The curse of natural resources

This paper summarizes and extends previous research that has shown evidence of a “curse of natural resources” – countries with great natural resource wealth tend nevertheless to grow more slowly than resource-poor countries. This result is not easily explained by other variables, or by alternative ways to measure resource abundance. This paper shows that there is little direct evidence that omitted geographical or climate variables explain the curse, or that there is a bias resulting from some other unobserved growth deterrent. Resource-abundant countries tended to be high-price economies and, perhaps as a consequence, these countries tended to miss-out on export-led growth.     

An empirical investigation of herding in the U.S. stock market

This paper proposes a new empirical testing method for detecting herding in stock markets. The traditional regression approach is extended to a vector autoregressive framework, in which the predictive power of squared index returns for the cross-sectional dispersion of equity returns is tested using a Granger causality test. Macroeconomic news announcements and the aggregate number of firm-level news items are treated as conditioning variables, while the average sentiment of firm-level news is treated as jointly determined. The testing algorithm allows the change points in the causal relationships between the cross-sectional dispersion of returns and squared index returns to be determined endogenously rather than being chosen arbitrarily a priori. Evidence of herding is detected in the constituent stocks of the Dow Jones Industrial Average at the onset of the subprime mortgage crisis, during the European debt and the U.S. debt-ceiling crises and the Chinese stock market crash of 2015. These results contrast with those obtained from the traditional methods where little evidence of herding is found in the US stock market.     

The curse of natural resources in fractionalized countries

This paper develops a model that can explain why natural resources are a blessing for some countries, but a curse for others. In this model, natural resources cause fighting activities between rivalling groups. Fighting reduces productive activities and weakens property rights, making productive activities even less attractive. The aggregate production decrease exceeds the natural resources’ direct positive income effect if and only if the number of rivalling groups is sufficiently large. The model thus predicts that natural resources lower incomes in fractionalized countries, but increase incomes in homogenous countries. Empirical evidence supporting this prediction is provided.     

The curse of natural resources in the transition economies*

The curse of natural resources is a well‐documented phenomenon for developing countries. Economies that are richly endowed with natural resources tend to grow slowly. Among the transition economies of the former ‘Eastern Bloc’, a similar pattern can be observed. This paper shows that a large part of the variation in growth rates among the transition economies can be attributed to the curse of natural resources. After controlling for numerous other factors, there is still a strong negative correlation between natural resource abundance and economic growth. Among the transition economies the prime reasons for the curse of natural resources were corruption and a neglect of basic education. In order to overcome the curse of natural resources and move to a sustainable path of development, the resource abundant transition countries should fight corruption and ensure that their resource revenues are invested in human capital or the preservation of natural capital.     

Risk attitudes and premiums of U.S. corn and soybean producers: an empirical investigation

The 2000 Agricultural Risk Protection Act and 2002 Farm Security and Rural Investment Act reduced price and yield risks faced by many U.S. crop producers to low levels. We use a non-structural methodology extended for application to pseudo panels and national survey data to examine the risk attitudes of U.S. corn and soybean producers to test whether, and examine how, risk attitudes varied during the 1996–2001 and 2002–2008 periods by revenue category. We cannot reject the hypothesis of risk neutrality for the entire population, and for each revenue category, for the former period, but can reject risk neutrality, in favor of risk tolerance, for the entire population and for the larger revenue categories for the latter period. Estimated risk premiums for the latter period suggest that U.S. corn and soybean farmers who earn more require larger payments to remain indifferent between receiving their expected income with certainty and receiving an uncertain income from farming and government programs.     

An empirical analysis of assortative mating in India and the U.S.

This paper uses a conditional logit model to analyze empirically how individuals sort themselves through marriage into households in India and the U.S. The results support positive assortative mating of spouses with respect to age and schooling. We find no evidence in favor of Becker's theory of labor market specialization in couples. Moreover, while similarity in age is the strongest predictor of marital choice in India, education of a prospective spouse plays a more important role in the U.S. Finally, we find that while dowry increases the likelihood of women marrying men with characteristics dissimilar to their own, availability of a mate has a positive effect on the degree of stratification in India.     

The effects of the Uruguay round: empirical evidence from U.S. industry

This article uses an event study to evaluate the anticipated results of the Uruguay Round on U.S. industry. Economists commonly use computable general equilibrium (CGE) models to predict the net economic efficiency effects of trade agreements. The event study method represents a complementary approach that relies on stock price movements to assess how investors predict that an event, in this case the conclusion of the Uruguay Round, will affect industry profitability. The empirical estimates indicate that U.S. industries with comparative advantage (disadvantage) experience positive (negative) stock price reactions, reflecting an increase (a decrease) in the industry trade and investment opportunities as well as an increased (decreased) return to existing tangible and intangible assets. For the market as a whole, the variation in stock prices does not differ significantly from zero, and the economic magnitude of industry gains and losses is small. These results are consistent with most CGE assessments and with the skeptical attitude that the real impact of the Uruguay Round Agreement remains uncertain.     

Profit rate equalization in the U.S. and Europe: An econometric investigation

Although the equality of profit rates has been a key concept in classical as well as neoclassical economics, there are few empirical studies ascertaining to what extent profit rates are equalized or a tendency toward equalization can be observed. Using recently published data, we estimate an econometric model of profit rate convergence for the United States and four European countries. We compare size and significance of interindustry profit rate differentials in Europe and the United States and examine the sensitivity of the results to the definition of the rate of profit and the time period considered.     

