The effects of economic freedom,regulatory quality and taxation on the level of per capita real income: a preliminary analysis for OECD nations and non-G8 OECD nations

This study of the impact of economic freedom, regulatory quality and the relative burden of taxation on the level of per capita real income/GDP among OECD nations over the period 2003 to 2007 adopts a modified version of the overall economic freedom index computed by the Heritage Foundation (2013), one with the fiscal freedom and business freedom indices removed. This study then provides panel least squares fixed-effects estimates for five linear specifications/models. Each nation during this time frame can be regarded either as a nation per se or as a de facto ‘economic region’ within the OECD. The analysis first focuses upon all of the OECD nations and then, as a robustness test, subsequently focuses only on non-G8 OECD member nations. The estimations in this study all provide strong empirical support for the three central hypotheses proffered here, namely: (1) the higher the overall degree of economic freedom, the higher the per capita real income (GDP) level; (2) the higher the level of regulatory quality, the higher the level of per capita real income (GDP) and (3) the higher the overall tax burden, expressed as a per cent of GDP, the lower is the level of per capita real income (GDP).     

The codetermined firm in a Cournot duopoly: A stability analysis

This paper aims to study the stability issue in a Cournot duopoly with codetermined firms. We show that when both firms codetermine employment together with decentralised employees' representatives, a rise in wages acts as an economic (de)stabiliser when the wage is fairly (high) low, while under profit maximisation a rise in wages always acts as a stabilising device because the parametric stability region monotonically increases with the wage in such a case. Moreover, a rise in the union's bargaining power has a de-stabilising effect, except when the wage is low and the firm power is already high. Therefore, under codetermination a change either in the wage or firm power in the Nash bargaining plays an ambiguous role on stability. We also show with numerical simulations that complex dynamics can also occur.     

The welfare effects of FDI: A quantitative analysis

Foreign direct investment (FDI) can increase productivity and wages. However, it is also often accompanied by primary income deficits as foreign-owned firms repatriate their profits. The welfare effects of FDI are thus ambiguous. A particularly illustrative example of this phenomenon are the Visegrád 4 (V4) countries (Czech Republic, Hungary, Poland, Slovakia). This paper investigates whether FDI can be beneficial in the presence of profit repatriation using a general equilibrium model calibrated to the V4 economies. Counterfactual simulations suggest that the benefits of FDI outweigh the costs for these countries. On average, a 1% increase in the share of foreign firms is associated with a 0.17% increase in welfare. However, incentivising foreign firms to reinvest more of their profits domestically is, ceteris paribus, welfare-improving. A 10-percentage-point increase in the profit repatriation rate is associated with a 1.06% welfare gain on average.     

Missing women in Indian districts: a quantitative analysis

The ratio of women to men in India reveals socially determined excess female mortality. The cultural and economic variables used to explain variations in the juvenile sex ratio are interrelated with each other and with other demographic and economic variables, and show large regional differences within India. Our empirical study is built on an extension to Sen's entitlements framework and spatial lag and spatial error econometric procedures. We find that low female labour participation (FLP) is an important determinant of anti-female child bias in regions characterised by both Indo-Aryan and Dravidian kinship systems, but where Indo-Aryan kinship predominates, mainly in Northern India, the effect of FLP is much more significant.     

The (Q,S,s) pricing rule: a quantitative analysis

Are nominal prices sticky because menu costs prevent sellers from continuously adjusting their prices to keep up with inflation or because search frictions make sellers indifferent to any real price over some non-degenerate interval? The paper answers the question by developing and calibrating a model in which both search frictions and menu costs may generate price stickiness and sellers are subject to idiosyncratic shocks. The equilibrium of the calibrated model is such that sellers follow a (Q,S,s) pricing rule: each seller lets inflation erode the effective real value of the nominal prices until it reaches some point s and then pays the menu cost and sets a new nominal price with an effective real value drawn from a distribution with support [S, Q], with s < S < Q. Idiosyncratic shocks short-circuit the repricing cycle and may lead to negative price changes. The calibrated model reproduces closely the properties of the empirical price and price-change distributions. The calibrated model implies that search frictions are the main source of nominal price stickiness.     

