ECONOMIC FREEDOM AND INCOME INEQUALITY REVISITED: EVIDENCE FROM A PANEL ERROR CORRECTION MODEL

We investigate the causal relationship between income inequality and economic freedom using data from U.S. states over the period 1981 to 2004 within a panel error correction model framework. The results indicate bidirectional causality between income inequality and economic freedom in both the short and the long run. These results suggest that high income inequality may cause states to implement redistributive policies causing economic freedom to decline. As economic freedom declines, income inequality rises even more. In other words, it is quite possible for a state to get caught in a vicious circle of high income inequality and heavy redistribution. (JEL D63, H11)     

Cities, Workers, and Wages: A Structural Analysis of the Urban Wage Premium

Workers earn higher wages in cities vs. rural areas. This gap could arise because cities make workers more productive, or it could be the result of a non-random selection of workers into cities based on their ability and their endogenous history of career choices. To untangle these issues, this paper estimates a dynamic programming model, which embeds the choice of residing in a city or rural area within a model of career choices over time. After controlling for all the sources of selection and endogeneity, the estimates indicate that a given worker does earn more in the city for white-collar work, but not for blue-collar work. In addition, city work experience is found to be worth more than rural work experience in the rural area for white-collar work, but not for blue-collar work. These results support the interpretation that cities make white-collar workers more productive and suggest that workers may consider moving to the city not only in terms of locational choice, but also as a form of human capital investment.     

Driving restrictions that work? Quito's Pico y Placa Program

Programs to reduce traffic congestion and air pollution by restricting use of motor vehicles on working days have generally not met with success, given existing studies of such programs. We conduct the first study of Quito, Ecuador's four‐year‐old Pico y Placa program and find that it has reduced ambient concentrations of carbon monoxide (CO), a pollutant primarily emitted by vehicles, by 9% to 11% during peak traffic hours. Given that ambient concentrations of CO generally track the spatial and temporal distributions of traffic, these reductions in pollution suggest similar reductions in vehicle flows. We find no significant evidence that traffic has shifted to other times of the day or week, or to other locations.     

Governance of shale gas development: Insights from the Bloomington school of institutional analysis

The Review of Austrian Economics - The boom in shale gas production has been accompanied by concerns that polycentricity, whereby multiple levels of government share regulatory authority, has...     

A generalized Keynes-Wicksell model with variable labor force growth

The comparative steady state properties of the generalized Keynes-Wicksell model with variable labor force growth is analyzed. The labor force is the product of a constant growth population and a variable labor force participation rate. The participation rate is a positive function of real wages and a negative function of real wealth. The effects of rises in the rate of monetary expansion and in the level of households' planned saving on the steady state equilibrium are explored and compared to the effects found in standard neoclassical and Keynes-Wicksell growth models.     

Testing Temporal Reliability and Carry-over Effect: The Role of Correlated Responses in Test-retest Reliability Studies

Test-retest studies help establish the reliability of contingent valuation (CV) responses but must confront the problem that the initial response may influence subsequent responses, and thus weaken conclusions. We develop a model that tests the influence of heterogeneous preferences and previous responses. By estimating a model of sportfishing, we show that correlation between answers to a CV question is induced by heterogeneous preferences.     

Barriers to Entry in the Unlisted Securities Market: the Significance of Administrative Expenses

This paper analyses the significance of administrative expenses incurred by a comprehensive sample of firms obtaining quotation on the Unlisted Securities Market and Official List in the 1980s. It is concerned with the extent to which barriers to entry in the new issue market arising from the existence of high fixed costs of obtaining a quotation established in previous research have been reduced as a result of the introduction of the USM. A comparative analysis is undertaken, examining the relative costs of new issues in the USM and the Official List, together with a study of whether total expenses are affected by the route chosen for ultimate progression to the Official List. The research examines the extent to which cost variation can be attributed to differences in characteristics of the issue and of the firms themselves so as to generate continuing and significant economies of scale. Finally, the paper considers briefly whether competition in the new issue market has been associated with a reduction over time in the real cost of expenses, or whether, as has been alleged, USM costs are again increasing at a faster rate than inflation.     

Investigating the Dynamic Interaction between Military Spending and Economic Growth

The relationship and interaction of military spending and economic growth have been theoretically and empirically investigated since the 1970s but it still cannot provide conclusive evidence towards the direction and the quantification of the impact between the two magnitudes. The use of different data sets in terms of time periods, and number and geographic location of countries, different theoretical background leading to different econometric specifications, and single type of econometric methodology, make any comparison impossible. This paper looks into the dynamic interaction between military spending and economic growth during the period 1988–2013 that includes the recent years of economic crisis covering 138 countries without making any prior assumptions about the theoretical channels of influence, while not limited to a single estimation method but employing a wide range of methodologies in order to form a complete picture of the long‐ and short‐run interaction. Furthermore, as such interaction might not be linear, we create three groups of countries based on the countries' income developmental stage. Overall we find no evidence of long‐ and short‐run causality from the military spending to economic growth except for the developing countries (positive in the long run). However, from economic growth to military spending we find a positive impact for all groups except the least developed countries. We also notice the interaction was more prominent prior to the start of the economic crisis.