Regional growth in West Germany: convergence or divergence?

Using data from the 11 West German Länder for the period 1970–1994 we investigate the issue of regional convergence across Germany allowing for heterogeneity over cross-sections and over time. The paper finds evidence in favour of conditional convergence, but persistent inequality of regional steady states. © 1999 Elsevier Science B.V. All rights reserved.     

Efficiency Wages and Work Incentives in Urban and Rural China

This paper examines incentive-wage effects for production and for managerial/technical workers in both urban and rural Chinese nonagricultural enterprises. We report strong evidence of productivity-enhancing wage behavior among enterprises in all ownership categories. There is also evidence that firms paying higher efficiency wages experience less shirking among their employees. We find that the profit-maximizing potential of incentive-wage setting is not fully exploited, although there is weak evidence that joint ventures come closer to profit-maximizing behavior at this margin of wage/employment behavior than do collectives or state-owned enterprises. J. Comp. Econ., December 2001, 29(4), pp. 645–662. The Ohio State University, 1945 North High St., Columbus, OH 43210 and University of Hawaii at Manoa, Honolulu, Hawaii 96822. © 2001 Elsevier ScienceJournal of Economic Literature Classification Numbers: P23, J31, O15.     

New evidence on the convergence of international income from a group of 29 countries

This paper updates and extends the time-series evidence on the convergence of international incomes using a set of 29 countries over the period 1900–2001. Time-series tests for stochastic convergence are supplemented with tests which provide evidence on the notion of “β-convergence” predicted by the Solow model. The evidence indicates that the relative income series of 21 countries are consistent with stochastic convergence, and that β-convergence has occurred in at least 16 countries at some point during the twentieth century. Further examination of the properties of the β-convergence test provides anecdotal evidence of conditional convergence in three additional countries for which the convergence hypothesis was initially rejected. Consideration of convergence clubs strengthens the evidence in favor of convergence. Analysis of the cross-country dispersion of incomes over time also suggests that convergence has occurred over the 1900–2001 period, particularly within certain clubs, with structural breaks associated with World War II in many countries causing a break in the convergence process.      

Hardened Budgets and Enterprise Restructuring: Theory and an Application to Romania

We identify the presence of soft budgets and analyze their impact on enterprise restructuring in Romania over the initial transition period. A simple analytical framework is developed to show that hardened budget constraints foster rationalization of costs but not new investment. The latter requires availability of external financing. The model emphasizes the importance of the credibility of hardened budgets and the empirical findings are consistent with its predictions. Using a sample of over 4000 Romanian enterprises from 1992 to 1995, we show that hardened budget constraints induce labor shedding. However, there is no evidence of new investments. J. Comp. Econ., December 2001, 29(4), pp. 749–763. University of Sienna, Central European University, and CEPR; and World Bank and CEPR. © 2001 Elsevier ScienceJournal of Economic Literature Classification Numbers: G32, G34.     

University education in future studies— a mark III critique: Part II

In 1970 an initial survey was made of futures courses at university level based on forty courses that could be located in the United States and Canada [Technol. Forecast. Soc. Change 2, 133–148 (1970)]. This was replicated during 1970–1972 on approximately 200 North American courses and reported changes in the field at the Third World Future Research Conference in Bucharest, September 1972 (Technol. Forecast. Soc. Change, 4, 387–407 [1973]). A third interation was funded by the World Institute Council and published in abstracted form with their permission here. The conclusions to be drawn from some six years of analysis of such courses, and drawn especially from the specifics of the 300 courses in the third iteration, can be lumped under five main headings: (1) All disciplines are to some degree finally alerted to the future implications of both their research and their teaching. (2) There remains still much “froth and nonsense” in futures courses. How to control this and encourage lively creativity is a complex problem-especially since the intellectual image of futurism today is not that high! (3) There appears to be no reliable sociocultural change theory backing future studies and there is precious little solid theory backing future studies and there is precious little solid theory in the field itself-offset by some progress in methodology. (4) Despite these strictures, if all future-oriented courses in American/Canadian universities were lumped together (future Studies per se; technology forecasting/assessment; policy sciences; peace studies; demography; environmental/ecology courses; general systems theory/system analysis/system dynamics; mathematical modelling and game theory; eschatology; utopian literature and science fiction; even black studies and women's courses) the total might approach 5000 and it is still growing, as is popular and academic understanding of the necessity “to plan ahead” in this period of human malaise. (5) Informal education of varied worth, from free swinging communes to middle management cram courses conducted by think-tanks, may turn out to be more useful in future-oriented advanced education than that which takes place in formal “walled” traditional institutions.     

