Growth of business services: A supply‐side hypothesis

This paper aims to explain why and how the service sector may grow faster than manufacturing. It develops a two‐sector, closed‐economy model, having a manufacturing sector and a service sector. Accumulation of human capital serves as the basis of growth. The analysis focuses on business services, while household services are also considered. It is argued that differences in returns to scale between the two sectors and employment frictions in manufacturing explain why the growth rate of the service sector may be higher. The model also features that within the service sector the business services sub‐sector may grow faster than household services.     

Adaptive two-treatment two-period crossover design for binary treatment responses

Adaptive designs are sometimes used in a phase III clinical trial with the aim, of allocating a larger number of patients to the better treatment. In the present paper, we use some adaptive designs in a two-treatment two-period crossover design where the treatment responses are binary. We use some simple designs to choose between the possible treatment combinations AA, AB, BA or BB. The goal is to use the better treatment a larger proportion of times. We calculate the allocation proportions to the possible treatment combinations and their standard deviations. We also study related inferential problems. Related asymptotics are derived. The proposed procedure is compared with some possible competitors. Finally, we use real data to illustrate the applicability of our proposed design.     

Asymmetric response of the US–India trade balance to exchange rate changes: Evidence from 68 industries

The relationship between the trade balance and the exchange rate continues to attract attention by international economists and has entered into new territory, mostly due to advances in econometric methods. The introduction of asymmetric error‐correction modelling and asymmetric cointegration using the nonlinear ARDL approach of Shin et al. (Festschrift in Honor of Peter Schmidt: Econometric methods and applications, Springer, 2014, 281) as compared to the symmetric and linear ARDL approach of Pesaran et al. (Journal of Applied Econometrics, 2001, 16, 289) has led us in a new direction to discover relatively better results. We apply these methods to the bilateral trade balance model of each of the 68 industries that trade between India and the USA. The nonlinear approach not only provides more support to the J‐curve effect, but also yields support in favour of short‐run and long‐run asymmetric effects of exchange rate changes in most of the industries.     

Harassment, corruption and tax policy: a comment on Marjit, Mukherjee and Mukherjee [Eur. J. Political Economy 16 (2000) 75–94]

This comment on Marjit, Mukherjee and Mukherjee [Eur. J. Political Economy 16 (2000) 75–94] shows that their basic model can be simplified by an alternative formulation. A corrupt auditor gives two choices to a taxpayer: pay bribe and evade tax or be overtaxed. Although harassment can be redressed through court, the taxpayer chooses to pay bribe. However, as this note discovers, the bribe–income ratio will critically depend on whether the taxpayer can afford the court fees. This may lead different income groups to have different preferences for corruption.     

Production and savings under uncertainty

This paper studies an integrated model of production and savings under uncertainty in which production inputs and the amount of savings are jointly chosen. The analysis shows that if the agent's risk preferences exhibit constant absolute risk aversion, then all results from nonintegrated or separate models of savings and production extend to the integrated framework. Under decreasing absolute risk aversion, the comparative static properties of optimal production decisions with respect to mean preserving spread and spread preserving mean parameters extend from the non-integrated to the integrated framework. However, extension of the savings model results for the same parameters requires a restriction on production technology.     

The interaction effect of economic freedom and democracy on corruption: A panel cross-country analysis

This paper examines the effects of economic freedom, democracy and its interaction term on controlling corruption. Interactive results indicate that economic freedom and democracy significantly combat corruption. Economic freedom reduces corruption in any political environment. Democracy increases corruption when economic liberalization is low.     

THE EXTENT OF THE WORLD COFFEE MARKET

This paper employs a novel method to determine whether the prices of various types of coffee are co-integrated. In the spirit of Stigler's arbitrage definition of the market, an attempt is made to test whether all the prices co-integrate in pairs, implying that there is a single market for coffee. This test for co-integration is carried out using both linear and non-linear approaches. This finding demonstrates that the conclusions drawn from the linear and non-linear tests may be drastically different.     

Confidence or competence: Do presidencies matter for households’ subjective preferences?

This paper investigates how households form subjective preferences. We examine the relationship between subjective economic confidence or sentiments and the perception of the incumbent government's competence, and consider how preferences affect each other. We further consider consequences of different presidencies. A theoretical model shows how households ‘anchor’ subjective views of the incumbent's competence on the household's confidence. Empirical analysis confirms the posited behavior and confirms that different presidencies have a bearing on the relationship.