Showing papers in "International Advances in Economic Research in 2010"

Cross-Border Shopping: A Survey

Abstract: The aim of this paper is to undertake a review of the most important literature on the phenomenon of fiscally induced cross-border shopping. Following the presentation of the principal theoretical models, the study concentrates on applied literature. Firstly, the elements common to the diverse applications are described, and then, a detailed analysis of the research undertaken into cross-border shopping for alcoholic drinks, tobacco, fuel, and lotteries is provided, concluding with a reference to the interaction between cross-border purchases and those effected over the internet. The results achieved by the empirical research coincide and support the principal result of the theoretical literature: the tax differentials between neighboring territories induce consumers to purchase in the territory where taxation is lower, on the condition that the tax saving compensates for the transport costs associated with the travel made by the purchaser in order to take advantage of the lower taxation.

How Does Globalization Affect Income Inequality? A Panel Data Analysis

Abstract: One of the major issues on the state of income inequality is the effect of globalization through foreign direct investment (FDI). It is well known that FDI inflows create employment opportunities for unskilled labor intensive countries. Hence, during recessionary (expansionary) periods, FDI outflows should cause an increase in a developing (developed) country’s unemployment rate, worsening income inequality. This study differs from the previous literature by employing the key variables FDI, trade volume, and GINI coefficient for a panel of three groups of countries (developed, developing, and miracle countries). We estimated panel cointegration coefficients via FM-OLS. Our results show that the effects of trade liberalization and FDI on income distribution differ for different country groups.

Incentives and Female Entrepreneurial Activity: Evidence from Panel Firm Level Data

Abstract: The goal of this paper is to investigate entrepreneurial activity and to analyze the incentives of female participation in the labor market. Female entrepreneurial activity is closely related to social and economic issues. They represent a driving force, active and effective members of economic, political, professional and managerial societies. On the other hand, they have families with serious maternal responsibilities and inelastic household obligations, roles which they are trying to balance effectively. To that reason, specific actions and carefully designed measures are essential in encouraging and promoting them to engage into entrepreneurial activity. To investigate the issue of entrepreneurial activity, personal characteristics and various motivation incentives are examined in order to determine the major factors that may influence female entrepreneurial spirit in Greece. Obtaining data from 1600 industrial firms located in the prefecture of Piraeus over the period 1999–2009, this study makes use of the panel methodology approach to provide evidence about the main determinants of female entrepreneurship. What is found is that a combination of pull and push motives and effective mentoring framework, in addition to a set of personal characteristics such as risk of failure, educational level, creativity, innovativeness, ambitiousness and marital status, seem important for the encouragement of women entrepreneurship in Greece to start up a new business. The implications seem very substantial for the formulation and implementation of effective support policies and measures for female entrepreneurs’ vital start up and early stage period.

Long-Term Nexus between Openness, Income, and Environmental Quality

Abstract: In this paper we examine the dynamic relationship between income, trade, and environmental quality as measured by carbon dioxide (CO2) emissions, disaggregated by source (oil, gas, and coal). Using time series data spanning from 1980 to 2006, 21 countries, including G7, BRIC, and middle and low income economies, we consistently find the existence of a long-run relationship between income, trade, and carbon emissions (from oil in particular). This is important because the Environmental Protection Agency (EPA) recently determined that CO2 emissions indeed pose a threat to human health and welfare.

OLS and GWR Approaches to Agricultural Convergence in the EU-15

Abstract: This paper contributes to the current debate moderated by the European Commission on the territorial dimension of the economic and social cohesion, investigating the role of the CAP in the agricultural convergence process across a sample of 166 EU-15 regions at NUTS2 level from 1995-2005. The empirical study compares results from GWR and OLS models of absolute and conditional β-convergence where total transfers provided by the CAP and Structural funds expenditure related to agriculture, rural development and fishery are the conditioning variables. Furthermore, GWR approach allows detecting the parameters spatial non stationarity and the role of spatial dependence and heterogeneity of regions. The results provide useful insights on important policy sensitive issues difficult to be predicted with the traditional global estimate. They reinforce the prescriptions of the economic geography theory and new economic growth theory on convergence.

