IS MINIMUM WAGE AN EFFECTIVE ANTI‐POVERTY POLICY IN JAPAN?

This paper considers whether the minimum wage is a well‐targeted antipoverty policy by examining the backgrounds of minimum‐wage workers. Whether raising the minimum wage reduces employment for unskilled workers is also investigated. An examination of micro data from a large‐scale government household survey, the Employment Structure Survey (Shugyo Kozo Kihon Chosa), reveals that approximately half of minimum‐wage workers belong to households with annual incomes of more than 5 million yen as a non‐head of household. A regression analysis indicates that an increase in the minimum wage moderately reduces the employment of male teenagers and middle‐aged married women, while it encourages the employment of high‐school age youth.     

SHORT‐RUN POLICY COMMITMENT WHEN INVESTMENT TIMING IS ENDOGENOUS: ‘MORE HARM THAN GOOD?’

In our model, firms choose when to set cost‐reducing investment and the government, which only has short‐run commitment power, sets an output subsidy. We show that firms that delay investment without government intervention have an incentive to invest early under policy activism, strategically underinvesting or overinvesting to obtain larger subsidies. The policy scheme thus creates a new, potentially more harmful, distortion. Under oligopoly, a firm has a weaker incentive to manipulate policy than under monopoly, which makes policy intervention less harmful. We investigate when the government may do better by adhering to laissez‐faire than by engaging in active policy intervention.     

RENAISSANCE OR REQUIEM: IS NUCLEAR ENERGY COST EFFECTIVE IN A POST‐FUKUSHIMA WORLD?

In the aftermath of Fukushima, decisions to slow or stop the future use of nuclear power have not been based on rational economic analysis. We find that there are cost‐effective technologies that would greatly mitigate future natural disasters. Even if the U.S. nuclear industry adopted new safety technologies and paid the full cost of insurance and borrowing, it is more efficient to continue to use existing nuclear plants than to replace them with new fossil fuel plants. However, new nuclear plant costs can exceed fossil fuel alternatives if the price of carbon emissions is below $118/ton. (JEL Q40, Q48, Q54)     

RETAKING IN HIGH STAKES EXAMS: IS LESS MORE?

Placement, both in university and in the civil service, according to performance in competitive exams is the norm in much of the world. Repeat taking of such exams is common despite the private and social costs it imposes. We develop and estimate a structural model of exam retaking using data from Turkey's university placement exam. Limiting retaking results in all agents gaining ex ante and most gaining ex post. This result comes from a general equilibrium effect: Retakers crowd the market and impose negative spillovers on others by raising acceptance cutoffs.     

DOES BIG GOVERNMENT HURT GROWTH LESS IN HIGH‐TRUST COUNTRIES?

Social trust is linked to both public sector size and to economic growth, thereby helping to explain how some countries combine high taxes with high levels of economic growth. This paper examines if social trust insulates countries against the negative effects of public sector size on growth, documented in several studies. We note that the effect is theoretically ambiguous. In panel data from 66 countries across 40 years, we find no robust evidence of insulation effects: when excluding countries with uncertain trust scores, our results suggest that big government hurts growth also in high‐trust countries, and that the mechanism is by lowering private investments. (JEL H10, O11, P16, Z10)     

IS SELF‐MANAGEMENT POSSIBLE? A STUDY ON THE RECOVERED FACTORIES IN BRAZIL

The scenario outlined by the productive restructuring associated with the economic crisis and other changes in the Brazilian economy in the 1990s led to the bankruptcy of many businesses and resulted in an increase in unemployment and uncertainty in work relations. Thus, the workers sought other forms of survival, including associated work. Some groups began to organize themselves with the aim of collectively assuming the management of bankrupted factories in order to keep their jobs. The first ‘recovered factories’ appeared in Brazil. In this context, some supporting institutions were also born, in order to support these experiences, as well as other initiatives within the cooperative and social economy. Our proposal is to make a general analysis of the current situation of the recovered factories in Brazil, discussing whether and how the values of cooperativism and self‐management are present in these factories today.     

