Income taxes and the income velocity of money: An empirical analysis

From 1981iv to 1983ii, the growth rate of the income velocity of money declined sharoly. Almost all forecasts of this rate based on standard models overpredicted the velocity growth rate over this period. In this paper it is argued that income taxes exert a direct and discernible influence on velocity of money which has not been recognized by these models. As a result, most models failed to capture the 1981–1983 Reagan tax cuts and, consequently, overpredicted the velocity growth rate in this period. It is shown that the tax-velocity hypothesis is supported by the results of an empirical test. It is also shown that the inclusion of taxes in a model of velocity helps alleviate the overprediction of the velocity growth rate in the 1981–1983 period.     

Income and well-being: an empirical analysis of the comparison income effect

This paper presents an empirical analysis of the importance of ‘comparison income’ for individual well-being or happiness. In other words, the influence of the income of a reference group on individual well-being is examined. The main novelty is that various hypotheses are tested: the importance of the own income, the relevance of the income of the reference group and of the distance between the own income and the income of the reference group, and most importantly the asymmetry of comparisons, i.e. the comparison income effect differing between rich and poor individuals. The analysis uses a self-reported measure of satisfaction with life as a measure of individual well-being. The data come from a large German panel known as GSOEP. The study concludes that the income of the reference group is about as important as the own income for individual happiness, that individuals are happier the larger their income is in comparison with the income of the reference group, and that for West Germany this comparison effect is asymmetric. This final result supports Dusenberry's idea that comparisons are mostly upwards.     

An empirical analysis of margin debt

Despite the extensive literature on margin requirements and stock market volatility, few articles consider the determinants of margin borrowing. Our trivariate autoregressive model of margin debt, stock returns, and the broker call rate shows that margin debt responds positively to stock returns and negatively to interest rate changes over the period 1951–2001. We also document an asymmetry, with margin debt responding quickly to stock market downturns and more gradually to market upswings.     

An empirical analysis of occupational expectations

Empirical research on the subject area of occupational choice has generally focused upon outcomes; that is, in terms of occupational attainment, gender and racial segmentation, and male–female earnings differentials. But individual preferences, in terms of which occupation to pursue, are likely to be of equal importance in considering many of these issues. Therefore, this paper is concerned with an empirical analysis of the occupational expectations of minimum-aged school-leavers. A logit analysis is performed to establish what independent variables are more important in determining which labour queue school-leavers join. This is followed by the implications of the analysis for policy makers and practitioners concerned with the youth labour market. The evidence shows that there are clear differences in the occupational expectations of males and females. For instance, female school-leavers are more likely to seek entry to clerical and other non-manual occupations, such as retailing and catering. Males, on the other hand, have a higher probability of seeking entry to craft occupations like engineering and construction. However, account must also be taken of other personal characteristics when considering occupational choice in this context. Indeed, both human capital and other ‘personality’ variables are shown to have a statistically significant influence upon the occupational expectations of minimumaged school-leavers.     

Adoption of an IMF programme and debt rescheduling. An empirical analysis

The existence of an empirical relationship between the adoption of an IMF programme and the concession of a debt rescheduling by commercial creditors is tested using a bivariate probit model. If countries who have arrangements with the IMF are more likely than others to obtain a rescheduling of their external debt, we could conclude that the adoption of an IMF programme could work as a sort of signal of a country's “good intent” which is thus rewarded with the debt relief. The results confirm the existence of a significant effect of the adoption of an IMF programme on the subsequent concession of a debt rescheduling by private creditors.     

Futures basis,inventory and commodity price volatility: An empirical analysis

We employ a large dataset of physical inventory data on 21 different commodities for the period 1993–2011 to empirically analyze the behavior of commodity prices and their volatility as predicted by the theory of storage. We examine two main issues. First, we analyze the relationship between inventory and the shape of the forward curve. Low (high) inventory is associated with forward curves in backwardation (contango), as the theory of storage predicts. Second, we show that price volatility is a decreasing function of inventory for the majority of commodities in our sample. This effect is more pronounced in backwardated markets. Our findings are robust with respect to alternative inventory measures and over the recent commodity price boom.     

