Showing papers in "Applied Economics in 2010"
TL;DR: In this article, the authors make a distinction between voluntary and involuntary early retirement, where voluntary early retirement results from employment constraints rather than from a preference for leisure relative to work, and find that involuntary early retirements are particularly widespread in Continental Europe.
Abstract: Recent literature makes a distinction between ‘voluntary’ and ‘involuntary’ early retirement, where ‘involuntary’ early retirement results from employment constraints rather than from a preference for leisure relative to work. This article analyses ‘voluntary’ and ‘involuntary’ early retirement based on international microdata covering 19 industrialized countries. The results show that ‘involuntary’ early retirement is particularly widespread in Continental Europe. Countries facing economic recessions and having strict employment protection legislation have higher shares of ‘involuntary’ retirements among early retirees. Generous early retirement provisions of the social security system do not only make ‘voluntary’ early retirement more attractive for individuals, but also induce firms to push more employees to retire early.
187 citations
TL;DR: In this paper, the authors analyse public sector efficiency in the new member states of the EU compared to that in emerging markets and find that expenditure efficiency across new EU member states is rather diverse especially as compared to the group of top performing emerging markets in Asia.
Abstract: In this article, we analyse public sector efficiency in the new member states of the EU compared to that in emerging markets. After a conceptual discussion of expenditure efficiency measurement, we compute efficiency scores and rankings by applying a range of measurement techniques. The study finds that expenditure efficiency across new EU member states is rather diverse especially as compared to the group of top performing emerging markets in Asia. Econometric analysis shows that higher income, civil service competence and education levels as well as the security of property rights seem to facilitate the prevention of inefficiencies in the public sector.
183 citations
TL;DR: This article analyzed the efficiency of 72 public German universities for the years 1998-2003, applying data envelopment and stochastic frontier analysis, and found that East German universities have performed better in total factor productivity change compared to those in West Germany.
Abstract: Due to tight public budget constraints, the efficiency of publicly financed universities in Germany is receiving increasing attention in the academic as well as in the public discourse. Against this background, we analyse the efficiency of 72 public German universities for the years 1998–2003, applying data envelopment and stochastic frontier analysis. Contrary to earlier studies, we account for the faculty composition of universities which proves to be an essential element in the efficiency of higher education. Our main finding is that East German universities have performed better in total factor productivity change compared to those in West Germany. However, when looking at mean efficiency scores over the sample period, West German universities still appear at the top end of relative efficiency outcomes.
145 citations
TL;DR: In this article, the authors investigated the impact of structural heterogeneity among euro-area economies on monetary policy decision-making and found that the welfare underperformance of an area-wide model-based rule is not only nonnegligible, but also robust with respect to a number of factors.
Abstract: Should euro-area economies be modelled in an aggregate (area-wide) fashion or in a disaggregate (multi-country) one? This article tackles that question from both statistical and economic viewpoint. From a statistical viewpoint, aggregation bias criteria are found to signal that the degree of structural heterogeneity among euro-area economies is such that the loss of information entailed by an aggregate modelling approach may be far from trifling. From an economic viewpoint, we investigate the following issue. Are those statistically detectable heterogeneities of any practical relevance when it comes to supporting monetary policy decision-making? To provide an answer to this question, we compute simple optimal monetary policy reaction functions on the basis of either an aggregate model or a disaggregate one, and compare the associated welfare losses. The results suggest that the welfare under-performance of an area-wide-model-based rule is not only nonnegligible, but also robust with respect to a number of...
143 citations
TL;DR: In this article, the authors test a new model where the entrepreneurial decision is described as a process of successive engagement levels, i.e., as an entrepreneurial ladder, and five levels are distinguished using nearly 12,000 observations from the 2004 "Flash Eurobarometer survey on Entrepreneurship" covering the 25 European Union member states and the United States.
