Showing papers on "Negative relationship published in 2001"

Central Bank Independence : An Update of Theory and Evidence

Abstract: This paper reviews recent research on central bank independence (CBI) After we have distinguished between independence and conservativeness, research in which the inflationary bias is endogenised is reviewed Finally, the various challenges that have been raised against previous empirical findings on CBI are discussed We conclude that the negative relationship between CBI and inflation is quite robust

Resource Curse or Debt Overhang

Abstract: It has been widely believed that resource abundant economies grow less than other economies. In a very influential paper, Sachs and Warner (1997), point out that there is a negative relationship between resource abundance and growth. Two important econometric problems are present in the traditional empirical literature: First, the result might depend on factors that are correlated with primary exports but that have been excluded from the regression. Second, total GDP includes the production in the resource sector that has been declining in the last 30 years. We correct for those issues. Our results indicate that the so called 'Natural Resource Curse' might be related to a debt overhang. In the 70's when commodities' prices were high, natural resource abundant countries used them as collateral for debt. The 80's witnessed an important fall in the prices that drove these countries to debt crises. When we estimate the model taking these into account, we found that the effect of resource abundance disappears.

Resource curse or debt overhang

Abstract: It has been widely believed that resource abundant economies grow less than other economies In a very influential paper, Sachs and Warner (1997), point out that there is a negative relationship between resource abundance and growth Two important econometric problems are present in the traditional empirical literature: First, the result might depend on factors that are correlated with primary exports but that have been excluded from the regression Second, total GDP includes the production in the resource sector that has been declining in the last 30 years We correct for those issues Our results indicate that the so called “Natural Resource Curse” might be related to a debt overhang In the 70’s when commodities’ prices were high, natural resource abundant countries used them as collateral for debt The 80’s witnessed an important fall in the prices that drove these countries to debt crises When we estimate the model taking these into account, we found that the effect of resource abundance disappears

Business Cycle Volatility, Uncertainty and Long-run Growth

Abstract: Using data for 24 OECD economies from 1961 to 1997 we investigate whether the empirical relationship between business cycle volatility and long-run growth is positive, as Blackburn (Economic Journal, Vol. 109, No. 1 (1999), pp. 67–77) suggests, or negative, the view of the UK and other governments. The existing empirical literature is ambiguous on this issue. Here we account for the disparate results and find a significant negative relationship. This relationship is found to depend crucially on the time dimension of the data. We also find that oil price volatility and inflation uncertainty, as indicators of world and general shocks, are robustly correlated with growth.

Education and Religion

Abstract: In the United States, religious attendance rises sharply with education across individuals, but religious attendance declines sharply with education across denominations. This puzzle is explained if education both increases the returns to social connection and reduces the extent of religious belief. The positive effect of education on sociability explains the positive education-religion relationship. The negative effect of education on religious belief causes more educated individuals to sort into less fervent religions, which explains the negative relationship between education and religion across denominations. Cross-country differences in the impact of education on religious belief can explain the large cross-country variation in the education-religion connection. These cross-country differences in the education-belief relationship can be explained by political factors (such as communism) which lead some countries to use state-controlled education to discredit religion.

Evidence on Youth Employment, Earnings, and Parental Transfers in the National Longitudinal Survey of Youth 1997

Abstract: The employment behavior of youths under age 16 has been neglected in the literature. This paper uses data from the new National Longitudinal Survey of Youth 1997 (NLSY97) to examine the employment and earning behavior of youths aged 12-16 as well as the cash transfers received from their parents. Nearly half the youths (47 percent) earned income in 1996. As youths age, the amount of money they control increases as earnings grow faster than allowances. Results also suggest that a negative relationship exists both between youth employment and parental allowances and between earnings and parental allowances for youths aged 14-16.

Financial Development and Financing constraints: International Evidence from the Structural Investment Model

Abstract: Microeconomic evidence from 40 countries shows that financial development aids growth by reducing financing constraints that would otherwise restrict efficient firm investment. The relationship between the financial and real sides of the economy has long been a topic of intense interest and debate. Love provides microeconomic evidence that financial development aids growth by reducing financing constraints that would otherwise restrict efficient firm investment. The author estimates a structural model based on the Euler equation for investment using firm-level data from 40 countries. The results show a strong negative relationship between the extent of financial market development and the sensitivity of investment to the availability of internal funds (a proxy for financing constraints). Considering size effects, business cycles, and the legal environment as plausible alternative explanations, the author finds the results to be robust in all cases. This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to study the determinants of access to finance. The author may be contacted at ilove@worldbank.org.

