Do economic integration agreements affect trade predictability? A group effect analysis

Recent theoretical findings in the trade literature suggest that economic integration agreements (EIAs) not only increase the level of trade but also make it more stable and predictable. This paper proposes a Hausman–Taylor quantile regression approach to identify the causal effect of EIA membership on trade predictability. The proposed methodology accounts for group effects in the gravity equation and is computationally efficient. Our results corroborate the theoretical findings that EIAs make trade more stable and predictable and this conclusion is even stronger for deeper EIAs.     

Does the public employment service affect search effort and outcomes?

In this paper, we examine the disincentive effects of the public employment service on the search effort of unemployed workers and on their exit rate from unemployment. For that purpose, we specify a structural search model with fixed and variable costs of search in which unemployed workers select their optimal search intensity given the exogenous arrival rate of job contacts coming from the public employment agency. Because the theoretical effect of an increase in this exogenous job contact arrival rate on the structural exit rate from unemployment is ambiguous, we estimate this model using individual unemployment duration data. Our results show that the exit rate from unemployment increases with the arrival rate of job contacts obtained by the public employment service, especially for low-educated and low-skilled workers. They also show that the search effort is more costly for low-educated women and low-skilled adult unemployed workers. This last result suggests that a public employment agency that matches searchers and employers is beneficial, in the sense that it saves searchers in terms of search costs they would otherwise bear.     

Do TV-aided model lessons in class improve student performance? Evidence from public primary schools in Papua New Guinea

Lack of access to high-quality education remains a serious concern in many developing countries. This is especially the case for rural areas, including islands suffering from a shortage of skilled teachers and sufficient educational equipment. We examine the impact of introducing TV-aided model lessons in class to enhance the quality of teaching (the EQUITV project) on the national examination test scores of Mathematics and “Combined Subject” (a comprehensive subject comprising 30% science and 70% social studies and other topics) as well as English in the final year of primary education in Papua New Guinea. We employ a panel event study to capture the different timings of the intervention across schools over multiple time periods. We find that the project significantly and robustly improved test scores for girls only in English 3 years after the introduction of the project, but no improvement was seen for boys.     

Do tax cuts generate twin deficits? A multi‐country analysis

Abstract We study the effects of tax shocks on the budget and external deficits for 16 industrialized countries over the post‐1970 period. Our structural approach is based on a small open economy model where a tax cut affects the external deficit by two distinct channels. The demographic channel works through the overlapping‐generation structure of the model. The forecasting channel works through the dynamic structure of the model. Our empirical analysis documents that tax shocks generate twin deficits, and that both channels play important roles in explaining the positive comovement between the budget and external deficits.     

Do overweight and obesity prevalence rates converge in Europe?

We exploit recently published data to evaluate the long-run evolution of overweight and obesity rates among European economies between 1975 and 2016. We find that overweight rates for both females and males converge in Europe. In particular, the convergence is driven by the nations in the EU. This fact is consistent with food patterns as well as trade, agricultural, and health policies that are common among EU members. Across our model specifications, the steady-state average overweight rate ranges between 60% and 77% for European female individuals and lies above 82% for their male counterparts. Confidence intervals suggest that such gender differences are statistically significant. In the EU, the point estimates of these rates are 62% and 91%, respectively. Obesity prevalence in Europe would reach long-term rates of 39% and 45% for females and males respectively, whereas these rates would be similar in the EU (approximately 28%).     

Do better schools lead to more growth? Cognitive skills, economic outcomes, and causation

We develop a new metric for the distribution of educational achievement across countries that can further track the cognitive skill distribution within countries and over time. Cross-country growth regressions generate a close relationship between educational achievement and GDP growth that is remarkably stable across extensive sensitivity analyses of specification, time period, and country samples. In a series of now-common microeconometric approaches for addressing causality, we narrow the range of plausible interpretations of this strong cognitive skills-growth relationship. These alternative estimation approaches, including instrumental variables, difference-in-differences among immigrants on the U.S. labor market, and longitudinal analysis of changes in cognitive skills and in growth rates, leave the stylized fact of a strong impact of cognitive skills unchanged. Moreover, the results indicate that school policy can be an important instrument to spur growth. The shares of basic literates and high performers have independent relationships with growth, the latter being larger in poorer countries.     

Do bookmakers possess superior skills to bettors in predicting outcomes?

In this paper we test the hypothesis that bookmakers display superior skills to bettors in predicting the outcome of sporting events by using matched data from traditional bookmaking and person-to-person exchanges. Employing a conditional logistic regression model on horse racing data from the UK we find that, in high liquidity betting markets, betting exchange odds have more predictive value than the corresponding bookmaker odds. To control for potential spillovers between the two markets, we repeat the analysis for cases where prices diverge significantly. Once again, exchange odds yield more valuable information concerning race outcomes than the bookmaker equivalents.     

