To harmonize or to compete? That's not the question

Neoclassical public economists stress economic distortions induced by differential taxation and therefore favour harmonization; political economists focus on political distortions and therefore reject harmonization. However, policy choices on the possibility frontier between economic and political distortions tend to be biased: economic advisers, politicians and interest groups typically favour harmonization. Harmonization is, moreover, undermined by incentives to re-establish tax differences. Both activities prevent the possibility frontier from being simply a menu of choice. Popular referenda and functional, overlapping, competing jurisdictions (FOCJs) are institutions able to reduce political distortions and to shift the possibility frontier.     

Demographic trends and international capital flows in an integrated world

This paper examines the impact of projected demographic trends on international capital flows. The analysis builds upon a ten-region overlapping generations' model of the world economy where capital is mobile across regions. Results show that, over the first half of the century, emerging regions will finance the demand of capital coming from the developed world where population aging is relatively advanced. In particular, the findings suggest that in the coming decades China will be the world's main creditor region. However, in the second half of the century, India will take over this leading position because of the predicted decline in the Chinese labor force. An additional analysis demonstrates that the economic consequences of demographic changes depend on the degree of capital market integration between regions.     

To educate or not to educate: Impact of public policies in developing countries

It is well-known in the empirical literature that present-oriented individuals are less likely to go to college as compared to forward looking individuals. There is compelling evidence of a high percentage of dropouts from high schools in poor countries. The endogenous sorting of homogeneous workers into skilled and unskilled types might be the outcome of exposure to income risk and an individual's aversion to risk. We obtain the critical risk aversion associated with income levels above which no individual chooses education. Broad-based economic policies may have perverse impact on educational attainments of individuals. We argue that such an analysis has been largely neglected in related studies. This outcome may also be undesirable from the perspective of a social planner. To address this, we suggest a sector-specific tax-subsidy scheme as a corrective instrument of public policy.     

To bet or not to bet: a reality check for tennis betting market efficiency

We present evidence that the tennis betting market appears to be much more efficient than suggested by previous studies. More specifically, we study the market efficiency by studying the forecasting performance of a diversified set of 40 betting rules in two ways: by searching for the existence of a return differential between betting rules and by analysing the profitability of betting rules. Even though individual tests provide evidence that, within our universe of betting rules, positive returns can be achieved, when data-snooping bias is taken into account, the evidence diminishes. Subsequently, we also find very little evidence of return differentials between betting rules. These results cast doubts on previous research as they suggest that when the potential detrimental effects of data-dreading are taken into account, betting markets in general might not, ultimately, be so inefficient.     

To engage or not to engage in corporate social responsibility: Empirical evidence from global banking sector

Whether or not banks should engage in corporate social responsibility (CSR) activities is controversial because of the concomitant high cost even if banks could enjoy the benefits of a higher income as a result of their good reputation. Faced with this dilemma, bank managers are hesitant to engage in CSR. This study pursues this issue by examining whether or not banks engaging in CSR can bring profits and reduce non-performing loans. We apply three novel estimation methods to obtain the unbiased and full-blown CSR effect. The first two methods are matching methods, namely, conventional propensity score matching method and nearest-neighbor variance bias-corrected matching method (nn-VBC). The third method is Heckman's two-step method in switching regression. Regardless of the methods used, CSR banks overwhelmingly outperform non-CSR banks in terms of return on assets and return on equity. Our study offers policy suggestions for both government regulators and bank managers.     

To disclose or not? An analysis of software user behavior

We address the ongoing debates over disclosing information about software vulnerabilities through an open public forum. A game-theoretic approach is used to show that full public disclosure can be an equilibrium strategy in a game played by rational loss-minimizing agents. We provide conditions under which full disclosure of vulnerabilities improves social welfare and analyze the effect of vendor and product characteristics, as well as the composition of the pool of software users on the decisions to disclose. We also provide conditions under which user threats to vendors to disclose after a grace period or users’ ability to develop fixes themselves further improve welfare. The likelihood that user-developed fixes improve welfare increases with user familiarity with the details of software, providing an argument for “open source” software.     

To innovate or to transfer?

FDI has been considered by many development economists as an important channel for transfer of technology to developing countries. It is suggested that modern, advanced technologies introduced by multinational firms can diffuse to domestic firms through spillovers. In this paper, we study innovation and technology transfer activities of domestic and foreign firms in Turkish manufacturing industries, and the impact of horizontal, vertical and labor spillovers on these activities. Our analysis shows that foreign firms are more innovative than their domestic counterparts, and transfer technology from abroad (mostly from their parent companies). Horizontal spillovers from foreign firms seem to be insignificant. The effects of foreign firms on technological activities of other firms in vertically related industries are ambiguous. High-tech suppliers tend to have a high rate of innovation when the share of foreign users is high, but the opposite is true for users: high-tech users supplied mainly by foreign firms tend to have a lower rate of innovation. Labor turnover is found to be the main channel of spillovers. Our findings reiterate the importance of tacitness of knowledge, and confirm that technology cannot easily be transferred through passive mechanisms.     

To converge or not converge: unit labor cost inflation in the Euro area

In this article, convergence of unit labor cost (ULC) inflation within the Euro area is tested by means of panel unit root tests. To account for the small cross-sectional dimension, cross-sectional dependence of model innovations and time varying volatility, wild bootstrap critical values are employed for inference. Convergence is tested separately for pre- and post-Euro introduction subperiods. Moreover, we identify particular economies that are characterized by diverging ULC inflation after the introduction of the Euro. While the German economy is characterized by ULC inflation which is persistently below the sample average, Spain and Italy have suffered sustained losses of price competitiveness against their trading partners within the Euro area. ULC inflation in Finland, France, and Ireland can be classified as neutral with respect to relative competitive positions.     