The Life Duration of Small Firms Born Within a Start-up Programme: Evidence from Italy

Abstract: DEL MONTE A. and SCALERA D. (2001) The life duration of small firms born within a start‐up programme: evidence from italy, Reg Studies 35, 11–21. We argue in this paper that the success of a subsidy programme should not be evaluated by comparing the survival rates of subsidized and non subsidized firms, since the purpose of subsidies is to offset a gap with firms that do not need subsidies. Secondly, we seek to identify the main factors aVecting the death probability of small firms born within a start-up programme. To this end, we conduct an empirical investigation of the firms supported by Law 44 in Italy between 1988 and 1997, finding that the amount of capital invested has a negative impact on life duration, while the capital/ labour ratio and the amount of subsidy exert a positive influuence. The main result is the unusual, negative relationship between size and survival, which we interpret in terms of the bias induced by subsidies in favour of larger and Riskier firms. DEL MONTE A. et SCALERA D. (200...

Trade Protection and Wages: Evidence from the Colombian Trade Reforms

Abstract: Starting in 1985, Colombia experienced gradual trade liberalization that culminated in the drastic tariff reductions of 1990-91. This paper exploits these trade reforms to investigate the relationship between protection and wages. The focus of the analysis is on relative wages, defined as industry wage premiums relative to the economy-wide average wage. Using the June waves of the Colombian National Household Survey, we first compute wage premiums for the period 1984-98, adjusting for a series of worker characteristics, job and firm attributes, and informality. We find that industry wage premiums in Colombia exhibit remarkably less persistence over time than U.S. wage premiums. Similarly, measures of trade protection are less correlated over time than in the U.S. data, indicating that as a result of trade liberalization the structure of protection has changed. Regressions of wage premiums on tariffs, without industry fixed effects, produce a negative relationship between protection and wages; workers in protected sectors earn less than workers with similar observable characteristics in unprotected sectors. With fixed effects the results are reversed: Trade protection is found to increase relative wages. The effect is economically significant: Elimination of tariffs in an industry with an average level of protection in 1984 would lead to a 4% wage decline in this industry. For the most protected industries the effect increases to 7.3%. We also find that - in contrast to the U.S. - sectors with high import penetration in Colombia pay higher wages; nevertheless, regressions with industry fixed effects indicate that an increase of imports in a particular sector is associated with lower wages. The differences between the results with and without fixed effects are indicative of the importance of (time-invariant) political economy factors as determinants of protection. Further issues concerning the effects of trade liberalization, such as the relevance of time-variant political economy factors, the importance of employment guarantees, liberalization induced productivity changes, and the interplay of trade and labor reforms, will be investigated in a sequel paper.

