Remittances and temporary migration

In this paper we study the remittance behavior of immigrants and how it relates to temporary versus permanent migration plans. We use a unique data source that provides unusual detail on remittances and return plans, and follows the same household over time. Our data allows us also to distinguish between different purposes of remittances. We analyze the association between individual and household characteristics and the geographic location of the family as well as return plans, and remittances. The panel nature of our data allows us to condition on household fixed effects. To address measurement error and reverse causality, we use an instrumental variable estimator. Our results show that changes in return plans are related to large changes in remittance flows.     

Geopolitics in the South Caucasus: Local and External Players

This article discusses geopolitics in the South Caucasus, situated between the Black and Caspian Seas on the edge of Europe and Asia. Three independent states, Armenia, Azerbaijan and Georgia, emerged here in 1991. The region may likely become economically and politically more important to the world in the twenty-first century.     

Relative scarcity and convenience yield: evidence from non-ferrous metals

We study the relationship between convenience yield and relative scarcity in the non-ferrous metal market for the period January 2000–March 2015. We identify various sets of economic relationships for six major base metals, namely, aluminium, copper, lead, nickel, tin and zinc. Our bivariate and multivariate VARs and associated Granger-causality test results generally support the existence of a positive relationship between convenience yields of base metals and our relative scarcity measure. Furthermore, the time-varying characteristics observed in the results, especially during contango and backwardation periods, provide useful information to market players in developing inventory strategies.     

Sequential migration theory and evidence from Peru

"The standard human capital model of labor migration has been successful in explaining several empirical regularities of the migration process. However, there are a number of empirical facts that have not yet been explained or empirically tested; among them, that migrants usually perform more than one move in their lifetime; return migration accounts for a very important share of total migration rates; and there is a high positive correlation between in- and out-migration rates in the more advantageous regions. This paper presents both a simple model explaining these facts and an empirical analysis using data from Peru."     

Guestworker migration,remittances and the extended family: evidence from Pakistan

"The paper places migration in the context of the extended family. It models informal loans between migrant and extended family for financing the costs of international labor migration. To show repayments to extended family is important; we trace the effects of such loans on migrant savings and remittance to the immediate family. We employ a standard life-cycle approach, which predicts that the demand for extended family financing rises with migration costs and falls with pre-migration wealth. Remittance to the immediate family and savings retained abroad both fall with the pre-migration loan." These hypotheses are tested using data from a survey of return migrants to Pakistan carried out in 1986.     

Relative prices and inflation: new evidence from different inflationary contexts

This paper analyses the relationship between inflation and relative price variability, in the direction of the latter, in two countries with very different inflationary experiences: Argentina and Spain. To address this objective, using disaggregated price indexes (the Wholesale Price Index for Argentina and the Consumer Price Index for Spain), we delimitate different inflationary regimes and compute a set of regressions for each country. Our results suggest evidence in favour of the non-neutrality of inflation (mostly in hyperinflation periods) and do not support either the menu costs or the signal extraction approaches. We also detect significant structural changes in the relationship depending on the inflationary regime.     

Investment opportunities in the source country and temporary migration

Abstract This paper examines how attractive investment opportunities available to temporary migrants at home affect their saving behaviour and the optimal duration of stay abroad. The model predicts an inverse U‐shaped relationship between migration duration and the expected rate of return on repatriated savings. A higher rate provides an incentive to go back earlier and consume less abroad, while it can also trigger emigration aimed at generating the savings required for investment after return. The paper illustrates how the behaviour of temporary migrants reflects the interaction between their preferences and the opportunities available in labour and capital markets of both countries.     

Relative deprivation and migration preferences

In this letter, we overcome the existing shortages with respect to the assignment of individuals to reference groups and are the first to show that individual aversion to relative deprivation plays a decisive role in shaping migration preferences.     