An empirical analysis of the U.S. Senate vote on NAFTA and GATT

This paper examines the determinants of the voting behavior of the U.S. Senate on the North American Free Trade Agreement and the General Agreement on Tariffs and Trade. Public choice theory suggests that the voting behavior of senators is influenced by constituent interests, special interest politics, and their ideology. This paper uses probit analysis to test the significance of the above factors. The results indicate that constituent economic interests and special interest money were significant determinants of the Senate voting on the North American Free Trade Agreement but not on the General Agreement on Tariffs and Trade.     

Creditor concentration: An empirical investigation

Most of the literature on multiple banking assumes equal financing shares. However, unequal, asymmetric or concentrated bank borrowing is widespread, and creditor concentration is only weakly correlated with the number of bank relationships. This paper therefore investigates the determinants of creditor concentration for German firms using a comprehensive firm-bank level dataset for the time period between 1993 and 2003. We document that corporate borrowing from banks is very often concentrated, even for the largest firms in our sample. Leveraged firms and firms with more redeployable assets concentrate their borrowing from banks, as are firms dealing with a relationship lender that is profitable, that has lower monitoring costs, or that operates in a concentrated regional lending market.     

The real exchange rate determination: An empirical investigation

This study examines the real exchange rate determination in Asian economies. The methods show that the real exchange rate and terms of trade can be jointly determined. Productivity differential, terms of trade, the real oil price, and reserve differential are found to be important in the real exchange rate determination in the long run. However, the significant impacts of those variables on the real exchange rate determination are different across economies. Moreover, the results of the generalised forecast error variance decompositions show that the important contributors of the real exchange rate are different across economies.     

The adoption of Web 2.0 services: An empirical investigation

The paper investigates the factors associated with the intensity of use of three Web 2.0 services - video sharing, social networking and social bookmarking - by looking at the users' characteristics and at the technological features. It relies upon a theoretical framework that combines the diffusion of innovation model with the technology acceptance model. However, it goes beyond them by focusing not simply on the determinants of adoption, but on the determinants of the intensity of use, and by introducing variables related to the social influence. The empirical analysis is based upon a survey of 300 users of Web 2.0 services. We find that the compatibility with users' needs and behaviours plays an important role for the intensity of usage of both video sharing and social networking services, while the ease of use positively affects the intensity of usage of social networking services, but has a negative effect on the intensity of usage of video sharing services. Extrinsic job-related motivations are important drivers of the intensive usage of social bookmarking and social networking services, while sharing contents is relevant for video sharing and social networking services. Finally, individual characteristics such as age, education and IT endowment also play an important role.     

Aspiration level effects: An empirical investigation

Theories of aspiration level effects predict that decisions under uncertainty will depend on whether performance is above or below some target level of performance. A sample of 5000 quarterly earnings announcements by publicity held companies listed on the COMPUSTAT and CRSP data bases is examined to test this hypothesis. Four models from the current accounting literature are used as alternative estimates of the target level of earnings for these firms. When earnings are announced the difference between actual and forecast earnings, here called a forecast error, can be computed. The data indicate that the relationship between valuation and forecast error differs conditional on the sign of the forecast error.     

Technological leadership and sectorial employment growth: A spatial econometric analysis for U.S. counties

This paper studies the determinants of technological catch‐up considering spatial and sectoral aggregation of industries. We investigate how geographical and technological proximity to the technology leader impact regional employment growth. We model technological progress by means of a hierarchical process of catch‐up to the technology leader. We also incorporate measures for knowledge spillover effects to test the roles of competition, specialisation, and diversity at the industry level. Empirical results using data at the county level for different economic sectors (2‐dig NAICS) for the United States indicate that human capital plays a crucial role in promoting sectoral employment growth. The association between technological/geographical distance to the technology leader and employment growth varies across sectors.     

Financial cycle and business cycle: An empirical analysis based on the data from the U.S

In this paper, we first study the relationship between the financial cycle and the business cycle in the time and frequency domain. Then we also explore the interactions and dynamic mechanisms of the financial cycle, the business cycle, real interest rate and exchange rate by the VAR model. The empirical results show that the financial cycle is closely related to the business cycle, especially at medium-term frequencies (8–30 years), the business cycle leads the financial cycle with a high positive correlation. However, the relationship between them is not significant during the Great Moderation at business-cycle (2–4 years). In addition, the financial cycle not only becomes a main driver of real interest rate, the financial cycle and the business cycle, but also serves as an important source of the business cycle fluctuations. In general, our results lay some theoretical foundation for the policy practice of financial and economic stability.     

Commodity prices and growth: An empirical investigation

Whereas empirical evidence on the effect of higher commodity prices on the long-run growth of commodity exporters is ambiguous, time series analyses using vector autoregressive (VAR) models have found that commodity booms raise income in the short run. In this paper we adopt panel error correction methodology to analyze global data for 1963 to 2008 to disentangle the short and long run effects of international commodity prices on output per capita. Our results show that commodity booms have unconditional positive short-term effects on output, but non-agricultural booms in countries with poor governance have adverse long-term effects which dominate the short-run gains. Our findings have important implications for non-agricultural commodity exporters with poor governance, especially in light of the recent wave of resource discoveries in low-income countries.