Showing papers in "LSE Research Online Documents on Economics in 2010"

An anatomy of economic inequality in the UK: report of the National Equality Panel

Abstract: Britain is an unequal country, more so than many other industrial countries and more so than a generation ago. This is manifest in many ways - most obviously in the gap between those who are well off and those who are less well off. But inequalities in people's economic positions are also related to their characteristics - whether they are men or women, their ages, ethnic backgrounds, and so on. The independent National Equality Panel, was established at the invitation of the Rt. Hon. Harriet Harman, Minister for Equality to report on the relationships between inequalities in economic outcomes and differences related to people's characteristics.

Social capital and management control systems: a study of a non-government organization

Abstract: In this paper we use the concept of social capital to outline a distinctive approach to understanding the interplay between management control systems and the development of social connections in and between organisations. Social capital provides a comprehensive framework for examining the nature of social connections through its focus on both structural networks (bridging) and interpersonal relationships that predispose individuals towards mutually beneficial collective action (bonding). In doing so, social capital provides a means of considering how individuals react to management control systems in terms of the social ties that exist both within the organization and external to the organization. Using a case study of a non-government organization, we show how social capital is implicated in efforts to attract economic capital and cultural capital. We demonstrate how elements of a management control system can either enhance or inhibit the bonding and bridging dimensions of social capital with potential consequences on both economic and cultural capital. We highlight the mixed and sometimes contradictory effects of management control systems on social capital, and provide a powerful illustration of the role of management control systems in brokering alliances and bridging structural holes.

From periphery to core: economic adjustments to high speed rail

Abstract: This paper presents evidence that high speed rail systems, by bringing economic agents closer together, sustainably promote economic activity within regions that enjoy an increase in accessibility. Our results on the one hand confirm expectations that have led to huge public investments into high speed rail all over the world. On the other hand, they confirm theoretical predictions arising from a consolidate body of (New) Economic Geography literature taking a positive, man-made and reproducible shock as a case in point. We argue that the economic geography framework can help to derive ex-ante predictions on the economic impact of transport projects. The subject case is the German high speed rail track connecting Cologne and Frankfurt, which, as we argue, provides exogenous variation in access to regions due to the construction of intermediate stations in the towns of Limburg and Montabaur.

Has ICT Polarized Skill Demand? Evidence from Eleven Countries over 25 years ∗

Abstract: The labor markets of the US and many other OECD countries have become more “polarized” with demand for workers in the middle of the skill distribution falling relative to those at the top and (in recent years) also the bottom of the skill distribution. We test the hypothesis of Autor, Levy, and Murnane (2003) that this is partly due to information and communication technologies (ICT) complementing highly educated workers and substituting for routine tasks often performed by middle educated workers (with little effect on low educated workers performing manual non-routine tasks). We use a new dataset on the US, Japan, and nine Western European countries between 1980 and 2004 finding evidence consistent with ICT-based polarization. We show that industries that experienced faster growth in ICT also experienced increases in relative demand for high education and falls in relative demand for mid-level education. Trade openness is also associated with polarization, but this is not robust to controls for technology (like R&D). Measured technologies can account for up to a quarter of the growth in demand for the college educated in OECD countries the last quarter century.

Mostly pointless spatial econometrics

Abstract: We argue that identification problems bedevil most applied spatial research Spatial econometrics solves these problems by deriving estimators assuming that functional forms are known and by using model comparison techniques to let the data choose between competing specifications We argue that in most situations of interest this, at best, achieves only very weak identification Worse, in most cases, such an approach will simply be uninformative about the economic processes at work rendering much applied spatial econometric research ‘pointless’, unless the main aim is simply description of the data We advocate an alternative approach based on the ‘experimental paradigm’ which puts issues of identification and causality at centre stage

Distributional Implications of Tax Evasion in Greece

Abstract: The shadow economy and tax evasion are both widespread in Greece. This has adverse effects in terms of horizontal and vertical equity, as well as in terms of efficiency. We take advantage of access to a large sample of income tax returns in 2004/05, and compare tax reported incomes with those observed in the household budget survey of that year. We re-weight our two datasets to make them fully comparable, and carefully select the reference population. We then calculate ratios of income under-reporting by region and income source. The synthetic distribution of reported incomes is then fed into a taxbenefit model to provide preliminary estimates of the size and distribution of income tax evasion in Greece. Income under-reporting is estimated at 10%, resulting in a 26% shortfall in tax receipts. The paper finds that the effects of tax evasion are higher income inequality and poverty, as well as lower progressivity of the income tax system.

