Estate recovery and long‐term care insurance

Estate recovery is a policy under which the state recovers part of long‐term care (LTC) subsidies from the estates of deceased beneficiaries. This paper studies the effect of estate recovery on LTC insurance demand. This effect strongly relies on the bequest motive since the main purpose behind purchasing LTC insurance is to protect bequests from the financial costs of LTC. We find that the impact of estate recovery on LTC insurance depends on the level of parental bequests and on whether and how the parent anticipates the child's preferences with respect to informal care. More specifically, we show that estate recovery encourages the parent to purchase LTC insurance when his child is considered selfish or to like providing care. However, this policy could provide disincentives to LTC insurance purchase by the parent if his child is considered to dislike providing informal care. Our results also show that estate recovery reduces and may even eliminate public support crowding out of private LTC insurance demand. Finally, we characterize the welfare implications of financing LTC public support by estate recovery.     

Indian residential schools: Height and body mass post‐1930

We study the effects of Canadian Indian residential schooling on two anthropometric measures of health during childhood: adult height and body weight. We use repeated cross‐sectional data from the 1991 and 2001 Aboriginal Peoples Survey and leverage detailed historical data on school closures and location to make causal inferences. We find evidence that, on average, residential schooling increases adult height and the likelihood of a healthy adult body weight for those who attended. These effects are concentrated after the 1950s, when the schools were subject to tighter health regulations and students were selected to attend residential school based partly on their need for medical care that was otherwise unavailable. Residential schooling is only one policy in Canada that had an impact on the health of status First Nations peoples, so our results must be understood in the broader social context. Taken in context, our results suggest that health interventions in later childhood can have significant impacts on adult health. We also document significant increases in height and body weight for status peoples born after the 1960s, suggesting substantial changes in diet and living conditions during this period.     

Long‐term care policy with lazy rotten kids

This paper studies the determination of informal long‐term care (LTC) provided by children in a scenario which is somewhere in between perfect altruism and selfish exchanges. Parents are altruistic but children are purely selfish, and neither side can make credible commitments. The model is based on Becker's “rotten kid” specification except that it explicitly accounts for the sequence of decisions. In Becker's world, with a single good efficiency is achieved. We show that when family aid is introduced the outcome is likely to be inefficient. Still, the rotten kid mechanism is at work and ensures that a positive level of LTC is provided as long as the bequest motive is operative. We identify the inefficiencies by comparing the laissez‐faire (subgame perfect) equilibrium to the first‐best allocation. We first assume that families are identical ex ante and then consider the case where dynasties differ in wealth. We study how the provision of LTC can be improved by public policies. Interestingly, crowding out of private aid by public LTC is not a problem in this setting. With an operative bequest motive, public LTC will have no impact on private aid. More amazingly still, when the bequest motive is (initially) not operative, public insurance may even enhance the provision of informal aid.     

Long‐term care and intrafamily moral hazard: Optimal public policy

The paper studies optimal public long‐term care (LTC) policy in the context of intrafamily moral hazard suggested by Pauly. The model considers a representative family consisting of an adult child and her elderly parent who might become dependent, in which case he places a special value on the LTC provided to him by his child. Since the child's caregiving is decreasing in the amount of insurance coverage, the parent prefers to underinsure, which is socially suboptimal. The child's choice of caregiving is also inefficient since she does not internalize its positive effect on the parent. The paper tackles these inefficiencies and shows that intrafamily moral hazard is a sufficient justification for public intervention targeted at insurance. If not necessarily for the introduction of mandatory public insurance, then at least for the taxation or subsidization of private insurance premiums.     

On the value of Medicaid in providing access to long‐term care

The crowding‐out by Medicaid has been identified as a possible reason for the low demand for private long‐term care (LTC) insurance in the USA. I extend the previous analysis to the case in which budget constraints inhibit access to care. This reduces the role of the implicit tax and fundamentally changes the nature, scope, and welfare implications of crowding‐out. It suggests a large value of Medicaid that a private insurance market is unable to offer due to a dilemma prevalent in—but not exclusive to—the market for LTC insurance: a dilemma between access and affordability.     

