Showing papers in "Empirical Economics in 2003"
TL;DR: In this paper, the authors argue that the proper specification of a panel gravity model should include main (exporter, importer, and time) as well as time invariant exporter-by-importer (bilateral) interaction effects.
Abstract: We argue that the proper specification of a panel gravity model should include main (exporter, importer, and time) as well as time invariant exporter-by-importer (bilateral) interaction effects. In a panel of 11 APEC countries, the latter are highly significant and account for the largest part of variation.
434 citations
TL;DR: In this article, the authors provide evidence on the unit root hypothesis and long-term growth by allowing for two structural breaks and show that most countries exhibit faster growth after their second breaks than during the decades preceding their first breaks.
Abstract: This paper provides evidence on the unit root hypothesis and long-term growth by allowing for two structural breaks. We reject the unit root hypothesis for three-quarters of the countries – approximately 50% more rejections than in models that allow for only one break. While about half of the countries exhibit slowdowns following their postwar breaks, the others have grown along paths that have become steeper over the past 120 years. The majority of the countries, including most of the slowdown countries, exhibit faster growth after their second breaks than during the decades preceding their first breaks.
153 citations
TL;DR: In this paper, the authors measure the effects of liberalization on technical efficiency and the productivity development of the Austrian insurance industry using Data Envelopment Analysis and construct efficiency frontiers for the years 1992 through 1999.
Abstract: The integration of European services markets and the implementation of associated European Union directives open up formerly closed national markets to competition from the Single Market. The purpose of this study is to measure the effects of liberalization on technical efficiency and the productivity development of the insurance industry. As an example we construct efficiency frontiers for the years 1992 through 1999 for the Austrian insurance industry using Data Envelopment Analysis. We use the resulting efficiency scores also to construct a Malmquist productivity index for the transition period. In search for effects from the Single Market, returns to scale, economies of diversification, and distribution channels we relate efficiency and productivity measures to several firm specific characteristics. For this purpose we use unbalanced and balanced panels of individual firm data.
150 citations
TL;DR: In this article, the authors proposed a class of asymmetric Autoregressive Conditional Duration models, which extends the ACD model of Engle and Russell (1997) by letting the duration process depend on the state of the price process in the beginning and at the end of each duration.
Abstract: This paper proposes a class of asymmetric Autoregressive Conditional Duration models, which extends the ACD model of Engle and Russell (1997). The asymmetry consists of letting the duration process depend on the state of the price process in the beginning and at the end of each duration. If the price has increased, the parameters of the ACD can differ from what they are if the price has decreased. Thus, the model is also a transition model for the price process, with durations following an ACD process. The logarithmic version of the model is applied to the bid/ask price revision process by the specialist for the IBM stock on the New York Stock Exchange. The empirical evidence in favour of asymmetry is compelling.
126 citations
TL;DR: In this paper, the authors find evidence that the number of inhabitants, the transfer by central government, and interest group arguments are important explanations for the reservations of local authorities towards contracting out.
Abstract: In this paper we seek an explanation for the reservations of local authorities towards contracting out. Although empirical evidence suggests that contracting out results in a significant cost decrease, a majority of Dutch municipalities provides for waste collection services themselves. Based on theoretical insights we model the choice between private, public, in-house, and out-house refuse collection. The models are estimated using a database comprising nearly all Dutch municipalities. We find evidence that the number of inhabitants, the transfer by central government, and interest group arguments are important explanations. Interestingly, ideology seems to play a minor role.
104 citations
TL;DR: In this paper, the performance of heterogeneous and shrinkage estimators versus the more traditional homogeneous panel data estimators is compared, and out-of-sample forecast performance as well as the plausibility of the various estimators are contrasted.
Abstract: This paper contrasts the performance of heterogeneous and shrinkage estimators versus the more traditional homogeneous panel data estimators. The analysis utilizes a panel data set from 21 French regions over the period 1973–1998 and a dynamic demand specification to study the gasoline demand in France. Out-of-sample forecast performance as well as the plausibility of the various estimators are contrasted.
