A tale of two Ginis in the US, 1921–2012

Following a methodology by Jantzen and Volpert (2012), we use IRS Adjusted Gross Income data for the US (1921–2012) to estimate two Gini indices representing inequality at the bottom and the top of the income distribution, and to calculate the overall Gini as a function of the parameters underlying the two indices. A steady increase in the overall Gini since the Second World War actually hides two different periods of distributional changes. First, the increase in inequality from the mid 1940s to the late 1970s is driven by rising inequality at the bottom of the income distribution that more than offsets a decrease in inequality at the top. The implication is that middle-income earners gained relative to high-incomes, and especially relative to low-income earners. Second, the rise in the Gini after 1981 is driven by rising inequality at the top. Third, top-driven inequality follows a U-shaped trajectory consistent with Piketty and Saez (2003, 2006). Fourth, the welfare effects of the different distributional changes behind increasing inequality can be evaluated in light of the Lorenz-dominance criterion by Atkinson (1970): we argue that the rise in inequality since 1981 is much more likely to be associated with a social welfare loss net of compensating growth.     

Does the law of one price hold in a high-inflation environment? A tale of two cities in Turkey

This study addresses the price convergence in two cities in Turkey (Istanbul and Ankara) using annual data over the three-quarters of the twentieth century (1922–1998), characterized by prevailing high inflation rates for most of the period. In contrast to the rest of the literature addressing convergence in price levels with a typical result of extremely slow convergence rates at best, we argue that convergence is much easier detected in growth rates rather than levels of prices. We suggest using the bounds testing procedure of Pesaran et al. (2001) for this purpose. We find a clear-cut evidence on the existence of a common driving force behind inflation dynamics in Istanbul and Ankara – a finding that is in contrast with the results typically reported in related literature.     

Monetary–fiscal policy interaction and fiscal inflation: A tale of three countries

We study the impact of the interaction between fiscal and monetary policy on the low-frequency relationship between the fiscal stance and inflation using cross-country data from 1965 to 1999. In a first step, we contrast the monetary–fiscal narrative for Germany, the U.S., and Italy with evidence obtained from simple regression models and a time-varying VAR. We find that the low-frequency relationship between the fiscal stance and inflation is low during periods of an independent central bank and responsible fiscal policy and more pronounced in times of non-responsible fiscal policy and accommodative monetary authorities. In a second step, we use an estimated DSGE model to interpret the low-frequency measure structurally and to illustrate the mechanisms through which fiscal actions affect inflation in the long run. The findings from the DSGE model suggest that switches in the monetary–fiscal policy interaction and accompanying variations in the propagation of structural shocks can well account for changes in the low-frequency relationship between the fiscal stance and inflation.     

Talent introduction and housing price: a tale of Xi’an

A comprehensive competition policy for talent introduction was first implemented in Xi’an in February 2017 and has been imitated by many cities in China ever since. Although turned out to be useful in alleviating the problem of talents loss in the lower-tier cities, the policy has been criticized for its potential effect of driving up housing prices. Using the synthetic control method proposed by Abadie and Gardeazabal (2003), we explore the influence of the competition policy for talent introduction on housing prices in Xi’an. Based on the monthly data of Xi’an and 62 control cities across 30 provinces in China from January 2015 to April 2018, we find strong evidence for the positive effect of the competition policy on housing prices. Specifically, the policy increased housing prices in Xi’an by approximately 43% until April 2018.     

The Opportunities and Perils of Growing China's Economy

ModernizingtheeconomyhasbeenoneofthemostcontentiousandformidabletasksfacingChineseleadersinthemod ernera.SincethefoundingofthePeople'sRepublicofChina,Chineseeliteshaveexperimentedwithsemi-autarkicdevel opmentstrategiesthatemphasizednormativemeanstoenhance…     

The Opportunities and Perils of Growing China's Economy

1ARemunerativeViewofCrisis:TheGreatLeapForwardTheGreatLeapForwardwasthefirstandperhapsmostseriousendogenouslygeneratedcrisistofacetheChineseleadership.OneyearafterZhouEnlai shumiliatingapologyforblocking“rashadvance”,studentsandteachersatPekingUniversit…     

When is a Nation? Comparing Lithuania and Georgia

The article uses a constructivist reformulation of the question 'when is a nation?' as a parameter of comparison for the analysis of nationalist discourses on history in post-socialist Lithuania and Georgia. It shows that Lithuanian nationalists, by means of a critical reassessment of national history, described the nation as something that still had to be created, whereas Georgian nationalists referred to the unchallenged image of a glorious past and so treated the nation as something to be simply picked up from history. It is also argued that these diverging historiographical narratives correspond to different conceptualisations of the notion of the nation. While Lithuanians nationalists conceptualised the nation in the tradition of the French Revolution as a category that aims at the reconfiguration of state-society relations, Georgian nationalists identified it with traditional modes of organising social relations.     

