Constitutions and economic reforms in transition: an empirical study

Experiences of countries undergoing post-socialist transition in Central and Eastern Europe, as well as Central and Southwestern Asia, during the last 17 years, reveal great variety in economic reform paths and their successful implementation. At different moments of transition varying constitutional rules have also emerged in these countries. In our empirical study we find a significant relationship between constitutional rules and the economic reform process in post-socialist countries of Europe and Asia after 1989. In principle, the results confirm the arguments of the so-called negative constitutionalists, according to which the main function of the constitution for economic reforms in transition is its functioning as a commitment mechanism. The conclusions constitute an important step towards verification of different and often conflicting theories proposed by constitutional economists and allow to formulate practical recommendations for constitutional legislators and other actors capable of influencing constitutional change in countries encompassed by the study.

Transaction tax and stock market behavior: evidence from an emerging market

This study examines the impact of a stamp tax rate increase on market behavior, using data from two stock exchanges in China. We find that when the tax rate increases from 0.3 to 0.5% (which implies that the transaction cost increases by about 1/3) trading volume decreases by 1/3. This implies an elasticity of turnover with respect to a stamp tax of −50% and an elasticity of turnover with respect to transaction cost of −100%. The markets’ volatility significantly increases after the increase in the tax rate. Furthermore, the change in the volatility structure indicates that the markets become less efficient in the sense that shocks are less quickly assimilated in the markets.

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Did efficiency of Indian public sector banks converge with banking reforms?

This paper examines the issue of convergence of efficiency levels among Indian public sector banks (PSBs) during the post-reforms period spanning from 1992/1993 to 2005/2006. The empirical results indicate that the majority of PSBs have observed an ascent in technical efficiency during the post-reforms years. Further, the inefficient PSBs have been noted to be catching up with the efficient ones. That is, the banks with low level of efficiency at the beginning of the period are growing more rapidly than the highly efficient banks. In sum, the study confirms a presence of convergence phenomenon in the Indian public sector banking industry.

Unemployment disparities and regional wage flexibility: comparing EU members and EU-accession countries

This paper provides empirical evidence on regional labor market flexibility in Europe and, in particular, in the EU-accession countries in Central and Eastern Europe. Whereas substantial regional disparities in unemployment are found for pre-accession EU member countries as well as for accession countries, an empirical analysis taking account of spatial effects shows that regional wage flexibility is significantly higher for accession countries. Moreover, unemployment disparities are found to be less persistent in the accession countries.

Market Shares and Concentration in the EU Auditing Industry: the Effects of Andersen’s Demise

This paper describes and analyses changes at the concentration level of the audit services markets in 15-EU member-countries. The sample consists of 2,862 clients of auditing firms for the period 1998 to 2004. The findings of the research show that concentration in the aggregate sample increased over time. Concentration in the audit markets of the EU-15 member-countries exhibits substantial variation across countries while average concentration, before and after Arthur Andersen’s dissolution, has increased in 12 and declined in three countries. Results segmented by economic sectors indicate that the concentration increased in all sectors except Energy, which is the sector with the highest concentration. Overall, the empirical results suggest that there are complexities in our understanding of auditing services markets for competition purposes.

‘Chariots of fire’: the evolution of tank technology, 1915–1945

We reconsider the notion of technological trajectories by means of a detailed case-study of the evolution of tank technology between 1915 and 1945. We use principal component analysis to analyze the distribution of technical characteristics and how they map into specific service characteristics. We find that, despite the existence of differences in technical leadership, tank designs of different countries show a high degree of overlap and closeness along a common technological trajectory. In the conclusions, we speculate on whether this pattern can be explained by common heuristics that influenced the rate and direction of design activities or by doctrinal viewpoints influencing the development and use of tanks in the battlefield.

