Cross‐Country Income Differences Revisited: Accounting for the Role of Intangible Capital

This paper develops a new intangible investment database that is consistent and internationally comparable for a set of 60 economies over the period 1995–2011. I find that over time a growing share of total investment consists of intangible assets, rather than investment in tangible assets, like machinery and buildings. Across countries, the level of economic development of a country is positively associated with its investment intensity in intangibles. By including intangible capital as an additional production factor, this paper finds that we can account for substantially more of the variation in cross‐country income levels. Depending on the assumptions regarding the output elasticities of factor inputs, the observed differences in intangible capital can account for up to 16 percentage points of the cross‐country income variation.     

Building and Interpreting Macro/Micro Estimates of Accrued‐to‐Date Pension Liabilities: French Reforms as a Case Study

Estimates of accrued‐to‐date pension liabilities (ADL) should become more widely accessible to statisticians and decision makers in the near future, in application of new SNA requirements. This raises two questions: how can such estimates be routinely produced, and what for? Microsimulation helps in answering the first question of the “how.” It allows ADL computations that take into account the complexity of pension rules. Concerning the “what for” question, it is known that ADL are not an indicator of global financial sustainability. Messages they convey are more interesting at the micro level, from a household perspective. This fosters the case for microsimulation which spontaneously generates consistent micro/macro results. We illustrate these points using the French situation as a case study. We emphasize one aspect of French reforms that may concern other countries as well: the move to price indexation and the connection it creates between sustainability and growth assumptions.     

Job Polarization and Task‐Biased Technological Change: Evidence from Sweden, 1975–2005

In this paper, we show that between 1975 and 2005, Sweden exhibited a pattern of job polarization with expansions of the highest‐ and lowest‐paid jobs compared to middle‐wage jobs. The most popular explanation for such a pattern is the hypothesis of task‐biased technological change, where technological progress reduces the demand for routine middle‐wage jobs but increases the demand for non‐routine jobs located at the tails of the job–wage distribution. However, our estimates do not support this explanation for the 1970s and 1980s. Stronger evidence for task‐biased technological change, albeit not conclusive, is found for the 1990s and 2000s. In particular, there is both a statistically and economically significant growth of non‐routine jobs and a decline of routine jobs. However, results for wages are mixed; while task‐biased technological change cannot explain changes in between‐occupation wage differentials, it does have considerable explanatory power for changes in within‐occupation wage differentials.     

Take‐Up of Social Assistance Benefits: The Case of the French Homeless

A considerable number of studies have been conducted to measure and analyze the phenomenon of the non‐take‐up of social assistance. However, the homeless portion of this population has long remained outside the scope of this research, so that little is known about their non‐take‐up behavior. In this paper, we focus on this population using a French national survey and we derive measures for the non‐take‐up of French basic income support. Our findings indicate that there is a substantial rate of non‐take‐up among the homeless, but that this rate is lower than that for the general population: approximately 18% of eligible homeless persons do not claim benefits compared to 35% of the general population. Using a large set of variables, we investigate the determinants of non‐take‐up. We show that although some of these determinants are shared with the general population, as identified in the literature, the homeless population exhibits some particularities. Furthermore, our results also suggest that the poorest of the homeless have a larger non‐take‐up rate than other homeless.     

Measuring the Underground Economy with the Currency Demand Approach: A Reinterpretation of the Methodology,With an Application to Italy

We contribute to the debate on how to assess the size of the underground (or shadow) economy by proposing a reinterpretation of the traditional Currency Demand Approach (CDA) à la Tanzi. In particular, we introduce three main innovations. First, we take a direct measure of the value of cash transactions—the flow of cash withdrawn from bank accounts relative to total non‐cash payments—as the dependent variable in the money demand equation. This allows us to avoid unrealistic assumptions on the velocity of money and the absence of any irregular transaction in a given year, overcoming two severe critiques to the traditional CDA. Second, in place of the tax burden level, usually intended as the main motivation for non‐compliance, we include among the covariates two direct indicators of detected tax evasion. Finally, we control also for the role of illegal production considering crimes like drug dealing and prostitution, which—jointly with the shadow economy—contributes to the larger aggregate of the non‐observed economy and represents a significant component of total cash payments. We propose then an application of this “modified CDA” to a panel of 91 Italian provinces for the years 2005–08.     

The Boom and Bust of the RMB's Internationalization: A Perspective from Cross‐Border Arbitrage

The RMB's internationalization developed very quickly from 2010 to 2015H1, but it slowed down significantly since 2015H2. This paper argues that cross‐border arbitraging activities played a significant role in both the boom and the bust of the RMB's internationalization. A slower pace of the RMB's internationalization based more on real demand might become a new norm in the future. To pursue a more sustainable RMB internationalization in the next decade, the Chinese government should maintain a relatively high economic growth rate, avoid the burst of systemic financial crisis, continue to liberalize the capital account in a gradual and cautious way, accelerate the reform and opening up of the domestic financial market, and integrate the RMB's internationalization with Asian monetary cooperation.     

Marginal Tax Rates and Tax‐Favoured Pension Savings of the Self‐Employed: Evidence from Sweden*

In recent years, the study of how individuals respond to policies that aim at promoting pension savings has emerged as a vital area of economic research. This paper adds to this body of literature by estimating the tax price elasticity of contributions to tax‐favoured pension‐savings accounts on a population of self‐employed individuals. I exploit a unique total database over the Swedish population that covers the years 1999–2005. Using instrumental variables, I obtain a tax price elasticity estimate of ?0.51 and an income elasticity estimate of 0.13, whereas ordinary least‐squares (OLS) produces estimates that conflict with consumer theory.     