Sustainability, Social Discount Rates and the Selection of Project Procurement Method

Abstract: The notion of sustainability has lead to the evaluation of public projects in terms of wider socio-economic and environmental benefits. The Cost Benefit Analysis and its respective, Social Discount Rate (SDR), is of crucial importance, especially when the advantages of private financing are to be demonstrated in comparison with the alternative traditional procurement of works and services. The SDR seen as a measure of a country’s value of future costs and benefits is related to the notion of promoted sustainability. The impact of smaller and declining SDRs on project selection is investigated, and a conceptual formulation concerning the selection of the project procurement method is presented. The modelled formulation will assist central and local governments in assessing projects and the potential benefit of private financing.

The Evaluation of University Departments. A Case Study for Firenze

Abstract: Over the last two decades, the interest to assess the quality of university teaching and research has considerably grown This paper presents a study concerning the evaluation of the departments of the University of Firenze using Data Envelopment Analysis It shows several applications with different variables choices to assess the performance both in teaching and in research activities The reliability of the preferred specification was verified with a heuristic experiment, using different variables and a different number of variables Particular attention is given to the problem of data availability and quality (eg for research output assessment)

Estimating Housing Prices: A Proposal with Spatially Correlated Data

Abstract: The price of housing per square meter and the trend observed over the last few years is one of the issues that most concerns Spanish citizens and subsequently their political and economic representatives. However, in spite of the importance of space in the real estate market, official averages do not take into account the spatial correlation of housing prices. In order to solve this handicap, we propose the kriging the mean method to estimate mean housing prices. This method provides the best unbiased linear estimation taking into account spatially correlated data.

Convergence across the United States: Evidence from Panel ESTAR Unit Root Test

Abstract: Many empirical studies try to test whether there is income convergence across metropolitan areas in the continental United States. Drennan et al. (Journal of Economic Geography 4(5), 2004) claim that income among metropolitan economies is diverging for the period 1969–2001, after applying univariate unit root tests to the time series data. This paper brings new information to this area of study by using the nonlinear panel unit root test of the Exponential Smooth Auto-Regressive Augmented Dickey–Fuller (ESTAR-ADF) unit root test on the time series data for the period 1929–2005. Our results find evidence of stationarity for time series and thereby support beta and sigma convergence among states in a nonlinear setup. However, when the non-linear test encompasses cross section dependence as advocated by Cerrato et al. (2008), the evidence is attenuated.

Predicting European Union Recessions in the Euro Era: The Yield Curve as a Forecasting Tool of Economic Activity

Abstract: Several studies have established the predictive power of the yield curve for the U.S. and various European countries. In this paper we use data from the European Union (EU15), from 1994:Q1 to 2008:Q3. We use the European Central Bank’s euro area yield spreads to predict European real GDP deviations from the long-run trend. We also augment the models tested with non monetary policy variables: the unemployment and a composite European stock price index. The methodology employed is a probit model of the inverse cumulative distribution function of the standard distribution using several formal forecasting and goodness of fit evaluation tests. The results show that the yield curve augmented with the composite stock index has significant forecasting power in terms of the EU15 real output.

Alternative Fat Taxes to Control Obesity

Abstract: This paper examines three alternative types of fat taxes to determine how effective they may be in reducing obesity. Upon the examination of the available evidence as to the effectiveness of fat taxes in reducing obesity authors conclude that all types of fat taxes are not sufficiently specific in targeting obesity. In some cases imposition of fat tax may actually lead to reversal of the intended effect. Therefore, the use of taxes to reduce obesity and promote healthy outcomes is not recommended.

Uncertainty and Learning in Stochastic Macro Models

Abstract: Limits on information have deep economic impact and affect the conduct of economic policy. In the present paper we explore the effect of substantive uncertainty in a macro model, from both an analytical and methodological point of view. Agents are boundedly rational and make their forecasts according to different techniques and try to learn the values of the various parameters. In this context, a Markov regime switching rule, a VAR system, and recursive least square are considered and compared. As a result, we obtain a model which is mostly keynesian in nature that can be compared with the new neoclassical synthesis models. Simulations are carried out and show the possible appearence of endogenous and persistent fluctuations.

