Testing the significance and the non-linearity of the Phillips trade-off in the Euro Area

This paper tests the significance and the non-linearity of the Phillips trade-off in the aggregate Euro Area, in an unobserved components model of stochastic NAIRU and trend output featuring the Phillips equation and the Okun law as main identifying equations, with quarterly data for 1970:I-2002:III. The Phillips curve turns out to be linear and its trade-off statistically significant, while non-linearity shows up in the Okun relation. The results prove to be robust to alternative lag length structures of the model, and to alternative non-linear functional forms. The trend-cycle decompositions estimated with the model capture the main features of the Euro Area’s recent macroeconomic record.First version received: 1 September 2003 / Final version received: June 2004CEMPRE - Centro de Estudos Macroeconómicos e Previsão - is supported by the Fundação para a Ciência e a Tecnologia, Portugal, through the Programa Operacional Ciência, Tecnologia e Inovação (POCTI) of the Quadro Comunitário de Apoio III, which is financed by FEDER and Portuguese funds.We thank comments on earlier versions by Fabio Canova, Miguel St Aubyn, Alvaro Almeida, Pete Richardson, Kevin Ross, and two anonymous referees. We acknowledge James D. Hamilton’s help with the confidence bands. The usual disclaimer applies.     

Efficiency in Crime Prevention: A Case Study of the Lisbon Precincts

This paper analyzes the technical efficiency of the Lisbon police precincts in order to investigate its performance. A stochastic cost frontier model is used to generate efficiency scores, assuming that efficiency is time varying. It investigates its efficiency and finds that the results are, at best, mixed since the efficient scores are low and not time varying. Therefore, an alteration of management procedures is proposed in order to enable efficiency to be increased based on a governance–environment framework.Financial support from Fundação para a Ciência e Tecnologia/MCT under FCT/POCTI partially funded by FEDER is gratefully appreciated. The authors also thank the participants at the International Atlantic Economic Conference in Lisbon, Portugal, March 10–13, 2004 for helpful comments. For our mistakes, the usual disclaimer applies.     

The order of integration for quarterly macroeconomic time series: A simple testing strategy

An empirical example and a simulation study show that much more attention should be devoted to the practical issue of selecting the maximum admissible order of integration for quarterly macroeconomic time series. In fact, it is shown that when that order is too high, one may get (spurious) evidence for an excessive number of unit roots, resulting in an overdifferenced series. Besides introducing a simple and intuitive definition for the order of integration of quarterly time series, this paper also presents a simple testing strategy to determine that order for the case of macroeconomic data.Helpful comments and suggestions from João Santos Silva and Paulo Rodrigues are gratefully acknowledged. I am also grateful to two anonymous referees, whose comments and suggestions helped improving this paper. Obviously, the usual disclaimer applies. This work has also benefited from financial support from Fundação para a Ciência e Tecnologia (FCT), through Programa POCTI (ECO/33778/2000). A previous version of this paper was presented at the Royal Economic Society Conference, March 2002, Warwick.     

Market potential and welfare: evidence from the Iberian Peninsula

We present a methodology to quantify market potential in the context of an economic geography model. The model is then applied to the NUTS 2 regions of Portugal and Spain. Some results can be pointed out. First, the Iberian Peninsula presents a clear centre-periphery pattern. The market potential pike is situated in the region of Madrid, followed very closely by Cataluña and Pais Vasco. Also all Portuguese regions are at the bottom of the market potential rank, i.e.: Portugal is at the periphery of Spain. Second, the regional welfare index confirms market potential results. There is therefore a direct correlation between market potential and regional welfare. Third, a scenario of complete integration between the Portuguese and the Spanish economy is favourable to the most laggard regions. On the contrary, the most advanced regions of each country loose a little. However, ‘lock-in’ effects allow the most central regions to continue in the forefront of development and welfare.Received: Received: July 2004 / Accepted: January 2005, Accepted: Received: July 2004 / Accepted: January 2005, JEL Classification: C68, F12, F15, R12, R13The author is in debt to Renato Flôres and Paula Fontoura for helpful discussions during the preparation of this work. A first version of this paper was presented at the conference “Portuguese Economic Development in the European Context” organized by the Portuguese Central Bank. I am thankful to José Braga de Macedo, Pedro Duarte Neves and to all participants for very useful observations and comments. This version benefited greatly from the remarks and suggestions by Mahahisa Fujita, Alireza Naghavi and two anonymous referees. I am also in debt to José Pedro Pontes for inviting me to the “Luso-Japanese Workshop in Geographical Economics” and for encouraging me to submit this paper to this special issue of the Portuguese Economic Journal. The research conducted here was supported by a grant from Fundação para a Ciência e a Tecnologia(Praxis XXI/BM/17786/98). The usual disclaimer however applies.     

