Market demand of smart but uninformed consumers rotates counterclockwise with better information: surprising welfare effects

Providing truthful and unbiased information about the true value of a good to a priori heterogeneous consumers generates a mean-preserving counterclockwise rotation of demand. The welfare analysis of such rotation in monopoly and perfectly competitive models indicates that consumers can lose surplus if they become better informed.     

The failure of the monetary model of exchange rate determination

In this article, we test three popular versions of the monetary model (flexible price, forward-looking and real interest differential models) for the OECD member countries by applying Johansen cointegration technique. Based on country-by-country analysis, we conclude that monetary models do not provide the expected results. We reveal several shortcomings of the models and examine the building blocks of the fundamental version. Although researchers always blame the deviations from purchasing power parity as the reason for the failure of the monetary model, our analysis indicates that invalidity of Keynesian money demand function is also responsible for unfavourable results.     

INTERNATIONAL LABOUR FORCE PARTICIPATION RATES BY GENDER: UNIT ROOT OR STRUCTURAL BREAKS?

This paper examines the possibility of unit roots in the presence of endogenously determined multiple structural breaks in the total, female and male labour force participation rates (LFPR) for Australia, Canada and the USA. We extend the procedure of Gil‐Alana for a single structural break to the case of multiple structural breaks at endogenously determined dates using the principles suggested by Bai and Perron. We use the Robinson LM test to determine the fractional order of integration. We find that endogenously determined structural breaks render the total, female and male LFPR series stationary or at best mean‐reverting.     

The Role of Collateral in the Credit Acquisition Process: Evidence from SME Lending

This study tests the simultaneous impact of observed characteristics and private information on debt term contracts in a multi‐period setting, using a dataset of 12,666 credit approvals by one major Portuguese commercial bank during 2007–2010. The main results show that borrowers with good credit scores that know they have a high probability of success and are unlikely to default are more willing to pledge collateral in return for a lower interest rate premium (IRP). Furthermore, lenders tailor the specific terms of the contract, increasing both collateral requirements and the IRP from observed risk, for borrowers operating in riskier industries and with less credit availability. The results are robust to controls for joint debt terms negotiation and the degree of collateralization offered by the borrower.     

The Role of Middle Class in Economic Development: What Do Cross‐Country Data Show?

This paper investigates the channels through which the middle class may matter for consumption growth. Using several different middle‐class measures and a panel of 105 developing countries spanning the period 1985–2013, we find that a larger middle class influences consumption growth primarily through higher levels of human capital accumulation. There is also a significant direct effect of middle‐class size on consumption growth, which is more pronounced in the latter half of the sample, the 2000–2013 period.     

The effect of border barriers to services trade on goods trade

This paper has two objectives (a) to introduce border policy-induced barriers (PIBs) to services trade and (b) analyse the impact of border PIBs in services sectors on goods trade. The World Input-Output Database covering 43 countries is used over the period 2000–14. A three-stage analysis is employed. The measures of bilateral services trade barriers calculated in each services sector in the first stage are decomposed into its cultural/geographic and policy-induced parts in the second stage. Border PIBs to services trade are used in the structural gravity estimations of bilateral goods trade in the final stage. The results demonstrate significant and robust adverse effects of barriers to services trade on goods trade. When the level of development is taken into consideration, there are marked differences in the impact of these barriers on goods trade.     

Likelihood‐Based Inference and Prediction in Spatio‐Temporal Panel Count Models for Urban Crimes

We develop a panel count model with a latent spatio‐temporal heterogeneous state process for monthly severe crimes at the census‐tract level in Pittsburgh, Pennsylvania. Our dataset combines Uniform Crime Reporting data with socio‐economic data. The likelihood is estimated by efficient importance sampling techniques for high‐dimensional spatial models. Estimation results confirm the broken‐windows hypothesis whereby less severe crimes are leading indicators for severe crimes. In addition to ML parameter estimates, we compute several other statistics of interest for law enforcement such as spatio‐temporal elasticities of severe crimes with respect to less severe crimes, out‐of‐sample forecasts, predictive distributions and validation test statistics. Copyright © 2016 John Wiley & Sons, Ltd.     

Interpersonal Targets and Types of Workplace Aggression as a Function of Perpetrator Sex

We investigated the relationship between biological sex of the perpetrator and enactment of two forms of psychological workplace aggression (i.e., overt and covert) against two different interpersonal targets (i.e., supervisors and co-workers). Based on theories of power, we tested hypotheses using two samples (n ₁  = 155, 57% females; n ₂  = 152, 54% females). In comparison to women, results showed that men enacted greater levels of overt aggression against both supervisors and co-workers. Men and women reported enacting equal levels of covert aggression against both supervisors and co-workers. Taken together, these findings suggest that although biological sex of the perpetrator distinguishes levels of enacted overt aggression in the workplace, there are no differences between the sexes on levels of enacted covert aggression in the workplace.     

Wage Dispersion and Firm Productivity in Different Working Environments

This article investigates the impact of wage dispersion on firm productivity in different working environments. More precisely, it examines the interaction with: (i) the skills of the workforce, using a more appropriate indicator than the standard distinction between white‐ and blue‐collar workers, and (ii) the uncertainty of the firm economic environment, which has, to our knowledge, never been explored on an empirical basis. Using detailed cross‐sectional linked employer–employee data for Belgium, we find a hump‐shaped relationship between (conditional) wage dispersion and firm productivity. This result suggests that up to (beyond) a certain level of wage dispersion, the incentive effects of ‘tournaments’ dominate (are dominated by) ‘fairness’ and/or ‘sabotage’ considerations. Findings also show that the intensity of the relationship is stronger for highly skilled workers and in more stable environments. This might be explained by the fact that monitoring costs and production–effort elasticity are greater for highly skilled workers, and that in the presence of high uncertainty, workers have less control over their effort–output relation, and associate higher uncertainty with more unfair environments.