Abstract: We test a new model where the entrepreneurial decision is described as a process of successive engagement levels, i.e., as an entrepreneurial ladder. Five levels are distinguished using nearly 12,000 observations from the 2004 "Flash Eurobarometer survey on Entrepreneurship" covering the 25 European Union member states and the United States. The most surprising of the many results is that perception of lack of financial support is no obstacle for moving to a higher entrepreneurial engagement level whereas perceived administrative complexity is a significant obstacle. We also show that the effect of age on the probability of moving forward in the entrepreneurial process becomes negative after a certain age implying that if entrepreneurial engagements are not taken early enough in life they may well never be taken.
125 citations
TL;DR: In this paper, the authors investigated efficiency in the municipal sector of the Region of Murcia (Spain) with the aim of collecting data of 31 municipalities (69% of the response rate) and found that public management by means of a company controlled by the local government is clearly more efficient than private.
Abstract: This article, investigates efficiency in the municipal sector of the Region of Murcia (Spain) With that aim, data of 31 municipalities (69% of the response rate) have been collected Services analysed are: police, culture, sports, green areas, refuse collection and water supply Ratios of efficiency have been related to other control variables, such as economic level, size of the municipality, decentralization, political sign and financial situation A weak positive relation between economic level and efficiency arises Some weak evidence also exists that public management of refuse collection is more efficient than private In water supply, public management by means of a company controlled by the local government is clearly more efficient than private It also seems that the higher the tax burden, the greater the efficiency in providing services
123 citations
TL;DR: In this paper, the authors used bank level data from 1991 to 2000 and evaluated how financial reforms affect banking efficiency of domestic and foreign banks in Pakistan and found that banking efficiency falls during initial reform period when banks adjust to enhanced competition but increases in more advanced stages of reform.
Abstract: This article uses a unique bank level data from 1991 to 2000 and evaluates how financial reforms affect banking efficiency of domestic and foreign banks in Pakistan. The results suggest that banking efficiency falls during initial reform period when banks adjust to enhanced competition but increases in more advanced stages of reform. While in general foreign and private banks show superior efficiency and factor productivity than do state-owned banks, the relative performance of foreign banks worsens after the consolidation stage of the financial reforms is over. We show the importance of link between bank size, asset quality and bank branches with efficiency indexes and also note that every 10% increase in share of nonperforming to total loans decreases banking efficiency by 6 to 10%.
114 citations
TL;DR: In this paper, the authors investigated tax-planning behavior by means of inter-company finance and the effectiveness of government countermeasures via thin-capitalization rules. And they found that tax planning via internal finance is effectively limited by thin capitalization rules, which induce significantly lower internal borrowing.
Abstract: This article investigates tax-planning behaviour by means of inter-company finance and the effectiveness of government countermeasures via thin-capitalization rules A simple theoretical model which considers the financing decision of a multinational company is used to obtain empirical implications The empirical analysis, based on German inbound investment data from 1996 to 2004, confirms a significant impact of tax-rate differentials on the use of inter-company debt The effectiveness of the German thin-capitalization rule is tested by using legal amendments as natural experiments The results suggest that thin-capitalization rules induce significantly lower internal borrowing Hence, tax planning via internal finance is effectively limited by thin-capitalization rules
113 citations
TL;DR: In this article, the authors used a unique data set on criminal behaviour to analyse the effects of education on offences and crimes committed and found that substantial savings on the social costs of crime can be obtained by investing in education.
Abstract: In this article, we use a unique data set on criminal behaviour to analyse the effects of education on offences and crimes committed. The findings suggest that substantial savings on the social costs of crime can be obtained by investing in education. We find that the probability of committing crimes like shop lifting, vandalism and threat, assault and injury decrease with years of education. The probability of committing tax fraud, however, increases with years of education. We further find that higher educated people have more permissive attitudes and social norms towards criminal behaviour.
108 citations
TL;DR: In this paper, a unique data set is used to provide a detailed examination of the survival of newly established manufacturing firms in north-east England, using data on 781 firms established between 1973 and 2001, log-logistic hazard models are estimated separately for (i) micro-enterprises and (ii) small and medium establishments (SMEs).
