Most recent papers:

• Environmental Policy And Labour Market Imperfection.
  Kuo‐Hsing Kuo, Cheng‐Te Lee, Shang‐Fen Wu.
  Bulletin of Economic Research. October 11, 2017
  This paper will set up a general equilibrium model with a distorted labour market to explore the effects of an environmental tax and union bargaining power on formal employment and the informal competitive wage. We find that when the government raises the environmental tax, both formal employment and informal competitive wage would fall. In addition, we confirm that a policy of labour market reform would increase both formal employment and the informal competitive wage.

  October 11, 2017   doi: 10.1111/boer.12122   open full text
• Profitable Strategic Delegation With Conjectural Variations.
  Aitor Ciarreta, Javier García‐Enríquez.
  Bulletin of Economic Research. October 11, 2017
  Firms delegate strategic decisions to managers because they find it profitable to do so. In the product market, when agents make conjectures about the reaction of their rivals to marginal changes in their own strategies, the set of equilibriums can be enlarged with respect to the case of no conjectures. This paper takes a duopolistic linear market parameterization where firms selling differentiated products can delegate either price or output decisions to managers. We show that it is a dominant strategy for firms to delegate no matter whether firms are Cournot or Bertrand competitors, although the equilibrium is not necessarily efficient. Futhermore, in equilibrium Cournot competition is more profitable for firms than Bertrand competition. Finally, requiring consistency in conjectures yields the same outcome no matter what type of strategic interaction and managerial choice there is on the part of firms.

  October 11, 2017   doi: 10.1111/boer.12137   open full text
• Risk‐Sharing Matching And Moral Hazard.
  Pu Chen, Sanxi Li, Bing Ye.
  Bulletin of Economic Research. October 03, 2017
  In this study we model the endogenous relationship formation between risk‐averse principals and agents in a CARA‐normal framework. Agents exert unobservable efforts to increase mean outputs and reduce risks. We show that risk‐reduction efforts are more important than mean‐increasing efforts in determining the matching patterns. Compared to cases without moral hazard, the agency problem in risk reduction induces more positive‐assortative matchings.

  October 03, 2017   doi: 10.1111/boer.12139   open full text
• Shirking, Standards And The Probability Of Detection.
  John G. Sessions, John D. Skåtun.
  Bulletin of Economic Research. September 22, 2017
  By relaxing the common efficiency wage assumption of exogenous shirking detection probabilities, we demonstrate how standards and efficiency wages are related. In a more general setting where the probability of detection depends upon the equilibrium effort level of non‐shirkers, we show that the uniformly positive (negative) supply‐side relationship between wages (unemployment insurance) and effort is no longer guaranteed. Profit maximization on the part of the firm, however, ensures that effort will depend positively (negatively) on wages (unemployment insurance) in equilibrium.

  September 22, 2017   doi: 10.1111/boer.12143   open full text
• Do Private Tutors Enhance English Language Ability? Regression Discontinuity Evidence From A Policy Experiment In India.
  Somdeep Chatterjee.
  Bulletin of Economic Research. September 12, 2017
  Empirical evidence has shown that returns to English language ability are substantial in India. Research has also focused on the impact of private tutoring in the context of developing economies to find evidence that remedial teaching leads to better student achievement and higher test scores. In this paper I analyze whether private tutoring helps in developing English language ability. Simple OLS estimates suggest statistically significant effects but estimated coefficients are rather small at 0.2 percentage points. Presence of confounders and selection bias may potentially understate the true effects of private tutoring on English language ability. To address this issue, I exploit a unique policy experiment in India in a regression discontinuity framework to identify cohorts eligible for private tutoring and compare their outcomes to the ineligible. I use this potentially exogenous policy variation as an instrument for private tutoring and find significant increases in English language ability estimated at 16 percentage points which is much larger than the simple OLS effects. Since standard academic curriculum is not directed towards improving foreign language ability, private tutoring as an input in the education production function seems to offer high marginal returns. From a policy perspective, this implies that private tutoring should be encouraged for enhancing English ability even though there are concerns that this provides disincentives for teachers to teach in school.

  September 12, 2017   doi: 10.1111/boer.12142   open full text
• Who Favours The Gay Community? Experimental Evidence Using Charitable Donations.
  Shahar Sansani, Arik Rozental.
  Bulletin of Economic Research. September 05, 2017
  In this paper, we conduct an experiment to determine the characteristics of individuals who are more likely to donate to a gay charity. After filling out a questionnaire that includes information on gender, ethnicity, and religiosity, as well as other factors, Israeli undergraduate students are asked to choose two out of four options: participation in a lottery, donation to a gay charity, donation to a religious charity, and donation to an education‐focused charity. Our most robust findings are that females and the less religiously observant are more likely to donate to the gay charity.

  September 05, 2017   doi: 10.1111/boer.12136   open full text
• Cognitive Abilities, Analytic Cognitive Style And Overconfidence: A Commentary On Duttle (2016).
  Michał Białek, Artur Domurat.
  Bulletin of Economic Research. August 18, 2017
  In his recent paper, Duttle (2016) showed that individuals with higher cognitive abilities show less overconfidence. In these findings, cognitive abilities were equated with an analytic cognitive style (as measured by a cognitive reflection test, or CRT), although recent works in the field of cognitive psychology suggest separating these two constructs. In particular, it is argued that the analytic cognitive style, but not cognitive abilities, decreases susceptibility to cognitive biases. Analyses of data from Duttle's study support this assertion. Implications for cognitive psychology and behavioural economics are discussed.

  August 18, 2017   doi: 10.1111/boer.12117   open full text
• Does Scientific And Technical Research Reduce Macroeconomic Volatility?
  Sam Hak Kan Tang.
  Bulletin of Economic Research. July 31, 2017
  This paper explores whether conducting scientific and technical (S&T) research reduces the volatility of output growth. The paper finds robust evidence that output volatility is significantly lowered by a country's production of S&T publications. The results show that the effect of S&T publications on output volatility is particularly strong in middle‐income, OECD and other high‐income countries. However, for East‐Asian, low‐income and sub‐Saharan African countries the effect is either weak or absent. These results provide strong evidence that not only OECD and other high‐income countries are actively engaged in S&T research, emerging developing countries are also conducting S&T research, which is effective in reducing output volatility. The results are robust to adding a host of control variables, various subsamples and different estimation techniques.

  July 31, 2017   doi: 10.1111/boer.12129   open full text
• Is The Phillips Curve Different In Poor Countries?
  Michael Bleaney, Manuela Francisco.
  Bulletin of Economic Research. July 31, 2017
  It has been suggested that the Phillips curve (positive output‐inflation correlation) is inverted in poor countries. It is argued here that the truth is more complex. In poor countries temporary supply‐side shocks, for example to agricultural output, induce a negative correlation between prices and output rather than between inflation rates and output. Empirical evidence supports this hypothesis.

  July 31, 2017   doi: 10.1111/boer.12124   open full text
• Infinite Asymmetric Equilibria In Mixed Oligopolies.
  Stefano Colombo.
  Bulletin of Economic Research. July 31, 2017
  We show that infinite asymmetric equilibria may be supported in a mixed Cournot oligopoly with identical private firms. This sharply contrasts with the case of private Cournot oligopolies, where only symmetric equilibria arise.

  July 31, 2017   doi: 10.1111/boer.12131   open full text
• On Intermediate Headcount Indices Of Poverty.
  S. Subramanian, Diganta Mukherjee.
  Bulletin of Economic Research. July 14, 2017
  The archetypal population‐relative measure of poverty is the Headcount Ratio, while the archetypal population‐absolute measure is the Aggregate Headcount. The overwhelming emphasis in the poverty measurement literature has been on population‐relative measures. The value‐basis for this preference has been seldom submitted to serious scrutiny, with the result that absolute and intermediate measures have generally been subjected to relative neglect. There would appear to be a strong case for the employment of indices which are intermediate between relative and absolute measures, and which avoid the extreme values underlying both. The present note, building on earlier work by scholars such as Arriaga, Krtscha, Del Rio, Alonso‐Villar, Mukherjee, Zheng and Zoli, aims to advance the cause of a workable and plausible population‐intermediate headcount index of poverty.

  July 14, 2017   doi: 10.1111/boer.12135   open full text
• A Closed‐Form Solution For Determining The Burden Of Public Debt In Neoclassical Growth Models.
  István Dedák, Ákos Dombi.
  Bulletin of Economic Research. June 30, 2017
  This paper develops a new approach, termed as the stock approach, to calculate the steady‐state output loss caused by public debt in neoclassical growth models. The novelty of our stock approach is that it provides a closed‐form solution to the steady‐state output‐debt relationship. The main conclusion of the paper is that the steady‐state burden of public debt is country‐specific in neoclassical growth models and it decreases with the private saving rate and increases with the population growth rate, with the exception of the special case where Ricardian equivalence holds.

