DOES SIZE MATTER? THE IMPACT OF CHANGES IN HOUSEHOLD STRUCTURE ON INCOME DISTRIBUTION IN GERMANY

Income inequality in Germany has been continually increasing during the past 20 years. One cause of this development, among others, could be structural shifts in household formation due to long‐term societal trends. These affect per capita incomes, which has repercussions for the income distribution even if wages remain constant. The aim of this paper is to quantify the proportion of changing household structures in the increase in inequality. We find that the growth of the income gap in Germany (for both East and West from 1991 to 2007) is indeed strongly related to changes in household structure and employment behavior, and a large part of this increase is compensated by the welfare state.     

DOES ADVERTISING MATTER? ESTIMATING THE IMPACT OF CIGARETTE ADVERTISING ON SMOKING AMONG YOUTH IN DEVELOPING COUNTRIES

The goal of this paper is to evaluate the impact of cigarette advertising on smoking among youth in developing countries. Using micro‐level data from 19 developing countries, we examine the structural relationship between smoking behavior and advertising exposure and the reduced‐form relationship between smoking and advertising bans. Instrumental variables are used to address the endogeneity of advertising exposure. Country‐specific unobserved heterogeneity is further reduced by controlling for measures of antismoking sentiment and cigarette prices. After accounting for the endogeneity of advertising, we find that the positive correlation between smoking and advertising exposure in our sample can be largely explained by the disproportionately higher propensity of smokers to observe advertising rather than a direct causal effect of advertising on smoking. (JEL I12, I18)     

WHAT DO CITIZENS THINK ABOUT PUBLIC ENTERPRISES? SUBJECTIVE SURVEY DATA ON THE LEGITIMACY OF THE ECONOMIC ACTIVITIES OF THE GERMAN PUBLIC SECTOR

We analyse the legitimacy of public enterprises that perform economic activities by focusing on the citizens’ subjective preferences, i.e. determining their political legitimacy. Using data from a representative survey conducted among 318 citizens of the German state of Rhineland‐Palatine, we explore determinants for the support of either privatisation efforts or the instrumental thesis, a widespread principle in German‐speaking countries, which considers public enterprises solely as instruments to fulfil economic policy objectives. Our results indicate that the respondents’ perception of the efficiency of public enterprises as well as their personal economic situation are important factors for the support of privatisation. The influential factors for the use of public enterprises as policy instruments are political ideology, the perception of a higher security of supplying goods and services as well as opinions regarding corporate social responsibility. The subjective preferences of a (democratic) country's citizens are thus an important reason why the public sector should or should not play an active part in providing goods and services. This can play an important role when decision makers from the public sector are keen to take into account the citizens’ approval or disapproval of privatisation measures.     

DOES POPULATION AGEING PROMOTE FASTER ECONOMIC GROWTH?

Can divergent demographic trends account for differences in per capita output across countries? We address this question by offering evidence that the process of population ageing is positively and significantly related to cross‐country economic performance. We define and estimate the effect of demographic change in two ways. First, a growing cohort of working age persons (15–64) as a share of the total population is found to have a large positive effect on GDP per capita. Second, an increase in the number of prime age persons (35–54) relative to the younger working age population (15–34) is found to have a positive but curvilinear effect with respect to per capita GDP. We find that changes in per capita GDP peak when the ratio of the prime‐to‐younger age population reaches an optimum of prime age workers for every younger aged worker. Beyond or below this optimal ratio, per capita output is lowered.     

THE ECONOMIC GROWTH OF LEUVEN(BELGIUM)

Leuven'soriginsdatebacktoaroundtheyear1000andthetownwasathrivingsettlementbythe12thcentury.Thepopu1ationincreasedsteadilyandtotalled20000inhabitantsbyaroundtheyear1340,thankstoasoundlocalindustry.Afterthat,Leuvenremainedasmallprovincialtownforcenturieswithafluctuatingpopulationthatwentbackupto20000forthefirsttimetowardstheendofthe18thcentury.However,afterthe1977amalgemation,thepopulationimmediate1ysoaredto87000andtodayLeuyenhasapproximately86000inhabitants.TheeconomicgrOwthofLeuyenasaregiona…     

DOES THE PROVISION OF PUBLIC GOODS CORRESPOND TO LOCAL DEMAND?

