Is social expenditure responsible for recent rise in public debt in OECD countries?

In developed economies, social expenditure is alleged to cause the rise in public debt over the last three decades. With dynamic panel data of 34 OECD countries from 1980 to 2014, we find robust evidence that the rise in public debt is not attributable to social expenditure.     

Which countries become tax havens?

This paper analyzes the factors influencing whether countries become tax havens. Roughly 15% of countries are tax havens; as has been widely observed, these countries tend to be small and affluent. This paper documents another robust empirical regularity: better-governed countries are much more likely than others to become tax havens. Controlling for other relevant factors, governance quality has a statistically significant and quantitatively large association with the probability of being a tax haven. For a typical country with a population under one million, the likelihood of a becoming a tax haven rises from 26% to 61% as governance quality improves from the level of Brazil to that of Portugal. Evidence from US firms suggests that low tax rates offer much more powerful inducements to foreign investment in well-governed countries than do low tax rates elsewhere. This may explain why poorly-governed countries do not generally attempt to become tax havens, and suggests that the range of sensible tax policy options is constrained by the quality of governance.     

Current expenditure upswings in good times and public investment downswings in bad times? New evidence from developing countries

Anecdotal evidence suggests that policymakers usually cannot resist the temptation of spending more on current expenditure (e.g., wages, transfers) in good times and mostly pick public investment to adjust during bad times. In this paper, we answer the following questions: do current expenditures and public investment react differently to the business cycle? If so, why? In a sample of more than 100 developing countries and 30 developed countries observed between 1980 and 2014, a new empirical regularity specific to developing countries is identified: upswings are associated with increases in current primary expenditures only, while public investment falls and current spending remains acyclical during downturns. Evidence is also presented that this asymmetrical response is more pronounced in countries where incumbent politicians face shorter time horizons and weak institutions. Other types of determinants traditionally discussed in the literature have limited explanatory power.     

Does decentralization contribute to efficiency? Evidence from OECD countries

This article provides evidence on the relationship between fiscal decentralization and technical efficiency. We begin the first stage of this study with a data envelopment analysis to obtain technical efficiency estimates for a sample of 23 OECD countries over the period 1992–2009. In a second stage, we explore the effects of fiscal decentralization and other control variables on technical efficiency. The results including all the control variables reveal a statistically significant negative relationship between fiscal decentralization of public expenditure and technical efficiency.     

Do per capita health care expenditures converge among OECD countries? Evidence from unit root tests with level and trend-shifts

This study examines the stochastic conditional convergence of per capita health care expenditures (PCHCE) among 19 OECD countries over the period 1972–2008. Specifically, newly developed LM and RALS-LM unit root tests with allowance for two endogenously determined structural breaks are employed. The results indicate support for PCHCE convergence among most OECD countries. The results are stronger in more general tests that control for two breaks and nonnormal errors. Panel unit root tests provide additional support for the stochastic convergence of PCHCE.     

Substitute or complement? Assessing renewable and nonrenewable energy in OECD countries

The elasticity of interfuel substitution between renewable and nonrenewable energy is key to establishing effective climate change policy. This is the first study to estimate the elasticity of substitution between different fossil fuels and renewable resources. We used 12 manufacturing industry-level datasets for the OECD countries from 1995 to 2009. We found a complementary relationship from nonrenewable energy to renewable energy in eight industries, whereas a substitute relationship was maintained for four industries. In particular, the food and pulp industries had a strong complementary relationship.     

Can country trade flows benefit from improved corporate social responsibility ratings?

We set out in this study to examine the effects of country ‘corporate social responsibility’ (CSR) ratings on the international trade flows of 28 countries. Drawing on categorization theory, we examine whether country CSR engagement is a categorizing factor capable of influencing the overall process of categorization. Based upon a two-stage approach, comprising of gravity and panel Tobit models, we find that a country's CSR rating has significantly positive effects on the country's international trade flows. When the CSR rating of a country is higher than that of another rival trading country, this will have significantly positive effects on the bilateral trade flows between the two countries.     

What drives the short-run costs of fiscal consolidation? Evidence from OECD countries

We investigate how the short-term effects of fiscal consolidation on output and employment vary with the state of the business cycle, monetary policy, public debt, the current account, and private credit. By examining the response of a large number of variables, we are also able to shed light on the transmission channels of fiscal policy. Our main finding is that short-term output multipliers are below unity, even in states in which multipliers are expected to be larger (eg when the output gap is negative or monetary policy tight). Key offsetting factors that reduce the size of multipliers and explain differences across states are the extent to which the external sector improves and monetary policy eases.     

Why do only the G7+2 countries among United Nations members discuss about international public goods? A simulation study

This article investigates why only the Group of 7 plus China and Russia (G7 + 2 countries) among 194 United Nations members discuss about international public goods? By simulating the heterogeneity of income, prices and preference parameters on the total provisions and the number of free riders, we find that the number of contributors for international public goods is 15 under the 194 member countries, while the others are free riders. In addition, the contributors are the top 15 powerful countries with largest dropout value over the world. Then, the discussion with only 15 countries for public goods is meaningful. As large as the heterogeneity of parameters is, the number of contributors becomes closer to G7 + 2.     