  June 30, 2017   doi: 10.1111/boer.12125   open full text
• Does Near‐Rationality Matter In First‐Order Approximate Solutions? A Perturbation Approach.
  Frank Hespeler, Marco M. Sorge.
  Bulletin of Economic Research. June 01, 2017
  This paper studies first‐order approximate solutions to near‐rational dynamic equilibrium models. Under near‐rationality, agents' subjective beliefs are distorted away from rational expectations via a change of measure process which fulfills some regularity conditions. In most applications, the beliefs distortion process is also directly observed by (a subset of) the decision‐makers – e.g., ambiguity‐averse households or policy‐makers with a concern for robustness – and therefore included into their optimization problems. We investigate conditions for existence and local uniqueness of solutions under endogenous distortions, as well as the relation with their rational expectations counterparts. We show that linearly perturbed solutions may well be affected by the presence of distorted beliefs, depending on the underlying model economy. In particular, while directly affecting first‐order decision rules, near‐rationality may also induce failure of the certainty equivalence principle. Moreover, the martingale representation of distorted beliefs might prove non‐unique, pointing to a subtle form of equilibrium indeterminacy.

  June 01, 2017   doi: 10.1111/boer.12127   open full text
• Banking Union In Europe: How Much Centralisation Is Needed?
  Wolfram Berger, Yoko Nagase.
  Bulletin of Economic Research. May 30, 2017
  We examine the efficiency of banking regulation in a federation with two tiers of government and highly integrated banking systems. We assume that policy makers have incomplete information about banks’ true health, and banking sector turmoil can generate cross‐border spill‐over effects. We show that, in such an environment, the decentralisation of policy responsibilities for the regulation of banks can achieve the first‐best allocation and ensure financial stability. While national governments design banking regulations, the federal policy maker authorises inter‐regional income redistribution payments throughout the federation. Our results suggest that strengthening national responsibilities in banking regulation and supervision in the course of the further development of the European banking union may be advisable.

  May 30, 2017   doi: 10.1111/boer.12126   open full text
• Interaction Terms In Poisson And Log Linear Regression Models.
  Shengwu Shang, Erik Nesson, Maoyong Fan.
  Bulletin of Economic Research. May 16, 2017
  This paper develops a difference‐in‐semielasticities (DIS) interpretation for the coefficients of dichotomous variable interaction terms in nonlinear models with exponential conditional mean functions, including but not limited to Poisson, Negative Binomial, and log linear models. We show why these interaction term coefficients cannot be interpreted as a DIS or semielasticity in the same manner as continuous coefficients, which has been overlooked by some empirical researchers. Then we show how interaction terms can be easily transformed into a DIS and derive the asymptotic distribution of this estimator. We illustrate the discrepancy between the interaction term coefficient and the DIS using an empirical example evaluating the relationship between employment, private health insurance and physician office visits. Our results can be applied in treatment effect models when the outcome variable is logged and the dichotomous variables indicating treatment participation and the post‐treatment time period.

  May 16, 2017   doi: 10.1111/boer.12120   open full text
• An Empirical Note On Commuting Distance And Sleep During Workweek And Weekend.
  Christian Pfeifer.
  Bulletin of Economic Research. May 16, 2017
  The author uses six years of large‐scale panel survey data for Germany to analyse the nexus between commuting distance from the place of residence to the workplace and quantity of sleep. Pooled and individual fixed‐effects regressions indicate that workers with longer commuting distance sleep significantly less per night during the workweek, but not less during the weekend. A one kilometer longer commuting distance is on average correlated with 0.0035 (pooled) and 0.0011 (fixed‐effects) hours less sleep per night during the workweek. As commuting seems to affect sleep quantity, it might negatively affect health and time allocation for other leisure activities.

  May 16, 2017   doi: 10.1111/boer.12121   open full text
• Financial Development And Macroeconomic Volatility.
  Yong Ma, Ke Song.
  Bulletin of Economic Research. May 16, 2017
  Using cross‐country panel data over the period 1996–2012, this paper examines the impact of financial development on macroeconomic volatility using GMM estimators. In contrast to the linear relationship identified in many previous studies, we present robust evidence suggesting that the effect of financial development on macroeconomic volatility is nonlinear and U‐shaped. We also investigate the potential differences between developed and developing countries. The results of the paper add new evidence and shed interesting insights into the recent debate on the role of finance in macroeconomic fluctuations.

  May 16, 2017   doi: 10.1111/boer.12123   open full text
• Predicting Stock Returns And Volatility With Investor Sentiment Indices: A Reconsideration Using A Nonparametric Causality‐In‐Quantiles Test#.
  Mehmet Balcilar, Rangan Gupta, Clement Kyei.
  Bulletin of Economic Research. April 28, 2017
  Evidence of monthly stock returns predictability based on popular investor sentiment indices, namely SBW and SPLS as introduced by Baker and Wurgler (, ) and Huang et al. () respectively are mixed. While, linear predictive models show that only SPLS can predict excess stock returns, nonparametric models (which accounts for misspecification of the linear frameworks due to nonlinearity and regime changes) finds no evidence of predictability based on either of these two indices for not only stock returns, but also its volatility. However, in this paper, we show that when we use a more general nonparametric causality‐in‐quantiles model of Balcilar et al., (forthcoming), in fact, both SBW and SPLS can predict stock returns and its volatility, with SPLS being a relatively stronger predictor of excess returns during bear and bull regimes, and SBW being a relatively powerful predictor of volatility of excess stock returns, barring the median of the conditional distribution.

  April 28, 2017   doi: 10.1111/boer.12119   open full text
• Stock‐Bond Co‐Movements And Flight‐To‐Quality In G7 Countries: A Time‐Frequency Analysis.
  Selcuk Bayraci, Sercan Demiralay, Hatice Gaye Gencer.
  Bulletin of Economic Research. April 28, 2017
  This paper examines co‐movement between stock returns and changes in 10‐year government bond yields as well as flight‐to‐quality behaviour in G7 countries. We conduct the wavelet squared coherence analysis to explore the dynamics in both time and frequency domain. Our results provide evidence of positive co‐movements, which vary over time and across investment horizon. The higher co‐movement is found to be more concentrated in the lower frequency bands. We further analyse the dynamic nature of the scale‐dependent wavelet correlations and find that the correlations are highly volatile and significantly increase across different time scales during the episodes of equity market turbulence. The increase in correlations reflects flights from stocks to safer bond investments as a result of dramatic changes in investor sentiment and risk aversion at times of market stress.

  April 28, 2017   doi: 10.1111/boer.12118   open full text
• The Impact Of Personality Traits On Wage Growth And The Gender Wage Gap.
  Konrad C. Schäfer, Jörg Schwiebert.
  Bulletin of Economic Research. April 04, 2017
  This paper considers the impact of personality traits on the change of the gender wage gap. Using data from the German Socioeconomic Panel (SOEP), we first explore how personality traits affect wage growth rates. Then, a decomposition analysis is performed to analyse the dynamic effects of personality traits on the change of the gender wage gap over time. Our empirical results indicate that gender differences in conscientiousness and emotional stability lead to a widening of the wage gap over time. By contrast, gender differences in extraversion lead to a narrowing of the wage gap over time.

  April 04, 2017   doi: 10.1111/boer.12115   open full text
• To Regulate Or To Deregulate? The Role Of Downstream Competition In Upstream Monopoly Vertically Linked Markets.
  Michael Polemis, Konstantinos Eleftheriou.
  Bulletin of Economic Research. March 21, 2017
  This paper attempts to cast light to the effect of monopoly regulation in Cournot markets compared to its effect in Bertrand markets. To this purpose, we use a simple model of a vertically linked market, where an upstream regulated natural monopoly is trading via two‐part tariff contracts with a downstream duopoly. Combining our results to those of the existing literature on deregulated markets, we argue that when the downstream competition is in prices, efficiency dictates regulating the monopoly with a marginal cost based pricing scheme. However, this type of regulation leads to significant welfare loss, when the downstream market is characterized by Cournot competition.

  March 21, 2017   doi: 10.1111/boer.12116   open full text
• What Determines Vacation Leave? The Role Of Gender.
  Ali Fakih.
  Bulletin of Economic Research. March 17, 2017
  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.

  March 17, 2017   doi: 10.1111/boer.12114   open full text
• Union–Firm Bargaining Agenda Revisited: When Unions Have Distinct Preferences.
  Luciano Fanti, Domenico Buccella.
  Bulletin of Economic Research. February 13, 2017
  In this paper we revisit the issue of the scope of bargaining between firms and unions by considering a more general union's utility function with distinct preferences and sequential negotiations. First, we compare exogenously given labour market institutions; i.e., right‐to‐manage (RTM) and sequential efficient bargaining (SEB). We show that the conventional wisdom, which states that firms always prefer RTM, no longer holds. In fact, when unions are adequately wage aggressive and have strong enough bargaining power, firms may prefer SEB negotiations; however, firms switch their preference to RTM when unions are very strong. Moreover, we show that a conflict of interest between the parties may emerge when unions are sufficiently employment oriented as well as sufficiently wage aggressive and not too strong or too weak in bargaining. Second, we analyse the endogenous choice of the bargaining agenda. We show that a rich plethora of equilibria may occur and new situations of conflict/agreement of interests between the bargaining parties arise in particular when unions are sufficiently wage‐aggressive.

