The ‘Home Grown’ Presidency: empirical evidence on localism in presidential voting, 1972–2000

This builds upon the conceptual framework of Lewis-Beck and Rice (American Journal of Political Science, 27, 548–56, 1983), in combination with the empirical design of Kjar and Laband (Public Choice, 112, 143–50, 2002), to investigate home grown-ness in US presidential elections from 1972–2000. It found that, ceteris paribus, home state vote shares for US Presidential election winners are 5.19–15.11 percentage points higher due to the home grown-ness effect. In the eight presidential elections analysed, this study confirms two aspects of prior work. First, the estimate of a home grown-ness effect in presidential elections of 5.19 percentage points (on average), supports the 4 percentage point average found by Lewis-Beck and Rice (1983 Lewis-Beck, MS and Rice, TW. 1983. Localism in presidential elections: the home state advantage. American Journal of Political Science, 27: 548–56.  ). Second, that support for the winning president monotonically increases as moves are made away from the opponent's home territory confirms the cascading dummy variable series approach developed by Kjar and Laband (2002 Kjar, SA and Laband, DN. 2002. On ‘home grown-ness’ in politics: evidence from the 1998 election for Alabama's Third Congressional district. Public Choice, 112: 143–50.  ).     

The long memory model of political support: some further results

This article extends the results of Byers et al. (1997 Byers, JD, Davidson, JEHD and Peel, DA. 1997. Modelling political popularity: an analysis of long range dependence in opinion poll series. Journal of the Royal Statistical Society, 160: 471–90. Series A [Google Scholar]) on long memory in support for the Conservative and Labour Parties in the UK using longer samples and additional poll series. It finds continuing support for the ARFIMA(0,?d,?0) model, though with somewhat smaller values of the long memory parameter. We find that the move to telephone polling in the mid-1990s had no apparent effect on the estimated value of d for either party. Finally, we find that we cannot reject the hypotheses that the parties share a common long memory parameter which we estimate at around 0.65.     

Cigarettes and addiction information: simulating the demand effects of the tobacco industry's ‘conspiracy of silence’

Although cigarette manufacturers were aware of the addictive properties of nicotine as early as 1962, the information did not become available to the US public until 1979 when the Surgeon General disclosed it (US Department of Health, Education, and Welfare, 1979 US Department of Health, Education, and Welfare 1979 Smoking and Health: A Report of the Surgeon General, Public Health Services, Office of Smoking and Health Washington ). This study simulates the impact this information would have had on the demand for cigarettes had it been released in 1962. The simulations build on past work by Fenn et al. (2001 Fenn, A, Antonovitz, F and Schroeter, J. 2001. Cigarettes and addiction information: new evidence in support of the rational addiction model. Economics Letters, 72: 3–45.  ) who found evidence that the release of addiction information resulted in a structural shift in demand in 1979. In the present study, the econometric results from Fenn et al. (2001 Fenn, A, Antonovitz, F and Schroeter, J. 2001. Cigarettes and addiction information: new evidence in support of the rational addiction model. Economics Letters, 72: 3–45.  ) are used to compute simulated time paths for state-level per capita consumption under the hypothetical scenario involving the earlier release of the addiction information. Using these simulated consumption paths; the projected reductions in cigarette sales revenue are calculated. These dollar figures provide a benchmark against which to judge the compensation amounts that the industry must pay because of recent tobacco lawsuit settlements.     

Forecasting profitability and earnings: a study of the UK market (1982–2000)

An approach recently developed by Fama and French (2000 Fama, EF and French, KR. 2000. Forecasting profitability and earnings. The Journal of Business, 73: 161–75.  ) is applied to the study of whether UK company profitability is mean-reverting. A sample of roughly 987 firms per year for a period from 1982–2000 is used, drawn from Datastream. In a simple partial adjustment model convergence towards the mean at a rate of about 25% per year is found. The results are very similar in direction to those of Fama and French (2000 Fama, EF and French, KR. 2000. Forecasting profitability and earnings. The Journal of Business, 73: 161–75.  ) but the results do not display significant non-linearities. The change in profitability appears to be more strongly influenced by dividends in the UK.     