Fertility and female labour supply

Abstract: The estimated relationship between the number of children and female labour supply is often negative; however, it is not clear whether this arises because of a causal effect of children on labour supply, or whether it is the result of heterogeneous preferences (women who have a preference for home-based activities have more children and a lower preference for market work). The fact that parents in industrialized countries prefer their families to consist of roughly equal numbers of girls and boys, and are therefore more likely to have a third child if their first two children are of the same sex, is used as an exogenous instrument for the birth of a third child in the female labour supply equation. This paper shows that heterogeneity is likely to be important in the female labour supply function, and that failure to account for heterogeneity leads to exaggerated estimates of the negative effect of children on female labour supply. A similar effect in the female hours of work equation is also demonstrated. NON-TECHNICAL SUMMARY Economists and other social scientists are interested in the relationship between the number of children a woman has, and her labour supply: how likely she is to go out to work, and if she does go out to work, for how many hours. There is no reason to believe a priori that the effect should go in either direction: one may argue that a woman with more children will be less inclined to go out to work, since the time she spends at work will be time foregone with her children, and the expense of childcare will reduce her effective wage. On the other hand, children are extremely expensive, and a mother may have to work more with every additional child to maintain the family income. Nevertheless, most estimates of this relationship have found a negative relationship between the number of children and a woman’s labour supply: that is, that women with more children on average go out to work less than women with fewer children. The problem with these estimates is that most are not able to say anything about causality, since the observed relationship may be due (A) to more children may ‘causing’ women to work less; or (B) to some third factor driving both the desire to have children and the desire to go out to work, so that the two appear to be related but in fact they are not causally related at all. In the language of econometrics, if women did indeed constitute a heterogeneous population, with some having a preference for family-based activity while others had a preference for market-based work, then fertility variables would be ‘endogenous’ in the labour supply function, and estimates of the relationship between the number of children and labour supply would yield no information about the effect of children on labour supply. This paper uses a technique called instrumental variables to get round this problem. This technique relies on finding a variable which is correlated with the number of children a woman has, but not with her likelihood of going out to work. Demographers have known for a long time that women whose first two children are of the same sex (two girls or two boys) are more likely to go on to have a third child than women whose first two children are of different sexes (one boy and one girl). These variables can be used to predict the probability that a woman with two children will go on to have a third child, and this predicted probability can be used in regressions instead of the observed ‘third child’ variable, to obtain estimates of the relationship between children and female labour supply, which more truly reflect the effect of children on whether a woman goes out to work, and for how many hours. This paper finds that under ‘standard’ techniques which do not take account of the endogeneity of fertility variables, having a third child is associated with a reduction in the probability that a woman will go out to work of between 12% and 15%. On the other hand, if endogeneity is accounted for, having a third child is associated with an increase in the probability of going out to work, of between 7% and 13%. This second set of estimates is rather imprecise and statistical tests do not rule out that the estimated effects are in fact equal to zero. However, the second set of estimates is significantly different from the first set, which shows that if the researcher fails to correct for the endogeneity of fertility variables, the estimated effect of fertility on female labour supply will be exaggerated in a negative direction.

Parental separation and children's educational attainment: a siblings approach

Abstract: This article analyzes whether the commonly found negative relationship between parental separation in childhood and educational outcomes is causal or mainly due to selection. We use data on about 100,000 Swedish full biological siblings, born in 1951-64, and perform cross-section and sibling-difference estimations. Outcomes are measured as educational attainment in 1996. Our cross-section analysis show the expected negative and significant relationship, while the relationship is not significant, though precisely estimated, in the sibling difference analysis. This finding was robust to the sensitivity tests performed and is consistent with selection, rather than causation, being the explanation for the negative relationship.

Comparable firms and the precision of equity valuations

Abstract: I investigate the relationship between the amount of information provided by a firm's comparables (i.e., firms in the same line of business as the firm being valued) and the precision of the firm's equity valuation. When investors have more information, previous studies argue that investors can make a more precise estimate of a firm's true equity value and this implies a lower (excess) stock return volatility around corporate events such as earnings announcements. I develop a simple model that shows a negative relationship between the amount of information provided by a firm's comparables and the firm's stock return volatility. Using alternative measures of information provided by comparables and different definitions of comparables, I consistently find a negative and significant relationship between these information measures and stock return volatility, ceteris paribus.

The Poor and the Dead: Socioeconomic Status and Mortality in the U.S., 1850-1860

Abstract: Despite the significant research on aggregate trends in mortality and physical stature in the middle of the nineteenth century, little evidence on the individual-level characteristics associated with premature mortality has been presented. This essay describes a new project that links individuals from the mortality schedules to the population schedules of the 1850 and 1860 federal population censuses. This makes it possible to assess the link between individual and household characteristics and the probability of dying. The results reveal a strong and negative relationship between household wealth and mortality in 1850 and 1860 and a somewhat weaker negative relationship between occupational status and mortality in 1850. The findings suggest that even when the U.S. population was largely rural and agricultural, changes in the distribution of income and wealth would have had a large impact on mortality rates and life expectancies. Urbanization merely exacerbated already existing disparities in mortality by socioeconomic status.

Modernisation in Arab societies: the theoretical and analytical view

Abstract: Examines the effects of demographic, mobility, economic, social and technology factors as independent variables upon industrialization, urbanization and modernization as dependent variables. Compares between results of the analysis of these factors related to both Cowgill’s and Kuznet’s models. Samples 22 different Arab societies. Suggests that results show a positive relationship between change rate in urban population, expenditure on education, energy consumption per capita, total exports, external debts and modernization. Shows a negative relationship between family size, illiteracy, total imports and modernization, and supports the Cowgill model.