The Greek Paradox of Falling Competitiveness and Weak Institutions in a High GDP Growth Rate Context (1995-2008)

Abstract: In this paper, we deal with some pieces of evidence that are necessary to explain the paradox of rapid GDP growth despite the dismal competitiveness of the Greek economy during 1995-2008. It is shown how the structural weaknesses of the Greek economy have hit the domestic economy investigating their impact on the current turmoil. It is argued that the previously favourable global economic environment acted as a locomotive to domestic growth, whereas now that it is gone, structural problems of poor governance, low competitiveness, and a ballooning public deficit and debt have come to the surface. We offer a specific explanation of the current unfortunate state of the economy briefly considering avenues of necessary reforms to overcome it.

Power and interests in developing knowledge societies: exogenous and endogenous discourses in contention

Abstract: The objective of the programme is to improve development practice by promoting change in the way the development sector approaches the selection, management and use of knowledge in the formation and implementation of its policies and programmes. It aims to achieve this by:  raising awareness of the importance of knowledge to development work and its contested nature;  promoting investment in and use of Southern knowledge production of all types and origins;  creating an environment for innovation, supported by research on existing and emergent practice, for people working in the development sector to raise and discuss means of addressing these issues; and  finding, creating, testing and documenting ideas for processes and tools which will illustrate the range of issues which affect how knowledge is used in development work and stimulate thought around possible solutions. Colophon IKM Working Papers comprises a series of publications published by the Information and Knowledge Management (IKM) Research Programme. Some IKM Working Papers are written by IKM Programme members, others have been commissioned from leading experts in a given field. The content may not necessarily be the view or position of the IKM Emergent Research Programme. IKM Working Papers are published and distributed primarily in electronic format via the IKM Emergent website at: www.ikmemergent.net. They are published under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Licence and may be copied freely for research and educational purposes when cited with due acknowledgment.

When foreign direct investment is good for development: Bulgaria’s accession, industrial restructuring and regional FDI

Abstract: This article examines the dynamic between the process of Bulgaria’s European Union accession and the flow of Foreign Direct Investments to the country in its industrial base. A critical differentiation between speculative and non-speculative FDI is drawn while determining that the geographic origin of investments matters. Greek FDI, in particular, emerges as a major source of strategic regional investments in Bulgaria’s industry highlighting the significance of regional trade and cooperation for the long-term economic outlook not only for the host country but also for the region by enhancing the area of economic progress and development.

Gis a job: what use geographical information systems in spatial economics

Abstract: Geographical information systems (GIS) are used for inputting, storing, managing, analyzing and mapping spatial data. This article argues that each of these functions can help researchers interested in spatial economics. In addition, GIS provide access to new data that is both interesting in its own right, but also as a source of exogenous variation.

Cultivated land conversion in China and the potential for food security and sustainability

Abstract: With over a billion people in China, the issue of cultivated land conversion is extremely important both in terms of food security and environmental sustainability. This paper investigates the relationship between cultivated land, environment, and food security in China; and seeks to identity the main challenges facing China in terms of arable land protection. It further discusses the concept and practical implications of land governance in relation to food and environmental security, and suggests that comprehensive, human-centred and sustainable land governance is required to enhance China’s food security and environmental sustainability.

Re-imagining Canadian development cooperation: a comparative examination of Norway and the UK

Abstract: This paper offers a detailed comparative study of Norwegian and UK aid architectures, with a view to informing discussions on reform and renewal within Canada’s development programme. This is undertaken via a quantitative assessment of each country’s standing on accepted measures of donor performance, as well as via a qualitative case study that traces and compares the processes and nature of organizational reforms undertaken in Norway and the UK. Based on this quantitative and qualitative analysis, lessons for Canada are presented along four key dimensions, namely strategy, governance, policy processes and organizational management.