Nonlinear Mean Reversion across National Stock Markets: Evidence from Emerging Asian Markets

This paper seeks empirical evidence of nonlinear mean-reversion in relative national stock price indices for Emerging Asian countries. It is well known that conventional linear unit root tests suffer from low power against the stationary nonlinear alternative. Implementing the nonlinear unit root tests proposed by Kapetanios et al. (2003 Kapetanios, G., Shin, Y. and Snell, A. 2003. Testing for a unit root in the nonlinear STAR framework. Journal of Econometrics, 112: 359–379. [Crossref], [Web of Science ®] , [Google Scholar]) and Cerrato et al. (2009 Cerrato, M., de Peretti, C., Larsson, R. and Sarantis, N. 2009. “A nonlinear panel unit root test under cross section dependence”. Working Papers 28, Department of Economics, University of Glasgow [Google Scholar]) for the relative stock prices of Emerging Asian markets, we find strong evidence of nonlinear mean reversion, whereas linear tests fail to reject the unit root null for most cases. We also report some evidence that stock markets in China and Taiwan are highly localized.     

Export activity,persistence and mark-ups

This article addresses the differences in margins across exporting and nonexporting firms. We jointly estimate a translog cost function, a variable factor share equation and price-cost margin equations to analyse the effect of persistence in export activity on margins. Results indicate that nonexporters have smaller margins than persistent exporters and firms that entered foreign markets during the nineties. However, larger export ratio is negatively associated with margins for persistent exporters. It suggests that efficiency advantages for exporters are partially compensated by higher competitive pressure in international markets. These results are in accordance with the predictions of Melitz and Ottaviano (2005 Melitz, MJ and Ottaviano, GIP. 2005. Market size trade, and productivity, NBER Working Paper Series No. 11393 (forthcoming in The Review of Economic Studies) [Google Scholar]).     

Does debt market timing increase firm value?

Survey evidence indicates that firm managers try to time debt markets when choosing the maturity of new debt issues, but we do not know whether these strategies increase firm value. This research examines differences in value across nontimers and timers, where timers are defined as firms that follow either a naïve strategy of choosing long-term debt when the term premium is low or a strategy from Baker et al. (2003 Baker, M, Greenwood, R and Wurgler, J. 2003. The maturity of debt issues and predictable variation in bond returns. Journal of Financial Economics, 70: 261–91. [Crossref], [Web of Science ®] , [Google Scholar]) based on the predictability of future excess bond returns. After controlling for various determinants of firm value, the research finds no differences in value across timers and nontimers. It also documents that the timing strategies do not increase firm value and do not affect announcement effects of long-term debt offerings. The results suggest that corporate debt markets are efficient and well integrated with equity markets.     

Inflation,growth, and distribution: The Brazilian economy after the post war

Abstract

Following Marglin and Bhaduri (1990 Marglin, S.A., and Bhaduri, A. “Profit Squeeze and Keynesian Theory.” In S.A. Marglin and J. Schor (eds.), The Golden Age of Capitalism. Reinterpreting the Postwar Experience. Oxford: Clarendon, 1990. [Google Scholar]), the purpose of this paper is to investigate empirically the interaction between income distribution and growth of aggregate demand during the 1951–89 period in Brazil. Applying Hein and Vogel’s (2008) methodology we conclude that the Brazilian economy showed a profit-led demand regime. In a context of high inflation, high concentration of markets, and wage control, retained profits were the main source to finance new capital. In this sense, we found a large sensitivity of investment relative to the wage share, a result that is compatible with a consumption pattern based on high income, which supported the growth trend with low wages observed during the period.     

The structure of tourist expenditure in Fiji: evidence from unit root structural break tests

The central aim of this paper is to investigate whether shocks to Fiji's tourism industry have a permanent effect or a transitory effect on tourist expenditure in Fiji. To accomplish this aim the Zivot and Andrews (1992 Zivot, E and Andrews, D. 1992. Further evidence of the great crash, the oil-price shock and the unit-root hypothesis. Journal of Business and Economic Statistics, 10: 251–70.  ) one break test and the Lumsdaine and Papell (1997 Lumsdaine, R and Papell, D. 1997. Multiple trend breaks and the unit root hypothesis. Review of Economics and Statistics, 79: 212–18.  ) two break tests are used. The one break and two break tests reveal 1987 – the year of the military coups in Fiji – as the year of the break. Moreover, it is possible to reject the unit root null leading to the conclusion that shocks to Fiji's tourism industry have a transitory effect on tourist expenditure in Fiji.     

