Showing papers by "London School of Economics and Political Science published in 1993"

Detrending, stylized facts and the business cycle

Abstract: The stylized facts of macroeconomic time series can be presented by fitting structural time series models. Within this framework, we analyse the consequences of the widely used detrending technique popularised by Hodrick and Prescott (1980). It is shown that mechanical detrending based on the Hodrick–Prescott filter can lead investigators to report spurious cyclical behaviour, and this point is illustrated with empirical examples. Structural time-series models also allow investigators to deal explicitly with seasonal and irregular movements that may distort estimated cyclical components. Finally, the structural framework provides a basis for exposing the limitations of ARIMA methodology and models based on a deterministic trend with a single break.

Does Electoral Accountability Affect Economic Policy Choices? Evidence from Gubernatorial Term Limits

Abstract: This paper uses data from U.S. states to investigate whether electoral accountability affects economic policy choices. We set up a model in which the possibility of being re-elected may curtail opportunistic behavior by incumbent governors. We find that facing a binding term limit affects choices on taxes, expenditures, state minimum wages and mandates on workers' compensation. Such effects are found also to vary with the party affiliation of the incumbent. The Democratic party also appears to suffer at the polls following the term of a lame-duck, Democratic incumbent.

Genealogies of calculation

Abstract: This paper calls firstly for genealogies of calculation, in contrast to traditional accounting history. The term genealogy conveys a focus on the outcomes of the past, rather than a quest for the origins of the present. It is intended to avoid an a priori limiting of the field of study to accounting as it currently exists, or to a particular accounting technique such as double-entry bookkeeping. And it entails an emphasis on the historical contingency of contemporary practices, a concern with the multiple and dispersed surfaces of emergence of disparate practices of economic calculation. Secondly, the paper emphasizes the discursive nature of calculation, the language and vocabularies in which a particular practice is articulated, the ideals attached to certain calculative technologies. Thirdly, the paper stresses the importance of attending to ensembles of practices and rationales that are assembled at various collective levels, rather than with isolated instances of this or that way of accounting. The delineation of the domain of traditional accounting history is illustrated by reference to three sets of issues: the links between double-entry bookkeeping and capitalism in the writings of Weber and Sombart; the links between bookkeeping practice and decision making in the writings of Yamey; and the quest for examples of “early management accounting” in the writings of those such as Edwards and Fleischman & Parker. In contrast to such concerns of accounting history, four genealogies are presented: the promotion of discounted cash-flow techniques for investment decisions in the U.K. in the 1960s; the emergence of costs in the late eighteenth century; the accounting for value added event in Britain in the late 1970s; and the construction of standard costing in the early decades of the twentieth century.

A Test for the Number of Factors in an Approximate Factor Model

Abstract: An important issue in applications of multifactor models of asset returns is the appropriate number of factors. Most extant tests for the number of factors are valid only for strict factor models, in which diversifiable returns are uncorrelated across assets. In this paper we develop a test statistic to determine the number of factors in an approximate factor model of asset returns, which does not require that diversifiable components of returns be uncorrelated across assets. We find evidence for one to six pervasive factors in the cross-section of New York Stock Exchange and American Stock Exchange stock returns.

Why China's economic reforms differ: the M-form hierarchy and entry/expansion of the non-state sector

Abstract: China's thirteen years of economic reforms (1979-1991) have achieved an average GNP annual growth rate of 8.6%. What makes China's reforms differ from those of Eastern Europe and the Soviet Union is the sustained entry and expansion of the non-state sector. We argue that the organization structure of the economy matters. Unlike their unitary hierarchical structure based on functional or specialization principles (the U-form), China's hierarchical economy has been the multi-layer-multi-regional one mainly based on territorial principle (the deep M-form, or briefly, the M-form). Reforms have further decentralized the M-form economy along regional lines, which provided flexibility and opportunities for carrying out regional experiments, for the rise of non-state enterprises, and for the emergence of markets. This is why China's non-state sector share of industrial output increased from 22% in 1978 to 47% in 1991 and its private sector's share from zero to about 10%, both being achieved without mass privatization and changes in the political system.