Saving the public from the private? Incentives and outcomes in dual practice

We consider a monopoly physician offering free public treatment and, if allowed, a private treatment for which patients have to pay out of pocket. While patients differ in the propensity to benefit from private treatment it always yields better health outcomes than public treatment but is also more costly in terms of money and time. We study the physician's supply of private care and allocation of time costs across public and private patients and contrast these with the first‐best allocation. To increase the willingness‐to‐pay for private treatment the physician shifts time costs to public patients. While this turns out to be socially optimal, the resulting positive network effect leads to an over‐provision of private care if time costs are sufficiently high. A second‐best allocation arises when the health authority sets public reimbursement but has no control over private provision. Depending on the welfare weight the health authority attaches to physician profits, a ban of dual practice may improve on the second‐best allocation. Notably, a ban benefits not only public patients but also private patients with a moderate propensity to benefit from private care.     

Do bank activities and funding strategies of foreign and state‐owned banks have a differential effect on risk‐taking in Central and Eastern Europe?

This paper explores the differential effects of the activity and funding strategies of foreign and state‐owned banks in Central and Eastern European countries on risk‐taking. Due to potentially beneficial external support, the disciplinary role of non‐deposit funding is completely ineffective for both foreign and state‐owned banks. Most likely, because of survival beliefs, non‐deposit financiers deposit their money even when state‐owned banks become riskier. Involvement in non‐interest‐income activities has no impact on the risk‐taking of foreign banks and worsens the risk of state‐owned institutions. However, both types of banks are risky when involved in trading, insurance income, rental and other non‐banking businesses.     

Afro‐descendants in Peru: Do beauty and race matter in the labor market?

This is a first study about labor discrimination against Afro‐descendants in Peru. We randomly assigned Afro‐Peruvian and white surnames and photographs (subjectively beautiful, homely looking, or not photos) to 3,828 fictitious résumés, sent for unskilled, technical, and professional occupations. We find an unprecedented, sizeable beauty premium in unskilled occupations (232.5 percent), no effect of looks in technical occupations, and a beauty penalty in professional occupations (–71.3 percent). Overall, whites receive 19.37 percent more callbacks than similarly qualified Afro‐Peruvians; this racial discrimination affects only Afro‐Peruvian females, and particularly those employed in technical occupations. These results remain unaltered when we restrict the sample to those markedly “Afro” surnames. Our findings unveil different dynamics of discrimination across job categories, which tend to be overlooked by the existing literature.     

Do Political Factors Cause the Regional Inequality in the Reform‐Era China?

We construct a political variable—the number of ministers of all national government departments born in each province weighted by provincial population—to examine its effect on economic growth in China during 1981–2010. We find that the lagged per capita political variable has a significant, positive effect on economic growth in both ordinary least squares (OLS) estimation and system generalized method of moments (GMM) estimation. We also find that the lagged per capita political variable has a significant, positive effect on financial deregulation policies distributed across provinces, which offers a possible mechanism for the political variable to impact growth.     

Do banks crowd in business ethics? An indirect evolutionary analysis

Trustworthiness as a major aspect of business ethics can evolve when it can be signaled. If this is impossible, only opportunistic traders will survive. For the institution of banks, which can guarantee payment, it is investigated whether they can crowd in trustworthiness. The crucial feature is the bank's ability to discriminate between trustworthy and unreliable debtors which, in our model, is formally captured by the probability difference of accepting their respective credit applications.     

Is Crowdfunding Different? Evidence on the Relation between Gender and Funding Success from a German Peer‐to‐Peer Lending Platform

According to the literature on traditional banking, lenders often discriminate against female borrowers. However, studies of Peer‐to‐Peer lending in the United States find that female borrowers have better chances of obtaining funds than do males. We provide evidence on the success of female borrowers at a large German peer‐to‐peer lending platform. Our results show that there is no effect of gender on the individual borrower's chance to receive funds on this platform, ceteris paribus. Several robustness checks confirm this finding. Hence, female discrimination seems to be eased by the ‘wisdom of the lending crowd’.     

Do international flights promote FDI? The role of face‐to‐face communication

International passenger flights facilitate business travel for in‐person meetings abroad. However, the significance of face‐to‐face communication (FFC) is not clear. To identify the FFC channel, this paper examines whether flights promote FDI more strongly for multinational firms that face relatively intensive FFC in foreign production. Expatriate employees are used as a proxy for the FFC intensity. Using firm‐level data on Japanese multinational firms for the period 1989 to 2006, I show that more frequent flights increase new FDI entry, with the larger positive effects for multinationals in high FFC sectors. The results support the FFC channel to connect flights and FDI.     