Interrelationships among banks,stock markets and economic growth: an empirical investigation

This article utilizes a simultaneous equations model to study the relationships among economic growth, banking and stock market development. In contrast to conventional instrumental variable approach, we implement the analysis via the methodology of identification through heteroscedasticity. Using Beck and Levine (2004 Beck, T. and Levine, R. (2004) Stock markets, banks and growth:panel evidence, Journal of Banking and Finance, 28, 423–42.[Crossref], [Web of Science ®] , [Google Scholar]) dataset, we find that each of the three variables interacts in important ways. While both are conducive to economic growth, banking development matters more for growth in low-income countries and stock market development is more favourable to growth in high-income or low-inflation ones. The data also reveal coexistence of a positive effect of banking development on stock market development and a negative effect of stock market development on banking development. Besides, the feedback effects of growth on both banking and stock market development are found.     

Nonlinearity in real exchange rates: an approach with disaggregated data and a new linearity test

Employing disaggregated real exchange rates from nine European counties in 16 goods categories, we assess in this study the nonlinearity in the real exchange rates. Surprisingly, we find evidence for nonlinearity in only four (10) out of 143 series with the linearity test proposed by Harvey et al. (2008 Harvey, D. I., Leybourne, S. J. and Xiao, B. 2008. A powerful test for linearity when the order of integration is unknown. Studies in Nonlinear Dynamics and Econometrics, 12 Art 8[Web of Science ®] , [Google Scholar]) at the 5% (10%) significance level. This result differs greatly from those of Juvenal and Taylor (2008 Juvenal, L. and Taylor, M. P. 2008. Threshold adjustment of deviations from the law of one price. Studies in Nonlinear Dynamics and Econometrics, 12 Art 8[Web of Science ®] , [Google Scholar]), Imbs et al. (2003 Imbs, J., Mumtaz, H., Raven, M. O. and Rey, H. 2003. Nonlinearities and real exchange rate dynamics. Journal of the European Economic Association, 1: 639–49. [Crossref] , [Google Scholar]), Sarno et al. (2004 Sarno, L., Taylor, M. P. and Chowdhury, I. 2004. Nonlinear dynamics in deviations from the law of one price: a broad-based empirical study. Journal of International Money and Finance, 23: 1–25. [Crossref], [Web of Science ®] , [Google Scholar]) and Berka (2009 Berka, M. 2009. “Non-linear adjustment in law of one price deviations and physical characteristic of good”. In Review of International Economics Vol. 17, 51–73.  [Google Scholar]), who report ample evidence for nonlinearity for the same or similarly disaggregated real exchange rate datasets.     

Is there really a gap between aggregate productivity and technology?

The important contribution by Basu and Fernald (2002 Basu, S and Fernald, JG. 2002. Aggregate productivity and aggregate technology. European Economic Review, 46: 963–91.  [Google Scholar]) shows that, in practice, there is a statistically significant gap between aggregate productivity and technology that can be attributed to inefficient product and labour markets. This is important, as it implies that the Solow residual is an imperfect index for aggregate technology change. We take a related approach and find that when we control for capacity utilization, time varying markup and account for externalities between industries, by employing a superior system estimator, the gap between the aggregate productivity and technology is shown to narrow considerably.     

Purchasing power parity for G-7 countries: panel SURADF tests

In this study, the panel Seemingly Unrelated Regressions Augmented Dickey–Fuller (SURADF) tests advanced by Breuer et al. (2001 Breuer, J. B., McNown, R. and Wallace, M. S. 2001. Misleading inferences from panel unit-root tests with an illustration from purchasing power parity. Review of International Economics, 9: 482–93. [Crossref] , [Google Scholar]) are used to test the validity of Purchasing Power Parity (PPP) for G-7 countries over the period 1980M1 to 2008M5. The empirical results from several panel-based unit root tests indicate that PPP does not hold for G-7 countries under study; however, Breuer et al.'s (2001 Breuer, J. B., McNown, R. and Wallace, M. S. 2001. Misleading inferences from panel unit-root tests with an illustration from purchasing power parity. Review of International Economics, 9: 482–93. [Crossref] , [Google Scholar]) panel SURADF tests unequivocally indicate that PPP is valid for half of the G-7 countries.     