Heaven's Swing Door: Endogenous Skills,Migration Networks,and the Effectiveness of Quality‐Selective Immigration Policies

A growing number of OECD countries are leaning toward the adoption of selective immigration policies, which are expected to raise the quality (or education level) of migrants. This view neglects two important dynamic effects: the role of migration networks, which could reduce the quality of migrants, and the responsiveness of education decisions to the prospect of migration. We propose a model of self‐selection into migration with endogenous education choices, which predicts that migration networks and the quality of migrants can be positively associated when destination countries adopt sufficiently selective immigration policies. Empirical evidence, presented as background motivation, suggests that this is indeed the case.     

Saving,Wealth and the Transition from Transfers to Individual Responsibility: The Cases of Taiwan and the United States*

Under the life‐cycle saving model, population aging leads to an increased demand for life‐cycle wealth. Changes in transfer systems create or destroy one component of life‐cycle wealth—transfer wealth. The decline in the familial transfer system in Taiwan and reform of the US Social Security system are two examples of ways that transfer wealth is reduced. The combined effects of aging and changes in transfer systems are analyzed using simulation analysis. Rapid aging and radical decline in transfer systems lead to a large but transitory surge in aggregate saving. Capital per worker increases rapidly and remains at a high level.     

The Effect of Benefit Reductions on the Retirement Age: The Heterogeneous Response of Manual and Non‐Manual Workers

I estimate the effect of benefit reductions on the timing of retirement. The introduction of actuarial adjustments in the German public pension system serves as a source of exogenous variation to estimate discrete time transition rates into retirement for individuals of age 60–66. Responses to benefit reductions are elaborated separately for manual and non‐manual workers. On average, individuals postpone retirement by 13.2 months if pension benefits are reduced by 3.6 percent for each year of early retirement. This result is in line with the previous quasi‐experimental literature and suggests that people respond to the incentive of reducing the implicit tax on further periods of work. However, among men the response is about 50 percent lower for manual workers compared to non‐manual workers. Surprisingly, this does not necessarily indicate that retirement incomes of manual workers deteriorate. The explanation is that disability pensions are available at age 63—without benefit reductions.     

Improving International Comparisons of Prices at Basic Heading Level: An Application to the Asia‐Pacific Region

The International Comparisons Program (ICP) run by the World Bank compares prices and real incomes across countries, and plays a pivotal role in the Penn World Table. Using a unique dataset consisting of over 600,000 price quotes from nine countries in the Asia‐Pacific region, we consider ways of improving the basic heading price indexes that form the building blocks of ICP. Current ICP methodology computes these price indexes using the country–product–dummy (CPD) method applied to the country average prices. We contrast this approach with: (i) a weighted version of CPD; (ii) CPD applied directly to the individual price quotes; and (iii) extended versions of CPD that include adjustments for unrepresentative products, urban–rural price differences, and different outlet‐types. Also considered are new CPD‐based methods for measuring urban–rural price differences, and the implications of our findings for the downward revision in China's GDP in ICP 2005.     

The Dynamics of Poverty and the Promotion of Transition from Non‐Regular to Regular Employment in Japan: Economic Effects of Minimum Wage Revision and Job Training Support

Comparison between Japan and other advanced countries shows that the relative poverty rate is high in Japan, and that many of the poor households are those with a non‐regular worker. As for mobility between income classes, the proportion of households remaining in the poor class for a long period of time in Japan is close to the average for EU countries. The panel estimation of its effect on wages shows that the raising of the minimum wage is statistically significantly associated with an increase in wages of non‐regular workers, in particular, female, but does not seem to decrease employment. The result shows that for male non‐regular workers, firm‐provided training promotes their transition to regular employment, and that for female non‐regular workers, occupational training promotes their transition to regular employment at different firms.     

Free Trade Agreements and Domestic Politics: The Case of the Trans‐Pacific Partnership Agreement

What is the role of domestic politics in facilitating or constraining a government's decision to participate in free trade agreements (FTAs)? This paper seeks to answer this question by focusing on the domestic politics in Japan over the Trans‐Pacific Partnership Agreement (TPP). In particular, we ask why the opposition to the TPP encompasses a much broader segment of society than is predicted by trade theorems. We show that a broader protectionist coalition can emerge through persuasion and policy campaigns by the elites, in particular, powerful protectionist interests expending resources to persuade the uncertain public.     

The Climate Policy Hold‐Up: Green Technologies,Intellectual Property Rights,and the Abatement Incentives of International Agreements

The success of global climate policies over the coming decades depends on the diffusion of “green” technologies. Using a simple model, we highlight a conflict between international environmental agreements (IEAs) on emissions reductions and international systems of intellectual property rights (IPRs) on abatement technologies. When IPRs are strong and global, IEA signatories anticipate rent extraction by innovators. This hold‐up effect reduces abatement, potentially to levels below those of non‐signatories, and it reduces the number of signatories to self‐enforcing IEAs. We explore policy options that respect existing property rights, but avoid the strategic interaction between signatories to an IEA and innovators.