From R&D to Productivity Growth: Do the Institutional Settings and the Source of Funds of R&D Matter?

This paper presents estimates of the long-term impact of various sources of knowledge (R&D performed by the business sector, the public sector and foreign firms) on multifactor productivity growth of 16 countries from 1980 to 1998. The main results show that the three sources of knowledge are significant determinants of long-term productivity growth. Further evidence suggests that several factors determine the extent to which each source of knowledge contributes to productivity growth. These factors are the absorptive capability, the origin of funding, the socioeconomic objectives of government support, and the type of public institutions that perform R&D.     

Is there Complete,Partial, or No Recovery from Childhood Malnutrition? – Empirical Evidence from Indonesia*

This article uses a dynamic panel data model to identify the impact of early nutritional deficiencies on individuals’ health status in later ages. We find that poor nutrition at young ages causes some, but not severe retardation in the growth of future height indicating partial recovery from chronic malnourishment. The results also indicate that – younger children, stunted children, and children who live in communities with six or more health posts exhibit larger recovery. The estimation strategy used here is especially attractive as it relies on weaker stochastic assumptions compared to earlier work in the literature.     

Economic growth,volatility and their interaction: What’s the role of finance?

This paper examines the relation between financial depth and the interaction of economic growth and its volatility. We use a sample of 52 countries for the period 1980–2011, and our main finding is that, at moderate levels of financial depth, further deepening increases the ratio of average growth to volatility; however, as financial depth increases, this relation reverts, and the rise in volatility overcomes that of economic growth. This result is obtained both in the medium and long run; however, the peak of the relation seems to be lower in the medium run (around 40%–55% of domestic credit/GDP) than in the long run (around 75%–99%). This suggests that increasing the level of domestic credit may intensify relative volatility in the medium term, but still raise relative long-term growth before the long-run threshold is achieved.     

Variable selection and functional form uncertainty in cross-country growth regressions

Regression analyses of cross-country economic growth data are complicated by two main forms of model uncertainty: the uncertainty in selecting explanatory variables and the uncertainty in specifying the functional form of the regression function. Most discussions in the literature address these problems independently, yet a joint treatment is essential. We present a new framework that makes such a joint treatment possible, using flexible nonlinear models specified by Gaussian process priors and addressing the variable selection problem by means of Bayesian model averaging. Using this framework, we extend the linear model to allow for parameter heterogeneity of the type suggested by new growth theory, while taking into account the uncertainty in selecting explanatory variables. Controlling for variable selection uncertainty, we confirm the evidence in favor of parameter heterogeneity presented in several earlier studies. However, controlling for functional form uncertainty, we find that the effects of many of the explanatory variables identified in the literature are not robust across countries and variable selections.     

Infectious diseases tracking and sectoral stock market returns: A quantile regression analysis

This paper investigates the relationship between changes in the newspaper-based infectious diseases tracking index (ITI) of Baker et al. (2020) and sectoral stock market returns in the US. Our results spanning the period 1985:01 to 2020:03 reveal the presence of a negative (positive) relationship between returns and ITI at lower (higher) return quantiles (representing different market conditions) in a majority of the sectors. For the health care sector, this relationship is negative at all quantiles. Interestingly, inclusion of the COVID-19 period in the sample data leads to the detection of a stronger relationship for smaller quantiles across all sectors. An asymmetric relationship between returns and the ITI is witnessed across different market conditions for the Consumer Staples, Healthcare, Industrial and Technology sectors. Results from a rolling regression uncover differences in the magnitudes of responses to various infectious diseases over time. Our results carry important implications regarding investment strategies for US sectoral returns in the presence of news relating to infectious diseases.     