SMEs Stakeholders’ Needs on Valuation and Financial Reporting

Abstract: Small-and-Medium-Sized Enterprises (SMEs) form as muchas 99% of business entities around the world. Therefore, it is necessary for policy makers to stress their attention to the needs of these enterprises. The identification of the stakeholders and their needs is based on stakeholder theory, adapted to SMEs. The theory includes both the regulatory and instrumental approaches of stakeholder analysis. The first approach leads to outlining some normative assumptions regarding the variables that define the stakeholder’s domain (Mitchell et al. Academy of Management Review 22:853–886, 1997). The second one reflects the manner in which the company takes into account the impact of the stakeholder to which it links its performance-aimed actions (e.g. Donaldson and Preston 1995; Polonsky and Scott European Journal of Marketing 39:1199–1215 2005). We also have to refer to property rights theory and to classical theory of the shareholder-manager, endorsed by Jensen and Meckling, quoted by Alchian (1991). This last group of theories helps us to distinguish between the shareholder-manager, present in the majority of SMEs, and the other stakeholders of SMEs. In the context of the international drive to simplify the SMEs’ financial reporting, one may identify a stringent call for the identification and serious analysis of the SMEs’ specific use of information. Through market research and accounting literature, it appears that this is not sufficiently developed at present. The needs of the users of information must be developed so that they can play a useful part in accounting regulation. The main objective of this study is to identify and rank the users and their needs within the European area and for emergent economies, taking into consideration that,

Exchange Rate Determination: An Application of a Monetary Model for Brazil

Abstract: The goal of this paper is to test a variant of the monetary exchange rate determination model, described by Obstfeld and Rogoff (1996), for the Brazilian economy in the recent period. The model starts with the Cagan (The Journal of Political Economy, 66(4):303–328, 1958) money demand, which is complemented by the hypotheses of purchase power parity (PPP) and uncovered interest parity (UIP). We used monthly data of exchange rate, GDP, interest rate for Brazil, and U.S. interest rate and inflation as proxies for international variables. We applied cointegration tests to identify a long run relationship among the variables. The estimated error correction model offers an exchange rate determination model in the short run. Due to potential endogeneity of some variables, GMM was applied to estimate a long-run model of exchange rate determination. The forecasting results of both estimatives were compared with a random walk approach. The results point to the existence of a long and short run equilibrium Real/dollar exchange rate using the structural model, which may be the achievement of this paper.

Foreign Trade Patterns Between Estonia and the EU

Abstract: In this paper, we focus on the development of the foreign trade flows between Estonia and the EU. We observe rapid reorientation of the trade flows from the former Soviet Union towards Western markets because of economic reforms and foreign trade liberalization. Moreover, we determine the commodity groups with a comparative advantage in the EU market and analyze its dynamics. Further analysis of the intra-industry trade (ITT) shows that vertical IIT plays a dominant role in Estonian-EU IIT flows. Shares of total, vertical, and horizontal IIT have grown rapidly since 2004, the year of accession to the EU.

The Economic Impact of SFAS NO. 157

Abstract: Statement of Financial Accounting Standards No. 157, “Fair Value Measurements,” (SFAS 157) defines fair value, establishes a three tiered framework for measuring fair value and expands the required disclosures about fair value measurements. The objective of this study is to examine and evaluate the benefits of the information disclosed by SFAS 157. The results of our study indicated that a large majority of the inputs are observable in that 93.5% of the sample financial assets and 93.1% of the sample financial liabilities were measured by level 1 or 2 criteria. However, we found a mismatch between assets and liabilities subject to the three tiers of fair value measurements. The companies in our sample disclosed $18.8 trillion in total assets, with 51%, or $9.5 trillion reported at fair value. Whereas, sample company liabilities totaled $16.1 trillion with only $3.7 trillion or 23% reported at fair value.

