Where have All the Educated Workers Gone? Services and Wage Inequality in Three Asian Economies

The wage returns to college have risen relative to those to secondary education in many developing economies. In India, the Philippines and Thailand, this is related to the expansion of services employment. We show this using decompositions connecting shifts in the returns to education to changing job opportunities. High‐skill services employment grew slowly while relative demand in the sector shifted from secondary to college graduates, pushing workers with secondary education into low‐skill intensive services. These polarizing trends in services employment account for the growing convexity of the Mincerian wage profile, and may constrain governments seeking to use educational expansion to alter the wage distribution.     

Firm heterogeneity and aggregate business services exports: Micro evidence from Belgium,France, Germany and Spain

This paper uses detailed micro data on services exports at the firm–destination–service level to analyse the role of firm heterogeneity in shaping aggregate services exports in Belgium, France, Germany and Spain from 2003 to 2007. We decompose the level and the growth of aggregate services exports into different trade margins paying special attention to firm heterogeneity within countries. We find that the weak export growth of France is at least partly due to poor performance by small exporters. By contrast, small exporters are the most dynamic contributors to the aggregate exports of Belgium, Germany and Spain. Our results highlight the importance of firm heterogeneity in understanding aggregate export growth.     

Do related party transactions affect family firm valuations?

We examine the likelihood and value relevance of related party transactions in family firms. Based on an extensive hand-collected sample, we find that founder-led family firms are more likely to enter into related party transactions than other firms. We also find that the founder-led family firm valuation premium is reduced when these firms disclose related party transactions, especially opportunistic related party transactions. We also examine the significant change in related party transaction reporting regulations enacted in 2006 and find that it led to a decline in the number of value-decreasing related party transactions for founder-led family firms. We find a corresponding decrease in the detrimental effect of related party transactions on founder-led family firms’ valuation. Our results suggest that changes in the 2006 SEC related party transaction reporting regulations better protected minority shareholders from wealth extraction via related party transactions in founder-led family firms.     

Information brokers and the use of budgetary and financial information by politicians: the case of Portugal

This paper analyses the intermediary role of the technical bodies that support the use of budgetary and financial information by central government politicians in Portugal. The main findings show that information brokers are playing a central role in preparing this information in a credible, simple and understandable way. However, even if not intentionally, the information they present can be biased. Politicians need to be aware that the information brokers they rely on may not be giving them ‘neutral’ information.     

Why do Aggregate Production Functions Work? Fisher’s simulations,Shaikh’s identity and some new results

The literature on aggregation has shown that the conditions for successful aggregation of micro production functions into an aggregate production function are far too stringent to be believable (Fisher 1969, 1971). Despite this, aggregate production functions continue being used. The reason is that they seem to 'work'. This happens, however, because underlying every aggregate production function is the income accounting identity that links input and output, i.e. output equals wages plus profits. A simple algebraic transformation of this identity yields a form that resembles a production function (Shaikh, 1974, 1980). This paper uses Monte Carlo simulations to study two questions. First, how much spuriousness can help explain the relatively good fits of the Cobb-Douglas production function? The simulations show that the contribution of spuriousness to a high R 2 is minor once we properly account for the fact that input and output data used in production function estimations are linked through the income accounting identity. It is mostly the link through this identity that explains the results. Secondly, we study how much factor shares have to vary in an economy so as to render the Cobb-Douglas production function with a time trend a bad choice for modelling and estimation purposes. We conclude that the Cobb-Douglas form is robust to relatively large variations in the factor shares. What makes this form often fail are the variations in the growth rates of the wage and profit rates.     

CONDITIONAL STOCHASTIC DOMINANCE TESTS IN DYNAMIC SETTINGS

This article proposes nonparametric consistent tests of conditional stochastic dominance of arbitrary order in a dynamic setting. The novelty of these tests lies in the nonparametric manner of incorporating the information set. The test allows for general forms of unknown serial and mutual dependence between random variables and has an asymptotic distribution that can be easily approximated by simulation. This method has good finite‐sample performance. These tests are applied to determine investment efficiency between U.S. industry portfolios conditional on the dynamics of the market portfolio. The empirical analysis suggests that Telecommunications dominates the other sectoral portfolios under risk aversion.