleitoral das diversas regioes, tendem a privilegiar as
regioes ja por si mais povoadas. Sendo certo que a decisao de
migrar acarreta custos obvios e so se justifica se (
hipoteticamente) as condicoes de vida na regiao de destino se
apresentarem inequivocamente melhores que as existentes na
regiao de origem, tal significa que a ‘votacao com os
pes’ e, quase sempre, sinonimo de uma efectiva
deslocalizacao da populacao activa (bem como das camadas
populacionais mais jovens que dela dependem). Assim sendo, a este
fenomeno demografico, para alem da desertificacao humana,
associa-se, quase inevitavelmente, o envelhecimento das regioes
de origem por contrapartida do rejuvenescimento das regioes de
destino. O objectivo principal deste trabalho e, assim, o de
verificar se existe evidencia empirica, em Portugal, suportando
a hipotese de que aos movimentos migratorios regionais se pode
associar o fenomeno da ‘votacao com os pes’. Dado que o
espaco de tempo decorrido entre os dois ultimos Censos da
Populacao nos parece ser suficiente para se puderem observar
com alguma seguranca as tendencias migratorias verificadas em
Portugal, aquele objectivo pretende ser atingido usando os dados
dos Censos de 1991 e 2001, recorrendo a uma metodologia que se
baseia no uso de tecnicas estatisticas especialmente adequadas
no tratamento de variaveis que se apresentam localizadas no
espaco nacional.
Keywords: Demografia Regional, Desemprego, Econometria Espacial,
Movimentos Migratorios
JEL: E24 J61 J64 R15
Date: 2005
URL: http://d.repec.org/n?u=RePEc:evo:wpecon:7_2005&r=all
424. Technology Frames: The Art of Perspective and
Interpretation in Strategy
Virginia Acha (SPRU, University of Sussex)
In this paper, I bring together the literatures of the economics
of innovation, corporate strategy and managerial and
organizational cognition to explore how and why companies come to
different conclusions and strategies for technology when
presented with essentially very similar situations and
information. Building on the work of Orlikowski and Gash (1994)
on technological frames, I seek to explore the role of the
technology frame of key senior managers in defining corporate
strategy with respect to technology. To provide an empirical
basis for the study, I take the case of the 6 leading US
vertically integrated oil companies involved in the exploration
and production of petroleum during the period 1984 to 1997. The
analysis considers two key salients for the technology frame
which are operationalised for the six companies based on their
R&D expenditures, patents, publications and contrasted with their
operational performance measures. These salients reflect
respectively adaptational mapping (whereby signals in the
environment prompt adaptation) and formational mapping (whereby
experience and path-dependency influence interpretation) within
the technology frame. The findings indicate support for the
proposed approach to proxying technology frames on the two key
points of salience for the upstream petroleum industry, and the
paper concludes with a short discussion of future lines of
research.
Keywords: technology frames, upstream petroleum, technology
strategy, adaptational mapping, formational mapping
JEL: O32
Date: 2005-04-26
URL: http://d.repec.org/n?u=RePEc:sru:ssewps:109&r=all
425. Persistent Knowledge Specialisation and Intra-Industry
Heterogeneity: an Analysis of the Spanish Pharmaceutical
Industry
Pablo D'Este Cukierman (SPRU, University of Sussex)
This paper aims to contribute to the analysis of within industry
inter-firm variety. Building upon the knowledge-based theory of
the firm (Nelson and Winter, 1982; Penrose, 1959; Fransman, 1994),
this paper develops two themes. First, the analysis of intra-
industry heterogeneity: why do firms that operate in the same
industry differ, and why are such differences persistent? Second,
the paper investigates the extent to which higher performance is
associated with the capacity of firms to expand their knowledge
base (rather than with their initial conditions). The main
contribution of the paper is empirical, based on a data source
consisting of information on documents published in scientific
international journals by Spanish pharmaceutical firms. The
empirical results support the argument that the firm's knowledge
base is a main driver of persistent heterogeneity within
industries on the one hand, because of the systematic variety in
terms of how firms articulate and organise their research
activities and their background knowledge, and on the other hand,
because of the positive correlation between the firms' knowledge
diversification and performance.
