How to Achieve the Take-off into Sustained Growth: A Case Study for Slovenia

In this paper, we show that successful policy aimed at enhancing economic growth in the long run must be based on policies which improve human capital and technological progress. This is applied to Slovenia, a small open economy in the European Union and the Euro Area. In particular, we investigate how fiscal policies should be designed to support economic growth without violating the European Union Stability and Growth Pact. Using the SLOPOL10 model, an econometric model of the Slovenian economy, we analyse the effects of different fiscal policies in Slovenia over the next few years by means of simulations. The fiscal policy multipliers of the Slovenian economy are small and short-lived, which renders demand-side expansionary fiscal policies inappropriate as a means of achieving higher growth. However, if an increase in government expenditures directly related to technological progress is implemented (such as better funding for tertiary education or subsidies for firms’ investments in research and development), this can trigger a path of output which is permanently higher than that of the baseline simulation. Reducing income taxes and social security contributions has strong positive effects on employment. This result shows that the key to prosperity and sustained growth is investment in human capital and technology, also for a small open economy like Slovenia.     

Birds,Birds, Birds: Co-Worker Similarity,Workplace Diversity and Job Switches

We investigate how the demographic composition of the workforce along the sex, nationality, education, age and tenure dimensions affects job switches. Fitting duration models for workers’ job-to-job turnover rate that control for workplace fixed effects in a representative sample of large manufacturing plants in Germany during 1975–2016, we find that larger co-worker similarity in all five dimensions substantially depresses job-to-job moves, whereas workplace diversity is of limited importance. In line with conventional wisdom, which has that birds of a feather flock together, our interpretation of the results is that workers prefer having co-workers of their kind and place less value on diverse workplaces.     

The cost-effectiveness and budget impact of stepwise addition of bolus insulin in the treatment of type 2 diabetes: evaluation of the FullSTEP trial

Background and aims:

Intensification of basal insulin-only therapy in type 2 diabetes is often achieved through addition of bolus insulin 3-times daily. The FullSTEP trial demonstrated that stepwise addition (SWA) of bolus insulin aspart was non-inferior to full basal-bolus (FBB) therapy and reduced the rate of hypoglycemia. Here the cost-effectiveness and budget impact of SWA is evaluated.

Methods:

Cost-effectiveness and budget impact models were developed to assess the cost and quality-of-life (QoL) implications of intensification using SWA compared with FBB in the US setting. At assessment, SWA patients added one bolus dose to their current regimen if the HbA1c target was not met. SWA patients reaching three bolus doses used FBB event rates. Outcomes were evaluated at trial end and projected annually up to 5 years. Models captured hypoglycemic events, the proportion meeting HbA1c target, and self-measured blood glucose. Event rates and QoL utilities were taken from trial data and published literature. Costs were evaluated from a healthcare-payer perspective, reported in 2013 USD, and discounted (like clinical outcomes) at 3.5% annually. This analysis applies to patients with HbA1c 7.0–9.0% and body mass index <40?kg/m².

Results:

SWA was associated with improved QoL and reduced costs compared with FBB. Improvement in QoL and cost reduction were driven by lower rates of hypoglycemia. Sensitivity analyses showed that outcomes were most influenced by the cost of bolus insulin and QoL impact of symptomatic hypoglycemia. Budget impact analysis estimated that, by moving from FBB to SWA, a health plan with 77,000 patients with type 2 diabetes, of whom 7.8% annually intensified to basal-bolus therapy, would save USD 1304 per intensifying patient over the trial period.

Conclusions:

SWA of bolus insulin should be considered a beneficial and cost-saving alternative to FBB therapy for the intensification of treatment in type 2 diabetes.     

Time variation in U.S. wage dynamics

Supply and demand shocks had much stronger long-run effects on nominal wages and prices during the “Great Inflation”. For supply shocks, there is even a sign switch in the nominal wage response. Before and after the “Great Inflation”, nominal wages moved in the same direction as real wages and in the opposite direction of the price level, whereas nominal wages and prices moved in the same direction at longer horizons after the shock in the 1970s. Estimation of a DSGE model shows that these results reflect changes in the degree of wage indexation over time, which was considerably higher during the “Great Inflation”.     

