Unemployment duration and unemployment insurance: a comparative analysis based on Scandinavian micro data

Based on pooled register data from Norway and Sweden, we findthat differences in unemployment duration patterns reflect dissimilaritiesin unemployment insurance (UI) systems in a way that convincinglyestablishes the link between economic incentives and job searchbehaviour. Specifically, UI benefits are relatively more generousfor low-income workers in Sweden than in Norway, leading torelatively longer unemployment spells for low-income workersin Sweden. Based on the between-countries variation in replacementratios, we find that the elasticity of the outflow rate frominsured unemployment with respect to the replacement ratio isapproximately one in Norway and 0.5 in Sweden.     

International Saving, Investment and Trade

Feldstein and Horioka (Econ J 90:314–329, 1980) observed that saving and investment move closely together in the major OECD countries. This finding is a puzzle if national economies are characterized by one sector neoclassical production functions—with diminishing returns to capital, a high level of savings in a country should create an incentive to export capital. In this paper, we show that this incentive disappears in the presence of multiple sectors with differing capital intensities. In a high saving country, national capital can be absorbed domestically without a decline in its marginal product through a shift in the sectoral composition of national production towards capital intensive sectors. This is nothing but the well-known Rybczynski effect. We present a modified version of the standard Heckscher–Ohlin (HO) Model to show that very small barriers to capital mobility are enough to force national savings to stay within the country of origin. We also argue that, while the assumptions of this model may appear special, they are not unrealistic for the developed countries in the Feldstein Horioka study. Some historical economic trends are also consistent with the picture presented in this paper. Finally, the paper shows that the conventional insights from the one sector neoclassical model can be completely overturned in a multi-sector setting when technological differences are introduced.

A Consistent Poverty Approach to Assessing the Sensitivity of Income Poverty Measures and Trends

This paper examines the sensitivity of estimates of income poverty rates and trends to variations in the poverty line and to whether or not certain households are included or excluded from the sample used to estimate poverty. The approach draws on the concept of consistent poverty, which has been used to identify those with incomes below the poverty line who also experience deprivation. Our approach involves excluding households with incomes below the poverty line if they report zero or negative income or are self‐employed, have expenditure well in excess of their income, have substantial wealth holdings, or if they do not report having experienced financial stress over the past year. The combined impact of all four exclusions is to reduce the half‐median income poverty rate from 9.9 per cent to 5.4 per cent, but also suggests that poverty increased by more over the decade to 2003–04 than the original estimates indicate.     

Entry and growth in a perfectly competitive vintage model

A perfectly competitive vintage-knowledge model of Schumpeterian growth is introduced to study the relation between growth, technology-lifetime, entry, and productivity-dispersion. The incentive to innovate is generated by the productivity-dispersion (latent in traditional vintage models) between new and old plants, rather than by monopoly rents. The model has a unique steady-state REE with endogenous growth. The endogenous extent of entry constitutes a buffer, dampening the effect of research-efficiency and completely neutralizing the effect of population size or population growth rates on per-capita income levels and growth rates. Variations of research-efficiency lead to a negative relation between growth and vintage-lifetime and a non-monotonic relation between growth and productivity-dispersion.     

Target ratcheting and effort reduction

In this paper, we examine how retail store managers reduce their sales activity in response to target ratcheting. We find that managers with favorable sales performance in the first three quarters reduce their sales activity in the final quarter. We also document that managers who engage in sales reducing activities enhance their likelihood of meeting their next-year sales target, which is based on their current sales. That is, managers who reduce their sales activity in the final quarter are more likely to beat their next-year sales targets than managers who refrain from reducing their final-quarter sales.     

A flight to Q? Firm investment and financing in Korea before and after the 1997 financial crisis

We examine investment behavior among exchange-listed Korean manufacturing firms before and after the 1997 financial crisis using firm-level panel data. Starting with the standard Q-theory of investment, we augment it by allowing for a sales accelerator and the possibility of cash constraints, categorizing firms based on their age, size and affiliation to an industrial conglomerate (i.e., chaebol). We find that Tobin’s Q is a robust determinant of investment in a pooled sample for 1992–2001, but that it became more important for small firms and less important for chaebol-affiliated firms after the crisis. Investment by chaebol firms also became more sensitive to the availability of internal cash balances after the crisis. We interpret this as reflecting a shift in the Korean economy to a stronger market orientation after the crisis and to a business climate in which the quality of potential projects became more important relative to capital market imperfections in determining the destination of investment funds.