Skill classification does matter: estimating the relationship between trade flows and wage inequality

Abstract: Empirical work must pay careful attention to how it measures the relative skill abundance of countries and the relative skill intensity embodied in trade flows. This paper compiles a new data set, using income levels, average education, manufacturing wages, and an index of these three variables, to classify countries and trade flows as relatively high skill or low skill. Then, in order to show the importance of skill classification, it uses a reduced-form fixed-effects model to estimate the relationship between trade flows and wage inequality. This specification not only controls for any time-invariant omitted variables, but also permits the inclusion of a large number of diverse countries. When more accurate skill rankings are utilized, results suggest that, in high-skill abundant countries, increased trade with lower-skill countries is correlated with an increase in wage inequality. This relationship is significant and highly robust and is driven by the negative relationship between trade and low-skill ...

Financing School-Based Education in England: Poverty, Examination Results, and Expenditure

Abstract: The authors examine two main research issues. First, they focus on the way in which funds for education are targeted on disadvantage at the level of the local education authority (LEA). They explore the relationship between various indicators of disadvantage and national test and public examination results and find that the relationship between one measure of disadvantage—the proportion of children dependent on Income Support recipients in an LEA—has a stronger negative relationship with examination results of that LEA than the additional educational needs (AEN) index currently used by central government in the formula to distribute resources to local authorities. Second, the authors focus on the relationship between expenditure and performance and find evidence that higher expenditure by LEAs on education is associated with better examination results once poverty (as measured by the Income Support measure) has been controlled for. The first finding suggests that targeting educational need could be improv...

A New Look at Service Climate: Its Relationship with Owner Service Values in Small Businesses

Abstract: The present study examined the relationship between service climate and an organizational-level variable not studied to date: owner service values. Thirty-one small businesses (35 owners and 221 employees) participated in the study. Service climate and owner service values were found to be negatively correlated such that the more an owner valued service, the lower the employees rated the organization's service climate. Although this result was contrary to expectations, the “false consensus” effect provides a useful framework to explain the negative relationship. Other owner values (e.g., innovation, aggressiveness, and decisiveness) did not correlate with service climate.

On the Determinants and Dynamics of UK Capital Structure

Abstract: In this paper we analyse the determinants of the capital structure for a panel of 1,054 listed UK companies from 1991 to 1997, giving a total of 6,001 firm-year observations. We find significant differences in the results depending on whether the estimation is undertaken using OLS or panel estimation, suggesting OLS results are inconsistent due to their failure to take into account firm effects. We extend the fixed effects panel estimation by incorporating time interactions with the intercept and each of the independent variables. Analysis of the dynamics in the panel reveals significant changes over time in the relationship between gearing and the level of growth opportunities, company size, profitability and tangibility. Over the period of analysis, there is a trend for larger companies to use more long-term securitised debt, with smaller companies making increasing use of long-term bank borrowing and trade credit. Companies with high levels of growth opportunities are in general reducing their level of indebtedness, particularly at short maturities. During the early years of the analysis, there is a strong negative relationship between gearing and profitability. However, there appears to be a significant shift during the 1990s, with short-term bank borrowing and trade credit becoming significantly positively related to profitability by the mid 1990s. Our results suggest the nature of the credit market in the UK has changed significantly during the 1990s.

Landlords are taking back the land: the agrarian transition in Vietnam

Abstract: In China, the population policy has been a major item on the political agenda since the early 1970s. Given the importance of human capital as an engine for economic growth, the question of how changes in birth rates affect human capital is particularly important for macroeconomic policy. Extant studies have presented contrasting views on the relationship between the number of children and educational investment in households. Some suggest a negative relationship due to the quantity/quality trade-off occasioned by limited resources within the family, while other studies point out a positive relationship caused by economies of scale. This study empirically analyzes the relationship between the number of children and educational attainment in households in China. More specifically, we estimate the effect of the number of siblings on the number of education years among individuals born since 1970, using the China General Social Survey (CGSS) and the Chinese Household Income Project Survey (CHIP). We estimate the causal impact of the number of siblings by exploiting exogenous variation in the number of siblings caused by family planning policies (“Later, Longer, Fewer”) that started in the early the 1970s. The results support the assertion that the number of siblings has a negative effect on educational attainment in China.