Financial development and growth: An empirical analysis

Over the last two decades several countries experienced currency crises. These were characterized both by a huge disruption of economic activity and an extreme speed of diffusion within countries. The financial turmoil happened in a period of very high degree of international financial integration. As a result financial liberalization was associated with greater incidence of crises and this brought an intense debate in both academic and policy circles about the consequences of free capital movements.     

Euro area,oil and global shocks: An empirical model-based analysis

We assess the impact of oil shocks on euro-area (EA) macroeconomic variables by estimating with Bayesian methods a two-country New Keynesian model of EA and rest of the world (RW). Oil price is determined according to supply and demand conditions in the world oil market. We obtain the following results. First, a 10% increase in the international price of oil generates an increase of about 0.1 annualized percentage points in EA consumer price inflation. Second, the same increase in the oil price generates a decrease in EA gross domestic product (GDP) of around 0.1% and a trade deficit, if it is due to negative oil supply or positive oil-specific demand shocks. Third, it generates a mild EA GDP increase and a trade surplus if due to a positive RW aggregate demand shock. Fourth, the increase in the oil price over the 2004–2008 period did not induce stagflationary effects on the EA economy because it was associated with positive RW aggregate demand shocks. The drop in RW aggregate demand contributes to explain the 2008 fall in oil prices, EA GDP and inflation.     

An empirical analysis of assortative mating in India and the U.S.

This paper uses a conditional logit model to analyze empirically how individuals sort themselves through marriage into households in India and the U.S. The results support positive assortative mating of spouses with respect to age and schooling. We find no evidence in favor of Becker's theory of labor market specialization in couples. Moreover, while similarity in age is the strongest predictor of marital choice in India, education of a prospective spouse plays a more important role in the U.S. Finally, we find that while dowry increases the likelihood of women marrying men with characteristics dissimilar to their own, availability of a mate has a positive effect on the degree of stratification in India.     

Industry structure,entrepreneurship, and culture: An empirical analysis using historical coalfields

There is mounting evidence demonstrating that entrepreneurship is spatially clustered and that these spatial differences are quite persistent over long periods of time. However, especially the sources of that persistence are not yet well-understood, and it is largely unclear whether persistent differences in entrepreneurship are reflected in differences in entrepreneurship culture across space as it is often argued in the literature. We approach the cluster phenomenon by theorizing that a historically high regional presence of large-scale firms negatively affects entrepreneurship, due to low levels of human capital and entrepreneurial skills, fewer opportunities for entry and entrepreneurship inhibiting formal and informal institutions. These effects can become self-perpetuating over time, ultimately resulting in persistent low levels of entrepreneurship activity and entrepreneurship culture. Using data from Great Britain, we analyze this long-term imprinting effect by using the distance to coalfields as an exogenous instrument for the regional presence of large-scale industries. IV regressions show that British regions with high employment shares of large-scale industries in the 19th century, due to spatial proximity to coalfields, have lower entrepreneurship rates and weaker entrepreneurship culture today. We control for an array of competing hypotheses like agglomeration forces, the regional knowledge stock, climate, and soil quality. Our main results are robust with respect to inclusion of these control variables and various other modifications which demonstrates the credibility of our empirical identification strategy. A mediation analysis reveals that a substantial part of the impact of large-scale industries on entrepreneurship is through human capital.     

An empirical analysis of euro cash payments

If the denominational structure of the euro is used in an optimal way, there should be no preferences for certain coins and notes when making cash payments. In Kippers et al. [2003. An empirical study of cash payments. Statistica Neerlandica 57, 484-508] it is documented that the Dutch public did have certain preferences concerning the Dutch guilder in the sense that a few notes and coins were used less often than they should have been. With the advent of the euro, which changed the denominational structure from 1--5 (guilder) to 1-2-5 (euro), it is of interest to examine whether there are any preferences for euro coins and notes. In this paper we use a unique dataset for the Netherlands to empirically examine if the euro range is used in an optimal way. We find that there are no preferences for certain euro denominations.     