Abstract: A unique data set is used to provide a detailed examination of the survival of newly established manufacturing firms in north-east England. Using data on 781 firms established between 1973 and 2001, log-logistic hazard models are estimated separately for (i) micro-enterprises and (ii) small and medium establishments (SMEs). Both micro-enterprises and SMEs show clear evidence of positive duration dependence, followed by negative duration dependence. We find the two firm types are differentially affected by firm-specific and macro-economic variables. Increases in initial plant size impact negatively on micro-enterprise survival and positively on SME survival.
107 citations
TL;DR: In this article, a random parameters stochastic frontier model is applied to Italian data in order to evaluate the cost function and efficiency of higher education institutions, which yields useful information about inter-institutional variation in cost structure and technical efficiency.
Abstract: A random parameters stochastic frontier model is applied to Italian data in order to evaluate the cost function and efficiency of higher education institutions. The method yields useful information about inter-institutional variation in cost structure and technical efficiency. Returns to scale and scope are evaluated for the typical university, and it is found that these returns are almost ubiquitously decreasing, a finding with clear policy implications.
TL;DR: In this paper, the authors compare standard linear models with models that characterize the relationship between exchange rate and the underlying fundamentals by nonlinear dynamics and find that linear models tend to outperform at short forecast horizons especially when deviations from long-term equilibrium are small.
Abstract: This article investigates the out-of-sample forecast performance of a set of competing models of exchange rate determination. We compare standard linear models with models that characterize the relationship between exchange rate and the underlying fundamentals by nonlinear dynamics. Linear models tend to outperform at short forecast horizons especially when deviations from long-term equilibrium are small. In contrast, nonlinear models with more elaborate mean-reverting components dominate at longer horizons especially when deviations from long-term equilibrium are large. The results also suggest that combining different forecasting procedures generally produces more accurate forecasts than can be attained from a single model.
TL;DR: In this paper, the authors investigated the Environmental Kuznets Curves (EKC) for CO2 emissions in a panel of 109 countries during the period 1959 to 2001, and showed that different EKC dynamics are associated with the different sub-samples of countries considered.
Abstract: This article investigates the Environmental Kuznets Curves (EKC) for CO2 emissions in a panel of 109 countries during the period 1959 to 2001. The length of the series makes the application of a heterogeneous estimator suitable from an econometric point of view. The results, based on the hierarchical Bayes estimator, show that different EKC dynamics are associated with the different sub-samples of countries considered. On average, more industrialized countries show evidence of EKC in quadratic specifications, which nevertheless are probably evolving into an N-shape based on their cubic specification. Nevertheless, it is worth noting that the EU, and not the Umbrella Group led by US, has been driving currently observed EKC-like shapes. The latter is associated to monotonic income–CO2 dynamics. The EU shows a clear EKC shape. Evidence for less-developed countries consistently shows that CO2 emissions rise positively with income, though there are some signs of an EKC. Analyses of future performance, neverthe...
TL;DR: This article applied meta-regression analysis (MRA) to the empirical literature to identify factors that help to explain why estimated trade effects vary from significantly negative to significantly positive, and suggested the importance of hedging opportunities for trade promotion.
Abstract: The trade effects of exchange rate variability have been an issue in international economics for the past 30 years. The contribution of this article is to apply meta-regression analysis (MRA) to the empirical literature. On average, exchange rate variability exerts a negative effect on international trade. Yet MRA confirms the view that this result is highly conditional, by identifying factors that help to explain why estimated trade effects vary from significantly negative to significantly positive. MRA evidence on the pronounced heterogeneity of the empirical findings may be instructive for policy: first, by establishing that average trade effects are not sufficiently robust to generalize across countries; and second, by suggesting the importance of hedging opportunities – hence of financial development – for trade promotion. For the practice of MRA, we make a case for checking the robustness of results with respect to estimation technique, model specification and sample.
TL;DR: In this paper, the authors present a method for jointly evaluating the direction of change predictions of real Gross Domestic Product (GDP) growth and inflation, and conclude that some of the inflation forecasts, examined separately, were not valuable.
