FDI,Education, and Economic Growth: Quality Matters

In this paper, we revisit the results from the influential study by Borensztein et al. (Journal of International Economics 45:115–135, 1998), which argues that inward foreign direct investment (FDI) promotes the economic growth in a less developed host country only when the host country obtains a threshold level of secondary schooling. Borensztein et al. (Journal of International Economics 45:115–135, 1998) only focus on the quantity of education. We take into consideration both the quantity and the quality of education. We adjust the original schooling data in Borensztein et al. (Journal of International Economics 45:115–135, 1998) by two quality of education indices and re-estimate their model. We find that the complementarity between inward FDI and schooling still exists, but the threshold level of schooling in our study is lower than the threshold calculated in Borensztein et al. (Journal of International Economics 45:115–135, 1998). Our results support the importance of education quality and suggest that with improved quality of education, it does not take as much quantity of schooling, as established in Borensztein et al. (Journal of International Economics 45:115–135, 1998), for inward FDI to have a positive impact on economic growth in the host country.     

Rural-Urban Differences in the Unemployment-Crime Relationship: The Case of Pennsylvania

This study analyzes the unemployment-crime (U-C) relationship in urban and rural Pennsylvania counties using a balanced panel data set over the period from 1990 to 2009. A two-way fixed effects model is estimated to account for unobserved county-specific and time-specific heterogeneity. The criminal opportunity and criminal motivation effects of unemployment on crime advanced by Cantor and Land are tested. The results suggest that there are rural-urban differences in the impacts of the covariates. Specifically, both statistically significant criminal opportunity and criminal motivation effects are present in urban counties. In contrast, rural counties fail to conform to U-C predictions. Oaxaca decomposition reveals that the unexplained portion of the rural-urban difference in the crime rate is 12%. The results provide support for addressing labor market conditions to complement traditional crime-fighting measures in urban settings.     

A generalized multi-country endogenous growth model

The transitional dynamics of open-economy endogenous growth models are largely unexplored. The present paper fills this gap in the literature. By applying the familiar Travis–Dixit–Norman (Dixit and Norman, Theory of International Trade, Cambridge University Press, Cambridge, UK, 1980) approach to a general class of growth models, it provides original results on the transitional dynamics of the multi-country open-economy versions of several prominent special cases, including the models of Romer (J Polit Econ, 94:1002–1037, 1986; J Polit Econ 98:S71–S102, 1990), Lucas (J Monet Econ, 22:3–42, 1988), Grossman and Helpman (Innovation and Growth in the Global Economy. MIT Press, Cambridge, MA, 1991a, Chaps. 3 and 4; Rev Econ Stud 58:43–61, 1991b), Jones (J Polit Econ, 103:759–784, 1995a), and Segerstrom (Am Econ Rev, 88:1290–1310, 1998). This approach also shows that, in the class of models considered, the question of whether or not international economic integration accelerates growth in the long run is equivalent to the question of whether or not scale effects prevail.      

Labor market deregulation and globalization: empirical evidence from OECD countries

This paper empirically investigates the influence of globalization on various aspects of labor market deregulation. I employ the data set by Bassanini and Duval (2006) on labor market institutions in OECD countries and the KOF index of globalization. The data set covers 20 OECD countries in the 1982–2003 period. The results suggest that globalization did neither influence the unemployment replacement rate, the unemployment benefit length, public expenditures on ALMP, the tax wedge, union density nor overall employment protection. In contrast, protection of regular employment contracts was diminished when globalization was proceeding rapidly. In fact, domestic aspects, such as unemployment and government ideology are more important determinants of labor market institutions and deregulation processes in OECD countries than globalization. For this reason, working conditions of unskilled workers are not likely to deteriorate and the jobs of unskilled workers are not likely to disappear in the course of globalization. All this is, of course, not to insinuate that globalization has any benign influence on labor market institutions.     

Racial differences in the unemployment response to structural changes in local labor markets

This analysis uses establishment-level data on job creation and destruction to examine the unemployment rate responses of black, Hispanic and white workers to shifts in demand across firms and industries during the period 1980–84. Black unemployment rates are significantly more responsive to differences in aggregate demand growth and wage flexibility than are white and Hispanic unemployment rates, and they are also more severely impacted by structural changes in labor demand than are white and Hispanic unemployment rates. Additional research using the measures and focus of the present analysis that cover other time periods can assist in developing a clearer picture of the contemporary dynamics of urban labor markets and can provide guidance for public policy.     

