Inside the bank lending channel

This paper tests cross-sectional differences in the effectiveness of the bank lending channel. The results, derived from a comprehensive sample of Italian banks, suggest that heterogeneity in the monetary policy pass-through exists. After a monetary tightening the decrease in lending is lower for well-capitalized banks that are perceived as less risky by the market and are better able to raise uninsured deposits. Liquid banks can protect their loan portfolio against monetary tightening simply by drawing down cash and securities. The presence of internal capital markets in bank holding companies also contributes to insulate monetary shocks. Bank size is never relevant.     

Feasible taxation in advanced democracies

One usually considers tax pressure as the result of the policymakers’ efforts to increase public expenditure, while populism is resorted to in order to alleviate tensions among the taxpayers. This paper takes a different view. It assumes that populism is exogenous in the short run and defines the tolerable degree of tax pressure required to bring about redistribution; however, taxpayers also resent disappointing economic performances and low-quality public expenditure. Within this context, therefore, policymakers try to find a compromise between their desire to engage in rent-seeking and their electoral ambitions. This paper shows under which circumstances compromise is obtained, how tensions arise, and what outcomes the taxpayers’ reactions may generate.     

Reducing Brazilian greenhouse gas emissions: scenario simulations of targets and policies

This paper aims to evaluate the economic impacts of greenhouse gas emission reduction on the Brazilian economy. To this end, we developed an integrated input–output linear programming model for 2009 using the Supply and Use Tables and emissions data of the Brazilian Ministry of Science and Technology and Innovation. We simulated emissions targets for various potential scenarios in which the adopted policy design took account of sectoral composition in terms of emissions and available production technology. The results were directly affected by the high level of livestock emissions, counterbalancing this sector’s economic importance for Brazil. In the short term, sectoral emissions targets associated with taxation policy or emission permits could be developed in order to create private incentives to mitigate emissions. In this sense, the results also show that different sectoral targets may be able to balance environmental benefits with the possible economic losses incurred by such policies.     

Real wages and labor-saving technical change: evidence from a panel of manufacturing industries in mature and labor-surplus economies

Recent theories have provided a persuasive account of a key stylized fact of mature economies: the common long-run trends of average real wages and labor productivity, and the ensuing stationarity of functional distribution. Central to these theories is the notion of directed technical change, which claims that a rise in labor costs sparks the adoption of labor-saving innovations. This paper empirically examines a core prediction of these theories, namely that shocks to functional distribution elicit compensatory adjustments in real product wages and labor productivity. Using two disaggregated data-sets of manufacturing industries (EU-Klems and Unido), I find evidence of cointegration and two-way, long-run Granger causality between these two variables. These findings suggest that directed technical change is indeed key for producing stationarity in functional distribution, and they complement the recent empirical literature on distributive cycles and productivity growth. Preliminary evidence from the Unido data-set also suggests the importance of directed technical change in developing countries. To illuminate the empirical procedure, I present a theoretical model of growth and distribution with directed technical change.     

Welfare Policy in the Presence of Unionised Labour and Internationally Mobile Firms*

To what extent does the welfare state exacerbate the loss of jobs due to offshoring? We consider a model with oligopolistic sectors that are exposed to offshoring, as well as a unionised labour force that is entitled to unemployment benefits. We find that deeper economic integration induces wage moderation to the point that wages become independent of workers' outside options. Because the entire incidence of redistribution falls on net wages, the unions' willingness to moderate wages is constrained by the level of redistribution. Beyond an upper limit of redistribution, extending the welfare state compels unions to oppose wage moderation at the cost of losing jobs to offshoring. Below that upper limit, however, redistribution becomes less rather than more distortive.     

Do Bank Capital and Liquidity Affect Real Economic Activity in the Long Run? A VECM Analysis for the US

This paper analyses the long‐term economic costs of the new regulatory standards (the so‐called Basel III reform) for the US. Using a Vector Error Correction Model that estimates long‐run relationships among a small set of macro‐variables over the period 1994–2008, it shows that tighter capital and liquidity requirements have negative (but rather limited) effects on the level of long‐run steady‐state output and more sizeable effects on banks’ return on equity. The economic costs are considerably below the estimated positive benefit that the reform should have by reducing the probability of banking crises and the associated banking losses ( BCBS, 2010b ).     

Bank profitability and the business cycle

An important element of the macro-prudential analysis is the study of the link between business cycle fluctuations and banking sector profitability and how this link is affected by institutional and structural characteristics. This work estimates a set of equations for net interest income, non-interest income, operating costs, provisions, and profit before taxes, for banks in the main industrialized countries and evaluates the effects on banking profitability of shocks to both macroeconomic and financial factors. Distinguishing mainly the euro area from Anglo-Saxon countries, the analysis also identifies differences in the resilience of the respective banking systems and relates them to the characteristics of their financial structure.     

Some Useful Concepts for Development Economics in the Tradition of Latin American Structuralism

The aim of this article is to provide a selective account of some of the most important conceptual contributions of the Latin American structuralist tradition to the area of development economics. We argue that this account may help modern development economics theory overcome visible limitations and develop in a more fruitful way. We trace back the origin of these conceptualizations and identify some recent and scant efforts to incorporate them into the mainstream economic development literature. We try to clarify the meaning of the concepts and amplify their current economic significance for developing countries. The constructs selected are: (1) structural change, (2) structural disequilibrium, (3) bottlenecks, (4) structural heterogeneity, (5) endogenous nucleus of technological dynamization, (6) social disarticulation, and (7) conflict‐led instability.     

Productivity, wages and intrinsic motivations

There is a long-standing debate in labour economics on the impact of workers’ intrinsic motivations on equilibrium wages. One direction in economic theory suggests that intrinsically motivated workers are willing to accept lower wages and “donate” work, for example, in terms of unpaid overtime (the donative-labour hypothesis). In the other direction, intrinsic motivations are expected to increase worker productivity and, in turn, wages (the intrinsic motivation-productivity hypothesis). Using a new database of a sample of workers in the cooperative non-profit sector, we find that, consistently with the motivation-productivity hypothesis, more motivated workers earn significantly higher wages, which signals higher productivity. Evidence supporting the donative-labour hypothesis is weaker, even though a generally positive connection between motivations and work-donation is confirmed. We interpret these findings by arguing that the impact of the donative-labour effect is dominated by the intrinsic motivation-productivity effect.     

Methods for computing marginal data densities from the Gibbs output

We introduce two estimators for estimating the Marginal Data Density (MDD) from the Gibbs output. Our methods are based on exploiting the analytical tractability condition, which requires that some parameter blocks can be analytically integrated out from the conditional posterior densities. This condition is satisfied by several widely used time series models. An empirical application to six-variate VAR models shows that the bias of a fully computational estimator is sufficiently large to distort the implied model rankings. One of the estimators is fast enough to make multiple computations of MDDs in densely parameterized models feasible.