Has the Internet Eliminated Regional Price Differences? Evidence from the Used Car Market

We study the effects of the Internet on regional price differences. Comparing two Dutch regions, we find that before the rise of the Internet, price differences of used cars between those regions amounted to some 11–15%, controlling for mileage, age, fuel type and engine volume. These price differences have completely disappeared after the rise of the Internet, in particular a website that allows consumers to make detailed comparisons between almost all used cars for sale in the Netherlands.     

How Sensitive is the Demand for Primary Education to Changes in Economic Factors?

During the recession in the 1970s and 1980s in less-developedcountries in general and in Zambia in specific, private costsof schooling increased and school quality deteriorated. Combinedwith poverty, these changes may have damaged the demand forprimary education. This observation motivated a study of therelationship between economic variables and the demand for primaryeducation. A binary choice model for the school enrolment decisionis estimated, and the relevance of economic incentives concerningthe decision to enrol in school is tested directly. Economicincentives to enrol in school are reflected in household income,educational expenses and quality indicators, and the resultsshow that they all affect school enrolment as expected, eventhough the magnitudes of the effects are relatively moderate.     

Has Trade Become More Responsive to Income? Assessing the Evidence for US Imports

This study tests the stability of a standard equation for aggregate US imports over the period 1975–2011. It finds evidence of significant parameter instability, though its dating varies with the equation specification and diagnostic. Nonetheless, the analysis finds a significant rise in the long-run income elasticity that is robust across most break dates and specifications. The increase in the long-run income elasticity is consistent with shifts in the composition of aggregate imports toward capital and consumer goods. There is further evidence that vertical specialization may be behind both the structural instability and the apparent rise in the income elasticity of aggregate US imports.     

Does Chinese Environmental Policy Affect Income Inequality? Evidence from the Central Environmental Protection Inspection

This paper investigates the effect of environmental policy on income inequality. It focuses on the central environmental protection inspection led by the central government in China. Using a difference-in-differences approach, it finds evidence that environmental regulation decreased the per capita income and enlarged the gap between urban and rural income while showing an insignificant effect on employment. Although the policy can reduce pollution levels and bring environmental benefits in aggregate, the findings of this study suggest that the regulations appear to have reduced the proportion of manufacturing industry and hindered general innovation and investment from entrepreneurs, which resulted in greater inequality. Rural residents suffered more from environmental regulation due to relatively high migration costs and their disadvantaged human resources on the aspects of health, education level, and skills. The local government's execution incentive can also play a key role in the effectiveness of environmental policy. Regions with lower GDP growth targets and younger government leaders were affected significantly with regard to the income growth of local residents and the urban–rural income gap.     

Is Real Earnings Smoothing Harmful? Evidence from Firm‐Specific Stock Price Crash Risk

This study examines whether and when real earnings smoothing influences firm‐specific stock price crash risk. Using a sample of U.S. public firms for the years 1993 through 2014, we find real earnings smoothing to be positively associated with firm‐specific stock price crash risk. This finding is consistent with the view that real earnings smoothing helps managers withhold bad news, keep poor‐performing projects, conceal resource diversion, and engage in ineffective risk management, which increases crash risk. Further, we find a stronger relation between crash risk and real earnings smoothing when firm uncertainty is higher, product market competition is lower, and balance sheet constraint is higher. Overall, our study suggests that real earnings smoothing destroys shareholder value in that it increases stock price crash risk.     

When is the Price Cost Margin a Safe Way to Measure Changes in Competition?

The price cost margin (PCM) is a popular way to measure competition. Although we know that this measure is not without problems, we actually do not know how often and under which conditions a change in PCM points in the wrong direction. We use a new competition measure, the profit elasticity, which is more robust than PCM. Our empirical analysis based on Dutch data shows that when competition changes the probability that PCM points in the wrong direction increases with industry concentration.     

Should the Law of One Price be Pushed Away? Evidence from International Commodity Markets

The long-term validity of the law-of-one-price hypothesis is explored empirically in international markets for individual commodities. The data consist of 10 commodity groups: lead, maize, newsprint, rice, rubber, sugar, tin, wheat, wool, and zinc. The results provide broad support for the hypothesis: out of the 17 bivariate relationships investigated, the hypothesis is supported in 14 cases. The results also imply that two thirds of the deviations from the law are eliminated within one year, on average. Thus, at the commodity level, the adjustment speeds are found to be considerably faster than what has been found previously for aggregate price indices.     