Recently China's central government has promoted public goods investment in pursuit of rural development and poverty reduction. However, the top down nature of investment planning may lead to mismatches between public goods projects and the demands of local residents. Using village‐ and household‐level survey data, this study seeks to identify the determinants of project implementation, focusing on investments in roads, drinking water, and irrigation. Contrary to some popular perception, our results suggest symmetry between farmers' reported demand and the types of projects implemented in their villages. The relative contribution of local demand to project implementation is seen to vary, however, across different types of public goods. (JEL D71, H41, H77, P35)     

DOES SIZE MATTER? THE INFLUENCE OF FIRM SIZE ON WORKING CONDITIONS,JOB SATISFACTION AND QUIT INTENTIONS

Using a detailed survey on Spanish workers, this paper investigates the relationship between firm size and working conditions, the extent to which firm size differences in workers' job satisfaction can be accounted for by differences in their work environment and the impact of firm size on workers' quit intentions. The results indicate that: (1) employees in larger firms face a worse work environment; (2) working in large firms significantly reduces job satisfaction when no controls for working conditions are included, but taking them into account makes differentials across size categories statistically insignificant; and (3) no systematic differences exist in intentions to quit across firm size categories, irrespective of conditioning on wages.     

SOCIAL COMPARISON AND SUBJECTIVE WELL‐BEING: DOES THE HEALTH OF OTHERS MATTER?

The importance of social comparison in shaping individual utility has been widely documented by subjective well‐being literature. So far, income and unemployment have been the main dimensions considered in social comparison. This paper aims to investigate whether subjective well‐being is influenced by inter‐personal comparison with respect to health. Thus, we study the effects of the health of others and relative health hypotheses on two measures of subjective well‐being: happiness and subjective health. Using data from the Italian Health Conditions survey, we show that a high incidence of chronic conditions and disability among reference groups negatively affects both happiness and subjective health. Such effects are stronger among people in the same condition. These results, robust to different econometric specifications and estimation techniques, suggest the presence of some sympathy in individual preferences with respect to health and reveal that other people's health status serves as a benchmark to assess one's own health condition.     

DOES THE MISSION OF PROVIDERS MATTER ON A QUASI‐MARKET? THE CASE OF THE BELGIAN ‘SERVICE VOUCHER’ SCHEME

ABSTRACT 1 : In 2001, the Belgian government introduced a ‘service voucher’ scheme in the field of domestic (housework) services, following a quasi‐market mechanism which fosters competition between providers of different types as regards sector (for‐profit, public, third sector) and mission (seeking profits, home care provision to vulnerable groups and work integration of the unemployed). Empirical evidence suggests that third sector organizations focusing on a social mission recognized by a tutelary regulation are the best performing with regards to the quality of jobs and service organization, leading to a better ‘triangulation’ of the service relationship. On the other hand, for‐profit providers, especially temporary work agencies, seem to favour their capacity of adaptation to the desiderata of their clients and costs’ minimization to the detriment of the quality of jobs which are made as flexible as possible.     

THE IMPACT OF INSURANCE SUBSIDIES ON SELF‐EMPLOYMENT: DO STATE NON‐GROUP HEALTH INSURANCE REGULATIONS MATTER?

This paper tests whether the effect of tax‐based subsidies for self‐employed health insurance on the level of self‐employment differs with the type of non‐group insurance regulatory regime at the state level. Using a panel of tax returns from 1999 to 2004, we estimate fixed effects instrumental variable regressions for the probability of being self‐employed, allowing the effect of the after‐tax price of self‐employed health insurance to differ by regulatory regime. Our results suggest that states with community rating and guaranteed issue regulations had significantly smaller increases in the fraction of taxpayers reporting some amount of self‐employment income as a result of a decrease in the after‐tax price of self‐employed health insurance. However, there is suggestive evidence that heavily regulated states experienced a larger increase in exclusive self‐employment, particularly among older taxpayers. (JEL J24, H24, I18)     

BOARD GOVERNANCE: DOES OWNERSHIP MATTER?

Good governance is crucial to achieving an organization's mission. Nevertheless, little is known about how the structure of governance is influenced by the nonprofit (NPO) or for‐profit ownership (FPO) structure of an organization, partly because they tend to be active in different sectors. In this paper we overcome this challenge by using data from a global sample of 392 microfinance institutions. The results show that the average NPO has a larger board, more female directors, and a higher number of board meetings than the average FPO. Moreover, where there are larger boards and more frequent board meetings, this has a positive effect on the financial performance of NPOs. It is thus confirmed that ownership structures influence boards’ characteristics and that some board mechanisms are more efficient in some ownership structures than in others. An effective board design should thus be based on a firm's ownership structure.     

DOES THE RIGHT TO CHOOSE MATTER FOR DEFINED CONTRIBUTION PLANS?

