The Future of EU-Russia Energy Relations in the Context of Decarbonisation

In 2013, there was a joint commitment to “long term strategic EU-Russia energy cooperation”.¹1. EU/RF Roadmap, ‘Roadmap EU-Russia Energy Cooperation until 2050‘, European Commission and Russian Government, March 2013, p. 4, available at <https://ec.europa.eu/energy/sites/ener/files/documents/2013_03_eu_russia_roadmap_2050_signed.pdf>.View all notes Whilst centred on oil and gas, it is noted that “the importance of renewables for EU-Russia energy relations should grow too”,²2. Ibid., p. 21.View all notes and that for energy efficiency, “cooperation potential is immense and could… contribute to the objective of a Pan-European energy area”.³3. Ibid., p. 26.View all notes Given this shared objective, this article analyses EU and Russian energy decarbonisation policy objectives and considers the potential for a supplementary trade relationship based on renewable energy flows and decarbonisation-related technology, as well as the implications for existing energy trade. Despite declarative statements of mutual interest, shared objectives and cooperation in decarbonisation policy, there has been very limited cooperation by early 2016. The EU has set ambitious plans to decarbonise its economy and energy sector by 2050. However, in Russia energy policy is dominated by hydrocarbon exports, decarbonisation targets are modest, and there are major problems with their implementation. The drivers of EU and Russian energy policies are evaluated, and the argument advanced is that different understandings of energy security and types of energy governance provide major obstacles to decarbonisation cooperation and trade. However, it is argued that ideas about energy policy and security are contested and subject to change and there exists significant potential for mutual gain and cooperation in the longer term.     

The CBI Industrial Trends Survey — A Statistical Note

As the high tariff barriers of the inter-war period have been gradually reduced over the past twenty years, non-tariff factors have taken on an increasingly important role. One of the more notable of these factors is a country's level of excise taxes. Since these taxes are applied to both imports and domestic production, it is obvious that a given percentage change in excise taxes will have a smaller influence on trade than an equal percentage change in tariffs. Nevertheless, excise takes can be used to some extend as a substitution for tariffs. Hence, it would seem desirable to determine the degree to which such substitution will affect the volume of imports.

The role of taxes and tariffs in trade models has been considered in a number of theoretical discussions. ^{1 1} The effects of commodity taxes on the terms of trade and on domestic welfare have been analysed by MUNDELL, (1960), and by FRIEDLAENDER and VANDENDORPE (1968). However, virtually no effort has been made to examine the relationships among excise taxes, tariffs and imports in order to determine the extent to which countries can use excise taxes as a device to counterbalance the movement toward freer trade through the aegis of G.A.T.T. This study will attempt to rectify this omission.     

Escaping the Resource Curse

According to the World Tourism Organisation (UNWTO), tourism is ‘number one in the international services trade’, accounting for 40 per cent of global trade in services and 6 per cent of total world trade.1 1. ‘Tourism – The Path Ahead’, UNWTO NEWS Year XX, Issue 3 (2006), http://www.unwto.org/newsroom/magazine/archives/news3_06_e.pdf (accessed 30 May 2007), p. 6. The tourism industry directly provides around 3 per cent of global employment, or 192 million jobs – the equivalent to one in every twelve jobs in the formal sector. The International Labour Organization (ILO) predicts that this share is likely to rise to 251.6 million jobs by 2010, or one in every eleven formal sector jobs.2 2. International Labour Organization, ‘Human Resources Development, Employment and Globalization in the Hotel, Catering and Tourism Sector’, report for discussion at the Tripartite Meeting on the Human Resources Development, Employment and Globalization in the Hotel, Catering and Tourism Sector, Geneva 2001, http://www.ilo.org/public/english/dialogue/sector/techmeet/tmhct01/tmhct-r.pdf (accessed 30 May 2007). Tourism also has an indirect impact beyond employment through tourism-related goods and services, air travel and global consumption patterns. The relevance of tourism for global political economy can no longer be ignored by analysts wishing to account for changing global patterns in poverty and inequality. Despite this, with a handful of exceptions, tourism as a significant feature of contemporary global political economy has thus far attracted little attention in the field of international political economy (IPE).3 3. See Stephen Britton, ‘The Political Economy of Tourism in the Third World’, Annals of Tourism Research, Vol. 9, No. 3 (1982), pp. 331–358; Michael Clancy, ‘Tourism and Development: Evidence from Mexico’, Annals of Tourism Research, Vol. 26, No. 1 (1999), pp. 1–20; William I. Robinson, ‘Globalisation as a Macro-Structural–Historical Framework of Analysis: The Case of Central America’, New Political Economy, Vol. 7, No. 2 (2002), pp. 221–50; Mariama Williams, ‘The Political Economy of Tourism Liberalisation, Gender and the GATS’, International Gender and Trade Network Economic Literacy Series, #4, April 2002, http://www.igtn.org/pdfs/30_TourismGATS.pdf (accessed 30 May 2007). Achieving United Nations (UN) specialised agency status in November 2003, UNWTO is the only international institution existing solely to promote the spread of the tourism industry across the globe.4 4. Address by Francesco Frangialli, Secretary-General of UNWTO, to the fifty-eighth Session of the United Nations General Assembly', New York, 7 November 2003, http://www.unwto.org/newsroom/speeches/2003/disc_sg_ag_nu_7nov03_A4.pdf (accessed 30 May 2007). Its role can be understood in a number of ways: as a campaigning organisation for the tourism industry; as a donor for tourism development projects; and as the primary source of research and statistics on global tourism.