  February 13, 2017   doi: 10.1111/boer.12113   open full text
• An Estimation Of Worker And Firm Effects With Censored Data.
  Ainara González de San Román, Yolanda F. Rebollo‐Sanz.
  Bulletin of Economic Research. January 24, 2017
  In this paper, we develop a new estimation method that is suitable for censored models with two high dimensional fixed effects and that is based on a sequence of least squares regressions, yielding significant savings in computing time and hence making it applicable to frameworks in which standard estimation techniques become unfeasible. We propose to apply this estimation method to investigate the role of firms in individual wage variation. Using a longitudinal match employer‐employee dataset from Spain, we show that the analysis of wage determination can be misleading when wages are censored. In particular, the role of firm wage policies in wage dispersion is overestimated by more than ten percentage points, while the role of time‐invariant individual characteristics is underestimated by fifteen percentage points. Hence, controlling for censored wages appears to reinforce the idea that when explaining individual wage dispersion, what workers ‘are’ is more important than what workers ‘do’.

  January 24, 2017   doi: 10.1111/boer.12112   open full text
• The Optimal Risk Choice Of Cooperative And Noncooperative R&D In Duopoly With Spillovers.
  Mingqing Xing.
  Bulletin of Economic Research. December 05, 2016
  This study examines the R&D risk choice in a duopoly market with technology spill overs. The firms conduct R&D programmes with different degrees of risk but an identical expected outcome and they compete or cooperate in R&D. Findings indicate that, in equilibrium, the R&D risk level decreases in the spill over rate under noncooperative R&D, while it may increase under cooperative R&D. Firms are more likely to engage in higher R&D risks under cooperative R&D than they are under non‐cooperative R&D. Moreover, the equilibrium R&D risk level both under competition and cooperation R&D is always too low from the perspective of social welfare, and the extent of this inefficiency increases with the spill over rate if the size of the spill over is large, but the opposite may occur if the size of the spill over is small.

  December 05, 2016   doi: 10.1111/boer.12109   open full text
• Impact Of Outcome Ambiguity On Self‐Insurance And Self‐Protection: Experimental Evidence.
  Ozlem Ozdemir.
  Bulletin of Economic Research. November 28, 2016
  This experimental study examines and compares individual valuations of the two risk reduction mechanisms: self‐insurance and self‐protection in risky versus ambiguous outcome situations. Results confirm that individuals do not perceive these mechanisms differently under risk. Moreover, ambiguity in the outcome (i.e., size of loss) affects valuations weakly, and changing representations of ambiguity do not alter valuation. In general, individuals are found to be ambiguity averse for low sizes of loss and ambiguity neutral for high sizes of loss, regardless of the probability of loss. Finally, no strong support is found for any particular model of ambiguity.

  November 28, 2016   doi: 10.1111/boer.12111   open full text
• Defining Relevant Markets For Pharmaceuticals.
  Oana Mihaescu, Niklas Rudholm.
  Bulletin of Economic Research. November 28, 2016
  To identify the relevant product markets for Swedish pharmaceuticals, a spatial econometrics approach is employed. First, we calculate Moran's Is for different market definitions and then we use a spatial Durbin model to determine the effect of price changes on quantity sold of own and competing products. As expected, the results show that competition is strongest between close substitutes; however, the relevant product markets for Swedish pharmaceuticals extend beyond close substitutes down to products included in the same class on the four‐digit level of the Anatomic Therapeutic Chemical system as defined by the World Health Organization. The spatial regression model further indicates that increases in the price of a product significantly lower quantity sold of that product and in the same time increase the quantity sold of competing products. For close substitutes (products belonging to the same class on the seven‐digit level of the Anatomic Therapeutic Chemical system), as well as for products that, without being close substitutes, belong to the same therapeutic/pharmacological/chemical subgroup (the same class on the five‐digit level of the Anatomic Therapeutic Chemical system), increased competition is also visible after 1 July 2009 when the latest policy changes with regards to pharmaceuticals have been implemented in Sweden.

  November 28, 2016   doi: 10.1111/boer.12106   open full text
• Personality Traits And The Perception Of Macroeconomic Indicators: Survey Evidence.
  Andreas Orland.
  Bulletin of Economic Research. November 28, 2016
  I examine the determinants of both perceived inflation and unemployment in one single survey and include Big Five traits in the analysis. This is the first survey on this topic in Germany. My sample consists of 1771 students from different fields and levels. Using PhD students’ estimates as a reference, I create categories for underestimation and overestimation of both variables. Multinomial logit regressions show that females overestimate both variables. Education and news consumption reduce misestimation. A higher level of Neuroticism is related with a higher probability to overestimate unemployment. Overstating (understating) one indicator is associated with overstating (understating) the other.

  November 28, 2016   doi: 10.1111/boer.12110   open full text
• Taylor Rule Reaction Coefficients And Real Exchange Rate Persistence.
  Bernd Kempa.
  Bulletin of Economic Research. November 23, 2016
  Recent literature has established a link between the persistence of real exchange rates and the degree of inertia in Taylor rule monetary policy reactions functions. This paper provides a different view on this link by investigating how the size of Taylor rule reaction coefficients impacts the adjustment dynamics of the real exchange rate. Within a stylized sticky‐price open‐economy macro model, it is demonstrated that a stronger interest rate reaction to inflation in the Taylor rule raises the convergence speed of the real exchange rate. Conversely, raising the coefficient on the output gap or attending to the exchange rate in an open‐economy version of the Taylor rule slows down real exchange rate adjustment. In all cases, more rapid convergence comes at the cost of stronger initial real exchange rate misalignments in the wake of monetary policy shocks.

  November 23, 2016   doi: 10.1111/boer.12108   open full text
• Money And Inflation In India: Evidence From P‐Star Model.
  Sunil Paul, Sartaj Rasool Rather, M. Ramachandran.
  Bulletin of Economic Research. November 15, 2016
  This study uses P‐star model to examine the role of money in explaining inflation in India. In particular, we compare the performance of traditional Phillips curve approach against P‐star model in forecasting inflation. Moreover, the study estimates P‐star model using the alternative measures of money such as simple sum and Divisia M3, to examine the relevance of aggregation theoretic monetary aggregates in explaining inflation. The empirical results indicate that P‐star model with real money gap has an edge over traditional Phillips curve approach in forecasting inflation. More importantly, we found that the P‐star model estimated with Divisia real money gap performs better than its simple sum counterpart. These empirical findings suggest that the changes in real money gap play a crucial role in explaining inflation in India.

  November 15, 2016   doi: 10.1111/boer.12104   open full text
• Secular Mean Reversion And Long‐Run Predictability Of The Stock Market.
  Valeriy Zakamulin.
  Bulletin of Economic Research. November 13, 2016
  The empirical financial literature reports evidence of mean reversion in stock prices and the absence of out‐of‐sample return predictability over horizons shorter than 10 years. Anecdotal evidence suggests the presence of mean reversion in stock prices and return predictability over horizons longer than 10 years, but thus far, there is no empirical evidence confirming such anecdotal evidence. The goal of this paper is to fill this gap in the literature. Specifically, using 141 years of data, this paper begins by performing formal tests of the random walk hypothesis in the prices of the real S&P Composite Index over increasing time horizons of up to 40 years. Although our results cannot support the conventional wisdom that the stock market is safer for long‐term investors, our findings speak in favor of the mean reversion hypothesis. In particular, we find statistically significant in‐sample evidence that past 15‐17 year returns are able to predict the future 15‐17 year returns. This finding is robust to the choice of data source, deflator, and test statistic. The paper continues by investigating the out‐of‐sample performance of long‐horizon return forecasting based on the mean‐reverting model. These latter tests demonstrate that the forecast accuracy provided by the mean‐reverting model is statistically significantly better than the forecast accuracy provided by the naive historical‐mean model. Moreover, we show that the predictive ability of the mean‐reverting model is economically significant and translates into substantial performance gains.

  November 13, 2016   doi: 10.1111/boer.12105   open full text
• ‘Choose To Be Optimistic, It Feels Better?’ Evidence Of Optimism On Employment Utility.
  Chris Dawson, Tim Hinks, Michail Veliziotis.
  Bulletin of Economic Research. November 13, 2016
  Individual's expected wages exceed predicted market wages. Rational expectations imply the divergence should be zero. If individuals over‐estimate the return from their attributes and view the paid‐employment return distribution too favourably, then conditional on market wages, subsequent employment utility is likely to be low through disappointment.

  November 13, 2016   doi: 10.1111/boer.12107   open full text
• Equality Of Opportunity: East Vs. West Germany.
  Andreas Peichl, Martin Ungerer.
  Bulletin of Economic Research. November 01, 2016
  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.

