How Much Income Mobility is There in Britain?

Using the first four waves of the British Household Panel Survey (1991–4) and a variety of methods, we show that there is much mobility in household net income from one year to the next in Britain. However most income changes from one year to the next are not very large, and when incomes are longitudinally averaged so that transitory variations are smoothed out, substantial 'permanent' income differences are revealed. There is some evidence of greater mobility for those in the tails of the income distribution relative to the middle, and for elderly persons compared to non-elderly persons     

Too Much Money

Savings. It'asn almostmystical word foreconomists. The more a countrysaves, themore ithasavai-l abletoinves.t And themore itin- vests-incomputers, factori,e sor in- frastructure-tmhoere productiveits economy becomes and the fasterit cangrow. From thisperspectiv,e most e- conomistshavejudgedtheU .S. and found itwanting. With American householdsputtingaway only 0.9% of theirincome in savingsand with politicianaspparentlyhelplessto e- liminatethe federalbudget defici,t theU .S. seemed tobe set…     

Too Much of a Good Thing? The Economics of Investment in R&D

Research and development is a key determinant of long-run productivity and welfare. A central issue is whether a decentralized economy undertakes too little or too much R&D. We develop an endogenous growth model that incorporates parametrically four important distortions to R&D: the surplus appropriability problem, knowledge spillovers, creative destruction, and duplication externalities. Calibrating the model, we find that the decentralized economy typically underinvests in R&D relative to what is socially optimal. The only exceptions to this conclusion occur when the duplication externality is strong and the equilibrium real interest rate is simultaneously high.     

How effective is potential competition?

I examine robustness of perfect contestability. A small sunk cost S causes large deviations from the results if the response lag L is even smaller. There is an essential discontinuity at S = 0 = L. I also examine what happens if incumbant, not entrant, exists after L.     

How German is German neo-liberalism?

In the relevant literature, different answers have been given to the question whether German neo-liberalism has its roots in the tradition of Anglo-Saxon liberalism or whether it reflects specific German traditions of thought. The paper focuses on the question how the German neo-liberals deal with the problem of social cohesion. The differences between Anglo-Saxon and German traditions of socio-philosophical thought are especially evident regarding this question. Thus, I argue, analysing how the German neo-liberals are dealing with this issue is particularly helpful to specify their relationship to the two traditions.     

How effective is automobile safety regulation?

Loeb(1989) questions the results of recent work on automobile safety inspection (Garbacz and Kelly, 1987) in which the results of a paper by Leob and Gilad (1984) were questioned. Specifically, their time series model, using New Jersey data, is missing a key economic variable (accident price) as well as some well-known variables associated with traffic accidents (yothful drivers and a proxy for drunk driving). An estimate of their model, with US data, results in no statistical effect for automobile inspection variables (Garbacz and Kelly, 1987).     

How remote is the offshoring threat?

Advances in communication technology make it possible for workers in India to supply business services to head offices located anywhere. This has the potential to put high-wage workers in direct competition with much lower paid Indian workers. Service trade, however, like goods trade, is subject to strong distance effects, implying that the remote supply of services remains limited. We investigate this proposition by deriving a gravity-like equation for service trade and estimating it for a large sample of countries and different categories of service trade. We find that distance costs are high but are declining over time. Our estimates suggest that delivery costs create a significant advantage for local workers relative to competing workers in distant countries.     

How effective is European merger control?

This paper applies an intuitive approach based on stock market data to a unique dataset of large concentrations during the period 1990–2002 to assess the effectiveness of European merger control. The basic idea is to relate announcement and decision abnormal returns. Under a set of four maintained assumptions, merger control might be interpreted to be effective if rents accruing due to the increased market power observed around the merger announcement are reversed by the antitrust decision, i.e. if there is a negative relation between announcement and decision abnormal returns. To clearly identify the events' competitive effects, we explicitly control for the market expectation about the outcome of the merger control procedure and run several robustness checks to assess the role of our maintained assumptions. We find that only outright prohibitions completely reverse the rents measured around a merger's announcement. On average, remedies seem to be only partially capable of reverting announcement abnormal returns. Yet they seem to be more effective when applied during the first rather than the second investigation phase and in subsamples where our assumptions are more likely to hold. Moreover, the European Commission appears to learn over time.     

The Economics of the Greenium: How Much is the World Willing to Pay to Save the Earth?

Environmental and Resource Economics - Sadly, not much. This paper provides a theoretical and empirical analysis of the greenium, the price premium the investor pays for green bonds over...     

How Much Does Annuity Demand React to a Large Price Change?

In this paper, we present new evidence for the effect of changes in annuity prices on the decision to annuitize. We exploit an unprecedented change in policy in several Swiss occupational pension plans. There is an implied 8 percent reduction in the rate at which retirement capital is translated into an annuity, and this represents a net present value loss of CHF 18,500 (around US$ 20,000). To estimate the impact of this change, we use data from companies that changed their prices and from one large company that did not. We find that the price change reduces the propensity to annuitize among affected individuals by 16.8 percentage points.     

How is β related to asset returns?

Existing empirical evidence for the relevance of the β in modelling asset returns is mixed. Drawing on conditional tests of β first proposed by Pettengill, Sundaram and Mathur (1995) and extended by Bollen (2010), empirical evidence employing monthly data is presented that indicates that β is highly related to variability of asset returns but not to the level of asset returns. This result is consistent with the predictions of the market model but not with the predictions of the CAPM. It is concluded that β remains a useful construct in financial economics but may have a differing role in financial economics than the conventional wisdom asserts.     

How big is the Chinese Government debt?

China’s public debt does not provide a meaningful guidance about the government’s overall debt burden, since it also has various forms of contingent liabilities such as shortfalls in the pension fund, debts of local government investment vehicles, and nonperforming loans of the state-owned commercial banks. However, there is no authoritative data on the government’s overall debt burden. In this paper, we try to put together a complete picture by piecing together information available, following a consistent framework. Our results suggest that the Chinese Government’s total debt could be already above 100% of GDP, in contrast to the public debt/GDP ratio of 15.5. Urgent reforms are needed in order to reduce fiscal risks, although risks of debt crisis look small in the short term, given sound balance sheet of the public sector. Local governments’ borrowing without hard budget constraint presents the greatest risk to sustainability of China’s fiscal system.