Endogenous fluctuations in unionized economies with productive externalities

Summary. We discuss the effects of unions on steady-state multiplicity and welfare, and on the existence of endogenous fluctuations. We consider an OG economy with productive capital externalities and we focus on underemployment equilibria. We find that for wide regions in the parameter space, including an arbitrarily small degree of externalities and a Cobb-Douglas technology, unions increase steady state employment and welfare, and local indeterminacy (sunspots) emerges. Moreover with a CES technology multiplicity of steady states is only possible in the presence of unions. Our results also show that the role of unions in shaping local dynamics and bifurcations depends on technology (externalities and factors substitutability).Received: 16 January 2002, Revised: 18 March 2004, JEL Classification Numbers: E32, J51, D60, D62. Correspondence to: Leonor ModestoThis paper is a much revised version of our former working paper Unions, Increasing Returns and Endogenous Fluctuations. Financial support from Fundação para a Ciência e Tecnologia under the POCTI, is gratefuly acknowledged.     

Institutions and economic growth in Portugal: a quantitative exploration

This paper presents a broad diagnostic of the level of institutional development in Portugal in the legal, corporate governance and financial systems. A comparative assessment suggests that Portuguese institutions are less developed than their European Union and East Asian counterparts, more developed than Greek institutions and on a level similar to that of Spanish institutions. We use data for a wide cross-section of countries since 1960 and correlate indicators of institutional development with the long-term average growth rate, identifying issues where reform is likely to significantly affect economic growth. We construct three new indices that measure the potential of institutional reform - the impact of reform on growth, the required reform effort and the efficiency of reform index - by taking into consideration the institutional distance between Portugal and the European Union. These indices measure, respectively, which reforms have the most payoff in terms of growth, which are less costly to undertake and which deliver the most growth per required effort. Our results strongly suggest that in a large number of issues, institutional reform may translate into substantially higher rates of economic growth. Of the ten most promising reforms, six are in the legal area, irrespective of which of the indices is considered. Whereas legal reform is promising at the aggregate and the microeconomic levels, in the financial sector aggregate indicators offer the wider scope for productive reform, while in the corporate governance area it is indices at the micro level that hold the most promise. These results support the view that a comprehensive reform effort is likely to deliver higher rates of growth in Portugal, allowing faster real convergence with the rest of the European Union.Received: January 2003, Accepted: February 2004, JEL Classification: O0, O5, K00, K4, G2, G3This paper is based on Firms, Financial Markets and the Law: Institutions and Economic Growth in Portugal, prepared for the conference Desenvolvimento Económico Português no Espaço Europeu: Determinantes e Políticas, organized by the Banco de Portugal. Financial support by the Banco de Portugal, NOVA FORUM and FUNDAÇÃO Para a Ciência e tecnologia and Polti through feder are gratefully acknowledged. Comments from Marcelo Rebelo de Sousa, two anonymous referees and the editor are sincerely appreciated. The usual disclaimer applies.     

Maturity and volatility effects on UK smiles

The smile effect is a result of an empirical observation of the options implied volatility with the same expiration date, across different exercise prices. However, its shape has been under discussion seeming to be dependent on the option underlying security. In this paper, and filling up a scarce empirical research on the topic, we used liquid equity options on 9 stocks traded on the London International Financial Futures and Options Exchange (LIFFE) between August 1990 and December 1991. We tested two different hypothesis for testing two different phenomena: (1) the increase of the smile as maturity approaches; (2) and the association between the smile and the volatility of the underlying stock. In order to estimate implied volatilities for unavailable exercise prices, we modelled the smile using cubic B-spline curves. We found empirical support for the smile intensification (the U-shape is more pronounced) as maturity approaches as well as when volatility rises. However, we found two major sources of disagreement with the literature on stochastic volatility models. First, as maturity approaches, out-of-the-money options implied volatility tends to be higher than the implied volatility of in-the-money options. Second, as the volatility of the underlying asset increases, the implied volatility of in-the-money options tends to be higher than implied volatility of out-of-the-money options.Received: September 2001, Accepted: September 2003, JEL Classification: G13Correspondence to: João L. C. DuqueWe thank Professor Dean A. Paxson (University of Manchester), António Sousa Câmara (University of Strathclyde), Ser-Huang Poon (University of Lancaster) and the attendees of the 26th EFA Annual Conference for helpful comments on previous versions of this paper. We also want to thank to two anonymous referees for their relevant comments and suggestions. Financial support granted by the Fundação para a Ciência e a Tecnologia (FCT) and the Programa Praxis XXI is gratefully acknowledged.     

