Are stock prices excessively sensitive to current information?

The last few years has seen publication of evidence that stock prices overreact to current information. These studies have been criticized on several grounds, that the test statistics are biased and are invalid in the presence of non-stationary dividend series. This paper develops an extension of the variance bound test which is immune to these criticisms. The paper also presents evidence that the degree of excess volatility increases as the length of time the stock is held increases. Indeed, the variance bound test is satisfied for holding periods of less than two years.     

Are nascent entrepreneurs ‘Jacks-of-all-trades’? A test of Lazear's theory of entrepreneurship with German data

In a recent paper Edward Lazear proposed the ‘Jack-of-all-trades’ view of entrepreneurship. Based on a coherent model of the choice between self-employment and paid employment he shows that having a background in a large number of different roles increases the probability of becoming an entrepreneur. The intuition behind this proposition is that entrepreneurs must have sufficient knowledge in a variety of areas to put together the many ingredients needed for survival and success in a business, while for paid employees it suffices and pays to be a specialist in the field demanded by the job taken. This study contributes to the entrepreneurship literature by empirically testing Lazear's hypothesis using a large recent representative sample of the German population. The empirical estimation takes the rare events nature of becoming a nascent entrepreneur and the regional stratification of the sample into account. The results illustrate the statistical significance and economic importance of the ‘jack-of-all-trades’ theory.     

Are ‘true’ preferences revealed in repeated markets? An experimental demonstration of context-dependent valuations

This paper reports a new and significant experimental demonstration that market participants adjust their bids towards the price observed in previous market periods when—by design—individuals’ values should not be affiliated with the market price. This demonstration implies that market prices may not adjust as standard comparative statics predicts and emphasizes the significance of social aspects even in market contexts. Hence, the present study shows that market behaviour is not anomaly-free. Indeed, market behaviour does not reveal the underlying true preferences but rather context-dependent preferences.     

Is ‘new’ behavioral economics ‘mainstream’?

When comparing ‘new’ and ‘old’ behavioral economics (BE), many argue that ‘new’ BE has close ties with what is often called ‘mainstream’ economics. The aim of this paper is to reframe the ‘old’ vs. ‘new’ BE debate and investigate the nature of the relationship between psychologists, behavioral economists, and ‘mainstream’ economists. This will lead us to develop the concept of ‘space of interaction’, building on Galison’s metaphor of ‘trading zones’, to emphasize the role of outsiders, strategic thinking, and negotiation in ‘new’ BE. By discussing some often implicit arguments in an otherwise disconnected literature, we seek to bring new arguments to the discussions through a careful study of those relationships in the history of ‘new’ BE and its more recent developments. Leaving aside the orthodox/heterodox contrast and comparative approaches, we hope to provide a different account of the changes in ‘new’ BE and its relationship with the ‘mainstream’.     

Political economy and the ‘modern view’ as reflected in the history of economic thought

This paper focuses on the transition from classical political economy to ‘modern’ economics, a central aspect of which is the ascent of the conception of ‘theory’ as a mere instrument of research. We analyse how this transitional phase was perceived and interpreted in representative, more or less contemporaneous histories of economic thought: those by Luigi Cossa in 1880, by John Kells Ingram in 1915 (originally published in 1888), and by Charles Gide and Charles Rist in 1915. Despite their differences, all authors share the same conception of the structure of scientific laws, as well as the view that economics must be separated from liberalism.     

How ‘exact’ are exact measures of welfare loss?

This paper examines the sensitivity of exact measures of welfare loss to changes in the assumed form of the underlying utility function.     

Are women really that happy at work? Australian evidence on the ‘contented female’

This article investigates the apparent paradox of females possessing higher levels of job satisfaction compared to their male counterparts despite possessing worse employment outcomes. Postulating that the female workforce is heterogeneous by age, education and the presence of children, we create four groups; the aggregated, young and childless, young with children and the educated. The article finds statistical evidence of significant gender differences, though not uniformly so. Econometric results, however, paint a muddier picture, indicating that statistical results alone should not be used to categorically report incidences of gender differences in job satisfaction. Sample-selection bias results also evince sub-group heterogeneity and require further study. The determinants of job satisfaction vary between measures and sub-groups, though not necessarily so across gender. In sum, the article finds that the paradox does exhibit itself for the aggregated and young and childless sub-groups, but is largely absent for the young with children group. As well, there is a clear bifurcation in job satisfaction between genders for the educated sub-group. This suggests that employed females should not be viewed as a monolithic bloc in the labour force.     

The caregiving responsibilities of retirees: what are they and how do they affect retirees’ well-being?

