The Poverty of Politics: How Income Redistribution Hurts the Poor

In spite of the significant research literature identifying a tradeoff between income redistribution and economic growth, massive public programs have been implemented to help the poor by transferring income to them. Since Lyndon Johnson's war on poverty began in 1964, over 3.5 trillion dollars have been transferred. However, the possibility that everyone, including the poor, may in fact be made worse off by the transfer has largely been ignored. With a simple algebraic model, the authors demonstrate that, over time, both high and low-income groups are harmed by redistribution. In addition, social mobility, as well as political concerns with relative poverty and international income redistribution increases the damage to all income groups produced by redistribution.     

The Surge in Short-Duration Contracts in Spain

Until the outbreak of the recent economic and financial crisis, Spain was leading the ranking of countries with the largest share of temporary employees. During the crisis this share has fallen to its lowest level in decades, but this does not mean that working conditions in Spain have improved. The flow of new temporary contracts is larger than ever before. A particularly striking feature is the steep growth in the volume of fixed-duration contracts lasting less than a week or a month. We document these trends and analyse how this phenomenon has affected the transition from temporary to permanent employment.     

The Diffusion of Local Differentiated Waste Disposal Taxes in the Netherlands

The diffusion of a novel taxing scheme (among Dutch municipalities over the period 1998–2005) is studied in which the waste disposal tax is increasing in the amount of waste a household produces. Inspection of the rise and spread of this tax shows that it is contagious: the probability of introduction is increasing in the number of neighboring municipalities that have already introduced this taxing scheme. A possible rationale is that the tax encourages the dumping of waste in neighboring municipalities. These municipalities may then introduce a similar tax to prevent dumping (spillover effect). Using panel data and a recently developed spatial probit approach (Elhorst et al. in J Appl Econom 32:422–439, 2017), it is possible to distinguish this spillover effect from time-specific effects. The results indicate the presence of strong spillovers.     

Inequality and Unemployment Patterns in Europe: Does Integration Lead to (Real) Convergence?

The economic convergence criteria adopted in the Maastricht Treaty and the fiscal discipline of the Stability and Growth Pact enforced nominal convergence, leaving aside real convergence indicators. In this paper, we use cluster analysis to examine the convergence patterns of income inequality, absolute redistribution (a measure of governments’ effectiveness in correcting for inequality) and unemployment. The expected outcome after years of economic integration was, ex-ante, convergence to a single cluster. Our results, however, uncover a variety of groups, implying that economic integration has not led to real economic convergence. Moreover, the existence of different patterns suggests: (i) that traditional classifications (Anglo-Saxon, Continental European, European Periphery, and Nordic models) remain broadly valid; (ii) that there is no unemployment-inequality trade-off to be exploited in terms of economic policy; and (iii) that the redistributive capacity of governments plays a pivotal role in coping with inequality without negative effects in terms of unemployment.     

The Performance of Islamic Vs. Conventional Banks: Evidence on the Suitability of the Basel Capital Ratios

This paper examines the effect of various types of bank capital on the profitability and efficiency of conventional and Islamic banks. Our results show that higher quality forms of capital improve the profitability and efficiency for both systems although the results are stronger for conventional banks. The capital effect is more pronounced for large, too-big-to-fail, and highly capitalized banks. The results are robust across various subsamples, alternative profitability and efficiency measures, and different estimation techniques.     

Does Central Bank Financial Strength Really Matter for Inflation? The Key Role of the Fiscal Support

This paper examines whether weak central bank finances affect inflation by scrutinizing the key rationale for such a relationship: that the absence of Treasury support makes central bank finances relevant for price stability. Specifically, I ask whether central banks which are not likely to enjoy fiscal support when needed experience higher inflation as their financial situation deteriorates. I find this to be true among a large sample of 82 countries between 1998 and 2008. De facto potential fiscal support appears relevant, while de jure fiscal support, which I survey analyzing 82 central bank laws, does not appear to matter. The results also bring forward an explanation for the conflicting results of the previous empirical studies, which neglected this key component.     

Assessing Productivity Gains from International Trade in a Small Open Economy

Empirical evidence suggests that exporter firms tend to charge higher markups than non-exporters due to trade barriers. The exporters’ markup premium, however, may disappear in a special case, namely when the home country is small relative to its trade partners and trade barriers are low. This can be because competition is more intense in the large export destination than in the small home country, so that firms are able to set higher markups for locally sold products but not for exports. This paper provides empirical evidence on the validity of this special case by estimating markups for firms in Luxembourg who generally export to larger countries. The estimated negative markup premium for exporters has important implications for the productivity measurement. In a sufficiently small open economy, exporters’ productivity may be biased downward, when the firm-level markup variation is not controlled for in the productivity estimation. The bias in the productivity estimates further leads to the inaccurate conclusion that openness to international trade lowers allocative efficiency.