Estimating school district expenditure functions under conditions of closed-end matching aid

Several studies have used ordinary least squares (OLS) to estimate school district expenditure functions for states with closed-end matching aid. The present paper demonstrates that the estimates of these studies may be inconsistent. A two-stage technique which guarantees consistent estimates is described and is used to estimate the price elasticity of expenditure for Pennsylvania school districts. The two-stage estimates indicate expenditure to be substantially more price-elastic than do the OLS estimates. The two-stage technique is appropriate for estimating any input demand or expenditure function when closed-end matching aid is involved.     

Environmental Regulation and Enterprise Innovation: A Review

The impact of environmental regulation on enterprise innovation is closely related to the competitiveness of the enterprise and sustainable development of the regional economy, but existing research does not provide a consistent view. This paper summarizes the impacts of environmental regulation on enterprise innovation from the perspectives of technological innovation, product innovation, system innovation and ecological innovation. We find that the impacts of environmental regulation on enterprise innovation behaviour are complex, and that the impacts can be reflected together by the four aspects above and even by their interaction. Moreover, the impacts are not limited to the creation of new technologies, products, and systems but also include their adoption and application. In particular, whether the Porter hypothesis is true and which versions of the Porter hypothesis environmental regulation causes in enterprise innovation depend on enterprise characteristics, means of environmental regulation, and enterprises' strategic behaviours in an enterprise ecosystem. Finally, we propose five potential research directions: quantifying the degree of enterprise innovation caused by environmental regulation, the impacts of environmental regulation on sustainable economic development from an enterprise ecosystem perspective, the impacts of enterprise innovation on environmental regulation, the role of enterprise initiative in the relationship between environmental regulation and enterprise innovation, and social security issues and the integration of eliminated enterprises resulting from environmental regulation.     

Recent evidence on the impact of government budget deficits on the ex ante real interest rate yield on Moody’s Baa-rated corporate bonds

This study provides recent empirical evidence on the impact of the federal budget deficit on the ex ante real interest rate yield on Moody’s Baa-rated corporate bonds. The study is couched within an open loanable funds model that includes the ex ante real short term real interest rate, the M1 money supply, net international capital inflows, and the unemployment rate. Using quarterly data for the period 1973.1–2007.4, two-stage least squares estimation reveals that the federal budget deficit, expressed as a percent of GDP, exercised a positive and statistically significant impact on the ex ante real interest rate yield on these corporate issues.     

Is there a ‘California effect’ in US environmental policymaking?

What determines state environmental policymaking in the US? Vogel (Trading Up: Consumer and Environmental Regulation in a Global Economy, Harvard University Press, Cambridge, MA, 1995; J. Eur. Pub. Pol. 4 (1997) 556–571) argues that California has been a de facto leader since the early 1970s in terms of automobile emissions standards. In this paper, we investigate the generality of California’s leadership role with respect to changes in overall pollution abatement expenditures. We present a simple model of yardstick competition in abatement costs. Using state-level panel data from 1977 to 1994 on abatement costs, our results indicate at best a minor role for California. Other states, in particular California’s immediate neighbors, do not appear to use California as a guideline.     

State-imposed solutions to negative externalities: employment impact of pollution abatement policy

Musgrave was acutely aware that many private activities, both consumption and production, generate negative externalities. Advocates for an active government rely on this concept to justify public sector regulation of private activities. Regulations and mandates, along with penalties for non-compliance, are the primary instruments used by government to bring about the “correct” level of output whenever private output gives rise to negative externalities such as environmental pollution. This study in effect offers a case study of the Clean Air Act on employment, i.e., it empirically investigates whether pollution abatement costs have had a negative impact on manufacturing employment in the U.S. Conventional microeconomic theory suggests that there is a trade-off between environmental protection outlays and manufacturing activity, i.e., higher pollution abatement compliance costs borne by industries may contribute to plant shutdowns, lower production levels and lay-offs, and/or lack of investment, thereby leading to diminished manufacturing employment. Existing studies fail to offer a clear conclusion as to the impact of existing environmental protection measures on manufacturing activity. Using state-level data for 2001, this study finds that government-imposed pollution abatement costs have had a statistically significant negative impact on manufacturing employment in the U.S. Richard J. Cebula, Shirley and Philip Solomons Eminent Scholar.     

