DO “CAPITALIZATION EFFECTS” FOR PUBLIC GOODS REVEAL THE PUBLIC'S WILLINGNESS TO PAY?

This article develops a welfare theoretic framework for interpreting evidence on the impacts of public programs on housing markets. We extend Rosen's hedonic model to explain how housing prices capitalize exogenous shocks to public goods and externalities. The model predicts that trading between heterogeneous buyers and sellers will drive a wedge between these “capitalization effects” and welfare changes. We test this hypothesis in the context of changes in measures of school quality in five metropolitan areas. Results from boundary discontinuity designs suggest that capitalization effects understate parents’ willingness to pay for public school improvements by as much as 75%.     

ARE LONG‐TERM INFLATION EXPECTATIONS WELL‐ANCHORED? EVIDENCE FROM THE EURO AREA AND THE UNITED STATES

This paper analyses the stability of long‐term inflation expectations and uncertainty, based on their sensitivity to innovations to observed inflation, short‐ and medium‐term forecast news. News is defined in a subjective sense and derived from revisions to shorter‐term fixed‐target forecasts. The assessment tests for presence of non‐linear effects, including regime changes during disinflation in the USA in the 1990s and the recent financial crisis. Stability is also investigated in terms of level evolution, based on a structural non‐linear and non‐Gaussian learning model to uncover the presence of a common trend underlying the long‐term dynamics of inflation, individual expectations, and uncertainty.     

DEFENCE AND NON‐DEFENCE SPENDING IN THE USA: STIMULI TO ECONOMIC GROWTH? COMPARATIVE FINDINGS FROM A SEMIPARAMETRIC APPROACH

Given its significant policy implications, the nexus between public expenditures and economic growth has been the subject of an extensive and often emotive theoretical and empirical debate. In this paper, a semiparametric model is used to explore the link between GDP and defence and non‐defence government spending in the USA over the period 1929–2009. Evidence reported herein indicates that the latter represents a greater stimulus vis‐à‐vis the former.     

EMPLOYER‐PROVIDED HEALTH INSURANCE AND JOB MOBILITY: DID THE AFFORDABLE CARE ACT REDUCE JOB LOCK?

Many have argued that concerns over health insurance reduce labor market mobility in the United States, causing a “job lock” effect. We take advantage of the novel natural experiment created by the Affordable Care Act's dependent coverage mandate to estimate the magnitude of the job lock effect for young adults. Using the 2008–2013 Current Population Survey and a difference‐in‐difference research design, we find that the expansion of dependent coverage did not increase job mobility, suggesting that job lock is not a major concern for young adults. (JEL J62, I13, I18)     

WAL‐MART AND BANKS: SHOULD THE TWAIN MEET? A PRINCIPLES‐BASED APPROACH TO THE ISSUES OF THE SEPARATION OF BANKING AND COMMERCE

The application in July 2005 by Wal-Mart to obtain a specialized bank charter from the state of Utah and to obtain federal deposit insurance reopened a national debate concerning the separation of banking and commerce. Though Wal-Mart withdrew its application in March 2007, the issue and the debate continue. This article offers a principles-based approach to this issue that begins with the recognition that banks are special and that safety and soundness regulation of banks is therefore warranted. Building on that recognition, the article lays out the principle that the "examinability and supervisability" of an activity should determine if that activity should be undertaken by a bank. Even if an otherwise legitimate activity is not suitable for a bank, it should be allowed for a bank's owners (whether the owners are individuals or a holding company), so long as the financial transactions between the bank and its owners are closely monitored by bank regulators. The implications of this set of ideas for the Wal-Mart case and for banking and commerce generally are then discussed . ( JEL G21, G28)     