Keywords: Firm heterogeneity, Knowledge diversification,
Bibliometric analysis, Spanish pharmaceutical industry
JEL: O33 L65
Date: 2005-04-26
URL: http://d.repec.org/n?u=RePEc:sru:ssewps:110&r=all
426. The Dynamics of Innovation Networks
Lionel Nesta (SPRU, University of Sussex)
Vincent Mangematin (INRA, University Pierre Mendes-France)
We analyse the changing contribution of networks to the
innovative performance of 30 pharmaceutical companies from 1989
to 1997. Count data models show that collaborations with
universities and biotechnology companies are important
determinants of the firms' innovative performance, but their
respective contributions diverge when industry matures. Larger
firms enjoy a significant size advantage and in-house research
activities are highly significant. Returns to scale in research
are decreasing over time while the size advantage is increasing.
The changing contribution of networks to knowledge production
suggests that these are phase-specific, which has substantial
managerial and policy implications.
Keywords: pharmaceutical industry, biotechnology, innovative
processes, networks
JEL: O31 D85
Date: 2005-04-26
URL: http://d.repec.org/n?u=RePEc:sru:ssewps:114&r=all
427. When Micro Shapes the Meso: Learning Networks in a Chilean
Wine Cluster
Elisa Giuliani (SPRU, University of Sussex)
Martin Bell (SPRU, University of Sussex)
Most analyses of the relationship between spatial clustering and
the technological learning of firms have emphasised the influence
of the former on the latter, and have focused on intra-cluster
learning as the driver of innovative performance. This paper
reverses those perspectives. It examines the influence of
individual firms' absorptive capacities on both the functioning
of the intra-cluster knowledge system and its interconnection
with extra-cluster knowledge. It applies social network analysis
to identify different cognitive roles played by cluster firms and
the overall structure of the knowledge system of a wine cluster
in Chile. The results show that knowledge is not diffused evenly
'in the air', but flows within a core group of firms
characterised by advanced absorptive capacities. Firms' different
cognitive roles include some - as in the case of technological
gatekeepers - that contribute actively to the acquisition,
creation and diffusion of knowledge. Others remain cognitively
isolated from the cluster, though in some cases strongly linked
to extra-cluster knowledge. Possible implications for policy are
noted.
Keywords: clusters, absorptive capacity, knowledge communities,
technological gatekeepers
JEL: O33
Date: 2005-04-26
URL: http://d.repec.org/n?u=RePEc:sru:ssewps:115&r=all
428. Social Networks of Researchers in Business To Business
Marketing: A Case Study of the IMP Group 1984-1999
Piera Morlacchi (SPRU, University of Sussex)
Ian F. Wilkinson (University of New South Wales)
Louise Young (University of Technology, Sydney)
Science is a social process that functions through social
networks of researchers that form invisible colleges. Analysis of
these social networks provides a means for examining the
structure of relations among researchers. The Industrial
Marketing and Purchasing (IMP) group, "an informal international
group of scholars concerned with developing concepts and
knowledge in the field of business-to-business marketing and
purchasing," is used as a case study of a network of researchers
because it has been responsible for considerable research over
the last decades in the area of business-to-business marketing,
yet its structure remains hidden because of its informal network
characteristics. The results of a social network analysis of the
IMP group is described based on the pattern of co-authorship at
annual IMP conferences. The results reveal a power law
distribution of paper co-authorship and a small world network
that conforms to the results of studies of other types of social
networks. A core network of 57 researchers is identified and its
network properties are described, including how it has evolved
over time. The study provides the basis for further studies of
the social networks of marketing and business researchers.
Keywords: informal networks, business-to-business marketing
JEL: D85
Date: 2005-04-26
URL: http://d.repec.org/n?u=RePEc:sru:ssewps:116&r=all
429. Organisational Memory and Innovation Across Projects:
Integrated Service Provision in Engineering Design Firms
Eugenia Cacciatori (CRORA, Bocconi University and SPRU,
University of Sussex)
This paper provides an exploration of the dynamics of
organisational remembering in firms operating through projects.
The paper focuses in particular on the deliberate use of
experience accumulated in the past in order to sustain innovation
in the provision of services. It relies on the notions of
boundary objects and brokers to empirically explore how a common
memory crossing occupational and organisational boundaries is
built. In so doing, it highlights how a boundary object as memory
device in a project environment operates at different levels, i.e.
personal, project-specific, organisational-specific and
occupational specific, and how it takes different formats to
perform its roles at each level. Finally, the paper highlights
the role of specific communities, beyond that of specific
individuals, as boundary brokers.
