Measuring central bank independence: a latent variables approach

We argue that central bank independence (CBI) is a latent variable of which the various existing quantifications are imperfect indicators. We show how factor analysis techniques can be employed to assess the quality of the various indicators, and how an optimal weighting of the indicators can be obtained that gives the best approximation of CBI. We also show how these results can be utilized in models in which CBI is an explanatory variable. In contrast to the well‐known study of Campillo and Miron (1997) , we find that our CBI indicator is significantly related to inflation, also when various control variables are included.     

Social Returns to Education: Macro-Evidence

Summary This paper presents new evidence on the social returns to education within a macroeconomic growth regression framework. I use improved schooling data and a macro version of the Mincer relationship between education and wages for individual workers. The results suggest that an increase by one year of the average education level of the labor force would increase labor productivity by 7–10% in the short run and by 11–15% in the long run. Some evidence is found for the presence of dynamic human capital spillovers: the human capital stock increases prospective economic growth. The empirical results are used to quantify the macroeconomic impact of skill upgrading as agreed upon in the European Union’s Lisbon strategy for growth and jobs. Finally, the paper discusses discrepancies between private and social returns to education. I would like to thank two referees, Dinand Webbink, Peter Wobst, and participants of the brown bag lunch seminar series at the Enterprise and Industry Directorate-General of the European Commission for helpful comments. Views expressed are my own, and do not necessarily reflect official positions of the European Commission or the CPB Netherlands Bureau for Economic Policy Analysis.     

Mapping uncertainty in genomics

The relatively novel and dynamic science of genomics holds many unknowns for stakeholders, and in particular for researchers and clinicians, as well as for participants and patients. At a time when many authors predict a future in which genomic medicine will be the norm, it is particularly relevant to discuss the unknowns surrounding genetics and genomics, including the notions of risk and uncertainty. This article will present a discussion regarding the uncertainty pertaining specifically to high throughput sequencing approaches, including the topic of incidental findings. This discussion will be guided by a taxonomy of uncertainty conceptualised around three areas of uncertainty: the source of uncertainty, the issues of uncertainty and the loci of uncertainty. This taxonomy can be used as a tool by all stakeholders involved in genomics to help further understand and anticipate uncertainties in genomics. Furthermore, to better contextualize this information, and also because this contribution is born out of an international project titled ‘Mind the Risk’, which addresses risk information in genetics and genomics from many different disciplinary perspectives, another aim of this article is to briefly present the basic issues pertaining to the unknowns, risks, and uncertainties of genetics as well as genomics for an audience of non-geneticists. Ultimately, the mapping out of uncertainty in genomics should allow for a better characterization of the uncertainty and consequently for a better management and communication of these uncertainties to end-users (research participants and patients).     

The Forward Premium in the Nord Pool Power Market

This article investigates the forward premium of futures contracts in the Nordic power market for the time period from January 2004 to December 2013. We find that futures prices are biased predictors of the subsequent spot prices and that there is a significant forward premium in the Nord Pool market, particularly during the winter and autumn. We analyze the impact from several factors on the forward premium. The spot price, and the deviation of water inflow from its usual level, positively affect the forward premium. The variance of the spot price also has a positive effect on the forward premium, but only for the contract closest to delivery.     

Setting a fox to keep the geese — Does the comply-or-explain principle work?

The German Corporate Governance Code works according to the comply-or-explain principle. One of its recommendations was to publish the remuneration of the members of the executive board on an individual basis. We examine the characteristics of the firms that complied with the code requirement. Our results indicate that firms that paid higher average remunerations to their management board members were less likely to comply, whereas firms with higher Tobin's Q were more likely to comply. We also document a non-monotonic relation between ownership concentration and the probability of compliance that is consistent with standard corporate governance arguments.Due to the fact that the number of firms complying with the disclosure requirement was low, a new law was passed that mandates disclosure unless the shareholders' meeting (with a 75% majority) decides otherwise. We find that this “loophole” in the new legislation is exploited by smaller firms, firms with comparatively high levels of executive remuneration, and firms with concentrated ownership. We discuss the implications of our results for the effectiveness of the comply-or-explain regulation.     

Book briefs

Food policy: Integrating supply, distribution and consumption, EDI series in economic development, John Hopkins University Press, Baltimore and London, 1987

Food poverty and consumption patterns in Kenya, International Labour Office, Geneva, 1986     

Employee ownership and firm performance: a meta‐analysis

Employee ownership has been an area of significant practitioner and academic interest for the past four decades. Yet, empirical results on the relationship between employee ownership and firm performance remain mixed. To aggregate findings and provide potential direction for future theoretical development, we conducted a meta‐analysis of 102 samples representing 56,984 firms. Employee ownership has a small, but positive and statistically significant relation to firm performance ( = 0.04). The effect is generally positive for studies with different sampling designs (samples assessing change in performance pre‐employee–post‐employee ownership adoption or samples on firms with employee ownership), different performance operationalisation (efficiency or growth) and firm type (publicly held or privately held). Suggesting benefits of employee ownership in a variety of contexts, we found no differences in effects on performance in publicly held versus privately held firms, stock or stock option‐based ownership plans or differences in effects across different firm sizes (i.e. number of employees). We do find that the effect of employee ownership on performance has increased in studies over time and that studies with samples from outside the USA report stronger effects than those within. We also find little to no evidence of publication bias.     

Fairness is intuitive

In this paper we provide new evidence showing that fair behavior is intuitive to most people. We find a strong association between a short response time and fair behavior in the dictator game. This association is robust to controls that take account of the fact that response time might be affected by the decision-maker’s cognitive ability and swiftness. The experiment was conducted with a large and heterogeneous sample recruited from the general population in Denmark. We find a striking similarity in the association between response time and fair behavior across groups in the society, which suggests that the predisposition to act fairly is a general human trait.     

Tourism mobilities from emerging world regions: a response to commentaries

This paper examines the operation and function of resort enclaves in the context of Third World tourism. The emergent linkages and inevitable tensions which develop between external capital and local entrepreneurship are examined through case studies of Indonesian resort enclaves on the islands of Bali, Lombok and Pulau Bintan in the Riau archipelago. The authors argue that the whole notion of enclavity is inherently unsustainable, marginalising local entrepreneurs and widening the economic, cultural and social gaps which already exist between hosts and guests.