DO INVESTMENT‐SPECIFIC TECHNOLOGICAL CHANGES MATTER FOR BUSINESS FLUCTUATIONS? EVIDENCE FROM JAPAN

The observed decline in the relative price of investment goods to consumption goods in Japan suggests the existence of investment‐specific technological (IST) changes. We examine whether IST changes are a major source of business fluctuations in Japan, by estimating a dynamic stochastic general equilibrium model using Bayesian methods. We show that IST changes are less important than neutral technological changes in explaining output fluctuations. We also demonstrate that investment fluctuations are mainly driven by shocks to investment adjustment costs. Such shocks represent variations of costs involved in changing investment spending, such as financial intermediation costs. We find that the estimated series of the investment adjustment cost shock correlates strongly with the diffusion index of firms' financial position in the Tankan (Short‐term Economic Survey of Enterprises in Japan). Therefore, we argue that the large decline in investment growth in the early 1990s was due to an increase in investment adjustment costs stemming from firms' financial constraints after the collapse of Japan's asset price bubble.     

DO LABOUR SOCIETIES PERFORM DIFFERENTLY TO COOPERATIVES? EVIDENCE FROM THE SPANISH BUILDING INDUSTRY

ABSTRACT: Labour Societies and Cooperatives are both Social Economy enterprises, but with noticeable differences, some of which are imposed by legislation in Spain. The aim of this paper is to study whether such differences affect their management capacity and, in particular, efficiency. In doing so, Data Envelopment Analysis techniques and the metafrontier approach proposed by O’Donnell et al. (2008) are used on a sample of Spanish Labour Societies and Cooperatives belonging to the building industry. Scores of technical efficiency and metafrontier ratios are computed at firm level and, as a novel contribution to existing literature in this field of research, at input‐specific level. The main finding shows that Cooperatives enjoy some technological advantages over Labour Societies, particularly in regard to the management of labour, fixed assets and current assets.     

THE 2007–2008 U.S. RECESSION: WHAT DID THE REAL‐TIME GOOGLE TRENDS DATA TELL THE UNITED STATES?

In the extant literature of business cycle predictions, the signals for business cycle turning points are generally issued with a lag of at least 5 months. In this paper, we make use of a novel and timely indicator—the Google search volume data—to help to improve the timeliness of business cycle turning point identification. We identify multiple query terms to capture the real‐time public concern on the aggregate economy, the credit market, and the labor market condition. We incorporate the query indices in a Markov‐switching framework and successfully “nowcast” the peak date within a month that the turning occurred. (JEL E37, G17)     

DOES INITIAL ACCESS TO BANK LOANS PREDICT START‐UPS' FUTURE DEFAULT PROBABILITY? EVIDENCE FROM ITALY

In Europe, several countries have established public loan guarantee funds throughout direct/indirect loan programs to facilitate the access of SMEs and start‐ups to bank credit. This paper investigates whether start‐ups' level of access to bank loans during the early stage represents an imprinting factor with effects on the likelihood of survival once the firm reaches maturity. We rely on a firm‐level longitudinal data set of 49,111 Italian startups born from 2003 to 2005. Implementing a 2SLS regression analysis we show that the initial level of start‐up bank debt negatively influences the probability of default controlling for firm characteristics and performance. (JEL G21, M20, H32)     

IS MARKET‐ORIENTED REFORM PRODUCING A ‘TWO‐TRACK’ EUROPE? EVIDENCE FROM ELECTRICITY AND TELECOMMUNICATIONS

ABSTRACT: The European Commission has formally recognized that adequate provision of basic household services, including energy, communications, water and transport, is key to ensuring equity, social cohesion and solidarity. Yet little research has been done on the impact of the reform of these services in this regard. This article offers an innovative way to explore such questions by analyzing and contrasting stated and revealed preferences on citizen satisfaction with and expenditure on two services, telecommunications and electricity, in two large countries, Spain and the UK. We find evidence that in telecommunications, but not in electricity, reform has led to a ‘two‐track’ Europe, where citizens who are elderly, not working or the less‐educated behave differently in the market, with the result that they are less satisfied with these services than their younger, working, better‐educated, counterparts.     