As a result of the macroeconomic developmental benefits to be gained from the tourism industry – including employment and foreign exchange generation – a growing number of countries are generating ‘national tourism development plans’, in which tourism is seen as the foundation of a country's development.5 5. This essay draws on the author's extensive interviews with tourism development policy makers, tourism workers, private-sector representatives and civil servants in Central America. Playing a consultancy role in such strategies, UNWTO needs to be taken seriously not merely as an industry-specific UN agency, but as an organisation with the ability to influence national and international development policy, albeit within the confines of the dominant development paradigm. This essay introduces the UNWTO by analysing the emergence, structure and scope of the organisation. A review of the organisation's activities identifies two key aims that guide the institution: tourism as a tool for poverty reduction and development, and the further liberalisation of the tourism services sector. ‘Tourism development’ as framed by UNWTO is presented as a problematic process, because of the potential conflict between poverty reduction and liberalisation of the tourism industry.     

Measurement of hospital case-mix: A note on alternative patient classifications

There is a general and growing displeasure with the commonly used methods by which hospital output is measured, and, therefore, with the methods for measuring hospital costs. ^{1 1}Discussions of output measurement problems may be found in REDER (1965), BERRY (1967), SOMERS and SOMERS (1967), LAVE and LAVE (1971), NEWHOUSE (1970), RAFFERTY (1971), and LEE and WALLACE (1971), among others. This disaffection springs largely from the questionable assumption of homogeneity that is implied when output is measured in the traditional units (number of patients or patient-days of care), for it is increasingly evident that output is not homogeneous in this respect. ^{2 2}For example, Lave and Lave have shown that hospitals do differ in the mix of the case-types which they treat (1971), and I have shown previously that case-type proportions vary in the short-run within the individual hospital system (1971 and 1972). Thus, attention is turning increasingly toward the measurement and analysis of case-mix behaviour, since these variations in the patient census reflect variations in output mix itself.

This study is limited to just one of the problems which arise in connection with any case-mix analysis, the problem of how to specify the case-types. Case-types may be identified by means of a few very broad categories or on the basis of the several thousand specific diagnoses, but there exists some trade-off between the degree of specificity and the ease of obtaining and handling the requisite empirical data. In the hope of facilitating future research efforts in this area, this paper examines several alternative methods of specifying the case-types, for the limited purpose of identifying differences among them in their sensitivity to case-mix variations.     

What factors inspire the high entry flow in Taiwan's manufacturing industries–A count entry model approach

Why is the entry flow of the manufacturing sector extremely high in Taiwan, and does it contribute to the prevailing entrepreneurship? This article aims to explore what factors inspire potential entrants to go into an industry. Based on a theoretical formulation of the Poisson probability entry model, a count data model is employed to investigate the determinants of entry flows. The empirical results reveal that traditional entry barriers indeed lower the entry flow. The entry incentives, including price cost margin and industry growth, play a lesser role at attracting new firms, while alternatively the market size acts as a better proxy of an entry incentive in explaining entry flows. Incumbents’ responses to entry, R&;D and advertising intensity are found to be associated with a significant negative impact on entry flows. This article also finds that there is a higher bound of covariate of entry, about 10%, that can be attributed to the immeasurable personality of entrepreneurs–entrepreneurship.

