The New Comparative Political Economy

With the collapse of communism in the late 1980s the field of comparative political economy has undergone major revision. Socialism is no longer considered the viable alternative to capitalism it once was. We now recognize that the choice is between alternative institutional arrangements of capitalism. Progress in the field of comparative political economy is achieved by examining how different legal, political and social institutions shape economic behavior and impact economic performance. In this paper we survey the new learning in comparative political economy and suggest how this learning should redirect our attention in economic development.JEL classification: B53, O10, O20, P0     

Do stock market returns predict changes to output? Evidence from a nonlinear panel data model

Recent empirical work suggests a predictive relationship between stock returns and output growth. We employ quarterly data from a panel of 27 countries to test whether stock returns as useful in predicting growth. Unlike previous research, our approach allows for the possible non-linear effect of recessions on the growth-return relationship. There is strong evidence to suggest that a linear model would be misspecified and provide potentially misleading inference. Using a switching regression approach, we find evidence that returns are most useful in predicting growth when the economy is in recession.First version received: November 2002/Final version received: April 2003This paper benefited greatly from discussions with Kalvinder Shields, Mark Harris, Pete Summers, and Vance Martin. Two anonymous referees provided useful comments on an earlier version of the paper for which we are grateful. The usual disclaimer applies to any errors and omissions. Funding from The University of Melbourne greatly assisted in the completion of this paper.     

Trends and cycles in Colombia's real GDP and fiscal deficit

The purpose of this paper is twofold. The first is methodological. We review the Beveridge-Nelson technique for decomposing economic time series, and illustrate its usefulness for examining the cyclical and secular movements in real GDP in Colombia. Second, we examine government expenditures and revenues in order to assess the extent to which the sharp increase in the fiscal deficit in the early 1980s should be viewed as a cyclical rather than a secular phenomenon.     

DISTRIBUTION OF WEALTH IN THE UNITED KINGDOM: EFFECT OF INCLUDING PENSION RIGHTS,AND ANALYSIS BY AGE-GROUP*

This article on the distribution of wealth among individuals in the United Kingdom presents recent work on the effects of including pension rights and the significance of sex, age and marital status. It describes the rationale for including the accrued rights in occupational and State pension schemes (funded or unfunded) and the methods of estimation used. For funded schemes the rights are valued as the accrued liability of the schemes to their members, and for unfunded schemes similar liabilities are hypothecated; these estimates of the value of accrued pension rights involve assumptions about future earnings and interest rates. The trend in average marketable wealth with age is upwards until advanced years when it slows down or slightly reverses. Adding occupational pension rights only slightly raises the trend for females but has a bigger effect for males. Adding State pension rights raises these upward trends until the age of 60 after which there is a decline. For marketable wealth on the average males are wealthier than females but less wealthy if single, divorced or widowed. Adding occupational pension rights improves the relative position of males; adding State pension rights cancels this out. The effect of marital status rises with both age and sex and therefore a detailed three-way analysis is made. For females widows are on average the wealthiest; for young males the married; for older males the single. Using Theil's coefficient of entropy for comparing the inequality of wealth, the addition of pension rights reduces inequality by two-thirds. Age accounts for only 6 percent of inequality for marketable wealth but for 31 percent if pension rights are included.     

Economic Potential of Biomass Based Fuels for Greenhouse Gas Emission Mitigation

Use of biofuels diminishes fossil fuelcombustion thereby also reducing net greenhousegas emissions. However, subsidies are neededto make agricultural biofuel productioneconomically feasible. To explore the economicpotential of biofuels in a greenhouse gasmitigation market, we incorporate data onproduction and biofuel processing for thedesignated energy crops switchgrass, hybridpoplar, and willow in an U.S. AgriculturalSector Model along with data on traditionalcrop-livestock production and processing, andafforestation of cropland. Net emissioncoefficients on all included agriculturalpractices are estimated through crop growthsimulation models or taken from the literature. Potential emission mitigation policies ormarkets are simulated via hypothetical carbonprices. At each carbon price level, theAgricultural Sector Model computes the newmarket equilibrium, revealing agriculturalcommodity prices, regionally specificproduction, input use, and welfare levels,environmental impacts, and adoption ofalternative management practices such asbiofuel production. Results indicate no rolefor biofuels below carbon prices of $40 perton of carbon equivalent. At these incentivelevels, emission reductions via reduced soiltillage and afforestation are more costefficient. For carbon prices above $70,biofuels dominate all other agriculturalmitigation strategies.     

The Economics and Bioeconomics of Folk and Scientific Classification

Synopsis This paper is the product of a collaboration between a biologist (Ghiselin 1997) who works on the philosophy of classification and an economist (Landa 1981, 1994) who works on the ‘Economics of Identity’: how and why people classify people based on identity in the context of a theory of ethnic trading networks. In developing the ‘bioeconomics’ (the synthesis of economics with biology) of classification, we crossed a number of disciplinary boundaries—anthropology, economics, sociology, biology, and cognitive psychology including evolutionary psychology’s ‘fast and frugal’ heuristics. Using a bioeconomics approach, we argue that folk classifications—the classifications used by ordinary persons—have much in common with scientific classifications: underlying both is the need for economy of information processing in the brain, for the efficient organization of knowledge, and for efficiency of information acquisition and transmission of information to others. Both evolve as a result of trial and error, but in science there is relatively more foresight, understanding, and planning.     

On estimating the reliability after sequentially estimating the mean: The exponential case

Sequential estimation problems for the mean parameter of an exponential distribution has received much attention over the years. Purely sequential and accelerated sequential estimators and their asymptotic second-order characteristics have been laid out in the existing literature, both for minimum risk point as well as bounded length confidence interval estimation of the mean parameter. Having obtained a data set from such sequentially designed experiments, the paper investigates estimation problems for the associatedreliability function. Second-order approximations are provided for the bias and mean squared error of the proposed estimator of the reliability function, first under a general setup. An ad hoc bias-corrected version is also introduced. Then, the proposed estimator is investigated further under some specific sequential sampling strategies, already available in the literature. In the end, simulation results are presented for comparing the proposed estimators of the reliability function for moderate sample sizes and various sequential sampling strategies.