A new poolability test for cointegrated panels

This paper proposes a new test of the null hypothesis that the parameters in a cointegrated panel data regression are equal across the cross‐section. The asymptotic distribution of the new test statistic is derived and simulation results are provided to suggest that it performs very well in small samples. An empirical application to the monetary exchange rate model is also provided. Copyright © 2009 John Wiley & Sons, Ltd.     

Who leaves after entering the primary sector? Evidence from Swedish micro-level data

Using 14 waves of panel data, this paper investigates why employeesentering the primary sector exit subsequently. Transition probabilitiesare explained by a rich set of individual, regional and sectoralcharacteristics and a discrete-time competing risks model withunrestricted base-line hazards is used to distinguish betweenexits into a job in other sectors and other exits. The resultsconfirm Jovanovic's suggestion of ‘survival of the fittestmatches’ as workers and firms learn more about the qualityof the match between them. It is found that agricultural education,higher income and sector wage differences are the main determinantsof the hazard of moving to another sector, whereas marriageand higher education lower the hazard of leaving for non-employment.     

A sequential purchasing power parity test for panels of large cross-sections and implications for investors

In this paper we use monthly time series data for not less than 64 countries and a new sequential approach to test for purchasing power parity (PPP). The results are strong in that the evidence in favor of PPP is very weak. In fact, for the US-dollar-based exchange rates the evidence is basically non-existent. In order to eliminate the effect of the base currency, we also apply the sequential PPP test to all pairs of exchange rates, and find similarly weak evidence of PPP. However, for those rates where evidence is found, using a technical trading rule, we find evidence of significant profits. The predictability of the stationary pairs is therefore important for investors.     

Japan Section News

Huge variations in expenditure per life saved have been documented in the USA, Sweden, and Japan. Using an original-position argument, this paper examines normative rationales that might permit departures from equalization of marginal lifesaving investments. The conclusion is that adjustment for identifiability, as reflected in strict benefit-cost analysis, is not justified yet adjustments for consideration of longevity, quality of life and productivity are compelling. It is less clear as to whether factors such as ability to pay, voluntariness and catastrophic potential should influence lifesaving expenditures.     

Testing for Predictability in panels with General Predictors

The difficulty of predicting returns has recently motivated researchers to start looking for tests that are either more powerful or robust to more features of the data. Unfortunately, the way that these tests work typically involves trading robustness for power or vice versa. The current paper takes this as its starting point to develop a new panel‐based approach to predictability that is both robust and powerful. Specifically, while the panel route to increased power is not new, the way in which the cross‐section variation is exploited also to achieve robustness with respect to the predictor is. The result is two new tests that enable asymptotically standard normal and chi‐squared inference across a wide range of empirically relevant scenarios in which the predictor may be stationary, moderately non‐stationary, nearly non‐stationary, or indeed unit root non‐stationary. The type of cross‐section dependence that can be permitted in the predictor is also very general, and can be weak or strong, although we do require that the cross‐section dependence in the regression errors is of the strong form. What is more, this generality comes at no cost in terms of complicated test construction. The new tests are therefore very user‐friendly. Copyright © 2016 John Wiley & Sons, Ltd.     

Network board continuity and effectiveness of open innovation in Swedish strategic small-firm networks

Increasing adoption of open innovation as an alternative route to research and development necessitates the development of new ways to organize innovation, as well as reassessment of existing ways. Much like traditional corporations that subscribe to the closed innovation paradigm, novel organizational arrangements targeting open innovation, such as small-firm networks, employ boards to effectively manage joint research-and-development activities. These boards are similar yet different from traditional corporate boards; as such, they may have different requirements for proper functioning. We use 5-year longitudinal data on 53 Swedish strategic small-firm networks to investigate how the boards should be organized to help improve the innovative status of network participants. We expand the set of tools available for effective organization of the boards' operations and emphasize the effects of network board continuity (rates of renewal) on network members' innovative performance. We argue that the relationship is curvilinear (U-shaped) and demonstrate that it is more pronounced in larger networks.     

CCE in fixed‐T panels

The presence of unobserved heterogeneity and its likely detrimental effect on inference has recently motivated the use of factor‐augmented panel regression models. The workhorse of this literature is based on first estimating the unknown factors using the cross‐section averages of the observables, and then applying ordinary least squares conditional on the first‐step factor estimates. This is the common correlated effects (CCE) approach, the existing asymptotic theory for which is based on the requirement that both the number of time series observations, T, and the number of cross‐section units, N, tend to infinity. The obvious implication of this theory for empirical work is that both N and T should be large, which means that CCE is impossible for the typical micro panel where only N is large. In the current paper, we put the existing CCE theory and its implications to a test. This is done by developing a new theory that enables T to be fixed. The results show that many of the previously derived large‐T results hold even if T is fixed. In particular, the pooled CCE estimator is still consistent and asymptotically normal, which means that CCE is more applicable than previously thought. In fact, not only do we allow T to be fixed, but the conditions placed on the time series properties of the factors and idiosyncratic errors are also much more general than those considered previously.     

Testing for a unit root in a random coefficient panel data model

This paper proposes new unit root tests in the context of a random autoregressive coefficient panel data model, in which the null of a unit root corresponds to the joint restriction that the autoregressive coefficient has unit mean and zero variance. The asymptotic distributions of the test statistics are derived and simulation results are provided to suggest that they perform very well in small samples.     

A modified LLC panel unit root test of the PPP hypothesis

In a recent study, Westerlund (Empir Econ 37:517–531, 2009) shows that the performance of the popular LLC (Levin et al., J Econ 108:1–24, 2002) panel unit root test depends critically on the choice of lag truncation used when correcting for serial correlation, and that it is only when this parameter is set as a function of time that the power raises above size. The purpose of the current paper is to propose a modified test that does not suffer from this drawback. The new test is not only simpler to compute but also superior in terms of small-sample performance, which is illustrated using an example purchasing power parity for less developed countries.     

Testing for Convergence in Carbon Dioxide Emissions Using a Century of Panel Data

This paper tests the convergence in per-capita carbon dioxide emissions for a collection of developed and developing countries using data spanning the period 1870–2002. For this purpose, three recently developed panel unit root tests that permit for dependence among the individual countries are employed. The results lend strong support in favor of convergence for the panel as a whole. Estimates of the speed of this convergence is also provided.