The relationship between insurance and economic growth in Europe: a theoretical and empirical analysis

The role of insurance companies, although growing in importance in financial intermediation, has received less attention than bank and stock markets and if so, mainly as a provider of risk transfer in single country or very heterogeneous samples. We investigate both the impact of insurance investment and premiums on GDP growth in Europe. We conduct a cross-country panel data analysis from 1992 to 2005 for 29 European countries. We find a positive impact of life insurance on GDP growth in the EU-15 countries, Switzerland, Norway and Iceland. For the New EU Member States from Central and Eastern Europe, we find a larger impact for liability insurance. Furthermore our findings emphasise the impact of the real interest rate and the level of economic development on the insurance-growth nexus. We argue that the insurance sector needs to be paid more attention in financial sector analysis and macroeconomic policy.

Output dynamics,flow equilibria and structural change—A prolegomenon to evolutionary macroeconomics

In an evolutionary approach to macroeconomics, the market disequilibrium dynamics resulting from structural change need to be properly represented at the aggregate level. As suggested by the late F.A. Hayek, a suitable equilibrium concept required to this end as a frame of reference, is that of a flow equilibrium. The paper explores the corresponding flow dynamics that draw attention to variables not usually considered in macroeconomic theorizing. Using statistical estimates for these new variables for the West German manufacturing sector during the German unification process allows some important new insights on the relationships between structural change and macroeconomic performance.

Export variety and the economic performance of countries

We explore the relationship between export variety and economic development, using data on OECD countries between 1964 and 2003. We show that structural change in the world economy has a particular arrow of time leading to a growing variety of exports. Distinguishing between related variety (within sectors) and unrelated variety (variety between sectors), we also show that related variety stimulates growth instantaneously, while unrelated variety only promotes growth with a considerable time lag. This finding is in line with the evolutionary notions that economic development and international trade patterns are path dependent.

The politics of constitutional amendment in postcommunist Europe

This paper analyzes the causes and consequences of constitutional amendments in Eastern Europe. Its results challenge the conventional wisdom that constitutional change is a consequence of institutions and that major changes will increase executive powers and limit rights. It finds that the political and social context rather than institutions is the main cause of amendments. These amendments moreover tend to reduce the power of executives and strengthen guarantees of human rights. The paper attributes these results to the particular circumstances of the postcommunist transition.

A sectoral taxonomy of educational intensity

This paper classifies 49 manufacturing and service industries according to their educational workforce composition. Statistical cluster techniques are applied to data for the USA, Germany, France, the UK and Austria. Industries are first classified separately for each country, providing an appropriate tool for the analysis of national micro-data. Later, the paper proposes a common consensus classification, enabling comparative international studies. Validation of the cluster solution reveals considerable robustness to variations over time and between countries. Finally, regression analyses and ANOVA decompositions on various measures of sector performance confirm a significant tendency towards “education-biased structural change” between industries.

Financial Development and Income in North Africa

We explore the short-run dynamics and long-run relationship between income and financial development in Algeria, Egypt, and Morocco. We use co-integration and VECM models and four indicators of financial development. The empirical results indicate that there is a long-run relationship between income and each financial development indicator, except credit to the private sector in Algeria. On the other hand, Granger-causality test results indicate that the evidence on the direction of causality is mixed.

Financial intermediation and growth: causality and causes without outliers

In a seminal paper, Levine et al. (J Monet Econ 46:31–77, 2000) provide cross-sectional evidence showing that financial development has positive average impact on long-run growth, using a sample of 71 countries. We argue that the evidence is sensitive to the presence of outliers.

Efficiency and productivity in the Indian unorganized manufacturing sector: did reforms matter?

This paper analyzes total factor productivity growth of the unorganized manufacturing sector in India using several rounds of the large scale national sample survey state level data for 15 major Indian states for the period 1978–1979 to 2000–2001. Data envelopment analysis is used to compute Malmquist total factor productivity index and its components. The impact of economic reforms on efficiency and productivity is examined. Evidence suggests that total factor productivity registered a positive growth during the period in the country as a whole. Most states in the country witnessed higher total factor productivity growth in the post 1990s reforms period than in the pre-reforms period. Decomposition of the Malmquist productivity index shows that improvement in technical efficiency rather than technical progress had contributed to the observed acceleration in the growth rate. Econometric analysis of the determinants of total factor productivity growth demonstrates that ownership, literacy, farm growth and infrastructure availability significantly influence total factor productivity growth in the sector.