  November 01, 2016   doi: 10.1111/boer.12103   open full text
• How Do Fiscal Consolidation And Fiscal Stimuli Impact On The Synchronization Of Business Cycles?
  Luca Agnello, Guglielmo Maria Caporale, Ricardo M. Sousa.
  Bulletin of Economic Research. October 24, 2016
  Using quarterly data for a panel of advanced economies, we show that synchronized fiscal consolidation (stimulus) programmes in different countries make their business cycles more closely linked. We also find: (i) some evidence of decoupling when an inflation targeting regime is unilaterally adopted; (ii) an increase in business cycle synchronization when countries fix their exchange rates and become members of a monetary union; (iii) a positive effect of bilateral trade on the synchronization of business cycles. Global factors, such as a rise in global risk aversion and uncertainty and a reversal of nonstandard expansionary monetary policy, can also reduce the degree of co‐movement of business cycles across countries. From a policy perspective, our work shows that an inflation targeting regime coupled with simultaneous fiscal consolidations can lead to more business cycle synchronization.

  October 24, 2016   doi: 10.1111/boer.12101   open full text
• SUSTAINABILITY AND OUTREACH: A COMPARATIVE STUDY OF MFIs IN SOUTH ASIA AND LATIN AMERICA AND THE CARIBBEAN.
  Sefa Awaworyi Churchill, Ana Marr.
  Bulletin of Economic Research. October 22, 2016
  Previous studies indicate that microfinance institutions (MFIs) in Latin America and the Caribbean (LAC) have different operational strategies to MFIs in South Asia (SA). Given the recent emphasis placed on the feasibility of MFIs to achieve the dual goals of outreach and sustainability concurrently, we examine and compare the relationship between sustainability and outreach of MFIs in LAC with MFIs in SA. Our results indicate that trade‐offs exist between outreach and sustainability in both regions. However, the severity of trade‐off is dependent on which goal MFIs decide to focus on in each region.

  October 22, 2016   doi: 10.1111/boer.12100   open full text
• An Attempt To Explain Differences In Economic Growth: A Stochastic Frontier Approach.
  Diana Aguiar, Leonardo Costa, Elvira Silva.
  Bulletin of Economic Research. October 22, 2016
  Total factor productivity (TFP), factor accumulation, and growth are analysed for a panel of 40 countries in 2001–11. TFP growth and technical inefficiency are estimated using a stochastic frontier model. Environmental variables are found to have an important role in explaining differences in inefficiency across countries. Over 2001–11, the general improvement in technical efficiency of countries is almost outweighed by technological regress. Results indicate that differences in factor accumulation between OECD and emerging economies are more important than differences in TFP change to explain differences in economic growth. Results also indicate negative and significant random shocks for the OECD countries.

  October 22, 2016   doi: 10.1111/boer.12102   open full text
• Us Health And Aggregate Fluctuations.
  Aleksandar Vasilev.
  Bulletin of Economic Research. October 19, 2016
  This paper aims to shed light on the importance of health considerations for business cycle fluctuations and the effect of health status on labour productivity and availability of labour input for productive use. To this end, Grossman's (2000) partial‐equilibrium framework with endogenous health is incorporated in an otherwise standard Real‐Business‐Cycle (RBC) model. Health status in this setup is modelled as a utility‐enhancing, intangible, and non‐transferrable capital stock, which depreciates over time. The household can improve their health (‘produce health') through investment using a health‐recovery technology. The main results are: (i) overall, the model compares well vis‐a‐vis data; (ii) the behaviour of the price of healthcare is adequately approximated by the shadow price of health in the model; (iii) the model‐generated health variable exhibits moderate‐ to high correlation with a large number of empirical health indicators.

  October 19, 2016   doi: 10.1111/boer.12099   open full text
• Wholesale Prices And Cournot‐Bertrand Competition.
  Olga Rozanova.
  Bulletin of Economic Research. October 18, 2016
  This note considers the competing vertical structures framework with Cournot‐Bertrand competition downstream. It shows that the equilibrium wholesale price paid by a Cournot (Bertrand)‐type retailer is above (below) marginal costs of a corresponding manufacturer. This result contrasts with the one under pure competition downstream (i.e., Cournot or Bertrand), where the wholesale price is set below (above) marginal costs in case of a Cournot (Bertrand) game at the retail level.

  October 18, 2016   doi: 10.1111/boer.12098   open full text
• Idiosyncratic And Aggregate Risks, Inequality And Growth.
  Yoseph Yilma Getachew.
  Bulletin of Economic Research. September 16, 2016
  The paper disaggregates productivity shocks at a firm level into idiosyncratic and aggregate risks, and studies their impacts on inequality, growth and welfare. It develops a growth model with human capital and incomplete insurance and credit markets that provides a closed‐form solution for income inequality dynamics. We find that uninsured idiosyncratic risks are the most important determinants of inequality, growth and welfare. They are the source of nondegenerate wealth distribution. A lower weight of these shocks leads to lower steady‐state inequality, higher growth and welfare. A redistribution of income that serves as social insurance against such risks increases welfare and decreases inequality. But, it also decreases growth by distorting individual consumption and saving decisions.

  September 16, 2016   doi: 10.1111/boer.12096   open full text
• Regional Effects Of Monetary Policy In China: Evidence From China's Provinces.
  Xiaohui Guo, Tajul Ariffin Masron.
  Bulletin of Economic Research. August 30, 2016
  This study examines the provincial effects of monetary policy from 1978 to 2011 in China. We used the SVAR method to measure the magnitude and timing of each province's response to monetary policy shocks when considering the influences of spillover effects among provinces. Then we also explored the regional effects of monetary policy employing multiple linear regressions. The results confirm that provinces respond differently to monetary policy actions. It was found that in the short run, the influence of spillover effects on a province's response is very important, but in the long run, the negative influence of deposit transfers overtake the positive impact of the spillover effect. For the factors causing the regional effects on monetary policy, the results show that the interest rate channel is rather weak at the regional level in China. The bank lending channel can explain the regional effects of monetary policy to some extent. Thus in China, the bank lending channel is more effective than the interest rate channel at the regional level.

  August 30, 2016   doi: 10.1111/boer.12095   open full text
• Determinants Of Sovereign Bonds Ratings: A Robustness Analysis.
  Dimitrios Soudis.
  Bulletin of Economic Research. August 24, 2016
  Several studies have attempted to deduce the determinants of sovereign bond ratings. In this study, Extreme Bounds Analysis is applied to approximately 30 factors proposed by the literature in order to assess their robustness with a focus on the relative importance that economic and political variables receive in the shaping of the ratings. We find that policies that constrain the public sector are among the most robust. Variables such as rule of law, openness to economic flows, central bank independence, and market friendly policies are found to be more robustly correlated with the ratings than foreign reserves, fiscal deficit, sovereign bond yields, and economic growth.

  August 24, 2016   doi: 10.1111/boer.12093   open full text
• Forecasting Global Equity Indices Using Large Bayesian Vars.
  Florian Huber, Tamás Krisztin, Philipp Piribauer.
  Bulletin of Economic Research. August 10, 2016
  This paper proposes a large Bayesian Vector Autoregressive (BVAR) model with common stochastic volatility to forecast global equity indices. Using a monthly dataset on global stock indices, the BVAR model controls for co‐movement commonly observed in global stock markets. Moreover, the time‐varying specification of the covariance structure accounts for sudden shifts in the level of volatility. In an out‐of‐sample forecasting application we show that the BVAR model with stochastic volatility significantly outperforms the random walk both in terms of point as well as density predictions. The BVAR model without stochastic volatility, on the other hand, shows some merits relative to the random walk for forecast horizons greater than six months ahead. In a portfolio allocation exercise we moreover provide evidence that it is possible to use the forecasts obtained from our model with common stochastic volatility to set up simple investment strategies. Our results indicate that these simple investment schemes outperform a naive buy‐and‐hold strategy.

  August 10, 2016   doi: 10.1111/boer.12094   open full text
• Hedging And The Competitive Firm Under Ambiguous Price And Background Risk.
  Yusuke Osaki, Kit Pong Wong, Long Yi.
  Bulletin of Economic Research. August 09, 2016
  This paper examines the optimal production and hedging decisions of the competitive firm that possesses smooth ambiguity preferences and faces ambiguous price and background risk. The separation theorem holds in that the firm's optimal output level depends neither on the firm's attitude towards ambiguity nor on the incident to the underlying ambiguity. We derive necessary and sufficient conditions under which the full‐hedging theorem holds and thus options are not used. When these conditions are violated, we show that the firm optimally uses options for hedging purposes if ambiguity is introduced to the price and background risk by means of mean‐preserving spreads. We as such show that options play a role as a hedging instrument over and above that of futures.