Fluctuations in Unemployment and Industry Labor Markets

Throughout the 1990s, and particularly in the mid- to late-1990s, the Japanese employment situation went from bad to worse. We investigate the causes of rising unemployment in Japan, using data on individual workers from the “Special Survey of the Labor Force” between 1988 and 1999. This research focuses on the effect of labor market segmentation by industry on labor flows. Our findings reveal that unemployment in the construction industry and, more recently, in the service industry has contributed greatly to the national unemployment rate. We also find that most successful job transfers occur within the same industry, even though workers may experience some periods of unemployment. Finally, our results show that labor market conditions in each industry affect the probability that a worker will fall into unemployment as well as the probability that an unemployed worker will find new employment. These findings suggest that the Japanese labor market is segmented by industry and this segmentation contributed to the worsening unemployment in Japan. J. Japan. Int. Econ., December 2001, 15(4), pp. 437–464. Department of Economics, Dokkyo University, 1-1 Gakuen-cho, Soka-shi, Saitama 340-0042, Japan; Graduate School of Economics, Nagoya University, Furo-cho, Chikusa-ku, Nagoya, 464-8601, Japan. © 2001 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: J63, J64.     

What do we really know about fiscal sustainability in the EU? A panel data diagnostic

We assess the sustainability of public finances in the EU-15 over the period 1970–2006 using stationarity and cointegration analysis. Specifically, we use panel unit root tests of the first and second generation allowing in some cases for structural breaks. We also apply modern panel cointegration techniques developed by Pedroni (Oxf Bull Econ Stat 61(1):653–670, 1999; Econom Theory 20(3):597–625, 2004), generalized by Banerjee and Carrion-i-Silvestre (Cointegration in panel data with breaks and cross-section dependence, European Central Bank, Working Paper 591, 2006) and Westerlund and Edgerton (Econ Lett 97(3):185–190, 2007), to a structural long-run equation between general government expenditures and revenues. While estimations point to fiscal sustainability being an issue in some countries, fiscal policy was sustainable both for the EU-15 panel set, and within sub-periods (1970–1991 and 1992–2006).     

Do Credit Cards Really Reduce Aggregate Money Holdings?

This paper discusses whether the use of credit cards reduces aggregate money holdings in an economy. Applying and modifying the Baumol-Tobin model (Baumol Quarterly Journal of Economics 66:545–556, 1952 and Tobin Review of Economics and Statistics 38(3):241–247, 1956), it studies how much money a credit card bank would normally maintain to support retail trade, and shows that whether or not the use of credit cards actually reduces the aggregate demand for money depends on how often consumers visit the bank and how long it takes to clear a check. With innovations in the banking industry such as ATMs, online banking, and other electric funds transfer services, the cost of visiting banks (i.e., switching funds between a checkable account and an interest-earning account) is now very low. For the whole economy, as a result, the use of credit cards may not necessarily reduce aggregate money holdings.     

Productivity-Wage Gaps Among Age Groups: Does the ICT Environment Matter?

This paper disentangles the age-productivity-wage nexus by estimating productivity and wage equations with longitudinal employer-employee panel data for Belgium. Results indicate that workers above 49 years are significantly less productive than their younger colleagues. Moreover, while relative productivities across age groups are not found to differ significantly between ICT and non ICT firms, the upward sloping age-wage profile appears to be somewhat steeper in ICT firms. Yet, whatever the ICT environment, findings show that young workers are paid below and older workers above their marginal productivity. This pattern is in line with the deferred payment model developed by Lazear (J Polit Econ 87:1261–1284, 1979).     

Empirical models of criminal behavior: How significant a factor is race?

Empirical models of the supply of criminal offenses in the United States have shown a positive relationship between the proportion of the population that is non-white (RACE) and crime rates. Though non-whites in the United States possess more “criminal capital” than the average person, such studies do not take into consideration this excess criminal capital. Since RACE and the omitted excess criminal capital are correlated, it will pick up the influence of the excess criminal capital. Using cross-sectional data from Florida’s municipalities, we show that after adjusting for excess criminal capital, RACE has no significant relationship with crime.     