ARE COOPERATIVES MORE PRODUCTIVE THAN INVESTOR‐OWNED FIRMS? CROSS‐INDUSTRY EVIDENCE FROM PORTUGAL

We analyse empirically whether cooperatives and investor‐owned firms differ in terms of productive efficiency. Using rich Portuguese panel data covering a wide range of industries, we apply two different empirical approaches to estimate potential differences in productive efficiency. The results from our benchmark random‐effects model show that cooperatives are significantly less productive, on average, than investor‐owned firms, both at the aggregate level and for most of the industries considered. However, the results derived from a System‐GMM approach, which is our preferred empirical strategy, are much less conclusive, and we cannot conclude that cooperatives are generally less efficient that investor‐owned firms. With either approach, though, we find no evidence that cooperatives are more productive than investor‐owned firms in any industry.     

IS ECONOMIC GROWTH IN COTE D'IVOIRE PRO‐POOR? EVIDENCE FROM LSMS DATA: A NOTE

This paper analyses the impact of the economic growth in Cote d'Ivoire on the poor people. We use household data from two LSMS (1992 and 2002) led by the National Statistical Office of Côte d'Ivoire. We show that the situation in this country is characterized by a trickle‐down growth: the poverty growth curve and the growth incidence curve computed show that growth reduces poverty but the poor people receive proportionally fewer benefits than the non‐poor.     

CAN INVESTMENT IN INTANGIBLES EXPLAIN THE SWEDISH PRODUCTIVITY BOOM IN THE 1990s?

In the early 1990s the Swedish economy experienced a severe economic and financial crisis which resulted in a substantial GDP decrease. Even though the crisis was not a complete surprise for many economists, almost no one expected that the Swedish economy would be prospering with booming productivity growth only a few years later. Economists have presented three explanations for the fast recovery and productivity growth in 1995–2006: market reforms, crisis recovery, and the impact of ICT. This paper offers an alternative view, emphasizing instead firms' substantial investment in intangible assets such as R&D, design, and advertising. Based on the growth accounting framework, intangible capital accounted for more than 30 percent of the labor productivity growth in the Swedish business sector from 1995 to 2006. Thus, Swedish TFP growth, one of the highest among OECD countries, is reduced substantially when investment in intangibles is included in the growth accounting analysis.     

ARE THERE PRODUCTIVITY SPILLOVERS FROM FOREIGN DIRECT INVESTMENT IN CHINA?

We review previous literature on productivity spillovers of foreign direct investment (FDI) in China and conduct our own analysis using a firm‐level data set from a World Bank survey. We find that the evidence of FDI spillovers on the productivity of Chinese domestic firms is mixed, with many positive results largely due to aggregation bias or failure to control for endogeneity of FDI. Attempting over 6000 specifications that take into account forward and backward linkages, we fail to find evidence of systematic positive productivity spillovers from FDI in China.     

IS THE PHILLIPS CURVE DIFFERENT IN POOR COUNTRIES?

It has been suggested that the Phillips curve (positive output‐inflation correlation) is inverted in poor countries. It is argued here that the truth is more complex. In poor countries temporary supply‐side shocks, for example to agricultural output, induce a negative correlation between prices and output rather than between inflation rates and output. Empirical evidence supports this hypothesis.     

IS THERE BIAS IN COMPUTING HOUSEHOLD EQUIVALENCE SCALES?

Household equivalence scales are often used to help perform welfare comparisons across households with different demographic composition. Abstracting from the problems of value judgments and ethical standards, the use of equivalence scales to perform welfare comparisons still faces several measurement problems, namely the identification problem and the endogeneity problem. This paper introduces and estimates an unconditional demand system that simultaneously addresses these two problems. By explicitly considering the demand for leisure, and the fact the household can choose some of its demographic characteristics, we deal with the endogeneity problem and obtain consistent estimates. We identify unconditional equivalence scales by estimating the demand for endogenous demographic variables along with the demand for leisure and consumer goods. More general equivalence scales allowing for better comparability are estimated and used for welfare comparisons.     

