Wages and productivity: the role of labour market institutions in OECD countries

In the context of a monetary union, to keep a territorial equilibrium in terms of economic activity and employment, the relationship between real wages and productivity is crucial. In this paper, empirical evidence about the response of wages to productivity is obtained for 20 OECD countries and the role of labour market institutions to explain differences in this response is analysed.     

Spatial Inequalities and Economic Growth

Abstract

In this editorial, we summarise and comment on the five articles published in issue 9.2. The five articles are a selection of papers presented at the ‘Workshop on Inequality and Regional Growth and Cohesion’ organised by the Regional Quantitative Analysis research group (AQR-IREA) of the University of Barcelona in November 2011. The first two articles, by De Dominicis and by Monastiriotis, focus on the analysis of regional growth and examine the influence of agglomeration and national development, respectively. The article by Ezcurra and Rodríguez-Pose looks instead at how trade openness impacts on within-country regional disparities, while the article by Kyriacou and Roca-Sagalés examines in turn how regional disparities impact on the quality of government at the national level. The final article by Sacchi and Salotti examines the impact of different forms of decentralisation on income inequalities at the household level. From our perspective, these articles contribute to a better understanding of the complex link between inequality and economic growth, while they also leave open several questions that could clearly stimulate future research on the topic.     

Exponential discounting bias

We address intertemporal utility maximization under a general discount function that nests the exponential discounting and the quasi-hyperbolic discounting cases as particular specifications. Under the suggested framework, the representative agent adopts, at some initial date, an optimal behavior that shapes her consumption trajectory over time. This agent desires to take a constant discount rate to approach the optimization problem, but bounded rationality, under the form of a present bias, deviates the individual from the intended goal. As a result, decreasing impatience will end up dominating the agent’s behavior. The individual will not be aware of her own time inconsistency and, therefore, she will not revise her plans as time elapses, what makes the problem relatively simple to address from a computational point of view. The general discounting framework is used to approach a standard optimal growth model in discrete time. Transitional dynamics and stability properties of the corresponding dynamic setup are studied. An extension of the standard utility maximization model to the case of habit persistence is also considered.     

Exploring multiple eco-routing guidance strategies in a commuting corridor

The introduction of eco-routing systems has been suggested as a promising strategy to reduce carbon dioxide emissions and criteria pollutants. The objective of this study is to scrutinize the impacts of an eco-routing guidance system on emissions through the use of a case study in a commuting corridor. This research aims at assessing the potential environmental benefits in terms of different pollutant emissions. Simultaneously, it addresses the extent of variations in system travel time (S_TT) that each eco-routing strategy implies. The methodology consists of three distinct phases. The first phase corresponds to the adjustment of a microsimulation platform of traffic and emissions with empirical data previously collected. Second, to volume-emission-functions (VEF), developed based on the integrated modeling structure. Final, to different scenarios of traffic flow optimization performed at the network level based on a simplified assignment procedure. The results show that if the traffic assignment is performed with the objective to minimize overall impacts, then the total system environmental damage costs can be reduced up to 9% with marginal oscillations in total S_TT. However, if drivers are advised based on their own emissions minimization, total system emissions may be higher than under the standard user equilibrium flow pattern. Specifically, environmentally friendly navigation algorithms focused on individual goals may tend to divert traffic to roads with less capacity affecting the performance of the remaining traffic. This case study brings new insights about the difficulties and potentials of implementing such systems.     

Academic spin-off creation: barriers and how to overcome them

The aim of this study is to analyze the process of academic spin-off creation, identifying the barriers to suggest how to overcome them. For this purpose, a case study method was adopted, and as data-collecting instruments, several in-depth interviews and documentary analysis were used from three academic spin-offs. The empirical evidence captures the different views of the founding researchers of the academic spin-offs, the researching lecturers in the department creating the spin-offs and the manager of the technology transfer office at the Portuguese university studied here. The results show that the different perceptions of barriers are seen to be solved through an internal strategy within the university. The findings also show that applied research should be valued in assessing lecturers, as it contributes, not only to the link with industry, and therefore to regional development, but also to universities' sustainability, overcoming the lack of financial support as a result of constant budget cuts. The contact networks resulting from universities' links with the different stakeholders will benefit the spin-offs themselves, facilitating their survival in the first years of their life.     

The flow-performance relationship around the world

We use a new dataset to study how mutual fund flows depend on past performance across 28 countries. We show that there are marked differences in the flow-performance relationship across countries, suggesting that US findings concerning its shape do not apply universally. We find that mutual fund investors sell losers more and buy winners less in more developed countries. This is because investors in more developed countries are more sophisticated and face lower costs of participating in the mutual fund industry. Higher country-level convexity is positively associated with higher levels of risk taking by fund managers.     

Determinants of the real exchange rate in the long-run for developing and emerging countries: a theoretical and empirical approach

This paper presents a new framework for the determinants of real exchange in the long-run in developing and emerging countries (DECs). We assume that currencies should be regarded as an asset. In consequence, dealers in the foreign exchange market play a crucial role on its dynamics. To set our model, we connect the model developed by Kaltenbrunner, which is grounded on chapter 17 of the General Theory, with productivity’s differential effect. By doing so, it states that even short-run factors and monetary variables affect the long-run real exchange rate. Moreover, it points out that the hierarchical nature of the international monetary system is crucial to understand exchange rate movements in DECs. Besides presenting such theoretical approach, our contribution is to test it empirically for 45 DECs from 1990 to 2008 by applying econometric techniques appropriate for panel data. We use a new data-set, which comprises, among other variables, foreign portfolio flow, interest rate differential, external vulnerability measures, and international liquidity, on annual basis. The empirical results endorse this framework. Overall, it shows the primacy of financial factors as determinants of the long-run real exchange rate and points to the endogenous and self-perpetuating nature of international monetary system hierarchy.