  August 09, 2016   doi: 10.1111/boer.12092   open full text
•  Global And Disaggregated Measures Of Earnings Mobility: Evidence From Five European Countries.
  Claudia Vittori, Paul Gregg.
  Bulletin of Economic Research. June 16, 2016
  This paper offers the first application of the local approximation method pioneered by Schluter and Trede (2003) for the Shorrocks mobility indices across the earnings distribution for a range of European Countries covering the main European social models: Denmark, Germany, Spain, the UK and Italy in the pre‐accession EU (1994‐2001). This insightful approach allows us to offer a global and disaggregate analysis of mobility as proportionate change in inequality and hence provide the reader with a full set of information to make his/her own judgment about the extent of mobility and country ranking. Specifically, we investigate the degree to which mobility is driven by low or high earners and how this picture changes across three different earnings measures: full‐time full‐year working, adding part‐time working and then part‐year working. Our results draw out some general key facts. First of all the vast bulk of the measured mobility occurs in the tails especially the lower tail with at least half of the index driven by mobility in the bottom earning quintile. Second, in the top 20 percent of the distribution there are few movements of earnings that effect the level of permanent inequality except in Denmark. Third, no country has a clear dominance for mobility across the full earnings distribution but Denmark differs from the other countries with clearly greater mobility in the middle and at the top. Finally, we find that with the exception of Denmark and Italy, mobility does not lead to clear convergence to the mean but rather to points around 0.7‐0.8 and 1.5 to 2 times the mean.

  June 16, 2016   doi: 10.1111/boer.12091   open full text
• Immigrant Relative Wages At The Great Recession: Evidence With Matched Employer‐Employee Data For Spain.
  Inés P. Murillo‐Huertas, Hipólito Simón.
  Bulletin of Economic Research. June 15, 2016
  The article examines relative wages of immigrants in Spain, with a particular focus on the impact of the Great Recession. The empirical analysis is restricted to men and is based on matched employer‐employee microdata and the decomposition techniques of Juhn et al. (1991, 1993) and Fortin et al. (2011). Our results show that the significant native‐immigrant wage gap that exists both in terms of average wages and of differentials along the wage distribution is essentially explained by differences in the endowments of observed characteristics so that, in general, immigrants tend to receive a similar wage treatment than Spaniards with analogous observed attributes. On the other hand, the Great Recession has had a noticeable impact on the relative wages of immigrants, given that the significant increase of the native‐immigrant wage gap observed during the previous expansionary period was mitigated during the economic downturn due to composition effects arising from the severe employment destruction pattern.

  June 15, 2016   doi: 10.1111/boer.12089   open full text
• Negative Correlation Between Stock And Futures Returns: An Unexploited Hedging Opportunity?
  Parantap Basu, William T. Gavin.
  Bulletin of Economic Research. June 14, 2016
  The negative correlation between equity and commodity futures returns is widely perceived by investors as an unexploited hedging opportunity. A Lucas (1982) asset‐pricing model is adapted to analyse the fundamentals driving equity and commodity futures returns. Using the model we argue that such a negative correlation could arise as an equilibrium relationship which reflects traders' perceptions about the shocks driving the fundamentals such as energy and consumables, and does not necessarily indicate any hedging opportunity.

  June 14, 2016   doi: 10.1111/boer.12090   open full text
• The Risk Preferences Of Entrepreneurs In Indonesia.
  Kitae Sohn.
  Bulletin of Economic Research. June 09, 2016
  Entrepreneurship is known to be important for innovation and economic growth, but relatively little attention has been paid to entrepreneurs in developing countries. We examined an important aspect of entrepreneurship: risk‐taking. We analysed the Indonesian Family Life Survey and compared risk preferences between entrepreneurs and non‐entrepreneurs. We found that risk tolerant workers were more likely to be entrepreneurs than risk averse workers by about 5 percentage points, or about 20 percent of the proportion of entrepreneurs in the labour force. The results imply that not all entrepreneurs in Indonesia are pushed into the sector; some actively take risks and seek innovations.

  June 09, 2016   doi: 10.1111/boer.12088   open full text
• Dynamics Between North American And European Agricultural Futures Prices During Turmoil And Financialization.
  Philipp Adämmer, Martin T. Bohl, Ernst‐Oliver Ledebur.
  Bulletin of Economic Research. May 24, 2016
  North American and European agricultural futures markets faced significant changes in recent years, i.e., the financialization which originated in the USA, the increase of futures trading in Europe and the recent price turmoils in international commodity markets. We analyse the long‐ and short‐run dynamics between North American and European agricultural futures prices during these institutional changes. The empirical results show that the US markets lead in terms of price transmissions and volatility spillovers. US markets, however, predominantly react to deviations from the long‐run equilibrium which indicates a rising impact of European agricultural markets on a global scale.

  May 24, 2016   doi: 10.1111/boer.12079   open full text
• Cash Incentives And Unhealthy Food Consumption.
  Miguel Flores, Javier Rivas.
  Bulletin of Economic Research. May 16, 2016
  This paper studies the effectiveness of taxes, subsidies and cash incentives in reducing unhealthy food consumption. Using an inter‐temporal rational choice model with habit, we calibrate and simulate the effect of those policies to US and UK data. Our findings suggest that cash incentives may be the most effective policy in reducing unhealthy food consumption. However, when comparing the reduction in costs for the social security system with the implementation costs, cash incentives can lead to significant monetary losses. Taxes are relatively ineffective in reducing unhealthy food consumption. Finally, subsidies have the best balance between effectiveness and monetary benefits to society.

  May 16, 2016   doi: 10.1111/boer.12085   open full text
• Nesting Vertical And Horizontal Differentiation In Two‐Sided Markets.
  Vitor Miguel Ribeiro, João Correia‐da‐Silva, Joana Resende.
  Bulletin of Economic Research. May 16, 2016
  We merge the two‐sided markets duopoly model of Armstrong (2006) with the nested vertical and horizontal differentiation model of Gabszewicz and Wauthy (2012), which consists of a linear city with different consumer densities on the left and on the right side of the city. In equilibrium, the high‐quality platform sells at a higher price and captures a greater market share than the low‐quality platform, despite the indifferent consumer being closer to the high‐quality platform. The difference between market shares is lower than socially optimal. A perturbation that introduces a negligible difference between the consumer density on the left and on the right side of the city may disrupt existence of equilibrium in the model of Armstrong (2006).

  May 16, 2016   doi: 10.1111/boer.12084   open full text
• A Note On Foreign Direct Investment And Exports In Vertically Differentiated Industries.
  Jie Ma, Jidong Zhou.
  Bulletin of Economic Research. May 12, 2016
  We examine the FDI versus exports decision of a multiproduct multinational firm which supplies vertically differentiated products, and show that the proximity‐concentration trade‐off can generate FDI‐export coexistence, i.e., the firm supplies the low‐quality products through FDI and the high‐quality products through exports. We also show that the opposite can never happen. Moreover, when the multiproduct multinational firm faces price competition in the target markets, it has an incentive to use trade costs to soften price competition, which can reduce its FDI incentive.

  May 12, 2016   doi: 10.1111/boer.12087   open full text
• The Focal Point In The Traveller's Dilemma: An Experimental Study.
  Andrea Morone, Piergiuseppe Morone.
  Bulletin of Economic Research. May 12, 2016
  This paper provides an experimental test of the traveller's dilemma. Our investigation aims to address the research hypothesis that introducing a reference point à la Schelling (set equal to the Pareto optimal solution) might drive people away from rationality even when the size of the penalty/reward is high. Experimental findings reported in this paper provide answers to this question showing that the reference point did not encourage coordination around the Pareto optimal choice.

  May 12, 2016   doi: 10.1111/boer.12086   open full text
• Entry And Import Quota.
  Ming‐Fang Tsai, Jiunn‐Rong Chiou.
  Bulletin of Economic Research. May 10, 2016
  An import quota set stricter than the free trade level is quite common for the domestic entry protection. However, this paper shows that as the products are vertically differentiated, an import quota that is simply set at the original free trade level could be effective on entrant protection. This quota policy also improves both consumer surplus and total domestic welfare, which is in sharp contrast to the implications of existing literature. Our result suggests that an import quota has a stronger protection effect on domestic production if the domestic and foreign products are vertically differentiated.

  May 10, 2016   doi: 10.1111/boer.12081   open full text
• A Shapley Decomposition Of Multidimensional Chronic Poverty In Argentina.
  Rocio Garcia‐Diaz, Daniel Prudencio.
  Bulletin of Economic Research. May 04, 2016
  This paper proposes a Shapley decomposition to analyse the evolution of chronic poverty in a multivariate setting using a chronic poverty measure proposed by Alkire and colleagues. The decomposition makes possible to assess a vast array of information to find the drivers of change in chronic poverty, and could be a valuable tool in the way public policy programmes focus resources. We present an empirical application of the changes in chronic poverty in Argentina during the period 2004–12 using the Permanent Household Survey. We found that households with older adults show great persistence of multidimensional chronic poverty in time while the employment indicators is found to be an important driver of the intensity of chronic poverty.

  May 04, 2016   doi: 10.1111/boer.12082   open full text
• Does Behaviour‐Based Price Discrimination Foster Firms’ Differentiation?
  Stefano Colombo.
  Bulletin of Economic Research. May 04, 2016
  We study the impact of behaviour‐based price discrimination on the incentive of the firms to differentiate their products. We consider both ‘standard’ and ‘extreme’ behaviour‐based price discrimination: the latter always reduces the incentive to differentiate with respect to uniform pricing, while the former fosters differentiation if the consumers are sufficiently forward‐looking and/or the firms are sufficiently myopic.