Convergence Across the United States: Evidence from Panel ESTAR Unit Root Test

Many empirical studies try to test whether there is income convergence across metropolitan areas in the continental United States. Drennan et al. (Journal of Economic Geography 4(5), 2004) claim that income among metropolitan economies is diverging for the period 1969–2001, after applying univariate unit root tests to the time series data. This paper brings new information to this area of study by using the nonlinear panel unit root test of the Exponential Smooth Auto-Regressive Augmented Dickey–Fuller (ESTAR-ADF) unit root test on the time series data for the period 1929–2005. Our results find evidence of stationarity for time series and thereby support beta and sigma convergence among states in a nonlinear setup. However, when the non-linear test encompasses cross section dependence as advocated by Cerrato et al. (2008), the evidence is attenuated.     

Innovation dynamics in the EU: convergence or divergence? A cross-country panel data analysis

This paper investigates whether a convergence or divergence of national innovation capabilities of the 15 EU countries occurs in the course of time. An answer to this question permits immediate conclusions with regard to the success prospects of a convergence of per capita incomes and labor productivities within the EU. For the empirical analysis based on patents granted at the US-Patent and Trademark Office, unit root tests for time series and panel data are used to scrutinize the convergence hypothesis. Taking all results together, evidence points to the fact that an absolute convergence of innovation capabilities is an exception. However, for a number of countries the results suggest either conditional convergence or convergence to their own growth paths.

A Proof of Calibration via Blackwell's Approachability Theorem

Over the past few years many proofs of the existence of calibration have been discovered. Each of the following provides a different algorithm and proof of convergence: D. Foster and R. Vohra (1991, Technical Report, University of Chicago), (1998, Biometrika85, 379–390), S. Hart (1995, personal communication), D. Fudenberg and D. Levine (1999, Games Econ. Behavior29, 104–130), and S. Hart and A. Mas-Colell (1997, Technical Report, Hebrew University). Does the literature really need one more? Probably not. But the algorithm proposed here has two virtues. First, it only randomizes between two forecasts that are very close to each other (either p or p + ε). In other words, the randomization only hides the last digit of the forecast. Second, it follows directly from Blackwell's approachability theorem, which shortens the proof substantially. Journal of Economic Literature Classification Numbers: C70, C73, C53.     

Deterministic seasonality in Dickey–Fuller tests: should we care?

This paper investigates the properties of Dickey–Fuller tests for seasonally unadjusted quarterly data when deterministic seasonality is present but it is neglected in the test regression. While for the random walk case the answer is straightforward, an extensive Monte Carlo study has to be performed for more realistic processes and testing strategies. The most important conclusion is that the common perception that deterministic seasonality has nothing to do with testing for the long-run properties of the data is incorrect. Further numerical evidence on the shortcomings of the general-to-specific t-sig lag selection method is also presented.

Coordination, “Magic,” and Reinforcement Learning in a Market Entry Game

Previous experimental studies have documented quick convergence to equilibrium play in market entry games with a large number of agents. The present study examines the effect of the available information in a 12-player game in an attempt to account for these findings. In line with the prediction of a simple reinforcement learning model (Roth and Erev, 1995,Games Econ. Behav.8, 164–212), quick convergence to equilibrium is observed even given minimal information (unknown payoff rule). However, in violation of the basic model, information concerning other players' payoff increases the number of entrants. The information effect can be described by a variant of the basic reinforcement learning model assuming that the additional information changes the player's reference point.Journal of Economic LiteratureClassification Number: C7, C92.     

Revisiting the Relevance of International Trade Theory

Probably one of the most controversial contributions to the literature of international trade theory was offered by the late social economist John Culbertson. In his view, low wage competition among corporations in a world characterized by capital mobility and massive trade deficits undermines the foundation trade theory based on David Ricardo’s celebrated notion of comparative advantage. Instead, there are several good reasons to believe that international trade with China, India, Vietnam, etc. will be governed by absolute advantage. The current essay is dedicated to the virtually ignored work of Culbertson, and it is meant as an invitation for social economists to critically evaluate the argument and in the process make an attempt to point out where it goes wrong.

Distribution Dynamics of CO<Subscript>2</Subscript> Emissions

This paper uses nonparametric methods to examine the convergence in CO₂ emissions per capita on a sample of 100 countries for the period 1966–1996. Industrial countries show a convergence pattern. However, there is little evidence of convergence for the whole sample.     

Evolution in Finitely Repeated Coordination Games

I apply a version of Kandori et al. (1993, Econometrica, 61, 29–56) and Young's (1993, Econometrica, 61, 57–84) evolutionary dynamic to finitely repeated coordination games. The dynamic is modified by allowing mutations to affect only off path beliefs. I find that repetition within a match leads agents to sacrifice current payoffs in order to increase payoffs in later stages. As a consequence, evolution leads to (almost) efficiency. Journal of Economic Literature Classification Number: C79.     