Women's Education, Child Welfare and Child Survival: A Review of the Evidence

Abstract: J. C. Caldwells 1979 paper on Nigeria suggested several pathways whereby the mothers education might enhance child survival. The World Fertility Survey (WFS) program considerably increased knowledge about the links between maternal education and child survival during the 1980s. Some of the areas improved by maternal education included cleanliness health services utilization child quality and the empowerment of women. Life events of the mother also exerted child survival effects: e.g. prenatal care vaccination for tetanus and type of assistance at delivery. Large differences according to maternal education were found for prenatal care in Bolivia and Egypt but there was much less difference in Kenya according to Demographic and Health Surveys (DHS) data. Educated women were much more likely to be attended by a trained person at delivery. Tetanus immunization differentials were small for Egypt and Kenya but substantial for Bolivia. Several multivariate analyses for 25 DHS surveys indicated that the odds of dying before age 2 for a child born to a mother with 7 or more years of education were only 42.5% compared with the children of uneducated mothers. The association of child survival with maternal education was weaker in sub-Saharan African countries possibly attributable to greater female autonomy child fostering and extreme hardship. Another analysis covering 17 DHS surveys and ages 1-24 months found that neonatal mortality was less sensitive to maternal education than mortality in the next 23 months. Stunting in early life was strongly related to maternal education but not as strongly as mortality at age 1-24 months. Maternal education was also strongly associated with immunization coverage and children of uneducated mothers were far less likely to be immunized. In addition diarrhea was at least 20% higher among children of uneducated mothers while more educated mothers were more likely to utilize health services for childhood diseases.

Incomplete Contracts, Vertical Integration, and Supply Assurance

Abstract: This paper extends the analysis of transactions cost models of vertical integration to multilateral settings. Its main focus is on supply assurance concerns which arise when several downstream firms are competing for inputs in limited supply. Integration reduces supply assurance concerns for an integrating firm but it may increase them for others. Therefore, to explain the scope of any firm, one must consider the overall network of production and distribution relations. Three fundamental questions are addressed: (1) What are the effects of different integration structures?; (2) What are the determinants of the socially efficient integration structures?; (3) In what way do equilibrium integration structures differ from socially efficient structures?

Forecasting Hourly Electricity Demand Using Time-Varying Splines

Abstract: A method for modeling a changing periodic pattern is developed. The use of time-varying splines enables this to be done relatively parsimoniously. The method is applied in a model used to forecast hourly electricity demand, with the periodic movements being intradaily or intraweekly. The full model contains other components, including a temperature response, which is also modeled using splines.

Faciliated Work Groups: Theory and Practice

Abstract: This paper concerns the facilitation of working groups whose general aims are to achieve a shared understanding of issues, a sense of common purpose and a mutual commitment to action. We see the main role of the facilitator in such a group as contributing to process and structure, not content. This view is coloured by our assumptions about groups and how their work can be facilitated: that groups have an emotional life which influences and is influenced by each participant who experiences a tension between what is best for the group and what is personally desired, and that the facilitator's main tasks are to see and understand the group life, intervening only to help the group maintain a task orientation to its work. To understand the group the facilitator observes verbal and non-verbal behaviour, attends to relationships between participants and maintains awareness of his or her own feelings. For some work groups, the facilitator can be helped by computers, which provide an effective means externalizing many aspects of group work. By assigning to the computer the information manipulation and communication tasks, group members can concentrate their attention on the judgmental tasks, and the facilitator can attend better to group processes. Effectively used, computers can help a group maximize the creative and minimize the destructive aspects of its life.

Computerization and Controversy: Value Conflicts and Social Choices

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The Tragedy of Cambodian History: Politics, War, and Revolution since 1945

Abstract: Introduction 1 In Search of Independence, 1945-1950 2 Political Warfare, 1950-1955 3 Sithanouk Unopposed, 1956-1962 4 Cambodia Clouds Over, 1963-1966 5 Changing the Rules, 1967-1969 6 Sliding Towards Chaos, 1970-1975 7 Revolution in Cambodia, 1975-1979 8 Inside the Typhoon: Testimonies

Accounting expertise and the politics of the product: Economic citizenship and modes of corporate governance