Structure and performance in the Portuguese banking industry in the nineties

In this paper we study the structure-performance relationship in the Portuguese banking industry during the nineties. The hypothesis of pure collusion, efficient structure, modified efficient structure and hybrid collusion/efficiency are tested using a direct measure of efficiency. Our results endorse the hybrid collusion/efficiency hypothesis in the first half of the nineties. However, after 1994 results lend some support to the modified efficient structure hypothesis. Competition at the local level remains important throughout the decade, suggesting that banks in less competitive local markets exert some level of market power and exhibit superior performances.Received: November 1999, Accepted: February 2003, JEL Classification: C21, L11Correspondence to: Victor MendesThe authors wish to thank Pedro Pita Barros and two anonymous referees for helpful comments. The usual disclaimer applies. Financial support from JNICT - Junta Nacional de Investigação Científica e Tecnológica (grant PCSH/ECO/938/95) is acknowledged.     

The state of Portuguese research in economics: an analysis based on publications in international journals

In this paper I analyze the state of Portuguese research in economics based on publications in international journals for the period of 1986 to 2000. I find that scientific production is increasing but productivity remains low. I also provide a revealing characterization of the production habits of Portuguese researchers by answering the following questions: where do Portuguese researchers publish? who are the most active publishers? how often do they publish? how much do they collaborate? what is their background? Finally, I analyze the impact of that research based on citation counts.Received: July 2001, Accepted: November 2001, Mathematics Subject Classification: A10, A14I would like to acknowledge the helpful comments of the Editor, Paulo Brito, as well as Ana Rute Cardoso, Clara Dismuke, João Santos Silva, Octávio Figueiredo, Pedro Pita Barros and Pedro Portugal.     

Alternative approaches to evaluation in empirical microeconomics

Four alternative but related approaches to empirical evaluation of policy interventions are studied: social experiments, natural experiments, matching methods, and instrumental variables. In each case the necessary assumptions and the data requirements are considered for estimation of a number of key parameters of interest. These key parameters include the average treatment effect, the treatment on the treated and the local average treatment effect. Some issues of implementation and interpretation are discussed drawing on the labour market programme evaluation literature.JEL Classification: J21, J64, C33Correspondence to: Richard BlundellThis review was prepared for the special microeconometrics PEJ. Comments from the editors, the referee and participants at the CeMMAP conference at which the papers for this volume were presented are gratefully acknowledged. The research is part of the program of the ESRC Centre for the Microeconomic Analysis of Fiscal Policy at IFS. Financial support from the ESRC is gratefully acknowledged. The second author also acknowledges the financial support from Sub-Programa Ciência e Tecnologia do Segundo Quadro Comunitário de Apoio, grant number PRAXIS XXI/BD/11413/97. The usual disclaimer applies.     

Is foreign trade important for regional growth? Empirical evidence from Portugal

The aim of this study is to investigate whether openness, export shares or trade balances affect regional growth in Portugal. Human capital is also considered as a conditional factor to growth, expressed by the rate of success in high school education. Thus, we analyse whether the combination of international trade and human capital is relevant to explain regional growth in Portugal and how it affects the convergence process between regions. In the empirical analysis, interaction terms are introduced to explore the existence of different performances between regions of the Littoral and the Interior. As an alternative to the traditional approach that considers the population growth rate, we include the share of sectoral employment aiming to capture labour specialisation in the main sectors of economic activity and measure its impact on regional growth.The empirical analysis estimates the conditional convergence model of the Barro's type, applied to the Portuguese NUTS3 regions for the period 1996-2005. The GMM estimation approach applied to regional panel data reveals that factors associated with external trade, human capital and sectoral labour share (especially of the industrial sector) are relevant to explain regional growth and convergence in Portugal.     

实现技术进步型经济增长的条件、路径和策略研究——基于人力资本投资的视角

提高创新效率和人力资本投资效率,采取渐进式技术进步以及经济危机的爆发和环保要求的提高等等,都可以激励企业家创新和劳动者的人力资本投资,使人力资本与技术进步形成一个良性循环,这决定了技术进步型经济增长的实现。随着创新和人力资本投资的不断进行,生产模式将不断更新,那么前后相继新旧生产模式的生产曲线的包络线就构成了经济增长的路径。发展中国家依靠技术模仿,可以发挥"后发优势"而实现短期高速增长,但是这种增长模式很难持续。采用技术模仿与技术创新相结合的技术进步方式,才是发展中国家实现长期增长和经济赶超的最佳策略。     

数量驱动或创新驱动：异质型人力资本对经济增长的机制演进

基于1987-2017年中国省际面板数据,运用SYS-GMM模型研究异质型人力资本对经济增长的影响。在区分高级与基本人力资本基础上,基于招生率和收入维度,从全局和阶段差异视角剖析异质型人力资本对经济提速的机制演进。研究发现：全局而言,两种测度下基础和高级人力资本各自以数量及创新方式驱动经济增长,并呈现以数量驱动为主,数量、创新双驱动的增长模式;从演进视角看,两种测度均表明,高级人力资本创新驱动是新常态阶段经济增长的核心动力,但相比旧常态阶段,基础人力资本数量驱动日趋弱化并呈异质性;进一步研究表明,产业结构、城镇化及开放程度均对创新驱动有不同程度激励效应,而城镇化是挤出数量驱动的主要推手。     

Earnings, Schooling and Social Capital of Cooperative Managers

Abstract ** : This paper estimates a human capital model for co‐operative managers and compares the results with the social capital model, based on a questionnaire distributed in Portugal in 2003. The study disentangles the relative contributions of the two competing theories of earnings: the human capital and social capital theories, as applied to co‐operative managers. We conclude that co‐operative managers' earnings are a function of both theories. Policy implications are derived .     

