Is Private Saving in Latin America and the Caribbean Different?

Private saving and economic growth are intimately linked, and low saving rates in Latin America and the Caribbean (LAC) have often been held responsible for disappointing growth in the region. Thus, identifying factors that spur saving is critical. This paper surveys previous empirical studies on LAC, highlighting contradictions, omissions and in some cases inconclusiveness of findings. Relying on a large dataset and a nested econometric framework, it analyzes private saving patterns and explores the role of its determinants in LAC, across LAC sub‐regions and compared with other regions. While the results highlight great heterogeneity in private saving rates within LAC and compared with the rest of the world, saving determinants are broadly the same notwithstanding some differences in sensitivity and contributions' sizes, and include its lag, income, demographics and public saving.     

Asymmetric Effects of Exchange Rate Changes and the J‐curve: New Evidence from 61 Malaysia–Thailand Industries

Research on the impact of currency depreciation on the trade balance is now moving in a new direction by incorporating nonlinear dynamic adjustment of the exchange rate and by using a nonlinear approach to error‐correction modeling and cointegration. Using these advances, researchers find not only more evidence of the J‐curve effect, but also new evidence of asymmetric effects of exchange rate changes on the trade balance. We contribute to this line of research by using monthly trade flow data from 61 two‐digit industries that trade between Malaysia and Thailand, and show that not only does currency depreciation have favorable effects on the trade balance of more industries, but the long‐run effects are asymmetric in 26 out of 61 cases. In line with current literature, our nonlinear model performs much better than the linear model when industry level data are used.     

When a Door Closes,a Window Opens? Long‐Term Labor Market Effects of Involuntary Separations

This study estimates the earning losses of workers experiencing an involuntary job separation. We employ, for the first time in the earning losses literature, a Poisson pseudo‐maximum‐likelihood estimator with fixed effects that has several advantages with respect to conventional fixed effects models. The Poisson estimator allows considering the full set of involuntary separations, including those with zero labor market earnings because of unemployment. By including individuals with zero earnings and by using our new method, the loss in the year of separation becomes larger than in previous studies. The loss starts with roughly 30% and, although it quickly shrinks, it remains at around 15% in the following years. In addition, we find that compared to other reasons for separation, the earning loss pattern is unique for involuntary separations, because no other type of separation implies such permanent scarring. This latter finding makes us confident that the self‐reported involuntariness of a separation is a reliable source of information.     

EFFECTS OF A CHILD'S DISABILITY ON AFFECTED FEMALE'S LABOUR SUPPLY IN AUSTRALIA

Australia has experienced a growing rate of child disability, with the rate of 3.7 per cent in 1998 increasing to 4.3 per cent in 2003 for children aged under four years and from 9.5 per cent to 10 per cent for children aged five to 14 years in the same period. However, surprisingly no study has examined the economic effects of child disability in the Australian context. This paper attempts to quantify the link between a child's disability and the work behaviour of the female in the affected family. Our findings provide empirical justifications for the current policy linking the severity level of child disability to the assessment of eligibility for Carer Payment (Child). We also found that child disability has different impacts on the labour market activities of married women and non‐married women. It appears that child disability imposes a greater hardship on non‐married women than on married women in terms of work choice decision. Once non‐married women manage to enter the labour force, they may have to stay on to work as usual even if they have a disabled child, because they may not have other family members to turn to for help as married women do.     

The Labour Market Effects of Vocational Education and Training in Australia

We provide estimates of the effects of completing a Vocational Education and Training (VET) qualification on individual labour market outcomes, particularly on the probability of employment and on earnings. Estimates are provided for 1997, 2001 and 2005. The estimation methodology is based on matched comparisons of persons at each level of VET qualification among Year 12 completers and non‐completers. We find that among Year 12 completers, there is little benefit from obtaining certificate level qualifications, but there are positive employment and earnings outcomes associated with obtaining diploma level qualifications. Among persons who did not complete Year 12, however, there are benefits from obtaining any kind of VET qualification, including the lower level Certificate I and II qualifications.     

Casino regulations and economic welfare

Abstract This paper studies the entry and tax regulation of oligopolistically competitive privately run casinos and government‐run casinos in a jurisdiction. We highlight three important external effects from casino‐style gambling: non‐casino income creation, social disorder costs, and cross‐border gambling. The laissez‐faire equilibrium need not be overcrowding compared with regulated or government‐run regimes. Entry regulation may lead to higher jurisdiction welfare than tax regulation. Government‐run casinos always operate on a larger scale and achieve higher welfare than other regimes, given the same number of casinos. With an endogenous fraction of external gamblers, a dispersed casino configuration yields higher welfare than a centralized one.     

FINANCIAL DEVELOPMENT ON GROWTH CONVERGENCE

This paper investigates whether the impacts of financial development on growth convergence vary with the stage of real development. We implement this analysis through the instrumental variable threshold regression approach proposed by Caner and Hansen. Our empirical evidence shows that financial intermediary development leads to long‐run convergence in growth of both economic activity and productivity. Moreover, such convergence‐enhancing effects of financial intermediation are stronger for less‐developed countries than for the more industrialized. In addition, the data reveal that stock market development assists growth convergence only in low‐income countries.     

Existence of a Condorcet Winner When Voters Have Other‐Regarding Preferences

In standard political economy models, voters are “self‐interested” that is, care only about “own” utility. However, the emerging evidence indicates that voters often have “other‐regarding preferences” (ORP), that is, in deciding among alternative policies voters care about their payoffs relative to others. We extend a widely used general equilibrium framework in political economy to allow for voters with ORP, as in Fehr and Schmidt (1999) . In line with the evidence, these preferences allow voters to exhibit “envy” and “altruism,” in addition to the standard concern for “own utility.” We give sufficient conditions for the existence of a Condorcet winner when voters have ORP. This could open the way for an incorporation of ORP in a variety of political economy models. Furthermore, as a corollary, we give more general conditions for the existence of a Condorcet winner when voters have purely selfish preferences.     

Debt Stabilizing Fiscal Rules

Unstable government debt dynamics can typically be stabilized around a certain target level of debt by adjustments in various fiscal instruments, like government spending, transfers, or taxes. This paper investigates properties of debt stabilizing rules which link the needed budgetary adjustments to the state of the economy. The paper establishes that the magnitude of the target level of long‐run debt is a key determinant of whether it is possible to find a rule of this type that can be implemented under all available fiscal instruments. Specifically, considering linear feedback rules, the paper demonstrates that there may well exist a critical target level of debt beyond which this is no longer possible. From an applied perspective, this finding is of particular relevance in the context of a monetary union with decentralized fiscal policies. Depending on the target level of debt, there might be a conflict between a common fiscal framework that tracks deficit developments as a function of the state of the economy and the unrestricted choice of fiscal policy instruments at the national level.