BENFORD'S LAW AS AN INDICATOR OF SURVEY RELIABILITY—CAN WE TRUST OUR DATA?

This paper analyzes how closely different income measures conform to Benford's law, a mathematical predictor of probable first digit distribution across many sets of numbers. Because Benford's law can be used to test data set reliability, we use a Benford analysis to assess the quality of six widely used survey data sets. Our findings indicate that although income generally obeys Benford's law, almost all the data sets show substantial discrepancies from it, which we interpret as a strong indicator of reliability issues in the survey data. This result is confirmed by a simulation, which demonstrates that household level income data do not manifest the same poor performance as individual level data. This finding implies that researchers should focus on household level characteristics whenever possible to reduce observation errors.     

Upheaval in the boardroom: Outside director public resignations,motivations, and consequences

We investigate the motives and circumstances surrounding outside directors' decisions to publicly announce their board resignations. Directors who leave “quietly” are in their mid-sixties and professional directors, i.e., retirees, who are retiring entirely from professional life. Directors who announce their resignation are in their mid-fifties and active professionals. Half the time they say they are leaving because they are “busy.” These directors leave from firms with some weakness in their performance, but with no overt manifestations of cronyism such as excessive compensation of either the CEO or directors. The other half of the time directors leave while publicly criticizing the firm. These directors are finance professionals who were members of the audit and compensation committees. They resign from firms with weak boards and financial performance with evidence that managers have manipulated earnings upwards. Public criticism appears to pressure these boards to make management changes associated with improved stock price performance. We conclude that while such public resignations are motivated by the reputational concerns of directors, they can act as a disciplining device for poor board performance.     

The interplay between labor market rigidity and volatility-growth nexus

Using a simple innovation‐driven growth model I investigate to what extent labor market regulations underlie the devastating effects of output volatility on long‐run growth trends. Empirical analysis conducted for 154 countries over the 1996–2005 period shows that an increase from low values of the rigidity of employment index strengthens the influence of volatility on growth. This effect weakens with further increases in rigidity. Hence implementation of labor protection legislation is recommended in economies frequently hit by shocks.     

GDPR: A Step Towards a User-centric Internet?

While the potential empowering impact of the GDPR is huge, we argue that the ambivalent attitudes of users towards data protection, as well as the risk of differentiation of legal practice among member states, can seriously limit the real effects of the privacy reform.     

A Bayesian method of combining judgmental and model-based density forecasts

This paper introduces a formal method of combining expert and model density forecasts when the sample of past forecasts is unavailable. It works directly with the expert forecast density and endogenously delivers weights for forecast combination, relying on probability rules only. The empirical part of the paper illustrates how the framework can be applied in forecasting US inflation by mixing density forecasts from an autoregressive model and the Survey of Professional Forecasters.     

Lange's 1938 model: dynamics and the “optimum propensity to consume”

Abstract

Oskar Lange's 1938 article “The Rate of Interest and the Optimum Propensity to Consume” is usually associated with the original IS-LM approach of the late 1930s. However, Lange's article was not only an attempt to illuminate Keynes's main innovations but the first part of a wide project that included the development of a theory of economic evolution. This paper aims at showing that Lange's article can help in illuminating critical aspects of this project: in particular, Lange's idea that a synthesis between Kaldor's and Kalecki's theories and that of Schumpeter, might have been possible and that it represented (in intentions) a “modern” and consistent reconstruction of the Marxist theory of the business cycle. Section 2 clarifies Lange's early reflection on dynamics. Section 3 centres on Lange's 1938 static model and indicates the effects of a change of saving on investment. Section 4 suggests a dynamic reconstruction from which are addressed important arguments raised by Lange in a series of papers written between 1934 and 1942.     

Can We Prevent Boom-Bust Cycles During Euro Area Accession?

Euro-area accession caused boom-bust cycles in several catching-up economies. Declining interest rates and easier financing conditions fuelled spending and borrowing from abroad. Over time inflation deteriorated external competitiveness, turning the boom into a bust. We ask whether such a scenario can be avoided using macroeconomic tools that are available in the period of joining a monetary union: central parity revaluation, fiscal tightening or increased taxation. We find that exchange rate revaluation is the most attractive option. It simultaneously trims the expansion of output and domestic demand, reduces the cost pressure and ranks first in terms of welfare.