The Netherlands and the United Kingdom: a European unemployment miracle?

Unemployment rates in both the UK and the Netherlands have declined substantially since the early 1980s. This has been a decline in equilibrium unemployment, the result of combinations of supply-oriented policies. The combinations are partly overlapping and partly differing between the two countries. The main difference is in wage negotiations: where the Dutch unions were already co-operative, British unions were made to co-operate. The main overlap is in the popularity of part-time work and the re-enforcement of financial incentives for work for unemployed workers collecting benefits.     

The Taylor rules and macroeconomic fluctuation in China: 1994–2006

The correlation and controllability of money supply as the intermediate object of monetary policy is gradually weakening, the argument that interest rate substitutes the money supply for the alternative object is hotly discussed. According to the Taylor rule and its extensions, this paper has a positive analysis on the efficiency of Taylor-type rules in China through historical analysis, policy reaction function approach and co-integration technology of time series analysis. This paper draws a conclusion that Taylor rule is unstable in China, and less correlation can be found between interest rate and the output gap, and the central bank focus on the inflation target rather than economic growth. Therefore, the central bank should abide by the simple rule of inflation targeting.     

A new approach for the input–output price model

This paper proposes a new approach to measure the impact of a sector's price shock on price indices. It works based on table adjustments to trace the effects of any initial price shock through an iteration process. It has the same accuracy and all the capabilities of the popular Standard Leontief Price (SLP) model. A distinct advantage of the new approach compared with the SLP model, however, is its ability to measure the impact of the initial price shock on all value-added components if and when it is required. This capability enables researchers to use interindustry price analysis to tackle problems of a more real-world nature. Other advantages of this approach are its simple computational implementation, especially relevant for larger size interindustry tables, the unified way to deal with all kind of different price issues, and the yielding of an adjusted interindustry table reflecting all endogenous price adjustments in response to the initial price shock.     

The scientific openness decision model: “Gaming” the technological and scientific outcomes

Open innovation has been examined a great deal in the last few years in the technology management and innovation literature, but its critical aspect – scientific openness – has been debated for centuries. The purpose of this paper is to elucidate the arguments for and against scientific openness. Using concepts from game theory, we develop the Scientific Openness Decision Model linking the strategic decision for openness/secrecy and the resultant business environment. We then empirically test that model using data from 118 companies across 54 industries. Openness, measured by scientific publications, is found to be a strong predictor of both positive technological and scientific outcomes for firms. These findings are examined to determine the relative merits of a strategy of scientific openness versus secrecy, and future research possibilities are discussed.     

Improving the predictability of the oil–US stock nexus: The role of macroeconomic variables

In this study, we revisit the oil–stock nexus by accounting for the role of macroeconomic variables and testing their in-sample and out-of-sample predictive powers. We follow the approaches of Lewellen (2004) and Westerlund and Narayan (2015), which were formulated into a linear multi-predictive form by Makin et al. (2014) and Salisu et al. (2018) and a nonlinear multi-predictive model by Salisu and Isah (2018). Thereafter, we extend the multi-predictive model to account for structural breaks and asymmetries. Our analyses are conducted on aggregate and sectoral stock price indexes for the US stock market. Our proposed predictive model, which accounts for macroeconomic variables, outperforms the oil-based single-factor variant as well as the constant returns (historical average) model for both in-sample and out-of-sample forecasts. We find that it is important to account for structural breaks in our proposed predictive model, although asymmetries do not seem to improve predictability. In addition, we show that it is important to pre-test the predictors for persistence, endogeneity, and conditional heteroscedasticity, particularly when modeling with high-frequency series. Our results are robust to different forecast measures and forecast horizons and are useful for making effective hedging decisions in the US stock market.     

A grey dynamic model for the evaluation of regional sustainable development and its empirical study

Currently, traditional development issues, such as economic stagnation, as well as new challenges like environmental degradation and globalization, need attention. Sustainable development, including economic, environmental, and social elements, is a main goal of decision-makers. The key to sustainable decision-making is to evaluate and forecast the status quo of sustainable development. Policy makers need a tool based on scientific information to forecast the effects of future actions on sustainability and make policies for sustainable development. This paper analyzes the relation of the economy, environment and social welfare by the grey dynamic model. The proposed method uses time series and basic indicators of ecological system, including economic, environmental and social sub-systems. It is applied to Heilongjiang Province and Jiangsu Province. The results have proved different status quo of sustainable development in these two regions, and suggestions are proposed, such as optimization of industrial structure and eco-industrial development. The conclusion is that there is no unique sustainable path, and accordingly, policy makers should choose different criteria and strategies to make efficient sustainable decisions for each region.     

The α-MEU model: A comment

In Ghirardato et al. (2004) [7], Ghirardato, Macheroni and Marinacci propose a method for distinguishing between perceived ambiguity and the decision-maker?s reaction to it. They study a general class of preferences which they refer to as invariant biseparable. This class includes CEU and MEU. They axiomatize a subclass of α-MEU preferences. If attention is restricted to finite state spaces, we show that any α-MEU preference relation, satisfies GMM?s axioms if and only ifα=0 or 1, that is, the preferences must be either maxmin or maxmax. We show by example that these axioms may be satisfied when the state space is [0,1].     