  May 04, 2016   doi: 10.1111/boer.12083   open full text
• Monopolistic Location Choice In A Two‐Sided Hotelling Model.
  Enrico Böhme, Christopher Müller.
  Bulletin of Economic Research. May 03, 2016
  We analyse the optimal location choice of a monopolistic firm that operates two arbitrarily located platforms on a two‐sided market. By extending the traditional Hotelling framework, we show that the optimal platform locations are equivalent to the one‐sided benchmark if both sides are either restricted to single‐ or multi‐homing. In the mixed case (one side single‐homes, the other one multi‐homes), the optimal platform locations are in line with the respective symmetric case. If the monopolist is restricted to choosing the same location on either side of the market, the optimal locations are determined by the relative profitability of the market sides.

  May 03, 2016   doi: 10.1111/boer.12078   open full text
• Corruption And Microcredit Interest Rates: Does Regulation Help?
  Moh'd Al‐Azzam.
  Bulletin of Economic Research. April 22, 2016
  Misunderstandings about the structure of microcredit interest rates continue to generate rich criticism of the industry's high interest rates. Research has focused attention on the cost structure of interest rates and, more recently, on macroeconomic and macro‐institutional factors. While the cost structure is probably the most important determinant of interest rates, other factors also matter. In addition to other important results that usually validate the empirical literature, this paper finds that microcredit interest rates respond positively to corruption. The analysis shows that there is asymmetry between the effects of corruption, depending on whether or not the MFIs are regulated. While corruption has a positive and significant impact on interest rates of unregulated MFIs, it has a negligible impact on interest rates of regulated MFIs.

  April 22, 2016   doi: 10.1111/boer.12080   open full text
• Alternative Strategies Of A Public Enterprise In Oligopoly Revisited: An Extension To Stackelberg Competition.
  Kojun Hamada.
  Bulletin of Economic Research. March 30, 2016
  This paper revisits De Fraja and Delbono (1989), which is the seminal paper on mixed oligopoly, in order to pay more attention to Stackelberg competition. First, we show that, even in Cournot competition, if the number of private firms is sufficiently small, privatization necessarily reduces social welfare. Second, we demonstrate that when a public firm is a Stackelberg leader before and after privatization, privatization necessarily reduces welfare irrespective of the number of private firms. Moreover, we show that even when a public firm remains a follower, privatization reduces welfare if the number of private firms is relatively small.

  March 30, 2016   doi: 10.1111/boer.12077   open full text
• Perceived Intentionality In 2 × 2 Experimental Games.
  Swee‐Hoon Chuah, Robert Hoffmann, Jeremy Larner.
  Bulletin of Economic Research. March 18, 2016
  We test experimentally whether decisions in 2 × 2 games with mixed equilibria depend on the co‐player being nature or a human agent. Controlling for social preferences, we find differences in decisions in the chicken game and battle of the sexes but not for stag hunt and matching pennies. We attribute these to subjects' perception of the other's intentionality and disapproval avoidance in particular.

  March 18, 2016   doi: 10.1111/boer.12073   open full text
• Fdi, Sectoral Output And Real Exchange Rate Dynamics Under Financial Openness.
  Emmanuel K.K. Lartey.
  Bulletin of Economic Research. March 14, 2016
  This paper adopts an alternative approach to the study of the impact of capital inflow on the real exchange rate by foremost, analysing the effect of FDI inflow on the ratio of tradables to nontradables, and then estimating the relationship between the tradable‐nontradable ratio and the real exchange rate, while accounting for the role of financial openness. Based on data for a group of developing countries, the findings show that an increase in FDI inflow is associated with a decrease in the tradable‐nontradable ratio, and that an increase in the tradable‐nontradable ratio leads to a depreciation of the real exchange rate; this effect being greater with an increase in financial openness. This suggests that an increase in FDI inflow could result in an expansion of the nontradable sector, which would be associated with a greater appreciation of the real exchange rate under a higher level of financial openness.

  March 14, 2016   doi: 10.1111/boer.12075   open full text
• ‘Have You Felt Angry Lately?’: A Note On Unfair Wage Perceptions And The Negative Emotion Of Anger.
  Christian Pfeifer.
  Bulletin of Economic Research. March 03, 2016
  The author analyses the nexus between unfair wage perceptions of workers and the frequency of the negative emotion of anger. For this purpose, German household panel data for the years 2007, 2009, 2011 and 2013 are used. Angry feelings in the last four weeks have occurred significantly more frequently for workers who perceive their wage as unfair, whereas the own absolute hourly wage is not significantly correlated with the frequency of having felt angry. The results further indicate that workers have felt more often angry if working hours are larger; but the economic significance seems rather small compared to unfair wage perceptions.

  March 03, 2016   doi: 10.1111/boer.12070   open full text
• Importance Of Demographics For Housing In The Oecd Economies.
  Philip Arestis, Ana Rosa Gonzalez‐Martinez.
  Bulletin of Economic Research. March 03, 2016
  The aim of this contribution is to study the role of demographics in the explanation of house prices in the last few decades. Special attention is paid to the role, which has been played by three groups of population that have different necessities in terms of the amount of housing services that they wish to consume: (a) population aged between 25 and 44 years old; (b) population aged between 45 and 64 years old; and (c) retirees. Following our discussion of recent trends in demographics and relevant stylized facts, the construction of a theoretical framework ensues; finally we provide empirical evidence in the case of 17 OECD economies over the period 1970–2013, discuss it in relation to our theoretical framework before we summarize and conclude.

  March 03, 2016   doi: 10.1111/boer.12072   open full text
• Modelling The Transition Towards The Renminbi's Full Convertibility: Implications For China's Growth.
  Luigi Bonatti, Andrea Fracasso.
  Bulletin of Economic Research. March 03, 2016
  There is a widespread consensus that China needs to rebalance its export‐driven growth paradigm towards a more consumption‐based one and that such process is to be accompanied by the transition towards the renminbi's full convertibility. However, the Chinese authorities have so far acted with great caution because this transition cannot but accelerate the slowdown of China's growth which will likely occur because of other structural factors. We address these issues by means of a two‐country two‐stage (before and after the renminbi's full convertibility) model, which reproduces some qualitative features of China's growth pattern and its relationship with the United States. We analyse the extent to which altering the Chinese exchange rate regime, as well as other policies affecting sensitive social and economic issues, may impact on the short‐, medium‐ and long‐term evolution of the Chinese economy. The paper shows that by lifting the controls on the capital account and letting the currency float, the Chinese authorities will renounce those policy instruments for controlling the allocation of the national resources and the dynamics of China's economy.

  March 03, 2016   doi: 10.1111/boer.12071   open full text
• Internationalization Strategies In Oligopoly With Heterogeneous Firms.
  Maja Barac, Rafael Moner‐Colonques.
  Bulletin of Economic Research. March 03, 2016
  This paper examines the foreign direct investment (FDI) versus exports decision of foreign oligopolistic firms under cost heterogeneity. An additional motivation for firms to invest abroad is the technological sourcing via spillovers, which flow from the host more efficient firm to foreign less advantaged firms. For intermediate values of the set‐up costs associated with FDI entry, it is shown that foreign firms choose opposite entry strategies. An equilibrium where the less efficient foreign firm exports whereas the more efficient invests is more likely to happen when foreign firms become more heterogeneous, the larger the trade costs and not too big oligopolistic profitability. Interestingly, the opposite may also be an equilibrium thus finding that the more efficient firm does not choose to invest, a result that emphasizes the relevance of the strategic setting under consideration. The latter result identifies a market failure since welfare in the host market is higher when both firms undertake FDI; a finding that calls attention to how appropriate are host government policies towards internationalization strategies.

  March 03, 2016   doi: 10.1111/boer.12076   open full text
• International Trade Networks Under Global Treaty Stability.
  Daniel E. May.
  Bulletin of Economic Research. March 03, 2016
  The stability of international trade networks has been investigated using the pairwise stability concept. This concept is suitable to study the formation of bilateral agreements. However, it cannot be used to determine the stability of global trade agreements. This article proposes an alternative stability concept that can be adopted to determine the stability of global agreements such as the Doha agreement. This concept is named in this paper Global Treaty Stability.

  March 03, 2016   doi: 10.1111/boer.12074   open full text
• The Forecasting Performance Of Setar Models: An Empirical Application.
  Gianna Boero, Federico Lampis.
  Bulletin of Economic Research. January 11, 2016
  The aim of this paper is to evaluate the forecasting performance of SETAR models with an application to the Industrial Production Index (IPI) of four major European countries over a period which includes the last Great Recession. Both point and interval forecasts are considered at different horizons against those obtained from two linear models. We follow the approach suggested by Teräsvirta et al. (2005) according to which a dynamic specification may improve the forecast performance of the nonlinear models with respect to the linear models. We re‐specify the models every twelve months and we find that the advantages of this procedure are particularly evident in the forecast rounds immediately following the re‐specification.

