Do dynamics and heterogeneity in panel data models matter?

This article investigates empirically the determinants of central banks’ reserve holdings for a large panel data set of developing and transition countries covering the period from 1975 to 2003. It estimates both a static and a dynamic relationship and applies estimators for homogeneous and heterogeneous panel data. Thereby, it examines the extent to which conclusions of panel data studies on the determinants of international reserve holdings are robust to the inclusion of dynamics as well as to the consideration of heterogeneity across countries. The results show that the neglect of dynamics and heterogeneity in country behaviour may lead to misleading inferences. Independently of the chosen estimation method, the findings suggest that trade openness and external debt are robust determinants of the level of reserves. Central banks take precautionary measures against the downside of the increasing international economic integration.     

The trend in female labour force participation: what can be expected for the future?

This study investigates the increase in the labour force participation rate of women. We estimate a binary age–period–cohort model for a sample of Dutch women born between 1925 and 1986. The results indicate that the increasing level of education and the diminishing negative effect of children have played an important role. Moreover, we find important unobserved cohort effects for pre-1955 generations, which is in line with results of studies on social norms. It is shown that the growth in female participation is likely to slow down in the near future, as such cohort effects are not relevant for younger generations.     

Cost economies,efficiency and productivity growth in the Chinese banking industry: evidence from a quarterly panel dataset

This article examines cost economies, productivity growth and cost efficiency of the Chinese banks using a unique panel dataset that identifies banks’ four outputs and four input prices over the period of 1995–2001. By assessing the appropriateness of model specification, and making use of alternative methodologies in evaluating the performance of banks, we find that the joint-stock commercial banks outperform state-owned commercial banks in productivity growth and cost efficiency. Under the variable cost assumption, Chinese banks display economies of scale, with state-owned commercial banks enjoying cost advantages over the joint-stock commercial banks. Consequently, our results highlight the ownership advantage of these two types of banks and generally support the ongoing banking reform and transformation that is currently taking place in China.     

Consumer welfare from publicly supplemented private goods: age and income effects on demand for health care

In spite of major advances in the theoretical, positive and normative, literature analysing the welfare implications of public provision of private goods, empirical investigation is often limited to contingent valuation studies, for example, of health care programmes. In this article we argue that when a market for a (subsidised or free of charge) publicly provided good exists, a consumer demand approach can be used to construct a money metric of welfare corresponding to the consumption of public provision. We illustrate this approach in investigating age and income effects on household demand for health care in Cyprus, where free public provision is not universal and those entitled to it often resort to private supplementation. Our findings suggest that the money metric of welfare, which consumers attach to free access to publicly provided health care, varies with age and to a lesser extent with household income.     

Roles played by financial development in economic growth: application of the flexible regression model

This study presents the nonlinear relationship that exists between financial development and economic growth. This study applies the flexible nonlinear regression model of Hamilton (Econometrica 69(3):537–573, 2001) because it imposes no specification restrictions. Two empirical results are obtained. First, an inverted U-shaped relation between banking sector development and economic growth is identified. Namely, the two variables are positively linked before the turning point, but negatively linked after it. Second, a positive relationship with asymmetric √-shape between stock market development and economic growth is found.     

Assessing fiscal sustainability subject to policy changes: a Markov switching cointegration approach

We propose a Markov switching cointegration approach to assess long run fiscal sustainability. This method allows us to simultaneously: (1) test for cointegration in the presence of significant fiscal policy changes; (2) assess the type of fiscal regime that a country experienced at a given period and (3) analyse the timing of the transition between the estimated regime types. Given its flexibility, our approach enable us to uncover a richer and more complex dynamics in the analysis of fiscal sustainability, which standard linear cointegration methods fail to capture.     

Is more competition conducive to the macroeconomic performance in the euro area?

One of the main goals of the European Union, laid down, inter alia, in the Lisbon Strategy and in the “Europe 2020” Strategy, is to raise employment. One important means of supporting the creation of new jobs is to increase competition. In this paper, it is shown that on average the mark-up, i.e. the deviation of prices from marginal cost in the euro area still exceeds the levels observed in the UK and in the US. After completion of the Single Market Programme in 1993, the mark-up has declined in the euro area and even more in the UK. Nevertheless, there is a strong cross-country variation between Member States, with a particularly high mark-up ratio found for Italy. Panel estimations show that total factor productivity growth, labour productivity growth and the labour market performance in the euro area could be improved by reducing the mark-up. This could be achieved by a proper institutional design. More competition could indeed improve the macroeconomic performance.     

Bequests,gifts, and education: links between intergenerational transfers

We study the channels parents use to make transfers to their children. First, we focus on the relationship between investments in education and property transfers. Second, we turn to how property transfers are divided between inter vivos gifts and bequests. We use a Swedish dataset that is superior to previously used data as it contains information on both gifts and inheritances received from parents. We estimate models for the probabilities of having university education, receiving gifts, and receiving inheritances. In addition, we estimate models for gift and inheritance amounts. We find that the more resources parents have, the higher the likelihood of transfers, and that the correlation between receiving inter vivos gifts and inheritances is very high. Finally, women are more likely to have university education and to receive gifts, and daughters receive gifts of larger amounts than sons, although there are no differences in terms of inheritance.     

What is unemployment in Europe? Concepts and measurement in the European community household panel

The purpose in this article is to evaluate the consistency between two measures of unemployment in a cross-country context. We use the European Community Household Panel to identify unemployment at an individual level based as well on the ILO criteria for being classified as unemployed as on the individual respondent reporting to be unemployed. This opens a unique opportunity to compare unemployment measured in two different ways based on a cross European Union panel study covering the years 1994 to 2001. The two main questions addressed in this article are to which extent the two unemployment measures differ and whether transition rates out of unemployment depend on which concept we use. Both questions are answered in the affirmative. The overall conclusion is that it is important, especially in some of the EU countries, to include both measures of unemployment as guidelines and indicators for policy.     

Finance–growth nexus: does causality withstand financial liberalization? Evidence from cointegrated VAR

The main finding of the paper is that, contrary to Rousseau and Wachtel (Economic growth and financial depth. Is the relationship extinct already? UNU-Wider discussion paper no. 2005/10, 2005), a long-run equilibrium relationship between financial and economic development is identified with data up to 2006—well over the financial openness boom of the nineties—in countries whose history is characterized by numerous years of high inflation and/or episodes of crisis or other structural change. Also, financial openness, or lack thereof, proves to be an important feature both in explaining differences in sensitivity of financial development to capital accumulation and in determining the direction of causality between financial and economic development. The paper finds that bidirectional causality between economic and financial development is not as frequent an outcome as in Luintel and Khan (J Dev Econ 60:381–405, 1999), and in several cases, Joan Robinson’s (The generalization of the general theory in the rate of interest, and other essays, Macmillan, London, pp 67–142, 1952) statement on the primacy of economic development over finance is supported by the estimations.