HAS INTERNATIONAL CAPITAL MOBILITY INCREASED IN ASIA? EVIDENCE FROM THE POST‐1997 FINANCIAL CRISIS PERIOD

This paper examines whether international capital mobility in Asia has increased after the 1997 Asian financial crisis by estimating the Feldstein‐Horioka (FH) coefficients using panel cointegration and dynamic OLS regressions. In the benchmark estimation, we find that the FH coefficients of ten Asian economies decrease significantly from 0.65 during the pre‐crisis period to 0.32 during the post‐crisis period. Furthermore, the coefficient for the post‐crisis period is less statistically significant than that for the pre‐crisis period. The extended model estimations with additional control variables controlling for the business cycle, different foreign exchange rate systems, and capital control also show the results which are consistent with the benchmark estimation results. Rolling regressions show a consistently declining trend of the FH coefficients in Asia during our sample period. These results provide consistent evidence, according to the FH proposition, of increasing international capital mobility in Asia during the post‐1997 Asian financial crisis period. (JEL F36, F37, F21)     

HOW HAS THE CRISIS OF 2008–09 AFFECTED SUBJECTIVE WELL‐BEING? EVIDENCE FROM 25 OECD COUNTRIES

This paper uses life satisfaction data of almost 140,000 individuals in 25 OECD countries to study how changes in the rates of GDP growth, unemployment, and inflation during the macroeconomic crisis of 2008–09 have affected subjective well‐being. The relative contributions of the three macroeconomic variables to individuals’ life satisfaction are used to assess how each country performed on balance during the crisis. This approach follows a recent trend of using subjective well‐being data for monitoring economic performance and for policy appraisal. We find that in the countries most strongly affected by the crisis, the effects on an average citizen's well‐being may be of a similar magnitude as the effects of the most serious personal life events. The main driver of these effects is the drop in GDP, whose impact is aggravated by the increase of unemployment. Though the inflation rate went down in several of the countries, the effect was too weak to significantly reduce the negative effect of the changes in GDP and unemployment. The results show that GDP fluctuations are important drivers of subjective well‐being.     

DOES THE CLARITY OF CENTRAL BANK COMMUNICATION AFFECT VOLATILITY IN FINANCIAL MARKETS? EVIDENCE FROM HUMPHREY‐HAWKINS TESTIMONIES

By applying readability statistics to the Humphrey‐Hawkins testimonies given by the Federal Reserve Chairman, it is tested whether the clarity of central bank communication affects volatility in financial markets. There are three results. First, when clarity matters, it has a diminishing effect on volatility. Second, clarity of communication matters mostly for volatility of medium‐term interest rates. Third, the effects of clarity vary over time. Clarity mattered especially, but not exclusively during Alan Greenspan's Chairmanship. Overall, the analysis illustrates the importance of transparent communication on monetary policy. (JEL E44, E52, E58)     

IS THE BALANCING ITEM FOR AUSTRALIA SUSTAINABLE? EVIDENCE FROM A THRESHOLD AUTOREGRESSIVE MODEL WITH AN AUTOREGRESSIVE UNIT ROOT

This article applies an unrestricted two-regime threshold autoregressive (TAR) model with an autoregressive unit root to examine the sustainability of the balancing item of the balance of payments for Australia from the first quarter 1960 to the second quarter 2006. The main finding is that the balancing item of the balance of payments in Australia is characterised by a non-linear, but stationary, series meaning that the balancing item is sustainable. This result implies that short-run volatility in the balancing item has no effect on the reliability of reporting of the balancing item in the long-run.     

HOW DO HIGH SCHOOL GRADUATES IN JAPAN COMPETE FOR REGULAR,FULL‐TIME JOBS? AN EMPIRICAL ANALYSIS BASED UPON AN INTERNET SURVEY OF THE YOUTH*

We use a survey of Japanese youth within 10 years after high school graduation to investigate impacts of academic and social skills on their success in the job market. We find three major factors account for the job market outcome immediately after school: school characteristics and job‐placement services, academic performance, and social skills, including negative impacts of problematic behaviors at school. Second, when we run a probit regression on whether or not the surveyed individuals hold regular, full‐time jobs, we find the persistent but declining (over age) impact of the job placement immediately after school. Moreover, we find that the impact of variables pertaining to social skills remain significant even after controlling for the job‐placement outcome after school, whereas other variables, such as grade point average or attributes of high schools, are largely irrelevant to the current employment status.