Governments’ payment discipline: The macroeconomic impact of public payment delays and arrears

This paper considers the impact of changes in governments’ payment discipline on the private sector. We argue that increased delays in public payments can affect private sector liquidity and profits and hence ultimately economic growth. We test this prediction empirically for European Union countries using two complementary approaches. First, we use annual panel data, including a newly constructed proxy for government arrears. Using panel data techniques, including methods that allow for endogeneity, we find that payment delays and to some extent estimated arrears lead to a higher likelihood of bankruptcy, lower profits and lower economic growth. While this approach allows a broad set of variables to be included, it restricts the number of time periods. We therefore complement it with a Bayesian VAR approach on quarterly data for selected countries faced with significant payment delays. With this second approach, we also find that the likelihood of bankruptcies rises when the governments increase the average payment period.     

Housing and unemployment: The search for the “American Dream”

This paper constructs a model of search and bargaining across two different markets: the labor market and the housing market. Interestingly, the model highlights that housing prices and frictions in the housing market have a profound impact on labor market activity through the desire of workers to eventually purchase a home, the “American Dream.” In particular, higher housing prices adversely affect workers’ incentives in the labor market as employment can eventually lead to access to housing through the ability to purchase a home. Similarly, labor market frictions can impact housing market activity. Notably, tighter housing markets are associated with higher unemployment rates and less job creation. Consequently, our work suggests that policymakers should be very careful in implementing policies targeted towards housing – housing markets are likely to generate significant external effects to other sectors of the economy, especially the labor market.     

The impact of cross‐ownership on the reaction of corporate investment and financing constraints: A panel threshold model

This paper studies whether or not investment decisions are financially constrained in a cross‐ownership system of Taiwan. Different from the financial structure in the USA, subsidiaries in Taiwan are allowed to buy stocks of the parent companies. Hence, the conventional debt‐to‐equity ratio is inappropriate to divide firms into high and low‐debt firms. Instead, a new threshold variable?–?the adjusted debt–equity ratio (ADE)?–?is employed to divide the sample into high‐debt firms and low‐debt firms. A panel of 115 Taiwan‐listed firms for the period 1991–1997 is used. Evidence supports the cash flow hypothesis and ADE has a notable significant influence on the financial constraints.     

On the Market for Principles of Economics Textbooks: Innovation and Product Differentiation—A Response

E. A. Ross was fired from Stanford University in 1900 because he had angered Jane L. Stanford, the surviving cofounder of the university, for violating her alleged prohibition of faculty participation in partisan political activity. The author argues that this prohibition may never have been written and that the injustice in the firing of Ross may have been compounded by deception.     

A Guide for Submissions to the Features and Information Section—A Wealth of Opportunities

The associate editor for the Features and Information (F&I) section of the Journal of Economic Education provides an overview of articles published in this section over the last 20 years with emphasis on pieces that serve as exceptional models for potential contributions. She also offers advice on topics and stylistic approach to authors considering a submission to F&I.     

Evaluating a leading indicator: an application—the term spread

This paper analyzes the procedures that have previously been used to evaluate indicators. These methods determine whether the indicator correctly classifies periods when there was (not) a recession. These approaches do not show whether or not an indicator signaled a turn or failed to predict it. This paper then presents a new approach and applies it to the term spread series. The results are mixed because the indicator predicts every recession but also generates a large number of false signals. This result may explain why economists do not always place great weight on this series.     

Industrial invention: a supply and demand model for the UK, 1961–1989

A supply and demand model of industrial invention is presented paying particular attention to the impact of past advances on present advances in knowledge. The model is estimated using a recent span of UK data: a good fitting specification is found, which passes a battery of diagnostic tests, and possesses sensible long-run properties and an interpretable lag structure. The specific results found should be of potential interest to governments wishing to encourage the flow of inventions by fiscal means.     

Atoms,Bits, and Wits: A New Economics for the Twenty-First Century—Part II

Learning also affects the organization of economic activity as a “force locomotif” of growth. Bounded rationality opens a theory of planning horizons as an ordinal measure of wits. The realm of wits shines a novel light on the nature of interdependence, since the balance of substitution and complementarity is horizonal: longer and broader horizons shift this balance away from substitution in favor of complementarity, augmenting concerts of interest over conflicts in social relations. Atoms, bits, and wits are modeled to show why substitution only applies to short-run atoms; a case for complementarity rises from both increasing returns and bits, where wits strengthen the case for cooperation as efficient. With complementarity, competition—not collusion—stifles output. The social and institutional implications of this are addressed theoretically in this paper.     

Atoms,Bits, and Wits: A New Economics for the Twenty-First Century—Part I

Part I: Three elementary components of economics are atoms, bits, and wits. The economics of atoms is familiar to economists, in the production of physical outputs treated as substitutes in consumption. The relation of value to scarcity with atoms is that abundance reduces the worth of material goods. The realm of bits is less understood; the issues appear in network effects, where abundance augments the worth of intangibles. The economics of networks is social: conflicts of interest (substitution) are balanced with concerts of value (complementarity) in combination. But in information networks—the realm of bits—substitution cedes to complementarity and competition defers to cooperation as efficient.     

Regional growth and unemployment in the medium run: asymmetric cointegrated Okun’s Law for UK regions

This article tests for the presence of a medium-run asymmetric Okun’s Law relationship between regional output and regional unemployment rate in UK regions. The test is performed with a panel data version of the hidden cointegration technique suggested by Granger and Yoon. A novelty of the article is to combine the method of hidden cointegration with a panel data method of removing cross-sectional dependence. The medium-run Okun relationship for regions in the UK appears to confirm results found elsewhere in the literature on countries as a whole, although the coefficients tend to be smaller.