Do South‐South trade agreements increase trade? Commodity‐level evidence from COMESA

Abstract .  South-South trade agreements are proliferating. Yet the impact of these agreements is largely unknown, as existing North-North and North-South micro-level studies are likely to yield misleading predictions for South-South trade agreements. This paper estimates the impact of COMESA on Uganda's imports between 1994 and 2003. Detailed import and tariff data at the 6-digit Harmonized System level are used for more than 1,000 commodities. Based on a difference-in-difference estimation strategy, the paper finds that – in contrast to evidence from aggregate statistics – COMESA's preferential tariff liberalization has not considerably increased Uganda's trade with member countries, on average, across sectors. The effect, however, is heterogeneous across sectors. Finally, the paper finds no evidence of trade-diversion effects.     

Do political determinants affect the size and composition of public expenditure? A study of the Indian states

This study examines whether there exists a systematic link between the size and composition of public expenditure and the political determinants across the Indian states. Three types of political determinants—forms of governments, government’s ideology, and electoral cycle—are identified and three sets of hypotheses are designed linking these characteristics with three different measures of public expenditure. The hypotheses are tested using a panel dataset of 14 Indian states spread over 27 fiscal years, from 1980–1981 to 2006–2007. The overall findings of the study suggest that the relationship between expenditure measures and political determinants across the Indian states validates the proposed hypotheses even after controlling for the traditional and other unobservable determinants. These findings are robust to various forms of sensitivity analysis.     

Do socially motivated self‐help groups perform better? Exploring determinants of micro‐credit groups’ performance in Eastern India

Group‐based micro‐credit initiatives, as part of the broader social and solidarity‐based finance initiatives, have gained prominence over the past decade, especially in developing economies like India. Lending to the poor, especially women, through micro‐credit groups, are significantly associated with the utilization of commons. Apart from their financial operations, self‐help groups promote social empowerment activities and collective action following a dual bottom‐line approach. However, the causal role of the group's motivation towards pursuing social objectives has not been explored in the past. The present study, therefore, investigates the interlinkages between the group's intrinsic motivation and efficiency using an innovative two‐stage double bootstrapped DEA‐based methodology. Results from the study affirm that apart from traditional factors like maturity, accessibility and group management, the motivation of the group is a crucial determinant of social efficiency. Additionally, the group's loan‐to‐savings ratio and receipt of cash payments significantly affect its long‐term financial sustainability. Micro‐credit groups cannot contribute sustainably as a viable alternative to traditional means of access to credit if it merely offers innovative forms of financing and consumption. They need to be socially aligned to serve the community better and contribute to the group's overall performance and galvanize community‐based resource management.     

Do German Welfare‐to‐Work Programmes Reduce Welfare Dependency and Increase Employment?

Abstract. During the last decade, many Western economies reformed their welfare systems with the aim of activating welfare recipients by increasing welfare‐to‐work programmes (WTWP) and job‐search enforcement. We evaluate the short‐term effects of three important German WTWP implemented after a major reform in January 2005 (‘Hartz IV’), namely short training, further training with a planned duration of up to three months and public workfare programmes (‘One‐Euro‐Jobs’). Our analysis is based on a combination of a large‐scale survey and administrative data that is rich with respect to individual, household, agency level and regional information. We use this richness of the data to base the econometric evaluation on a selection‐on‐observables approach. We find that short‐term training programmes, on average, increase their participants' employment perspectives. There is also considerable effect heterogeneity across different subgroups of participants that could be exploited to improve the allocation of welfare recipients to the specific programmes and thus increase overall programme effectiveness.     

Family migration in China: Do migrant children affect parental settlement intention?

This paper investigates the role of migrant children in the permanent settlement intention of their parents. Using two independent survey datasets on Chinese internal migration, we examine whether and how migrant children-related factors are associated with migrant parents’ intention of permanent urban settlement. Our results show that parents with migrant children are more likely to settle in a destination city permanently than those without. The probability of permanent urban settlement intention of parents with migrant children is 49% higher than those without. The results are robust to a series of sensitivity tests. Potential channels for the findings are also explored.     

Does the reliability of institutions affect public good contributions? Evidence from a laboratory experiment

Reliable institutions, i.e., institutions that live up to the norms that agents expect them to keep foster cooperative behavior. We experimentally confirm this hypothesis in a public goods game with a salient norm that cooperation was socially demanded and corruption ought not to occur. When nevertheless corruption attempts came up, groups that were told that ‘the system’ had fended off the attempts made considerably higher contributions to the public good than groups that learned that attempts only did not affect their payoffs or that were not exposed to corruption at all.