Openness and growth: The long shadow of the Berlin Wall

The question whether international openness causes higher domestic growth has been subject to intense discussions in the empirical growth literature. This paper addresses the issue in the context of the fall of the Berlin Wall in 1989. We analyze whether the slow convergence in per capita incomes between East and West Germany and the lower international openness of East Germany are linked. We address the endogeneity of openness by adapting the methodology proposed by Frankel and Romer (1999) to a panel framework. We instrument openness with time-invariant exogenous geographic variables and time-varying exogenous policy variables. We also distinguish the impact of different channels of integration. Our paper has three main findings. First, geographic variables have a significant impact on regional openness. Second, controlling for geography, East German states are less integrated into international markets along all dimensions of integration considered. Third, the degree of openness for trade has a positive impact on regional income per capita.     

Labour effects of foreign and domestic remittances – evidence from Pakistan

Remittances are playing an increasingly important role in the economies of developing countries. In this paper, we study the effects of these flows on Pakistan’s labour market. We employ the 2007–2008 Household Integrated Economic Survey and Probit as well as Propensity Score Matching techniques to examine the impact on labour participation, quantity of work and activities of working as well as non-active members of remittance-receiving households. We find that both foreign and domestic remittances tend to lower labour supply of the recipient households. This impact is higher among women and among the young. The impact is more pronounced in the rural areas. In addition, foreign remittances increase the likelihood of household members attending middle school. We also examine the quantity of labour supplied by the remittance-recipient households. Results show little difference in the number of months and days worked between the households receiving and not receiving remittances. Furthermore, we find that the likelihood of being self-employed and cultivating one’s own land is higher among remittance recipients. In sum, our analysis highlights a higher role of foreign remittances in the labour market as compared to internal remittances.     

Economic integration and specialization in production in the EU27: does FDI influence countries’ specialization?

The objective of this article is twofold. Firstly, we proceed to an analysis of the evolution of specialization in production in the enlarged EU, taking into account all its 27 member countries. Given their decomposability properties, we use the entropy-based indices to measure countries’ relative specialization and then, given our rather short period of analysis, we use the bootstrap method to analyze the evolution of the specialization index. We first analyze all economic sectors and then, our analysis is more detailed focusing on manufacturing industries. Globally, we find that specialization is decreasing across all economic sectors, while it is increasing across manufacturing industries. Secondly, we study specialization determinants, with a special interest in the impact of foreign direct investment (FDI). For homogeneity reasons, we analyze two separate samples, one including old EU members plus Cyprus and Malta and the other, the CEECs. In order to take into account the endogeneity of most of our independent variables, we use the vector autoregression (VAR) technique and analyse the impulse response functions. Globally, FDIs seem to positively influence countries’ relative specialization, for our both samples and for both economic sectors and manufacturing industries. However, their impact appears weaker than most of the other independent variables, such as the market potential or the relative endowments.     

COMPOSITE CORPORATE INCOME TAX

The federal, state, and local income tax rates can be combined into a single composite income tax rate. Such a composite tax rate significantly simplifies the consideration of income taxes in economic analyses. The composite tax rate can vary by as much as 6 percent from one state to another. Thus, managers should carefully consider the state and local income tax laws in their economic studies.     

Forecasting Inflation Using Constant Gain Least Squares

This paper assesses the usefulness of constant gain least squares when forecasting inflation. An out‐of‐sample forecast exercise is conducted, in which univariate autoregressive models for inflation in Australia, Sweden, the United Kingdom and the United States are used. The results suggest that it is possible to improve the forecast accuracy by employing constant gain least squares instead of ordinary least squares. In particular, when using a gain of 0.05, constant gain least squares generally outperforms the corresponding autoregressive model estimated with ordinary least squares. In fact, at longer forecast horizons, the root mean square forecast error is reliably lowered for all four countries and for all lag lengths considered in the study.     

The determinants and impact of telecommunications reforms in developing countries

This paper has two related objectives. First, it seeks to identify the key determinants of some policies that have been at the heart of the reforms of the telecommunications industry in developing countries, namely, liberalization, privatization, and the (re)structuring of regulation. Second, it attempts to estimate the extent to which these policies have translated into actual deployment of telecommunications infrastructure. This simultaneous investigation is conducted by means of an econometric analysis of a 1985-1999 time-series-cross-sectional database on 86 developing countries. Sectoral as well as institutional and financial factors are found to be important determinants of the actual reforms implemented. We uncover a positive relationship between the decision to introduce competition in the digital cellular segment and the growth of the fixed-line segment, suggesting that these two segments have benefited from each other. We also find that countries facing increasing institutional risk and financial constraints are more likely to introduce competition in the digital cellular segment and to privatize the fixed-line incumbent, these policies being economically attractive to both investors and governments. In turn, these policies are those that enhance the deployment of fixed-line infrastructure. In contrast, competition in the analogue cellular segment and the creation of a separate regulator seem to be relatively less attractive policies as they are found to be less likely to be introduced in countries facing increasing institutional risk and budget constraints. Their impact on fixed network deployment is found to be negative or non significant.     

The relevance of pecking order hypothesis for the financing of computer software and biotechnology small firms: some UK evidence

This study explores the funding issues at the early stages of development of computer software and biotechnology small firms in the UK. This study reviewed previous relevant literature in this area and presents empirical evidence derived from an extensive online questionnaire survey. The sample contains a total of 83 small firms, which includes 41 biotechnology and 42 software firms. With regards to funding issues, we found that software firms reports more funding problems than the biotechnology firms. Software firms are fastest growing firms and goes through the early stages of development quicker than the biotechnology firms. With regards to the sources of funding the evidence shows that biotechnology small firms mainly use venture capital finance whilst the main source of funding for the software firms are personal savings and house mortgage/re-mortgage. On the one hand, software firms seem to follow the pecking order hypothesis whilst financing their business growth and development. On the other hand, the pecking order hypothesis may not be fully followed by the biotechnology small firms. However, both software and biotechnology small firms report difficulties in securing equity finance. Software firms are financially constrained not only due to the supply side financial constraints but also by the demand side financial constraints.     

Selective Immigration Policies and Wages Inequality

We quantify the overall impact of immigration on native wages in France from 1990 to 2010. Our short‐run simulations indicate that immigration has decreased native wages by 0.6%. We find on average no impact of immigration on wages in the long run. However, we show that the long‐run effects of immigration on wages are detrimental to high‐skilled native workers and benefits to low‐skilled native workers. Our structural estimation allows us to evaluate the impact of “selective” migration policies. In particular, we find that selective immigration policies toward highly educated workers reduce the wage dispersion of French native workers.