Quasi‐rational and ex ante price expectations in commodity supply models: an empirical analysis of the US broiler market

A statistically optimal inference about agents' ex ante price expectations within the US broiler market is derived using futures prices of related commodities along with a quasi‐rational forecasting regression equation. The modelling approach, which builds on a Hamilton‐type framework, includes endogenous production and allows expected cash price to be decomposed into anticipated and unanticipated components. We therefore infer the relative importance of various informational sources in expectation formation. Results show that, in addition to the quasi‐rational forecast, the true supply shock, future prices, and ex post commodity price forecast errors have, at times, been influential in broiler producers' price expectations. Copyright © 2003 John Wiley & Sons, Ltd.     

Reconciling the Porter hypothesis with the traditional paradigm about environmental regulation: a nonparametric approach

This paper estimates the impact of pollution abatement investments on the production technology of firms by pursuing two new directions. First, we take advantage of recent econometric developments in productivity, efficiency analysis and nonparametric kernel regression by adopting a conditional nonparametric frontier analysis. Second, we focus not only on the average effect but also search for potential nonlinearities. We provide new results suggesting that pollution abatement capital affects with a bell-shaped fashion technological catch-up (inefficiency distribution) and does not affect technological change (shifts in the frontier). These results have relevant implications both for modeling and for the purposes of advice on environmentally friendly policy.     

NO x Emissions and the Use of Advanced Pollution Abatement Techniques in West Germany

This paper concentrates on the integration of pollution abatement techniques for NO x emissions into the environmentally enlarged input-output model PANTA RHEI II for West Germany. The use of available abatement technologies is explained by emission prices, investment and technological factors for different sectors and energy carriers. Simulation runs to the year 2005 show the economic, environmental and technological effects of a tax on NO x emissions, when revenues are recycled via reductions of employers' social security contributions. A cut of emissions by almost one third against the businessas-usual level is reached. In particular, the use of advanced pollution abatement techniques and structural changes prevent negative economic effects on the macro level. Lower real wages even induce higher employment.     

Do tournaments solve the adverse selection problem?

This paper provides a solution to a puzzle in the analysis of tournaments, that of why there is no agent discrimination or differential contracting in certain business practice settings. The paper examines the problem of a principal contracting with multiple agents whose activities are subject to common shocks. The presence of common shocks invites the use of relative performance evaluation to minimize the costs of moral hazard. But, in the additional presence of adverse selection, the analysis shows that there may be no need for ex ante screening through menus of offers. This is so because the principal becomes better informed ex post about agent types, via the realization of common uncertainty, and can effectively penalize or reward the agents ex post. Thus, unlike the standard adverse selection problem without common uncertainty where the principal always benefits from ex ante screening, it is shown that ex post sorting through relative performance evaluation reduces the scope for ex ante screening through menus, and can eliminate it completely if agents are known to not be very heterogeneous. This is consistent with observed practice in industries where the primary compensation mechanism is a cardinal tournament which is uniform among employees. The analysis connotes that by using relative instead of absolute performance measures, firms with employees who are not substantially heterogeneous not only can alleviate the agency problem, but there is also no need to extract the agents' ex ante private information about their innate abilities via a screening menu.     

Improved forecasting of autoregressive series by weighted least squares approximate REML estimation

Restricted maximum likelihood (REML) estimation has recently been shown to provide less biased estimates in autoregressive series. A simple weighted least squares approximate REML procedure has been developed that is particularly useful for vector autoregressive processes. Here, we compare the forecasts of such processes using both the standard ordinary least squares (OLS) estimates and the new approximate REML estimates. Forecasts based on the approximate REML estimates are found to provide a significant improvement over those obtained using the standard OLS estimates.     

Can voluntary environmental regulation promote corporate technological innovation?

