The Role of Income Effects in Early Retirement

We provide a long‐term perspective on the individual retirement behavior and on the future of retirement by emphasizing the role of (negative) income effects. We consider a political economic theoretical framework, with actuarially “fair” and “unfair” early retirement schemes, and derive a political equilibrium with positive social security contribution rates and early retirement. A reduction in the wages in youth, consistent with the recent labor market trends since the massive introduction of temporary jobs, induces workers to postpone retirement, and—in the “unfair” system—leads to lower contribution rates. A reduction in the growth rate of the economy has opposite effects on the retirement decisions, leading—in the “unfair” system—to more early retirement. Aging induces a negative income effect, but has also an opposite political effect on social security contributions and retirement decisions. For an actuarially “fair” social security system, we provide conditions for the political effect to dominate; in an “unfair” scheme, numerical simulations confirm a slight predominance of the political effect, as contribution rates increase. These results may shed some light on the future of early retirement in aging societies.     

Government Expenditure Financing in a Two‐Sector Cash‐In‐Advance Model of Endogenous Growth

We show that an expansion in the government size could be desirable from the viewpoint of the economy's long‐run growth, wherein factor intensity between the sectors, the mode of public spending financing, and the form of the cash‐in‐advance (CIA) constraint are crucial. We also show that when real balances are required only for consumption purchases, money financing is equivalent to consumption tax financing, but is not equivalent to income tax financing. If both consumption and gross investment are liquidity‐constrained, then the three financing methods are mutually not equivalent. The optimal financing scheme has the following features: (1) when the CIA constraint applies only to consumption purchases, any combination of the money growth rate and the consumption tax rate that satisfies the government budget constraint constitutes an optimal financing mix; (2) when the CIA constraint applies to both consumption and investment purchases, consumption tax financing only is optimal.     

Multivariate choices and identification of social interactions

This paper considers the identification of social interaction effects in the context of multivariate choices. First, we generalize the theoretical social interaction model to allow individuals to make interdependent choices in different activities. Based on the theoretical model, we propose a simultaneous equation network model and discuss the identification of social interaction effects in the econometric model. We also provide an empirical example to show the empirical salience of this model. Using the Add Health data, we find that a student's academic performance is not only affected by academic performance of his peers but also affected by screen‐related activities of his peers.     

Shareholder Value Maximisation,Stock Market and New Technology: Should the US Corporate Model be the Universal Standard? 1

In 1992 a blue‐ribbon group of US economists led by Michael Porter concluded that the US stock market‐based corporate model was misallocating resources and jeopardising US competitiveness. The faster growth of US economy since then and the supposed US lead in the spread of information technology has brought new legitimacy to the stock market and the corporate model, which is being hailed as the universal standard. Two main conclusions of the analysis presented here are: (a) there is no warrant for revising the blue‐ribbon group’s conclusion; and (b) even US corporations let alone developing country ones would be better off not having stock market valuation as a corporate goal.     

GAUGING THE SOURCES OF GROWTH OF HIGH‐TECH AND LOW‐TECH INDUSTRIES: THE CASE OF KOREAN MANUFACTURING*

Literature argues that the source of growth for high‐tech industries emanates from technological progress, while that for low‐tech industries comes from technical efficiency improvement. Also, some empirical studies have shown that technological progress is often accompanied by deterioration in technical efficiency. The focus in this study is to discuss a methodology and test the above two hypotheses with regard to Korean manufacturing data from 1970 to 1997. The study found that the 2.5 per cent average annual rate of technological progress during this period was the major contributor to total factor productivity (TFP) growth in Korean manufacturing whereas technical efficiency grew by a modest 1.1 per cent per annum. The analysis also showed that technological progress was responsible for TFP growth in both high‐tech and low‐tech industries and that both technological progress and technical efficiency improvement co‐existed in the case of Korean manufacturing industries.     

Parallel Trade and its Ambiguous Effects on Global Welfare

The regulation of parallel trade is a fiercely debated issue in the global trading system. This paper investigates the welfare effects of parallel trade freedom for different levels of trade costs and market size. It is found that parallel trade freedom has a positive effect on global welfare if countries are sufficiently heterogeneous in terms of market size and trade costs are sufficiently low. Contrary to intuition, this result even holds in a situation where parallel trade freedom implies the closure of the smaller market. If, however, countries are virtually homogenous in terms of market size, parallel trade freedom may be detrimental to global welfare for specific levels of trade costs.     

Introducing ‘Journeys Home’

Homelessness, despite being a major social policy issue in Australia, is an area that is not well served by data. Most sorely lacking is any large‐scale panel study that follows a broad sample of persons with recent experience of homelessness and unstable housing histories. In 2010, the Australian Government set about rectifying this deficiency when it commissioned the Melbourne Institute to undertake a new panel study, now known as ‘Journeys Home’. This study draws its sample from the population of Centrelink income‐support recipients, targeting persons identified in the administrative data as having recent experience of homelessness, as well as others with similar characteristics who may be vulnerable to housing difficulties in the future. This article summarises the design of this new study and reports on fieldwork outcomes from the first two waves of data collection.     

Regional Economic Disparity,Financial Disparity,and National Economic Growth: Evidence from China

The dynamic relations among national economic growth, economic disparity, and financial disparity in China are examined. Specifically, the focus is on whether economic disparity or financial disparity affects national economic growth. As measures of economic and financial disparity across regions and provinces, the Williamson coefficient of disparity is employed using both regional data (eastern, central, and western) and provincial data (from 31 provinces). Overall, it is found that both provincial financial disparity and, to a lesser degree, economic disparity have a negative effect on national economic growth. In addition, financial disparity appears to be exogenous, suggesting that financial disparity is not influenced by either economic disparity or national economic growth.     

Do Immigrants Affect Firm‐Specific Wages?*

We propose and test a novel effect of immigration on wages. Existing studies have focused on the wage effects that result from changes in the aggregate labour supply in a competitive labour market. We argue that if labour markets are not fully competitive, immigrants might also affect wage formation at the most disaggregate level – the workplace. Using linked employer?employee data, we find that an increased use of low‐skilled immigrant workers has a significantly negative effect on the wages of native workers at the workplace – also when controlling for potential endogeneity of the immigrant share using both fixed effects and instrumental variables.