Does cost sharing really reduce inappropriate prescriptions

Abstract: This paper explores different empirical strategies to examine the effect of cost sharing for prescription drugs in some dimensions of medication-related quality, namely the probability of inappropriate prescription drug use among United States seniors. Using data from 1996 to 2005, we explore various specifications that correct for sample selection, endogeneity¸ and unobserved heterogeneity. We find a small, but measurable, negative price elasticity for inappropriate drug use with respect to self-reported average out-of-pocket costs for all drugs consumed. That is, user fees reduce the use of potentially inappropriate medications, however the elasticity of cost sharing is lower than that of drugs in general and the price elasticity is relatively close to zero, suggesting that any quality improvements from co-payments are small.

Higher education academic salaries in the UK

Abstract: It is widely believed that higher education academic salaries are too low, and that this may lead to a ‘brain drain’ and also lower quality in higher education, as universities fail to attract the ‘brightest and the best’. We compare the salaries of Higher Education teaching professionals in the UK with those of other comparable professionals. We compare academic salaries to a range of occupational groupings that one might view as similar, in terms of unobserved characteristics, to academics. We conclude that HE teaching professionals earn lower earnings than most public sector graduates and do particularly poorly compared to most other comparable professionals. In particular, academic earnings compare poorly to those in the legal professions, consultant physicians and dental practitioners (across both the public and private sectors). On the other hand, some public sector workers do worse than HE academics, e.g. FE teachers.

Privatization in the Name of 'Europe': analyzing the telecoms privatization in Greece from a 'discursive institutionalist' perspective

Abstract: This paper analyzes why governments in Greece have systematically appealed to ‘Europe’ during their domestic privatization discourse. It illustrates that, when proposed policy reforms get rough and the opposition grows, governments anticipate garnering increased public justification in order to implement their policies by justifying their choices in the name of Europe. In addition, it attempts to contribute to the opening up of discourse analysis in the field of political science and to reveal how the institutional arrangement across a polity is at least partially responsible for the approach national actors pursue in it and the form of the domestic discourse they produce.

Human Resource Management and Productivity

Abstract: In this handbook of labor economics chapter we examine the relationship between Human Resource Management (HRM) and productivity. HRM includes incentive pay (individual and group) as well as many non-pay aspects of the employment relationship such as matching (hiring and firing) and work organization (e.g. teams, autonomy). We place HRM more generally within the literature on management practices and productivity. We start with some facts on levels and trends of both HRM and productivity and the main economic theories of HRM. We look at some of the determinants of HRM - risk, competition, ownership and regulation. The largest section analyses the impact of HRM on productivity emphasizing issues of methodology, data and results (from micro-econometric studies). We conclude briefly with suggestions of avenues for future frontier work.

Financing welfare regimes: a literature review and cluster analysis

Abstract: This paper studies how the composition of public revenues, in terms of sources like taxation, contributions to social insurance programmes, mineral rents and aid, is associated with different welfare regimes and social policy outcomes. It is divided into two main parts: a literature review and cross-national data analysis. The first part summarises theories and research. It uses a model derived from scholarly research into the development of Western welfare states which identifies five explanatory factors, the “5 I’s”: industrialisation, interests, institutions, ideas and international influences. The model is applied to the development of tax and revenue systems as well as welfare systems in the West, and then its applicability to the developing world is discussed. The authors note parallels and differences in the findings on fiscal states and welfare states, and the more striking differences between the North and the South. The conclusion is that the model has less purchase in understanding welfare and revenue systems in the developing world. In the second part, the authors develop a novel model of welfare regimes and demonstrate its utility as a framework for analysing social policy in the developing world. Subsequent sections then operationalise this framework using cluster analysis to identify patterns in welfare regimes and revenue systems across the developing world. The empirical analysis draws on data for 65 non-OECD countries, excluding small countries, for the year 2000, covering welfare regimes, revenue structures, and the relationship between the two. In the conclusion, the authors explore whether a relationship between specific revenue structures, regime types and welfare outcomes across the global South can be identified.