The technological determinants of long‐run inequality

I explore the effect of skill‐biased technological change and unbiased technological progress on long‐run inequality using a theoretical model in which the supply of skilled and unskilled workers is endogenous. The main assumption of the model is that young agents can finance their education and become skilled workers by borrowing against their future income on an imperfect credit market. I show that whenever the rate of unbiased technological progress is sufficiently high there is no steady‐state inequality, independent of the degree of skill bias. If instead the rate of unbiased technological progress is low, then the long‐run skill premium increases with the technological skill bias. Therefore, similarly to the short run, in the long run higher technological skill bias may cause higher inequality. However, contrary to the short run, in the long run unbiased technological progress is more important than technological skill bias in determining inequality. I also discuss how the efficiency of the educational technology and the degree of financial development affect long‐run inequality.     

Demographic change and long‐term growth in China: Past developments and the future challenge of aging

This paper explores the influence of demographic changes, particularly the sharp decline in fertility and the evolution of the population age structure, on economic development in China. A general equilibrium overlapping generations model with endogenous decisions on fertility, educational investment, and factor accumulation is employed for our analysis. The family support provided by children to the elderly, which is a component of traditional culture in Chinese society, is also considered. We find that technological changes matter most for growth. Demographic changes, on average, account for approximately 4% of the growth in China, while the effect is negative in the pre‐1980 period. With an extension to include population aging, we find that aging is not necessarily adverse to growth. This finding reflects the fact that a longer life expectancy requires more savings and makes educational investment in children more attractive, which accelerates physical capital and human capital accumulation. However, if the social norm of family support for aging parents is strict, aging will significantly increase the children's burden and crowd out physical and human capital accumulation.     

The impact of recycling on the long‐run forestry

Abstract Interest in recycling of forest products has grown in recent years, one of the goals being to conserve trees or possibly increase their number to compensate for positive externalities generated by the forest and neglected by the market. This paper explores the issue as to whether recycling is an appropriate measure to attain such a goal. We do this by considering the problem of the private owner of an area of land, who, acting as a price taker, decides how to allocate his land over time between forestry and some other use, and at what age to harvest the forest area chosen. Once the forest is cut, he makes a new land allocation decision and replants. He does so indefinitely, in a Faustmann‐like framework. The wood from the harvest is transformed into a final product that is partly recycled into a substitute for the virgin wood, so that past output affects the current price. We show that in such a context, increasing the rate of recycling will result in less area being devoted to forestry. It will also have the effect of increasing the harvest age of the forest, as long as the planting cost is positive. The net effect on the flow of virgin wood being harvested to supply the market will as a result be ambiguous. An important point, however, is that recycling will result in fewer trees in the long run, not more. It would therefore be best to resort to other means if the goal is to conserve the area devoted to forestry.     

Bank ownership type and temporal evolution of long‐term bank funding in the period 2005–2017

This study uses a large panel dataset of Western European banks to examine the determinants of bank funding stability. Banks are divided into three categories by bank ownership type; the ownership types in this study are commercial banks, cooperative banks and savings banks. Three sources of stable bank funding are investigated: customer deposits, equity, and long‐term liabilities. Furthermore, the sum of these funding components is used as a proxy variable for a bank's total available stable funding (ASF). A special focus is on the temporal evolution of these funding types. The regression results show that commercial banks’ funding became much more stable in the period 2005–2017. However, that funding remains, on average, less stable than does cooperative and savings banks’ funding. In addition, funding stability has remained at the pre‐crisis level in cooperative and savings banks, despite a steep dip in cooperative banks’ ASF during the sovereign debt crisis. Furthermore, banks substantially decreased financing from long‐term liabilities after the financial crisis, replacing it with customer deposits and equity.     