Scope and scale economies in multi-utilities: evidence from gas,water and electricity combinations

Within the recent debate on liberalization of local public services, the paper investigates the cost properties of a sample of Italian public utilities providing in combination gas, water and electricity. The estimates from a Composite Cost Function econometric model (Pulley and Braunstein, 1992 Pulley, LB and Braunstein, YM. 1992. A composite cost function for multiproduct firms with an application to economies of scope in banking. Review of Economics and Statistics, 74: 221–30.  ) are compared with the ones coming from other traditional functional forms such as the Standard Translog, the Generalized Translog, and the Separable Quadratic. The results highlight the presence of global scope and scale economies only for multi-utilities with output levels lower than the ones characterizing the ‘median’ firm. This indicates that relatively small specialized firms would benefit from cost reductions by evolving into multi-utilities providing similar network services such as gas, water and electricity. However, for larger-scale utilities the hypothesis of null cost advantages is not rejected. Thus, it is possible that the recent diversification waves of leading companies are explained by factors other than cost synergies, so that the welfare gains that can be reasonably expected from such examples of horizontal integration, if any, are likely to be very low.     

An Evaluation of Institutional Matrices Theory Which Was Designed to Illustrate Differences Between Russian and Western Political Economies

This article is devoted to the evaluation of the institutional matrices theory (IMT), which was designed to illustrate the differences between Russian and Western political economic systems. IMT has no matrix, and it is an ideological declaration rather than a theory. It is a set of assertions and assumptions that are adopted without evidence, and then hypostatized to be Russian and Western socioeconomic systems. IMT literature claims to utilize the reciprocity, redistribution, and exchange model of Karl Polanyi (1944 Polanyi, Karl. The Great Transformation. New York, NY: Rinehart &; Company, 1944. [Google Scholar], 1957 Polanyi, Karl. “The Economy as Instituted Process.” In Trade and Market in the Early Empires: Economies in History and Theory, edited by Karl Polanyi, Conrad M. Arensberg and Harry W. Pearson, pp. 239-270. New York, NY: Free Press, 1957. [Google Scholar]). However, IMT suffers from a number of assumptive and methodological problems in its application, the first of which consists of the complete exclusion of reciprocity from consideration. The first section of the article is an explanation of problems with IMT, and the second section demonstrates some particulars of the IMT problems with a real-world social fabric matrix from a Western nation.     

Estimating short and long-run relationships: a guide for the applied economist

Many applied economists face problems in selecting an appropriate technique to estimate short and long-run relationships with the time series methods. This article reviews three alternative approaches viz., general to specific, vector autoregressions and the vector error correction models. As in other methodological controversies, definite answers are difficult. It is suggested that if these techniques are seen as tools to summarize data, as in Smith (2000 Smith, RP. 2000. “Unit Roots and all that: the impact of time-series methods on macroeconomics”. In Macroeconomics and the Real World, Edited by: Backhouse, RE. and Salanti, A. 199–215. Oxford: Oxford University Press.  [Google Scholar]), often there maybe only minor differences in their estimates. Therefore a computationally attractive technique is likely to be popular.     