A contribution to the empirics of convergence in real GDP growth: the role of financial crises and exchange-rate regimes

This paper investigates the convergence in real gross domestic product growth focusing on the impact of financial crises (i.e. banking crises, currency crises and debt crises) and nominal exchange-rate regimes (i.e. fixed, intermediate and flexible) on convergence. To that end, we compute four convergence indicators (σ-convergence, γ-convergence, absolute β-convergence and conditional β-convergence) for 163 countries classified into four income groups during the period 1970–2011. The results suggest that (i) there is evidence in favour of σ-convergence and γ-convergence only for high-income countries; (ii) absolute and conditional β-convergence are present in each of the four income groups of the countries under study; (iii) exchange-rate regimes seem to play some role in upper-middle and lower-middle-income countries; and (iv) financial crises have a negative and significant impact on GDP growth independently of the income level of the countries.     

Structural Breaks and Convergence in the Regions of Peru: 1970–2010

The aim of this paper is the analysis of stochastic and β‐convergence in the relative regional per capita outputs using different unit root tests both with and without structural breaks and using a further test that is robust to the presence of I(0) or I(1) errors. It allows robust inference on the estimates of the initial per capita output (intercepts) and the respective growth rates (slopes). The results of the application of unit root tests without structural breaks show the absence of stochastic convergence. However, by incorporating the presence of endogenous breaks, the results are reversed for all regions. In the case of β‐convergence, the results of the robust test W_RQF show that all regions have a structural break at some point during the period 1970–2010. We find different behavior for different regions. There is a catching‐up process and a lagging‐behind process for different groups of regions towards more negative or more positive paths.     

Taxes and labor supply: Portugal, Europe, and the United States

I relate hours worked with taxes on consumption and labor for Portugal, France, Spain, United Kingdom and United States. From 1986 to 2001, hours per worker in Portugal decreased from 35.1 to 32.6. With the parameters for Portugal, the model predicts hours worked in 2001 with an error of only 12 min from the actual hours. Across countries, most predictions differ from the data by 1 h or less. The model is not sensible to special assumptions on the parameters. I calculate the long run effects of taxes on consumption, hours, capital and welfare for Portugal. I extend the model to discuss implications for Social Security. I discuss the steady state and the transition from a pay-as-you-go to a fully funded system.

Convergence and divergence in Latin America, 1970-1998

This paper examines the process of convergence in Latin America over the period 1970–1998. There has been relatively little work on income convergence among developing countries in general and in Latin America in particular, even though many studies have examined convergence both within and among developed countries. There is little support for the convergence hypothesis over the sample period as a whole - although the beta coefficient is positive, it is insignificant. Convergence is strong in the 1970s but by the 1990s it has disappeared. There is no evidence of a narrowing in the cross-country dispersion of income (sigma convergence) for the sample period as a whole. The results offer little support for the neo-classical growth model - poorer countries have not grown faster than richer ones. There is a strong case for strengthening regional development policy.     

Cycles and multiple equilibria in the market for durable lemons

Summary. The paper investigates the nature of market failure in a dynamic version of Akerlof (1970) where identical cohorts of a durable good enter the market over time. In the dynamic model, equilibria with qualitatively different properties emerge. Typically, in equilibria of the dynamic model, sellers with higher quality wait in order to sell and wait more than sellers of lower quality. The main result is that for any distribution of quality there exist an infinite number of cyclical equilibria where all goods are traded within a certain number of periods after entering the market. Received: December 21, 2000; revised version: September 5, 2001     

Subgame-perfect implementation of bargaining solutions

We study house allocation problems introduced by L. Shapley and H. Scarf (1974, J. Math. Econ.1, 23–28). We prove that a mechanism (a social choice function) is individually rational, anonymous, strategy-proof, and nonbossy (but not necessarily Pareto efficient) if and only if it is either the core mechanism or the no-trade mechanism, where the no-trade mechanism is the one that selects the initial allocation for each profile of preferences. This result confirms the intuition that even if we are willing to accept inefficiency, there exists no interesting strategy-proof mechanism other than the core mechanism. Journal of Economic Literature Classification Numbers: C71, C78, D71, D78, D89.     

Labor Market Segmentation and the Implications for Public Sector Retrenchment Programs

Despite the importance placed on reducing public sector employment in sub-Saharan Africa, remarkably little is known about the labor market transition paths of departing public sector workers. This paper uses household survey data from Conakry, Guinea to establish evidence of labor market segmentation between the wage and nonwage sectors. An empirical model of the unemployment durations experienced by departing public sector workers finds that transition paths vary significantly according to personal characteristics that also affect the resulting earnings opportunities in segmented labor markets. Particularly, there is a marked tendency of females to enter quickly the nonwage sector, relative to males, and a negative influence of severance payments on wage sector employment acceptance.J. Comp. Econom.,December 1997,25(3), pp. 385–402. Department of Agricultural and Applied Economics, Virginia Tech University, 208 Hutcheson Hall, Blacksburg, Virginia 24060-0401 and Cornell University, 3M28 Martha Van Rensselaer Hall, Ithaca, New York 14853.