Effects of blocking patents on R&D: a quantitative DGE analysis

What are the effects of blocking patents on R&;D and consumption? This paper develops a quality-ladder growth model with overlapping intellectual property rights and capital accumulation to quantitatively evaluate the effects of blocking patents. The analysis focuses on two policy variables (a) patent breadth that determines the amount of profits created by an invention and (b) the profit-sharing rule that determines the distribution of profits between current and former inventors along the quality ladder. The model is calibrated to aggregate data of the US economy. Under parameter values that match key features of the US economy and show equilibrium R&;D underinvestment, I find that optimizing the profit-sharing rule of blocking patents would lead to a significant increase in R&;D, consumption and welfare. Also, the paper derives and quantifies a dynamic distortionary effect of patent policy on capital accumulation.     

Religion in macroeconomics: a quantitative analysis of Weber’s thesis

Max Weber in 1905 claimed that Protestantism, and more specifically Calvinism, facilitated the rise of capitalism. This paper assesses the quantitative plausibility of his hypothesis by introducing religious beliefs into a dynamic general equilibrium model of development and growth. Through counterfactual exercises, the paper investigates whether differences between Catholics and Protestants most closely identified with the Protestant Work Ethic can account for long delays in the start of Industrialization observed between various countries and regions. The main finding is that these differences may possibly explain why Northern Europe developed before Southern Europe, but they cannot explain why Europe developed before Latin America.

Many of the tenets of Calvinism have had profound social implications–in particular, that thrift, industry, and hard work are forms of moral virtue and that business success is an evidence of God’s grace. Because these views helped to create a climate favorable to commerce, Calvinism played a role in the overthrow of feudalism and the establishment of capitalism. Microsoft Encarta

We thank Doug Gollin, Larry Neal, Richard Layton, as well as seminar participants at University of Wisconsin Madison and Vanderbilt University for their comments.     

The technological capabilities of nations: The state of the art of synthetic indicators

Composite synthetic indicators of the technological capabilities of nations have been used more frequently over the last years becoming a sort of Olympic medal table of the innovation race. The European Commission, specialised United Nations Agencies, the World Bank, the World Economic Forum, and individual scholars have developed several of these measurement tools at macroeconomic level. All these indicators are based on a variety of statistical sources in order to capture the multidimensional nature of technological change. This paper reviews these various exercises and: i) it brings into light the explicit and implicit assumptions on the nature of technological change; ii) it discusses their pros and cons; and iii) it explores the consistency among the results achieved. Most of the final rankings at the country level are fairly consistent, but significant discrepancies for some nations emerge. The value of synthetic indicators of technological capabilities for public policy, company strategies and economic studies is finally discussed.     

The price stability under inflation targeting regime: An analysis with a new intermediate approach

This paper analyzes the relevance of the inflation targeting (IT) policy in achieving its primary goal of medium-term price stability. Contrary to previous studies, we propose, in this work, a new approach; an intermediate approach that consists in conducting a time-series analysis (employed in the literature under unilateral cases-absolute approach) with a comparison of inflation performance of IT countries and those of non-IT countries (comparison made in literature under the relative approach). Empirically, we employ a frequency analysis based on evolutionary spectral theory of Priestley (1965–1996) in order to distinguish between different inflation horizons; short-run and the medium-run inflation rates. To check the stability of spectral density functions for inflation series for each country under studied frequencies, we apply a Bai and Perron (2003a,b) test. Our results show that after IT framework implementation, there is no break point in inflation series in short and medium terms. This result is not verified for non-IT countries. Therefore, IT is more relevant in achieving price stability and consequently more effective on inflation expectation anchoring than other monetary policies.     

Regional (in)stability in Europe a quantitative model of state fragmentation

Although there is a rich and burgeoning theoretical literature on regional (in)stability, its empirical implications remain unclear due to the scarcity of complementary quantitative research. This paper presents simulated experimental findings on spatial heterogeneity in secession proneness across 264 regions belonging to 26 European countries. To do so, it develops a broad model of state fragmentation that reconciles the views of the dominant strands in the literature. In order to apply the model, a novel indicator of regional political distinctiveness is proposed, rooted in the discrepancy between regional and national electoral behavior. Using this new indicator, we show that regional electoral heterogeneity has been on the rise in Europe in the past 40 years, offering an empirical rationale for the simultaneous rise in regionalism that is consistent with contemporary economic thinking on optimal country size. Calibrating our model to the current European situation, we find that Catalonia, Flanders and the Basque country are the regions currently predicted to be the most likely to break away. In line with these results, governments in all three regions have consistently vocalized demands for increased autonomy - or even secession - in recent years. Denmark, Hungary and Slovenia show up as the most secession-robust European countries.     