Keywords: project development, innovation processes,
organisational memory, boundary brokers
JEL: O22 O31
Date: 2005-04-26
URL: http://d.repec.org/n?u=RePEc:sru:ssewps:117&r=all
430. Knowledge and Productivity in the World's Largest
Manufacturing Corporations
Lionel Nesta (SPRU, University of Sussex)
I examine the relationship between the characteristics of firm
knowledge in terms of capital, diversity and relatedness, and
productivity. Panel data regression models suggest that unlike
knowledge diversity, knowledge capital and knowledge relatedness
explain a substantial share of the variance of firm productivity.
Activities based on a set of related technological knowledge are
more productive than those based on unrelated knowledge because
the cost of co-ordinating productive activities decreases as the
knowledge used in these activities becomes integrated efficiently.
The contribution of knowledge relatedness to productivity is
significantly higher in high-technology sectors than in other
sectors.
Keywords: knowledge, productivity, large corporations, knowledge
measurement, panel data
JEL: O33
Date: 2005-04-26
URL: http://d.repec.org/n?u=RePEc:sru:ssewps:119&r=all
431. Change, Coordination, and Capabilities
Andrea Prencipe (Universita G. D’Annunzio di Pescara, and
SPRU, University of Sussex)
Empirical studies on coordination of economic activities focused
on the two polar cases of governance mode, namely vertical
integration and market exchanges. Whether firms should be
vertically integrated or lever market exchanges in the face of
change is, however, debated. Two positions have emerged. Some
scholars argue that the vertically integrated firm is the
appropriate mode of coordination when change occurs, while market
exchanges are more appropriate for dealing with stable contexts (
Teece, 1996). On the other hand, Harrigan (1984, 1985) contends
that firms should rely on market exchanges when technological
change renders upstream capabilities obsolete. Based on two case
studies of the aircraft engine industry, this paper introduces
the concept of systems integration as the primary coordination
mechanism in-between markets and hierarchies that firms employ to
cope with change. The focus is on multitechnology settings.
Multitechnology, multicomponent products intensify the
coordination efforts for firms developing them and therefore
provide a vantage point to study coordination modes in the face
of technological change. The paper argues that systems
integration, as a coordination mechanism, comprises a set of
different technological and organizational skills, ranging from
component assembly through the understanding and integration of
the technological disciplines underlying a product, to project
management. It shows that from a competitive point of view,
systems integration is most appropriately understood as knowledge
integration. Systems integrating firms are understood as those
organizations that set up the network of actors involved in the
industry and lead it from an organizational and technological
viewpoint.
Keywords: technological change, systems integration, knowledge
integration, vertical integration, market exchanges
JEL: O33 L22
Date: 2005-04-26
URL: http://d.repec.org/n?u=RePEc:sru:ssewps:120&r=all
432. Sustained Innovation: Career Engineers, Stock Markets, and
the Theory of the Innovative Enterprise
William Lazonick (INSEAD and University of Massachusetts)
Andrea Prencipe (Universita G. D’Annunzio di Pescara, and
SPRU, University of Sussex)
The aim of this paper is to document the role that career
engineers played in the investment strategies and eventual
survival of an organization producing large high technology
capital goods. Using the theory of innovative enterprise
developed by Lazonick and O'Sullivan (2000), we analyze the locus
of strategic control and its interactions with the cognitive and
behavioral dimensions of Rolls-Royce, nowadays a successful
industrial firm. The company has been analyzed during an intense
period of radical changes in the ownership structure of the
company that followed the firm's misdemeanors. Analysis of the
role of engineers is paralleled with an analysis of what
influence the firm's exposure to the stock market had on its
innovative activities. The case analyzed shows that there was a
clear lead by the engineering-related functions, while other
functions had little say in important investment decisions.
Company decisions were driven by the creed of engineering
excellence transmitted from generation to generation of engineers
via the recruitment and apprentice systems that were at the basis
of the company's internal training policy.