Episodic Nonlinearity in Leading Global Currencies

We perform non-linearity tests using daily data for leading currencies that include the Australian dollar, British pound, Brazilian real, Canadian dollar, euro, Japanese yen, Mexican peso, and the Swiss franc to resolve the issue of whether these currencies are driven by fundamentals or exogenous shocks to the global economy. In particular, we use a new method of testing for linear and nonlinear lead/lag relationships between time series, introduced by Brooks and Hinich (J Empir Finance 20:385–404, 1999), based on the concepts of cross-correlation and cross-bicorrelation. Our evidence points to a relatively rare episodic nonlinearity within and across foreign exchange rates. We also test the validity of specifying ARCH-type error structures for foreign exchange rates. In doing so, we estimate Bollerslev’s (J Econom 31:307–327, 1986) generalized ARCH (GARCH) model and Nelson’s (1988) exponential GARCH (EGARCH) model, using a variety of error densities [including the normal, the Student-t distribution, and the Generalized Error Distribution (GED)] and a comprehensive set of diagnostic checks. We apply the Brooks and Hinich (1999) nonlinearity test to the standardized residuals of the optimal GARCH/EGARCH model for each exchange rate series and show that the nonlinearity in the exchange rates is not due to ARCH-type effects. This result has important implications for the interpretation of the recent voluminous literature which attempts to model financial asset returns using this family of models.     

Boosting the Employment Rate of Older Men and Women

European countries need to expand employment among older individuals. Many papers have examined this issue from different angles. However, very few seem to have considered its gender dimension properly, despite evidence that lifting the overall senior employment rate requires significantly raising that of women older than 50. The key issue examined by this paper is whether employers are willing to employ more older workers, in particular older women. The answer depends to a large extent on the ratio of older individuals’ productivity to their cost to employers. To address this question we tap into a unique firm-level panel of Belgian data to produce robust evidence on the causal effect of age/gender on productivity and labour costs. We take advantage of the panel structure to identify age/gender-related differences from within-firm variation. Moreover, inspired by recent developments in the production function estimation literature, we address the problem of endogeneity of the age/gender mix, using a structural production function estimator (Olley and Pakes in Econometrica 64(6):1263–1297, 1996; Levinsohn and Petrin in Rev Econ Stud 70(2):317–341, 2003) alongside IV-GMM methods where lagged value of labour inputs are used as instruments. Our results indicate a small negative impact of larger shares of older men on the productivity-labour cost ratio. An increment of 10%-points of in their share causes a 0.17–0.69%-point contraction. However, the main result is that the equivalent handicap with older women is larger, ranging from 1.3 to 2.0%-points. This is not good news for older women’s employability. And the vast services industry does not seem to offer working conditions that mitigate older women’s disadvantage, on the contrary.     

Why India is mainly engaged in offshore service activities,while China is disproportionately engaged in manufacturing?

We extend the model of Antràs and Helpman (Antràs, P., Helpman, E., 2004. Global Sourcing. Journal of Political Economy 112(3), 552–580) by incorporating the merits of Zhang and Markusen (Zhang, K.H., Markusen, J.R., 1999. Vertical Multinationals and Host-country Characteristics. Journal of Development Economics 59(2), 233–252.) to demonstrate why China has been so successful in disproportionately attracting foreign offshore manufacturing activities, while India has been engaged mainly in offshore service activities. We argue that the host country's industry-specific technology capabilities make the difference in FDI composition between China and India. In addition to incomplete contract frictions, the host country's technological capabilities, which affect technology transfer costs, are essential to FDI inflows. We also find that, after excluding overseas Chinese investment, India is almost on par with China in terms of the market size it offers to marketing-seeking FDI.     

Unemployment and racial differences in imprisonment

Conventional wisdom about the criminal justice system suggests that extralegal factors such as race or employment status should not affect sentencing outcomes. In this paper we examine an alternative model of the relationship between imprisonment and unemployment and race. The model suggests that penal practices are shaped by the labor market conditions of a system of production and that prisons, as part of a larger set of institutions providing support for economically-dependent populations, help to regulate the most superfluous group of workers in the industrial economy of the Northern states of the United States—unemployed black workers who comprise a large fraction of the pool of “reserve” workers necessary for price stability and economic expansion. We find support for the structural model that links black imprisonment (and Northern imprisonment in general) to manufacturing output and black unemployment.     