Is There a Link Between Exchange Rate Pass-Through and the Monetary Regime: Evidence from Sub-Saharan Africa and Latin America

This paper investigates the relationship between the monetary regime: pegged, currency board, dollarization, and the exchange rate pass-through for a sample consisting of 15 Sub-Saharan Africa countries and 12 Latin American countries. The research findings about pass-through rates will shed light on the feasibility of a monetary union for Sub-Saharan Africa. The inclusion of the latter country group was deemed desirable to explore pass-through behavior in several monetary regime options not often used in Sub-Saharan Africa.

Does a non-linear mean reverting process characterize real GDP movements?

This paper uses non-linear models to investigate non-stationarity of real GDP per capita for seven OECD countries over the period 1900–2000. Unit root tests based on non-linear models are more powerful than traditional ADF statistics in rejecting the null unit root hypothesis. Empirical results show that, contrary to what the linear ADF statistics suggest, stationarity characterizes five out of the seven countries. This finding stands at variance with other recent studies which conclude that movements in real GDP per capita can be characterized as a non-stationary process.

Openness and the Efficiency of FDI: A Panel Stochastic Production Frontier Study

This paper uses a stochastic translog production frontier to estimate technical inefficiency indices whose conditional mean is specified as a function of FDI and its interaction with openness of the economy. The model is estimated using an annual panel of 46 countries for the years, 1981–2001. The results suggest that increased FDI increases potential output in both developed and developing countries with the effect being more profound in the former. It is also found that increased FDI reduces technical inefficiencies the more open is the economy but that this effect holds only for developed economies. Thus qualified support is found for the “Bhagwati hypothesis” as the results reveal that the efficiency–enhancing effect of FDI depends not only on openness but also on the degree of development of the host country.

Extending the Learning-By-Exporting Hypothesis: Introducing a Credit Constraint

This paper develops a theoretical framework which can be used to examine policy implications from the learning-by-exporting hypothesis. This work builds on previous theoretical literature by introducing a credit constraint. When credit is available, the analysis suggests that supporting a learning sector via an export subsidy is not necessarily advised to improve social welfare. The learning sector’s goods may be over-produced (relative to another non-tradable sector goods) when consumers can borrow freely for their consumption. If the learning sector’s goods are over-produced, social welfare will be improved via a tax on production.

Measurement of technical and allocative efficiencies using a CES cost frontier: a benchmarking study of Japanese transmission-distribution electricity

This paper estimates the technical and allocative inefficiencies of the transmission-distribution sector of Japanese electric utilities using a panel data during the 1981–1998 period. A stochastic production frontier of the CES form is jointly estimated with input demand equations. Taking advantage of the self-duality, we retrieve the cost frontier by which the impacts of technical and allocative inefficiencies on costs and input demands are measured. The estimated elasticity of substitution is significantly different from unity in favor of the CES specification over the Cobb–Douglas. The results show that observed costs are 9 to 48% higher than the efficient level; technical inefficiency raises costs by 1 to 28%, while allocative inefficiency does so by 8 to 30%. Although their impacts on costs are similar, technical inefficiency more fluctuates so the differences in the performance of utilities are mainly due to technical inefficiency. We also find a substantial over-utilization of capital for all utilities.

An evolutionary perspective on health innovation systems

This paper elaborates on the general properties of medical innovation processes. It begins with a critical review of different perspectives and methods of investigation used in various streams of research that have previously analysed technical change in the health sector. After profiling and discussing their characteristics, the paper proposes an evolutionary approach to change in medicine constructed around the notion of a ‘Health Innovation System’. Health innovation, it is argued, consists of complex bundles of new medical technologies and clinical services emerging from a highly distributed competence base. Health Innovation Systems are driven by the combination of (1) institutionally-bound interactions among agents (‘gateways’ of innovation) and (2) history-dependent trajectories of change (‘pathways’ of innovation) whose developments emerge from and feed back into the structure of the system through organised transfers of knowledge between research and clinical practice. After drawing examples from recent empirical work on clinical research in specific disease areas, the paper concludes by identifying implications for further research.