Supply management and household poverty in Canada

The regulation of the Canadian dairy and poultry industries through production quotas (also known as supply management) is widely believed to result in higher consumer prices that disproportionately impact poorer households. Using the most recent Survey of Labour and Income Dynamics (Statistics Canada 2013), we estimate the number of Canadians pushed below the poverty/low-income threshold as a result of this policy as ranging between 133,000 and 189,000 individuals.     

Multi-equation modelling of desirable and undesirable outputs satisfying the materials balance

The key feature when modelling joint production of intended outputs and unintended residuals is that the latter stem from the use of material inputs. A multi-equation model building on the factorially determined multi-output model of classical production theory satisfies the materials balance that tells us that the mass contained in inputs cannot disappear, but must turn up in the desirable outputs or end up as residuals. In this model, potentially complex technical relationships are simplified to express each of the intended outputs and the residuals as functions of the same set of inputs. Serious problems with the single-equation models most often found in the literature are demonstrated. Abatement activity in the form of end of pipe is added, and an optimal planning solution is derived using the concept of an environmental damage function for the impact of discharge of residuals into the natural environment. It is shown that the traditional environmental policy instruments, like direct regulation restricting the amount of undesirable residuals discharged to the environment, a Pigou tax on pollutants, and cap and trade, all function well. Extending the multi-equation model to allow for inefficiency, three efficiency measures are introduced: desirable output efficiency, residuals efficiency, and abatement efficiency. It is conjectured that these measures can be estimated independently using the DEA model.     

Slack-based directional distance function in the presence of bad outputs: theory and application to Vietnamese banking

In this paper we extend the slack-based directional distance function introduced by Färe and Grosskopf (Eur J Oper Res 200(1):320–322, 2010) to measure efficiency in the presence of bad outputs and illustrate it through an application on data of Vietnamese commercial banks. We also compare results from the slack-based directional distance function relative to the directional distance function, the enhanced hyperbolic efficiency measure (Färe et al. in Rev Econ Stat 71(1):90–98, 1989) and the Farrell-type technical efficiency and confirm that it has greater discriminative power.     

The long-run effect of foreign direct investment on total factor productivity in developing countries: a panel cointegration analysis

This paper examines the long-run effect of the level of foreign direct investment (FDI) on the level of total factor productivity (TFP) for 49 developing countries for the period 1981–2011 using panel cointegration and causality techniques. It is found that (i) FDI has, on average, a negative long-run effect on TFP in developing countries, (ii) long-run causality runs in only one direction, from FDI to TFP, (iii) in the short run, TFP has a negative effect on FDI, and (iv) the long-run effect of FDI of TFP differs between selected groups of countries: While the estimated long-run FDI–TFP coefficients are always relatively large, negative, and significant for countries with lower levels of human capital, financial development, and trade openness, the estimated effects are relatively small, insignificant, or even significantly positive for subgroups of countries with higher levels of human capital, financial development, and trade openness.     

Short- and long-run heterogeneous investment dynamics

In this paper, we model the dynamics of business investment taking into account asset-specific characteristics potentially affecting the reactivity of aggregate and disaggregate capital accumulation over the business cycle. We estimate Information and Communication Technologies (ICTs) and traditional investment (non-ICT) determinants within a Vector Error Correction Model testing the assumptions of the flexible accelerator and neoclassical model as well as the role of financial constraints and uncertainty. We evaluate our model on Italian data over the period 1980–2012, and we check our results also with Spanish and UK data. Our findings support the assumption that capital is heterogeneous since short- and long-run determinants are significantly different across the assets. Traditional assets experience stock adjustment costs while ICT investment incurs flow adjustment cost. In the short run, liquidity is a key determinant of investment independently of the asset type. In the long run, uncertainty significantly affects ICT. Finally, the results of the counterfactual exercises support the idea that ICT is a key policy variable to foster economic growth.     

How do financial cycles affect public debt cycles?

