Showing papers in "Economics Bulletin in 2007"

The Ramsey model with logistic population growth

Abstract: In standard economic growth theory it is assumed that labor force follows exponential growth, a not realistic assumption. As described in Maynard Smith (1974), the growth of natural populations is more accurately depicted by a logistic growth law. In this paper we analyze how the Ramsey growth model is affected by logistic growth of population, comparing it with the classic Ramsey model. We show that there is a unique nontrivial steady state of the model and that the parameters of the logistic equation play no role in determining long run equilibrium per worker level of consumption and capital. In addition, we study the stability of the model showing that its nontrivial equilibrium is a saddle point.

Foreign Aid, FDI and Economic Growth in East European Countries

Abstract: This paper examines the effectiveness of foreign aid and foreign direct investment in the Czech Republic, Estonia, Hungary, Latvia, Lithuania and Poland. The model includes the labor force, capital stock, foreign aid and foreign direct investment, and is estimated using pooled annual time series data from 1993 to 2002. Before carrying out the estimation, the time series properties of the data are diagnosed and an error-correction model is developed and estimated using a fixed-effects estimator. The results indicate that an increase in the stock of domestic capital and inflow of foreign direct investment are significant factors that positively affect economic growth in these countries. Foreign aid did not seem to have any significant effect on real GDP.

Comparison of Panel Cointegration Tests

Abstract: The main aim of this paper is to compare the size and size-adjusted power properties of four residual-based and one maximum-likelihood-based panel cointegration tests with the help of Monte Carlo simulations. In this study the panel-‰, the group‰, the panel-t, the group-t statistics of Pedroni (1999) and the standardized LR-bar statistic of Larsson et al. (2001) are considered. The simulation results indicate that the panel-t and standardized LR-bar statistic have the best size and power properties among the flve panel cointegration test statistics evaluated. Finally, the Fisher Hypothesis is tested with two difierent data sets for OECD countries. The results point out the existence of the Fisher relation.

SME Innovation in the Malaysian Manufacturing Sector

Abstract: This paper examines the determinants of innovation amongst small and medium enterprises in the Malaysian manufacturing sector using firm-level data. For small-sized firms, younger firms are more likely to innovate compared to older firms. However, for medium-sized and large-sized firms, older firms are more likely to innovate. The extent of foreign ownership is not an important determinant of innovation. Small-sized firms with more employees are more likely to innovate. Medium-sized firms that produce for domestic market tend to be more innovative. In terms of ownership structure, medium-sized firms that are public limited companies are less likely to innovate. The relationship between technological characteristics of industry and firms’ likelihood to innovate appear to be complex. Higher market concentration is associated with higher probability to innovate for medium-sized firms.

Does the "Phillips Curve" Really Exist? New Empirical Evidence from Malaysia

Abstract: The hypothesized trade-off relationship between inflation rate and unemployment rate has been known as the “Phillips curve”. Though the Phillips curve has played an important role in the decision-making process on macroeconomic policy, there have been critics who doubted the existence of the “Phillips curve”. Despite a number of studies on the Phillips curve, there has been a lack of research that probed the hypothesis in the developing countries’ context. This paper chooses Malaysia as a case study to empirically examine the relationship between inflation rate and unemployment rate. The most interesting finding of this paper is the existence of a long-run and trade-off relationship ‐ and also causal relationship -- between the unemployment rate and the inflation rate in Malaysia. In other word, this paper has provided an empirical evidence to support the existence of the Phillips curve in the case of Malaysia.

Relationship between education and GDP growth: a mutivariate causality analysis for Bangladesh

Abstract: This paper uses the multivariate causality analysis to examine relationship between education and growth in Bangladesh using annual time series data from 1976 to 2003. Recent research works have preferred multivariate to the bivariate approach as the former is thought to be more general than the latter. Besides growth and education whose relationship we examined, two other variables included in our analysis are capital and labour. The empirical results show evidence of bidirectional causality between education and growth in Bangladesh.