The effects of monetary policy in a small open economy: the case of Portugal

In this article, I analyse the macroeconomic effects of monetary policy on the Portuguese economy. I show that a positive interest rate shock leads to: (i) a contraction of real GDP and a substantial increase of the unemployment rate; (ii) a quick fall in the commodity price and a gradual decrease of the price level and (iii) a downward correction of the stock price index. It also produces a ‘short-lived liquidity effect’ and helps explain the negative comovement between bonds and stocks. In addition, I find evidence suggesting the existence of a money demand function characterized by small output and interest rate elasticities. By its turn, the central bank’s policy rule follows closely the dynamics of the money markets. Finally, both the real GDP and the price level in Portugal would have been higher during almost the entire sample period if there were no monetary policy surprises.     

Addressing child sex tourism: The Indian case

The paper investigates policy options for a successful fight against child sex tourism in a context of increased human mobility inherent to the global economy era. Using state and district-level data on child-related crimes in India we find that international policy coordination is necessary. Coordination involves a combination of policies aimed at providing a safer environment for children by removing them from the streets (supply-side policies) with those intended to deal with child-related offences (demand-side policies). One-standard deviation increase in coordination efforts reduces the illegal importation of minor girls by 1.24 standard deviation.     

Macroeconomic effects of fiscal policy changes: A case of South Africa

This study develops comprehensive full-sector macro-econometric models for the South African economy with the aim of explaining and providing the macroeconomic effects of fiscal policy changes in the country. The models are applied to test the effectiveness of fiscal policy actions in an economic environment with existing structural supply constraints versus demand-side constraints and also to detect which components of the fiscal would be more effective in stabilising the economy. Based on the structure of the South African economy and the framework presented, the study concludes that the South African economy can be characterised as one which is embedded with structural supply constraints. Thus, a model which is suitable for policy analyses of the South African economy needs to capture the long-run supply-side characteristics of the economy. A price block is incorporated to specify the price adjustment between the supply-side sector and real aggregate demand sector. The models are estimated with time-series data from 1970 to 2011, capturing both the long-run and short-run dynamic properties of the economy. The results from the series of fiscal policy scenarios suggest that fiscal policy actions are more effective in an economic environment with limited or no supply constraints. Fiscal expansion or consolidation that comes more from government spending changes will be more effective in an economic environment where structural supply constraints are absent while tax revenue changes will be more effective in an economic environment where there exist major structural supply constraints.     

The response of term rates to monetary policy uncertainty

This paper shows that greater uncertainty about monetary policy can lead to a decline in nominal interest rates. In the context of a limited participation model, monetary policy uncertainty is modeled as a mean preserving spread in the distribution for the money growth process. This increase in uncertainty lowers the yield on short-term maturity bonds because the household sector responds by increasing liquidity in the banking sector. Long-term maturity bonds also have lower yields but this decrease is a result of the effect that greater uncertainty has on the nominal intertemporal rate of substitution—which is a convex function of money growth. We examine the nature of these relations empirically by introducing the GARCH-SVAR model—a multivariate generalization of the GARCH-M model. The predictions of the model are broadly supported by the data: higher uncertainty in the federal funds rate can lower the yields of the three- and six-month treasury bill rates.     

Markets of concentration permits: The case of manure policy

Concentration permits are regarded as an interesting policy tool for regulating emissions where, besides absolute amounts, also local concentration is important. However, effects of governance structure, trading system and possible policy interventions in the permits' allocation are not yet well analysed and understood. This paper explores in how far tradable fertilisation standards can be seen as a concentration permit trading (CPT) system which can be fine-tuned for further policy intervention. Indeed fertilisation standards such as obliged by the EU Nitrate Directive can be regarded as local nitrate emissions limits, and thus concentration permits. A multi-agent spatial allocation model is used to simulate the impact of defining the manure problem in terms of concentration permits rather than conventional emission permits. Impacts are simulated in terms of environmental performance and increased reallocation costs. The model is applied on the Flemish manure problem.     