Rather be the chicken's beak than be the cow's behind. 1 ¹?This proverb explains in terms the concept of choosing jobs as how one would like to be a leader of a small firm rather than an employee in a large enterprise.

The trade that might cause life hazard will be dealt, while the trade that might cause a loss will not be dealt.

Two traditional Chinese proverbs     

A Model of U.K. Exports of Manufactures to Industrial Countries

THIS paper describes a model of U.K. exports of manufactures to industrial countries. The model is outlined in the first section and estimated in the succeeding section. The next section compares the relative efficiencies of aggregate and micro-relations. The paper ends with a discussion of a partially reduced form of the model.

Industrial countries are defined as 1967 OECD members (excluding Iceland); ¹ 1. That is: Canada, U.S.A., Austria, Belgium-Luxembourg, Denmark, France, Germany, Greece, Ireland, Italy, Japan. Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, and the U.K. This definition thus includes some countries often classified as ‘semi-industrial’. these countries accounted for 50 per cent of world imports of manufactures and 70 per cent of total world imports and took about 56 per cent of U.K. total exports of manufactures, in 1967. Manufactured goods are defined as SITC Sections 5–8 inclusive. Quarterly data from 1956 to mid-1968 are used. All trade and price series are expressed at 1963 U.S. dollar prices, and activity indicators are also expressed in real terms. This was because it was thought that the structural parameters of the model could be better estimated using volume rather than value flows. Also the full London Business School macro-economic model measures national income as the sum of expenditures corresponding to output produced at home at 1963 prices. So, in forecasting G.D.P., estimates are needed of U.K. exports at 1963 prices. Conversion to current price forecasts, for balance of payments purposes, is made using an explanatory relationship for U.K. export prices of manufactures. Conversion into sterling terms from dollar values is straightforward, after allowing for the sterling devaluation of November, 1967.

The present model is only a partial version of a larger system explaining individual trade flows between countries; it is concerned only with indiliidual relations for British exports by markets and with total import flows for the other industrial countries.     

An analysis of growth competitiveness

The publication of the Global Competitiveness Report 2005‐2006 by the World Economic Forum (WEF) (2005 World Economic Forum. 2005. The global competitiveness report, 2005–2006, Hampshire: Palgrave MacMillan.  [Google Scholar]) has focused attention once more upon the relative abilities of many countries to compete in world markets. This article provides an analysis and evaluation of the approach taken by the WEF in constructing its measure of international growth competitiveness, the Growth Competitiveness Index (GCI) which is used to rank countries. In particular, the study identifies three areas where the GCI is vulnerable to criticism. First, the treatment of outliers for hard data items is ambiguous and we identify alternative methods for dealing with outliers that are justifiable or even superior. Second, the crucial role of the variable utility patents in the calculation of the GCI is questioned and serious doubts concerning the use of this variable are raised. Third, the article suggests an alternative approach, based upon structural equation modeling, which should be used for the determination of weights in the index calculation process, rather than the arbitrary method adopted by the WEF.     

The extensive and intensive margins of Spanish trade

Recent empirical research highlights that differences in trade flows across countries, products and years are governed by two margins: the intensive margin and the extensive margin. The analysis of the relative contribution of each margin is very important to determine which policies can be more efficient to foster trade at the aggregate, geographic, product or firm level. We use the whole universe of firm level transaction data to analyse the relative contribution of these margins to changes in Spanish trade flows during the 1997–2007 period. We first apply the methodology proposed by Bernard et al. (2009 Bernard, A.B., Jensen, J.B., Redding, S.J. and Schott, P.K. 2009. The margins of US trade. American Economic Review: Papers & Proceedings, 99(2): 487–93. [Crossref], [Web of Science ®] [Google Scholar]) to decompose trade variation over time into three components: net entry of firms, product-country switching and value growth by regular trading firms. The first two components correspond to the extensive margin and the last one refers to the intensive margin. We find that short-run changes in exports and imports are governed by firms’ intensive margin; however, in the long-run, both the extensive and the intensive margins are equally important to foster trade. We also examine the importance of the trade margins at the cross-sectional level for the year 2007. We find that large differences in the Spanish trade flows across countries and products, especially in the case of exports, are explained by the number of firms that participate in trade, which is consistent with the fact that the number of trading partners decline significantly with distance.     

