Asset Mapping,the Social Fabric Matrix,Economic Impact Analysis,and Criteria for Sustainability and Justice: Operational Elements for Holistic Policy Planning

Asset mapping defines, identifies, and quantifies available resources. It has two advantages for planning economic development. First, while it is labor intensive, asset-mapping implementation is straightforward. Second, it yields information useful to establish, inform, and achieve policy goals. Its limitations are (i) a static approach and (ii) the absence of an evolutionary process to evaluate goal attainment and modify future activities. We explore how asset mapping can be embedded into a social fabric matrix for strategic planning and evaluated using economic impact analysis. This sequential, yet two-way iterative process provides an adaptive template for policy assessment, and a qualitative and quantitative predictive framework to evaluate attainment of goals (here to be understood as the criteria for sustainability and justice, as proposed by Underwood, Hackney and Friesner 2015 Underwood, Daniel A., Donald Hackney and Dan Friesner. “Criteria for Sustainable Community Economic Development: Integrating Diversity and Solidarity into the Planning Process.” Journal of Economic Issues 49, 4 (2015): 1112–1123.[Taylor &; Francis Online], [Web of Science ®] , [Google Scholar]). Asset mapping in the next time period, structured using evaluative outputs of the social fabric matrix and economic impact analysis, can be reemployed creating a new round of inputs for the social fabric matrix and economic impact analysis to assess the extent to which the criteria for sustainability and justice are achieved. Thus, the iterative process becomes purposeful, evolutionary, and pragmatic.     

Purchasing power parity for G-7 countries: panel SURADF tests

In this study, the panel Seemingly Unrelated Regressions Augmented Dickey–Fuller (SURADF) tests advanced by Breuer et al. (2001 Breuer, J. B., McNown, R. and Wallace, M. S. 2001. Misleading inferences from panel unit-root tests with an illustration from purchasing power parity. Review of International Economics, 9: 482–93. [Crossref] , [Google Scholar]) are used to test the validity of Purchasing Power Parity (PPP) for G-7 countries over the period 1980M1 to 2008M5. The empirical results from several panel-based unit root tests indicate that PPP does not hold for G-7 countries under study; however, Breuer et al.'s (2001 Breuer, J. B., McNown, R. and Wallace, M. S. 2001. Misleading inferences from panel unit-root tests with an illustration from purchasing power parity. Review of International Economics, 9: 482–93. [Crossref] , [Google Scholar]) panel SURADF tests unequivocally indicate that PPP is valid for half of the G-7 countries.     

Nonlinearity in real exchange rates: an approach with disaggregated data and a new linearity test

Employing disaggregated real exchange rates from nine European counties in 16 goods categories, we assess in this study the nonlinearity in the real exchange rates. Surprisingly, we find evidence for nonlinearity in only four (10) out of 143 series with the linearity test proposed by Harvey et al. (2008 Harvey, D. I., Leybourne, S. J. and Xiao, B. 2008. A powerful test for linearity when the order of integration is unknown. Studies in Nonlinear Dynamics and Econometrics, 12 Art 8[Web of Science ®] , [Google Scholar]) at the 5% (10%) significance level. This result differs greatly from those of Juvenal and Taylor (2008 Juvenal, L. and Taylor, M. P. 2008. Threshold adjustment of deviations from the law of one price. Studies in Nonlinear Dynamics and Econometrics, 12 Art 8[Web of Science ®] , [Google Scholar]), Imbs et al. (2003 Imbs, J., Mumtaz, H., Raven, M. O. and Rey, H. 2003. Nonlinearities and real exchange rate dynamics. Journal of the European Economic Association, 1: 639–49. [Crossref] , [Google Scholar]), Sarno et al. (2004 Sarno, L., Taylor, M. P. and Chowdhury, I. 2004. Nonlinear dynamics in deviations from the law of one price: a broad-based empirical study. Journal of International Money and Finance, 23: 1–25. [Crossref], [Web of Science ®] , [Google Scholar]) and Berka (2009 Berka, M. 2009. “Non-linear adjustment in law of one price deviations and physical characteristic of good”. In Review of International Economics Vol. 17, 51–73.  [Google Scholar]), who report ample evidence for nonlinearity for the same or similarly disaggregated real exchange rate datasets.     

