COMPARING PARTIAL AND GENERAL EQUILIBRIUM ESTIMATES OF THE WELFARE COST OF INFLATION

Reserve banks worldwide have been moving towards zero inflation policies. Confusion clouds the welfare cost of maintaining such inflation policies despite the best attempts at clarification. Monetary theory research has shifted from partial to general equilibrium economies. This shift has left the partial equilibrium estimates of the welfare cost of inflation below most of the general equilibrium estimates. Put on a comparable basis, partial equilibrium estimates compare more closely with the general equilibrium estimates. Furthermore, evidence suggests that integration under the money demand function appears applicable in general equilibrium economies. Finally, the estimates depend on the elasticities of money demand and the underlying structural parameters.     

Why Did Income Inequality in Germany Not Increase Further After 2005?

While income inequality in Germany considerably increased in the years before 2005, this trend stopped after 2005. We address the question of what factors were responsible for the break in the inequality trend after 2005. Our analysis suggests that income inequality in Germany did not continue to rise after 2005 for the following reasons. First, we observe that the general rise in wage inequality that explained a lot of the inequality increase before 2005, became less steep (but did not stop) after 2005. Second, despite further increases in wage inequality after 2005, inequality in annual labour incomes did not increase further after 2005 because increased within‐year employment opportunities compensated otherwise rising inequality in annual labour incomes. Third, income inequality did not fall in a more marked way after 2005 because also the middle and the upper part of the distribution benefited from the employment boom after 2006. Finally, we provide evidence that the effect of a wide range of other factors that are often suspected to have influenced the distribution such as capital incomes, household structures, population ageing, changes in the tax and transfer system and the financial crisis of 2008 did not significantly alter the distribution after 2005.     

Reversed servitization paths: a case analysis of two manufacturers

The literature on service business in manufacturing companies posits that manufacturers “servitize” by increasing the proportion of services offered. This study presents two paths that are contrary to such forward-unidirectional servitization, indicating “reversed servitization.” In the first case, a capital goods manufacturer lost visibility to its installed base due to evolving product technology. We use the case of photocopier manufacturer Xerox to support our findings; a regulation change forced Xerox to move from a service-based toward a product-based business model. We thus propose that influencing environmental factors need to be researched and that the literature of organizational ecology may serve as a complementary perspective.     

Testing a model of exploration and exploitation as innovation strategies

We suggest a structural model that specifies firm growth as a function of firm-specific parameters, market-specific parameters, and competition for purchasing power. The model distinguishes between two firm innovation strategies: exploration and exploitation. On the basis of a set of simulations of this model, we derive a number of empirically testable hypotheses. A subset of these have already found support in the empirical literature. We take these as evidence in favor of the explanatory power of the model. In addition, we are able to derive further testable propositions on the interaction of firm-demographic processes, innovative behavior and market structure that go beyond the existing literature and that we suggest for further research. We conclude that the approach chosen here provides a fruitful pathway for further research.     

The Economic Consequences of Mr Trump

The Trump administration has embarked upon two large economic policy initiatives at a time of full employment: increasing the budget deficit by cutting personal and corporate tax rates; and increasing protection, especially against countries with which the United States has bilateral trade deficits. These initiatives are meant to reduce trade deficits and increase employment and incomes in the US manufacturing sector. Economic analysis tells us that the result will be larger trade deficits, and weaker total tradeables, including manufacturing employment. There may or may not be a net gain for employment and incomes in those industries which have been the greatest beneficiaries of protection. Trump's protection policies will damage incomes in the United States and the rest of the world; the damage will be greater if other countries retaliate or emulate. Alternative policies that compensate losers from free trade would give better results.     

Asian Economic Problems and Prospects for Foreign Direct Investment: Local Evidence from the UK

This paper explores the implications of the Asian crises and economic problems in the Japanese economy on a UK region with a high dependence on employment in Asian manufacturing transplants. The paper examines the development of the Asian transplant sector in the case region (Wales), and maps out the economic significance of the sector on the local economy. Following a review of the potential impacts of economic problems in Asia on the local transplant sector, the paper uses local case evidence to explore recent changes in the Asian manufacturing base in Wales. Recent reversals in the transplant sector have largely been caused more by local manufacturing conditions. The paper concludes with a discussion of factors that are most likely to affect the trajectory of the Asian transplant sector in the case region in the new millennium.     

Optimal convergence rates,Bahadur representation,and asymptotic normality of partitioning estimators

This paper studies the asymptotic properties of partitioning estimators of the conditional expectation function and its derivatives. Mean-square and uniform convergence rates are established and shown to be optimal under simple and intuitive conditions. The uniform rate explicitly accounts for the effect of moment assumptions, which is useful in semiparametric inference. A general asymptotic integrated mean-square error approximation is obtained and used to derive an optimal plug-in tuning parameter selector. A uniform Bahadur representation is developed for linear functionals of the estimator. Using this representation, asymptotic normality is established, along with consistency of a standard-error estimator. The finite-sample performance of the partitioning estimator is examined and compared to other nonparametric techniques in an extensive simulation study.