Does PPP hold in African countries? Further evidence based on a highly dynamic non-linear (logistic) unit root test

With a view to investigating whether the purchasing power parity (PPP) theory holds true for selected African countries during the January 1980–December 2003 period, we employ a rigorous, highly dynamic non-linear (logistic) unit root test, as first advanced by Leybourne et al. (1998 Leybourne, S, Newbold, P and Vougas, D. 1998. Unit roots and smooth transitions. Journal of Time Series Analysis, 19: 83–97. [Crossref] , [Google Scholar]), which is considerably more powerful than those tests traditionally used. Compared with the rejection of the null of the unit root process for only one of the 22 countries under study when we use the traditional ADF, PP, KPSS, NP and the DF-GLS unit root tests, with the Leybourne et al. (1998 Leybourne, S, Newbold, P and Vougas, D. 1998. Unit roots and smooth transitions. Journal of Time Series Analysis, 19: 83–97. [Crossref] , [Google Scholar]) test, we strongly reject the null of the unit root process for a surprising six of the 22 countries. These empirical results clearly indicate that PPP holds true for these six countries, namely the Central African Republic, the Côte d’Ivoire, Kenya, Madagascar, Uganda and Lesotho.     

Impatience and Inconsistency in Intertemporal Choice: An Experimental Analysis

In this article the experiment carried out by Takahashi et al. [2009 Takahashi, T., T. Hadzibeganovic, S. A. Cannas, T. Makino, H. Fukui, and S. Kitayama. “Cultural Neuroeconomics of Intertemporal Choice.” Neuroendocrinology Letters, 30, (2009), pp. 185–191.[PubMed], [Web of Science ®] , [Google Scholar]] is replicated to analyze the influence of culture, gender, origin (urban or rural), and socioeconomic level on the impulsivity and consistency of decision-making processes concerning monetary gains and losses. The results indicate that Spanish students show inconsistency, and more impulsivity over gains (i.e., more impatience, as they discount delayed outcomes more rapidly) than do Japanese and American students. Additionally, participants from urban areas show more impatience over gains than do participants from rural ones, women are more impatient than men are over losses, and participants of different socioeconomic levels show differences in their impulsivity parameters.     

Will the skill-premium in the Netherlands rise in the next decades?

While the skill-premium has been rising sharply in the US and the UK for 20 years, the Dutch skill-premium decreased for much of that period and only started to rise in the early 90s. In this article, we investigate whether the Dutch skill-premium will rise in the next decades. To answer this question, we forecast the skill-premium using the Katz and Murphy (1992 Katz, L and Murphy, K. 1992. Changes in relative wages, 1963–1987: supply and demand factors. Quarterly Journal of Economics, 107: 35–78. [Crossref], [Web of Science ®] , [Google Scholar]) and the Krusell et al. (2000 Krusell, P, Ohanian, L, Ríos-Rull, J-V and Violante, G. 2000. Capital-skill complementarity and inequality: a macroeconomic analysis. Econometrica, 68: 1029–53. [Crossref], [Web of Science ®] , [Google Scholar]) models. The Katz and Murphy model (KM) explains demand shifts by skill-biased technological change in unobservable variables captured by a time trend. In contrast, the Krusell et al. model (KORV) explains demand shifts by (observable) changes in the capital stock under a capital-skill complementarity technology. The results show that while the KM model predicts that the skill-premium will have increased by 30% in 2020, based on realistic predictions of the stock of capital, the KORV model predicts that the skill-premium will remain between ?5 and +5% of its 1996 level.     

Underground Economy,Evasion and Inequality

Economic theory is paying increasing attention to a non-observed economy (NOE) and its causes. Recently, a couple of works (Rosser et al., 2000 Rosser, J. B., Rosser, M. V. and Ahmed, E. 2000. Income inequality and the informal economy in transitions economies. Journal of Comparative Economics, 28(1): 156–171.  [Google Scholar], 2003 Rosser, J. B., Rosser, M. V. and Ahmed, E. 2003. Multiple unofficial economy equilibria and income distribution dynamics in systemic transition. Journal of Post Keynesian Economics, 25(3): 425–447. [Web of Science ®] , [Google Scholar]) have claimed that there is a positive relationship between income inequality and the size of NOE. This supposed relationship is not so clear and deserves in-depth analysis. There is a crucial aspect that has been completely avoided in these studies: income inequality is mainly measured using ‘regular’ incomes and this fact could lead to some bias. The existence of a certain size of NOE implies some income evasion that can affect the inequality indexes used in the study of the relationship between NOE and inequality. Including the regional share of NOE in a wage equation, I find that, in the specific case of the Italian private sector employees, the income evasion attached to NOE tends to reduce inequality measured by regular wages statistics.