101 citations
TL;DR: In this article, the authors examined the effect of functional form specification on the estimation of technical efficiency using a panel data set of 125 olive-growing farms in Greece for the period 1987-93.
Abstract: This paper examines the effect of functional form specification on the estimation of technical efficiency using a panel data set of 125 olive-growing farms in Greece for the period 1987–93. The generalized quadratic Box-Cox transformation is used to test the relative performance of alternative, widely used, functional forms and to examine the effect of prior choice on final efficiency estimates. Other than the functional specifications nested within the Box-Cox transformation, the comparative analysis includes the minflex Laurent translog and generalized Leontief that possess desirable approximation properties. The results indicate that technical efficiency measures are very sensitive to the choice of functional specification. Perhaps most importantly, the choice of functional form affects the identification of the factors affecting individual performance – the sources of technical inefficiency. The analysis also shows that while specification searches do narrow down the set of feasible alternatives, the identification of the most appropriate functional specification might not always be (statistically) feasible.
101 citations
TL;DR: In this paper, the ability of five structural demand systems to predict demand when estimated with cross-sectional data spanning countries with widely varying per capita expenditure levels was assessed. And the authors concluded that demand systems with less restrictive income responses are superior to demand system with more restrictive income effects.
Abstract: This paper assesses the ability of five structural demand systems to predict demands when estimated with cross sectional data spanning countries with widely varying per capita expenditure levels. Results indicate demand systems with less restrictive income responses are superior to demand systems with more restrictive income effects. Among the least restrictive demand systems considered, An Implicitly, Directly Additive Demand System (AIDADS) and Quadratic Almost Ideal Demand System (QUAIDS) seem roughly tied for best, while the Quadratic Expenditure System (QES) is a close second. Given differences in the characteristics of AIDADS and QUAIDS, it is concluded the former is better suited to instances where income exhibits wide variation and the latter to cases when prices exhibit considerable variation.
101 citations
TL;DR: In this paper, the authors extend the standard kernel density estimator to the case of weighted samples in several ways, such as substituting the simple sum in the definition of the estimator by a weighted sum, and considering the weights as indicators of the informational content of the observations and signals of the local density of the data.
Abstract: This note extends the standard kernel density estimator to the case of weighted samples in several ways. In the first place I consider the obvious extension by substituting the simple sum in the definition of the estimator by a weighted sum, but I also consider other alternatives of introducing weights, based on adaptive kernel density estimators, and consider the weights as indicators of the informational content of the observations and in this sense as signals of the local density of the data. All these ideas are shown using the Penn World Table in the context of the macroeconomic convergence issue.
70 citations
TL;DR: This article used data from Germany, The Netherlands, Portugal and Spain to test for the effect of earnings variation on individual earnings and found that the variance of earnings in an occupation affects individual wages positively while the skewness of earnings has a negative effect.
Abstract: We use data from Germany, The Netherlands, Portugal and Spain to test for the effect of earnings variation on individual earnings. We replicate estimates for the USA and find that the variance of earnings in an occupation affects individual wages positively while the skewness of earnings has a negative effect. Both results are in conformity with wage compensation for risk averse workers.
65 citations
TL;DR: In this article, a doubly heteroscedastic stochastic cost frontier model was proposed to estimate the technical inefficiency of farms in the UK using data from 101 mainly cereal farms in England.
Abstract: In previous studies, measures of technical inefficiency effects derived from stochastic production frontiers have been estimated from residuals which are sensitive to specification errors. This study corrects for this inaccuracy by extending the doubly heteroscedastic stochastic cost frontier suggested by Hadri (1999) to the model for technical inefficiency effects. This model is a stochastic frontier production function for panel data as proposed by Battese and Coelli (1995). The study uses, for illustration of the techniques, data on 101 mainly cereal farms in England. We find that the correction for heteroscedasticity is supported by the data. Both point estimates and confidence intervals for technical efficiencies are provided. The confidence intervals are constructed by extending the “Battese-Coelli” method reported by Horrace and Schmidt (1996) by allowing the technical inefficiency to be time varying and the disturbance terms to be heteroscedastic. The confidence intervals reveal the precision of technical efficiency estimates and show the deficiencies of making inferences based exclusively on point estimates.