Fiscal centralization versus decentralization: Growth and welfare effects of spillovers, Leviathan taxation, and capital mobility

This paper develops an endogenous growth model with spillovers of public goods, Leviathan taxation, and mobile capital to examine the relative merits of centralized and decentralized fiscal systems for economic growth and social welfare. We show that a decentralized system dominates a centralized system in terms of economic growth; however, the difference in social welfare between a decentralized and a centralized system is non-monotonic and displays a hump-shaped relationship with respect to capital mobility. Since higher capital mobility induces stronger tax competition, this finding implies that there is an optimal degree of tax competition; some tax competition is desirable, but fierce tax competition may be harmful. We also show that there is a critical level of spillovers of public goods above which centralization dominates decentralization in terms of social welfare, as in previous studies; however, if spillovers are below this critical level, capital mobility also matters in the welfare comparison between centralized and decentralized systems.     

The productivity of transport infrastructure investment: A meta-analysis of empirical evidence

Investments in transport infrastructure have been widely used by decision makers to encourage economic growth, particularly during periods of economic downturn. There has been extensive research on the linkage between transport infrastructure and economic performance since the late 1980s, characterised by widely varying evidence. We conduct a meta-analysis of the empirical evidence on the output elasticity of transport infrastructure, based on a sample of 563 estimates obtained from 33 studies. Previous meta-analyses have focused on total public capital and hence cannot appropriately explain the wide variation in the productivity effect of transport infrastructure nor provide guidance to policymakers on the returns to investment in different types of transport infrastructure. Our results indicate that the existing estimates of the productivity effect of transport infrastructure can vary across main industry groups, tend to be higher for the US economy than for European countries, and are higher for roads compared to other modes of transport. The variation in the estimates of the output elasticity of transport is also explained by differences in the methods and data used in previous studies. Failing to control for unobserved heterogeneity and spurious associations tends to result in higher values, while failing to control for urbanisation and congestion levels leads to omitted variable bias. These findings can be used to inform future research on the choice of model specification and estimation and transport-related policy making.     

A Welfare‐Based Approach to Aggregating Growth Rates across Countries*

Aggregating per capita gross domestic product growth across countries has always been a technical problem because of the complexities in the relative movements of exchange rates, economic output and populations. As such, the conventional approach to aggregating growth across countries suffers from sensitivity to exchange rates, as well as from the possibility of aggregate growth rates not being convex combinations of individual growth rates. This article introduces a new methodology in aggregating per capita growth rates that does not suffer from the drawbacks of the conventional approach. Using a welfare‐based approach, it is shown that the proposed methodology is robust w.r.t. exchange rates and generates weights that always add up to unity, thus avoiding the anomalies that are inherent in the conventional approach. The methodology proposed in the article is applied to calculate aggregate growth rates of 33 developing member countries as well as five regional groupings, and the results are compared with those arising from the conventional approach. A number of insights arise that were previously hidden or inaccessible.     

Do Spillovers Stimulate Incremental or Drastic Product Innovations? Evidence from German Establishment Data*

Despite the generally recognized importance of knowledge spillovers, the empirical literature is essentially silent on the type of innovation stimulated by spillovers. We estimate the determinants of product innovations differing in their degree of newness to the adopting firm. Knowledge spillovers from rivals have a positive impact on incremental innovations. This impact is largely independent of participation in R&D cooperation. Spillovers exert no such independent influence on drastic innovation activities. The results support the hypothesis that establishments face difficulties in using knowledge that comes from areas they are not familiar with. Establishments exploit spillovers for incremental innovations rather than for drastic innovations. To some degree R&D cooperation can help to overcome the difficulties in using spillovers for drastic innovations. Furthermore, our estimates provide evidence that the firm's own R&D effort and the use of outside information are substitutes.     

Mortality Shocks and Survivors’ Consumption Growth*

In contrast to health shocks, mortality shocks do not only induce direct costs such as medical and funeral expenses and possibly income loss, but also reduce the number of consumption units in the household. Using data from Indonesia, it is shown that the economic costs related to the death of children and older persons seem to be fully compensated for by the decrease in consumption units. In contrast, when prime‐age adults die, survivors face additional costs and, in consequence, use coping strategies. These strategies seem to be quite effective, although households may face higher long‐term vulnerability.     

