Increasing the credibility of the twin birth instrument

Twin births are an important instrument for the endogenous fertility decision. However, twin births are not exogenous either as dizygotic twinning is correlated with maternal characteristics. Following the medical literature, we assume that monozygotic twins are exogenous, and construct a new instrument, which corrects for the selection although monozygotic twinning is usually unobserved in survey and administrative datasets. Using administrative data from Sweden, we show that the usual twin instrument is related to observed and unobserved determinants of economic outcomes, while our new instrument is not. In our applications we find that the classical twin instrument underestimates the negative effect of fertility on labor income. This finding is in line with the observation that high earners are more likely to delay childbearing and hence have a higher risk to get dizygotic twins.     

Causal relations between inflation and inflation uncertainty—Cross sectional evidence in favour of the Friedman-Ball hypothesis

We test for causality between inflation and its associated uncertainty by means of both in-sample and out-of-sample modelling. Our findings indicate that the impact of inflation on inflation uncertainty is more pronounced than the reverse causal effect.     

Practical Problems with Reduced‐rank ML Estimators for Cointegration Parameters and a Simple Alternative*

Johansen's reduced‐rank maximum likelihood (ML) estimator for cointegration parameters in vector error correction models is known to produce occasional extreme outliers. Using a small monetary system and German data we illustrate the practical importance of this problem. We also consider an alternative generalized least squares (GLS) system estimator which has better properties in this respect. The two estimators are compared in a small simulation study. It is found that the GLS estimator can indeed be an attractive alternative to ML estimation of cointegration parameters.     

An empirical examination of the role of vertical product differentiation in north-south trade

Conclusions Our results indicate that the general line of reasoning embodied in the recently developed models of North-South IIT would seem to be valid. The various measures of income and size similarity do seem to affect North-South IIT in the theoretically predicted way. Further, this type of trade is positively impacted by the direction of quality differences and, to a lesser degree, the extent of quality differences. Finally, it would appear that modeling this type of trade on a bilateral basis using data detailed by both industry and country has not only theoretial appeal, but is empirically useful. The results, however, do not address the mechanism which generates these quality differences between the exports of the North and South. The theoretical models use different assumptions concerning the process which generates the quality differences. Such differences may be related to capital abundance as in Falvey [1981]; a Ricardian form of comparative advantage as in Flam and Helpman [1987]; or a complex combination of the two.¹⁵ Some preliminary evidence on the role of quality differences has been given in this paper. The difficult task of explaining what generates these differences is an important issue left unaddressed at this point.     

Import instability and LDCs’ response: The destabilization of the inflow of capital and intermediate goods

Zusammenfassung Importinstabilit?t und die Reaktionen der Entwicklungsl?nder: Die DeStabilisierung der Einfuhr von Kapital- und Vorleistungsgütern. — Anhand von modifizierten Importnachfragefunktionen für sieben Entwicklungsl?nder wird empirisch die Hypothese untersucht und best?tigt, da\ instabile Rohstoffimportpreise die Importmengen von Kapitalgütern im Sinne eines Verdr?ngungsvorgangs destabilisieren. Dies ist ebenso festzustellen, wenn die Ausgaben für Nahrungsimporte aufgrund heimischer Erntefluktuationen schwanken. Bezüglich der Instabilit?t von Importpreisindizes und Gesamtimportausgaben reagieren die Importmengen von Kapitalgütern und industriellen Vorleistungen elastisch, w?hrend die Stabilit?t von Rohstoffeinfuhren hiervon wenig berührt wird. Die H?he der Destabilisierangseffekte ist abh?ngig von dem Ausma\ der internationalen Liquidit?t, über welche das betroffene Entwicklungsland verfügt. Diese Ergebnisse werden damit erkl?rt, da\ in den Entwicklungsl?ndern die M?glichkeiten der kurzfristigen Importsubstitution, der Wechselkursanpassungen und der internationalen Finanzierung begrenzt sind und dadurch die Transmission internationaler Preisinstabilit?ten auf die Importstrukturen erleichtert wird.

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Résumé L’instabilité des importations et les réactions des pays en voie de développement: La déstabilisation de l’importation des produits d’investissement et intermédiaires. — Au moyen de fonctions d’importation modifiées pour sept pays en voie de développement l’hypothèse est confirmée que les prix instabiles à l’importation des matières premières déstabilisent les quantités d’importation des produits d’investissement au sens d’un processus de déplacement. C’est constaté également, si les importations alimentaires flottent à cause de fluctuations de récolte locale. Au sujet des prix directs à l’importation et des dépenses totales d’importation les volumes d’importation des produits d’investissement et des produits intermédiaires manufacturiés réagissent souplement, tandis que la stabilité des importations des matières premières est peu touchée. Les effets de déstabilisations dépendent de l’ampleur de liquidité internationale de laquelle les pays concernés disposent. Ces résultats sont expliqués par la possibilité limitée de substitution d’importations, d’ajustements des cours de change et de financement international pour les pays en voie de développement; ainsi la transmission des instabilités des prix internationaux aux structures d’importation est facilitée.

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Resumen Inestabilidad de las importaciones y las reacciones de los países en desarrollo: la desestabilización de la importación de bienes intermedios y de capital. — A través de funciones de demanda de importación modificadas para siete paises en desarrollo se somete empfricamente a test y se confirma la hipótesis que precios de importación inestables para las materias primas desestabilizan los volúmenes de importación de bienes de capital en el sentido de un proceso de desplazamiento. Esto también se puede constatar, cuando el gasto para la importación de productos alimenticios oscila como consecuencia de fluctuaciones en las cosechas domésticas. Los volúmenes de importación de bienes intermedios industriales de capital reaccionan en forma elástica frente a inestabilidades de índices de precios de importación propios y gastos totales en importación, mientras que la estabilidad de las importaciones de materias primas prácticamente no se ve tocada por ello. La importancia de los efectos desestabilizadores que provienen de fluctuaciones en los precios de importación propios y de materias primas, depende de la magnitud de la liquidez internacional de que dispone el país en desarrollo afectado. Estos resultados tienen su explicación en el hecho, que los paises en desarrollo, debido a sus posibilidades limitadas de sustituir importaciones, ajustar las tasas de cambio y obtener financiamiento internacional en el corto plazo, facilitan las transmisiones de inestabilidades de precios internacionales hacia las estructuras de importación.

     

Unified structural adjustment policy in Europe?

Low growth and high unemployment have induced the European Union (EU) to outline an economic programme in which long-term effective growth and structural policy measures play a central role. Simultaneously, the German government adopted an “action programme aiming at more growth and employment”, in which the efforts on the EU level play hardly any role. Is international coordination of growth and structural adjustment policy legitimated from an economic point of view or is competition between national policies more efficient?