Asymmetries in the revenue–expenditure nexus: A tale of three countries

The objective of this paper is to examine the government revenue and expenditure relationship in the context of what is known as the soft and hard budget constraint strategy. We adopt a nonlinear framework with structural breaks and focus our empirical analysis in three countries. Two of them represent the two extremes of polities in the EU: Sweden and Greece and the third, Germany is used for comparison purposes. Our results indicate absence of any asymmetries, TAR or MTAR, for Sweden and Germany. The symmetric ECM provides support for the fiscal synchronization hypothesis of revenues and expenditures in both countries. For Greece, however, we find evidence for asymmetries of the MTAR form, which in turn support the spend-and-tax hypothesis with asymmetric adjustment towards the long-run equilibrium. This indicates that the Greek fiscal authorities would cut deficits only if they exceeded a high “trigger” threshold, which gives support to the soft budget constraint strategy to gain political support. The fiscal adjustment takes place by cutting government expenditure. The out-of-sample forecast results suggest that a shift from a univariate model specification to a multivariate model improves marginally the forecast performance.     

What can wavelets unveil about the vulnerabilities of monetary integration? A tale of Eurozone stock markets

The study has two main objectives: (i) to investigate whether there is pure contagion or fundamental-based contagion/interdependence among the Eurozone equity markets (Germany, France, Italy, Spain and Netherlands), attributable to the shocks stemming from nine major crises around the world (ii) to investigate the evolution of market integration, whether mainly short-run or long-run. Wavelet decompositions, in both its discrete and continuous forms, are employed to unveil the multi-horizon nature of co-movements, volatility and lead–lag relationships. This is to unveil the path of linkages and the behavior underlying the transmission mechanism of financial shocks across major Eurozone stock markets. Evidence also supports the presence of common shocks whereby equity markets in Eurozone are significantly affected by episodic crisis events globally. Prior to the recent subprime crisis, contagion effects have generated short-term shocks that may potentially involve, among other factors, excessive channels. In stark contrast, the most recent US subprime crisis and EMU sovereign debt crisis reveal the evidence of fundamental-based contagion. We also find the increasing short-run and long-run stock market integration, driven by several stages of the establishment of EMU. Policy implications for regulators and investors are discussed in the context of continued monetary integration.     

Poverty and social exclusion: two sides of the same coin or dynamically interrelated processes?

There is growing interest in the analysis and measurement of social exclusion, to complement the static and dynamic literature on income poverty. On theoretical grounds, social exclusion and income poverty are seen as different processes, but with closely interrelated dynamics. However, our empirical understanding of the way these two processes dynamically interact at the individual level is still very limited. To shed some light on the issue, we use a dynamic bivariate probit model, controlling for unobserved heterogeneity and Wooldridge (2005)-type initial conditions. Both the first- and second-order Markov dynamics are examined. We estimate the model using the Italian sample of the European Community Household Panel (ECHP), waves 1–8, and find a sizable extent of state dependence in both poverty and social exclusion. Moreover, there are dynamic cross-effects implying that poverty and social exclusion are mutually reinforcing. Social policies aimed at eradicating poverty and avoiding individuals’ social and economic marginalization should take these interaction effects explicitly into account.     

Sulfur Allowance Trading and the Regional Clean Air Incentives Market: A Comparative Design Analysis of two Major Cap-and-Trade Permit Programs?

This paper investigates in detail the design parameters of the two mostprominent US cap-and-trade permit program – the US EPA Sulfur AllowanceTrading Program and the South Californian Regional Clean Air IncentivesMarket (RECLAIM). In contrast to expectations the two programs turn out to be rather different in several important design parameter choices.Common elements emerge primarily in the existence of an ambitious, quantifiedenvironmental target, mandatory use of stringent emission monitoring methodsand stiff penalties for non-compliance, coexisting command-and-controlregulations, the creation of a competitive permit market structure, andsome distributional concessions in the initial permit allocation. Generalizing from these common features we find that provisions to assurepolitical acceptance, functional interdependencies and overlapping regulation are the most important influences on the design of applied cap-and-trade permit programs.     