An Evaluation of Institutional Matrices Theory Which Was Designed to Illustrate Differences Between Russian and Western Political Economies

This article is devoted to the evaluation of the institutional matrices theory (IMT), which was designed to illustrate the differences between Russian and Western political economic systems. IMT has no matrix, and it is an ideological declaration rather than a theory. It is a set of assertions and assumptions that are adopted without evidence, and then hypostatized to be Russian and Western socioeconomic systems. IMT literature claims to utilize the reciprocity, redistribution, and exchange model of Karl Polanyi (1944 Polanyi, Karl. The Great Transformation. New York, NY: Rinehart &; Company, 1944. [Google Scholar], 1957 Polanyi, Karl. “The Economy as Instituted Process.” In Trade and Market in the Early Empires: Economies in History and Theory, edited by Karl Polanyi, Conrad M. Arensberg and Harry W. Pearson, pp. 239-270. New York, NY: Free Press, 1957. [Google Scholar]). However, IMT suffers from a number of assumptive and methodological problems in its application, the first of which consists of the complete exclusion of reciprocity from consideration. The first section of the article is an explanation of problems with IMT, and the second section demonstrates some particulars of the IMT problems with a real-world social fabric matrix from a Western nation.     

Does PPP hold in African countries? Further evidence based on a highly dynamic non-linear (logistic) unit root test

With a view to investigating whether the purchasing power parity (PPP) theory holds true for selected African countries during the January 1980–December 2003 period, we employ a rigorous, highly dynamic non-linear (logistic) unit root test, as first advanced by Leybourne et al. (1998 Leybourne, S, Newbold, P and Vougas, D. 1998. Unit roots and smooth transitions. Journal of Time Series Analysis, 19: 83–97. [Crossref] , [Google Scholar]), which is considerably more powerful than those tests traditionally used. Compared with the rejection of the null of the unit root process for only one of the 22 countries under study when we use the traditional ADF, PP, KPSS, NP and the DF-GLS unit root tests, with the Leybourne et al. (1998 Leybourne, S, Newbold, P and Vougas, D. 1998. Unit roots and smooth transitions. Journal of Time Series Analysis, 19: 83–97. [Crossref] , [Google Scholar]) test, we strongly reject the null of the unit root process for a surprising six of the 22 countries. These empirical results clearly indicate that PPP holds true for these six countries, namely the Central African Republic, the Côte d’Ivoire, Kenya, Madagascar, Uganda and Lesotho.     

Will the skill-premium in the Netherlands rise in the next decades?

While the skill-premium has been rising sharply in the US and the UK for 20 years, the Dutch skill-premium decreased for much of that period and only started to rise in the early 90s. In this article, we investigate whether the Dutch skill-premium will rise in the next decades. To answer this question, we forecast the skill-premium using the Katz and Murphy (1992 Katz, L and Murphy, K. 1992. Changes in relative wages, 1963–1987: supply and demand factors. Quarterly Journal of Economics, 107: 35–78. [Crossref], [Web of Science ®] , [Google Scholar]) and the Krusell et al. (2000 Krusell, P, Ohanian, L, Ríos-Rull, J-V and Violante, G. 2000. Capital-skill complementarity and inequality: a macroeconomic analysis. Econometrica, 68: 1029–53. [Crossref], [Web of Science ®] , [Google Scholar]) models. The Katz and Murphy model (KM) explains demand shifts by skill-biased technological change in unobservable variables captured by a time trend. In contrast, the Krusell et al. model (KORV) explains demand shifts by (observable) changes in the capital stock under a capital-skill complementarity technology. The results show that while the KM model predicts that the skill-premium will have increased by 30% in 2020, based on realistic predictions of the stock of capital, the KORV model predicts that the skill-premium will remain between ?5 and +5% of its 1996 level.     

The long memory model of political support: some further results

This article extends the results of Byers et al. (1997 Byers, JD, Davidson, JEHD and Peel, DA. 1997. Modelling political popularity: an analysis of long range dependence in opinion poll series. Journal of the Royal Statistical Society, 160: 471–90. Series A [Google Scholar]) on long memory in support for the Conservative and Labour Parties in the UK using longer samples and additional poll series. It finds continuing support for the ARFIMA(0,?d,?0) model, though with somewhat smaller values of the long memory parameter. We find that the move to telephone polling in the mid-1990s had no apparent effect on the estimated value of d for either party. Finally, we find that we cannot reject the hypotheses that the parties share a common long memory parameter which we estimate at around 0.65.     

