Modelling trigonometric seasonal components for monthly economic time series

The basic structural time series model has been designed for the modelling and forecasting of seasonal economic time series. In this article, we explore a generalization of the basic structural time series model in which the time-varying trigonometric terms associated with different seasonal frequencies have different variances for their disturbances. The contribution of the article is two-fold. The first aim is to investigate the dynamic properties of this frequency-specific Basic Structural Model (BSM). The second aim is to relate the model to a comparable generalized version of the Airline model developed at the US Census Bureau. By adopting a quadratic distance metric based on the restricted reduced form moving-average representation of the models, we conclude that the generalized models have properties that are close to each other compared to their default counterparts. In some settings, the distance between the models is almost zero so that the models can be regarded as observationally equivalent. An extensive empirical study on disaggregated monthly shipment and foreign trade series illustrates the improvements of the frequency-specific extension and investigates the relations between the two classes of models.     

Smallholder participation in vegetable exports and age‐disaggregated labor allocation in Northern Tanzania

Modern agricultural supply chains have been playing an increasingly important role in developing countries and have had significant effects on rural labor markets. This article analyses the effects of smallholder farmer participation in export vegetable supply chains in Northern Tanzania on both household hired labor demand and off‐farm labor supply, using an age‐disaggregated approach. In our sample, neither separability nor exogeneity of smallholder farmer participation in export supply chains can be rejected. Hence, we apply lognormal double‐hurdle models and find that participation in export supply chains positively affects households’ decision to hire labor from all age groups. We also find that it increases the unconditional overall level of hired labor demand, while the age‐disaggregated analysis shows that these effects mostly benefit rural youth. However, our sample does not allow us to establish statistically significant evidence of an effect on household off‐farm labor supply although the point estimates point to nonnegligible positive effect sizes.     

Heterogeneity of Long‐run Technical Efficiency of German Dairy Farms: A Bayesian Approach*

In parametric efficiency studies, two alternative approaches exist to provide an estimate of the long‐run efficiency of firms: the dynamic stochastic frontier model and the generalised true random‐effects model. We extend the former in order to allow for heterogeneity in the long‐run technical efficiency of firms. This model is based on potential differences in firm‐specific characteristics and in firms’ inefficiency persistence. The model is applied to an unbalanced micro‐panel of German dairy farms over the period 1999 to 2009. Estimation of long‐run technical efficiency and inefficiency persistence is based on an output distance function representation of the production technology and estimated in a Bayesian framework. The results suggest that heterogeneity in long‐run technical efficiency of farms is mostly attributed to discrepancies in farm‐specific factors rather than differences in farms’ inefficiency persistence. Farm size is positively related to long‐run technical efficiency while subsidies exert a negative effect on the long‐run technical efficiency of farms. Inefficiency persistence is found to be very high, but heterogeneity in this persistence is low.     

Betting market inefficiencies are short-lived in German professional football

In this article, we argue that potential inefficiencies on betting markets are more likely to exist at the very beginning of a season, when the available information on the teams’ playing strength is difficult to evaluate. This lack of reliable information should be particularly large in the case of recently promoted teams that have typically undergone major changes in the composition of their roster following their promotion. Without any information on the latter teams’ potential performance, they are particularly difficult to evaluate, which may eventually lead to inefficiencies and positive returns on investment in the betting market. We analyse odds from German first division Bundesliga soccer for the seasons from 2002/03 to 2015/16 to find betting market inefficiencies at the start of the season. As expected, betting on recently promoted team wins generates temporarily positive returns, especially for away games. These results suggest bookmakers to underestimate promoted teams’ ability to familiarize with the conditions in the new league, such as having to play in front of larger, often hostile crowds.     

THE ECONOMICS OF COUNTERTERRORISM: A SURVEY

We provide a review of theoretical and empirical contributions on the economic analysis of terrorism and counterterrorism. We argue that simple rational‐choice models of terrorist behavior – in the form of cost‐benefit models – already provide a well‐founded theoretical framework for the study of terrorism and counterterrorism. We also hint at their limitations which relate to the failure of accounting for the dynamics between terrorism and counterterrorism that may produce unintended second‐order effects as well as for the costs associated with counterterrorism and its international dimension. We reevaluate previously proposed counterterrorism strategies accordingly. Finally, in the light of our findings, we discuss interesting areas of future research.     

Forecasting Euro‐Area Macroeconomic Variables Using a Factor Model Approach for Backdating

We suggest to use a factor model based backdating procedure to construct historical Euro‐area macroeconomic time series data for the pre‐Euro period. We argue that this is a useful alternative to standard contemporaneous aggregation methods. The article investigates for a number of Euro‐area variables whether forecasts based on the factor‐backdated data are more precise than those obtained with standard area‐wide data. A recursive pseudo‐out‐of‐sample forecasting experiment using quarterly data is conducted. Our results suggest that some key variables (e.g. real GDP, inflation and long‐term interest rate) can indeed be forecasted more precisely with the factor‐backdated data.     

Evaluating market efficiency without price data: the Swedish market for wood fuel

The overall objective of this paper is to analyse the price development and price formation for wood fuel used by the Swedish district heating sector. According to Lönner et al., there is a significant potential for increasing the use of wood fuel in Sweden, at a fairly moderate cost. The basic question raised in this paper is then why this potential is not realized. Specifically, a methodology is proposed for testing whether the reason is that market imperfections are present. As a first step the shape of the technology in the Swedish district heating sector is estimated for the period 1989 to 1996. In the second step the estimated technology and the assumption of cost-minimizing firms are combined to calculate shadow prices, i.e. marginal valuation of wood fuel in this sector. If the average shadow price significantly deviates from the average observed price one may conclude that this market is functioning inefficiently due to imperfections. According to constructed bootstrap confidence intervals this difference is significant only for three out of eight years, implying that the quantities of wood fuel traded are too small. For the other years the difference is not significant, implying that one cannot, on statistical grounds, reject the efficient market hypothesis for all years.     

Interregional trade and economic integration: A partial equilibrium analysis

The classical comparative static analysis of economic integration is extended to a spatial world by the theory of partial spatial price equilibrium. It is made operational by gravity-like specifications of the demand functions and is applied to a quantitative study of regional effects of the EEC and EFTA formation in Scandinavia and the FRG. Aggregated effects of integration on regional output are presented, based on a hypothetical pre-integration versus post-integration comparison for 1970. It is shown that, contrary to the common views, European economic integration has not been generally detrimental to geographically peripheral areas.     

The EC internal market,Lomé IV and the ACP countries

The implications that the internal market could hold for the EC's foreign trade relations are a cause of considerable worry to countries in the Third World. Particularly the ACP countries, for many of whom the EC is their foremost product and import market, fear the possible strengthening of protectionist barriers and a Europe increasingly preoccupied with itself. This article examines the perspectives of EC-ACP trade relations in the light of the Lomé IV agreement.