Output Expectations and Forecasting of UK Manufacturing

This paper analyses both quarterly data from the Confederation of British Industry (CBI) Survey on respondents’ expectations of recent and forthcoming manufacturing output and monthly Office of National Statistics (ONS) figures on actual manufacturing output within the UK. Quarterly output expectations of the CBI manufacturers are explained from the monthly ONS observations using a bounded rationality approach. The logistic formulation models the diffusion process across respondents. There is a backward-looking CBI Survey perspective, explained by past ONS observations, and a forward-looking perspective, explained from future ONS statistics. Also, the forecasting of monthly manufacturing output from earlier values, along with the quarterly CBI Survey information, is examined and tested against the alternative Pesaran/Thomas method. The study provides econometric evidence for the validity of the logistic model and shows that bounded rationality can explain the formation of predictions among business managers in the UK manufacturing sector. The emerging consensus from the literature, supported by this paper, is that the logistic format is a superior approximation to the true data generating process compared with the earlier standard Anderson/Pesaran/Thomas approach. An adjustment to the Survey is used, which achieves perfect symmetry with up and down versions of the data. The benefits of this adjustment are tested in the forecasting section.

Relative Responsiveness of Bargaining Solutions to Changes in Status-quo Payoffs

It is a well-known fact that several prominent bargaining solutions are responsive to changes in status-quo (i.e., disagreement or fallback) payoffs. When an agent’s status-quo payoff increases, his solution payoff either stays the same or increases. A fully general result for these solutions’ status-quo point ranking is impossible to establish. In this paper, using an important class of bargaining problems, a ranking of the relative status-quo point responsiveness of prominent bargaining solutions is obtained. Using the Constant Elasticity of Substitution class of bargaining problems, regardless of the concavity of the Pareto frontier and the level of increase in one’s status-quo payoff, we find the equal gains solution is the most responsive with respect to changes in status-quo payoffs, followed by the Nash solution. The equal sacrifice solutions is the least responsive, followed by the Kalai/Smorodinsky solution.

The Lack of International Consumption Risk Sharing: Can Inflation Differentials and Trading Costs Help Explain the Puzzle?

The bulk of evidence on the lack of international risk sharing is based on regressions of idiosyncratic consumption growth on idiosyncratic output growth. This paper argues that the results from such regressions obtained from international data are, however, not directly comparable to those based on regional data: the standard practice of running such regressions on international data fails to account for persistent international differentials in consumer prices, whereas—implicitly—most of the literature based on regional data has accounted for these differences. When risk sharing regressions are set up in conceptually the same way in international and regional data sets, the estimated coefficients are also very similar. To explore this result further, we adapt the variance decomposition of Asdrubali et al. (Q J Econ 111:1081–1110, 1996) to allow for deviations from purchasing power parity across countries. While quantity (income and credit) flows are the dominant channel of risk sharing among regions, relative consumption and output price (internal terms of trade) fluctuations account for the bulk of the deviation from the complete markets outcome in international data. To the extent that persistent differences in consumer prices are an indication of goods market segmentation, our findings provide empirical evidence for the proposition by Obstfeld and Rogoff (NBER Macroeconomics Annual 2000, 2000) that segmented international goods markets rather than asset market incompleteness may account for the (apparent) lack of risk sharing between countries.

Multinationals: Too Many or Too Few?— The Proximity–concentration Trade-off

The paper builds an analytically tractable model that illustrates the “proximity–concentration trade-off” involved in horizontal multinationals. For low trade costs, firms are single-plant firms, for intermediate costs, some are single-plant firms whereas others are multinationals, for large trade costs, firms are multinationals. Because of the modeling strategy, the model is suited for a welfare analysis of multinationals. It shows that too many firms choose to concentrate their production in only one location. Also, for some transport costs, a reduction in transport costs worsens welfare.

“Thirlwall’s Law” reconsidered

Thirlwall’s Law is found to be the necessary but not sufficient condition for balanced long-run growth. A simple equation is considered whose empirical analysis could confirm—or reject—the validity of the Law. The analysis, conducted by means of econometric co-integration using the Dynamic Ordinary Least Squares method applied to data for 59 countries covering the years 1960–2012, suggests that Thirlwall’s Law may not hold for the decisive majority of countries.     

Recent developments in EC USSR commercial and economic relations

Conclusion Trade with the Soviet Union represents only a small part of total Community trade (3.5 % of EC imports and 2.7 % of EC exports in 1990). EC imports from the Soviet Union increased moderately between 1989 and 1990 as well as between the first six months of 1990 and the corresponding period of 1991, whilst EC exports decreased sharply as a result of hard currency shortage in the Soviet Union.The CMEA and Soviet disintegration processes will lead to a substantial reorientation of trade flows. This development has already begun with large increases of trade between the EC and the Central and Eastern European countries.International assistance to the USSR mainly consists of export credits. Community assistance involves a large proportion of grants and technical assistance. The cost of assistance measures envisaged so far remains limited for Western countries.The economic effects of assistance would be enhanced if effective coordination was implemented among the providers. Adequate mechanisms such as triangular operations or the untying of assistance would be required in order to avoid crowding out traditional suppliers from Soviet markets.     

Combining “real effort” with induced effort costs: the ball-catching task

We introduce the “ball-catching task”, a novel computerized task, which combines a tangible action (“catching balls”) with induced material cost of effort. The central feature of the ball-catching task is that it allows researchers to manipulate the cost of effort function as well as the production function, which permits quantitative predictions on effort provision. In an experiment with piece-rate incentives we find that the comparative static and the point predictions on effort provision are remarkably accurate. We also present experimental findings from three classic experiments, namely, team production, gift exchange and tournament, using the task. All of the results are closely in line with the stylized facts from experiments using purely induced values. We conclude that the ball-catching task combines the advantages of real effort tasks with the use of induced values, which is useful for theory-testing purposes as well as for applications.