Effective timing of tourism policy: The case of Singapore

In this paper, we examine the effective timing of economic policies actions in the tourism industry of a small open economy such as Singapore. The effective timing of policy actions is an open challenge issue to researchers and also a much needed rule of thumb to policy makers and private agents. This paper aims to (a) derive the influencing factors of a tourism demand function and (b) identify the time impact of these factors, thus, allowing the formulations of effective policy actions, by both, governmental tourism authorities and private tourism agents in Singapore. Our findings suggest that tourism government authorities and private tourism agents in Singapore should choose the timing of their actions depending upon the anticipated factor changes and their estimated impact. That is, if exchange rate variability is anticipated then policy actions should start at least twelve months prior to the start of the tourist period. If, a keen price competition is expected to prevail then the best timing of policy actions is nine months ahead the tourism period. If income improvements in origin countries could be expected, then a rather shorter timing action of six months would be available to tourism authorities and private agents in Singapore.     

The role of liquidity in monetary policy transmission: Evidence from Indian banks1

The role of bank liquidity in monetary policy transmission has received insufficient attention in the literature. Faced with monetary tightening, banks with more liquidity can sell off securities and protect their loan portfolios. We test this proposition using panel data for Indian banks during 2005–2020. Employing dynamic threshold panel regressions with liquid assets as the threshold variable, we show that bank lending declines with monetary policy tightening in low liquidity regimes, but not in high liquidity regimes. We also find evidence for different portfolio reallocation behaviour by banks in high versus low liquidity regimes in response to monetary policy changes.     

The macroeconomic effects of fiscal policy

We investigate the macroeconomic effects of fiscal policy using a Bayesian Structural Vector Autoregression (B-SVAR) approach. We identify fiscal policy shocks via a partial identification scheme, but also: (i) include the feedback from government debt; (ii) look at the impact on the composition of output; (iii) assess the effects on asset markets; (iv) use quarterly data; and (v) analyse empirical evidence from the US, the UK, Germany and Italy. The results show that government spending shocks, in general, have a small effect on Gross Domestic Product (GDP); lead to important ‘crowding-out’ effects; have a varied impact on housing prices and generate a quick fall in stock prices. Government revenue shocks generate a mixed effect on housing prices and a small and positive effect on stock prices. The empirical evidence also suggests that it is important to explicitly consider the government debt dynamics in the model.     

The Impact of Labour Market Reforms and Economic Performance on the Matching of the Short‐term and the Long‐term Unemployed

As a reaction to high and persistent unemployment in Germany, the largest labour market reforms in post‐war history were implemented between 2003 and 2005. We analyse the impact of the reforms and its coincidence with an economic expansion on the efficiency of matching out of unemployment. Especially focussing on searcher heterogeneity, we estimate a system of stock‐flow matching functions for short‐term and long‐term unemployment (three‐stage least squares) on the basis of administrative data. In sum, the reforms increased matching efficiency for both groups, but the effect was larger for the long‐term unemployed. The interaction of reforms and economic expansion, however, was not influential.     

R&D,public innovation policy,and productivity: The case of danish manufacturing

The purpose of this paper is to investigate the relationship between private R&D, public innovation support transferred to the private sector, and productivity in Danish manufacturing. Two main conclusions are established. First, public innovation support has a positive and significant effect on private R&D expenditures with an estimated elasticity of 0.062. Second, the indirect effect on productivity from public innovation support is reflected in a positive point estimate which is found to be robust to different specifications of R&D capital.     

The Innovation‐R&D Nexus in an Emerging Economy: Evidence from the Indian Manufacturing Sector

While R&D is considered an important input for innovation, its relationship with the output of the innovation process continues to remain enigmatic, especially in developing countries with low levels of domestic research. Using patents and knowledge capital stock as proxies for the output and input of the innovation process, we study their nexus in the emerging economy of India using a large sample of manufacturing firms over the period 2001–2010. Using a specification that addresses the problem of ‘excess zeroes’ in count data, the firm's non‐technical knowledge stock as an additional factor of the success with which R&D transforms into patents, and a linear feedback mechanism that yields consistent estimators, we find that a one unit increase in knowledge capital likely raises expected patent count by only about 4.3% at most. Further, although patenting experience, resource access and knowledge spillovers are strongly significant in explaining patent counts, the magnitude of these effects is marginal at best. In brief, evidence for the knowledge production function is rather weak even in the context of a dynamic developing economy.