The impact of environmental regulation on technological innovation has been widely discussed in the academic circle. Based on the panel data of 403 Chinese manufacturing firms from 2010 to 2015, this paper explored the role of voluntary environmental regulation in technological innovation. The results showed the following: First, both voluntary environmental information disclosure and environmental management system certification had a positive effect on corporate innovation investment. Second, compared with the impact of environmental information disclosure, the impact of environmental management system certification on corporate innovation investment was more significant. Third, there was a significant positive interaction between environmental information disclosure and environmental management system certification. Finally, the effect of voluntary environmental regulation on corporate technological innovation in heavily polluting industries was stronger than that in lightly polluting industries.     

What drives environmental innovation? A meta-analysis

To clarify the drivers of environmental innovation, this study selected 50 independent samples from 49 publications to investigate the effects of four major factors—policy, market, resource capacity, and organizational characteristics—on environmental innovation using a meta-analysis, as well as demonstrating the moderating role of cultural background and industrial diversity. The results show that both environmental regulations and government subsidies positively promote environmental innovation and that cultural background and industrial diversity do play moderating roles in how environmental regulations impact environmental innovation. Furthermore, customer demand is also shown to have a positive impact on environmental innovation and is moderated by industrial diversity. However, market concentration is not shown to significantly affect environmental innovation. The results also show that knowledge sources, technological capabilities, organization's performance, and environmental management systems positively influence environmental innovation. Additionally, cultural background plays a moderating role between an organization's performance and environmental innovation, and industrial diversity can moderate technological capability and environmental innovation. Finally, the size of an organization is shown to positively affect environmental innovation and is also moderated by cultural background.     

The role of biomass energy consumption and economic complexity on environmental sustainability in G7 economies

This paper empirically examines the effect of biomass energy consumption and economic complexity on environmental sustainability in G7 economies. The current study attempts to report a comprehensive analysis of biomass energy and economic complexity on ecological and carbon footprints and carbon emissions. We employ data from 1990 to 2019 and adopt robust panel econometric techniques that account for the analysis's cross-sectional dependence. We conduct cointegration analysis, pooled ordinary least squares (OLS), system generalized method of moments (GMM) and conditional quantile model for our empirical analysis. The empirical findings show that both biomass energy consumption and economic complexity are detrimental to the ecological footprint and carbon footprint. Additionally, we find that globalization positively affects the environment, while we find some evidence that bureaucratic quality improves environmental quality. Finally, in line with other research, we find that economic growth has detrimental effects on the environment. Our results suggest that policymakers should be more cautious in promoting biomass as a clean energy source and that the G7 economies should take advantage of their leading position in innovation to invest more in sustainable practices and investment.     

Some complications in the measurement of environmental control impacts: A case study of water pollution controls

This paper examines several complications in the measurement of the impact of government regulations on industry. It focuses on problems of water pollution control, but its lessons apply to almost any exogenous and discontinuous change in factor costs whether regulation induced or not. Among the problems addressed are: estimation of industry cost curves; economic criteria for identifying the technical alternatives to be included in engineering studies of regulatory impact; choice of minimum cost abatement methods; sensitivity of findings to factor price changes; managerial criteria for selection of control methods; intra-industry disaggregation of impacts; dynamic economic process of adjustment to controls. The methods demonstrated are microanalytical in nature. This paper does not examine the larger social questions regarding the effectiveness of regulation.     

Time Horizons and Smoothing in the Bank of England's Reaction Function: The Contrast Between the Standard GMM and Ex Ante Forecast Approaches*

The monetary policy reaction function of the Bank of England is estimated by the standard GMM approach and the ex ante forecast method developed by Goodhart (2005) , with particular attention to the horizons for inflation and output at which each approach gives the best fit. The horizons for the ex ante approach are much closer to what is implied by the Bank's view of the transmission mechanism, while the GMM approach produces an implausibly slow adjustment of the interest rate, and suffers from a weak instruments problem. These findings suggest a strong preference for the ex ante approach.     

Effects of Target Timing and Contract Frame on Individual Performance

Abstract

This study experimentally examines the effects of target timing and contract frame on individual performance. We study four target-based incentive contracts, categorised by when participants learn the performance target (ex ante, or before production starts, vs. ex post, or after production ends) and how the incentive contract is framed (bonus vs. penalty). The performance target in this study is determined by a peer group's average productivity. We find that performance is significantly higher for bonus-framed contracts when the performance target is revealed ex post, as opposed to ex ante. In contrast, revealing the peer-based performance target ex ante or ex post has no impact on performance for penalty-framed contracts. We also find that the ex post, bonus-framed contract significantly outperforms the other three contracts. This finding supports practitioners' claim that employers should reward (as opposed to punish) individuals based on their performance, relative to that of their peers, ex post.     

