Is the Relationship between Inflation and Its Uncertainty Linear?

Abstract. We use parametric power ARCH models of the conditional variance of inflation to model the relationship between inflation and its uncertainty using monthly data for Germany, the Netherlands and Sweden over a period ranging from 1962 to 2004. For all three countries inflation significantly raises inflation uncertainty as predicted by Friedman. Increased uncertainty affects inflation in all countries but not in the same manner. For Sweden we find a negative impact in accordance with the Holland hypothesis, whereas for Germany and the Netherlands we find the opposite in support of the Cukierman–Meltzer hypothesis. In a sensitivity analysis we show that an arbitrary choice of the heteroscedasticity parameter influences this relationship significantly.     

WHAT DETERMINES VACATION LEAVE? THE ROLE OF GENDER

Vacation leave is introduced in workplaces to improve the working environment. Surprisingly, it has been observed that a large number of workers do not use all of their entitled vacation days. This paper provides a novel set of facts about the gender differences in taking vacation time using the Canadian Workplace Employee Survey, which is a linked longitudinal employer‐employee dataset. The results show considerable differences between men and women in the estimated effects of some demographic characteristics after controlling for job and workplace characteristics. However, they reveal significant implications of work arrangements (e.g., part‐time work, flexible work schedules, and home‐based work), job promotion, supervisory tasks, and union membership for vacation use, for both men and women. This paper provides further insights on the use of fringe benefits that may be useful to policymakers and businesses.     

Fiscal decentralization and government size: The role of democracy

This paper examines how the level of democracy in a country affects the relationship between fiscal decentralization and government size. We argue that political regimes, proxied by their democracy levels, are important for different decentralization theories to predict the impact of fiscal decentralization on government size. We test this argument using panel data from 76 developed and developing countries during 1972–2013. We find strong and robust evidence that fiscal decentralization is negatively associated with government size and that a higher level of democracy tends to mitigate the negative impact of fiscal decentralization. Therefore, our study contributes to the literature by offering a novel insight on mixed results regarding the relationship between fiscal decentralization and government size in the literature.     

INFRASTRUCTURE PROVISION,POLITICS AND RELIGION: INSIGHTS FROM TUNISIA'S NEW DEMOCRACY

This paper analyzes the relationship between access to infrastructure services and support for religious parties based on the evidence produced by a recent democratic experience in Tunisia in which a religious political party, Ennahdha, governed from 2011 to 2014. The experience points to a complex relationship. In the 2011 election, areas with higher access are associated with higher support for Ennahdha than areas with lower access. In the 2014 election, however, infrastructure access is positively correlated with support for the party in areas where access had improved but negatively correlated with support for the party in areas that already had high access. A possible pragmatic general implication is that, to be politically competitive, religious parties, cannot bet solely on their religious commitment to provide basic services, including infrastructure, to the poor. They need to recognize the multiplicity of voter's concerns and their evolving agenda.     

Specialization,diversification, and productivity: a panel data analysis of rice farms in Korea

This article examines the microeconomics of productivity associated with specialization/diversification in production activities, with an application to Korean rice farms. Korean rice farms tend to be very small and highly specialized. Our analysis examines the productivity effects associated with both farm size and farm specialization/diversification in Korean agriculture. Relying on farm‐level panel data, the analysis studies farm productivity in a multi‐input multi‐output context, accounting not only for changes in inputs and technical change in rice production, but also for the role of diversification in the production of other crops in current and previous periods. We find positive but small productivity gains from farm diversification. These gains come mostly from complementarity effects across farm outputs, with minimal effect of scale economies. The positive complementarity effects work against nonconvexity effects, which provide strong productivity incentives for rice farms to specialize.     

How do Agricultural Programmes Alter Crop Production? Evidence from Ecuador

Evaluating agricultural programmes requires considering not only the programmes’ influence on input and output indicators, but also considering the relationship between these indicators as embodied in the production technology. This article examines the impact on production of an intervention in the Ecuadorian Sierra designed to improve returns to potato production through training and through linking smallholders to high‐value markets. Critical to identifying the impact of the programme is the careful construction of a counterfactual and meticulous data collection. To assess the impact of the programme on production, a weighted estimation, where weights are constructed through propensity score matching, is employed to estimate a production function within a damage abatement framework. The function incorporates a series of interaction terms to assess the impact of the programme on the production technology. The findings provide evidence that the programme enhances yields both through a general shift in technology as well as increased input use. The results suggest that the use of effective farming techniques that are learned through the programme induce this technological shift.     

Evaluating the median voter model’s explanatory power

We match individual senators’ voting behavior on legislative proposals with 24 real referendum decisions on exactly the same issues with identical wording. This setting allows us to evaluate the median voter model’s quality with revealed constituents’ preferences. Results indicate a limited explanatory power of the median voter model: It explains 17.6% points more than random voting and that a senator’s probability to accept a proposal in parliament increases on average by 8.4% points when the district median voter accepts the proposal.     

Temporary Layoffs and Unemployment Insurance: Is Experience Rating Desirable?

Abstract. This paper explores how the introduction of an experience-rated system of unemployment insurance affects employment and welfare in a model where implicit contracts between firms and workers give rise to wage rigidities and unemployment. In the literature, it has been argued that experience-rated systems of unemployment insurance may reduce long-term employment as firms anticipate the higher costs of layoffs implied by experience rating. Our analysis shows that the introduction of experience rating may increase or decrease long-term employment but it unambiguously raises welfare.     

Price and quantity regulation in general equilibrium

We consider a general equilibrium model with a production externality (e.g. pollution), where the regulator does not observe firm productivity shocks. We examine quantity (permit) regulation and price (tax) regulation. The quantity of permits issued by the regulator are independent of the productivity shock, since shocks are unobserved. Price regulation implies use of the regulated input is an increasing function of the productivity shock because firms take advantage of a good productivity shock by increasing input use. Thus price regulation generates higher average, but more variable, production. Therefore, we show that in general equilibrium the relative advantage of quantity versus price regulation depends not only on the slopes of marginal benefits and costs, but on general equilibrium effects such as risk aversion. The general equilibrium effects are often more important than the slopes of the marginal benefits and cost curves. In the simplest model, a reasonable risk aversion coefficient implies quantity regulation generates higher welfare regardless of the benefit function.     

Credible assignments can improve efficiency in laboratory public goods games

This paper reports an experiment investigating how assignments improve economic efficiency in a modified version of the standard voluntary-contributions mechanism. The experiment uses a non-binding message that makes common information assignments in the repeated game. A credible assignment is one actually followed by the participants. It turns out to be difficult to credibly assign the symmetric efficient outcome in four person cohorts, but we did discover one assignment that was credible in the last match of the evolutionary repeated game.