Is real per capita state personal income stationary? New nonlinear,asymmetric panel-data evidence

This paper re-examines the stochastic properties of U.S. state real per capita personal income, using new panel unit-root procedures. The new developments incorporate non-linearity, asymmetry, and cross-sectional correlation within panel-data estimation. Including nonlinearity and asymmetry finds that 43 states exhibit stationary real per capita personal income whereas including only nonlinearity produces 42 states that exhibit stationarity. Stated differently, we find that two states exhibit nonstationary real per capita personal income when considering nonlinearity, asymmetry, and cross-sectional dependence.     

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.     

Political competition,tax salience and accountability. Theory and evidence from Italy

This paper argues that electoral competition may hinder rather than foster political accountability, especially when elected officers can choose among a number of tax instruments. We develop a political agency model showing that politicians in more competitive jurisdictions use less salient tax instruments more intensely. Defining salience as visibility or, analogously, as voters' awareness of the costs associated with specific government revenue sources, we argue that voters are less likely to hold politicians to account for the associated tax burden of a less salient instrument. This in turn implies that strategic politicians will more heavily rely on less salient revenue sources when electoral competition is stronger. Using data on Italian municipal elections and taxes over a 10-year period, we determine the degree of salience of various tax instruments, including property taxes (high salience) and government fees for official documents (low salience). We then show that mayors facing stronger competition for re-election use less salient tax instruments more intensely.     

Railways and the Exploitation of Victoria's Forests, 1880s–1920s

Railways made a large contribution to the expansion of Victoria's economy, and in the process enabled and drove environmental change. This article focuses on one industry, forestry. It first examines railway demand for timber in construction and maintenance, particularly for sleepers. This demand caused tensions – a bitter dispute in the 1890s between the Railways Department and the Conservator of Forests, George Perrin, over timber cut on state land led to uneasy co-existence after the turn of the century. Railways not only required timber but also carried commercial quantities in bulk, providing forest industries with access to profitable markets – in particular firewood, the significance of which has been underappreciated previously. Forest products contributed substantially to railway revenue, representing a more stable source of income than other major categories of freight such as wheat, wool, and coal.     

The Impact of Farmland Transfers on Agricultural Investment in China: A Perspective of Transaction Cost Economics

There is growing concern that farmland transfers lead to less agricultural investment, which may adversely affect agricultural productivity growth in China. Prior research has primarily focused on the differences between owned cultivated land and rented plots, but little is known about how farmland transfers between relatives, which are popular in rural China, specifically affect agricultural investment. In this paper, we present a conceptual framework of transaction cost economics to compare different contracting strategies in China's farmland rental markets. As farmland rental markets in China are immature, land transfer between relatives establishes bilateral governance, which has the advantage of addressing the opportunistic activities of both parties and can ultimately increase investment by tenants. Based on data from two waves of household surveys, we empirically examine the impact of bilateral governance on the application of organic fertilizer, an indicator for agricultural investment. Our findings show that apart from economic factors, kinship is important to the functioning of farmland rental markets in rural areas.     

Protection for sale under monopolistic competition: Beyond the CES

We extend the protection for sale model of Grossman and Helpman (1994) by introducing a general model of monopolistic competition with variable markups and incomplete pass-through. We show that the structure of protection emerging in the political equilibrium not only depends on the weight attached by the government to consumer welfare when making its policy decision, but also on the degree of market power of firms and on the terms-of-trade variations due to the degree of pass-through. Our results highlight the importance of preferences in shaping the structure of protection and are consistent with the occurring of protectionism also in unorganized industries.     

The side effects of quantitative easing: Evidence from the UK bond market

We examine the returns to UK government bonds before, during and between the phases of quantitative easing to identify the side effects for the market itself. We show that the onset of QE led to a sustained reduction in the costs of trading and removed some return regularities. However, controlling for a wide range of market activity, including issuance and QE announcements, we find evidence that investors could have earned excess returns after costs by trading in response to the purchase auction calendar. Drawing on economic theory, we explore the implications of these findings for both the efficiency of the market and the costs of government debt management in both the short and long run.     

A new approach to measuring riskiness in the equity market: Implications for the risk premium

We introduce a new approach to measuring riskiness in the equity market. We propose option implied and physical measures of riskiness and investigate their performance in predicting future market returns. The predictive regressions indicate a positive and significant relation between time-varying riskiness and expected market returns. The significantly positive link between aggregate riskiness and market risk premium remains intact after controlling for the S&P 500 index option implied volatility (VIX), aggregate idiosyncratic volatility, and a large set of macroeconomic variables. We also provide alternative explanations for the positive relation by showing that aggregate riskiness is higher during economic downturns characterized by high aggregate risk aversion and high expected returns.     

Stabilizing and destabilizing mechanisms: A new perspective to understand business cycles

Economists believe that economic fluctuations can be smoothed by stabilization mechanisms, such as price adjustment, embedded in the economy. While price adjustment can be seen as a stabilization mechanism, are there mechanisms that can destabilize an economy? We find that as early as 1939, Harrod discussed a destabilization mechanism, the firm's investment adjustment, illustrated in his knife-edge puzzle. We build a macro-dynamic model with investment and price as the core macroeconomic variables. Our analysis shows that the interaction between the stabilization mechanism (price adjustment) and the destabilization mechanism (investment adjustment) generates fluctuations and cycles. However, due to price stickiness, the price adjustment mechanism may not be enough to stabilize the economy. In this case, a government stabilization policy is necessary for further stabilization. As this paper also addresses the microfoundations of Keynesian quantity theory, including the choice of output and investment in optimization, it can be related to traditional Keynesian economics, with a new perspective to understand business cycles.     

What's on the Menu? Policies to Reduce Young People's Sugar Consumption

Young people in the UK consume far above the maximum recommended levels of added sugar. It is likely that neither they nor their parents fully take account of the future health, social and economic costs of this high sugar consumption. This provides a rationale for policy intervention. The majority of young people's added sugar consumption occurs in the home, where purchases are typically made by parents. This means that understanding the purchase decisions of adults is important for policy design, even if the policies aim to reduce the consumption of young people. We discuss the merits of popular policies, including taxes, advertising restrictions and restrictions on the availability of specific foods, and we identify promising avenues for future research.