Is democracy good for growth? — Development at political transition time matters

Is democracy a better political regime for economic prosperity than autocracy? This paper shows that the answer depends on the initial economic development level during the democratic transition when the foundation of institutions was laid. Democracy facilitates growth only in countries that already have adequate development at transition time. These countries are more likely to create and sustain growth-enhancing institutions than others. Without appropriate development, democracy does not improve growth; this applies to about 40% of the third-wave democratized countries. These results are based on a sample of 153 countries in 1960–2010 and robust to various specifications and endogeneity issues.     

Bootstrapping the autoregressive structure of cross-country demand systems

A simulation based on Efron's (1979) bootstrapping technique suggests that the asymptotic chi-square distribution provides adequate confidence intervals for the autoregressive parameter in cross-country demand systems.     

Emergy evaluation perspectives of an irrigation improvement project proposal in China

Emergy theory and method are used to evaluate the feasibility of an irrigation improvement project in China and its contribution to local agricultural development. An emergy method for evaluating the costs and benefits of the project and a composite index named the emergy cost-benefit ratio (EmCBR) were developed. The emergy evaluation shows that the major costs associated with the proposed project come from earthwork (77.4% of the total cost) and concrete work (15.4%), and that water saving (43.0% of the total benefit) and agricultural yield increase (56.9%) are the most important contributions. The calculated EmCBR is 0.97 (the lowest value for a feasible project is 1.0) which indicates that this project would not be feasible in emergy terms. The regional agricultural system could not benefit from the proposed project, according to several emergy indices: emergy yield ratio (EYR), emergy investment ratio (EIR), environmental load ratio (ELR) and environmental sustainability index (ESI). The results show that conventional cost-benefit analysis could fail to provide an adequate decision-making framework because it is unable to value resources and environmental impacts properly. More additional emergy evaluations should be completed on other alternatives to the proposed project to provide adequate guidelines for selecting the best alternative that contributes most to agricultural development with limited environmental impact.     

The co-evolution of innovation,demand and growth

In order to explain long-run economic development, we analyse in this paper the interplay between supply-side and demand-side processes. On the supply side, three different innovation processes are observed and interact: (i) growing productive efficiency, (ii) the emergence of new sectors and (iii) the increasing quality and differentiation of existing products. On the demand side, we analyse the meaning of disposable income and varying preference systems. The analysis is undertaken with the help of a numerical model of economic growth by the emergence of new industries. Our results show that the time path of economic development which we observe could not have been generated by taking into account a supply-side-based view on innovations alone. Without making reference to the formation of an adequate demand, development processes cannot be explained. The three processes need to be combined because each one individually would not suffice to generate long-run economic development. However, only with the formation of an adequate demand long-run economic development becomes sustainable.     

Incentives for subjects in internet experiments

Providing incentives to subjects in internet experiments can be tricky. One simple method is a high score (as in computer games). We test whether high scores provide adequate incentives in comparison to the usual performance based incentives. We find significant differences.     

Relating the philosophy and practice of ecological economics: The role of concepts, models, and case studies in inter- and transdisciplinary sustainability research

We develop a general and unifying methodology for ecological economics which integrates philosophical considerations on the foundations of ecological economics with an adequate operationalization. We argue that the subject matter and aims of ecological economics require a specific combination of inter- and transdisciplinary research, and discuss the epistemological position on which this methodology is based. In accordance with this understanding of inter- and transdisciplinarity and the underlying epistemological position, we develop an operationalization which comprises simultaneous analysis on three levels of abstraction: concepts, (generic) models and case studies. This provides a systematic and integral view on ecological economics, and thus allows one to see the relationship between contributions to the field that have so far been perceived as very heterogeneous and largely unrelated. At the same time, this methodological framework may provide orientation for the further development of ecological economics.     

Conditional volatility and correlations of weekly returns and the VaR analysis of 2008 stock market crash

Modelling of conditional volatilities and correlations across asset returns is an integral part of portfolio decision making and risk management. Over the past three decades there has been a trend towards increased asset return correlations across markets, a trend which has been accentuated during the recent financial crisis. We shall examine the nature of asset return correlations using weekly returns on futures markets and investigate the extent to which multivariate volatility models proposed in the literature can be used to formally characterize and quantify market risk. In particular, we ask how adequate these models are for modelling market risk at times of financial crisis. In doing so we consider a multivariate t version of the Gaussian dynamic conditional correlation (DCC) model proposed by Engle (2002), and show that the t-DCC model passes the usual diagnostic tests based on probability integral transforms, but fails the value at risk (VaR) based diagnostics when applied to the post 2007 period that includes the recent financial crisis.     