On non-marginal cost-benefit analysis

Abstract: Conventional cost-benefit analysis incorporates the normally reasonable assumption that the policy or project under examination is marginal in the sense that it will not significantly change relative prices. In particular, it is assumed that the policy or project does not change the underlying growth rate of the economy. However, these assumptions may be inappropriate in some important circumstances, such as large development projects in small economies, or large-scale infrastructure investment programmes. This paper develops the theory on the evaluation of non-marginal policies and projects, with an empirical application to the mitigation of global climate change. We examine the conditions under which evaluation of a non-marginal project using marginal methods may be both qualitatively and quantitatively wrong, and explore the magnitude of the potential error using a commonly employed integrated assessment model of climate change.

Economic geographers and the limelight: the reaction to the 2009 World Development Report

Abstract: The reaction of economic geographers to the World Bank's World Development Report 2009 – Reshaping Economic Geography – has so far been a corporatist turf-protecting exercise. The report has been dismissed as the work of economists who completely ignore a rich tradition of work by ‘proper’ economic geographers. However, this negative response has prevented geographers from engaging constructively with the World Bank’s analysis and proposals. In this note I argue that, while the report presents an accurate diagnosis of recent development trends and should be praised for its flexibility in providing numerous policy alternatives, geographers can significantly contribute to promote a discussion around two key issues in the report: its treatment of institutions and its recommendation of spatially-blind policies.

Economic growth in Malaysia: some possible lessons for Ghana

Abstract: Malaysia and Ghana both gained their independence from British rule in 1957. Both economies were relatively resource rich. Ghana was the leading exporter of cocoa while Malaya, as it was then known, was pre-eminent in exporting rubber and tin. This discussion paper, delivered at the Ghana Growth Forum, draws possible lessons from Malaysia’s high growth and economic diversifi cation over the decades that followed.

Quantile Uncorrelation and Instrumental Regressions

Abstract: We introduce a notion of median uncorre- lation that is a natural extension of mean (linear) uncorrelation. A scalar random variable Y is median uncorrelated with a k-dimensional random vector X if and only if the slope from an LAD regression of Y on X is zero. Using this simple definition, we characterize properties of median uncorrelated random variables, and introduce a notion of multivariate median uncor- relation. We provide measures of median uncorrela- tion that are similar to the linear correlation coefficient and the coefficient of determination. We also extend this median uncorrelation to other loss functions. As two stage least squares exploits mean uncorrelation between an instrument vector and the error to derive consistent estimators for parameters in linear regressi- ons with endogenous regressors, the main result of this paper shows how a median uncorrelation assumption between an instrument vector and the error can simi- larly be used to derive consistent estimators in these linear models with endogenous regressors. We also show how median uncorrelation can be used in linear panel models with quantile restrictions and in linear models with measurement errors.

Global metro monitor: the path to economic recovery: a preliminary overview of 150 global metropolitan economies in the wake of the great recession

Abstract: Original citation: Berube, Alan, Friefhoff, Alec, Nadeau, Carey, Rode, Philipp, Paccoud, Antoine, Kandt, Jens, Just, Tobias and Schemm-Gregory, Reto (2010) Global metro monitor: the path to economic recovery: a preliminary overview of 150 global metropolitan economies in the wake of the great recession. The Metropolitan Policy Program, The Brookings Institution and LSE Cities, London School of Economics and Political Science.

Moving into the projects: social housing neighbourhoods and school performance in England

Abstract: This study estimates the effect of living in a very deprived neighbourhood, as identified by a high density of social housing, on the educational attainment of fourteen years old (9th grade) students in England. Neighbourhoods with markedly high concentrations of social housing have very high unemployment and extremely low qualification rates, as well as high building density, rooms over-crowding and low house prices. In order to identify the causal impact of neighbourhood deprivation on pupil attainments, I exploit the timing of moving into these neighbourhoods. The timing of a move can be taken as exogenous because of long waiting lists for social housing in high-demand areas. This is a new strategy that by-passes the usual sorting and reflection problems. Using this approach, there is no evidence for otherwise negative effects, which has potentially wide-ranging implications for social housing policy.

