Inflation,financial development,and growth: A trilateral analysis

A large body of evidence links financial development to economic growth, yet the channels through which inflation affects this relationship and its stability have been less thoroughly explored. We take an econometric and graphical approach to examining these channels, and find that higher levels of financial development, combined with low-inflation, are related to higher rates of economic growth, especially in lower income countries, but that financial development loses much of its explanatory power in the presence of high-inflation. In particular, small increases in the price level seem able to wipe out relatively large growth effects of financial deepening when the annual rate of inflation lies between 4% and 19%, whereas the operation of the finance–growth link is less affected by inflation rates above this range. Growth is generally much lower, however, in such high-inflation settings where financial development is typically repressed.     

Gender and competition

In almost all European Union countries, the gender wage gap is increasing across the wage distribution. In this 2008 presidential lecture I briefly survey some recent studies aiming to explain why apparently identical women and men receive such different returns and focus especially on those incorporating psychological factors as an explanation of the gender gap. Research areas with high potential returns to further analysis are identified. Several examples from my own recent experimental work with Patrick Nolen are also presented. These try to distinguish between the role of nature and nurture in affecting behavioural differences between men and women that might lead to gender wage gaps.     

The effect of general counsel prominence on the pricing of audit services

We investigate the effect of corporate general counsel (GC) ascension to the senior management team on the pricing of audit services. Prior research suggests that the GC position may have a significant influence in setting the tone at the top by promoting corporate integrity, ethics, and serving as a governance and monitoring mechanism, but also recognizes that prominent GCs may face ethical dilemmas, causing them to disregard professional responsibilities to curry the favor of the CEO and other executives. Using audit fees to proxy for audit engagement risk, we find a negative association between GC ascension to top management and audit fees. We investigate the mechanisms behind this relation and find GC ascension is associated with a reduction in both default risk and financial misstatement risk, which supports auditors’ perceived reduction in client business risk and audit risk, respectively.     

Tests of functional form in dynamic econometric models: Some empirical experience

Econometric theory has provided several rival tests of functional form specifications in economic relations, but there is little empirical experience in using many of them. This note reports some practical applications, and compares the performance of various tests, in specifying dynamic econometric models.     

Youth Poverty,Employment, and Leaving the Parental Home in Europe

This paper studies the nature of youth poverty dynamics in Europe. First, it analyzes to what extent experiencing poverty in a given period is in itself positively related to the probability of living below the poverty line again in the future. That is, we assess the degree of poverty genuine state dependence among young people. Second, we study the interrelationships between poverty, employment, and residential emancipation. The results show that youth poverty genuine state dependence is positive and highly significant, but this scarring effect is short‐lived in Scandinavia compared to Southern or Continental Europe. Moreover, although we find a strong association between poverty and leaving home in Nordic countries, time spent in economic hardship does not last long. On the contrary, in Spain and Italy, young adults tend to leave their parental home much later in order to avoid falling into a poverty state that is more persistent.     

A resilience perspective of the SEEA

While the SEEA is an important advance in national accounting it remains deficient in a number of ways in regard to natural resources. The dynamic and interactive nature of ecosystems means that any linear, compartmentalised system of accounting will miss significant changes that influence human wellbeing. In particular, losses in resilience of critical capital stocks (through changes in underlying ecosystem variables that do not contribute directly to valued flows, and are therefore not included in the accounts) means that the accounts will not recognise that such stocks are becoming riskier, likely to collapse, and are therefore over‐valued. We present a stock‐based approach to measuring sustainable development (the Inclusive Wealth Approach of [Arrow KJ, Dasgupta P and Maler K‐G. (2003) Evaluating projects and assessing sustainable development in imperfect economies, Environmental and Resource Economics, 26:647-685]) at a regional scale, using an example from South East Australia, which includes an assessment of the resilience of critical capital stocks.     

Market power and fiscal policy in OECD countries

We compute average markups as a measure of market power throughout time and study their interaction with fiscal policy and macroeconomic variables in a VAR framework. From impulse-response functions, the results, with annual data for a set of 14 OECD countries, show that the markup (i) depicts a pro-cyclical behaviour with productivity shocks and (ii) a counter-cyclical behaviour with fiscal spending shocks. We also use a PVAR, increasing the efficiency in the estimations, which confirms the country-specific results.     

The emerging value network in the mobile phone industry: The case of Japan and its implications for the rest of the world

This paper considers how the mobile phone industry is changing from a value chain to a value network using the Japanese market as an example. Value networks involve a larger number of firms, a more complex set of relationships between them, and agreements on a greater number of interface standards than do value chains. Building from this concept of a value network, the paper shows how: (1) agreements on many of these interface standards are enabling connections to be made between the mobile phone and other industries; (2) the resulting products and services often reflect the technological capability of phones and the existing products and services in these “other” industries; (3) each new interface standard requires a new critical mass of users; and (4) a critical mass of users for a new interface standard partly builds from previously created critical masses of users. On a practical level, this paper's analysis adds to a growing list of evidence that the growth in Western mobile Internet markets is nowhere near its potential and that the change from a value chain to a value network requires a different form of standard setting, policy making, and management than are currently used in the mobile phone industry.