Regional differences in personal saving rates in Spain

Abstract: The aim of this article is to analyze, from an aggregate perspective, the differences in personal saving rates among the Spanish regions at the NUTS II level from 1986 to 1994. In accordance with the postulates of the life cycle hypothesis, we present the main economic determinants for personal saving rates obtained from an aggregate personal saving model. Correcting for temporal and spatial dependence in the empirical model, the analysis suggests the existence of a significant and negative relationship between aggregate personal saving rates and wealth, access to credit and direct tax burdens. Likewise, a nearly significant positive relationship between personal saving rates and per capita gross disposable personal income has been detected.

Financial development and financing constraints - international evidence from the structural investment model

Abstract: The relationship between the financial, and real sides of the economy has long been a topic of intense interest, and debate. The author provides microeconomic evidence that financial development aids growth, by reducing financing constraints that would otherwise restrict efficient firm investment. The author estimates a structural model, based on the Euler equation for investment, using firm-level data from forty countries. The results show a strong negative relationship between the extent of financial market development, and the sensitivity of investment, to the availability of internal funds (a proxy for financing constraints). Considering size effects, business cycles, and the legal environment as plausible alternative explanations, the author finds the results to be robust in all cases.

articles: Regional differences in personal saving rates in Spain

Abstract: The aim of this article is to analyze, from an aggregate perspective, the differences in personal saving rates among the Spanish regions at the NUTS II level from 1986 to 1994. In accordance with the postulates of the life cycle hypothesis, we present the main economic determinants for personal saving rates obtained from an aggregate personal saving model. Correcting for temporal and spatial dependence in the empirical model, the analysis suggests the existence of a significant and negative relationship between aggregate personal saving rates and wealth, access to credit and direct tax burdens. Likewise, a nearly significant positive relationship between personal saving rates and per capita gross disposable personal income has been detected.

Competitive Pressure on China : Income Inequality

Abstract: In the preceding paper we have seen that the top types of labor are relatively scarce in China and this raises the issue of income inequality under competition.Our main finding is that inequality would multiply indeed. Subsidiary, the nature of inequality would shift from the rural-urban divide to differences between social classes.The existing negative relationship between development and inequality would be dissolved by competition.

The Welfare State as a Substitute for a Conservative Central Banker

Abstract: Many years since their introduction, positive theories of inflation have rarely been tested. This paper documents a negative relationship between inflation and the welfare state (proxied by the parameters of the unemployment benefit program) that is to be expected in such theories. Because unemployment benefits make the monetary authority less concerned about the plight of the unemployed, building a welfare state has a similar effect to appointing a conservative central banker. The relationship holds in a panel of 21 OECD countries over the period 1961-92, a region where Romer (1993) finds no evidence of commitment problems. It also holds controlling for country and time fixed effects, country specific time trends, other co-variates and a lagged dependent variable. The effects are economically large: a one standard deviation decrease in benefits is predicted to add 2.7 percentage points to inflation, or 52 percent of the standard deviation in inflation. We also allow for unemployment benefits to be endogenously determined.

A contracting-agency analysis of the association between firm risk, incentives and firm performance: an Australian perspective

Abstract: Tosi and Gomez-Mejia, (1989) suggest that the challenge of corporate governance is to set up supervisory and incentive alignment mechanisms that alter the risk and effort orientation of agents to align them with the interests of principals. The research problem is to discern the conditions that align the goals of the agent with those of the principal. These conditions will promote maximum effort in achieving the organisational goal thus maximizing shareholder wealth. Therefore, the objective of this study is to determine the efficiency of incentive contracts given certain characteristics of the firm. That is, the study sets out to determine whether risk firms with higher levels of incentives are associated with higher firm performance. In this study, data was collected from 40 of the top 500 Australian publicly listed companies. Information on incentives and firm characteristics was acquired from company annual and financial reports, a mailed questionnaire and the Australian graduate school of management risk measurement service of the University of New South Wales. The results of this study demonstrated how the relationship between firm risk and performance is associated with the incentive contracts used by these firms. In particular, the results of this study showed that the negative relationship between firm risk and firm performance is weakened by higher levels of share options in executives’ compensation contracts. In addition the results demonstrated that the relationship between firm performance and share ownership is dependent on the level of firm risk. The results of this study are expected to improve our understanding of how and why firms adopt different types of incentives in an effort to reduce agency costs. Rarely has prior research examined whether the effectiveness of the incentive contract in eliminating agency costs is associated with the environmental characteristics of the organisation (Bloom & Milkovich, 1998).