The Contractionary Short‐Run Effects of Nominal Devaluation in Developing Countries: Some Neglected Nuances

This article extends the model developed by Krugman and Taylor (1978 Krugman, P. and Taylor, L. 1978. Contractionary effects of devaluation. Journal of International Economics, : 445–56. [Crossref], [Web of Science ®] [Google Scholar]) to take into account interesting features of the evolving structure of global trade. The growing presence of transnational production chains and differential pricing behaviour of exports destined for industrial and developing countries are accommodated. Individual country and panel data pass‐through estimates derived from several econometric approaches are provided to justify the latter extension. The likelihood of contractionary short‐run effects of devaluations is shown to be positively related to: 1) the proportion of a country’s exports destined for other developing countries; and 2) the presence of transnational corporations (TNCs) in either the export or home goods‐producing sector. Unlike the Krugman‐Taylor case, devaluation will generally have a contractionary impact even if: 1) trade is initially balanced; 2) consumption behaviour does not differ between wage and profit earners; and 3) the government sector has a high marginal propensity to consume in the short run. The resulting policy implications underline the need to take into account these increasingly important nuances of international trade while designing exchange rate policies for developing countries.     

How different are the production functions of the European manufacturing sectors? New empirical evidence

The neo-classical model of international trade assumes that the Total Factor Productivity (TFP) of a sector is common across countries, that returns to scale are constant and that the sectoral production of the countries differs by virtue of the factor endowments. In this article, we consider whether the differences in production can also be explained by the economies of scale in the national industries and by the technological differences across countries. To test this hypothesis, we estimate three models proposed in Harrigan (1999 Harrigan, J. 1999. Estimation of cross-country differences in industry production functions. Journal of International Economics, 47: 267–93.  [Google Scholar]) with data for eight European Union (EU) Member States covering the period 1978 to 1992 and analyse how the TFP changes from country to country.     

Unionization and absenteeism

Until recently any labour economist doing empirical work on unionization was concerned almost exclusively with the effect of unionization on wages. But beginning with Freeman's 1976 analysis of the rich institutional structure of unions, economists have been considering the role of unions in, for example, increasing productivity, lowering quit rates, enhancing fringe benefits, reducing income inequality, improving working conditions, and affecting a variety of other attributes at the workplace. ^{1 1}It is not the purpose of this paper to provide an exhaustive bibliography on the ‘new view’ of unionization. Nevertheless, the interested reader may want to see Freeman (1976, 1978, 1980) and Brown and Medoff (1978). To date, however, no study has directly addressed a question that appears ripe for empirical analysis: Does unionization affect absenteeism?

This paper presents results from a study designed to answer that question. The first section presents a simple model of absenteeism. The second section discusses the five mechanisms through which unionization influences absenteeism. The third section describes the data and variable selection. Results from logit regressions are presented in the fourth section and the paper closes with a summary of the arguments and evidence.     

Trade-induced Industrialization and Economic Growth

Based on a modified Heckscher-Ohlin model of Deardorff and Park (2010 Deardorff, A. and Park, J.-H. 2010. A story of trade-induced industrialization. International Economic Journal, 24: 283–296. [Taylor & Francis Online] , [Google Scholar]), this paper develops a dynamic model of trade-induced industrialization and economic growth. It shows that a developing country may grow out of its autarky steady state with no industrialization into a new steady state with full industrialization by opening to trade with a large industrialized country, exporting the labor-intensive intermediate input in exchange for the capital-intensive intermediate input for the modern good. Even when the developing country is on its path toward complete industrialization under autarky, free trade may induce it to grow faster with its return to capital being raised and sustained at a level that is higher than its autarky level during its industrialization process. Once it completes its industrialization process by having all of its resources in the modern sector, then diminishing returns to capital come back to accompany further capital accumulation, slowing down the growth of the economy. This trade-induced industrialization and economic growth, having an expansion of international trade both in its absolute value and in its ratio to the size of the developing country, correspond well with the dynamic profiles of East Asian Miracle countries’ economic growth based on their export-oriented industrialization strategy.     