TL;DR: In this paper, an EM algorithm was used to estimate a mixture of stochastic frontiers with no sample separation information, using data on U.S. savings and loans for the years 1986, 1987, and 1988.
Abstract: Researchers have become increasingly interested in estimating mixtures of stochastic frontiers. Mester (1993), Caudill (1993), and Polachek and Yoon (1987), for example, estimate stochastic frontier models for different regimes, assuming sample separation information is given. Building on earlier work by Lee and Porter (1984), Douglas, Conway, and Ferrier (1995) estimate a stochastic frontier switching regression model in the presence of noisy sample separation information. The purpose of this paper is to extend earlier work by estimating a mixture of stochastic frontiers assuming no sample separation information. This case is more likely to occur in practice than even noisy sample separation information. In order to estimate a mixture of stochastic frontiers with no sample separation information, an EM algorithm to obtain maximum likelihood estimates is developed. The algorithm is used to estimate a mixture of stochastic (cost) frontiers using data on U.S. savings and loans for the years 1986, 1987, and 1988. Statistical evidence is found supporting the existence of a mixture of stochastic frontiers.
TL;DR: In this article, the authors provide an empirical analysis of the structure of earnings in West Germany across skill groups and industries, based on data from the German Socioeconomic Panel for the period 1984 to 1994.
Abstract: This paper provides an empirical analysis of the structure of earnings in West Germany across skill groups and industries. Our analysis is based on data from the German Socioeconomic Panel for the period 1984 to 1994. We estimate quantile regressions, both for the entire sample period and for each year separately, in order to obtain a finer picture of the earnings structure compared to conventional least squares methods. For robust standard error estimation, this study uses a block bootstrap procedure taking account of heteroskedasticity and autocorrelation in the error term. We also suggest a simple procedure to obtain a consistent estimate of inter-industry earnings variability. Our main findings are: first, pooled estimation comprising a uniform time trend is not rejected by the data, and second, the effects of human capital variables and industry dummies on earnings differ considerably across quantiles.
TL;DR: In this paper, the authors examined the short and long-term price linkages among major art and equity markets over the period 1976-2001 and found that there is a stationary long-run relationship and significant short-and long run causal linkages between the various painting markets and between the equity market and painting markets.
Abstract: This paper examines the short and long-term price linkages among major art and equity markets over the period 1976–2001. The art markets examined are Contemporary Masters, French Impressionists, Modern European, 19th Century European, Old Masters, Surrealists, 20th Century English and Modern US paintings. A global equity index (with dividends and capitalisation changes) is also included. Multivariate cointegration procedures, Granger non-causality tests, level VAR and generalised variance decomposition analyses based on error-correction and vector autoregressive models are conducted to analyse short and long-run relationships among these markets. The results indicate that there is a stationary long-run relationship and significant short and long run causal linkages between the various painting markets and between the equity market and painting markets. However, in terms of the percentage of variance explained most painting markets are relatively isolated, and other painting markets are generally more important than the equity market in explaining the variance that is not caused by innovations in the market itself. This suggests that opportunities for portfolio diversification in art works alone and in conjunction with equity markets exist, though in common with the literature in this area the study finds that the returns on paintings are much lower and the risks much higher than in conventional financial markets.
TL;DR: It is suggested that health information has affected consumption in a healthy way in all countries studied except for Denmark and positive effects on the demand for chicken in Finland, Norway and Sweden and for fish in Finland and Sweden are found.
