The size and scope of government in the US states: does party ideology matter?

We investigate empirically how party ideology influences size and scope of government as measured by the size of government, tax structure and labor market regulation. Our dataset comprises 49 US states over the 1993–2009 period. We employ the new data on the ideological mapping of US legislatures by Shor and McCarty (Am. Polit. Sci. Rev. 105(3):530–551, 2011) that considers spatial and temporal differences in Democratic and Republican Party ideology. We distinguish between three types of divided government: overall divided government, proposal division and approval division. The main result suggests that Republican governors have been more active in deregulating labor markets. We find that ideology-induced policies were counteracted under overall divided government and proposal division.     

Interest Rates, Stock Returns and Credit Spreads: Evidence from German Eurobonds

We investigate daily variations in credit spreads on investment‐grade Deutschemark‐denominated Eurobonds during the challenging 1994–1998 period. Empirical results from a Longstaff and Schwartz (1995) two‐factor regression, extended for correlated spread changes and heteroskedasticity, indicate strong persistence in spread changes. Consistent with theory and previous findings, changes in spreads are significantly negatively related to the term‐structure level while, contrary to theory, the proxy for asset value does not yield a significant negative contribution. We even find a significant positive relation for Eurobonds with long maturity. Tentative interpretations are portfolio‐rebalancing activities or differing risk factor sensitivities on short‐ vs. long‐maturity bonds.     

Home sweet home: Home bias and international diversification among individual investors

A striking feature of international portfolio investment is the extent to which equity portfolios are concentrated in the domestic market of the investor. We investigate differences in home bias on an individual level by studying portfolios formed as a part of the new defined contribution pension plan in Sweden. We estimate the likelihood of home bias and use individuals’ demographic and socioeconomic features as explanatory variables. Our findings indicate that the likelihood of home bias is caused by both rational and irrational factors. Moreover, we relate home bias to investors’ desire to hedge against inflation, sophistication and overconfidence.     

Temporary grant programmes in Sweden and central government behaviour

The purpose of this paper is to study whether the central government in Sweden approves applications for temporary grants from municipalities according to political objectives. We also study factors that determine the municipal decision to apply for temporary grants. Two hypotheses are tested, that the central government supports municipalities with many swing voters in order to influence voters, and that the central government provides benefits to groups that share its ideology and that provide political support. Data is used from three election years 1982, 1985, and 1988. Under the Socialist governments municipalities with a high share of Socialist voters were more likely to apply for grants. The same pattern does not apply to the 1982 Conservative government. There is evidence that Socialist governments approved temporary grants on the basis of party tactical criteria. However, there is no indication of vote purchasing behaviour by the 1982 Conservative government.     

The Difficult Path to Lean Product Development

Lean product development holds the promise of dramatically improving a company's competitive position. Its implementation offers the potential for faster product development with fewer engineering hours, improved manufacturability of products, higher quality products, fewer production start-up problems, and faster time to market. Of course, all of this improves the likelihood of market success. As Christer Karlsson and Pär Åhlström point out, however, a company attempting to implement lean product development must overcome numerous obstacles. By spending more than 2 years observing and facilitating one company's efforts to make this transition, they were able to identify various factors that either hinder or support the implementation of lean product development. Lean product development comprises numerous interrelated techniques, including supplier involvement, cross-functional teams, concurrent engineering, integration (as opposed to coordination) of various functional aspects of each project, the use of a heavyweight team structure, and strategic management of each development project. However, a company does not achieve lean product development simply by implementing some of these techniques. A successful move toward lean product development requires approaching these interrelated techniques as elements of a coherent whole. As observed in the subject company, several factors can hinder attempts to achieve lean product development. For example, managerial overemphasis on R&D in development projects hampers efforts to achieve cross-functional integration. In other words, creating a team with members from various functions is easier than achieving a cross-functional focus throughout an organization. Similarly, a cross-functional team cannot perform effectively if a sequential view of the development process persists. Factors that support the transition to lean product development include: tight development schedules, which contribute to a must-do attitude; close cooperation with a qualified customer, who can provide vital information as well as challenge the development team; highly competent engineers; and, most important, the active, ongoing support and participation of top management. Most participants in the process examined in this study seemed interested in the possibilities of lean product development, which suggests that motivation to change may not pose a significant problem in similar efforts.     

Tests for cointegration rank and the initial condition

Many economic events involve initial observations that substantially deviate from long-run steady state. Such initial conditions are known to affect the power of univariate unit root tests diversely, whereas their impact on multivariate tests is largely unknown. This paper investigates the impact of the initial condition on the power of tests for cointegration rank, such as Johansen??s widely used likelihood ratio test, tests with prior adjustment for deterministic terms, and a test based on the eigenvalues of the companion matrix. We find that the power of the likelihood ratio test is increasing in the magnitude of the initial condition, whereas the power of the other tests is generally decreasing. We exploit these findings in an application to price convergence.     

The globalisation–welfare state nexus: Evidence from Asia

How globalisation influences social expenditure has been examined for industrialised countries. Globalisation has often been shown to be positively associated with social expenditure in established industrialised countries, a finding that corroborates the compensation hypothesis. Scholars have focused on industrialised countries, because social expenditure is difficult to measure in developing countries. I use new data on social expenditure for Asian non‐OECD countries. Globalisation is measured by the new KOF Globalisation Index. My results do not suggest that globalisation influenced social expenditures in Asia. Neither do the results suggest that the nexus between globalisation and social expenditures varied across high‐income countries, such as Hong Kong and Singapore, and lower‐income Asian countries or across Asian regions. It is conceivable that Asian citizens did not demand increasing social support when globalisation proceeded rapidly because they enjoyed family and other private assistance. Asian countries also have weaker tax and labour market institutions than OECD countries and have therefore more difficulties in increasing social expenditure.