Book reviews

Abstract

It is a commonly accepted view that the parity theory of forward exchange based on the law of one price was first formulated by Keynes. In this article we assess the preliminary shapes of the interest parity (IP) relation. After reviewing the early beginnings of the IP relation, we investigate two French economists of the mid-nineteenth century who have hitherto received no adequate attention. We argue that Bonnet and Juglar ought to be considered pioneers in the assessment of IP relation since Goschen's contribution is related to the specificity of ‘long’ exchange rates at a bimetallic time.     

Ethnic diversity and economic development

This paper analyzes the role that different indices and dimensions of ethnicity play in the process of economic development. Firstly, we discuss the advantages and disadvantages of alternative data sources for the construction of indices of religious and ethnic heterogeneity. Secondly, we compare the index of fractionalization and the index of polarization. We argue that an index of the family of discrete polarization measures is the adequate indicator to measure potential conflict. We find that ethnic (religious) polarization has a large and negative effect on economic development through the reduction of investment and the increase of government consumption and the probability of a civil conflict.     

“Generalized Darwinism” and the quest for an evolutionary theory of policy-making

According to the “Generalized Darwinism” movement (GD), the three principles of variation, selection and retention/replication (labeled “Darwinian” in some variants of GD) can and should be used as a meta-theoretical framework for the explanation of evolutionary processes in the sociocultural domain. Despite their biological origins, the various variants of GD aim at redefining these principles in a way that is supposed to abstract from any domain-specific particulars. We argue that in order to qualify as an adequate meta-theoretical framework for evolutionary economics, GD should not only inspire and guide positive theory development in evolutionary economics, but also be able to support viable practical policy implications. Examining its potential to do so, however, leads us to the conclusion that in its specific deductive variant proposed by Hodgson & Knudsen (HKGD), it risks systematically misguiding evolutionary policy advice. Competing variants, such as the one proposed by Pelikan, fare better in this regard.     

Conquering China’s Unbalanced and Inadequate Development: Macroeconomic Outlook,Policy Simulations,and Reform Implementation—A Summary of Annual SUFE Macroeconomic Report (2017–2018)

Leaving year 2017 China’s macroeconomy is continuously characterized by unbalanced and inadequate development. Whereas some aggregate indicators have shown improvement over the year, the cumulative growth rates in consumption and fixed asset investment have continued their downward trajectories. Worsening income inequality and resource misallocations, both between secondary and tertiary industries, and within the latter, pose serious challenges, let alone the systemic risk associated with the flourishing shadow banking system, rapid credit growth and debt overhang that weigh on the Chinese economy like the Sword of Damocles. This summary report highlights both the status quo and the consequences of the unbalanced and inadequate development embodied in China’s persistently distorted economic structure, and the role of deepening reforms of the institutions and governance in resolving the problems. Our analyses based on IAR-CMM model provide a unified framework for addressing China’s short-, medium-, and long-term issues in an internally coherent manner. Looking into year 2018, our benchmark projection of real GDP growth rate is 6.7% (6.41% using more reliable rather than the official data). Alternative scenario analyses and policy simulations are conducted to reflect various aspects of the economic challenges in the short to long runs. Through the lens of these analyses we conclude that rule-of-law based and market-oriented structural reforms should continue to hold a center stage in China’s transition from a phase of high-speed but unbalanced growth, to a stage of balanced and adequate high-quality development.     

Health Damage of Air Pollution: An Estimate of a Dose–Response Relationship for the Netherlands

This paper estimates the dose-response relationship between air pollution and the number of work loss days for the Netherlands. The study is based on illness data (work loss days) for the Dutch labour population and average year concentrations of air pollution in 29 districts. The dose-response relationship has been estimated by means of two different techniques: the ordinary least squares method (OLS) and the one-way fixed-effects method (OWFEM), which we consider to be more adequate. In general health effects are much smaller when OWFEM is applied than if OLS is used. With OWFEM a significant relationship is found between sulphate aerosol (SO₄), ammonia (NH₃) and the number of work loss days (WLDs). Particulates (TSP), O₃ and SO₂ have no significant effect on the number of WLDs. These results differ from those obtained in studies in the United States, which indicate that particulates (TSP) and other small particles, ozone (O₃) and to a lesser extent SO₄ and SO₂ significantly influence the number of WLDs.     

On the relationship between creativity and standardisation: evidence from a qualitative study on the introduction of standardised evaluation framework in recruitment

Creativity and standardisation are two interrelated, but contrasting constructs that are considered as indispensable for successful corporate management. While several scholars have tackled this issue with varying scopes, the literatures examining the impact of standardised framework on creativity in human resource development are scant. To further contribute to this discussion, this study aims to explore the effect of standardised competency evaluation on creative performance based on the qualitative interview data from various stakeholders. The results indicate that standardisation and creativity can be mutually reinforcing under specific conditions. It has been identified that a basic understanding of standardisation can create an adequate space for tolerance to cope with failure and build legitimacy, thus having a more informational rather than controlling effect on individuals’ creative performance. Individuals must be in control of the given standards to access the appropriate resources necessary for creativity to bloom.     