Abstract: Increasing public concerns about health risks associated with dietary intakes of cholesterol are expected to have significant impacts on the demand for foods with high fat content. This paper investigates how information about cholesterol, as measured by two newly constructed indices based on published medical research, has affected the demand for meats (beef, chicken and pork) and fish in the Nordic countries (Denmark, Finland, Norway and Sweden). To compare the effects of information across countries and over time, the demand equations for all the countries are estimated within one system, and a complete set of price and expenditure elasticities is estimated. Our findings suggest that health information has affected consumption in a healthy way in all countries studied except for Denmark. We find positive effects on the demand for chicken in Finland, Norway and Sweden and for fish in Finland and Sweden. A negative effect on the demand for beef in Sweden also is found.
TL;DR: In this paper, the authors provide new evidence on how to model unemployment durations in the presence of temporary layoffs using two types of econometric models: the multiple phase duration model and the competing risks model.
Abstract: In this paper, we provide new evidence on how to model unemployment durations in the presence of temporary layoffs. Two different types of econometric models are used: the multiple phase duration model and the competing risks model. Special attention is paid to the possibility of time-varying or non-proportional effects of the explanatory variables on the hazard function. The results show that instead of using the multiple phase duration model as an alternative to the competing risks model, it may be more fruitful to use it to extend the specification of the competing risks model.
TL;DR: In this paper, the authors analyzed a set of output data for 113 countries and identified common sources of fluctuations, to estimate a world business cycle, and also analyzed the multiplier effects of worldwide or global shocks and their implications for the persistence and amplitude of cyclical fluctuations.
Abstract: This paper analyses a set of output data for 113 countries and identifies common sources of fluctuations, to estimate a world business cycle. We also analyze the multiplier effects of worldwide or global shocks and their implications for the persistence and amplitude of cyclical fluctuations. We find that a higher relative importance of global shocks leads to lower persistence and greater volatility. Finally, we compare some regional integration agreements and find that the EC emerges as the most integrated block. The analytical framework used is that of Forni, Hallin, Lippi and Reichlin (1999).
TL;DR: This article found that more educated young people are somewhat more likely to be trained than high school dropouts, although there is strong evidence of selectivity as employers clearly seem to support training for those that have the most favorable characteristics.
Abstract: Using information on job histories and on two training questions contained in Statistics Canada's Follow-Up to the School Leavers Survey, this paper seeks to answer three basic questions: 1) what are the characteristics of the trainees?; 2) Does the receipt of employer-supported training cause an increase in the wage paid to those young workers?; and 3) Does it improve the degree of job attachment?; I find that more educated young people are somewhat more likely to be trained than high school dropouts although there is strong evidence of selectivity as employers clearly seem to support training for those that have the most “favorable” characteristics. Also, controlling for unobserved individual characteristics, I find that training has a sizeable wage impact for men while the effect is much more modest for women. Finally, results using Chamberlain (1985) fixed-effects hazard model show that the conditional probability of the employment relationship being terminated decreases substantially for trainees, which is consistent with the notion that the skills learned by trainees may have a sizeable firm-specific component.
TL;DR: The theoretical development of a new threshold autoregressive model based on trended time series is presented and a nonlinear economic model is used to derive the specification of the empirical econometric model.
Abstract: This paper presents the theoretical development of a new threshold autoregressive model based on trended time series. The theoretical arguments underlying the model are outlined and a nonlinear economic model is used to derive the specification of the empirical econometric model. Estimation and testing issues are considered and analysed. Additionally we apply the model to the empirical investigation of U.S. GDP.
TL;DR: In this article, a new bivariate jump model was developed to study jump dynamics in foreign exchange returns, which extends a multivariate GARCH parameterization to include a bivariate correlated jump process.
Abstract: This paper develops a new bivariate jump model to study jump dynamics in foreign exchange returns. The model extends a multivariate GARCH parameterization to include a bivariate correlated jump process. The conditional covariance matrix has the Baba, Engle, Kraft, and Kroner (1989) structure, while the bivariate jumps are governed by a Correlated Bivariate Poisson (CBP) function. Using daily data we find evidence of both independent currency specific jumps, as well as jumps common to both exchange rates of the Canadian dollar and Japanese Yen against the U.S. dollar. The paper concludes by investigating a time-varying structure for the arrival of jumps that relaxes the assumption of constant and bounded jump correlation imposed by the CBP function.