We find that sensitivity of fund flows and fund performance are both related to participants' right to choose their investments in defined contribution plans. Under the Mandatory Provident Fund system of Hong Kong, both employers and employees are required to contribute to a retirement account. Originally, employees' investment choices were restricted to a subset of funds chosen by their employers. The system was later modified so that employees are allowed to invest in any fund within the system. We present evidence that flows of fund have become more sensitive to past fund performance after this policy change, and that average fund performance in the system has also improved. Based on the improvement in fund performance, we estimate the accumulated cost of the lack of choice to be around 10% of the current total asset value of the system. (JEL G14, G18)     

PUBLIC–PRIVATE PARTNERSHIP TO DEVELOP TECHNOLOGY INFRASTRUCTURE: A CASE STUDY OF THE ECONOMIC RETURNS OF DNA DIAGNOSTICS

This paper presents a quantitative case analysis of one US Advanced Technology Program (ATP) public–private partnership that advanced the technology infrastructure of molecular diagnostics, resulting in substantial downstream economic and public health benefits. Biotechnology R&D is generally characterized by technologies requiring substantial investments in time, money, and effort to develop and sustain concepts through long incubation times. Public sponsorship of a partnership between two companies who would have not otherwise collaborated, Affymetrix and Molecular Dynamics, accelerated the development of DNA microarrays and DNA sequencing technologies and induced innovation at competitor firms. Public sponsorship of private-company research accelerated the completion of the Human Genome Project and improved both the quality and rapidity with which the biotechnology industry and medical science acquire genetic information. Counterfactual scenarios were used to quantify net public benefits by estimating the hypothetical costs of achieving the same outcomes as using the processes and technologies the ATP-cofunded innovations superseded.     

WHAT MAKES INTERNATIONAL CAPITAL FLOWS PROMOTE ECONOMIC GROWTH? AN INTERNATIONAL CROSS‐COUNTRY ANALYSIS

This paper re‐examines the relationship between international capital flows and economic growth within the context of various ‘conditional factors’ that possibly have the potential to influence such relationships. It achieves this by employing panel data for 80 countries that cover 1976–2007. International capital inflow is broken down into foreign direct investments (FDI) and foreign portfolio investments (FPI). We find interesting evidence that only FDI has a positive effect on growth and that FPI has an unfavorable, if not negative, effect on growth. The conditional variables of banking liberalization, high‐income level, twin crises, lower corruption, and human capital mitigate the positive impacts of FDI on growth. In contrast, the middle‐income level and good shareholder protection have a positive effect. As concerns FPI, the level of financial liberalization, being in a Latin American region, the wealth of countries, and market governance all influence the way that FPI affects growth, whereas the conditional variables of twin crises and human capital do not influence the effect of FPI on economic growth.     

ISLAMISTIC TERROR AND THE LABOUR MARKET PROSPECTS OF ARAB MEN IN ENGLAND: DOES A COUNTRY'S DIRECT INVOLVEMENT MATTER?

This paper considers two questions on the labour market discrimination against Arab or Muslim men after the recent terrorist attacks. First, I consider for the first time the impact of the September 11 attacks on the wages and working hours of Arabs in Europe. Second, I test whether the fact that a country was the direct target of terrorist attacks influences discrimination using the Madrid train bombings on 11 March 2004 and the London bombings on 7 July 2005 as quasi‐experimental events. The results indicate that the wages, hours worked and employment probabilities of Arab men were unchanged by the attacks.     

HOW DO FISCAL CONSOLIDATION AND FISCAL STIMULI IMPACT ON THE SYNCHRONIZATION OF BUSINESS CYCLES?

Using quarterly data for a panel of advanced economies, we show that synchronized fiscal consolidation (stimulus) programmes in different countries make their business cycles more closely linked. We also find: (i) some evidence of decoupling when an inflation targeting regime is unilaterally adopted; (ii) an increase in business cycle synchronization when countries fix their exchange rates and become members of a monetary union; (iii) a positive effect of bilateral trade on the synchronization of business cycles. Global factors, such as a rise in global risk aversion and uncertainty and a reversal of nonstandard expansionary monetary policy, can also reduce the degree of co‐movement of business cycles across countries. From a policy perspective, our work shows that an inflation targeting regime coupled with simultaneous fiscal consolidations can lead to more business cycle synchronization.     

HOW CONSERVATIVE DOES THE CENTRAL BANKER HAVE TO BE? ON THE TREATMENT OF EXPECTATIONS UNDER DISCRETIONARY POLICYMAKING

This paper explores an issue that arises in the delegation process. The paper shows that a myopic central banker, one who treats expectations as constant in setting discretionary policy, can replicate the behaviour of output and inflation under policy from a timeless perspective. For that to happen, society must delegate a price level target or a speed limit policy to a central banker who is more weight-conservative than society.     

DOES FOREIGN DIRECT INVESTMENT PROMOTE ECONOMIC GROWTH? EVIDENCE FROM EAST ASIA AND LATIN AMERICA

Although there is considerable evidence on the link between foreign direct investment (FDI) and economic growth in developing countries, causal patterns of the two variables has not been investigated yet with a reliable procedure. This article provides an empirical assessment of the issue by using data for 11 economies in East Asia and Latin America. Although FDI is expected to boost host economic growth, it is shown that the extent to which FDI is growth-enhancing appears to depend on country-specific characteristics. Particularly, FDI tends to be more likely to promote economic growth when host countries adopt liberalized trade regime, improve education and thereby human capital conditions, encourage export-oriented FDI, and maintain macroeconomic stability.