Can innovation improve income inequality? Evidence from panel data

Income inequality is a source of social instability and armed conflict, which in turn are detrimental to economic development. This study examines the role of innovation in income inequality in twenty-three developed countries, using a panel mean group estimator that takes cross-sectional dependence into consideration. Three income inequality indicators are used: the Standardized World Income Inequality Database (SWIID), the University of Texas Inequality Project (UTIP), and the Estimated Household Income Inequality (EHII). The innovation indicators are patent applications and patents granted. The empirical results based on the common correlated effect mean group (CCEMG) reveal that innovation widens income inequality. We also investigate whether the innovation–income inequality nexus is subject to a country’s level of globalization and financial development. The findings suggest that the interaction terms between innovation with these two variables have positive effects on income inequality, whereas innovation failed to reduce income inequality. Globalization and financial development are found to drive income inequality. The empirical results are robust to different income inequality and innovation measures as well as estimation techniques.     

Does income inequality lead to banking crises in developing countries? Empirical evidence from cross-country panel data

This study empirically examines whether increasing income inequality results in banking crises using panel data for 68 countries covering the years 1973 to 2010. The results show that developing countries with high inequality tend to have higher levels of domestic credit and that domestic credit booms increase the probability of banking crises. We also find that developing economies display direct channels from inequality to banking crises without an association with credit booms. We find no consistent evidence that income inequality contributes to banking crises in advanced economies. In developing countries, the probability of banking crises increases dramatically as income inequality levels increase: The probability of a systemic banking crisis within three years is 9.5% when the Gini is as low as 0.2 in developing countries and increases to 57.4% when the Gini is 0.4. These results are robust to several specifications.     

Can we model the educational process?

Operational analysis has not yet made a contribution to the improvement of the educational process. There are several reasons for this. First, relative to the magnitude of the job of teaching our youth, financial support for educational research and analysis has been much smaller than for other problem areas, e.g., health.

The second difficulty is in the relationship between operational analysis and theory. The more complete the theory, the better the system designs resulting from analysis. For education there is no theory. Worse, there are few efforts to develop such theory. It must be recognized, however, that the phenomenon called learning is very complex.

The lack of theory means that the system design proceeds with more uncertainty. Large “safety factors” must be built in. This means that educational systems have to be expensive.

Large, continuing financial support is required; first, to build up present school systems, so that they perform well under existing, changing circumstances; and, second, to support research that will provide theories and models which in turn will lead to more effective learning systems.     

Can portfolio adjustments explain deviations of consumption from permanent income?: An empirical study of UK data

It has become something of a stylized fact that the change in consumer spending exhibits persistence. This is often interpreted as indicating a violation of the rational expectations-permanent income (RE-PI) hypothesis. This paper considers an alternative interpretation: the observed persistence could be due to portfolio adjustments which push consumption away from its RE-PI path. Empirical support for this interpretation is provided using a UK data set.     

How do services of owner-occupied housing affect income inequality and redistribution?

This paper aims at analyzing the redistributive impact that the inclusion of the imputed rental market value of owner-occupied housing would have if used for quantifying the ability to pay rather than imputation based on cadastral values. We consider the Spanish personal income tax as reference, due to the differential treatment that it provides for imputed income from owner-occupied housing, together with the exceptionally high percentages of home ownership in Spain. By means of micro-simulation we explore the consequences of alternative possibilities for dealing with implicit income from owner-occupied housing.     

The evolution of the US family income–schooling relationship and educational selectivity

We estimate a dynamic model of schooling on two cohorts of the National Longitudinal Survey of Youth and find that, contrary to conventional wisdom, the effects of real (as opposed to relative) family income on education have practically vanished between the early 1980s and the early 2000s. After conditioning on a cognitive ability measure (AFQT), family background variables and unobserved heterogeneity (allowed to be correlated with observed characteristics), income effects vary substantially with age and have lost between 30% and 80% of their importance on age-specific grade progression probabilities. After conditioning on observed and unobserved characteristics, a $300,000 differential in family income generated more than 2 years of education in the early 1980s, but only 1 year in the early 2000s. Put differently, a $70,000 differential raised college participation by 10 percentage points in the early 1980s. In the early 2000s, a $330,000 income differential had the same impact. The effects of AFQT scores have lost about 50% of their magnitude but did not vanish. Over the same period, the relative importance of unobserved heterogeneity has expanded significantly, thereby pointing toward the emergence of a new form of educational selectivity reserving an increasing role to noncognitive abilities and/or preferences and a lesser role to cognitive ability and family income.     