TL;DR: The method adds flexibility to allow for and test competing structural assumptions can improve measurement of the global properties of multiproduct cost structures and an application to a cross section of U.S. railway firms demonstrates this key advantage.
Abstract: Pooling diversified and specialized firm data to analyze multiproduct cost technologies raises two issues in applied research: (1) a functional form must be specified that accommodates zero outputs, and (2) assumptions must be made regarding the structure of the multiproduct technology when some outputs are not produced. This article introduces a methodology to estimate the translog multiproduct cost function in the presence of zero outputs. The method adds flexibility to allow for and test competing structural assumptions. The added flexibility can improve measurement of the global properties of multiproduct cost structures. An application to a cross section of U.S. railway firms demonstrates this key advantage.
TL;DR: In this article, the authors evaluate the effectiveness of educational programs used as an employment strategy for disabled workers in Norway and find that participants in educational programmes have employment rates that are around eight percentage points higher than those who did not participate in such programmes, econometric selection models produce a training effect for education not significantly different from zero.
Abstract: In this paper we evaluate the effectiveness of educational programmes used as an employment strategy for disabled workers in Norway. To obtain these estimates we follow the employment career of a sample of participants in educational programmes and nonparticipants three years after they had left the vocational rehabilitation benefit system. We specify an employment outcome model that includes both unobserved heterogeneity and selection bias due to correlation between unmeasured factors and a person's training status. Even though participants in educational programmes have employment rates that are around eight percentage points higher than those who did not participate in such programmes, econometric selection models produce a training effect for education not significantly different from zero.
TL;DR: In this article, the authors proposed a new testing strategy for unemployment hysteresis as the joint restriction of a unit-root in the unemployment rate and no feedback effect of unemployment in the Phillips wage equation.
Abstract: This paper proposes a new testing strategy for unemployment hysteresis as the joint restriction of a unit-root in the unemployment rate and no feedback effect of unemployment in the Phillips wage equation. The associated test statistics are derived when this joint restriction is imposed and when a sequential two steps testing strategy is adopted. An empirical application leads to reject the null hypothesis of wage hysteresis for most of our OECD countries. Evidence against hysteresis is reinforced when accounting for wage adjustments in the bivariate approach.
TL;DR: In this article, the authors present an attempt to provide an explanation in terms of rapid income growth rates linked to the life cycle hypothesis under the modification that consumption standards rise as income does, and that they continue to rise well beyond the consumer's retirement age.
Abstract: Why are saving rates in the East Asian countries so high? This paper represents an attempt to provide an explanation in terms of rapid income growth rates linked to the life cycle hypothesis under the modification that consumption standards rise as income does, and that they continue to rise well beyond the consumer's retirement age. Empirical tests support the relationship between saving rates and growth implied by the theory. This approach goes a long way toward explaining high saving rates in East Asia.
TL;DR: In this paper, the long-run trend in RPI inflation (core inflation) for the UK over the 1961-1997 period is estimated within the framework of a multivariate common trends model which extends the bivariate VAR approach of Quah and Vahey (1995).
Abstract: In this paper the long-run trend in RPI inflation (core inflation) for the UK over the 1961–1997 period is estimated within the framework of a multivariate common trends model which extends the bivariate VAR approach of Quah and Vahey (1995). In this context core inflation is directly linked to money and wage growth and interpreted as the long-run forecast of inflation from a small-scale, cointegrated macroeconomic system.
TL;DR: In this article, the authors evaluate the impacts of spatial and industrial spillovers on economic performance by incorporating activity level measures for nearby states and related industries into a cost function model, and find significant cost-savings from proximity to other food manufacturing centers and areas with high purchasing power.