Exploring the relationship between Information and Communication Technologies (ICT) and academic performance: A multilevel analysis for Spain

With the world becoming increasingly digitalized, determining the relationship between the use of Information and Communication Technologies (ICT) and educational outcomes takes on special relevance for guiding educational policy decisions in a reasoned way. The objective of this research is to explore the relationship between different types of ICT use at school and at home, students' attitudes towards ICT, and academic performance, as well as to see if these associations differ according to the level of performance of the students. For this purpose, we apply multilevel regression models and quantile regression models with data from the Programme for International Student assessment survey (PISA) 2015. The results show differences in the sign of the association according to the ICT variable analysed. The positive association between ICT use and academic performance is related with its use for entertainment at home, the students’ interest in ICT and an earlier starting age for using ICT. Results also show that higher availability of computers per student in the schools is associated with higher levels of academic performance. However, the use of ICT for schoolwork at home, the use of ICT by students in schools and the importance of ICT as a topic in social interaction for students, are factors negatively associated with academic performance. Finally, our quantile regressions by ability levels suggest that certain types of ICT use appear to be particularly associated with the academic performance of students in the lowest percentiles of performance. These results highlight the need to consider and include ICT as an input into the educational production function. Moreover, public policies should consider the interaction between ICT and the educational performance of underperforming students.     

Breaking the link between poverty and low student achievement: An evaluation of Title I

This study provides an evaluation of the impact of Title I funding of compensatory education programs on school finance and student performance in New York City public schools during the 1993, 1997 and 2001 school years. Estimates based on a regression-discontinuity approach indicate that the program was unsuccessful in improving student outcomes in high-poverty schools in New York City during this period, and may in fact have had adverse effects during the earlier years in our sample. Less evidence of a negative effect is found for the 2001 school year. These findings are related to the way in which the federal funds were spent.     

Why has China Grown So Fast? The Role of Physical and Human Capital Formation*

Cross‐province growth regressions for China are estimated for the reform period. Two research questions are asked. Can the regressions help us to understand why China as a whole has grown so fast? What types of investment matter for China's growth? We address the problem of model uncertainty by adopting two approaches to model selection to consider a wide range of candidate predictors of growth. Starting from the baseline equation, the growth impact of physical and human capital is examined using panel data techniques. Both forms of capital promote economic growth. ‘Investment in innovation’ and private investment are found to be particularly important. Secondary school enrolment contributes to growth, and higher education enrolment even more so.     

Diversity,Choice and the Quasi‐market: An Empirical Analysis of Secondary Education Policy in England*

This article investigates the extent to which exam performance at the end of compulsory education has been affected by three major education reforms: the introduction of a quasi‐market following the Education Reform Act (1988); the specialist schools initiative introduced in 1994; and the Excellence in Cities programme introduced in 1999. Using a panel of schools for all state‐funded secondary schools in England (1992–2006), we find that only about one‐third of the improvement in school exam scores is directly attributable to the combined effect of these three major education reforms. The distributional consequences of the policy, however, are estimated to have been favourable, with the greatest gains being achieved by schools with the highest proportion of pupils from poor families.     

Growth, development and natural resources: New evidence using a heterogeneous panel analysis

This paper explores whether natural resource abundance is a curse or a blessing. To do so, we firstly develop a theory consistent econometric model, in which we show that there is a long run relationship between real income, the investment rate, and the real value of oil production. Secondly, we investigate the long-run (level) impacts of natural resource abundance on domestic output as well as the short-run (growth) effects. Thirdly, we explicitly recognize that there is a substantial cross-sectional dependence and cross-country heterogeneity in our sample, which covers 53 oil exporting and importing countries with very different historical and institutional backgrounds, and adopt the non-stationary panel methodologies developed by Pesaran (2006) and Pedroni (2000) for estimation. Our results, using the real value of oil production, rent or reserves as a proxy for resource endowment, reveal that oil abundance has a positive effect on both income levels and economic growth. While we accept that oil rich countries could benefit more from their natural wealth by adopting growth and welfare enhancing policies and institutions, we challenge the common view that oil abundance affects economic growth negatively.     