Who responds to changes to the federal adoption tax credit? Evidence from Florida

The federal adoption tax credit (ATC) can help offset the cost of adoption, yet it is unclear whether it has a positive impact on the number of adoptions or if it merely transfers resources to households who would have adopted anyway. The ATC has primarily been a nonrefundable tax credit, but in 2010 and 2011 the full amount (over $13,000) was available as a refundable tax credit, representing a substantial increase in the benefit to lower- and middle-income families—those with typically low tax liability. Using county-level data from Florida, we estimate an increase of 265 additional public adoptions over what would be expected at the end of 2011. Relative decreases in adoptions in the first months of 2012 suggest that much of this increase is due to retiming rather than new adoptions. The response appears to be concentrated in lower- and middle-income households living in higher-income, more populated areas.     

Is there an environmental benefit to being an exporter? Evidence from firm-level data

One concern over globalisation is its impact on the environment. We analyse the consequences of becoming an exporter on a firm??s energy consumption. We show theoretically and empirically with firm-level data that the increase in energy use when exporting is negatively correlated with energy intensity. This is because, although energy use rises with exporting due to greater production and transportation, it can be offset by adopting more energy-efficient technology. This second effect is strongest for high energy intensity firms. As such, analysis of average effects, as in other studies, conceals important connections between the trade and the environment.     

Authoritarian Legacies in Post–New Order Indonesia: Evidence from a New Dataset

Democratisation has fundamentally changed the formal institutional structure of Indonesian politics, but a wealth of contemporary research has demonstrated that the informal mechanisms of power and influence have survived the transition. This article uses a unique, hand-collected dataset of information on Indonesian public figures to empirically catalogue the changes and continuities in Indonesian politics since democratisation. Our results provide quantitative evidence of a substantial shift in Indonesia’s political economy over the last decade and a half: the simultaneous rise of the private sector and decline of the military and the state as avenues to political influence at the national level. Our evidence also suggests that the origins of this shift pre-date democratisation itself.     

Is downsizing a good strategy during the downturn? Evidence from Taiwanese manufacturing firms

In response to a crisis, while retrenchments are considered to be an important part of a firm’s long-term recovery, research has indicated that downsizing strategies, reducing employment and shrinking the R&D budget, may lead to an erosion of a firm’s valuable core competence. Drawing from the literature of organizational turnaround strategies, this study advances the downsizing research by explaining how downsizing strategies affect a firm’s long-term performance. Using a uniquely compiled dataset of 2559 Taiwanese manufacturing firms, our research shows that increasing labor employment during a financial crisis can significantly improve a firm’s long-term total factor productivity and sales. In other words, employment downsizing may not be the best solution when encountering an economic downturn.     

When Is the Client King? Evidence from Affiliated-Analyst Recommendations in China's Split-Share Reform

China's split-share reform of 2005 (the Reform) converts the previously restricted shares held by founding shareholders to shares tradable on the open market. Against this backdrop, we study how underwriter-affiliated analysts and firms' large shareholders interact in the event of the latter's sales of restricted shares. We document that recommendations made by affiliated analysts are significantly more optimistic when firms' large shareholders plan to sell their restricted shares. This optimism, however, is associated with negative post-sale stock returns, suggesting large shareholders profit from share sales. Furthermore, large shareholders sell more restricted shares through the affiliated brokerages for which analysts have issued more optimistic recommendations and firms under their control are more likely to appoint such brokerages as lead underwriters when they refinance in the future. The affiliated analysts also conduct more site visits to the firms after the share sales, thereby improving their earnings-forecast accuracy. Our analysis shows how conflicts of interest by financial intermediaries arise following the Reform and lead to large shareholders' extraction of rents from public investors.     

Are immigrants really attracted to the welfare state? Evidence from OECD countries

This paper examines the impact of fiscal policies on both the size and educational levels of immigrants in destination countries. We find that whether or not a country’s policies are attracting highly educated immigrants goes beyond the issue of the “welfare state”. Immigrants are making important distinctions between the different benefits provided by a receiving country’s government. Health and education spending are found to have a positive impact on the education levels of immigrants while the reverse is true for unemployment and retirement benefits. Welfare programs are found to be insignificant once other government programs/taxes and other factors are taken into account. These results imply that countries should be less concerned about whether they are a “big government” with regards to attracting immigrants, and more concerned with what types of benefits they offer.