To search or not to search? The effects of UI benefit extension for the older unemployed

In Finland the older unemployed can collect unemployment insurance benefits until retirement, while the entitlement period for younger groups is two years. In 1997 the eligibility age of persons benefiting from extended benefits was raised from 53 to 55. This paper takes advantage of this quasi-experimental setting to identify the effect of extended benefits on transitions out of unemployment among the older unemployed. We apply a competing risks version of a split population duration model to account for multiple exit routes and the possibility that some of the older unemployed may not be active in the labour market due to pension rules. Our finding is that roughly half of the unemployed with extended benefits withdraw from job search.     

To draft or not to draft? Inefficiency, generational incidence, and political economy of military conscription

We study the military draft as a form of intergenerational redistribution, taking into account endogenous human capital formation. Introducing the military draft initially benefits the older generation while it harms the young and all future generations. As it distorts human capital formation more severely than an equivalent intergenerational transfer using public debt or pay-as-you-go pensions, the draft can be abolished in a Pareto-improving way if age-dependent taxes are available. In the absence of age-specific taxes, the political allure of the draft can be explained by the specific intergenerational incidence of its costs and benefits.     

Economists' perceptions versus managers' decisions: an experiment in transaction-cost analysis

Are the perceptions of professional economists on transactioncosts consistent with make-or-buy decisions made within firms?The answer may have important implications for transaction costresearch. Data on firms' outsourcing during the new productdevelopment process are taken from a large-scale survey of UK,German and Irish manufacturing plants, and we test the consistencyof these outsourcing decisions with the predictions derivedfrom the transaction cost perceptions of a panel of economists.Little consistency is evident between actual outsourcing patternsand the predictions of the (Williamsonian) transactions costmodel derived from the panel of economists. There is, however,evidence of a systematic pattern to the differences, suggestingthat a competence or resource-based approach may be relevantto understanding firm outsourcing, and that firms are adoptinga strategic approach to managing their external relationships.     

To react or not? Technology shocks, fiscal policy and welfare in the EU-3

This paper develops a dynamic stochastic general equilibrium (DSGE) model to examine the quantitative macroeconomic implications of counter-cyclical fiscal policy for France, Germany and the UK. The model incorporates real wage rigidity and consumption habits, as the particular market failures justifying policy intervention. We subject the model to productivity shocks and allow policy instruments to react to the output gap and the debt-to-output ratio. A welfare analysis reveals that the most effective instrument-target combination is to use public consumption to stabilize the output gap. Moreover, welfare gains from counter-cyclical fiscal policy are much stronger in the presence of wage rigidities compared with consumption habits. Finally, since active policy and automatic stabilizers are substitutes, it is possible that relatively undistorted economies may be in need of countercyclical fiscal action due to inadequate automatic stabilizers.     

To bid or not to bid: That is the question: Public procurement,project complexity and corruption

The main aim of this study is to improve our comprehension of the role played by project complexity and institutional quality as possible drivers of the choice between open auctions and negotiations in a sample of Italian municipalities. Controlling for project characteristics, for observed and unobserved heterogeneity at municipality level, our main results suggest that projects that are more complex are more likely to be procured with negotiated procedures. On average, a rise in the project complexity index from the 25th to the 75th percentile of its distribution increases the probability of procuring the project with a negotiated procedure by about 6%–8%. However, our results also suggest that the impact of complexity might be more relevant in the case of projects procured by municipalities located in provinces characterized by low levels of corruption. Moreover, we also find that complex projects are associated to longer delays in their execution, larger rebates and to higher probabilities to be awarded to local firms.     

不确定性世界的企业领导

我们存在于一个动态变迁的世界之中,这决定了企业在决策时面临着大量的不确定性,企业要在这样的情况下获得持续生存,就必须认清环境演变的意义,建立一套具有适应性效率的制度结构,将不确定性融入到决策的制定过程中去。     

Measuring productivity in an imperfect world

Most measures of multifactor productivity (MFP) assume constant returns to scale and perfect competition. Using a general aggregate production function together with duality theory and allowing for the possibilities of disequilibrium, markups and economies of scale, the study derives a more generalized MFP measure. The model was used to assess the economic performance in US manufacturing for the 1949 to 1988 period. The results suggest that scale and markups have substantial power in explaining MFP growth for all periods and that half of the measured MFP growth (as measured within the conventional framework) comes from biases due to scale economies, market power, and interaction effects.     

Industrial policy in an imperfect world

We study industrial policy and its effectiveness in a model with both market and government failures. We introduce a public agency responsible for industrial policy into the model of Hausmann and Rodrik [Hausmann, R., Rodrik, D., 2003. Development as Self-Discovery. Journal of Development Economics 72, 603–633], and we assume that this agency has limited information and political motives. In an extension, we further allow entrepreneurs to engage in rent seeking activities. We find that industrial policies are ineffective if the public agency is poorly informed, but not necessarily so if it is highly politically motivated. Given a politically motivated public agency, industrial policies are effective if and only if the institutional setting ensures that such policies are modest, e.g. by restricting the agency's budget. Moreover, our model helps us to understand why the same industrial policies that have failed elsewhere have been relatively successful in South Korea and Taiwan.     

To Go or Not to Go: Emigration from Germany

Abstract. This study analyses the qualitative aspects of emigration from Germany, taking account of economic and non-economic reasons. The reported willingness to emigrate from Germany in the German Socio-Economic Panel (GSOEP) is explained for men and women by three groups of variables: individual characteristics, household characteristics and regional characteristics. It transpires that the educational background and West German residency positively affect the willingness to emigrate, whereas German nationality, age and the family situation are mostly negatively correlated with it.