Keywords: career engineers, investment strategies, Rolls-Royce,
innovative processes
JEL: L10 L62 O31
Date: 2005-04-26
URL: http://d.repec.org/n?u=RePEc:sru:ssewps:121&r=all
433. A Combinatorial Model of Organizational Innovation: The
Case of Pilkington Plc
Anna Grandori (CRORA, Bocconi University)
Andrea Prencipe (Universita G. D’Annunzio di Pescara, and
SPRU, University of Sussex)
Based on an in-depth case study of Pilkington Plc, this study
illustrates that received perspectives in organization theory and
theory of the firm fall short of explaining organizational
evolution. The framework of organizational evolution developed in
this paper is combinatorial in two ways. First, it shows how
factors drawn from different perspectives can be combined in
understanding organizational evolution. Second, it shows the
explanatory and prescriptive potential of a combinatorial
approach to resources and organizational configurations. This
approach helps distinguish those features of organizational
history that are ineffective and those that are instead effective
for the firm survival. In Pilkington, the successful changes of
firm boundaries have been predominantly linked to the combination
of complementary resources rather than the resolving of
transactional problems or realizing economies of scope through
related diversification. The changes of internal structure have
been successful due to a combination of waves of decentralization
and centralization with a stable, robust coordination by
communities at the level of research activities.
Keywords: organizational structure and evolution, Pilkington plc,
combinatorial approach, organization theory
JEL: L20
Date: 2005-04-26
URL: http://d.repec.org/n?u=RePEc:sru:ssewps:122&r=all
434. The Impact of Dual Use Controls on UK Science: Results from
a Pilot Study
Caitriona McLeish (SPRU, University of Sussex)
Paul Nightingale (SPRU, University of Sussex)
Concerns about the proliferation of biological weapons and the
threat posed by bioterrorism have assumed greater political
prominence in recent years. In response, governments are actively
attempting to frustrate the diffusion of technologies, relevant
to the production of biological weapons, to regimes and non-state
actors which might develop and use such weapons. Their most
recent efforts have involved the introduction of a range of new
national measures to control access to materials, knowledge and
technologies. Preventing the diffusion of the necessary knowledge
and technologies used to develop biological weapons is
complicated because the underlying technologies often have
legitimate and socially beneficial applications. Any controls to
prevent their hostile application can also potentially disrupt
legitimate activity, thereby generating social costs. For example,
anecdotal evidence suggests that the introduction of biosecurity
controls in the US and Germany are adversely affecting scientific
research in those countries. Governments therefore need to
balance these costs against the security benefits that such
controls generate. To do this policy makers need information on
the impact of these new ‘biosecurity’ measures. However, this
is a new area of policy and few impact assessments have been
performed. This pilot project, funded by the Economic and Social
Research Council3, developed and validated new methods for
assessing the impact that UK government biosecurity policies,
introduced to prevent legitimate scientific research from being
misused, are having on the practice of science. This short report
briefly explains the project and outlines a sample of the initial
results.
Keywords: biological weapons, bioterrorism, knowledge, control
of proliferation, biosecurity
JEL: O33
Date: 2005-04-20
URL: http://d.repec.org/n?u=RePEc:sru:ssewps:132&r=all
435. Modelling and Measuring Scientific Production: Results for
a Panel of OECD Countries
Gustavo Crespi (SPRU, University of Sussex)
Aldo Geuna (SPRU, University of Sussex)
This paper presents results from employing an econometric
approach to examine the determinants of scientific production at
cross-country level. The aim of this paper is not to provide
accurate and robust estimates of investment elasticities (a
doubtful task given the poor quality of the data sources and the
modelling problems), but to develop and critically assess the
validity of an empirical approach for characterising the
production of science and its impact from a comparative
perspective. We employ and discuss the limitations of a
production function approach to relate investment inputs to
scientific outputs using a sample of 14 countries for which we
have information about Higher Education Research and Development (
HERD). The outputs are taken from the Thomson ISI® National
Science Indicators (2002) database on published papers and
citations. The inputs and outputs for this sample of countries
have been recorded for a period of 21 years (1981-2002). A
thorough discussion of data shortcomings is presented in this
paper. On the basis of this panel dataset we investigate the
profile of the time lag between the investment in HERD and the
research output and the returns to national investment in science.
