The Feldstein–Horioka puzzle in South Africa: A fractional cointegration approach

The Feldstein–Horioka (FH) puzzle, that is the strong correlation between saving and investment in a world where obstacles to capital mobility are limited, has been studied extensively since it was exposed in 1980. Even though the theoretical and empirical literature has examined many of its potential causes, the puzzle persists. This paper aims at shedding further light on the issue by investigating the relationship between saving and investment in South Africa since 1946 using fractional integration and cointegration techniques to account for high persistence in the series. We find evidence of fractional cointegration between saving and investment, indicating some degree of persistence in the gap between the two variables. We also find a structural break in saving and investment ratios to GDP around 1980, which roughly coincides with the start of a financial deregulation process in South Africa. While fractional cointegration holds before the break, it does not thereafter. In other words, while the FH puzzle is observed before the start of financial deregulation, it subsequently disappears. This suggests that financial deregulation may have loosened the link between saving and investment.     

(Re)discovering the Social Responsibility of Business in Germany

The concept of corporate social responsibility (CSR) is a relatively recent addition to the agenda in Germany, although the country has a long history of companies practicing social responsibilities. The expectations of society had remained stable for many years, encapsulated in laws, societal norms, and industrial relations agreements. But the past decade has seen significant changes in Germany, challenging established ways of treating the role of business in society. This contribution reviews and illustrates the development of diverse forms of social responsibility in German corporations and analyzes how actors in business and society can build on traditional strengths to find new institutional arrangements for sharing tasks and responsibilities in the interests of achieving a better balance between societal, economic, and environmental needs.     

Corporate cash holdings,uncertainty avoidance,and the multinationality of firms

We examine the relationship between uncertainty avoidance, multinationality and firm cash holdings. We develop several hypotheses from corporate finance and multinational firm theory, positing that cultural factors as well firm multinationality influence corporate cash holdings. In particular, firms in countries with high uncertainty avoidance hold more cash as a way to hedge against undesired states of nature. At the same time, firm multinationality moderates the effects culture has on the firm's holdings of liquid assets. Based on a large panel of firms in fifty countries, we present evidence consistent with these hypotheses. Firms in countries with high levels of uncertainty avoidance tend to hold more cash. Against commonly held views in cash management, the degree of multinationality of the firm is positively correlated with holdings of cash. At the same time, the effect of national culture on firm's cash holdings is lower for multinationals. These results are economically significant.     

Labor market segmentation: African American and Puerto Rican labor in New York City, 1960–1980

This study examines the determinants of wage differences between African Americans and Puerto Ricans in New York City. The empirical analysis, conducted on census data for 1960, 1970, and 1980, highlights two important patterns. Changes in returns to human capital have been more important for Puerto Ricans than for African Americans; and changes in group segmentation structure have had a positive effect for African Americans, a negative effect for Puerto Ricans. The results are suggestive of the notion that the two groups are pursuing different paths of economic mobility.     

European integration or world integration?

Zusammenfassung Europ?ische oder weltweite Integration? -In dem Aufsatz wird untersucht, ob die europ?ische Integration seit Mitte der 70er Jahre auf Kosten der weltweiten Integration betrieben wurde oder ob die Europ?ische Gemeinschaft zunehmend in die Weltwirtschaft integriert wurde. Eng damit verbunden ist die Frage, ob-wie einige neuere Studien anzudeuten scheinen-der Au?enhandel innerhalb der Gemeinschaft einiges von seinem Schwung verloren hat. Es zeigt sich, da? nicht nur immer mehr Binnenm?rkte durch ausl?ndische Lieferanten versorgt wurden, sondern da? auch die Einfuhren aus Drittl?ndern st?rker gestiegen sind als die Einfuhren aus Partnerstaaten der Gemeinschaft. Im übrigen scheint der relative Rückgang st?rker auf sektorspezifischen Umst?nden als auf nationalen Besonderheiten zu beruhen.

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Résumé Intégration européenne ou intégration mondiale? -Dans cet article les auteurs analysent si l’intégration européenne fut poursuivie depuis le milieu des années soixante-dix aux dépens de l’intégration mondiale ou si la Communauté s’est intégrée de plus en plus dans l’économie mondiale. Etroitement lié à cette question est l’aspect si, comme des études récentes semblent l’indiquer, le commerce intra-communautaire a perdu un peu de son élan. Les auteurs démontrent que les producteurs étrangers ont gagné une part accroissante des marchés locaux et que, en même temps, les importations extra-communautaires ont accru plus rapidement que les importations des pays membres. De plus, les auteurs indiquent que la réduction relative est associée plus aux facteurs sectoriels qu’aux caractéristiques spécifiques des économies nationales.

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Resumen ?Integración europea o integración en la economia mundial? -Este trabajo analiza si la integraci?n europea desde la mitad de los a?os setenta ha sido perseguida a expensas de la integración en la economía mundial o si la Comunidad se ha integrado paulativamente a la economía mundial. Este aspecto esta vinculado con la pérdida de ímpetu en el comercio intraregional, como parecieran indicar algunos estudios recientes. Se muestra que no sólo una parte creciente de los mercados nacionales están siendo servidos por proveedores extranjeros, sino que las importaciones de países terceros también han aumentado más rápidamente que las importaciones de los pafses miembros. Además, la disminución relativa parece estar asociada más con factures sectoriales que con características nacionales específicas.

     

Transmission of inflationary pressures between the E.E.C. members: A tentative measurement using cost-push and demand-pull formulations

This study tries to measure the transmission of inflationary pressures through import prices. The first part presents a two-country example in order to illustrate the methodology. The second part analyses the results obtained from nine linked econometric models representing the E.E.C. countries first in a pure cost-push approach and second in a mixed cost-push-demand-pull formulation.