Takeoffs

This paper identifies factors associated with takeoff—a sustained period of high growth following a period of stagnation. Countries that experience takeoffs average 2.3% annual growth following their stagnation episodes, while those that do not average 0%. Using probit, we find that de jure trade openness is positively and significantly associated with takeoffs. A one‐standard‐deviation increase in de jure trade openness is associated with a 55% increase in the probability of a takeoff in our default specification. Capital account openness encourages takeoff responses, but measures of de facto trade openness are found to be poor predictors of takeoffs. We also examine the determinants of nations achieving “sustained” takeoffs; i.e. those lasting eight years or longer. Takeoffs in countries with more commodity‐intensive output bundles are less likely to be sustained, suggesting that adverse terms‐of‐trade shocks may play a role in ending long‐term high growth episodes.     

FDI Location and the Relevance of Spatial Linkages: Evidence from Provincial and Industry FDI in China

In this study both aggregate and industry‐level foreign direct investment (FDI) data are employed to investigate the spatial dependence of FDI hosts. The analysis contributes to the existing literature by focusing on the heterogeneous spatial correlation of FDI in different industries. Using more comprehensive FDI data across multiple industries and multiple provinces in China from 1999 to 2007, the results show a significant spatial correlation among provinces. Aggregate FDI tends to be regional trade platform oriented indicating neighboring provinces become competitors for FDI. In contrast, results based on industry‐level provincial FDI show stronger support for vertical or complex vertical FDI.     

Legal Reform,Contract Enforcement and Firm Size in Mexico

The variation in legal system quality across states in Mexico is used to examine the relationship between judicial quality and firm size over the course of the 2000s, when systemic changes were taking place. Using economic census microdata and survey‐based measures of legal institutions, a robust effect of judicial quality is observed on the firm size distribution and efficiency, instrumenting for underlying historical determinants of institutions. Indicative evidence is found that the effect is strongest in more capital‐intensive industries. Market size and distance‐to‐market are also found to matter for firm size outcomes, consistent with the new trade literature.     

THE DECISION TO DEMUTUALIZE: AN EXPLORATION OF THE DRIVERS OF ORGANIZATIONAL CHANGE WITHIN THE AUSTRALIAN LIFE INSURANCE MARKET

The restructuring of the financial landscape that has occurred in the last three decades, has led to a reassessment of co‐operative models of organization. An outcome of this process has been the demutualization of mutual financial organizations. Using a case study approach this paper analyses the pressures on mutual structures encountered by Australian mutual life insurers. Such an approach provides a number of insights into the way in which firms adjust to changes in regulatory and competitive environments. It is concluded that a number of exogenous and endogenous forces combined to drive the process of organizational change.     

RIDGE ESTIMATORS FOR PROBIT REGRESSION: WITH AN APPLICATION TO LABOUR MARKET DATA

In this paper we propose ridge regression estimators for probit models since the commonly applied maximum likelihood (ML) method is sensitive to multicollinearity. An extensive Monte Carlo study is conducted where the performance of the ML method and the probit ridge regression (PRR) is investigated when the data are collinear. In the simulation study we evaluate a number of methods of estimating the ridge parameter k that have recently been developed for use in linear regression analysis. The results from the simulation study show that there is at least one group of the estimators of k that regularly has a lower mean squared error than the ML method for all different situations that have been evaluated. Finally, we show the benefit of the new method using the classical Dehejia and Wahba dataset which is based on a labour market experiment.     

Taxation and Market Power

We analyze the incidence and welfare effects of unit sales tax increases in experimental monopoly and Bertrand markets. We find, in line with economic theory, that firms with no market power are able to shift a high share of the tax burden to consumers, independent of whether buyers are automated or human players. In monopoly markets, a monopolist bears a large share of the burden of a tax increase. With human buyers, however, this share is smaller than with automated buyers, as the presence of human buyers constrains the pricing behaviour of a monopolist. Several control treatments corroborate this finding.     

OPTIMISM AND PESSIMISM IN GAMES

This article considers the impact of ambiguity in strategic situations. It extends the existing literature on games with ambiguity‐averse players by allowing for optimistic responses to ambiguity. We use the CEU model of ambiguity with a class of capacities introduced by Jaffrray and Philippe (Mathematics of Operations Research 22 (1997), 165–85), which allows us to distinguish ambiguity from ambiguity‐attitude, and propose a new solution concept, equilibrium under ambiguity (EUA), for players who may be characterized by ambiguity‐preference. Applying EUA, we study comparative statics of changes in ambiguity‐attitude in games with strategic complements. This extends work in Eichberger and Kelsey (Journal of Economic Theory 106 (2002), 436–66) on the effects of increasing ambiguity if players are ambiguity averse.     

Capital Inflows,Exchange Rate Flexibility and Credit Booms

Historically, capital flow bonanzas have often fueled sharp credit expansions in advanced and emerging market economies alike. Focusing primarily on emerging markets, this paper analyzes the impact of exchange rate flexibility on credit markets during periods of large capital inflows. It is shown that bank credit is larger and its composition tilts to foreign currency in economies with less flexible exchange rate regimes, and that these results are not explained entirely by the fact that the latter attract more capital inflows than economies with more flexible regimes. The findings thus suggest countries with less flexible exchange rate regimes may stand to benefit the most from regulatory policies that reduce banks' incentives to tap external markets and to lend/borrow in foreign currency; these policies include marginal reserve requirements on foreign lending, currency‐dependent liquidity requirements and higher capital requirement and/or dynamic provisioning on foreign exchange loans.     

ACCOUNTING FOR HOUSEHOLD PRODUCTION: A PROTOTYPE SATELLITE ACCOUNT USING THE AMERICAN TIME USE SURVEY

This paper presents a satellite account where households are treated as production units. It extends previous work that treats consumer durables as investment and that values nonmarket household production activities such as cooking, cleaning, and childcare. Services from consumer durables and government capital related to household production are also valued. In constructing the updated accounts, this paper incorporates new time use data from the American Time Use Survey (ATUS) and the harmonized time use data from the Multinational Time Use Study (MTUS). This paper also discusses and incorporates recommendations made by the U.S. National Academies panel on nonmarket accounts.     

COALITION GOVERNMENTS AND SOVEREIGN DEBT CRISES

This article examines the domestic politics of sovereign debt crises. I focus on two alternative mechanisms that aggregate the preferences of domestic actors over debt repayment: single-party versus multiparty coalition governments. I uncover a very strong empirical regularity using cross-national data from 48 developing countries between 1971 and 1997. Countries that are governed by a coalition of parties are less likely to reschedule their debts than those under single-party governments. The effect of multiparty coalitions on sovereign defaults is quantitatively large and roughly of the same order of magnitude as liquidity factors such as debt burden and debt service. These results are robust to numerous specifications and samples.