Is nuclear energy clean? Revisit of Environmental Kuznets Curve hypothesis in OECD countries

A transition towards the adoption of clean energy sources in electricity generation is essential to reduce the emission of greenhouse gases. The present study aims to examine the EKC hypothesis by taking into account nuclear energy in 18 OECD countries for the period 1995–2015. This study employs panel dynamic Generalised Method of Moments (GMM) and panel Fully Modified Ordinary Least Squares (FMOLS) to investigate the effects of electricity production from nuclear source, electricity production from non-renewables and trade openness on CO₂ emissions. The empirical findings suggest that EKC hypothesis is valid in OECD countries where nuclear energy plays a pivotal role in protecting the environment. On the contrary, non-renewable energy sources tend to increase CO₂ emissions. Our results support the notion that electricity generated by nuclear source leads to lower CO₂ emissions without retarding the long run growth in OECD countries. The findings also provide important policy insights and recommendations not only for OECD countries, but also for developing countries in designing appropriate energy and economic policies.     

Is eco-efficiency in greenhouse gas emissions converging among European Union countries?

Eco-efficiency refers to the ability to produce more goods and services with less impact on the environment and less consumption of natural resources. This issue has become a matter of concern that is receiving increasing attention from politicians, scientists and researchers. Furthermore, greenhouse gases emitted as a result of production processes have a marked impact on the environment and are also the foremost culprit of global warming and climate change. This paper assesses convergence in eco-efficiency in greenhouse gas emissions in the European Union. Eco-efficiency is assessed at both country and greenhouse-gas-specific levels using Data Envelopment Analysis techniques and directional distance functions, as recently proposed by Picazo-Tadeo et al. (Eur J Oper Res, 220:798–809, 2012). Convergence is then evaluated using the Phillips and Sul (Econometrica, 75:1771–1855, 2007) approach that allows testing for the existence of convergence groups. Although the results point to the existence of different convergence clubs depending on the specific pollutant considered, they signal the existence of at least four clear groups of countries. The first two groups are core European Union high-income countries (Benelux, Germany, Italy, Austria, the United Kingdom and Scandinavian countries). A third club is made up of peripheral countries (Spain, Ireland, Portugal and Greece) together with some Eastern countries (Latvia and Slovenia), while the remaining clubs consist of groups containing Eastern European countries.     

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.     

Do the global stochastic trends drive the real house prices in OECD countries?

This paper demonstrates that in the long-run the main determinants of the real housing prices for a panel dataset comprising the quarterly observations of 12 OECD countries are the real GDP per capita and the real interest rate along with the global stochastic trends.     

Which commercial partners are important for the most recently admitted EU countries?

This paper describes the degree of trade integration inside the European Union (EU) after the fifth enlargement in 2004. To achieve this goal, we build a database of information on trade flows between the new EU countries (EU‐10) and 180 commercial partners in six different sectors from 1999 to 2011. Using the standard gravity model and estimating a difference‐in‐differences specification, we analyze how joining the EU affected the intensity and direction of the EU‐10's trade flows. Our results show that though trade exchanges between the EU‐10 and EU‐15 intensified after 2004, the impact of integration was much more significant to the EU‐10 group.     

What drives investment in the telecommunications sector? Some lessons from the OECD countries

Regulation of telecommunications sector plays a crucial role in the political and economic agenda for both industrial and developing countries. The regulatory efforts of more developing countries in order to attract investments and enhance the level of effective competition in the industry are hindered by the absence of a sound legal framework, the weak level of regulation and the extended state interventionism. The main aim of this study is to examine the regulatory process in the telecommunications industry within the OECD countries and determine the extent to which it has affected the level of investment and economic growth. For this purpose, we use an updated data set for thirty OECD countries covering the period 1988–2010 and panel data econometric techniques. Our analysis reveals that there is a strong and positive relationship between effective regulation and investment.     

Which countries show favour towards negative,zero or positive population growth?

This article develops an overlapping generations model with eldercare by migrants and children in the context of the ageing problem and examines what conditions cause people to prefer a negative, zero or positive population growth rate. We find that a wage ratio of around 0.7 for eldercare by migrants can explain well the coexistence of negative, zero and positive population growth rates in the European Union. A country that does not need eldercare and has an optimistic view of the future will have a positive population growth rate. Other countries will have zero or negative population growth rates.     

Does higher government debt link to higher social expenditure? New method,new evidence

Scholars believe that higher social expenditures are usually linked with higher government debts, whereas higher debts reduce social expenditures. However, it is reasonable to speculate that higher government debt may contribute to higher social spending, while fiscal deficits occur during a recession, which commonly creates greater demand for social expenditure. For a deeper investigation, this paper revisits the dynamic relationship between social spending and public debts in the time-frequency domain, using the novel wavelet-coherency analysis as well as the phase-difference technique to derive the co-moved and causal relationships between social spending and public debts in 13 OECD countries. The evidence identifies a dynamic relationship between variables. While higher social expenditures increase government debts, the shocks from government debts to social expenditures are conversely uncertain. We discover that higher government debt does reduce social expenditures, but it may be linked to higher social spending. The robustness of partial coherency and phase-difference discovers the role of a political party in the decision over social welfare programmes in the sample countries.