Same Same But Different: Dialects and Trade

Language is a strong and robust determinant of international trade patterns: Countries sharing a common language trade significantly more with each other than countries using different languages, holding other factors constant. In this article we present the first analysis of the effect of language on trade in an intra‐national context. Analyzing unique data for a single‐language country, Germany, we find that similarities in the local dialect have a significantly positive impact on regional trade. We interpret this finding as evidence for the trade‐promoting effect of culture, because linguistic similarities likely reflect cultural ties across regions, rather than lower costs of communication or similar institutions.     

Gauging potential sovereign risk contagion in Europe

This study adopts the CoVaR methodology to analyse the tail risk relationships among European sovereigns, which provide arguably important information for policymakers to identify countries that should come under close scrutiny during the current debt crisis.     

Employment cycles, low income work and the dynamic impact of wage regulations. A macro perspective

In this paper we investigate, against the background of Goodwin??s (1967) growth cycle model, a dual labor market economy and the consequences of introducing an unemployment benefit system and minimum wages in the second labor market and a maximum wage barrier in the first one. In the framework with free ??hiring?? and firing?? in the both labor markets we show (a) that in fact maximum real wages in the first labor market not only reduce the volatility of this labor market, but also provide global stability to the system dynamics if they are locally explosive, and (b) that larger fluctuations in employment can be made (at least partially) socially acceptable through a (workfare oriented) unemployment benefit system augmented by minimum wage in the low income segment of the labor market.     

Why the Rigour–Relevance Gap in Management Research Is Unbridgeable

In this paper we discuss, on the basis of system theory, the rigour–relevance gap in management research and the proposal to overcome it. From a system theory perspective, social systems are self-referential or autopoietic, which means that communication elements of one system, such as science, cannot be authentically integrated into communication of other systems, such as the system of a business organization. Social systems can only irritate – provoke – each other, i.e. alter conditions in such a way that other systems are forced to respond. Because of the differences between management science and practice it is impossible to assess relevance of research output within the system of science. On the basis of our analysis we show that neither action research nor Mode 2 research nor recent approaches to collaborative research can succeed in producing research that is rigorous as well as relevant. Researchers and practitioners cannot collaboratively produce research, they can only irritate each other. However, sometimes irritations or provocations turn out inspiring.     

Local Linear Impulse Responses for a Small Open Economy*

Traditional vector autoregressions derive impulse responses using iterative techniques that may compound specification errors. Local projection techniques are more robust to this problem, and Monte Carlo evidence has suggested they provide reliable estimates of the true impulse responses. We use local linear projections to investigate the dynamic properties of a model for a small open economy, New Zealand. We compare impulse responses from projections to those from standard techniques, and consider the implications for monetary policy. We pay careful attention to the dimensionality of the model, and focus on effects of policy on gross domestic product, interest rates, prices and exchange rates.     

The rhetoric and reality: employer responses to the national minimum wage

The national minimum wage (NMW) was introduced to Britain in April 1999 amid much speculation. This paper considers the political reasons for introducing the NMW and the economic effects of doing so. It also addresses the issue of the additional costs created by the NMW and the strategies adopted by employers to defray them. The paper provides evidence from the hotel sector that suggests some wage gains but no significant disemployment effects. The value of conventional labour market models as predictive tools is questioned.     

The competitive consequences of hub dominance: A case study

Hub-and-spoke has become the predominant configuration of airline routes, with individual hubs typically dominated by single carriers. These operations have characteristics of natural monopoly; but dominance is a consequence also of advantages that cannot be subsumed under the rubric of superior efficiency. The carrier with the strongest presence attracts a grossly disproportionate amount of traffic and, secondarily, of the high fare-paying traffic originating at the hub. While the welfare consequences of the consequent price discrimination are ambiguous, United's acquisition of 50 additional slots at the slot-constrained O'Hare airport raised a legitimate Clayton Act Section 7 issue.Robert Julius Thorne Professor of Political Economy, Emeritus, Cornell University; Special Consultant, National Economic Research Associates, Inc. I acknowledge with gratitude the indispensable assistance of Gary J. Dorman in assembling the data presented here and offering criticisms, and of Scott Thomas. They bear no necessary responsibility, however, for the article itself.     

Endogenous growth cycles—Arrow's learning by doing reconsidered

A two-sector growth model is presented in which human capital is acquired through learning by doing. It is shown that, for both the competitive situation and the social optimum, endogenous growth cycles may be the outcome. Concerning the economic prerequisite for persistent oscillations we detect a bunching of investment at nearby dates leading economic variables to overshoot the long-run steady state values. This clustering of investment, for its part, may be caused by adjacent complementarity with respect to the stocks or by a sufficiently strong external effect of investment on the marginal product of physical capital or on the opportunity costs of investment.