When and why do countries break their national fiscal rules?

This paper identifies determinants of compliance with various types of national numerical fiscal rules. Based on 51 fiscal rules in force in EU member states from 1995 to 2015, the analysis identifies determinants among specific rule characteristics and their fiscal frameworks, as well as their political, (socio-)economic and supranational environments. While the average compliance across all rules and countries is around 50%, compliance with rules constraining stock (rather than flow) variables, set out in coalitional agreements, as well as rules covering larger parts of general government finances is significantly higher. Furthermore, independent monitoring and enforcement bodies (issuing real-time alerts) turn out to be significantly associated with a higher probability of compliance. Several theories of the deficit bias of governments due to government fragmentation, decentralization and political budget cycles are also significant with regards to compliance with fiscal rules. However, neither the economic environment or business cycle, nor forecast errors (except for an unexpectedly higher primary balance) on average seem to play a significant role.     

Politically influenced counterterrorism policy and welfare efficiency

The paper examines how two targeted countries strategically deploy their counterterror forces when lobbying defense firms influence counterterror provision. For proactive measures, lobbying activities in a single targeted country lessen underprovision, raise overall counterterrorism, and reduce terrorism. Welfare decreases in the lobbied country but increases in the other targeted country owing to enhanced free riding. Lobbying influence on the targeted countries' welfare is tied to terrorists' targeting preferences and how the lobbied government weighs citizens’ welfare. Lobbying in both targeted countries may result in the first-best equilibrium. International policy coordination may lead to less efficient outcomes than the noncooperative equilibrium.     

International flows of people and institutional change

International travel clearly increases human interaction over space and exposes societies to foreign influences, foreign ideas, and foreign institutions. Does international travel promote institutional change in a traveler's home country? This paper uses panel data from 149 countries to test the hypothesis of institutional change stemming from international travel. We generally find that foreign travel does not affect political institutions. In one sub-sample, we find limited evidence that international travel can be a determinant of institutional quality in the home country depending upon whether the home country is an autocracy or democracy.     

EQUALITY OF OPPORTUNITY: EAST VS. WEST GERMANY

The case of German reunification has been subject to extensive research on earnings inequality and labour market integration. However, little is known about the development of equality of opportunity (EOp) in East and West Germany after 1990. Using German micro data, we empirically analyse how circumstances beyond the sphere of individual control relate to inequality in East and West Germany. Our results show that EOp is larger in East than in West Germany. However, despite increasing income inequality, EOp remained surprisingly constant.     

中央企业A股+H股整体上市及其对中国资本市场的影响

在分拆上市和单独境外上市对中国资本市场的不利影响日益凸显的情况下,中央企业A股+H股整体上市是兼顾企业利益和国家利益的现实选择。本文利用实证的研究方法,分析了中央企业先H股后A股、A股+H股同步和先A股后H股三种整体上市路径以及中央企业A股+H股整体上市对中国资本市场的影响,得出的结论是,三种中央企业A股+H股整体上市路径都能对我国资本市场的发展产生或多或少的积极影响;同时,中央企业A股+H股整体上市对包括中国香港在内的中国资本市场将产生多方面的积极影响。     

Intra-industry trade with multinational firms

Recent developments, including the analysis of firm-level adjustment to falling trade costs, have contributed to a revival of interest in intra-industry trade (IIT). Most empirical work still relies on the standard Grubel-Lloyd measure. This however refers only to international trade, disregarding income flows stimulated by repatriated profits of multinational firms. Given the overwhelming importance of the latter, this is a major shortcoming. This paper provides a guide to measurement and estimation of the determinants of bilateral IIT shares from the perspective of new trade theory with multinational firms. We develop an analytically solvable general equilibrium model to investigate the impact of investment costs, multinational activities and income flows from repatriated profits. We also discuss and quantify the bias of the Grubel-Lloyd index associated with repatriated profit flows of multinationals. Using bias-corrected versions of the Grubel-Lloyd index as the dependent variable, we demonstrate that the determinants motivated by our theoretical analysis offer important insights into variations in IIT shares.     

Taxation of Mobile Factors as Insurance under Uncertainty

This paper considers the effects of the taxation of mobile factors, i.e., capital, under uncertainty. The wages earned by residents of a jurisdiction are uncertain due to random shocks. Since the uncertain wages in a jurisdiction depend on the amount of mobile capital employed in the jurisdiction, and since taxation alters the quantity of capital employed, taxation affects the riskiness of uncertain wages. In particular, the taxation of capital moderates the fluctuation of uncertain wages, thereby providing insurance. For this reason, jurisdictions use distortionary capital taxation even if lump‐sum taxation is available. In addition, this insurance effect counteracts the tendency toward too low tax rates on capital arising from tax competition, and possibly improves the efficiency of tax competition.     

How Inequality Affects Trust in Institutions: Evidence from Indonesia

Trust is an important ingredient to improve economic performance and people's welfare by alleviating market failures caused by imperfect information, costly enforcement, or coordination failures. Using the World Values Survey 2018, we estimate the impact of village and district levels inequality on trust in institutions in Indonesia. We find that higher village level inequality has a negative effect only on trust in strangers, while higher district level inequality reduces trust in television, the press, the central government, the courts, and the police. The implication points to the importance of keeping inequality at the aggregate level in check to maintain people's trust in social, political and state institutions.     

Consistent inference in fixed-effects stochastic frontier models

The classical stochastic frontier panel data models provide no mechanism to disentangle individual time invariant unobserved heterogeneity from inefficiency. Greene (2005a, b) proposed the so-called “true” fixed-effects specification that distinguishes these two latent components. However, due to the incidental parameters problem, his maximum likelihood estimator may lead to biased variance estimates. We propose two alternative estimators that achieve consistency for $n\to \infty$ with fixed $T$. Furthermore, we extend the Chen et al. (2014) results providing a feasible estimator when the inefficiency is heteroskedastic and follows a first-order autoregressive process. We investigate the behavior of the proposed estimators through Monte Carlo simulations showing good finite sample properties, especially in small samples. An application to hospitals’ technical efficiency illustrates the usefulness of the new approach.     

Political openness and armed conflict: Evidence from local councils in Colombia

In this paper, I empirically investigate how the openness of political institutions to diverse representation can impact conflict-related violence. Regression discontinuity estimates that exploit plausibly exogenous variations in the number of councillors in Colombian municipalities show that political openness substantially decreases conflict-related violence, namely the killing of civilian non-combatants. Empirical evidence suggests that the lower level of political violence stems from parties with close links to armed groups having greater representation on larger municipal councils. Using data about the types of violence employed by these groups, and government representation, I argue that armed violence has decreased not because of power-sharing arrangements involving armed groups linked to the parties with more political representation, but rather because armed groups with more political power deter other groups from initiating certain types of violence.