How Will the Court Decide? – Tax Experts’ versus Laymen's Predictions

We conduct a survey of German tax professionals (tax advisors and revenue agents) and laymen to examine whether tax experts more accurately forecast the outcomes of five real cases from the German Federal Fiscal Court. With an average of 2.39 correct predictions among experts and an average of 2.49 correct predictions among laymen, our results reveal no significant difference in forecasting accuracy between the two groups. Additionally, neither general nor task-specific tax expertise increases the experts’ forecasting accuracy. This unpredictability of tax court decisions indicates that accounting rules and taxpayer penalties that rely on accurate predictions of tax court decisions may need to be re-evaluated. Moreover, our results indicate the existence of two types of ‘advisor bias’. First, tax advisors exhibit a significantly higher level of overconfidence in comparison to other experts (i.e. revenue agents) and laymen. In particular, they believe that they correctly predict, on average, 1.52 more cases than they actually do. Second, we find some evidence indicating that tax advisors acting as client advocates form stronger appeal recommendations than revenue agents.     

Family Size and Educational Investments in Children: Evidence from Private Tutoring Expenditures in South Korea*

Relying on private tutoring expenditures in South Korea, this paper examines whether large family size has a strong negative impact on educational investments in children. To deal with endogeneity of family size, the paper employs a non‐parametric bounding method as well as an instrumental variables method. Our primary finding is that quantity–quality trade‐offs in educational investments function in a way that varies by the sex of the child. While there is a non‐negligible negative effect of large family size on educational investments for girls, there is little if any impact on those for boys. Son preferences traditionally shown by Korean parents seem to underlie such empirical findings.     

Supersizing supercenters? The impact of Walmart Supercenters on body mass index and obesity

Researchers have linked the rise in obesity to technological progress reducing the opportunity cost of food consumption and increasing the opportunity cost of physical activity. We examine this hypothesis in the context of Walmart Supercenters, whose advancements in retail logistics have translated to substantial reductions in the prices of food and other consumer goods. Using data from the Behavioral Risk Factor Surveillance System matched with Walmart Supercenter entry dates and locations, we examine the effects of Supercenters on body mass index (BMI) and obesity. We account for the endogeneity of Walmart Supercenter locations with an instrumental variables approach that exploits the unique geographical pattern of Supercenter expansion around Walmart’s headquarters in Bentonville, Arkansas. An additional Supercenter per 100,000 residents increases average BMI by 0.24 units and the obesity rate by 2.3% points. These results imply that the proliferation of Walmart Supercenters explains 10.5% of the rise in obesity since the late 1980s, but the resulting increase in medical expenditures offsets only a small portion of consumers’ savings from shopping at Supercenters.     

Export discoveries, diversification and barriers to entry

The literature on the relationship between economic diversification and development established that diversification rises with development up to a point. Some have argued that market failures reduce private investments that are necessary to find out whether a new product can be exported profitably, thus implying that the threat of entry can reduce export discoveries and consequently hamper diversification. In parallel, the trade literature on the “extensive margin” of trade has focused on the role of fixed costs of exporting, which affects the number and types of firms that enter into exporting activities. This article presents data suggesting that export diversification and export discoveries are correlated over the course of development, and it provides an empirical test of market failures that might deter export discoveries. The findings suggest that the threat of entry by imitators reduces the number of export discoveries within countries and industries for a given rate of growth of non-discovery exports. However, this market-failure effect is less pronounced when allowing for inter-industry spillovers, whereby export discoveries in one industry lead to discoveries in another industry. The policy implication is that barriers to entry should not be used to protect innovators from the threat of imitation, but governments could consider interventions that directly focus on stimulating export discoveries.