Abstract: Cost-impacts of spatial and industrial spillovers on economic performance are evaluated by incorporating activity level measures for nearby states and related industries into a cost function model. We focus on localization and urbanization economies for state level food processing industries, from activity levels of similar industries in neighboring states, agricultural input suppliers, and final product demand. We find significant cost-savings from proximity to other food manufacturing centers, and areas with high purchasing power. Cost savings from locating near an agricultural area are also evident, although it seems costly to be located within a rural agricultural state, implying thin market diseconomies. Marginal production costs instead appear higher in more urban, and lower in more rural, areas. These spillover patterns also have input composition implications; materials demand responses are the most closely tracked by the agglomeration cost effects, and capital and labor impacts vary.
TL;DR: The authors carried out a decomposition of Theil-entropy measures into a between-group component, based on factors such as education, age, gender, and marital status, and a component representing inequality within each group.
Abstract: This study carries out a decomposition of Theil-entropy measures into a between-group component, based on factors such as education, age, gender, and marital status, and a component representing inequality within each group. We apply a bootstrapping technique to measures of inequality to enable statistical inference. Trends in household income inequality in Canada are investigated using data from 1991 to 1997 drawn from Survey of Consumer Finance. We find an evident trend toward increasing inequality of household incomes between the years 1991–1997, during which the economy was recovering from a steep recession. Although most of the increase in measured inequality is attributed to the `within-group' component, we find the change in `between-group' inequality to be significant for education, age, and marital status.
TL;DR: In this paper, the authors examined the relationship between two sets of three variables: Swedish real exports, Swedish real GDP, and foreign real GDP in one set; and Swedish real export, Swedish total factor productivity, and the foreign real economy in the other set.
Abstract: In this paper we examine the relationships between two sets of three variables: Swedish real exports, Swedish real GDP, and foreign real GDP in one set; and Swedish real exports, Swedish total factor productivity, and foreign real GDP in the other set. The foreign real GDP facing Sweden is proxied by total OECD real GDP minus Sweden's real GDP. Multivariate tests for integration and cointegration show that the variables in each model are cointegrated. We also perform Granger causality tests on these variables in our examination using the Toda-Yamamoto procedure. We discover bi-directional causality between Swedish real exports and Swedish real GDP (or Swedish total factor productivity). Foreign real GDP is shown to Granger cause Swedish real exports, but no significant causation of foreign real GDP on either domestic GDP or total factor productivity was found. A change in foreign real GDP thus appears to affect Swedish output and productivity only indirectly, through changes in Swedish exports.
TL;DR: In this paper, a simple macroeconomic framework is used to model the effect of four structural shocks, i.e. shocks to productivity, demand, wages and labour supply, and derive impulse response functions that show the effects of these shocks on unemployment.
Abstract: Assuming full hysteresis in the Austrian labour market, a simple macroeconomic framework is used to model the effect of four structural shocks, i.e. shocks to productivity, demand, wages and labour supply. By using SVAR analysis, we derive impulse-response functions that show the effects of these shocks on unemployment. What constitutes a distinctive feature of our study is the deliberate use of overidentifying restrictions, allowing for a likelihood ratio test. The objection to SVAR methodology, that it relies on arbitrary assumptions, can thus be overcome, as invalid sets of identifying restrictions are rejected.
TL;DR: In this paper, unit roots and other non-stationary hypotheses were applied to the Nelson and Plosser's (1982) series and the results were consistent with those in Perron (1989) when testing the nulls of trend-stationarity or a unit-root.
Abstract: Tests of unit roots and other nonstationary hypotheses that were proposed by Robinson (1994) are applied in this article to the Nelson and Plosser's (1982) series. The tests can be expressed in a way allowing for structural breaks under both the null and the alternative hypotheses. When applying the tests to the same dataset as in Perron (1989), we observe that our results might be consistent with those in Perron (1989) when testing the nulls of trend-stationarity or a unit-root. However, we also observe that fractionally integrated hypotheses may be plausible alternatives in the context of structural breaks at a known period of time.