Using data from the 2010 and 2012 American Time Use Surveys (ATUS) and the associated Well-being Modules (WBM), this article examines how caregiving affects the well-being of retirees who are caregivers. Different caregiving activities are examined, including caring for household adults, caring for non-household adults, and caring for children. Different aspects of well-being are examined, including how meaningful respondents find their activities and how happy, sad, tired, in pain, and stressed their activities make them. The results show that, controlling for selection into caregiving, most caregiving negatively affects the well-being of retirees. This suggests that policies that remove some of the caregiving burden from retirees would increase their well-being.     

The ‘Rise of the South’: Global Convergence at Last?

This article offers a political economy review of the literatures and the empirical evidence concerning the ‘Rise of the South’. The study focuses on global convergence (in the long-term, in the last 30 years, and in the aftermath of the 2008 global crisis), economic decoupling between developing and advanced economies, and the economic strategies which may help catching-up, especially the ‘flying geese’ paradigm and industrial policies supporting manufacturing sector growth. It shows that the mainstream literature suffers from significant weaknesses; that empirical claims concerning convergence and decoupling have been exaggerated, and that flying geese-type strategies are severely limited. Examination of the drivers of growth in the South and the policies implemented in key converging countries support the claim that political economy approaches can offer valuable policy insights to countries grappling with the challenges of long-term growth and development.     

Are China’s sovereign credit ratings underestimated?

A key implication of Becker’s (1957) work on discrimination is that greater product market competition can reduce employment discrimination generally, and discriminatory wage gaps in particular. Using US data on manufacturing wages and import exposure, we explore whether increased competition, in the form of a heightened exposure to imports, reduces the racial wage gap. Our findings support Becker’s contention. We find that import exposure helped narrow the racial wage gap by about 1.4 percentage points between 1983 and 1993. The effect is especially pronounced among the most disadvantaged: unskilled Southern workers. For them, import exposure helped reduce racial wage disparities by 2.2 percentage points.     

Does travel inspire? Evidence from the superstars of modern art

This paper investigates whether travel increases the value of paintings produced by modern visual artists. The analysis is based on the 214 most prominent modern visual artists born between 1850 and 1945 and auction records of their paintings over the past 20 years. We find that artworks produced in the year of a journey are 7% more valuable than paintings produced in periods with no travel. We attribute this effect to human capital investments, knowledge spillovers and inspiration from the travel destination itself. There are persistent, but declining benefits to travel over the subsequent 4 years. The analysis shows that the impact of travel is smaller for later periods as modern art becomes more abstract. The effect on the value of paintings differs depending on the purpose of a journey: work-related, recreational and politically motivated journeys have a positive contemporaneous effect on value, whereas educational journeys have a negative effect. In addition, we find that France, Germany and the United States are the most frequently visited destinations for modern artists and also yield considerable benefits during times of strong innovation.     

How ‘Islamic’ is Islamic Banking?

Islamic Banks hold well over US $700 billion in assets and are growing at over 15% p.a. Islamic Banking and Finance (IBF) involves wider ethical and moral issues than simply ‘interest-free’ transactions. Its advocates argue that these make it more economically efficient than conventional banking and promote greater economic equity and justice. To what extent, then, do actual Islamic Banking practices live up to the ideal, and how different are they from conventional banking? A preliminary investigation shows that, three decades after its introduction, there remain substantial divergences between IBF's ideals and its practices, and much of IBF still remains functionally indistinguishable from conventional banking. This runs counter to claims by IBF advocates that it would rapidly differentiate itself from conventional banking. However, despite not providing an alternative to conventional banking and finance, IBF does strengthen a distinctly Islamic identity by providing the appropriate Islamic terminology for de facto conventional financial transactions.     

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.     

On the efficiency of ‘single window’

In many countries, the process of obtaining government approval for different projects involves interaction with multiple government agencies at various levels. This often makes the approval process inefficient by unnecessary lengthening it. In this paper we study the effect of a re-organization of the approval process towards making it a single window clearance system, on the efficiency of the entire process. We have used the expected queue length and the expected waiting time in the system at the stochastic steady state as measures of inefficiency of an approval system.     

The political economy of decarbonisation: from green energy ‘race’ to green ‘division of labour’

This paper aims to provide an addendum to the rapidly growing concept of a global ‘green energy race’ between major states. It argues that although this framing has been useful in underscoring important dynamics in the process of decarbonisation, its narrow focus on installed capacity obscures a much broader and more complex process at play. In particular, it overlooks the critical role played by states aggressively investing in R&D and export manufacturing in the renewable energy sector. The paper thus supplements the concept of a green ‘energy race’ with that of a green ‘global division of labour’, which sees the process of decarbonisation not exclusively as an effort by individual states to install renewables domestically, but rather as a collective and interdependent process by dozens of states, all striving in different ways to promote capital accumulation on their soil. The paper provides an overview of data covering innovation, manufacturing and deployment in the clean energy sector, and offers a theoretical analysis of the trends observed.