Abstract: The “rediscovery of the factory” has been one of the key events in American political and economic debates of the past decade. This paper addresses the complex of arguments, claims and strategies that have centered on the factory and manufacturing processes in American industry. These it terms the “politics of the product”. Accounting expertise, defined as a changing set of legitimated claims to competence, is fundamentally implicated in the politics of the product. For accounting expertise has been identified as an important part of the problem, rather than the solution. But the politics of the product is more than a set of claims and arguments. It also involves attempts to change the ways in which production processes are represented and acted upon. Three dimensions are identified: problematizations, programmes and technologies. Current attempts to reform the calculative technologies of accounting, through such mechanisms as activity based costing, are seen to be more than technical devices for better representing new manufacturing systems. Rather, they are considered to be an integral component of a significant shift in modes of corporate governance. Attempts to transform accountancy are held be intrinsically linked to attempts to foster a new form of economic citizenship. Changes in accounting expertise are thus seen to be centrally implicated in transformations in the government of economic life.

Disturbance smoother for state space models

Abstract: SUMMARY This paper develops a method to evaluate the smoothed estimator of the disturbance vector in a state space model together with its mean squared error matrix. This disturbance smoother also leads to an efficient smoother for the state vector. Applications include a method to calculate auxiliary residuals for unobserved components time series models and an EM algorithm for estimating covariance parameters in a state space model.

Wage Bargaining and the Phillips Curve: The Identification and Specification of Aggregate Wage Equations

Abstract: Most economists believe that wage-setting is very important for understanding macroeconomic behavior, but the form of wage equations commonly estimated suffer from problems of identification. The aim of this paper is to consider whether these problems are inevitable and, if they are not, to suggest ways in whi ch one can estimate structural models of wage-setting. It is argued that if one confines attention to models of wage bargaining t hat are commonly used, identification of the parameters of wage-setting should not be a problem and that the most appropriate form of an aggregate wage equation should be a Phillips Curve. Copyright 1993 by Royal Economic Society.

Regulation Theory, the Local State, and the Transition of Urban Politics:

Abstract: An effort is made in this paper to contribute to recent debates, inspired by the regulationist literature, on the restructuring of capitalist society. A major weakness in this literature concerns the treatment of the state, and especially the local state. Despite the fact that the state is clearly identified as a key component of any mode of regulation, the actual processes through which economic and social forces are translated into state activity are rarely examined. Moreover, these forces are usually assumed to operate at the national scale, but in this paper it is contended that the practices and relations of regulation also operate locally. These local spaces of regulation arise not only because of the uneven development of capitalist societies, but also because local agencies are often the very medium through which regulatory practices are interpreted and ultimately delivered. The local state is thus a key component in these local modes of regulation, and will be implicated in any transition from one mode to another. These issues are examined by looking at the changing nature of urban politics in three British 'cities': Sheffield, Bracknell, and Camden in inner London. It is concluded that the local state is both an object and an agent of regulation, which itself needs to be regulated so that its strategies and structures can be used to help forge a new social, political, and economic settlement.

News effects in a high-frequency model of the sterling-dollar exchange rate

Abstract: This paper uses an extremely high frequency data set on the dollar-sterllng exchange rate to investigate the impact of news events on the very short-term movements in exchange rates. The data set is a continuous record of the quoted price for the exchange rate on the Reuters screen. As such it records some 130,000 observations over an 8-week period. The paper investigates the time-series properties of the data using orthodox regression models, and then by making allowance for a time-varying conditional variance. The conclusions vary significantly in moving to this more sophisticated model. The exercises are repeated now incorporating news announcement effects, letting these affect the level of the exchange rate and then the conditional variance process. Again it is found that the conclusions are radically altered in moving to the increasingly sophisticated model.

Differential School Effectiveness: results from a reanalysis of the Inner London Education Authority's Junior School Project Data

Abstract: The paper reports the results of a reanalysis of data from a major longitudinal data base (the Inner London Education Authority's (ILEA) Junior School Project). Multilevel models are used to examine the extent of differential school effectiveness for reading and mathematics at entry (year 3) and at year 5, and the impact of pupil background characteristics. Differential school effectiveness is investigated for prior attainment in the two areas and for selected background characteristics. The results reveal the existence of differential effectiveness (differential school slopes) for both measures of prior attainment. No evidence of differential effectiveness for pupils of different groups (sex, social class, ethnicity) is found. The presentation of schools’ test results is also examined. Raw test averages are compared with school‐level residuals from multilevel analyses. Marked differences in schools’ rank positions are found and the implications for the publication of ‘league tables’ of schools’ ...