Mean reversion in stock prices: new evidence from panel unit tests for seventeen European countries

Abstract: There is a large and growing literature that investigates evidence for mean reversion in stock prices. Empirically, there is no consensus as to whether stock prices are mean reverting or random walk processes at best, the results are mixed. In this paper, we provide further evidence on the mean reversion hypothesis for seventeen European countries using the Levin and Lin (1992), seemingly unrelated regression and the multivariate augmented Dickey-Fuller panel unit root tests. Our main finding is that stock prices of all seventeen European countries are characterised by a unit root, consistent with the efficient market hypothesis.

On the Link Between the Concepts of Kurtosis and Bipolarization

Abstract: In a paper on the measurement of the flatness of an income distribution Berrebi and Silber (1989) showed how it was possible to derive from the Gini index a measure of the degree of Kurtosis of a distribution whose definition made it quite similar to the more famous Pearson measure of Kurtosis. This note shows that it is possible to derive from the index of flatness proposed by Berrebi and Silber (1989) a measure of bipolarization that has all the important properties one would like a bipolarization index to have.

Foreign Direct Investment and Transition Economies: Empirical Evidence from a Panel Data Estimator

Abstract: This paper identifies the factors that determine FDI inflows in the former socialist countries of Eastern and Central Europe. In our analysis, FDI inflows are modeled as a function of the market size (i.e., real GDP), inflation, the current account balance, the real exchange rate, openness and government regulation for the host country. Using data from 1995 to 2004, a panel data estimator suggests that the real exchange rate, openness of the economy and deregulation are the primary factors determining FDI inflows in these countries.

On the Use of Cheap Talk in New Product Valuation

Abstract: This study reports on the potential use of “cheap talk” in hypothetical new product valuation research using a simple field experiment eliciting subjects’ willingness to pay for a new product. While cheap talk has been used in the non-market valuation literature, its application in hypothetical new product valuation research is very limited.

Economic growth and environmental quality: a meta-analysis of environmental Kuznets curve studies

Abstract: Meta-analysis is used to investigate systematic variation across Environmental Kuznets Curve (EKC) studies. Based on 588 observations, modeling results indicate that data characteristics, study methods, estimation techniques, and the chosen environmental quality degradation measure all significantly affect the absence or presence of the EKC, and any predicted income turning points (ITPs). With respect to anthropogenic activity-related greenhouse gases, the evidence does not support the presence of an EKC.

The Taiwan stock market does follow a random walk

Abstract: Applying the Lo and MacKinlay variance ratio test on the weekly returns from the Taiwan stock market from 1990 to mid 2006, I obtained results strongly indicative of the fact that not only does the Taiwan composite stock index move in a random walk fashion, returns for the individual stocks do so as we. Previous authors employing the same methodology obtained opposite results, namely, that the movements of the Taiwan stock composite index do not follow a random walk.

The determinants of costs and efficiencies where producers are heterogeneous: the case of Spanish universities

Abstract: A multi-product cost function is evaluated for the universities of Spain, using a random parameters stochastic frontier model. This allows estimates of systematic cost differences to be obtained alongside estimates of universities’ efficiency. In addition, we evaluate average incremental costs of key university output, and provide measures of economies of scale and scope.

Is there a J-Curve at the Industry Level?

Abstract: There exits two groups of studies that have investigated the short-run and the long-run effects of currency depreciation on the trade balance. The first group has employed trade data at the aggregate level between one country and the rest of the world. The second group has used trade data at the bilateral level between one country and her major trading partners. Both groups have provided mixed conclusions. In this paper we employ import and export data at industry level. Sixty six industries in the U.S. (SITC Commodity Groupings) have been identified for which monthly data over the January 1991-August 2002 period are used in investigating the short-run and the long-run effects of real depreciation of the dollar. The results reveal evidence of the J-Curve effect only in six industries. However, the long-run favorable effect of real depreciation is supported in 22 industries

Okun’s law in the Spanish regions.