Can we improve the perceived quality of economic forecasts?

A number of topics are discussed concerning how economic forecasts can be improved in quality or at least in presentation. These include the following: using 50% uncertainty intervals rather than 95%; noting that even though forecasters use many different techniques, they are all occasionally incorrect in the same direction; that there is a tendency to underestimate changes; that some expectations and recently available data are used insufficiently; lagged forecasts errors can help compensate for structural breaks; series that are more forecastable could be emphasized and that present methods of evaluating forecasts do not capture the useful properties of some methods compared to alternatives.     

Relative income,absolute income and the life satisfaction of older adults: do retirees differ from the non‐retired?

We examine life‐satisfaction of older adults using a representative sample of Canadian individuals aged 45+. Our findings confirm a long line of employment relations research on the importance of ‘relational concerns’ in that: (i) income relative to the average for a given person's gender, age, region and marital status (relative income) matters more in improving life satisfaction as a whole than does absolute personal income; (ii) the relationship between relative income and happiness is much stronger for the non‐retired than retired persons, likely reflecting the importance of comparisons among peers at the workplace; and (3) absolute personal income does have a small positive relationship with life satisfaction but only for retirees and not for the non‐retired.     

Can loss framing improve coordination in the minimum effort game?

Journal of Economic Interaction and Coordination - I study how framing payoffs as losses affects group coordination using the minimum effort game. The previous literature shows groups as small as...     

Can problem-solving attitudes explain the gender gap in financial literacy? Evidence from Italian students’ data

Recent results from the OECD PISA (Financial literacy assessment framework. Australian Council for Educational Research. ACER, Australia, 2012) highlight that Italy is the only surveyed country where, among 15-year-old students, boys perform significantly better than girls in terms of financial literacy. This gap is relevant because financially literacy is crucial to make sound financial decisions and, consequently, it is likely to impact strongly on well-being of women. The main findings reveal that students’ performance in financial literacy is most strongly influenced by some personality traits, such as perseverance and openness to solving complex problems, and, at same time, by the school career and the type of school attended. Their effects are larger among low-performing students than in the upper tail of the score distribution. A decomposition exercise of the gender gap in financial literacy confirms the role played by motivational and attitudinal factors and, at the same time, highlights that putting males and females on an even footing with respect to personal characteristics does not suffice to close the gap.     

Environmental attitude in the board. Who are the “green directors”? Evidences from Italy

Board members' attitudes towards environmental protection are an important antecedent of how companies define and implement sustainability initiatives, but little is known about directors' attitudes and the factors associated with these. Using survey data on Italian board members, the research sought to explore the relationships between these individual's personal attributes, especially those related to their roles on boards, and their attitudes towards environmental protection. The findings suggest that female directors, directors with financial background, and independent directors are positively related to attitudes towards environmental protection. In the financial sector, younger board members and risk committee members show stronger environmental attitudes. The results could be of interest to policymakers because the board member attributes identified may require a stronger regulatory focus in order to achieve public policy's environmental protection objectives and to governance bodies in terms of defining board committees' composition and selecting “green directors” oriented towards environmental issues.     

Is there a unit root in the inflation rate? Evidence from sequential break and panel data models

Using sequential trend break and panel data models, we investigate the unit root hypothesis for the inflation rates of thirteen OECD countries. With individual country tests, we find evidence of stationarity in only four of the thirteen countries. The results are more striking with the panel data model. We can strongly reject the unit root hypothesis both for a panel of all thirteen countries and for a number of smaller panels consisting of as few as three countries. The non-rejection of the unit root hypothesis for inflation is very fragile to even a small amount of cross-section variation. © 1997 John Wiley & Sons, Ltd.     

Do unions redistribute income from capital to labour? Union density and wage shares since 1960

The income distribution between capital and labour is understudied within industrial relations. This article investigates the relationship between union density, taken as an indicator of the bargaining power of unions, and the wage share of national income in 16 advanced capitalist economies since 1960. It is shown that overall there is a positive relationship between union density and the wage share, as one would expect. But the relationship is weak or non‐existent in the Nordic countries, and in some specifications in Germany and Anglo‐Saxon countries, and overall it is weak in the 1980s and early 1990s. The article discusses the differences between countries in relationship to the literature on corporatism and wage moderation, and the decreasing effect over time with reference to increased global competition and conservatism of monetary policy from about 1980 on, increasing unions' incentives for wage moderation policies.     