Family planning in developing nations: a global concern,our concern

Rapid population growth is a serious problem in many developing countries and family planning policies developed in response to the problem raise many ethical issues; home economists can help the citizens in their respective countries increase their knowledge of population dynamics and help them assess the ethical implications of population and family planning policies. Most developing countries have high population growth rates. The annual population growth rates for 1975-79 were 2.8% for Africa, 2.6% for Latin America, and 2.1% for Asia. Population grows exponentially: a population growing at an annual rate of 3% increases. 1900% in a century. If current population trends continue the world's population will stablize toward the end of the 21st century at about 10 billion persons, compared to the world's present population of 4.3 billion. Rapid population growth not only threatens the future welfare of society as a whole, but currently impedes the economic development of the world's poorest nations. Consequently, the governments in many developing countries have adopted vigorous family planning programs. It is difficult to reduce population growth in developing countries because these countries have a high proportion of young people in their populations, i.e., a high number of persons of reproductive age. Barriers to family planning acceptance include 1) high illiteracy rates 2) high infant mortality rates 3) the high economic and socialvalue placed on children in developing countries and 4)religious beliefs. Methods used by governments to alter population growth include 1) manipulating access to contraceptives, 2)developing programs to alter social determinants of fertility, 3) using propaganda to encourage or discourage birth control and repressing information contrary to the government's policies, 4) offering incentives to those who further government policies and imposing disincentives on those who do not comply with government policies, and 5) exerting political pressure to force individual to comply with the govermnent's policies. The use of some of these methods raises ethical issues. When does pressure become coercion? Is coecion justified by the need to ensure the future welfare of the world? In India, sterilization was promoted by making payments to sterilization acceptors and promoters and to physicians who performed sterilizations. In Taiwan, savings deposits were made for children of couples with 1 or 2 children, and the deposits were decreased in additional childred were born. In China incentives, disincentives, and polititcal and peer pressure are used to promote the governt's family planning policies. Do these strong measures lead to infaticide and to the abuse of children whose births result in economic loss for other family members? Do they violate human rights? These issues should be discussed in home economics classes, and additional efforts must be made to ensure that male students are also provided with population information. Home economists can promote the critical assessment of the population problem and its solutions.     

The welfare cost of monopolistic competition: a quantitative assessment

This paper quantifies the welfare cost of monopolistic competition in a simple parametric class of endogenous growth models, embedding the neoclassical growth framework as a special case. We put particular emphasis on taking transitional dynamics into account. In doing so, we develop an original two-step numerical procedure to compute the value function. We find for conservative calibrations that the welfare cost of monopolistic competition can be anywhere between 0.4 and 1.2% of consumption, depending on whether labor is elastically or inelastically supplied.     

When economics harmonized mathematics in Japan: a history of stability analysis

This article discusses how economics was mathematized by Japanese theoretical economists with the cooperation of Japanese mathematicians before 1950. Mathematicians played the leading part in assimilating European scientific ideas and providing an internationally oriented attitude in Japan from the mid nineteenth century. They began to publish many updated textbooks in Japanese from around 1930 on. In the 1940s, Japanese mathematical economists were intensively studying the so-called stability problem, thereby mathematizing economics more rapidly than ever before. Their research activity will give us an interesting example of a process of organizing economic knowledge by introducing more mathematics into the economics literature.     

The structure of personal influence of the Belgian holding companies: A quantitative analysis

In this paper, a model of the input-output type is developed which enables the quantitative analysis of personal influence between firms, induced by simultaneous presence in the boards of directors. The empirical part is confined to the system of the most important Belgian holding companies. The structure of personal influence in this system is tackled by means of the calculation of matrices of so-called direct and total communication coefficients. Subsequently, these matrices are dichotomised using appropriate thresholds, and quasi-block-diagonalised. The resulting groups of holding companies are checked with a priori information and with the results of clique detection.     

The (in)stability of money demand in the euro area: lessons from a cross-country analysis

The instability of standard money demand functions has undermined the role of monetary aggregates for monetary policy analysis in the euro area. This paper uses country-specific monetary aggregates to shed more light on the economics behind the instability of euro area money demand. Our results obtained from panel estimation indicate that the observed instability of standard money demand functions could be explained by omitted variables like e.g. technological progress that are important for money demand but constant across member countries.