Venture capital in Europe: social capital,formal institutions and mediation effects

Venture capital (VC) as an industry has existed for more than 50 years, yet it has only moderately developed beyond the USA despite numerous trials of governments to foster it. Vast research endeavors have been carried out to understand the antecedents, barriers, and facilitators of the industry. However, the focus has been rather limited and accounted almost exclusively for formal features of institutional environments, leaving the informal dimensions unexplored. This paper tries to close that gap. Based on longitudinal country-level data on 18 European countries, we first explore if the “usual suspects,” mostly embodied in reformable formal institutions, do play a role in the European context. We also investigate if informal institutions, and in particular social capital, may exert a prominent effect. In this respect, we found that the impact of social capital on VC activity is indeed indirect, through determining those structural formal institutions which in turn significantly affect VC activity. These findings contribute to the literature on VC and inform European policy makers on the most promising channels for creating a prosperous institutional environment for the financing of innovative start-ups.     

ECONOMIC FREEDOM & HAPPINESS INEQUALITY: FRIENDS OR FOES?

This article examines the relationship between economic freedom and happiness inequality for a large sample of countries. We find that economic freedom is negatively associated with happiness inequality and robust to several alternative measures of happiness inequality, including the standard deviation, mean absolute difference, coefficient of variation, and Gini coefficient. Among the economic freedom areas, legal system and sound money are negatively correlated with happiness inequality. Drawing on the Engerman‐Sokoloff hypothesis, we use a measure of factor endowments as an instrument for economic freedom to provide a further robustness test, finding a negative association between economic freedom and happiness inequality. (JEL D63, I31, P16)     

EMU and the transmission of monetary policy: evidence from business lending rates

This paper analyses the pass-through of money market rates to short-term and long-term business lending rates in the four largest euro area countries. The main findings of the paper are (1) that since the start of EMU loan rates appear to have become more responsive to money market rate changes in France, Italy and Spain, but not in Germany, and (2) that German loan rates are significantly more sluggish than loan rates in the other three large euro area countries. I also test for non-linear pass-through based on an asymmetric error-correction model but do not find much evidence of non-linearity in euro area interest rate pass-through.The views expressed in this paper do not necessarily represent the views of the Deutsche Bundesbank.     

Employee motivation: a powerful new model

Motivating employees begins with recognizing that to do their best work, people must be in an environment that meets their basic emotional drives to acquire, bond, comprehend, and defend. So say Nohria and Groysberg, of Harvard Business School, and Lee, of the Center for Research on Corporate Performance. Using the results of surveys they conducted with employees at a wide range of Fortune 500 and other companies, they developed a model for how to increase workplace motivation dramatically. The authors identify the organizational levers that companies and frontline managers have at their disposal as they try to meet workers' deep needs. Reward systems that truly value good performance fulfill the drive to acquire. The drive to bond is best met by a culture that promotes collaboration and openness. Jobs that are designed to be meaningful and challenging meet the need to comprehend. Processes for performance management and resource allocation that are fair, trustworthy, and transparent address the drive to defend. Equipped with real-world company examples, the authors articulate how to apply these levers in productive ways. That application should not be selective, they argue, because a holistic approach gets you more than a piecemeal one. By using all four levers simultaneously, and thereby tackling all four drives, organizations can improve motivation levels by leaps and bounds. For example, a company that falls in the 50th percentile on employee motivation improves only to the 56th by boosting performance on one drive, but way up to the 88th percentile by doing better on all four drives. That's a powerful gain in competitive advantage that any business would relish.     

Do monetary indicators lead euro area inflation?

This paper assesses based on euro area data whether the strong in-sample long-run link between money growth and inflation that has been highlighted by a number of recent empirical studies is exploitable to predict inflation out of sample. The results from standard bivariate forecasting models suggest that no monetary (nor any other) single indicator significantly outperforms a simple benchmark forecast. The further analysis shows that it would be premature however to discard based on such evidence the usefulness of monetary (and all other) indicators. First, it is shown that based on judgemental adjustments to monetary indicators correcting for the effects of identifiable, persistent velocity shifts, it appears possible to significantly improve predictive ability in real time. Second, I find that a factor forecasting model combining monetary and economic indicators, which can be regarded as a generalized quantity theory- or two-pillar Phillips Curve-forecasting model, delivers a fairly good and stable forecasting performance.