Globalization and the effects of changes in functional income distribution on aggregate demand in Germany

Germany has experienced a period of extreme nominal and real wage moderation since the mid‐1990s. Contrary to the expectations of liberal economists, this has failed to improve Germany’s mediocre economic performance. However, Germany is now running substantial current account surpluses. One possible explanation for Germany’s disappointing performance is found in Kaleckian theory, which highlights that the domestic demand effect of a decline in the wage share will typically be contractionary, whereas net exports will increase (Blecker 1989 Blecker, R. 1989. International competition, income distribution and economic growth. Cambridge Journal of Economics, 13: 395–412. [Web of Science ®] [Google Scholar]). The size of the foreign demand effect will critically depend on the degree of openness of the economy. This paper aims at estimating empirically the demand side of a Bhaduri and Marglin (1990 Bhaduri, A. and Marglin, S. 1990. Unemployment and the real wage: The economic basis for contesting political ideologies. Cambridge Journal of Economics, 14: 375–93. [Crossref], [Web of Science ®] [Google Scholar]) type model for Germany. The paper builds on the estimation strategy of Stockhammer, Onaran, and Ederer (2009 Stockhammer, E., Onaran, Ö. and Ederer, S. 2009. Functional income distribution and aggregate demand in the Euro area. Cambridge Journal of Economics, 33(1): 139–59. [Crossref], [Web of Science ®] [Google Scholar]) and Hein and Vogel (2008 Hein, E. and Vogel, L. 2008. Distribution and growth reconsidered – empirical results for six OECD countries. Cambridge Journal of Economics, 32: 479–511. [Crossref], [Web of Science ®] [Google Scholar], 2009 Hein, E. and Vogel, L. 2009. Distribution and growth in France and Germany – single equation estimations and model simulations based on the Bhaduri/Marglin‐model. Review of Political Economy, 21(2): 245–72. [Taylor & Francis Online] [Google Scholar]). The main contribution lies in a careful analysis of the effects of globalization. Since Germany is a large open economy by now it is a particularly interesting case study.     

Underground Economy,Evasion and Inequality

Economic theory is paying increasing attention to a non-observed economy (NOE) and its causes. Recently, a couple of works (Rosser et al., 2000 Rosser, J. B., Rosser, M. V. and Ahmed, E. 2000. Income inequality and the informal economy in transitions economies. Journal of Comparative Economics, 28(1): 156–171.  [Google Scholar], 2003 Rosser, J. B., Rosser, M. V. and Ahmed, E. 2003. Multiple unofficial economy equilibria and income distribution dynamics in systemic transition. Journal of Post Keynesian Economics, 25(3): 425–447. [Web of Science ®] , [Google Scholar]) have claimed that there is a positive relationship between income inequality and the size of NOE. This supposed relationship is not so clear and deserves in-depth analysis. There is a crucial aspect that has been completely avoided in these studies: income inequality is mainly measured using ‘regular’ incomes and this fact could lead to some bias. The existence of a certain size of NOE implies some income evasion that can affect the inequality indexes used in the study of the relationship between NOE and inequality. Including the regional share of NOE in a wage equation, I find that, in the specific case of the Italian private sector employees, the income evasion attached to NOE tends to reduce inequality measured by regular wages statistics.     

Nonlinear Mean Reversion across National Stock Markets: Evidence from Emerging Asian Markets

This paper seeks empirical evidence of nonlinear mean-reversion in relative national stock price indices for Emerging Asian countries. It is well known that conventional linear unit root tests suffer from low power against the stationary nonlinear alternative. Implementing the nonlinear unit root tests proposed by Kapetanios et al. (2003 Kapetanios, G., Shin, Y. and Snell, A. 2003. Testing for a unit root in the nonlinear STAR framework. Journal of Econometrics, 112: 359–379. [Crossref], [Web of Science ®] , [Google Scholar]) and Cerrato et al. (2009 Cerrato, M., de Peretti, C., Larsson, R. and Sarantis, N. 2009. “A nonlinear panel unit root test under cross section dependence”. Working Papers 28, Department of Economics, University of Glasgow [Google Scholar]) for the relative stock prices of Emerging Asian markets, we find strong evidence of nonlinear mean reversion, whereas linear tests fail to reject the unit root null for most cases. We also report some evidence that stock markets in China and Taiwan are highly localized.     