  January 11, 2016   doi: 10.1111/boer.12068   open full text
• Cognitive Skills And Confidence: Interrelations With Overestimation, Overplacement And Overprecision.
  Kai Duttle.
  Bulletin of Economic Research. December 26, 2015
  This experimental study measures the three major types of judgmental overconfidence in a within‐subjects design. Performance‐based overestimation and overplacement are elicited in a Raven Progressive Matrices test for general intelligence. Calibration‐based overprecision is evaluated in a forecasting by confidence intervals task. This study takes a closer look at the interrelations of these different types. Moreover, as the main focus, it considers the effect of cognitive abilities on overconfidence. These are quantified in a cognitive reflection test. I find that cognitive skills are substantially interrelated with subjects’ confidence levels. Although overconfidence in absolute terms (overestimation) is not affected by cognitive abilities, the effect on overconfidence in relative terms (overplacement) is positive and significant. Overprecision, the calibration‐based type of overconfidence, is found to be significantly affected by cognitive capacity as well. Interval forecasts of cognitively more able subjects were much better calibrated than those of their peers who displayed substantial overconfidence in the precision of their forecasts.

  December 26, 2015   doi: 10.1111/boer.12069   open full text
• BERTRAND Vs. COURNOT COMPETITION WITH UPSTREAM FIRM INVESTMENT.
  DongJoon Lee, Kangsik Choi.
  Bulletin of Economic Research. December 26, 2015
  This paper compares Bertrand and Cournot competition in a vertical structure in which the upstream firm sets the input price and makes R&D investments. We show that from the downstream firms’ point of view, Cournot competition has the advantage of a more monopolistic effect, leading to the setting of a higher price, but has the disadvantage of inducing a lower incentive for the upstream firm to invest. On the other hand, Bertrand competition has the advantage of providing a greater incentive for the upstream firm to invest but has the disadvantage of a more competitive effect, leading to the setting of a lower price. Our main findings are as follows. First, R&D investment level is greater under Bertrand competition than under Cournot competition. Second, from the standpoint of the upstream firm and industry, Bertrand competition is more efficient than Cournot competition. Third, from the standpoint of the downstream firms, Bertrand competition is more efficient than Cournot when investment is sufficiently efficient and products are sufficiently differentiated.

  December 26, 2015   doi: 10.1111/boer.12067   open full text
• Public Goods And The Dissolution Of States.
  Christopher Ellis, Silke Friedrich.
  Bulletin of Economic Research. December 21, 2015
  We present a simple model of the dissolution of states. We combine elements of the literature on the break‐up and integration of states based on models in the fiscal federalism tradition, with elements of the literature that explains the determination of a state's political institutions as a means to credibly promise redistributions in the face of costly, perhaps violent, redistributive conflict. We are able to characterize when the equilibrium involves the dissolution of a country, and when it involves continued unity. We are also able to explore some aspects of the linkages between political institutions and the determination of national boundaries.

  December 21, 2015   doi: 10.1111/boer.12065   open full text
• Is There A Curse Of Relocation? Analysing The Causal Link Between Offshoring And The Innovation Performance Of (Small) Firms.
  Timo Mitze, Fabian Kreutzer.
  Bulletin of Economic Research. November 23, 2015
  We analyse the empirical link between offshoring activities and different dimensions of innovation performance at the firm‐level. In order to identify causal effects running from offshoring to innovation, we use a quasi‐experimental comparison group approach by means of (conditional) difference‐in‐difference estimations applied to German establishment‐level data for firms that conducted offshoring activities in the period 2007–13. We find that the international relocation of business functions has a negative impact on the firms’ propensity to be innovative in terms of product and process innovations as well as product improvements. While for larger firms the reduction in process innovations is most striking, potentially due to a lack of resources, stagnation in expertise and a reduction in intra‐organizational learning‐by‐doing associated with the relocation of some business activities, for small and medium‐sized enterprises we particularly observe a reduction in product innovations after the offshoring activity has taken place. When interpreting this ‘pessimistic’ picture on the link between offshoring and the innovation performance of firms, the reader should note that our findings for German establishments have to be assessed through the lens of a global economy in economic recession after 2008, which may have intensified the negative impact of offshoring on the firms’ innovation performance.

  November 23, 2015   doi: 10.1111/boer.12064   open full text
• Credit Markets And Housing Choices.
  Serena Trucchi.
  Bulletin of Economic Research. November 23, 2015
  This paper analyses how individual characteristics and credit market conditions interact and determine homeownership. The impact of the lifetime profile of resources on homeownership is larger when credit market imperfections are more severe. We combine data from the Bank of Italy's Survey on Household Income and Wealth with information on regional differences in interest rate spreads. We find that an increase in current resources by 10,000 euros increases the probability of homeownership by five (two) percentage points under the least (most) favourable credit market conditions.

  November 23, 2015   doi: 10.1111/boer.12063   open full text
• Stability Of Thai Baht: Tales From The Tails.
  Phornchanok Cumperayot.
  Bulletin of Economic Research. November 20, 2015
  We demonstrate how the EVT‐based signalling approach for currency crises can be applied to an individual country with a small sample size. Using Thai historical data, first, we study the tail characteristics of the distributions of two Thai baht instability measures and 21 economic fundamentals. Then, we test asymptotic dependence between the currency instability measures and lagged economic fundamentals. Empirically, we find that the distributions of both currency instability measures and economic variables are heavy tailed. Assuming a normal distribution for the variables tends to underestimate the probability of extreme events. Furthermore, most of the economic variables which are usually used as signalling indicators for currency crises are asymptotically independent of the currency instability measures. Signals issued by these variables are thus not reliable. Nevertheless, the non‐parametric EVT approach facilitates the selection of economic indicators with credible signals and high crisis prediction success.

  November 20, 2015   doi: 10.1111/boer.12066   open full text
• Progressive Taxation, Endogenous Growth, And Macroeconomic (In)Stability.
  Shu‐Hua Chen, Jang‐Ting Guo.
  Bulletin of Economic Research. October 29, 2015
  In the context of a standard one‐sector AK model of endogenous growth, we show that the economy exhibits equilibrium indeterminacy and belief‐driven aggregate fluctuations under progressive taxation of income. When the tax schedule is regressive or flat, the economy's balanced growth path displays saddle‐path stability and equilibrium uniqueness. These results imply that in sharp contrast to a conventional automatic stabilizer, progressive income taxation may destabilize an endogenously growing macroeconomy by generating cyclical fluctuations driven by agents' self‐fulfilling expectations or sunspots.

  October 29, 2015   doi: 10.1111/boer.12062   open full text
• Endogenous Timing In Quality Choices And Price Competition.
  Luca Lambertini, Alessandro Tampieri.
  Bulletin of Economic Research. October 29, 2015
  We modify the price‐setting version of the vertically differentiated duopoly model by Aoki (2003) by introducing an extended game in which firms noncooperatively choose the timing of moves at the quality stage. Our results show that there are multiple equilibria in pure strategies, whereby firms always select sequential play at the quality stage. We also investigate the mixed‐strategy equilibrium, revealing that the probability of generating outcomes out of equilibrium is higher than the probability of playing one Nash equilibria in pure strategies. In the alternative case with full market coverage, we show that the quality stage is solved in dominant strategies and therefore the choice of roles becomes irrelevant as the Nash and Stackelberg solutions coincide. With full market coverage and corner solution, the results show that the game has a unique subgame perfect equilibrium in pure strategies, where the high‐quality firm takes the lead in the quality stage.

  October 29, 2015   doi: 10.1111/boer.12061   open full text
• Dynamic Correlation Between Stock Returns And Exchange Rate And Its Dependence On The Conditional Volatilities – The Case Of Several Eastern European Countries.
  Dejan Živkov, Jovan Njegić, Jasmina Pavlović.
  Bulletin of Economic Research. October 15, 2015
  The objective of the paper is to determine whether the linkage between stock returns and exchange rates in several Eastern European countries was in accordance with the flow oriented model or the portfolio‐balance approach. The dynamic interdependence between exchange rate and stock returns is determined using the Dynamic Conditional Correlation (DCC) framework. The results pointed to a negative dynamic correlation which is in line with portfolio‐balance approach. Rolling regression revealed that conditional correlation was affected primarily by conditional volatility of currency, while the impact of stock returns volatility was negligible.

  October 15, 2015   doi: 10.1111/boer.12059   open full text
• Nonparametric Models Of Financial Leverage Decisions.
  João A. Bastos, Joaquim J. S. Ramalho.
  Bulletin of Economic Research. September 02, 2015
  This paper applies nonparametric decision tree models to the analysis of financial leverage decisions. This approach presents three appealing features: (i) the relationship between leverage and explanatory variables is not predetermined but is derived from information provided by the data, (ii) the models respect the fractional nature of leverage ratios, and (iii) each covariate is allowed to influence in different ways the financial leverage decisions of firms automatically assigned to different groups. Based on a data set of Portuguese firms, decision trees are used to tackle both classification (the decision to issue debt) and regression (the decision on the amount of debt to be issued, conditional on using debt) problems. It is found that: (i) two‐part models are the most appropriate specification for explaining the overall amount of debt used by firms, (ii) there are no drastic differences between the results produced by tree and parametric models, although some divergences may arise, and (iii) tree models suggest relationships between covariates and leverage that parametric models fail to capture, especially when the sample size is small.