基于上海股市的资本资产定价模型的实证检验

鉴于资本资产定价模型对资产评估和资本定价的作用,以上海股票市场为对象,选取上证180指数中178家股票的相关数据,运用计量经济学的方法进行相关的资本资产定价模型的实证检验。结果显示:上海股票市场存在较大的投机行为,资本资产定价模型在上海股票市场还不适用,对于上海股票市场股票的定价还存在一定的困难。并就结论出现的原因给予了相关的解释。     

21世纪中国农村经济可持续发展政策研究

本文从我国现实国情和农业,农村经济可持续发展政策供给不足出发,提出了２１世纪我国农业,农村经济可持续发展政策的四大战略重点,即加强农业保护;发展一体化农业;加速农村城市化进程;把农村工业纳入城市工业体系。     

Beyond rational behaviour: the non-financial variables that condition shareholder action during a takeover

This article provides experimental evidence that bidder and target shareholders of a takeover announcement exhibit differences in their actions explained by individual traits and by the environment in which investors must decide. These variables should be considered when designing an adequate investor protection policy. Before the crisis, investor protection regulation was based on the rational behaviour hypothesis and characterized by an overreliance on disclosure and financial literacy strategies. However, the new European policy on financial services has acknowledged the lack of adequate protection, and has increased transparency and access to information for investors in MIFID II and MiFIR.     

Forecast accuracy of small and large scale dynamic factor models in developing economies

Developing economies usually present limitations in the availability of economic data. This constraint may affect the capacity of dynamic factor models to summarize large amounts of information into latent factors that reflect macroeconomic performance. This paper addresses this issue by comparing the accuracy of two kinds of dynamic factor models at GDP forecasting for six Latin American countries. Each model is based on a dataset of different dimensions: a large dataset composed of series belonging to several macroeconomic categories (large scale dynamic factor model) and a small dataset with a few prescreened variables considered as the most representative ones (small scale dynamic factor model). Short‐term pseudo real time out‐of‐sample forecast of GDP growth is carried out with both models reproducing the real time situation of data accessibility derived from the publication lags of the series in each country. Results (i) confirm the important role of the inclusion of latest released data in the forecast accuracy of both models, (ii) show better precision of predictions based on factors with respect to autoregressive models and (iii) identify the most adequate model for each country according to availability of the observed data.     

Revisiting the infant industry argument

This paper identifies a flaw in the infant industry argument that previous literature has ignored. A simple model first replicates the infant industry logic but subsequently shows that, in the presence of a ‘traditional technology’ with poor growth potential, the infant-industry logic is likely to fail. Under protectionism domestic producers substitute advanced technologies with the low-growth alternative, thereby inhibiting learning and economic growth. Protectionism's adverse effect on development is magnified by complementarities among advanced input goods and, under adequate conditions, in a three-country setting.     

Financing development in less developed countries

Defining development and measuring growth is not an easy task. Countries without adequate internal capital seek financial aid from external sources. Private, direct investment from foreign sources has been inadequate for financing growth. Debt and development assistance in the form of grants has been necessary for financing less developed country growth. Foreign debt and foreign equity have contributed to growth and development unequally. This paper examines the relationship between development and financing in 15 less developed countries.     

Who should be precautionary? Governance of nanotechnology in the risk society

This article focuses on one important ethical and political element in the development of nanotechnologies: the relevance and importance of the precautionary principle. The principle recommends political actions based upon experiences and early scientific warnings, even when there is no clear scientific evidence to prove causal links. Our chief contribution to the discussion about the precautionary principle in nanotechnologies is the development of the stakeholder approach in a governance perspective. We link our article to the theoretical and empirical discussions on risk society. In at least two ways the risk society of Ulrich Beck seems highly relevant for the precautionary principle within nanotechnologies: Precautionary actions represent one model for the society to deal with modern risks; and Beck redefined the relation between science and society. This article is based upon qualitative interviews with four groups of stakeholders in Norway: (1) non-governmental organizations—consumer, environment, health; (2) political authorities and politicians; (3) industry and businesses; and (4) the scientific community. In the present phase of the development of nanotechnologies, the responsibility for taking precautionary actions are, to a large extent, placed on the individual researcher and the scientific community. We have identified seven issues in the interviews that are pertinent for the scientific and political discourse about nanotechnologies.