We devote particular attention to analysis of the presence of
cross-country spillovers. We show their relevance and underline
the international effect of the US system.
Keywords: productivity of science, lag structure, returns to
HERD investment, international spillovers
JEL: L3 O3
Date: 2005-04-19
URL: http://d.repec.org/n?u=RePEc:sru:ssewps:133&r=all
436. Technical Efficiency in the Iron and Steel Industry: A
Stochastic Frontier Approach
Jung Woo Kim (Samsung Economic Research Institute, Seoul,
Korea)
Jeong Yeon Lee (Graduate School of International Studies,
Yonsei University)
Jae Yong Kim (Korea Institute Public Finance, Seoul Korea)
Hoe Kyung Lee (Korea Advanced Institute of Science of
Science and Technology, Seoul, Korea)
In this paper we examine the technical efficiency of firms in
the iron and steel industry and try to identify the factors
contributing to the industry's efficiency growth, using a time-
varying stochastic frontier model. Based on our findings, which
pertain to 52 iron and steel firms over the period of 1978-1997,
POSCO and Nippon Steel were the most efficient firms, with their
production, on average, exceeding 95 percent of their potential
output. Our findings also shed light on possible sources of
efficiency growth in the industry. If a firm is government-owned,
its privatization is likely to improve its technical efficiency
to a great extent. A firm's technical efficiency also tends to be
positively related to its production level as measured by a share
of the total world production of crude steel. Another important
source of efficiency growth identified by our empirical findings
is adoption of new technologies and equipment. Our findings
clearly indicate that continued efforts to update technologies
and equipment are critical in pursuit of efficiency in the iron
and steel industry.
JEL: L61 C23 O33
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:ewc:wpaper:wp75&r=all
437. Common Shocks and Relative Compensation Schemes
Michael Magill
Martine Quinzii
This paper studies qualitative properties of an optimal contract
in a multi-agent setting in which agents are subject to a common
shock. We derive a necessary and sufficient condition for the
optimal reward of an agent producing an output level y to be a
decreasing (increasing) function of the outputs of the other
agents, under the assumption that the agents’ outputs are
informative signals of the value of the common shock. The
condition is that the likelihood ratio p(y, e, )/p(y, e', ),
where e is a higher effort level than e', and is the value of the
common shock, be a decreasing (increasing) function of . We
derive conditions on the way the common shock affects the
marginal product of effort under which the likelihood ratio is
decreasing for all output levels, or increasing for some output
levels and decreasing for others.
Date: 2004-12
URL: http://d.repec.org/n?u=RePEc:scp:wpaper:05-21&r=all
438. An Equilibrium Model of Managerial Compensation
Michael Magill
Martine Quinzii
This paper studies a general equilibrium model with two groups
of agents, investors (shareholders) and managers of firms, in
which managerial effort is not observable and influences the
probabilities of firms’ outcomes. Shareholders of each firm
offer the manager an incentive contract which maximizes the
firm’s market value, under the assumption that the financial
markets are complete relative to the possible outcomes of the
firms. The paper studies two sources of inefficiency of
equilibrium. First, when investors are risk averse and effort
influences probability, market-value maximization differs from
maximization of expected utility. Second, because the optimal
contract exploits all sources of information for inferring
managerial effort, when firms’ outputs are correlated the
contract of a manager depends on the outcomes of other firms.
This leads to an external effect of the effort of one manager on
the compensation of other managers, which market-value
maximization ignores. We show that under typical conditions these
two effects lead to an under-provision of effort in equilibrium.
These inefficiencies disappear however if each firm is replicated,
and in the limit there is a continuum of firms of each type.