Abstract: Many studies have undertaken separate analyses of the Fed's forecasts of real Gross Domestic Product (GDP) growth and inflation. This article presents a method for jointly evaluating the direction of change predictions of these variables. We conclude that some of the inflation forecasts, examined separately, were not valuable. However, the joint pattern of GDP and inflation projections was generally in accord with the economy's movements. ‘… directional forecasting … is now an increasingly popular metric for forecasting performance….’ (Pesaran and Timmermann, 2004, 414)
TL;DR: In this article, the authors studied the time-series properties of both inflation and core inflation during the 1995-2006 period for the Mexican economy, using recently developed techniques to detect a change in the persistence of economic time series.
Abstract: When a central bank commits credibly to a nonaccommodative monetary policy, observed inflation should be a stationary process. In countries where, for a variety of reasons, the determinants of inflation could lead it to follow a nonstationary process, the adoption of a credible disinflationary programme should therefore induce a fundamental change in the stochastic process governing inflation and, in particular, should diminish its persistence. This article studies the time-series properties of both inflation and core inflation during the 1995–2006 period for the Mexican economy, using recently developed techniques to detect a change in the persistence of economic time series. Consistently with the adoption of an inflation-targeting framework, the results suggest that inflation in Mexico seems to have indeed switched from a nonstationary to a stationary process around the end of year 2000 or the beginning of 2001.
TL;DR: In this article, the authors employ the bounds test for cointegration and Granger causality tests to investigate the long-run equilibrium relationship and the direction of causality between financial development, international trade and real income growth for the Cyprus economy.
Abstract: This study employs the bounds test for co-integration and Granger causality tests to investigate the long-run equilibrium relationship and the direction of causality between financial development, international trade and real income growth for the Cyprus economy. The results of the study reveal that financial development as measured by broad money (M2), international trade and real income growth are cointegrated; thus, a long-run equilibrium relationship can be inferred among these three variables. On the other hand, Granger causality test results suggest that in Cyprus the growth in real income stimulates the growth of international trade (both exports and imports) and the growth of money supply. Furthermore, growth in imports of goods and services also stimulates a growth in exports of goods and services of Cyprus. Although this result contradicts our initial expectations, it indicates the importance of capital inflows in Cyprus that plays a major role in financing the investments mainly in the tourism ...
TL;DR: This article examined the impact of inward Foreign Direct Investment (FDI) on host countries' domestic investment and found that inward FDI has a negative contemporaneous effect on domestic investment, while the cumulative effect of FDI over time tends to be positive.
Abstract: This article examines the impact of inward Foreign Direct Investment (FDI) on host countries’ domestic investment Utilizing data from 50 countries over the period of 1970 to 2004, we find that inward FDI has a negative contemporaneous effect on domestic investment, while the cumulative effect of FDI over time tends to be positive In addition, we separately study FDI in Developed Countries (DCs) and Less Developed Countries (LDCs) The effect of contemporaneous FDI on domestic investment is negative in DCs, and the cumulative effect of FDI is neutral Strong evidence suggests that the contemporaneous effect of FDI on domestic investment is neutral in LDCs, while the cumulative effect of FDI is positive
TL;DR: In this paper, the authors investigated whether oil price shocks have nonlinear effects on stock returns and found that an increase in oil prices has a negative and significant impact on stock prices in one state of the economy, whereas this effect is significantly dampened in another state of economy.
Abstract: Using Markov-switching models, we investigate whether oil price shocks have nonlinear effects on stock returns. Empirical evidence from a set of international stock indexes suggests that an increase in oil prices has a negative and significant impact on stock prices in one state of the economy, whereas this effect is significantly dampened in another state of the economy. Furthermore, it is shown that changes in oil prices or in oil price volatility do not lead to a higher probability of switching between regimes.
TL;DR: In this paper, the authors investigated two possible explanations for low-educated workers' unwillingness to participate in further training: the lower economic returns to these investments or their lower willingness to participate.