Determinants of technical change: Empirical evidence from Switzerland

The purpose of this paper is to analyse both theoretically and empirically those factors which underlay the—empirically observable—inter-industry differences in technical progress. At the theoretical level economists agree more and more that technical progress can be explained at the industry level ey the following three factors: 1. the technological opportunities, 2. the appropriability conditions, meaning the ability to capture and protect the results of technical innovations, and 3. the market demand conditions.The basic theoretical model was tested with the help of two sets of Swiss data. One set was made available by Swiss Federal Office of Statistics and consists of quantitative information on R&D expenditures, R&D personnel, total employment and sales figures for 124 (4-digit SIC) industries for the year 1986. The second set was derived from a survey I carried out in the summer of 1988. 940 industry experts were approached: 358 of them, or 38 percent, covering 127 industries, completed the questionnaire. The items on the questionnaire were related to the two supply-side determinants of technical progress—items 1. and 2. above. For the empirical specification of the theoretical model, technical progress (as the dependent variable) was measured by three indicators: an output indicator, representing the introduction rate of innovations since 1970; two input indicators, share of R&D expenditures in sales and share of R&D personnel in total employment. All data were aggregated at the industry level (4-digit SIC). Three equations were estimated individually, using the OLS, GLS and Tobit methods.     

Stock market integration and risk premium: Empirical evidence for emerging economies of South Asia

This article investigates the dynamics of regional financial integration and its determinants in an international setting. We test a conditional version of the International Capital Asset Pricing Model (ICAPM) accounting for the deviations from Purchasing Power Parity (PPP) as well as temporal variations in both regional and local sources of risk. Using data from five major South Asian markets (Malaysia, Thailand, Singapore, Indonesia, and Sri Lanka), our results support the validity of an ICAPM and indicate that the risk is regionally priced. Furthermore, we show that changes in the degree of regional stock market integration are explained principally by the U.S. term premium, and the level of market openness, whatever the measure of currency risk. Finally, and as expected, the degree of stock market integration varies considerably over time and from one market to another. As intense market integration induces both benefits and risks, our findings should have significant implications for economic policies and market regulations in emerging, frontier-emerging and transition countries, particularly for countries from the same region.     

Young democracies and government debt: evidence from South America

I test the hypothesis that when democracies are young, or still fragile and unconsolidated, government debt tends to increase, presumably because of increased demand for redistribution, or to buy out the electorate, so that democracy becomes acceptable and “the only game in town”. I use a sample of all South American young democracies during the 1970–2007 period and the results, based on dynamic panel time-series analysis, suggest that those young democracies are indeed associated with larger government debt. Furthermore, I test the hypothesis that the outgoing dictatorships of the day bequeathed the young democracies with large government debt. This hypothesis is not confirmed by the analysis. Lastly, there is no evidence that, as those democracies mature over time, government debt tends to decrease. Given how I conduct the exercise, that is, the nature of the sample, the methodology I use and the counterfactuals I run, and also that there are always new episodes of democratisation being experienced by different countries around the world, with some being economically successful and others less so, the results I report are informative of what to expect in terms of government debt during political transitions into democracy when particular institutions are still not in place.     

Viewpoint: Empirical evidence and tax policy design: lessons from the Mirrlees Review

Abstract This paper examines the role of evidence in drawing up the recommendations for tax reform in the Mirrlees Review. The arguments are organised loosely under five related headings: (i) Key margins of adjustment. (ii) Measurement of effective tax rates. (iii) The importance of information and complexity. (iv) Evidence on the size of responses. (v) Implications from theory for tax design. Although the Mirrlees Review focuses on all aspects of tax reform, the focus is this paper is on the taxation of earnings with some examples drawn from the taxation of consumption and savings.     

Income segregation and local progressive taxation: Empirical evidence from Switzerland

This study investigates spatial income segregation in fiscally decentralized urban areas. The theoretical part proposes the progressivity of local income taxes as a new theoretical explanation for income segregation. The empirical part studies how income tax differentials across municipalities affect the households' location decisions. I use data from the Swiss metropolitan area of Basel that contains tax information on all moving households in 1997. The location choice of the households is investigated within the framework of the random utility maximization model. Different econometric specifications of the error term structure, such as conditional logit, nested logit and multinomial probit, are compared. The empirical results show that rich households are significantly and substantially more likely to move to low-tax municipalities than poor households. This result holds after controlling for alternative explanations of segregation. Social interactions and distance from the central business district are established as other major factors for income segregation. Households in general tend to choose locations close to other households like themselves.     

Health status and labour market outcome: Empirical evidence from Australia

This paper uses eight waves of Australia Household, Income and Labour Dynamics data to study the issues of state dependence and the short‐run and long‐run response to health shocks on the labour market. We consider six alternative panel data binary dependent variable models with different ways of modelling labour market dynamics and individual heterogeneity. We find that the key results with regard to labour market dependence and the impacts of health shocks are sensitive to model specification and pooling of male and female samples with differences as large as sixfold. Specification analysis is conducted and favours the dynamic fixed effects logit model for separate male and female samples. Methods for evaluating dynamic response paths to a one‐time health shock for binary outcomes are also suggested and results are presented.     