The Interest Rate Brake on Maturity Transformation

Must banks match asset and liability maturities, as William Barnett and Walter E. Block (2009 Barnett, William and Walter E. Block. “Time Deposits, Dimensions and Fraud.” Journal of Business Ethics 88, 4 (2009): 711–716.[Crossref], [Web of Science ®] , [Google Scholar], 2011 Barnett, William and Walter E. Block. “Rejoinder to Bagus and Howden on Borrowing Short and Lending Long.” Journal of Business Ethics 100, 2 (2011): 229–238.[Crossref], [Web of Science ®] , [Google Scholar]), as well as Ivan Jankovic (2011) Jankovic, Ivan. “Economic Calculation, Maturity Mismatching and the Credit Cycle.” New Perspectives on Political Economy 7, 1 (2011): 105–124. [Google Scholar], surmise? While we agree with these authors that issuances of fiduciary media breed financial instability, we disagree that maturity transformation represents such a case. Maturity transformation — otherwise known as borrowing short-term and lending long-term — guided by several base legal principles, does not result in the issuance of fiduciary media. Most notable among these principles is that any credit issued must be funded by borrowing of a positive duration, i.e., not via a demand deposit. We demonstrate that two factors instigate larger degrees of maturity transformation than would otherwise be the case, breeding potential instability: a continual increase in the credit supply and the provision of a lender of last resort. We also show that the interest rate is a natural stabilizing brake on the over-issuance of longer-dated credit against short-term financing.     

Ownership herding and informational herding

This article takes as its point of departure the herding model of Bikhchandani et al. (1992 Bikhchandani, S., Hirshleifer, D. and Welch, I. 1992. A theory of fads, fashion, custom, and cultural change as informational cascades. Journal of Political Economy, 100: 992–1026. [Crossref], [Web of Science ®] , [Google Scholar]). We extend earlier experimental evidence to distinguish between informational herding, as in the model, and ownership herding, an alternative explanation for observed behaviour.     

Impatience and Inconsistency in Intertemporal Choice: An Experimental Analysis

In this article the experiment carried out by Takahashi et al. [2009 Takahashi, T., T. Hadzibeganovic, S. A. Cannas, T. Makino, H. Fukui, and S. Kitayama. “Cultural Neuroeconomics of Intertemporal Choice.” Neuroendocrinology Letters, 30, (2009), pp. 185–191.[PubMed], [Web of Science ®] , [Google Scholar]] is replicated to analyze the influence of culture, gender, origin (urban or rural), and socioeconomic level on the impulsivity and consistency of decision-making processes concerning monetary gains and losses. The results indicate that Spanish students show inconsistency, and more impulsivity over gains (i.e., more impatience, as they discount delayed outcomes more rapidly) than do Japanese and American students. Additionally, participants from urban areas show more impatience over gains than do participants from rural ones, women are more impatient than men are over losses, and participants of different socioeconomic levels show differences in their impulsivity parameters.     

Within-groups wage inequality and schooling: further evidence for Portugal

This article provides further evidence on the positive impact of schooling on within-groups wage dispersion in Portugal, using data on male workers from the 2001 wave of the European Community Household Panel. The issue of schooling endogeneity is taken into account by using the latest available instrumental-variable technique for quantile regression, i.e. the control-function estimator due to Lee (2007 Lee, S. 2007. Endogeneity in quantile regresssion models: a control function approach. Journal of Econometrics, 141: 1131–58. [Crossref], [Web of Science ®] , [Google Scholar]). The findings are compared with earlier results based on different techniques, i.e. the instrumental-variable estimator due to Arias et al. (2001 Arias, O, Hallock, KF and Sosa-Escudero, W. 2001. Individual heterogeneity in the returns to schooling: instrumental variables quantile regression using twins data. Empirical Economics, 26: 7–40. [Crossref] , [Google Scholar]) and the standard exogeneity-based estimator due to Koenker and Bassett (1978 Koenker, R and Bassett, G. 1978. Regression quantiles. Econometrica, 46: 33–50. [Crossref], [Web of Science ®] , [Google Scholar]).     

