Another look at the maximum entropy correlation coefficient

A simulation experiment based on 10,000 trials shows that the Fisher transform of the maximum entropy correlation coefficient has a smaller bias than that of the sample correlation coefficient when the parent correlation ρ satisfies |ρ|?0.8, and a smaller root-mean-square error when |ρ|?0.95.     

Another look at mass migration and unions in Western Europe

The paper analyses implications of unions' strategy for employment in western European countries that are baffled with mass migration of unskilled workers from neighboring poor countries. Unions' strategy in this paper includes bargaining for non-wage benefits together with monetary compensation for workers. It is shown that unions' strategy generates employment, raises the ratio of skilled to unskilled workers and raises national income. This suggests that even when migration acts as a competitive fringe, instead of using controversial migration policy as a covert anti-union tool, policy makers should encourage this type of bargaining which will have both economically and politically favorable effects.     

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%.     

Another look at momentum crashes: momentum in the European Monetary Union

This article studies the profitability of a selection of prominent momentum-based strategies in the European Monetary Union (EMU). In contrast to past examples documenting the lack of profitability of unconditional price momentum in the most recent decade, the current research finds that unconditional price momentum yielded significant positive payoffs. There is evidence of option-like behaviour for strategies based on intermediate past performance. Surprisingly, there is no such evidence for the momentum strategy based on recent past performance.     

Another look at the identical tastes hypothesis on the analysis of cross-country alcohol data

A number of studies have appeared in the area of cross-country consumption comparisons, where a common system of demand equations is used to model the consumption patterns of all countries. Under this approach, tastes are taken to be the same internationally. Such an assumption of identical tastes was forcibly advocated by the dual Nobel laureates, Stigler and Becker, who argued that tastes neither change capriciously nor differ importantly between people. In this paper, we use the system-wide approach to demand analysis to analyse the alcohol consumption patterns of drinkers from 10 high-income industrialised countries and verify Stigler and Becker’s (Rev Econ Statist 59:113–118, 1977) hypothesis by testing whether pooling the data across countries is acceptable. We also present the implied demand elasticities for beer, wine and spirits for the 10 countries and discuss the use of these elasticities in policy-related applications.     

Another look at the Relationship between Telecommunications Investment and Economic Activity in the United States

Abstract

In a recent issue of this journal, Beil et al. (2005, hereafter, BFJ) examined the relationship between telecommunications investment and economic growth in the United States over the period 1947–1996. Based on results from Granger-Sims test, BFJ conclude that ‘… investment by telecommunications firms is caused by, but does not cause, economic activity, and the findings are robust across lag lengths’. However, using another version of the Granger causality test due to Toda & Yamamoto (1995) and the same data set transformed into natural logarithms, the evidence in this paper indicates a feedback where there was a bi-directional causality between telecommunications investment and economic growth. This seems to suggest that policies aimed at stimulating the US economy by accelerating investment in the telecommunications sector may be successful.     

Social insurance and social justice—Another look at the antipoverty effects of social insurance programs

This paper analyzes social insurance programs in the United States to determine if they support the principles of social justice, with special emphasis on the principle of preferential treatment of the poor. The paper also examines the antipoverty effects of social insurance programs. The major conclusions are the following: (1) social insurance programs generally are consistent with the principles of social justice, but parts of certain programs clearly violate the norms of social justice; (2) social insurance programs are especially powerful in reducing the poverty rate and poverty gap for the elderly, but are generally ineffective in reducing the poverty rate for single-parent families with related children under age 18; (3) social insurance programs have only a minor impact in reducing the poverty rate among married-couple families with related children under age 18; and (4) although the Social Security payroll results in a small increase in the poverty rate, social insurance programs are especially effective in reducing income inequality.     

Do more open economies have bigger governments? Another look

We reconsider the evidence of a positive relationship between openness and the size of government recently established by Rodrik [Rodrik, D., 1998. Why do more open economies have bigger governments? Journal of Political Economy 106, 997–1032] and others. While the existing literature focuses on expenditure based measures of government, we consider non-budgetary measures such as government ownership of enterprises, price controls, asset expropriation. Each of these may have little impact on government expenditures, yet can make the role of government sizable. We demonstrate that the scope of government is much larger in less open economies when considering non-budgetary measures. Additionally, we show that higher levels of non-budgetary government are positively correlated with trade barriers. Finally, we provide further evidence on the hypothesis that larger governments provide social insurance in open economies subject to terms of trade shocks. Although we find that greater terms of trade risk is weakly associated with larger government in all forms, these interventions include price controls and greater risk of asset expropriation which are hard to reconcile with a pure insurance motive.     

Another look at the linear q model: an empirical analysis of aggregate business capital spending with maintenance expenditures

Abstract .  The paper revisits the empirical investment literature, which has established that aggregate business fixed investment is not found to be related linearly to marginal or average Tobin's q . The theoretical background is extended here by developing a supply-side model where the depreciation rate of private capital is determined endogenously. The firm can either invest in 'new' capital, which adds directly to the existing capital stock at the presence of convex adjustment costs, or extend the durability of installed capital through maintenance expenditure, which affects its depreciation rate. The model shows that Tobin's q is then a positively related sufficient statistic for both components of aggregate capital expenditures. This central implication is tested empirically using aggregate time-series survey data from Canada on 'new' investment and maintenance expenditures covering the period 1956–93. The estimated relationships produce significant and plausible parameter estimates for the structural parameters of the q model.     

Health insurer market power and employer size: an empirical evaluation of insurer concentration and wages through compensating differentials

This article explores the differentiated effects of health insurer market concentration on net compensation of employees across distinct firm sizes. Consistent with the existing literature evaluating insurer market concentration and the theory of compensating differentials, we find evidence of higher premiums and reduced net compensation for employees in markets with more concentrated insurers. Furthermore, we find evidence that the magnitude of these effects is distinctly smaller for large employers. This implies that mergers of large health insurance companies may have a significant impact on small businesses but that the effect is mitigated for larger employers.     

A first look at nurse editors' compensation

While the compensation for many nursing roles is published and accessible, no data have heretofore been available on monetary compensation for nurse editors. Answers to questions about compensation contained in a 108-question international survey of 88 editors of nursing journals, which was designed to learn about all aspects of the role of editor, are described. This study provides a first look at editor compensation.     

Earnings differentials and household-income differentials in Hungary—Policies and practice

Since about 1970 it has been the policy of the Hungarian leaders to widen earnings differentials for incentive reasons and, simultaneously, to narrow household-income differentials for equity reasons. The two policies work in opposite direction.This paper analyzes the policies and their actual results. Hungary has managed indeed to considerably narrow income differentials due to rapid expansion of transfer payments. The introduction of the NEM in 1968 was marked by a widening of earnings differentials in order to increase economic efficiency. However, since 1973 an opposite development has taken hold for political reasons and is still going forward.     

Another Look at the Equity Risk Premium Puzzle

The model of Mehra and Prescott (1985, J. Econometrics, 22, 145–161) implies that reasonable coefficients of risk‐aversion of economic agents cannot explain the equity risk premium generated by financial markets. This discrepancy is hitherto regarded as a major financial puzzle. We propose an alternative model to explain the equity premium. For normally distributed returns and for returns far away from normality (but still light tailed), realistic equity risk premia do not imply puzzlingly high risk aversions. Following our approach, the ‘equity premium puzzle’ does not exist. We also consider fat‐tailed return distributions and show that Pareto tails are incompatible with constant relative risk aversion.