The influence of taxes on migration: evidence from Switzerland

Empirical studies on the impact of taxation on migration havebeen limited by a lack of comparable data in an internationalcontext and a lack of variation in tax burdens within countries.A notable exception to the latter is Switzerland. Prior empiricalstudies on tax competition in Switzerland have had to rely onaggregated data. In general, these studies have been supportiveof the notion of tax competition, i.e., high earners tend torelocate to low-tax regions. The authors use an alternativepanel approach based on micro-data from the first three wavesof the newly established Swiss Household Panel. Despite activecommunity tax policies aimed at attracting new residents anda significant increase in tax-burden dispersion among communitiesin the past decade, no tax-induced migration is observed. Migrationdecisions are found to be strongly influenced by accommodation-relatedfactors that point to important housing-market effects.     

Network effects and the dynamics of migration and inequality: Theory and evidence from Mexico

International migration is costly and initially only the middle class of the wealth distribution may have both the means and incentives to migrate, which can increase inequality in the sending community. However, the migration networks formed lower the costs for future migrants, which can in turn lower inequality. This paper shows both theoretically and empirically that wealth has a nonlinear effect on migration, and then examines the empirical evidence for an inverse U-shaped relationship between emigration and inequality in rural sending communities in Mexico. After instrumenting, we find that the overall impact of migration is to reduce inequality across communities with relatively high levels of past migration. We also find some suggestive evidence for an inverse U-shaped relationship among communities with a wider range of migration experiences.     

International migration,remittances, and schooling: evidence from El Salvador

We examine the effect of remittances from abroad on households' schooling decisions using data for El Salvador. Following the massive war-related emigration of the 1980s, remittances became a significant source of household income throughout the 1990s. We use the Cox proportional hazard model to examine the determinants of school attendance. Measuring income from a source that is uncorrelated with parental schooling—remittances—, we find that remittances have a large, significant effect on school retention. We estimate that while household income net of remittances has a small, though significant, impact on the hazard of leaving school in rural and urban areas, remittances have a much larger impact on the hazard of leaving school. In urban areas, the effect of remittances is, at its smallest, 10 times the size of the effect of other income. In rural areas, the effect of remittances is about 2.6 times that of other income. Our finding is of interest in that it suggests that subsidizing school attendance, particularly in poor areas, may have a large impact on school attendance and retention, even if parents have low levels of schooling.     

Financial statement comparability and audit efficiency: evidence from South Korea

In this study, we examine the effect of financial statement comparability on audit hours, which we use as a proxy for audit efficiency. We examine the hours worked by auditors in completing 2322 audits in Korea between 2006 and 2010. Audit efficiency can be determined by the total audit effort required to achieve a successful audit. Using a sample consisting of firms maintaining a certain level of audit quality, we investigate whether financial statement comparability reduces audit hours. We find that comparability is negatively associated with audit hours. In addition, we find that the effect of comparability on audit hours is attenuated for firms that are ‘highly followed’ by financial analysts. This study contributes to the literature by proposing a possible way to improve audit efficiency from a unique perspective. While prior studies show that a client’s inherent risk and control risk lower audit efficiency, the results of this study show that comparability between financial statements facilitates audit efficiency. Improvements in audit efficiency reduce the opportunity costs associated with audit effort and thereby enable auditors to spend more time and effort focusing on high-risk engagements. Comparability is one of four qualitative characteristics of accounting information included in accounting conceptual frameworks. Despite the importance of comparability, there is very little research on its benefits. This study makes a unique contribution by measuring audit effort using a large database of audit hours worked by auditors in Korean firms.     

Monetary policy responses to the exchange rate: Empirical evidence from the ECB

The exchange rate is an important part of the transmission mechanism in the determination of monetary policy because movements in the exchange rate have significant effect on the macroeconomy. It can be difficult to measure the reaction of monetary policy to the movements of the exchange rate, due to the simultaneous response of monetary policy to the exchange rate and the possibility that both variables respond to several other variables. This study addresses these problems by using an identification method based on the heteroscedasticity in the high-frequency data. The results in this paper suggest that the ECB systematically responds to exchange rate movements but that quantitative effects are small. Such a significant but small reaction coefficient seems consistent with the hypothesis that the central banks do not target the fluctuations in the exchange rate but consider them only to the extent they impact on the expected inflation and output path.