Abstract: The purpose of this paper is to analyse Okun’s law for Spain and its seventeen regions over the period 1980-2004. Based on its “gap” specification and using two different detrending techniques, the results show that an inverse relationship between unemployment and output holds for most of the Spanish regions and for the whole country. However, the quantitative values of Okun’s coefficients for these regions are quite different. In addition, the coefficients for each region varied across the two detrending techniques. Even so, these coefficients are lower than those initially estimated by Okun and others.

Does the US IT stock market dominate other IT stock markets: Evidence from multivariate GARCH model

Abstract: Utilizing multivariate GARCH framework, this study finds that generally the US Information Technology (IT) market contributes a strong volatility rather than mean spillover effect to non-US IT markets, implying that the US IT market plays a dominant role in affecting the volatility of world IT markets. However, our further analysis of the dynamic path of correlation coefficients reveals that the strong relationship between US and non-US IT markets had weakened after the burst of the IT bubble.

Capacity Choice in a Mixed Duopoly under Price Competition

Abstract: This paper shows that when firms compete on prices in a mixed duopoly, the public firm chooses over-capacity when products are substitutes and under-capacity when products are complements. The private firm always chooses under-capacity. This result is in contrast with that obtained in the literature assuming quantity competition.

A century of purchasing power parity: Further evidence

Abstract: Since the publication of Taylor's (2002) results supporting Purchasing Power Parity (PPP) theory using a century of data, several authors have tried to verify PPP using the same data set. While one study has rejected Taylor''s strong conclusion, others have supported it. In this paper we use yet a different unit root testing procedure to determine whether Taylor''s results are sensitive to switching the null hypothesis of stationarity with the alternative of non-stationarity. More precisely, we rely upon Kwiatkowski, et al. (1992) test and apply it to the real bilateral and real effective exchange rates of 20 countries in Taylor''s sample. The results provide support for PPP in 18 of the 20 countries that are much closer to Taylor''s findings than any other study.

The adjusted churn: an index of competitive balance for sports leagues based on changes in team standings over time

Abstract: This paper introduces an index called the adjusted churn, designed to measure competitive balance in sports leagues based on changes in team standings over time. This is a simple yet powerful index that varies between zero and one. A value of zero indicates no change in league standings from year to year and therefore minimal competitive balance. A value of one indicates the maximum possible turnover in league standings from year to year and therefore a high level of competitive balance. Application of this index to Major League Baseball suggests that there has been a significant decline in competitive balance in MLB since the 1990s with the most severe decline occurring in the American League. This index also indicates minimal competitive balance for the American League Eastern Division of MLB from 1998 to 2003

Privatization and government preference

Abstract: This paper uses a mixed oligopoly model to examine the relationship between the privatization of a public firm and government preferences for tax revenue. From a public choice viewpoint, we assume the government prefers tax revenue to the sum of consumer and producer surplus, whereas the public firm only cares about the sum of consumer and producer surplus. The results indicate that if the government sufficiently prefers tax revenue, it will not privatize the public firm.

Understanding monetary policy in Central European countries using Taylor-type rules: the case of the Visegrad four

Abstract: This paper assesses to what extent simple Taylor-type monetary policy rules provide a good description of interest rate setting behaviour in the Visegrad four countries. Six different models are analysed, chosen on the basis of possessing desirable theoretical features. The paper finds that exchange rates feature prominently in three of the four countries' policy rules and that the results are sensitive to the measure of inflation used.

Mixed Oligopoly and Productivity-Improving Mergers

Abstract: This paper investigates productivity improving merger activities between a public firm and a private firm in mixed oligopoly. We assume that the merged firm has two plants (formerly, firms). We show that both owners of a public firm and a private firm want to merge by coordinating their shareholding ratios in the merged firm, whenever the number of private firms is larger than a critical value, while the public firm does not want to merge without the effect of improving the productivity of the merged firm.