Economies of scale in school operation–a reply

In addition to pointing out that Kumar (1983) omits Hough (1981) and Knight (1983) from its list of reference, Hough (1983) raises two issues of largely statistical nature. ^{1 1} Omissions are clearly inadvertant. The time lag between publication and the general availability makes ther reference list look more subjective than it actually is. These are:

1. the use of an average (AC) rather than a total (TC) cost curve as the correct statistical device for examining economies of scale, and

2. estimation problems arising from possible heteroscedasticity of the error term in the estimating relation.

Exactly the same issues are also raised in Hough (1981). Notwithstanding our earlier disclaimer (p. 324) that ‘no new grounds are broken on the methodological front’ as well as a clear mention of both problems (Footnotes 1 and 2), Hough is quite correct that the implications of these issues for our results were not spelled out. We take this opportunity to offer some clarifications with respect to the results in Kumar (1983).     

Computers And Growth

The purpose of this paper is to describe the impact of investment in computers on the growth of the U.S. economy. The economic literature on computers is relatively rich in information on the decline in computer prices and the growth of computer investment. Constant quality price indices for computers have been included in the U.S. National Income and Product Accounts (NIPA) since 1986. These indices employ state of the art methodology to capture the rapid evolution of computer technology.

While the annual inflation rate for overall investment has been 3.66 percent for the period 1958 to 1992, computer prices have declined by 19.13 percent per year! Similarly, overall investment grew at 3.82 percent, while investment in computers increased at an astounding 44.34 percent! These familiar facts describe growth in the output of computers. The objective of this paper is to complete the picture by analyzing the growth of computer services as inputs.

In a pioneering paper Bresnahan (1986) has focused on pecuniary externalities arising from the rapid decline in computer prices. Griliches (1992, 1994) has emphasized the distinction between pecuniary and nonpecuniary externalities in the impact of computer investment on growth. This paper is limited to pecuniary externalities or the impact of reductions in computer prices on the substitution of computer services for other inputs. As Griliches (1992) points out, this is an essential first step in identifying nonpecuniary externalities or ‘spill-overs’ through the impact of a decline in computer prices on productivity growth. ^{* *}Brynjolfsson (1993) has proveded a detailed survey of studies of nonpecuniary externalities or ‘spill overs’. Recent studies include those of Brynjolfsson and Hitt (1994a, 1994b) and Lichtenberg (1993).

In two important papers Stephen D. Oliner (1993, 1994) has introduced a model of computer technology that greatly facilitates the measurement of computer services as inputs. In this paper we estimate computer stocks and flows of computer services for all forms of computer investment included in NIPA. We construct estimates of computer services parallel to NIPA data on computer investment by combining these data with information on computer inventories. For example, the International Data Corporation (IDC) Census of Computer Processors includes an annual inventory of processors in the U.S.

In Section 1 we present data on investment in computers and constant quality price indices from NIPA. These data incorporate important innovations in modeling computer technology stemming from a joint study by IBM and the Bureau of Economic Analysis (BEA) completed in 1985. This study utilized a ‘hedonic’ methodology for constructing an econometric model of computer prices that accurately reflects rapid changes in computer technology. This methodology generates an index of computer prices that holds the quality of computers constant.

In Section 2 we present the model of computer services originated by Oliner (1993,1994). This differs in important respects from the model of capital services used in the previous studies of U.S. economic growth surveyed by Jorgenson (1989,1990). The model employed in previous studies is based on the decline in productive capacity with the chronological age of a capital good. Oliner assumes that computers maintain their productive capacity until they are retired. Decline in productive capacity occurs only through removal of used computers from the inventory through retirement.

In Section 3 we construct estimates of stocks of computers that incorporate IDC data on computer inventories and derive the implied flow of computer services. While output of computer investments has grown very rapidly, the input of computer services has grown even faster. The price of these services has declined at 23.22 percent per year over the period 1958 to 1992, while the input of these services has grown at 52.82 percent! This is prima facie evidence of an important role for computer price declines as a source of pecuniary externalities.