Optimum Experimental Designs for Properties of a Compartmental Model

Abstract: SUMMARY Three properties of interest in bioavailability studies using compartmental models are the area under the concentration curve, the maximum concentration, and the time to maximum concentration Methods are described for finding designs that minimize the variance of the estimates of these quantities in such a model These methods use prior information Both prior estimates and prior distributions are used The designs for an open one-compartment model are compared with the corresponding D,-optimum design for all parameters and also with designs that minimize the sum of the scaled variances of the individual properties

Alternative Funding Resources for Higher Education

Abstract: This paper discusses the funding of higher education, starting (Section II) with the theoretical answers to a number of key questions. Section III sets out alternative funding packages, and Section IV considers recent developments in a number of countries. To make such a vast topic manageable, the paper is limited in several ways. It discusses the funding but not the production of higher education. It does not discuss the nature of the 'product', nor the specific issues raised by the funding of research. It looks only at advanced industrialised economies.2 Finally, it attempts to be systematic in surveying broad options, but not in surveying countries. Since policy can usefully be assessed only against stated aims, a word is needed about objectives. Macro efficiency aims relate to the total quantity of resources devoted to higher education, i.e. to the size of the sector. Micro efficiency is concerned with the division of total higher education resources between teaching and research and between different subject areas, and with the quality of the output and the extent to which it satisfies the demands of its three major constituencies, students, employers and government. Equity aims relate to the distribution of higher education by socio-economic group. Improving access for students from disadvantaged backgrounds depends on the organisation both of higher education and of the school system. Thus equity includes discussion of how resources should be divided between higher education, and policies to promote access earlier in the system. UK policy is concerned particularly with macro efficiency (e.g. expansion of the higher education system) and with improving access. Other countries, such as the United States, with large systems and a fairly broad class composition, are more concerned with aspects of micro efficiency, most particularly the quality of education and its contribution to broader aims such as output growth. These different concerns should not be surprising, since they follow fairly directly from the different nature of the two systems. Large taxpayer subsidies (for tuition fees and/or living costs) create supply-side constraints because of the desire to contain public spending. Where, as in Britain, qualified students have no automatic entitlement to a university place, the constraint takes the form of a view (typically by the Treasury) about student numbers. The result

The Arbitrage Pricing Theory and Multifactor Models of Asset Returns

Abstract: The Arbitrage Pricing Theory (APT) of Ross (1976, 1977), and extensions of that theory, constitute an important branch of asset pricing theory and one of the primary alternatives to the Capital Asset Pricing Model (CAPM). In this chapter we survey the theoretical underpinnings, econometric testing, and applications of the APT. We aim for variety in viewpoint without attempting to be all-inclusive. Where necessary, we refer the reader to the primary literature for more complete treatments of the various research areas we discuss.

Indeterminacy and the specificity of accounting change: Renault 1898–1938☆

Abstract: This essay focuses on the manner in which an enterprise's accounting practices may be affected by a complex of independent and disparate external factors interacting with internal forces to create a sustained dynamic of change within the organisation. As its object of enquiry, the French motor car manufacturer Renault is studied over a forty-year period immediately preceding the Second World War. The conditioning influences of scientific management and statistical information and their interplay with Renault's costing concerns are examined. The study suggests that accounting change at Renault was dependent on a complex set of relationships and preconditions and that the specificity of the company's accounting controls was tied to both contemporary and historically distant influences rather than to notions of functional requirements dictated by processes internal to the organisation. As such, accounting change is argued to have been determined by circumstance as opposed to essence.

Common sense, science and social representations:

Abstract: The theory of social representations is perfectly suited to the empirical investigation of the public's understanding of science. A sharp distinction is drawn between a scientific theory and its social representation corresponding, respectively, to the contrasting worlds of science and of common sense. Representations of science are to be found in the media as well as in people's minds and need to be sampled and studied in both locations. Moscovici initiated this French tradition of research with his study, in the late 1950s, of psychoanalysis. It is a sociological form of social psychology with close affinities to the sociology of knowledge. The applicability to the natural sciences of a theory developed in relation to the social and human sciences is discussed. The views of Moscovici and of Wolpert are compared and contrasted, especially in regard to the relations between science and common sense. It is argued that the study of social representations is a form of social science that natural scientists n...