Does Higher Education Affect Economic Growth? The Case of Greece

Abstract

The purpose of the study is twofold: first, it presents an extensive review of empirical studies that have examined the relationship between higher education and economic growth. Second, it estimates the effect of higher education on economic growth in Greece over the period 1960–2009. It applies the model introduced by Mankiw, Romer, and Weil (1992 Mankiw, G., Romer, D., & Weil, D. (1992). A contribution to the empirics of economic growth. Quarterly Journal of Economics, 107(2), 407–437. doi: 10.2307/2118477[Crossref], [Web of Science ®] , [Google Scholar]) by using the higher enrolment rates as a proxy of human capital. The paper employs cointegration and an error-correction model to test the causal relationship between higher education, physical capital investments and economic growth. The empirical analysis reveals that there is a long-run cointegrating relationship between higher education, physical capital investments and economic growth. The elasticity of economic growth with respect to higher education is 0.52%. The results also suggest that there is evidence of unidirectional long-run and short-run Granger causality running from higher education and physical capital investments to economic growth.     

The persistence of Taiwan's output fluctuations: an empirical study using innovation regime-switching model

In this article we examine the persistence nature of Taiwan's aggregate output fluctuations by using the ‘innovation regime-switching’ (IRS) model in which the effect of an innovation may be permanent or transitory, depending on an unobservable state variable that follows a first order Markov chain. By applying the IRS model to Taiwan's real GDP data, we find that during the 1961 to 2000 period 61% (39%) of the real output shocks are likely to have permanent (transitory) effects. Moreover, the innovations in the officially identified expansion (contraction) are more likely to have a permanent (transitory) effect. These results are similar to those found in many studies of US real output fluctuations, e.g. Beaudry and Koop (1993 Beaudry, P and Koop, G. 1993. Do recessions permanently change output?. Journal of Monetary Economics, 31: 149–63. [Crossref], [Web of Science ®] , [Google Scholar]), Kim and Nelson (1999 Kim, C-J and Nelson, CR. 1999. Friedman's plucking model of business fluctuations: tests and estimates of permanent and transitory components. Journal of Money, Credit and Banking, 31: 317–34.  [Google Scholar]) and Kuan et al. (2005 Kuan, C-M, Huang, Y-L and Tsay, RS. 2005. An unobserved component model with switching permanent and transitory innovations. Journal of Business and Economic Statistics, 23: 443–54. [Taylor &; Francis Online], [Web of Science ®] , [Google Scholar]). However, we also find that Taiwan's output dynamics have changed drastically ever since year 2000. In particular, the shocks to real GDP have become more likely to have only transitory effect, even during the period of post-2001:IV expansion.     

Estimating short and long-run relationships: a guide for the applied economist

Many applied economists face problems in selecting an appropriate technique to estimate short and long-run relationships with the time series methods. This article reviews three alternative approaches viz., general to specific, vector autoregressions and the vector error correction models. As in other methodological controversies, definite answers are difficult. It is suggested that if these techniques are seen as tools to summarize data, as in Smith (2000 Smith, RP. 2000. “Unit Roots and all that: the impact of time-series methods on macroeconomics”. In Macroeconomics and the Real World, Edited by: Backhouse, RE. and Salanti, A. 199–215. Oxford: Oxford University Press.  [Google Scholar]), often there maybe only minor differences in their estimates. Therefore a computationally attractive technique is likely to be popular.     

Rethinking the Links between Human Relationships and Economic Efficiency Using Local Institutions: The Case of Two Emerging Economies