In Section 4 we combine computer services with the services of other types of capital to produce a measure of capital input into the U.S. economy. We link this with labor input to obtain the contributions of both inputs to U.S. economic growth, arriving at the growth of productivity as a residual. We find that the contribution of computer services to input into the U.S. economy is far more important than the contribution of computer investments to output. This is a significant step toward resolution of the Solow paradox: ‘We see computers everywhere except in the productivity statistics. ^{* *}Robert M. Solow, quoted by Brynjolfsson (1993). Declines in computer prices generate very sizable pecuniary externalities through the substitution of computer services for other inputs. By contrast Solow focuses on nonpecuniary externalities that would appear as productivity growth.

In Section 5 we conclude that information on inventories of computers is critical in quantifying the role of computer services as inputs. The constant quality price indices for computers incorporated into NIPA are also essential. A price index for computers that reflects only general trends in inflation would result in a highly distorted perspective on the growth of GDP and capital services, especially during the past decade. To capture the contribution of all forms of investment to U.S. economic growth, similar price indices should be included in NIPA for capital goods with rapidly evolving technologies, as proposed by Gordon (1990).

The long term goal should be a unified system of income. product, and wealth accounts, like that proposed by Laurits Christensen and Jorgenson (1973) and Jorgenson (1980). This incorporates capital stocks, capital services, and their prices. Achieving this goal will necessitate much greater elaboration of the accounting system described in Section 3. These accounts would incorporate data on prices and quantities of investment, stocks of assets, and capital services for all forms of capital employed in the U.S. economy.     

International trade,technological shocks and spillovers in the labour market: a GVAR analysis of the US manufacturing sector

We empirically analyse the response of labour market related variables in the US manufacturing sector to various shocks, notably to trade openness and technology, as well as examining spillovers from industry-specific labour market shocks. The econometric approach involves an application of the recently developed Global Vector Autoregression methodology of Dées et al. (2007 Helbling, T, Jaumotte, F and Sommer, M. 2006. How has globalization affected inflation?. IMF World Economic Outlook, April: 97–134.  [Google Scholar]) to 12 manufacturing industries over the period 1977–2003. The framework allows us to analyse the response of a standard set of labour-market related variables (employment, real compensation, productivity and capital stock) to exogenous factors (a sector-specific measure of trade openness, a common technology and oil price shock), along with industry spillovers using specific measures of manufacturing-wide variables for each sector. Generalized impulse responses indicate that increased trade openness negatively affects real compensation, has negligible employment effects and leads to higher labour productivity. These impacts, however, are relatively weaker than those induced by technology shocks, with the latter positively and significantly affecting both real compensation and employment. There is also evidence of positive spillovers across industries from sector-specific employment and productivity shocks. Impact elasticities suggest strong intra-sectoral linkages for employment and capital stock formation, contrasting with weak linkages for what concerns real compensation and productivity.     

The Geopolitics of the Eastern Border of the European Union: The Case of Romania-Moldova-Ukraine

Since the fall of the communist regimes, we have been witnessing in Europe two phenomena that dominate the geopolitical scene: on the one hand there is integration, with the advance of the borders of the European Union (EU) towards the east through its two enlargements, and on the other hand there is disintegration, as expressed by social crisis, and latent tensions and conflicts in the countries found beyond the said border. This article focuses on the geopolitical changes that came about on the eastern border of Europe (Romania-Moldova-Ukraine) and the border relations between these three countries after the fall of the Soviet Union, and the integration of Romania into the EU. This is both a multidimensional and ethno-territorial border, associated with tensions and conflict. ¹ 1. D. Newman, ‘Conflict at the Interface: The Impact of Boundaries and Borders on Contemporary Ethno-National Conflict’, in C. Flint (ed.), Geographies of War and Conflict (Oxford: Oxford University Press 2004) pp. 321–345; G. Blake, ‘State Limits in the Early 21st Century: Observations on Form and Function’, Geopolitics 5/1 (2000) pp. 1–18; S. Ratner, ‘Drawing a Better Line: Uti Possidetis and the Borders of New States’, American Journal of International Law 90/4 (1996) pp. 590–624; S. Waterman, ‘Boundaries and the Changing World Political Order’, in Clive Schofield (ed.), World Boundaries, Vol. I, Global Boundaries (London: Routledge, 1994). Using the territorial dialectic of the globalisation argument, we are able to analyse, describe and interpret from a theoretical-empirical standpoint, the two current discussions about that border: opening by means of cooperation, or closing by means of control and security.     

