Why should Southern economies stay in the Euro Zone? The role of labor markets

We assume a world of two countries in a fixed exchange rate system. These countries differ in the features of their labor markets. The home country is characterized by a dual labor market, with formal and informal sectors. In the foreign country, a nominal wage rigidity exists. In this context, the situation of the labor markets in each country is not optimal owing to a misallocation of workers between sectors in the domestic economy and unemployment in the foreign economy. We show that a devaluation of domestic currency implies a fall in production in each country and deterioration of labor markets in both countries.     

What role can nurse leaders play in reducing the incidence of pressure sores?

Pressure sores have plagued the nursing profession for many years as a major health care problem in terms of a patient's suffering and financial cost. Pressure sores are increasingly common in hospitalized patients in the United States with a 63% increase from 1993 to 2003. The nurse leader is accountable for the occurrence of pressure sores, a nurse-sensitive indicator, by a scorecard which is benchmarked against other facilities. The nurse leader must take a systematic approach in the prevention of pressure sores, with the strategy being consistent and motivating to the staff in order to improve patient outcome. The chief nursing officer, the unit manager, and the bedside nurse must all collaborate to prevent tissue injury in patients at risk for developing pressure sores and to promote wound healing in patients with existing breakdown.     

Long-run money demand in OECD countries: what role do common factors play?

This article examines the long-run money demand function for 11 OECD countries from 1983Q1 to 2006Q4 using panel data. The distinction between common factors and idiosyncratic components using principal component analysis allows for the detection of cross-member cointegration and the determination as to whether national or international sources are responsible for the non-stationarity of money and its determinants. Indeed, the finding that the common factors are I(1) while the idiosyncratic components are I(0) indicates that cross-member cointegration may exist and non-stationarity in the variables is primarily driven by common international trends. Furthermore, it is found that the impact of income on money demand is positive, whereas it is negative for the interest rate, exchange rate and stock prices. Except for the income elasticity of money demand, all estimated long-run coefficients are larger for the common factors of the variables than for the variables themselves. This article provides evidence that the exchange rate is an important determinant of money demand, whereas the results for the stock prices are ambiguous. Finally, the results of a panel-based error-correction model suggest that several domestic money stocks converge to a common international equilibrium relationship between the common factors.     

Optimal tax progressivity in unionised labour markets: What are the driving forces?

In labour markets with collective wage bargaining higher progressivity of the labour income tax creates a trade-off. On the one hand, wages are lowered and unemployment decreases, on the other hand, the individual labour supply decision is distorted at the hours-of-work margin. The optimal level of tax progressivity within this trade-off is determined using a numerical general equilibrium model with imperfect competition on the goods market, collective wage bargaining and a labour-supply module calibrated to empirically plausible elasticity values. The model is calibrated to macroeconomic and institutional parameters of both the OECD average and a number of individual OECD countries. In most cases the optimal degree of tax progressivity is below the actual level. A decomposition approach shows that the optimal level is increased by high unemployment and by the general tax level.     

What is in a surname? The role of ethnicity in economic decision making

This article reports results from two experiments that investigate possible incidence of discrimination against people with foreign backgrounds in Sweden. In the first experiment, participants played the trust game and the dictator game with co-players of different ethnic affiliation. The family name of the players was exposed to their co-players. Results for the trust game showed no significant discrimination against co-players with foreign backgrounds. On the other hand, the results for the dictator game showed a statistically significant discriminatory behaviour by men against co-players with non-European backgrounds. The discriminatory behaviour was solely a male phenomenon. In the second experiment, the dictator game was replicated to check the stability of the results in the first experiment. The second experiment also examined whether people with foreign backgrounds discriminate against other people with foreign backgrounds; that is, the purpose was to discover whether discrimination is systematic. The observations in the second experiment underlined the results found in the first experiment: foreign co-players are discriminated against by Swedish players. However, we did not find that people with foreign backgrounds discriminated against other people with foreign backgrounds.     

The gender gap in university enrolment: Do parents play a role beyond investing in skills?