Emerging countries around the world have been growing fast over the last thirty years, with most of these countries basing their economic development on a state capitalism. Within these countries, there is a concentration of wealth in the hands of a few people. This fact confirms the analysis of Thorstein Veblen (1898 Veblen, Thorstein. “Why Is Economics Not an Evolutionary Sciences?” Quarterly Journal of Economics 12, 2 (1898): 373–397.[Crossref] , [Google Scholar]) who shows the gap that exists between the vested interest of the rich and the unmet needs of the poor. The world happiness report (Helliwell, Layard and Sachs 2016 Helliwell, John F., Richard Layard and Jeffrey Sachs, eds. World Happiness Report 2016. World Happiness, 2016. Available at http://worldhappiness.report/wp-content/uploads/sites/2/2016/03/HR-V1_web.pdf. Accessed December 1, 2016. [Google Scholar]) also shows for the emerging economies a gap between the world rank in economic growth and in wellbeing. I propose a new paradigm of development for two emerging economies, Brazil and South Africa, by putting human development in the center of economic development and by using different approaches in economics and psychology. My analysis links the theories of Carl Shapiro and Joseph E. Stiglitz regarding “efficiency wages” (1984 Shapiro, Carl and Joseph E. Stiglitz. “Equilibrium Unemployment as Worker Disciplines Devices.” American Economic Review 74, 3 (1984): 433–444.[Web of Science ®] , [Google Scholar]) with the complexity approach (Le Moigne 1995 Le Moigne, Jean-Louis. La modélisation des systèmes complexes. Paris, France: Dunod, 1995. [Google Scholar]). This approach combines the results of positive psychology (Kahneman 2011 Kahneman, Daniel. Thinking, Fast and Slow. London, UK: Penguin, 2011. [Google Scholar]) with the role of local institutions for improving the economic development of emerging economies (Deaton 2016 Deaton, Angus. La grande évasion: Santé, richesse et origine des inégalités. Paris, France: PUF, [2015] 2016. [Google Scholar]). In the first section of the article, I examine definitions of economic and human wealth. In the second section, I analyze the gaps that exist between the standard-of-living ranking and the wellbeing ranking for both Brazil and South Africa in order to present meso-happiness indexes linking the micro- and macro-levels of human wealth. In the last section, I analyze the way local institutions in Brazil and South Africa could create dynamic links for these countries’ efficient functioning in the world economy.     

Malmquist productivity index decompositions: a unifying framework

In two widely cited but unpublished working papers, Simar and Wilson (1998 Shephard, R. 1970. Theory of Cost and Production Functions, New Jersey: Princeton University Press.  [Google Scholar]) and Zofío and Lovell (1998 Wheelock, D and Wilson, PW. 1999. Technical progress, inefficiency, and productivity change in U.S. banking, 1984–1993. Journal of Money, Credit and Banking, 31: 212–34. [Crossref], [Web of Science ®] , [Google Scholar]) proposed an alternative decomposition of the Malmquist Productivity Index, which retained what seemed to be the strongholds of previous proposals with regard to the contribution of technological and efficiency change to productivity change. Namely, a technical change term with regard to the best practice variable returns to scale (VRS) technology, which is to be found in Ray and Desli (1997 Ray, S. Sept. 2001. “On an extended decomposition of the malmquist productivity index”. In Paper Presented at the Seventh European Workshop on Efficiency and Productivity, Sept., 25–29. Oviedo: Universidad de Oviedo.  [Google Scholar]) and a scale efficiency change term that illustrates a firm's situation with regard to optimal scale (benchmark technology), Färe et al . (1994 Färe, R, Grosskopf, S and Norris, M. 1997. Productivity growth, technical progress, and efficiency change in industrialized countries: reply. American Economic Review, 87: 1040–43. [Web of Science ®] , [Google Scholar]). Attaining this objective required the introduction of an additional term in the Malmquist Productivity Index decomposition, which would reflect the scale bias of technical change. It is our objective to provide economic rationale for this term within a theory of production context, the existing decompositions and recent articles that further elaborate on this issue. The ideas are illustrated using productivity trends in 17 OECD countries.     

Another look at the spending response to the 2001 income tax rebates

This article revisits the spending response to the 2001 US tax rebates by focussing on two key aspects of how tax policy researchers use the Consumer Expenditure Survey (CEX). These two attributes, which are often overlooked, are as follows: the measures used for consumption and the ‘outlier’ criteria applied to the data. First, I reproduce the results in Johnson et al. (2006 Johnson, DS, Parker, JA and Souleles, NS. 2006. Household expenditure and the income tax rebates of 2001. American Economic Review, 96: 1589–610. [Crossref], [Web of Science ®] , [Google Scholar]), which (using the CEX) concluded that households immediately spent 20–40% of their rebates on nondurable consumption goods. Then, I show how making two changes – both of which are relied upon in the literature – affects their results. These adjustments reduce the estimated magnitude of the rebate's impact by as much as 100%.