The two sides of academic research: do basic and applied activities complement each other?

It is generally acknowledged that the cuts in government funding for research implemented in several European countries will induce academic researchers to increase their interaction with non academic entities to promote the acquisition of external funding for research. Indirectly this implies that there will be a shift in the focus of academic scientific activity from basic to applied research via private research contracts and consultancy work. The aim of our paper is to assess the extent of the trade-off between basic research and applied activity in academic research departments. We use data for the universe of Italian academic departments over the period 2006–2011 and estimate whether increased applied activity is substituting or complementing basic research activity. We provide empirical evidence of a strong substitution effect for life sciences departments and, to a lesser extent, for engineering and technology departments, while there does not seem to be evidence of a substitution effect for departments whose scientific activity revolves around basic science.     

Changing International Financial Architecture: Growing Chinese Influence?

It is often said that the 21st century will be the Asian century. Based on population and gross domestic product projections, it certainly looks as if this will be so. Will the existing international financial institutions give more voices, votes, and top positions to Asia? Or will Asia create its own institutions that would rival the old architecture? This present paper argues, first, that China, and possibly India, will be in a position to be so influential that the international financial architecture may have to go through significant changes. Second, the three large crises in the last 20 years have made Asian countries more confident that they can manage capital flows by accumulating large foreign reserves and by adopting sound macrofinancial policies. After 2009, China started to push various initiatives that will amount to creating its own sphere of influence with new regional institutions in the future.     

Riding the 'J' Curve—Tourism and Successful Transition in Estonia?

This article is concerned with the function of the service industries in the transition from a Soviet planned economy to a market-oriented Western type of economy. In particular, it will examine the role of the tourism industry in economic transition in Estonia between 1985 and 1995. The economics of transition have hitherto been largely viewed within the context of a macroeconomic orthodoxy—an orthodoxy which has made use of the 'success story' of the Estonian economy to underline the validity of its point of view. This contribution will offer an alternative view of a successful instance of transition from a microeconomic perspective, and will suggest that the service sector—including tourism—was perhaps the transition catalyst. A large part of the content is based on personal research conducted in Estonia in the period 1992, 1995 and 1996.     

From scratch to efficiency gains after a financial crisis? A tale of a restructured banking system

We study the efficiency of the Argentine banking system after the 2001–2002 crisis. The financial system had to be restructured from scratch and recovered jointly with the economy, but its productivity and average cost levels have been stagnant since 2007. The analysis includes efficiency frontier estimations for retail banks and a comparison of subsamples for different categories of banks for the period 2005–15. We try to determine whether public banks are more efficient than private ones, whether privatized are more efficient than always private, as well as national versus foreign entities. Our findings show a modest average efficiency of the system and quite similar efficiency rankings for the different groups of banks. On average, public tend to be slightly more cost efficient than private, and national are slightly more efficient than foreign.     

R&D and patents: is it a two way street?

ABSTRACT

This paper provides empirical evidence on the link between firms’ R&D expenditure and patent registrations by applying the Granger causality test. We use a panel of Spanish manufacturing firms for the period 1990–2013. We first, examine the R&D-patents relationship in the manufacturing firms as a whole and subsequently, manufacturing was broken down into three groups of firms according to the technological level of the industries to which the firms belonged: high and medium-high (HMHT), low medium (LMT) and low (LT) technology firms. For the entire panel, our results provide support for a bidirectional relationship between R&D and patents, supporting both the traditional view and the reverse causality approach (patents cause R&D). When the sample is split into the three technology levels, we also find strong support for a bidirectional relationship in HMHT firms and weak support in LT ones. We found no evidence of this bidirectional link in LMT firms.     

Entrepreneurship and unemployment: A nonlinear bidirectional causality?

This paper tests the view that the relation between unemployment and entrepreneurship is dynamic and possibly nonlinear. It performs Granger-causality tests and STAR-EXT estimation to assess the causality direction and the nonlinear nature of the relation for a set of OECD countries. The results reveal a bidirectional and nonlinear relation between business creation and changes in unemployment.