Young men are far less likely than women to attend university across most OECD countries. I use data from the Youth in Transition Survey (YITS) to investigate this issue in the Canadian context, focusing on how parents might influence this gender gap. In particular, my goal is to isolate the incremental effect of parents’ valuations of education during the teenage years, holding constant the stock of skills acquired up to that point. To estimate this effect, I use a factor model based on a framework developed by Foley et al. (2014). My results confirm the importance of skills in determining the gender gap in university attendance. I also find that differences in the distribution of parental valuations of education account for 22% of the gender gap in the YITS data, pointing toward an important role that parents play, not accounted for in prior work.     

What should classical liberal political economists do?

In 1964 James Buchanan famously asked “What Should Economists Do?” He argued that economists should focus their intellectual attention on exchange and the institutions within which exchange takes place. This paper reflects on Buchanan’s message and looks at the development of that argument, and its implications in the wake of post-socialist political economy on the one hand, and the post-financial crisis of 2008 on the other. Following Buchanan, the paper argues that classical liberal political economists must embrace the intellectual and practical challenges of the day, and bring a robust theory of political economy to bear on questions of justice, questions of freedom and responsibility, and questions concerning the invisible hand and the appropriate institutional framework which results in peaceful social cooperation and productive specialization in a society of free and responsible individuals.     

Women and work: what role do social norms play?

Against the background of the current (economic) research which concentrates particularly on individual and structural factors, this paper examines if and to what extent social norms (in terms of attitudes towards gender roles and work commitment) can make a complementary statement in explaining women’s employment status and number of working hours. The impact is presumed to be enhanced through norms shared by people belonging to the same households, peer groups, and by residents of the same region. The analysis relies on a rich German dataset and employs a probit model with sample selection. The results highlight, among other things, the importance of the ‘relevant others’ (particularly partners living in the same household and peers sharing similar social and work characteristics, but not necessarily geographical proximity) in explaining women’s employment status.     

(How) do flexible labour markets really work? The role of profitability in influencing unemployment

This paper assesses the theoretical justifications availablefor policies of flexible labour markets (FLMs) in reducing thelevel of unemployment in developed economies. It empiricallyassesses the OECD's rationalisation of policy linking profitabilityto investment and job creation in four country cases. New capitalinvestment is found to be significant for unemployment in allcases but it is not found to be a consequence of the mechanisticachievement of ‘normal’ profits. Without an empiricallysupported mechanism for how FLMs reduce unemployment, the policyis open to the accusation of being no more than a politicaltool for altering distribution, without concern for the widersocio-economic consequences.     

Segmentation of consumer markets in the US: What do intercity price differences tell us?

We quantify the magnitude of market segmentation in US consumer market and explore the underlying factors behind this segmentation, using a quarterly panel of retail prices for 45 products in 48 US cities from 1985 to 2009. The extent of market segmentation is estimated using city‐pair price differences within the framework of both linear autoregressive (AR) and nonlinear threshold autoregressive (TAR) models. We find that the magnitude of market segmentation varies from one product to another, but even more across city pairs in each product. Contrary to a widespread perception, market segmentation within the US is not necessarily larger for non‐tradable services compared to tradable goods. We identify potential drivers of market segmentation by relating the cross‐city and cross‐product variations of market segmentation to location‐specific and product‐specific characteristics—distance, relative city sizes, differences in wage and rent, type of product and proximity to marketplace. Distance, which captures more than transport costs, turns out to be the most salient factor even after controlling for a range of other potential factors. The effect of distance, however, varies substantially across products, with perishable products and locally produced products showing larger distance effect on market segmentation. We find that the magnitude of market segmentation has been somewhat stable during the sample period, but intercity price differences have become more sensitive to distance over time in many products under study.     

What are the effects of fiscal policy on asset markets?