Abstract: Several studies document that low-educated workers participate less often in further training than high-educated workers. This article investigates two possible explanations: low-educated workers invest less in training because of (1) the lower economic returns to these investments or (2) their lower willingness to participate in training. Controlling for unobserved heterogeneity, we find that the economic returns to training for low-educated workers are positive and not significantly different from those for high-educated workers. However, low-educated workers are significantly less willing to participate in training. We show that this lesser willingness to train is driven by economic preferences, and personality traits.
TL;DR: In this paper, the authors present the results of an empirical study on the effects of the patent stock on profitability of German manufacturing firms and use a number of control variables including measures of competition and firm leadership.
Abstract: Successful innovative activity is a major contribution to the intangible capital of firms. Although its importance is generally acknowledged, the contribution to companies' profits is a priori unclear. We present the results of an empirical study on the effects of the patent stock on profitability. The data base is a representative sample of German manufacturing firms and we use a number of control variables including measures of competition and firm leadership. It turns out that the patent stock has a strong and robust effect on profitability.
TL;DR: The authors empirically analyse the response of labour market related variables in the US manufacturing sector to various shocks, notably to trade openness and technology, as well as examining spillovers from industry-specific labour market shocks.
Abstract: We empirically analyse the response of labour market related variables in the US manufacturing sector to various shocks, notably to trade openness and technology, as well as examining spillovers from industry-specific labour market shocks The econometric approach involves an application of the recently developed Global Vector Autoregression methodology of Dees et al (2007) to 12 manufacturing industries over the period 1977–2003 The framework allows us to analyse the response of a standard set of labour-market related variables (employment, real compensation, productivity and capital stock) to exogenous factors (a sector-specific measure of trade openness, a common technology and oil price shock), along with industry spillovers using specific measures of manufacturing-wide variables for each sector Generalized impulse responses indicate that increased trade openness negatively affects real compensation, has negligible employment effects and leads to higher labour productivity These impacts, however,
TL;DR: In this paper, the authors apply stochastic data envelope analysis (SDEA) to assess the efficiency of hotels and investigate the determinants of hotel efficiency using Tobit regression model.
Abstract: This current study is the first to apply Stochastic Data Envelopment Analysis (SDEA) approach to assess the efficiency of hotels. The determinants of hotel efficiency were also investigated employing the Tobit regression model approach. The SDEA results show that the SDEA efficiency measures are higher than the deterministic ones and the greater the stochastic variability of outputs, the closer the envelope moves successively to any given observation and the efficiency score approaches one. The optimal solution to SDEA involves the presence of some buffer (slack) of all outputs. In applications involving practice production situation, such buffer (slack) can be interpreted as the firms' need to hold inventory, excess capacity and organizational slack against stochastic uncertainty of market environment. Our results also indicate that resort hotels achieve better efficiency than those in metropolitan areas and operating as part of a chain is not the main determinant of the efficiency of international touri...
TL;DR: In this paper, the authors provide a critical assessment of the line of research that measures speculative and hedging activities in futures markets from volume and open interest data, and analyse empirically the basic statistical properties of all the ratios when they are applied to real data for some of the stock index futures contracts most actively traded in the world.
Abstract: This article provides a critical assessment of the line of research that measures speculative and hedging activities in futures markets from volume and open interest data. It makes several contributions. First, a detailed theoretical analysis of the measures proposed in the previous literature as proxies for speculative activity clarifies the circumstances in which they fail, as well as the assumptions that have to be made, when they are used as intended. Second, we propose a new way of combining the volume and the open interest figures, which provides additional information regarding the type of trading activity that takes place in the market on a given date. Finally, we analyse empirically the basic statistical properties of all the ratios when they are applied to real data for some of the stock index futures contracts most actively traded in the world. This empirical analysis shows the diverse behaviour of the ratios when they are applied to a common sample of real data, which confirms our previous the...
TL;DR: In this paper, an advanced panel threshold regression model is employed to investigate the panel threshold effect of R&D intensity on firm performance among publicly traded Taiwan information technology and electronic firms.