JEL: D23 D51 D62 D82
Date: 2005-03
URL: http://d.repec.org/n?u=RePEc:scp:wpaper:05-22&r=all
439. Assessing the Determinants of Willingness to Pay for Urban
Flood Control: The Role of Locational, Demographic and
attitudinal Factors
David E. Clark (Department of Economics, Marquette
University)
Robert Griffin (Department of Communications, Marquette
University)
Vladimir Novoty (Department of Civil and Enviornmental
Engineering, Northeastern University)
The urbanization of urban watersheds can influence flooding
risks. Traditional Federal Emergency Management Agency (FEMA)
flood risk maps identify 100 year floodplains. These maps are
updated infrequently. However, as a community urbanizes, flood
risks can change, especially for downstream residents. Thus, one
would expect that the willingness to pay (WTP) to prevent the
worsening of flooding risk would depend in part on the location
of the household in the community and their associated flooding
risk. Economists and regional scientists have evaluated the role
played by traditional demographic factors. However, attitudinal
factors measuring community norms, political philosophy, and
other psychological factors that may be unique to the individual
have not received the same level of scrutiny. Milwaukee, WI has
experienced major flooding events, classified as floods with an
expected frequency of once every 100 years or less, in 1986 and
most recently in 1997 and 1998. In this study, 1000 residents of
the Menomonee watershed in Milwaukee were interviewed in a two-
wave panel survey (i.e., telephone interviews took place in 2000
and 2001) to determine their willingness to pay for a referendum
which would prevent flood risks from worsening. The interviews
queried respondents about their attitudes concerning flooding and
ecological risks, political beliefs, information seeking behavior,
and other psychological factors unique to the respondent.
Information was also gathered on demographic characteristics of
the respondent, and also that individuals address. The address
was geocoded and hydrologic modeling was used to determine the
unique flood risk associated with the residence. A willingness to
pay function was estimated using Tobit analysis. Preliminary
findings indicated that all three categories of factors influence
willingness to pay, with psychological factors and flood risk
factors having a relatively strong impact on willingness to pay.
Paper prepared for the 2005 Annual Meetings of the Midcontinent
Regional Science Association and the Southern Regional Science
Association in Arlington VA, April 8-10, 2005. PLEASE DO NOT
QUOTE WITHOUT PERMISSION.
Date: 2005-04
URL: http://d.repec.org/n?u=RePEc:mrq:wpaper:0503&r=all
440. Openness, Centralized Wage Bargaining, and Inflation
Joseph P. Daniels (Department of Economics, Marquette
University)
Farrokh Nourzad (Department of Economics, Marquette
University)
David D. VanHoose (Hanmaker School of Business, Baylor
University)
This paper develops a model of an open economy containing both
sectors in which wages are market-determined and sectors with
wage-setting arrangements. A portion of the latter group of
sectors coordinate their wages, taking into account that their
collective actions influence the equilibrium inflation outcome in
an environment in which the central bank engages in discretionary
monetary policymaking. Key predictions forthcoming from this
model are (1) increased centralization of wage setting initially
causes inflation to increase at low degrees of wage
centralization but then, as wage centralization increases,
results in an inflation dropoff; (2) a greater degree of
centralized wage setting reduces the inflation-restraining effect
of greater central bank independence; and (3) increased openness
is more likely to reduce inflation in nations with less
centralized wage bargaining. Analysis of data for seventeen
nations for the period 1970-1999 provides generally strong and
robust empirical support for all three of these predictions.
Date: 2004-10
URL: http://d.repec.org/n?u=RePEc:mrq:wpaper:0505&r=all
441. Don’t Frighten the Horses – the Political Economy of
Singapore’s Foreign Exchange Rate Regime since 1981
Peter Wilson (Department of Economics, National University
of Singapore)
Gavin Peebles
In this paper we explore the links between Singapore’s foreign
exchange rate regime since 1981 and the broader aspects of its
political economy. Singapore has been remarkably successful in
achieving fast growth, low and stable price inflation and a
strong external position. An important part of this strategy has
been its managed floating exchange rate regime, which is
generally regarded as being successful, but this needs to be
viewed within the broader context of the government’s
‘pragmatic socialism’ to keep inflation low and stable as the
bedrock for attracting inflows of mobile foreign capital to
sustain long-run export competitiveness, and an economic strategy
based on high levels of centralized saving and investment, a high
degree of government involvement in the economy and the
relentless accumulation of foreign exchange reserves. Indeed,
part of the reason why managed floating has been successful in
Singapore has been because the credibility of monetary policy has
been enhanced through the government’s command over resources
and its ability to respond quickly and flexibly to changes in
economic circumstances using, where necessary, unorthodox
policies of demand management to cut business costs. Exchange
rate policy, therefore, becomes an integral part of the policy to
redistribute income to capital to sustain employment and prevent
mobile firms from leaving Singapore. By the early 1990s the
imperative became to diversify the structure of the economy away
from exclusive reliance on a predominantly foreign manufacturing
base and to reduce the extent of government involvement in the
economy and it became harder to justify high levels of
centralized saving and investment. The dilemma is that the
government is finding it difficult to extricate itself from the
economy without compromising policy effectiveness, and there is
little evidence that dependence of the economy on foreign capital
and labour has diminished.