Does the quality of public-sponsored training programs matter? Evidence from bidding processes data

This paper analyzes the link between training quality and labor-market outcomes. Multiple proxies for training quality are identified from bidding processes in which public and private training institutions compete for limited public funding in Peru. Information about exact dates of program enrollment is analyzed to show whether the first-come-first-served assignment rule randomized eligible individuals across courses of varying quality. Generalized propensity score (GPS) is implemented to estimate dose–response functions in the context of multiple treatments. We find that beneficiaries attending high-quality training courses show higher earnings and better job-quality characteristics than either beneficiaries attending low-quality courses or nonparticipants. The returns are particularly robust for women, making the provision of high-quality training services cost-effective. Furthermore, the most important training attribute is expenditures per trainee. Class size and infrastructure are weakly related to the expected impacts, while teacher experience, curricular activities, and market knowledge seem to bear no relationship with the expected impacts. External validity was assessed by using five cohorts of individuals over an eight-year period.     

Can you pay employees to innovate? Evidence from the Canadian private sector

Using 7 years of data representing the Canadian private sector, we estimate the effects of the major components of compensation on a rarely studied form of employee performance: innovation. Although there are some limitations inherent in the data, our results indicate the complex motivation required for consistent innovation success. Surprisingly, we find that fixed pay (salary) and individual performance pay have no effect on innovation, while variable group pay and indirect pay (employee benefits) have a positive effect. In other words, our results suggest that you can pay employees to innovate, provided that you select the right compensation incentives.     

Were there no returns to education in the USSR? Estimates from Soviet-period household data

The relation between wages and schooling in the USSR is studied, by estimating log–linear wage-equations for a sample of a Russian city in 1989. Estimates, made separately for men and women, show that there were rewards to education, contrary to claims by many Soviet and Western scholars. The low wages of some professionals, relative to skilled workers, were partly caused by gender differentials, partly by excess demand for manual labour. In addition, private costs of schooling were low and there were important non-monetary incentives connected with higher education.     

Can University Leaders Manage the Tensions Between the Practice of Innovation and the Traditions of the University?

The practice of innovating within a university causes tension because it is not well understood, is perceived as risky, and is seen as a threat to established power, which makes it difficult to know where to house it for maximum effect. The tension can be reduced by focusing on the similarities of innovating and teaching, inviting faculty and staff to serve as early adopters, and having senior administrators be the budgetary and political champions for innovation initiatives.     

Trading income and bank charter value during the financial crisis: Does derivatives dealer designation matter?

Derivative markets have exploded over the last decade, remained active in the midst of the 2007–2009 financial crisis and continue to be dominated by a small group of bank holding companies (BHC). BHC motives for derivative usage are usually tied to hedging purposes (balance sheet risk management), trading purposes (profit motives) or some combination thereof. This paper examines the relationship between derivative trading income and bank charter value for 27 BHC between 2001Q1 and 2011Q3. We find that the impact of derivative trading income on bank charter value, using Tobin's Q, is very small and seems to be tied to BHCs derivatives dealer trading designation. We also find that trading incomes are a modest fraction of net operating revenue, highly volatile, and did not contribute to overall BHC income during the crisis.     

Accounting for Employee Stock Options: What Can We Learn from the Market's Perceptions?

The scope of this is paper is to provide new empirical evidence on the value relevance of employee stock options (ESOs) in Europe. We show, empirically, that the market participants when pricing a firm's equity place approximately the same valuation weights on the ESO‐deferred compensation expense (the so called “ESO asset”) and the compensation option liability (the so called “ESO liability”). Our empirical findings support the theoretical work of Ohlson and Penman who suggest that the deferred compensation expense be treated as a contra‐liability. The second contribution of our work rests on the nature of the ESO expense. We show that the distinction between persistent and non‐persistent ESO expenses is of critical importance for the market participants. Accordingly, an improved accounting disclosure should assist the investors in assessing the long‐term goals of the ESO plans at the firm level.