Abstract: This article tests whether there is an optimal level of research and development (R&D) intensity at which point a firm is able to maximize its performance. An advanced panel threshold regression model is employed to investigate the panel threshold effect of R&D intensity on firm performance among publicly traded Taiwan information technology and electronic firms. The results confirm that a single-threshold effect does exist and show an inverted-U correlation between R&D intensity and firm performance. This article demonstrates that it is possible to identify the definitive level beyond which a further increase in R&D expenditure does not yield proportional rewards. Some important policy implications emerge from the findings.
TL;DR: In this article, the authors re-examine the sustainability hypothesis by testing whether government revenues and expenditures for eight rich OECD countries between 1977Q1 and 2005Q4 are cointegrated.
Abstract: This study reexamines the sustainability hypothesis by testing whether government revenues and expenditures for eight rich OECD countries between 1977Q1 and 2005Q4 are cointegrated. For this purpose, a nonstationary panel data approach is adopted, which is general enough to permit for cross-country dependence as well as structural breaks representing major shifts in fiscal policy. In contrast to many earlier studies, the results reported in this study suggest that the sustainability hypothesis cannot be rejected.
TL;DR: In this article, the authors investigate empirically the link between the tax reform and the investment performance of Chile since the reform and find that higher taxes increase the cost of capital (cost of capital channel); and on the other, they reduce internal funds available for investment (liquidity constraint channel).
Abstract: Along with several structural reforms, Chile embarked upon a major income tax reform in the eighties. Its basic feature was a significant reduction in the corporate income tax rate. The purpose of this article is to investigate empirically the link between the tax reform and the investment performance of Chile since the reform. Macroeconomic and microeconomic evidence is found to be consistent with the hypothesis of the reduction in the corporate income tax as being one of the determinants of the investment boom of the late eighties and nineties in Chile. Our estimations suggest that there are two channels in which taxes affect investment: on the one hand, higher taxes increase the cost of capital (cost of capital channel); and on the other, they reduce internal funds available for investment (liquidity constraint channel).
TL;DR: In this paper, the authors investigated the impact of BSE and bird flu on consumers' meat demand in Japan by using the "almost ideal" demand system, and found that BSE had a larger impact on consumers’ meat demand than did bird flu.
Abstract: In this article, we investigate the impact of BSE and bird flu on consumers’ meat demand in Japan by using the ‘almost ideal’ demand system. The BSE and bird flu scares brought about a fall in demand for beef and chicken, respectively, and an upturn in demand for pork and fishery products, which are substitutes for beef and chicken in Japan. We also find that the bird flu outbreak had no impact on the market share for beef. This suggests that BSE had a larger impact on consumers’ meat demand than did bird flu. Our empirical results also show that BSE has had a persistent impact whereas, bird flu has not. These differences might depend on the characteristics of each disease, such as the incubation period, cure rate and infection risk.
TL;DR: In this article, the applicability of the framework underlying Solow (1956) to analyse the determinants output in Kiribati for the period 1970 to 2005 was explored.
Abstract: Country specific time-series models of the determinants of output for the small developing island countries in the Pacific region are relatively few. This article explores the applicability of the framework underlying Solow (1956) to analyse the determinants output in Kiribati for the period 1970 to 2005. It is found that technical progress in Kiribati has been negative virtually offsetting the positive effects of factor accumulation. Aid and remittances have negative effects and exports have only a small positive effect in the short-run.
TL;DR: In this paper, the authors use both ARCH and GARCH models to estimate price conditional heteroscedasticity and find evidence of a time-varying property in the volatilities of the house price series.
Abstract: This article analyses investment risk in the housing market by examining volatility properties of house prices for the UK. We use both ARCH and GARCH models to estimate price conditional heteroscedasticity and find evidence of a time-varying property in the volatilities of the house price series. We then use the SWARCH model and find there are three volatility states in the price series. Our estimations suggest the UK housing markets are relatively stable and different states do not switch very often. The magnitude of high price volatility is as high as 20.99 times of the low volatility for the older housing market and 14 times of the low volatility for the new housing market. In addition, the older housing market is less efficient than the new housing market, since the impacts of events on the volatility state of the older house prices is more lasting than in new housing market.