DOES NEAR‐RATIONALITY MATTER IN FIRST‐ORDER APPROXIMATE SOLUTIONS? A PERTURBATION APPROACH

This paper studies first‐order approximate solutions to near‐rational dynamic equilibrium models. Under near‐rationality, agents' subjective beliefs are distorted away from rational expectations via a change of measure process which fulfills some regularity conditions. In most applications, the beliefs distortion process is also directly observed by (a subset of) the decision‐makers – e.g., ambiguity‐averse households or policy‐makers with a concern for robustness – and therefore included into their optimization problems. We investigate conditions for existence and local uniqueness of solutions under endogenous distortions, as well as the relation with their rational expectations counterparts. We show that linearly perturbed solutions may well be affected by the presence of distorted beliefs, depending on the underlying model economy. In particular, while directly affecting first‐order decision rules, near‐rationality may also induce failure of the certainty equivalence principle. Moreover, the martingale representation of distorted beliefs might prove non‐unique, pointing to a subtle form of equilibrium indeterminacy.     

IS IT IS OR IS IT AIN'T MY OBLIGATION? REGIONAL DEBT IN A FISCAL FEDERATION*

This article studies the repayment of regional debt in a multiregion economy with a central authority: Who pays the obligation issued by a region? With commitment, the central government will use its economy‐wide taxation power in support of its objective to smooth distortionary taxes and consumption across regions. Absent commitment, this tool of the central government may be exploited to induce it to bail out regional government deficits. We characterize the conditions under which bailouts occur and their welfare implications. In particular, we show when the gains from a federation may outweigh the welfare costs of a bailout. We use these insights to comment on actual fiscal relations in three quite different federations: the United States, the European Union, and Argentina.     

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.     

WILL TAX‐BASED HEALTH INSURANCE REFORMS HELP THE SELF‐EMPLOYED STAY IN BUSINESS?

The self‐employed face a tax‐induced disadvantage relative to wage and salary workers when it comes to the payment of health insurance premiums. This paper uses a panel of individual tax return data to test whether lower health insurance premium costs because of an expanded tax incentive result in longer periods of self‐employment. The results suggest that households claiming the deduction are indeed less likely to exit self‐employment. Equalizing the treatment of health insurance premiums for the self‐employed and wage workers by allowing full deductibility from Self‐Employment Contributions Act (SECA) taxes would result in a 7% decrease in the probability of exit. (JEL H32, I18, L26)     

BANKING UNION IN EUROPE: HOW MUCH CENTRALISATION IS NEEDED?

We examine the efficiency of banking regulation in a federation with two tiers of government and highly integrated banking systems. We assume that policy makers have incomplete information about banks’ true health, and banking sector turmoil can generate cross‐border spill‐over effects. We show that, in such an environment, the decentralisation of policy responsibilities for the regulation of banks can achieve the first‐best allocation and ensure financial stability. While national governments design banking regulations, the federal policy maker authorises inter‐regional income redistribution payments throughout the federation. Our results suggest that strengthening national responsibilities in banking regulation and supervision in the course of the further development of the European banking union may be advisable.     

WHO’S THE BOSS? HOUSEHOLD DISTRIBUTION OF POWER IN A NON‐COOPERATIVE FRAMEWORK

When labour market participation influences bargaining power in a household, the male and the female labour supplies can be either positively or negatively related. If negatively related, possibilities include: ‘balance of power’, the complete dominance of one member, and circumstances where inequity persists with incomplete dominance. If effort levels are positively sloped, it is possible to have equilibrium at either high or low effort levels leading to equity. The effects of economic development and wage discrimination are also discussed.     

OLD‐AGE PENSION AND EXTENDED FAMILIES: HOW IS ADULT CHILDREN'S INTERNAL MIGRATION AFFECTED?

This article makes use of the most recent social pension reform in rural China to examine whether receipt of the pension payment equips adult children of pensioners to migrate. Employing a regression discontinuity (hereafter RD) design to a primary longitudinal survey, this article overcomes challenges in the literature that households eligible for pension payment might be systematically different from ineligible households and that it is difficult to separate the effect of pension from that of age or cohort heterogeneity. Around the pension eligibility age cutoff, results reveal large and significant increase among adult sons (but not daughters) to migrate out of their home county. Meanwhile, adult children are more likely to migrate out if their parents are healthy. Our Fuzzy RD estimations survive a standard set of key placebo tests and robustness checks. (JEL H55, I38 J14, J22)