External Imbalances and Fiscal Fragility in the Euro Area

This paper presents two views of the European sovereign debt crisis. The first is that countries in the South of the Eurozone were fiscally irresponsible and failed to implement pro-competitive supply side policies. The second view holds that the crisis reflects a deep divide between the external surpluses of the North and external deficits of the South. Basic stylized facts cast doubt on the explanation based on the first thesis alone. A relatively simple model shows how poor fundamentals can create a debt problem independently of fiscal responsibility. The empirical analysis of the determinants of government bond yield spreads relative to Germany suggests that both views in fact provide useful insights into the roots of the current sovereign crisis. However, differences in growth and competitiveness and capital flows between North and South have assumed a much more dominant role since the onset of the global crisis.     

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Machine tools and mass production in the armaments boom: Germany and the United States, 1929–44

This article anatomizes the ‘productivity race’ between Nazi Germany and the US over the period from the Great Depression to the Second World War in the metalworking industry. We present novel data that allow us to account for both the quantity of installed machine tools and their technological type. Hitherto, comparison of productive technologies has been limited to case studies and well‐worn narratives about US mass production and European‐style flexible specialization. Our data show that the two countries in fact employed similar types of machines combined in different ratios. Furthermore, neither country was locked in a rigid technological paradigm. By 1945 Germany had converged on the US both in terms of capital‐intensity and the specific technologies employed. Capital investment made a greater contribution to output growth in Germany, whereas US growth was capital‐saving. Total factor productivity growth made a substantial contribution to the armaments boom in both countries. But it was US industry, spared the war's most disruptive effects, that was in a position to take fullest advantage of the opportunities for wartime productivity growth. This adds a new element to familiar explanations for Germany's rapid catch‐up after 1945.     

Modelling Intercontinental Tourism Consumption in South Africa: A Systems‐of‐Equations Approach

This paper investigates the pattern of inbound tourists' consumption in South Africa, examining four main intercontinental markets and five different tourism goods. The empirical investigation develops an almost ideal demand system (AIDS) model and it extends recent research by allowing tourists to base their spending decision on the real effective price differences between South Africa and their home country. The results show that tourist spending in South Africa is a luxury good, and tourists react normally to a change in the relative price of goods. The cross‐price elasticities suggest that the preferences of different markets influence their view of substitutability and complementary effects between various products in South Africa.     

On the Relative Optimality of Environmental Policy Instruments: An Application of the Work of Alberto Alesina

We study the issue of optimality of policies devoted to environmental goals, building upon the recent and interesting work by Alesina and Passarelli (2010) and extending their analysis to the more general framework set up by Weitzman (The Review of Economic Studies 41: 477-491, 1974). We illustrate instruments that governments have at their disposal to reduce polluting emissions, and we point out the economic implications that may arise from the overlapping regulation through both instruments in the European context. We review the literature on political determination of environmental regulation. On the basis of existing literature, we show that political factors are more important than economic ones in explaining why particular instruments are implemented for certain problems (Hepburn et al. Climate Policy 6: 137–160, 2006). We recognize Alesina’s contribution which states that environmental policy, and the decision to adopt one tool instead of another, is subject to a complex political process. Governments are subject to pressure from politicians, households, and firms because their decisions imply winners and losers. Then, we focus in detail on the work by Alesina and Passarelli (2010) who consider which policy tool and at what level would be chosen by majority voting to reduce polluting emissions; they find out that even if a tax is in general superior to quantity based mechanisms (quotas and tradable permits), the majority may strategically choose a quantity mode in order to charge the minority a larger share of the cost for polluting emissions reduction. We extend Alesina’s analysis, focusing on the optimality of price-based mechanisms, since it is not always the case that price instruments are more efficient than quantity instruments. To this aim, we explicitly make use of Weitzman results (The Review of Economic Studies 41: 477–491, 1974), which suggest that if costs are highly nonlinear compared to benefits, then price-type regulation is more efficient, while if costs are close to linear, then quantity-type regulation is more efficient. We cast Alesina’s analysis in the European context, analyzing potential voting outcomes, assuming that EU countries can be arranged according to different criteria. We find that depending on the empirical distribution of voting countries, Alesina’s voting procedure leads to interesting different outcomes.     

National Determinants of Family Firm Development? Family Firms in Britain, Spain, and Italy in the Nineteenth and Twentieth Centuries

We provide here a complement to recent work on family business,which has demonstrated the need to go beyond the generic definitionof the family firm to place personal capitalism in an appropriateinstitutional, historical, and cultural framework. By focusingon the nineteenth- and twentieth-century experiences in Britain,Spain, and Italy, we challenge the notion that in the nineteenthand twentieth centuries there was anything so simple as a Mediterraneanmodel for family business. Rather, we demonstrate the need toconsider family businesses in national and regional contextsif we are to understand their various capabilities and characteristics.We use similarities and differences in the experiences and responsesof families and firms in the three countries to support thisclaim.     

Prudence or Profligacy: Deficits, Debt, and Fiscal Consolidation

Over the last quarter century, public finances have been underpressure in most OECD countries as deficits and debts rose underthe pressure of relatively slow growth and high interest rates.This, in turn, has affected the welfare state, since effortsat containing deficits have often been concentrated on publicexpenditure. Much of the literature argues that this is desirable,since curbing deficits via tax increases seldom succeeds. Amedium-term survey of OECD country experience suggests a lessclear-cut conclusion. In a number of countries which were ableto curb debt/GDP ratios, the bulk of the adjustment did, indeed,come from spending cuts (but was, also, in some cases helpedby rapid growth and/or currency depreciation). In several, however,tax increases also appear to have succeeded in reducing deficitsand debt. Footnotes ¹ E-mail addresses: andrea.boltho{at}magd.ox.ac.uk; andrew.glyn{at}economics.oxford.ac.uk