Disaggregated Earnings and Stock Prices: Evidence from International Listed Shipping Firms

Abstract: The goal of this study is to investigate the impact of earnings from vessel sales on stock prices for international listed shipping firms. The empirical findings show that operating income from vessel sales has a higher power in explaining stock prices than operating earnings only as a sole piece of accounting information for future profitability, investment opportunities, and firm valuation. The testing period is from 2000 to 2009. The methodologies are those of panel cointegration and panel causality tests. The implications are very crucial, since managers may manipulate annual earnings by such non-operating activities.

Trade Integration as a Mechanism of Financial Crisis Prevention

Abstract: We have created an eclectic model that synthesizes the different versions of the third generation exchange rate crises models. This eclectic model takes current existing schemes beyond the traditional analyses—based on causes and consequences of external financial crises in emerging markets—and raises trade openness as an effective mechanism to prevent and avoid foreign debt crises and exchange rate crises. Our findings give theoretical support to empirical economic literature about this topic because, at the present time, most of the studies connecting international trade and financial crises are basically empirical.

Did the Uruguay Round Agreement on Agriculture Affect Trade Flows? An Empirical Investigation for Meat Commodities

Abstract: The Uruguay Round Agreement on Agriculture (URAA) was designed to reduce trade barriers and temper domestic and export policies that affect trade flows in agricultural commodities. This paper employs a dynamic framework to estimate the effects of the URAA on trade flows, as measured by export volumes, of three meat commodities. The model controls for several important factors, including regional trade agreements, and finds that the URAA had mixed effects on meat exports. Several complicating factors and policy responses, including increasing use of non-negotiated trade barriers, smaller export subsidies and domestic support, and limited effectiveness of market access provisions, explain the mixed empirical results.

The Impact of SFAS No. 157 on Commercial Banks

Abstract: During 2008, U. S. banks were mired in a credit crisis. According to a group of economists and bankers, one cause of the 2008 credit crisis was an accounting rule termed mark-to-market. This rule required banks to write down large portions of their investment portfolios. The purpose of this study is to examine the impact of the mark-to-market model on a sample of banks for the first three quarters of the year 2008. Results indicated that while banks grew by 20% over time, the percentage of assets measured at fair value rose only slightly. Additionally, the results indicated that applying the mark-to-market rule did not reduce the regulatory capital position of banks.

Firm Metrics with Continuous R&D, Quality Improvement, and Cournot Quantities

Abstract: The paper considers a dynamic two-firm model of intra-industry trade in which the firms compete for the same market on the basis of product reliability By assumption, the home firm always has the reliability cost advantage but it may or may not have the manufacturing cost advantage The results suggest that reliability improvement always helps customers in that they pay a lower full quality price Comparing the home firm with the foreign firm, metrics such as price, sales, profit margins, and variable profits depend on the relative costs, with the low cost firm performing better Finally, although this is not the common outcome, the paper suggests that it is possible for the reliability cost advantages gained by R&D expenditures to overcome manufacturing cost disadvantages

The Impact of Maternity Minimum Stay Mandates on Hospitalizations: An Extension

Abstract: Due to concerns about the health impacts of deliveries with short postpartum hospital stays, many states—and later the federal government—passed mandates regulating the minimum length of hospitalizations insurance policies had to cover. We use the Healthcare Cost and Utilization Project-National Inpatient Sample to analyze whether these mandates have differential impacts on various groups of patients. We find that mandates do have a differential impact based on race and hospital size. These differential effects, however, are not equally present in all analyzed discharge groups.

Nationalizations and Efficiency

Abstract: We develop a theoretical model in which firms are either private or state-owned. When firms become insolvent, the government can intervene with general measures, like subsidies, or by nationalizing firms. The government only intervenes when the bankruptcy of a firm entails social costs. In a stylized model, we analyze how government interventions affect allocative and productive efficiency. Nationalization of private firms in case unprofitable investments were made, leads to increased allocative efficiency despite private ownership. The effort level chosen by the managers working for firms is also affected by government intervention with an impact on productive efficiency.