We employ the duration framework to study determinants of public debt cycles in 57 advanced and emerging economies over the 1960–2014 period, with a particular focus on the impact of financial cycles. The results suggest that the association between financial and debt cycles is asymmetric. Debt expansions preceded by overheating in credit and financial markets tend to last longer than other expansions, but there is no significant association between financial cycles and debt contractions. There is strong evidence of duration dependence in both phases of the cycle, with the likelihood of expansions and contractions to end increasing with the length of their respective spells. Higher initial level of debt increases the spell of contractions (persistence of adjustment effort hypothesis) and reduces the spell of expansions (debt sustainability hypothesis). The results are robust to the inclusion of global factors, openness, political stability, and debt crisis indicators as additional controls.     

National information and euro area monetary policy: a generalized ordered choice approach

We empirically analyze the influence of inflationary pressure originating from persistent national misalignments on the ECB’s interest rate decisions between 2000 and mid-2010. To do so, we introduce an indicator that summarizes the threat to euro area price stability originating from self-reinforcing expected inflation differentials. The indicator is computed based on persistent deviations of national expected inflation and GDP growth rates from the corresponding euro area aggregate. It thereby captures area-wide excess demand pressure on the euro area inflation rate. In order to determine the information content of this indicator, we add it to an empirical monetary policy reaction function. We then analyze this reaction function in the framework of a generalized ordered choice model that fits the data a lot better than its commonly used, more restricted counterpart. Within this empirical framework, we find that after controlling for several area-wide aggregates, national information does not provide additional information that is indicative of the ECB’s policy rate decision.     

Internalization of externalities and local government consolidation: empirical evidence from Japan

The fact that jurisdictional consolidation overcomes externality problems in the provision of local public goods is one of the best-known benefits of consolidation in the theoretical literature. Nevertheless, previous studies provide little evidence of how public service spillover effects influence consolidation decisions. This study empirically tests the hypothesis that spillovers induce consolidation, using voting data on the consolidation of Japanese municipalities. The extent of spillovers is measured by estimating the demand function for public goods with externalities. It is found that residents of the municipalities that can internalize a large amount of public goods spillovers through municipal consolidation tend to favor consolidation. This result supports the theoretical inference that spillovers in local public goods affect utility gains from jurisdiction integration, thus serving as one of the key impetuses for boundary reform. Moreover, after controlling for the spillover effects, economies of scale, population share, differences in median income, and unconditional grants can help explain consolidation preference.     

Intraday price information flows between the CSI300 and futures market: an application of wavelet analysis

This study investigates linear and nonlinear price information flows between the Chinese Stock Index 300 (CSI300) and futures market using high-frequency data and their wavelet transformed series for three regimes for which stock short-selling restrictions in China are different. Empirical results generally indicate information feedback between these two markets regardless of assumptions of linear and nonlinear causality and regimes for original series and wavelet transformed data at different scales.     

Strategic decisions on bilateral bidding behavior: evidence from a wholesale electricity market

This article analyzes the strategic bilateral bidding behavior in the Spanish electricity wholesale market (OMEL). The collection of data includes information regarding weekly averages of spot prices, the quantity bid in the wholesale market, the quantities purchased in the wholesale market and sold in the open market, and the behavior of conduct parameters for the period from January 2002 to April 2007 for the four largest firms of the Spanish electricity market: Endesa, Iberdrola, Unión Fenosa and Hidrocantábrico. This article employs the New Empirical Industrial Organization approach. The empirical analysis was based on the autoregressive distributed lag approach to cointegration and on the Toda–Yamamoto Granger causality tests to validate the standard version of the theoretical formulation of the standard Cournot model, and its theoretical extension, to encompass the hypothesis of the presence of bid interdependence for electricity quantities sold and bought in the Spanish electricity wholesale market. The results of cointegration and causality analysis reinforce the empirical results of the extended Cournot model with the inclusion of the two main bidding variables that solved the optimization problem of profit maximization for each of the four firms analyzed.