Regulatory reform and labour earnings in Portuguese banking

This study examines changes in union contracts and wage structure during and after the introduction of regulatory reforms (deregulation and privatisation) in the Portuguese banking sector. The main finding is that, despite a relative wage erosion detected in the contract data, banking workers were able to enjoy an increasing wage premium in the period 1985–2000, probably reflecting the increasing profitability of the industry and the rise in labour productivity. The evidence also shows that some specific groups benefited relatively more than others: the least skilled and educated workforce and male workers gained more from the regulatory reforms. However, this unequal sharing of the wage premium did not raise wage inequality across ownership groups in the industry. I thank Mark Stewart, Odd Rune Straume, Ian Walker and two anonymous referees for very helpful comments. I am indebted to the Ministério do Trabalho e da Solidariedade for allowing the availability of data from Quadros de Pessoal. Financial support was provided by the Ministério da Ciência e Tecnologia under the grant BD/SFRH/2000/1291.     

人力资本门槛、创新互动能力与低发展陷阱——对1990年以来中国地区经济差距的实证检验

1990年以来,中国各地区经济差距不断扩大现象引起理论界的广泛关注。内生增长理论认为,原因可能在于落后地区的低人力资本禀赋难以同本地创新形成良性互动,导致经济增长速度始终囿于低发展陷阱。中国地区数据的实证结果表明,中等层次人力资本是创新经济增长的主要驱动要素,同一人力资本门槛内部的相近地区经济增长率基本保持均衡。如果外生政策变量不诱导落后地区跨越人力资本门槛,这类地区的低发展均衡状态将很难被突破。因此,在增加物质资本投入的同时突出人力资本建设,对平衡中国各地区经济增长具有很强的政策意义。     

Capital services estimates in Portuguese industries, 1977–2003

This paper presents capital services estimates for 26 Portuguese industries for the 1977–2003 period. The estimation procedure follows an integrated approach under which the flows of capital services are approximated as a proportion of the capital stock converted into standard efficiency units. Our findings suggest a close proximity between the evolution of capital flows and the observed fluctuations of Portuguese macroeconomic growth. TFP growth estimates based on growth accounting reveal, furthermore, a very disappointing performance of the Portuguese economy during the period under study, with an average annual rate of TFP growth of 0.8% being observed. Performance varies across industries, but the bulk of activities show very modest rates of TFP growth.     

Immigration, fertility, and human capital: A model of economic decline of the West

I show how the influences of unskilled immigration, differential fertility between immigrants and the local indigenous population, and incentives for investment in human capital combine to predict the decline of the West. In particular, indigenous low-skilled workers lose from unskilled immigration even if the indigenous low-skilled workers do not finance redistribution, do not compete with immigrants in the labor market, and do not compete with immigrants for publicly financed income transfers. For the economy at large, high-fertility unskilled immigrants and a low-fertility indigenous population result in economic decline through reduced human capital accumulation and reduced growth of per-capita output.     

新常态下的人力资本与经济增长——综合金融资本和创新创业的理论建模

在国内外形势的双重影响下,中国经济步入了"新常态"的阶段,放缓的经济增长步伐带来新的矛盾和挑战,经济增长模式从以往的粗放型逐渐向集约型转变,但以往的经济理论在经济新阶段都具有一定的局限性.本文使用主流宏观经济学前沿的建模方法将现有的四大经济增长理论囊括在一个综合模型中,把人力资本投资、金融资本投资、实物资本投资、创新创业活动、纳什博弈机制有机地结合在统一的分析框架下,对经济增长理论文献做出重要的概括和拓展.通过校准赋值和数值模拟,得出理论模型的基本结论:人力资本积累虽然可以通过创新和创业促进经济增长,但是其效果仍是递减的,呈现出新古典增长模型的属性.     

R&D, Learning, and Phases of Economic Growth

The role of learning and R&D in economic development is addressed in an endogenous growth model. When human capital is below a threshold level, the model predicts that skills are accumulated as the only growth-generating activity, whereas both innovation activities and learning drive growth above this level. Hence, an endogenous regime shift is triggered when the level of human capital reaches the threshold level because it becomes profitable to innovate.