Intra-firm trade and product contractibility (Long Version)

Abstract: This paper examines the determinants of intra-firm trade in U.S. imports using detailed country-product data. We create a new measure of product contractibility based on the degree of intermediation in international trade for the product. We find important roles for the interaction of country and product characteristics in determining intra-firm trade shares. Intra-firm trade is high for products with low levels of contractability sourced from countries with weak governance, for skill-intensive products from skill-scarce countries, and for capital-intensive products from capital-abundant countries.

Minimum wages and schooling: evidence from the UK's introduction of a national minimum wage

Abstract: This paper uses the introduction of the national minimum wage in the UK in April 1999 as a ‘natural experiment’ to analyse the impact of minimum wages on enrolment in schooling At the time of its introduction, only workers aged 18 years or more were covered by the legislation The paper uses panel data for a sample of young people in a given school-year cohort, some of whom were aged 18 years in spring 1999 and therefore eligible to receive the national minimum wage, and others who were aged only 17 years We compare participation in post-compulsory schooling for the two groups, both before and after the enactment of the legislation and find robust evidence that eligibility for the national minimum wage significantly reduces the probability of participation in post-compulsory schooling for young people living in areas where the national minimum is high relative to local earnings

A historical analysis of core financial services infrastructure: Society for Worldwide Interbank Financial Telecommunications (SWIFT)

Abstract: Research in this article traces the origins of a not-for-profit financial institution the Society for Worldwide Interbank Financial Telecommunications (S.W.I.T.). Swift is a core part of the financial services infrastructure and widely regarded as the most secure trusted third party network in the world serving 200 countries with over 8000 users. Our analysis focuses on how the design and current state of SWIFT was influenced by its historical origins. In order to ensure widespread compatibility in a sector experiencing asynchronous technological development, legacy Telex specifications had to be accommodated in SWIFT’s design. Over time, what began as a closed “society” founded to reduce errors and increase efficiency in inter-bank payments grew into an industry co-operative supporting an enthusiastic community of practice and transformed into an unexpected network phenomenon. SWIFT achieved such success that it has been accused of being an installed base stifling innovation. In recent years, SWIFT has had to institute new categories of membership in an effort to counter concerns about its bank dominated governance and it continues to search for ways to meet the requirements of key constituents in the financial supply chain.

Climate change: is Southeast Asia up to the challenge?: forest and climate change policy: what are the costs of inaction?

Abstract: Deforestation and forest degradation are some of the main contributors to anthropogenic climate change. Accordingly, policies to arrest deforestation or increase forest areas are proposed as important forms of climate change policy. This paper summarizes current proposals for addressing the contribution of forests to climate change, and the political problems of implementing these policies, especially in developing countries. The paper argues that current estimates of the likely sequestration benefits and costs of forest policies need to be tempered according to the political barriers and need for local consultation in formulating and implementing these proposals. These problems are likely to be most felt concerning current plans for Reduced Emissions from Deforestation and forest Degradation (REDD).

Wage effects from changes in local human capital in Britain

Abstract: This paper examines the impact of local human capital on individuals' wages through external effects. Employing wage regressions, it is found that changes in individuals' wages are positively associated with changes in the shares of high-paid occupation workers in the British travel-to-work-areas for the late 1990s. I examine this positive association for different occupational groups (defined by pay) in order to disentangle between production function and consumer demand driven theoretical explanations. The wage effect is found to be stronger and significant for the bottom- paid occupational quintile compared to the middle-paid ones, and using also sectoral controls the paper argues to provide evidence for the existence of consumer demand effects.

Economic growth and structural change in South Asia: miracle or mirage?

Abstract: This monograph has been prepared by Dr Ijaz Nabi with assistance from Abdul Malik, Rabin Hattari (World Bank), Turab Husain, Adeel Shafqat, Sana Anwaar, and Ammar Rashid (Lahore University of Management Sciences)