Testing slope homogeneity in large panels with serial correlation

Pesaran and Yamagata (Pesaran, M.H., Yamagata, T., Testing slope homogeneity in large panels, Journal of Econometrics 142, 50–93, 2008) propose a test for slope homogeneity in large panels, which has become very popular in the literature. However, the test cannot deal with the practically relevant case of heteroskedastic and/serially correlated errors. The present note proposes a generalized test that accommodates both features.     

Trade facilitation and the extensive margin

The literature on trade facilitation has mostly focused on implications for trade volumes. However, recent theoretical contributions have emphasized that trade costs – such as transaction costs related to cross-border trade procedures – affect both the traded volumes of ‘old’ goods (the intensive margin) and the range of traded goods (the extensive margin). This article therefore tests whether trade facilitation affects the extensive margin by counting the number of 8-digit products that are exported from developing to EU countries, and using this as the dependent variable in an estimation. Moreover, it also tests whether the extensive margins in differentiated and homogeneous goods are affected in the same way by transaction costs. Estimation results suggest that if export transaction costs – proxied by the number of days needed to export a good – declined by 1%, the number of exported differentiated and homogeneous products would rise by 0.6% and 0.3%, respectively. Policy simulations further illustrate that if all countries were as efficient at the border as the most efficient country at the same level of development, the number of exported differentiated and homogeneous products would increase by 62% and 26%, respectively.     

Misperceptions,rigidity and welfare

In this paper we derive precise measures of the welfare costs of errors in the expectations in a simple two-period model of a small open economy. Over-optimistic expectations about future productivity lead to a misallocation of investment and consumption and, if future wages are rigid, to a fall in employment. The welfare costs of misallocations can, in close analogy with other distortions, be expressed as areas of familiar triangles. The costs of unemployment are, however, likely to be relatively more important when expectation errors are small.     

Non-linear relationship between industrial service offering and sales growth: The moderating role of network capabilities

In an effort to approach the mixed findings regarding the relationship between a firm's industrial service offering and its performance, this study analyzes the impact of the industrial service offering on sales growth and the moderating role of network capabilities. The proposed research model is tested based on data from 91 Finnish manufacturing firms. Our results demonstrate a non-linear effect of the service offering on sales growth. We also find that network capabilities enhance the effect of the service offering on sales growth. For managers of manufacturing firms, the results imply that the active development of a comprehensive service offering should be implemented in conjunction with the development of organizational capabilities, such as network capabilities, to create value and promote improved performance.     

Entrepreneurial orientation and network board diversity in network organizations

This study extends the concept of entrepreneurial orientation (EO) to the network level to investigate how diversity among officers serving on network organization boards affects network-level entrepreneurial orientation (NEO). Using data from 53 strategic network organizations across five years, we found that insider/outsider and functional diversity among network board members promotes NEO. The results also demonstrate that board group tenure moderates the influence of diversity in opposite ways. The impact of board insider/outsider diversity is stronger in networks in which board members lack long tenure. On the contrary, the effect of functional diversity on network entrepreneurial orientation is stronger in network organizations with tenured boards.     

Technological arbitrage opportunities and interindustry differences in entry rates

In this study we investigate the relationship between technological arbitrage opportunities and entry rates in twenty-six industries over the course of five years. Arbitrage opportunities are shown to be a positive and significant predictor of business entry rates. Such positive effect is weakened in industries with strong appropriability regime including effective patents, secrecy, and lead time. Adding arbitrage opportunities to the typical determinants of entrepreneurship such as innovative opportunities significantly increases predictive power of the regression models.     

Live or Let Die? Alternative Routes to Industry Exit

Each year around 8% of Swedish manufacturing firms leave an industry. Of the exit routes available, the least likely is firm closure. Firms are more likely to merge, become acquired or switch to a new industry. We investigate the importance of a range of firm and industry characteristics for the exit decision of Swedish firms from 1980–1996. From our analysis two patterns are evident. First, firms that close down appear to be the most distinct compared to those that remain within the sector. Second the same characteristics can have quite different associations with different exit strategies.

Are state–local government expenditures converging? New evidence based on sequential unit root tests

Large and persistent gaps in subnational public expenditure have important implications regarding growth, equity, and migration. In this context, we revisit the question of expenditure convergence across the American states to provide more nuanced evidence than found by a small number of previous studies. We employ a methodology due to Smeekes (Bootstrap sequential tests to determine the stationary units in a panel, 2011) that sequentially tests for unit roots in pairwise (real per capita) expenditure gaps based on user specified fractions. In a panel of 48 combined state–local government units (1957–2008), we found that expenditures on highways, sanitation, utility, and education were far more convergent than expenditures on health and hospitals, police and fire protection, and public welfare. There was little evidence of “club convergence” based on the proportion of intraregional convergent pairs. Several historically high-grant receiving states showed relatively strong evidence of convergence. Our results bode well for future output convergence and opportunities for Tiebout-type migration across jurisdictions. They also imply a diminished role for public infrastructure and education spending in business location choices over time and a mixed role for federal grants in inducing convergence.     

Sickness Absence and Local Benefit Cultures

In many countries, sickness absence financed by generous insurance benefits is an important concern in the policy debate. There are strong variations in absence behavior among local geographical areas. Such variations are difficult to explain in terms of observable socioeconomic factors. In this paper, we investigate whether such variations are related to group effects in the form of social interaction among individuals within neighborhoods. Well‐known methodological problems arise when trying to answer this question. A special feature of our efforts to deal with these problems is that we adopt several alternative approaches to identify group effects. Our study is based on a rich set of Swedish panel data, and we find indications of group effects in each of our approaches.