Household financial vulnerability: An empirical analysis

Using survey data, we investigate household financial distress. Specifically, we propose an indicator of financial vulnerability to jointly analyse different features of household financial distress, analysing its socio-demographic and economic determinants. A total number of 3102 Italian households make up the sample.The empirical analysis highlights that for the median level of the financial vulnerability index households already exhibit some important symptoms of financial vulnerability, such as problems in getting to the end of the month or an inability to face unexpected expenses. As regards the determinants of the financial vulnerability index, three findings need to be pointed out. First, the level of debt servicing is positively related to financial vulnerability and the effect is stronger for households holding unsecured debt, i.e. consumer credit. Second, financial vulnerability also increases for impulsive individuals, who may adopt impatient, short-sighted behaviour patterns which make it difficult for them to be fully aware of the consequences of their financial and spending decisions. Third, a higher level of education helps to reduce financial fragility.     

An empirical analysis of the U.S. Senate vote on NAFTA and GATT

This paper examines the determinants of the voting behavior of the U.S. Senate on the North American Free Trade Agreement and the General Agreement on Tariffs and Trade. Public choice theory suggests that the voting behavior of senators is influenced by constituent interests, special interest politics, and their ideology. This paper uses probit analysis to test the significance of the above factors. The results indicate that constituent economic interests and special interest money were significant determinants of the Senate voting on the North American Free Trade Agreement but not on the General Agreement on Tariffs and Trade.     

An empirical analysis of habit and addiction to antibiotics

Because of bacterial resistance, current antibiotic consumption is reinforced by past use, and future utility is lower. The purpose of this article is to provide evidence on habit and addictive behavior toward antibiotics by exploring variations in the average consumption of antibiotics across 20 Italian regions. Using a balanced panel data set (2000–2009), we estimate myopic and rational addiction models, in which antibiotic consumption depends upon demographic and socioeconomic characteristics of the population, the supply of health care in the community, antibiotic price, and the “capital stock” of endogenous bacterial resistance measured by past and future consumption. Our empirical evidence shows that past antibiotic consumption stimulates current consumption and is also consistent with the rational addiction hypothesis. The low price elasticity of antibiotic demand suggests that policy measures targeted at antibiotic co-payments may not be effective in controlling antibiotic consumption. There is scope for other policy interventions, such as incentives and information campaigns targeted at doctors.     

Multinational companies and indigenous development: An empirical analysis

This paper presents an empirical study of the effect of foreign multinational companies on the development of indigenous firms in the host country. Our starting point is a recent paper by Markusen and Venables (European Economic Review 43 (1999) 335-356) that shows formally that multinationals, through the creation of linkages with indigenous suppliers, can exert positive effects on the development of indigenous firms. Based on the literature on entry in industrial organisation, we estimate empirically a model describing the entry of indigenous firms using data for the Irish manufacturing sector. Our results indicate that there is a positive effect of multinational companies on the entry of indigenous firms for a variety of alternative specifications.     

An empirical analysis of firm process and product patenting

This paper presents an empriical study of the determinants of firm patenting. Since industrial research and development (R&D) encompasses a variety of activities, this study distinguishes between patents on process innovations and patents on product innovations. The property rights provided by a patent may differ between process and product patents, which suggests that the determinants of process innovations and product innovations may difer as well.

Several recent studies have distinguished between research directed toward process innovations and research directed toward product innovations. Scherer (1983a) included measures of process R&D spending and product R&D spending in regressions for inter-industry differences in productivity growth. Link and Lunn (1984) found that the returns to process-related R&D activity exceed the returns to product-related R&D activity. Link (1982) found inter-firm differences in the allocation of R&D spending for process innovations and product innovations. Lunn (1986) found differences in the determinants, as well as the effects, of process patenting and product patenting at the industry level. This paper examines whether the determinants of product and process patenting differ at the firm level.     

An empirical analysis of ‘acting white’

Using a newly available data set, which allows one to construct a novel measure of a student's social status, we demonstrate that there are potentially important racial differences in the relationship between social status and academic achievement. The effect is concentrated among students with a grade point average (GPA) of 3.5 or higher and more pronounced in schools with more interracial contact. Earlier studies showing a positive relationship between popularity and academic achievement for blacks are sensitive to the inclusion of more continuous achievement measures. We argue that the data are most consistent with a model of ‘acting white’ in which investments in education are taken as a signal of one's opportunity costs of peer-group loyalty, though imprecise estimates make definitive conclusions difficult.