Social responsibility for living standards: Presidential address,association for social economics, 2007

This address presents a vision of economics—drawing upon social, institutional, and feminist economics—that supports the assertion that there should be social responsibility for living standards. Alternative definitions of what an economy is and what economics should study are related to three definitions of living standards presented in Amartya Sen's 1985 Tanner Lectures on the topic. A social provisioning approach to economic life emphasizes that provisioning needs to be organized to promote human flourishing. One contemporary challenge is to do this in a manner that sustains caring and promotes gender equity. 1 1 Following my Presidential Address and prior to publication, I have benefited from comments by Wilfred Dolfsma, Laurie Nisonoff, Nancy Folbre, Ellen Mutari, Martha Starr, and an anonymous reviewer.      

The real exchange rate and economic growth: are developing countries different?

Recent research has found a positive relationship between real exchange rate (RER) undervaluation and economic growth. Different rationales for this association have been offered, but they all imply that the mechanisms involved should be stronger in developing countries. Rodrik (2008 Rodrik, D. 2008. The real exchange rate and economic growth. Brookings Papers on Economic Activity, 2: 365–412.  [Google Scholar]) explicitly analyzed and found evidence that the RER–growth relationship is more prevalent in developing countries. We show that his finding is sensitive to the criterion used to divide the sample between developed and developing countries. Using alternative classification criteria and empirical strategies to evaluate the existence of asymmetries between groups of countries, we find that the effect of currency undervaluation on growth is indeed larger and more robust for developing economies. However, the relationship between RER undervaluation and per capita GDP is non-monotonic, and is limited largely to the least developed and richest countries. This discontinuity constitutes a puzzle that calls for closer analysis.     

Divorce as a risky prospect

In 1910, the divorce rate per 1000 members of the US population stood at 0.9. ^{1 1}Histroical divorce rates can be found in the Statistical Abstract for the US (1981). . This rate showed a slow upward trend for the next 50 years, and by 1960 had more than doubled to 2.2. It took only 20 years for the rate to more than double again so that by 1980, the rate was 5.3. For the last 20 years, the marriage rate, by contrast, has experienced mild fluctuations between 10.0 and 11.0 per 1000 in the population with no discernible trend. If the same pattern for both rates holds until the year 2000, the annual number of divorces will exceed the annual number of marriages.

Although sociologists have researched divorce extensively, only a few economic studies exist. This is unfortunate since divorce is likely to have considerable impact on economic vaiables such as hours of work, labour force participation, human capital accumulation, work performance and earnings. ^{2 2}For a recent study of hours at work and labour supply, see Green and Quester (1982); for studies on earnings and work performance, see Santos (1975) or Hoffman and Holmes (1976). King (1982) argues that couples anticipating divorce will individually invest more heavily in human capital since the costs of any current investment are at least partially absorbed by the spouse. Without denying the influences of peer groups, social norms and role models, it seems reasonable to suggest that pecuniary considerations may also help to explain divorce.

A search through the economics literature uncovered only two studies of the determinants as opposed to the implications of divorce: one by Orcutt, Caldwell and Wertheimer (1976) and another by Becker, Landes and Michael (BLM) (1977). The study by BLM is by far the most widely cited of the two. The authors of both studies argue that the current state of marriage is the primary determinant of divorce. BLM, for example, assert that ‘the probability of divorce is smaller the greater the expected gain from marriage, and the smaller the variance of the distribution of unanticipated gains from marriage’. BLM, in other words, view marriage as a risky investment with a distribution of returns. The alternative is divorce which, by implication in BLM, involves a certain return.

The first contribution of this study is to draw the implications for an alternative view in which the investment in marraige is certain, but the investment in divorce is risky.

The second contribution lies in presenting formal expected utility-maximizing models of an individual and/or a couple contemplating divorce which can be tested empirically. The thrid contribution is the method developed to test the predictions of the models.

The paper of follows a simple format. Section I presents the models. Section II provides an explanation of the data used in the empirical tests. Methodology and results are presented in sections III and IV. Caveats are observed in section V. The final section closed with a summary of the arguments and evidence.