Keywords: Exchange Rate, People’s Action Party, Political
Economy, Singapore
JEL: F4 O10 P16
URL: http://d.repec.org/n?u=RePEc:sca:scaewp:0506&r=all
442. A Dynamic Shift-Share Analysis of the Electronics Export
Market 1988-2001: Can the NIEs Compete with China?
Peter Wilson (Department of Economics, National University
of Singapore)
Ting Su Chern
Tu Su Ping
Edward Robinson
This paper uses dynamic shift-share analysis to examine the
export performance of China in electronics compared to the east
Asian NIEs exporting to the USA, European Union and Japan between
1988 and 2001. Our findings suggest that China has now emerged as
a serious contender in the export market for electronics goods,
but this position has not been a dominant one. Her main gains
have been in consumer electronics and telecommunications
equipment and to a lesser extent in disk-drives, printers and PCs;
but in the higher-end exports of printed circuit boards and
semiconductors, China has not yet gained a significant stronghold
in developed country markets, at least to the extent that the
growth in her overall exports and increase in market shares might
suggest. Moreover, China’s success since the early 1990s has
been largely underpinned by strong export growth rather than a
favourable industry mix. Nonetheless, If China can sustain rapid
growth in exports and is able consolidate its industrial base,
China’s overall competitiveness can be expected to improve
substantially in the future. Its low cost structure, an
increasingly skilled workforce and an influx of technology and
management skills associated with large foreign direct investment
inflows, together with its recent entry into the WTO, places
China in a very favourable position.
Keywords: Trade, Competitiveness, Exports, East Asia, Shift-Share
JEL: F10 F14
URL: http://d.repec.org/n?u=RePEc:sca:scaewp:0507&r=all
443. Investment in Land, Tenure Security and Area Farmed in
Northern Mozambique
Tilman Bruck (German Institute for Economic Research (DIW
Berlin))
The analysis of land investment and tenure security usually
assumes land scarcity. However, some developing countries have
communities with land abundance. This article therefore examines
the effects of land abundance for investment and tenure security.
The paper develops a formal test of land abundance and estimates
a system of three simultaneous equations. The empirical analysis
uncovers significant land abundance in Northern Mozambique. In
contrast to the literature, area farmed is a determinant of
investment and tenure security. However, no link exists between
investment and tenure security. These findings have strong
implications for rural development policy in land abundant
communities.
Keywords: rural development, land use, agricultural investment,
property rights, farm household survey
JEL: O12 O13 Q12 Q15
Date: 2003-07
URL: http://d.repec.org/n?u=RePEc:hic:wpaper:01&r=all
444. Coping Strategies in Post-War Rural Mozambique
Tilman Bruck (German Institute for Economic Research (DIW
Berlin))
This paper analyses post-war coping strategies by farm
households in developing countries. The analysis is based on a
portfolio model of activity choices in war-affected rural Sub-
Saharan Africa. A case study using farm household survey data
estimates the determinants of agricultural coping strategies in
post-war Mozambique. Post-war coping strategies are expected to
differ from pre- and mid-crisis coping strategies. War-affected
households are forced to adopt very risky coping strategies that
re-enforce their vulnerability. Households choose between market
and non-market forms of exchange and even exit markets entirely.
Post-war reconstruction policy should focus on re-capitalizing
households and providing public goods.
Date: 2004-03
URL: http://d.repec.org/n?u=RePEc:hic:wpaper:02&r=all
445. The Economic Consequences of Terror: A Brief Survey
Tilman Bruck (German Institute for Economic Research (DIW
Berlin))
Bengt-Arne Wickstrom (Humboldt University of Berlin)
This brief survey reviews the economic consequences of terrorism.
It is argued that the indirect effects of terrorism are likely
to outweigh the direct effects. The former include changes in
risk, transaction costs, demand, public finances and growth. We
also address the nature of anti-terrorist policy and of policies
reducing the negative impact of terrorism. The former can change
the incentives for terrorists to break with social conventions or
maximize the costs of conducting terrorism. The latter is
particularly important as badly designed policies could enhance
the negative economic effects of terrorist actions.