Endogenous I-S and External L-M Diagram in Equilibrium towards Policy-Making

Abstract: This paper reforms the conventional I-S and L-M diagram endogenously, clarifying how to finalize the relationship between the real and financial assets, replacing the I-S by the rate of return function of the ratio of investment to output/income and the L-M by the ratio of M2 to endogenous capital K, after verifying the neutrality of the markets to the real assets, and using endogenous parameters and variables in the 58 country data-sets, 1990–2007 (KEWT 3.09), with three average areas, where equilibrium holds by year, country, and sector, over years. This diagram and its interpretation are able to present urgent policies for perceiving a bud of bubbles and suggesting urgent steps not to reoccur bubbles.

Real Money Demand, Income, and Interest Rates in Senegal: Is there a Long-Run Stable Relation?

Abstract: In this paper, I examine the stability of the long-run relationship between real money demand, income, and interest rates in Senegal. Using advances in unit root and co-integration, I test for co-integration between M1 velocity, output, and the interest rate. By virtue of the fixed exchange rate regime, I used both the three months French Treasury bill and the deposit rate to proxy the opportunity cost of holding money. I used Stock and Watson (1993) DOLS in addition to an ECM. Quarterly data ranging from 1970:Q4 to 2006:Q4 is used in the analysis, and the results reveal evidence of co-integration between real money demand, income, and the interest rate. For this study, I used both an ECM co-integration test and Johansen (Journal of Economic Dynamics and Control 12(2/3), 231-254, 1988) co-integration method.

Foreign Direct Investment, Technology Spillovers, and Host Country Spending on R&D

Abstract: Previous studies focused on host country absorptive capacity [e.g. Girma, Oxford Bulletin of Economics and Statistics, 2005] as a main determinant of technology spillovers from Foreign Direct Investment (FDI). However, they did not extensively examine other determinants of the magnitude of these spillovers (e.g., host country innovation and imitation activities). To overcome this limitation, this paper differs from previous studies in two important respects. First, it investigates host country innovation and imitation activities, measured by R&D spending as a percentage of GDP, as a main determinant of FDI technology spillovers. Second, it avoids the low quality of FDI data by using U.S. multinational enterprises (MNEs) data from the Bureau of Economic Analysis (BEA). By using these data, we can extract the technology diffusion effect from other productivity effects of FDI. The main result of panel data regressions shows that host country spending on R&D had a positive and significant impact on the magnitude of technology spillovers from FDI in 38 developed and developing countries during the period 1966–2000. This result may imply that government policies encouraging R&D activities may significantly increase the magnitude of technology spillovers from FDI. Int Adv Econ Res (2010) 16:325 DOI 10.1007/s11294-010-9265-0

Sustainable Government Debt in a Two-Country Overlapping Generations' Model

Abstract: Several years before the outburst of the present economic crisis, maximum sustainable government debt in closed economies has become a matter of theoretical concern (Chalk, Journal of Monetary Economics, 2000; Rankin and Roffia, The Manchester School, 2003). The closed-economy framework precludes, however, the analysis of sustainable government debt in large open, interdependent economies. At the present stage of international integration, dramatically rising government deficits in large open OECD countries make it imperative to explore limits for national government debt levels which, if slightly changed, would lead to a sudden collapse of the world economy. To the best of these authors knowledge, limits for government debt in neoclassical open-economy growth models have not been investigated at all. Hence, there are the following research questions to be answered: (1) Do maximum sustainable government debt levels always exist and what happens if these limits are reached? (2) How are national maximum government debt levels related, positively or negatively? (3) Which structural parameters determine national government debt limits? Methodologically, we extend Rankin and Roffia’s closed economy overlapping generations’ model towards a two-good, two-country setting which portrays a world economy consisting of two sets of countries characterized by opposite net foreign asset positions. Both countries are interconnected through free trade in produced commodities and in bonds emitted by national governments. Within this model setting, interconnectedness and determining factors of maximal national Int Adv Econ Res (2010) 16:124–125 DOI 10.1007/s11294-009-9236-5