We investigate the link between fiscal policy shocks and asset markets. Our results show that spending shocks have: a positive and persistent effect on GDP in the U.S. and in the U.K., while for Germany and Italy, such impact is temporary; a positive and persistent effect on housing prices; a negative effect on stock prices; and mixed effects on the price level. A VAR counter-factual exercise suggests that fiscal shocks play a minor role in the asset markets of the U.S. and Germany, and substantially increase the variability of housing and stock prices in the U.K., while government revenue shocks have increased volatility in Italy.     

What is the role of innovation in productivity growth in Central and Eastern European countries?

The paper uses company level data from the Eurostat's Community Innovation Survey 2008 and applies CDM model in order to estimate the links between R&D engagement, R&D intensity, innovation output and productivity in selected Central and Eastern European Countries – Bulgaria and Romania, and compares their performance with Germany. The results showed that different processes drive company's decision to engage in R&D in Bulgaria and Romania in comparison to Germany; R&D intensity is an important factor of product innovation in the observed CEE countries and product innovation leads to higher productivity in Bulgaria and Romania, while process innovation leads to higher productivity in Bulgaria, but not in Romania.     

Is public capital productive in Europe?

This paper addresses the issue of whether and by how much public investment or public capital can increase GDP. In comparison with the literature on the subject, we apply many different methodologies to answer these questions. A vector autoregressive (VAR) model (for France, Italy, Germany, the UK and the USA), a panel composed of 6 European countries (Austria, Belgium, France, Germany, Italy and the Netherlands) and a regional panel (French regions) are estimated. Public investment is shown to be a significant determinant of output; this is also true for public capital but to a lesser extent than public investment with a VAR methodology. The size of the estimated coefficient is also more realistic than those obtained in the literature. This empirical result confirms that the focus of some economists on safeguarding the level of public investment is not misplaced. The debate on the introduction of a ‘golden rule of public finance’ in the European Monetary Union is legitimate in this respect.     

Not just financial support? Another role of public subsidy in university–industry research collaborations

Management of university–industry research collaboration (hereafter UIC) is the key to its success. In this respect, government can play an essential role in UIC. A public subsidy for research and development (hereafter R&D) is not only an important financial support for UIC but may also serve as a useful means of promoting trust among UIC members, resulting in higher innovation performance. However, few empirical studies have investigated the role a public R&D subsidy plays in promoting trust in UIC. To this end, by using original survey data, this study examines empirically whether a public R&D subsidy for UIC contributes to trust formation and, thus, to higher innovation performance based on trust. Our findings suggest that a public R&D subsidy promotes trust formation, which then increases the innovation performance of UIC participants, partially mediating the more direct effects of R&D subsidy on innovation performance.     

Weakness of investment in Portugal: what role do credit supply and fiscal consolidation shocks play?

Portuguese Economic Journal - In order to illustrate how tightened financial conditions have hampered investment in Portugal, we estimate a Factor Augmented Vector AutoRegressive model (FAVAR) with...     

Health shocks and consumption smoothing in rural households: Does microcredit have a role to play?

This paper estimates, using a large panel data set from rural Bangladesh, the effects of health shocks on household consumption and how access to microcredit affects households’ response to such shocks. Households appear to be fairly well insured against health shocks. Our results suggest that households sell livestock in response to health shocks and short term insurance is therefore attained at a significant long term cost. However microcredit has a significant mitigating effect. Households that have access to microcredit do not need to sell livestock in order to insure consumption. Microcredit organizations and microcredit therefore have an insurance role to play, an aspect that has not been analyzed previously.     

Political markets? Politics and economics in the emergence of markets for biodiversity offsets

This paper analyses the relationship between politics and performativity of economics in the emergence of markets for biodiversity offsets. While the role of economics in constructing markets has been demonstrated by sociology and social studies of science, it has also become apparent that politics plays an important role in the material outcome of economic experiments. Two case studies of the creation of markets for biodiversity offsets are analysed, in the United States and England. The findings suggest that the creation of both markets is rooted in the language, concepts and models of economics. Politics, on the other hand, functions as a mediator of the material expression of those models. Through this mediation effect, similar economic models are performed differently, resulting in a variety of markets. This suggests that the material outcomes of processes of market creation are not defined at the outset, but can be influenced by political processes.