Keywords: terror, terrorism, security policy
JEL: N40
Date: 2004-04
URL: http://d.repec.org/n?u=RePEc:hic:wpaper:03&r=all
446. The Welfare Effects of Farm Household Activity Choices in
Post-War Mozambique
Tilman Bruck (German Institute for Economic Research (DIW
Berlin))
This paper analyses the effects of activity choices on farm
household income and consumption in a war-affected developing
country. The study uses household survey data from Mozambique and
controls for the endogeneity of activity choices with
instrumental variables. War-time activity choices (such as
subsistence farming) are shown to enhance welfare in the post-war
period. Market and social exchange induce limited welfare gains.
Cotton adoption reduces household welfare, which contradicts
previous studies not controlling for endogenous activity choices.
The study thus demonstrates how standard predictions of economics
may become invalid in post-war economies. Furthermore, the paper
identifies pro-poor reconstruction policies.
Keywords: poverty, farm households, activity choices, rural
development, war, reconstruction
JEL: O12 I32 C31
Date: 2004-05
URL: http://d.repec.org/n?u=RePEc:hic:wpaper:04&r=all
447. Redistribution, Inequality and Political Conflict
Patricia Justino (Poverty Research Unit at Sussex)
This paper analyses the relationship between redistributive
policies and civil unrest. This relationship is modelled in a
discrete two-period recursive model. Key theoretical assumptions
and outcomes are tested empirically using data for a panel of 14
major Indian states between 1973 and 2000. The analysis shows
that, in the medium-term, redistributive policies have been
significantly more effective in reducing civil unrest in India
than more direct solutions, such as the use of police and
military forces, and have resulted in important positive
externalities on economic growth. This represents an important
lesson for countries where social cohesion tends to break
frequently but large-scale wars may be avoidable.
Keywords: redistribution, conflict, inequality, economic growth,
India, panel data
JEL: C33 O1 O53
Date: 2004
URL: http://d.repec.org/n?u=RePEc:hic:wpaper:05&r=all
448. An Economic Analysis of Security Policies
Tilman Bruck (German Institute for Economic Research (DIW
Berlin))
This paper analyses public policy choices in the security
economy from an economic perspective. It discusses the role of
public goods for national and global security and identifies the
importance of the first- and second-order indirect effects of
insecurity on economic activity, which include the behavioural
responses of agents and the government to security measures, akin
to such effects in insurance economics. Furthermore, key public
policy trade-offs are outlined, in particular between security
and efficiency, globalisation, equity and freedom. The analysis
identifies suitable policy options for raising security in the
national and international contexts and in view of these trade-
offs. A suitable balance between market and non-market
instruments in achieving security should be aimed for to minimise
the adverse effects of aiming for higher security. In addition,
the public good nature of security implies that international
coordination of security policies is important, despite this
process being itself fraught with enforcement problems.
Keywords: collective goods, public policy, regulation, risk,
security, terrorism
JEL: D74 H40 K40
Date: 2004-11
URL: http://d.repec.org/n?u=RePEc:hic:wpaper:06&r=all
449. Long Term Consequences Of Early Childhood Malnutrition
Harold Alderman (World Bank)
John Hoddinott (International Food Policy Research Institute)
Bill Kinsey (University of Zimbabwe and Free University,
Amsterdam)
This paper examines the impact of preschool malnutrition on
subsequent human capital formation in rural Zimbabwe using a
maternal fixed effects - instrumental variables (MFE-IV)
estimator with a long term panel data set. Representations of
civil war and drought “shocks” are used to identify
differences in preschool nutritional status across siblings.
Improvements in height-for-age in preschoolers are associated
with increased height as a young adult and number of grades of
schooling completed. Had the median pre-school child in this
sample had the stature of a median child in a developed country,
by adolescence, she would be 3.4 centimeters taller, had
completed an additional 0.85 grades of schooling and would have
commenced school six months earlier.
Keywords: health, education, shocks, Zimbabwe
JEL: I12 I20 O15
Date: 2004-07
URL: http://d.repec.org/n?u=RePEc:hic:wpaper:09&r=all