Firm performance and board composition: Some new evidence

We investigate the effect of board composition on overall corporate performance while controlling for managerial ownership and other key variables. We recognize that both managerial ownership and board composition may be endogenous to performance, but our work differs from previous in two important respects. First, we measure performance using the market value to book value ratio of common stock equity rather than the more commonly used Tobin's q. Second, recognizing that overall estimates from the IV approach depend greatly on the choice of instruments, we perform sensitivity analysis by using a variety of instruments to proxy for board composition and managerial ownership. Both our OLS and IV estimates indicate a significant curvilinear relation between board composition and performance. However, we find that moderate differences in first-stage regressions, resulting in small changes to first-stage R²s, lead to widely differing overall results. Our results suggest that findings of studies using IV and similar techniques (e.g. two- and three-stage least squares) must be interpreted cautiously.     

Do environmental regulations hamper small enterprises' market entry? Evidence from China

Due to the serious increase of environmental pollution in China, environmental regulations have become significantly stringent. Such regulations are playing an increasingly important role in the development of small enterprises (SEs) in China, especially in SEs' market entry. However, existing studies pay little attention to this issue. This paper investigates for the first time the effect of environmental regulations on SEs' market entry and the mechanism of environmental regulation effects in China. We consider two sets of panel data for the periods 2003–2010 and 2012–2015 in China. We also use the fixed effect model and the instrumental variable method to explore the role of environmental regulations in SEs' market entry. The results show that, overall, environmental regulations play a significantly positive and robust role in SEs' market entry. However, the mechanisms associated with the effect of environmental regulations on different innovative types of SEs differ. Environmental regulations promote the market entry of SEs with product innovation, but this impact is not significant for SEs with research and development (R&D) activities and R&D institutions. Our findings indicate that China's SEs prefer product innovation, which is a lower level innovative type, over R&D innovation, as a means to avoid the negative impact of stringent environmental regulations.     

Leading Indicators for Euro‐area Inflation and GDP Growth*

In this paper, we evaluate the role of a set of variables as leading indicators for Euro‐area inflation and GDP growth. Our leading indicators are taken from the variables in the European Central Bank's (ECB) Euro‐area‐wide model database, plus a set of similar variables for the US. We compare the forecasting performance of each indicator ex post with that of purely autoregressive models. We also analyse three different approaches to combining the information from several indicators. First, ex post, we discuss the use as indicators of the estimated factors from a dynamic factor model for all the indicators. Secondly, within an ex ante framework, an automated model selection procedure is applied to models with a large set of indicators. No future information is used, future values of the regressors are forecast, and the choice of the indicators is based on their past forecasting records. Finally, we consider the forecasting performance of groups of indicators and factors and methods of pooling the ex ante single‐indicator or factor‐based forecasts. Some sensitivity analyses are also undertaken for different forecasting horizons and weighting schemes of forecasts to assess the robustness of the results.     

Do firms with different levels of environmental regulatory pressure behave differently regarding complementarity among innovation practices?

This study explores the complementary effects among environmental innovation, organizational innovation, and training for innovation and their effect on firm productivity, within a supermodularity framework. Furthermore, it attempts to understand whether different innovation practices are complements or substitutes for firm profitability according to the industrial environmental regulation context by distinguishing between clean and dirty industries. Using a Spanish technological innovation panel survey over the period 2008–2015, our findings indicate that the interrelationship between different innovation practices is complementary rather than substitutive, and the pattern of complementarity among innovation practices differs according to the environmental regulation under which an industry operates. Engaging in a broad range of innovation practices such as environmental and organizational innovations, clean industry can strengthen productivity. For dirty industries, our results indicate a greater affinity between training activities and environmental innovation than between environmental innovation and organizational innovation on firm productivity achievement. Taken all together, these results provide managers with considerable insights in terms of how to adapt the various combinatorial practices to the industrial environment in which they are embedded, taking market and regulatory pressure into account.