Optimal licensing contract in an open economy

Abstract: Empirical evidences show that technology licensing contracts differ significantly and may consist of only up-front fixed-fee, only output royalty or the combinations of fixed-fee and output royalty We explain these possibilities under international technology transfer The trade-off between the incentive for saving the transportation cost of exporting and the incentive for reducing competition after licensing is responsible for the results Our explanation differs from the existing studies where imitation and product differentiation are responsible for different licensing contracts

Strategic Targeted Advertising and Market Fragmentation

Abstract: This paper proves that oligopolistic price competition with both targeted advertising and targeted prices can lead to a permanent fragmentation of the market into a local monopoly. However, compared to mass advertising, targeting increases social welfare and turns out to be more beneficial for consumers than for firms.

The characteristics of chemical firms registering for ISO 14001 or Responsible Care

Abstract: We use survey data to investigate the determinants of chemical firms’ registration for the ISO 14001 standard or the Responsible Care program. We show that most determinants are different for the two systems analyzed: while firm size, previous experience with similar standards, information disclosure requirements and customers’ location are major determinants of ISO 14001 standard registration, regulatory pressure, past environmental problems, and future risks are the main drivers of Responsible Care registration.

Can population promote income per-capita growth? A balanced perspective

Abstract: We develop a model in which technical progress, human capital and population interact endogenously to examine the impact of population growth on economic development. We find that population growth can be positively or negatively correlated with the growth rate of income per-capita. The outcome depends on the relative contribution of population and human capital to the determination of output growth.

A comparative analysis of the demand for higher education: results from a meta-analysis of elasticities

Abstract: Studies of the demand for higher education have produced numerous estimates of the tuition and income elasticities. Because of widespread variation in the models estimated, this paper performs a meta-analysis of the literature to uncover the extent to which study characteristics influence elasticities. In addition to being more inelastic in the short-run, the results reveal that demand is least responsive to tuition and income in the United States. Also, the measure of quantity and price, coupled with the method of estimation, have important effects on the tuition elasticity. Nonetheless, there are many study characteristics that have little impact on elasticity estimates.

Hurst Exponents, Power Laws, and Efficiency in the Brazilian Foreign Exchange Market

Abstract: We find evidence of weak informational efficiency in the Brazilian daily foreign exchange market using Hurst exponents (Hurst 1951, 1955, Feder 1988), which offer an alternative (from statistical physics) to traditional econometric gauges. We show that a trend toward efficiency has been reverted since the crisis of 1999. We also find power laws (Mantegna and Stanley 2000) in means, volatilities, the Hurst exponents, autocorrelation times, and complexity indices of returns for varying time lags.

On the valuation of psychic returns to art market investments

Abstract: Investing in art objects yields financial and psychic returns The psychic returns arise since art has a superior consumption good aspect as well The question is whether it is possible to measure the psychic returns One valuation method for estimating the psychic returns to investing in artworks is their rental price Here, we make use of the prices charged by a Canadian fine art company for its art rental services and calculate the implied psychic returns to be about 28 percent Next, we review the finance-theoretic approaches to measuring the psychic returns to investing in artworks We follow Hodgson and Vorkink's (2004, Canadian Journal of Economics) suggestion that the alpha parameter in the CAPM captures the extent of net psychic returns The evidence on alpha from the art market applications of the CAPM coupled with the transaction cost data from international art auctions also suggests that the psychic returns to investing in artworks might amount to about 28 per cent

Convergence in Income Inequality: the Case of Brazilian Municipalities

Abstract: This paper investigates income inequality convergence among 5507 Brazilian municipalities. Two periods are used, 1991 and 2000, and inequality is measured by the Gini index. For the country as a whole, the results suggest that the Brazilian municipalities are converging to an inequality level greater than the current (year 2000) level. However, when regional differences are controlled for, the South region converges to a lower inequality level while the other four regions remain converging to a higher level.