Determinants of Deep Integration: Examining Socio-political Factors

This research has three main aims: firstly, to empirically analyse the determinants of different levels of integration by re-examining the evidence presented by Baier and Bergstrand (Journal of International Economics 64(1):29–63, 2004) in the JIE 64 (1); secondly, to analyse the importance of additional factors, in particular socio-political factors; and thirdly, to analyse the dynamics of the EU integration process. The results show that although economic and geographical factors are the most important explanatory factors for the probability of regional integration agreement formation or enhancement, socio-political variables also contribute to explain the formation of regional integration agreements. Democracies and countries with a higher level of economic freedom are more likely to form or enhance RIAs.     

Inflation and Welfare in Latin America

This paper follows Bailey (J Polit Econ 64:93–110, 1956) and Lucas (Econometrica 68:247–274, 2000) and estimates the welfare cost of inflation for 17 Latin American economies. We use annual data, from 1955 to 2000, and recent advances in the field of applied econometrics to estimate the inflation rate elasticity of money demand and report significantly high and differential welfare cost estimates for these economies.     

Why is There a Spike in the Job Finding Rate at Benefit Exhaustion?

Putting a limit on the duration of unemployment benefits tends to introduce a “spike” in the job finding rate shortly before benefits are exhausted. Current theories explain this spike from workers’ behavior. We present a theoretical model in which also the nature of the job matters. End-of-benefit spikes in job finding rates are related to optimizing behavior of unemployed workers who rationally assume that employers will accept delays in the starting date of a new job, especially if these jobs are permanent. This gives some workers an incentive to not immediately start working after they have found a job. Instead they wait until their benefits expire. We use a dataset on Slovenian unemployment spells to test this prediction and find supporting evidence. We conclude that the spike in the job finding rate suggests that workers exploit unemployment insurance benefits for subsidized leisure.     

Communists and the Fight for Jobs and Revolution

Winning in the battle for jobs is two-fold: making gains in jobs and relief, and making gains in the development of anti-racist revolutionary class consciousness. Marxists and institutionalists have shown theoretically that unemployment is endemic to capitalism. The global experience of the 20th century validates this view. Efforts to ease the negative social effects of unemployment can modestly and temporarily assist distressed unemployed workers and their families, but only when there is a significant grassroots mobilization??at both local and national levels??to struggle for such improvements. Communist organizers have often been the most effective leaders of struggles against unemployment and its effects by relying on mobilizations of unemployed, employed, and unionized workers. Communist organizations have often combined efforts to win ??survival?? reforms (i.e., attempts to keep unemployed workers?? heads above water) with agitation and education about the need to end unemployment permanently with socialist and/or communist revolution. Two examples of these struggles are described: the Unemployed Council of St. Petersburg in 1905?C06 and the unemployed councils initiated by the Communist International (the Comintern) during the early 1930s, with an emphasis on the U.S. experience. Lessons for today??s global struggle against unemployment are drawn from these earlier experiences.     

The origin,birth, and adolescence of the review of black political economy and the black economic research center

The Review of Black Political Economy (RBPE) and the Black Economic Research Center (BERC) arose from the atmosphere of the late sixties, when black nationalism was at its apex and vigorous efforts were under way to give meaning to the concepts of “black economic development” and “black capitalism.” They were created as vehicles to assist black economists and economic activists to analyze and disseminate relevant data on black economic affairs and to explore and facilitate new approaches to black economic problems.RBPE offered black economists a place where they could publish their work and share it with their colleagues. The flavor ofRBPE has changed somewhat over its twenty-three year life, becoming less polemical and more scholarly.     

Training,Job Upgrading,Job Creation and Job Destruction

We extend the Mortensen and Pissarides (1999a, b) model to feature an endogenous upgrading or training rate, to gain a novel, general equilibrium, approach to training and labour market policy to gain a distinct model from the traditional partial equilibrium approach (e.g. Acemoglu and Pischke 1998). Among other results, we show training subsidies decrease equilibrium unemployment incidence, duration and level and less generous unemployment benefits increase the occurance of training. We also show the high elasticity of job destruction to aggregate conditions causes the frequency of training to be procyclical. A calibrated version of our model rationalizes cross-country differences in labour and training equilibrium outcomes.