  September 02, 2015   doi: 10.1111/boer.12054   open full text
• A RE‐EXAMINATION OF REAL INTEREST PARITY IN CEECs USING ‘OLD’ AND ‘NEW’ SECOND‐GENERATION PANEL UNIT ROOT TESTS.
  Claudiu Tiberiu Albulescu, Dominique Pépin, Aviral Kumar Tiwari.
  Bulletin of Economic Research. August 17, 2015
  This study applies ‘old’ and ‘new’ second‐generation panel unit root tests to check the validity of the long‐run real interest rate parity (RIP) hypothesis for ten Central and Eastern European Countries (CEECs) with respect to the Euro area and an average of the CEECs’ real interest rates. When the ‘new’ panel unit root tests are carried out relative to the Euro area rate as reference, we confirm the results of previous studies that support the RIP hypothesis, and the results of the ‘old’ tests used as a benchmark. Nevertheless, when the ‘new’ tests are performed using the average of the CEECs’ rate as reference, our results are mitigated, revealing that the hypothesis of CEECs’ interest rates convergence cannot be taken for granted. From a robustness analysis perspective, our findings indicate that the RIP hypothesis for CEECs should be considered with caution, because the RIP hypothesis is sensitive to the retained reference rate for computing the real interest rate differential, and also to the retained countries in the sample.

  August 17, 2015   doi: 10.1111/boer.12052   open full text
• Allowing For Jump Measurements In Volatility: A High‐Frequency Financial Data Analysis Of Individual Stocks.
  Vassilios G. Papavassiliou.
  Bulletin of Economic Research. August 17, 2015
  Following recent advances in the non‐parametric realized volatility approach, we separately measure the discontinuous jump part of the quadratic variation process for individual stocks and incorporate it into heterogeneous autoregressive volatility models. We analyse the distributional properties of the jump measures vis‐à‐vis the corresponding realized volatility ones, and compare them to those of aggregate US market index series. We also demonstrate important gains in the forecasting accuracy of high‐frequency volatility models.

  August 17, 2015   doi: 10.1111/boer.12050   open full text
• Growth Effects Of Inflation Under The Presence Of Informality.
  Dila Asfuroglu, Ceyhun Elgin.
  Bulletin of Economic Research. August 17, 2015
  In this paper we build an endogenous growth model in which the informal economy is subject to a cash‐in‐advance constraint along with physical capital accumulation and consumption. In this setting, we find that inflation generally adversely affects long‐run growth. However; this effect strongly interacts with the size of the informal economy. Specifically, the negative effect becomes milder (and can even be positive) under the presence of a large informal economy. Moreover, using an annual cross‐country panel data set of 161 countries over the period 1950‐2010 we also provide some empirical support for the mechanism of our theory.

  August 17, 2015   doi: 10.1111/boer.12057   open full text
• Activity Choices Of Internally Displaced Persons And Returnees: Quantitative Survey Evidence From Post‐War Northern Uganda.
  Carlos Bozzoli, Tilman Brueck, Tony Muhumuza.
  Bulletin of Economic Research. August 17, 2015
  We investigate post‐war economic activity choices of displaced and just‐returned individuals. In particular, the effect of living in an internally displaced persons camp on the choice of economic activities is analysed. Because individuals relocating away from camps may be different from those staying in them, a recursive bivariate probit procedure is used to control for selection on unobservables. The empirical procedure also relies on merging survey data with the micro‐level dataset on conflict events. This allows us to incorporate conflict in the framework, but also to use a bivariate probit procedure to control for endogeneity (selection of households out of camps). This work contributes to literature on household labour allocation and economics of conflict. Results show that residing in a camp has varied effects on the choice of economic activities. Individuals in camps may be more inclined than those who choose to return home, to engage in certain economic activities. One of the key lessons that could be drawn from this paper is that internally displaced persons may possess important livelihood skills that post‐conflict development interventions need to take advantage of, in order to fast‐track recovery.

  August 17, 2015   doi: 10.1111/boer.12056   open full text
• Price Setting Practices In Greece: Evidence From A Small‐Scale Firm‐Level Survey.
  Daphne Nicolitsas.
  Bulletin of Economic Research. August 17, 2015
  The paper documents the price setting practices followed by some 400 or so firms operating in Greece. Survey replies reveal a low percentage of firms changing prices with frequency higher than annual and staggering of price changes during the year. As to firms’ reactions to unexpected shocks, prices appear to adjust sluggishly to cost shocks with asymmetries in price adjustment across positive and negative shocks. Adjustments to increases in costs appear speedier than those to reductions in demand. The data confirm a result found for other countries: the existence of cross‐sectional variations in price setting strategies and in the extent to which prices are adjusted in reaction to unexpected shocks. The results suggest a positive association between, on the one hand, product market competition and, on the other hand, state‐dependent pricing, frequent price changes and the likelihood of a price adjustment following an adverse demand shock.

  August 17, 2015   doi: 10.1111/boer.12058   open full text
• Strategic Interaction And Catching Up.
  Mehmet Özer, Çağrı Sağlam.
  Bulletin of Economic Research. August 14, 2015
  In this study, we prove that the strategic interaction among agents differing in initial wealth levels leads the poor to be able to catch up with the rich, which is not the case for the standard Ramsey model where the initial wealth differences perpetuate. Extending the analysis to account for relative wealth concern and the adjustment cost of consumption, the strategic interaction among agents is shown to affect not only the distribution of wealth in the long run but also the transitional dynamics substantially. In particular, we show that structurally very simple frameworks may lead to limit cycles thanks to the strategic interaction among agents in the economy.

  August 14, 2015   doi: 10.1111/boer.12053   open full text
• The Interplay Of Inequality And Reference Dependence With Trust An Experimental Study.
  Gilles Grolleau, Sana El Harbi, Hayet Saadaoui, Angela Sutan.
  Bulletin of Economic Research. June 17, 2015
  Using a canonical trust game, we investigate whether the inequality of endowment between trustor and trustee and the acquired versus permanent financial state affect trust and trustworthiness. We found that trust and trustworthiness are reference‐dependent and that individuals with permanent financial state receive more trust and are more trustworthy than others. In our experiment, unequal endowments do not significantly affect trust, but trustworthiness increases significantly when the trustor is poorer.

  June 17, 2015   doi: 10.1111/boer.12049   open full text
• Information Aggregation, Growth, And Franchise Extension With Applications To Female Enfranchisement And Inequality.
  Christopher Ellis, John Fender.
  Bulletin of Economic Research. April 23, 2015
  We develop a model of voluntary gradual franchise extension and growth based on the idea that voting is an information aggregation mechanism. A larger number of voters means that more correct decisions are made, hence increasing output, but also implies that any incremental output must be shared among more individuals. These conflicting incentives lead to a dynamic model of franchise extensions that is consistent with several real world episodes, including female enfranchisement. The model also predicts that in certain circumstances growth and enfranchisement will be accompanied by Kuznets curve type behaviour in inequality. Contrary to the preceding literature these conclusions do not rest on incentives for strategic delegation.

  April 23, 2015   doi: 10.1111/boer.12043   open full text
• A New Comparative Study On The Free‐Floating And Currency Board Regimes In Hong Kong.
  Kwo Ping Tam.
  Bulletin of Economic Research. March 19, 2015
  This study aims to compare the performance of free‐floating and currency board regimes for Hong Kong by examining historical data of the two on the output growth and inflation rate. Structural vector autoregression has been applied in the empirical analysis. Without making a strong assumption of unit variance in the residual matrix, this study applies a more natural approach proposed by Cecchetti and Rich to recover the structural parameters. The study has further investigated the recovery of the economy under a demand shock under different exchange rate regimes, in order to provide some evidence to answer why Hong Kong's recovery process after the Asian financial crisis is relatively longer than that in other economies with a managed floating exchange rate regime. New evidence in this study indicates that output recovers much faster in a flexible exchange rate regime than in a fixed exchange rate regime after an aggregate demand shock. Furthermore, this study has applied a more robust method in the counterfactual analysis when comparing the two regimes. New evidence in this study suggests that a free‐floating regime may generate much smaller output variance in Hong Kong and deliver higher output and price levels to Hong Kong.

  March 19, 2015   doi: 10.1111/boer.12047   open full text
• Harsh Norms And Screening For Loyalty.
  Nathan Berg, Jeong‐Yoo Kim.
  Bulletin of Economic Research. March 18, 2015
  Norms that restrict choice sets or impose otherwise harsh requirements would seem to act as barriers to group formation by raising the costs of adherence to potential and continuing members. Contrary to that intuition, one observes a broad range of group norms in the real world that impose large costs on group members. Iannaccone provides a rationale for harsh norms as a mechanism to reduce free‐riding in supplying a club good. This paper proposes a new rationalization for harsh group norms as a mechanism under which harsh norms serve to screen out disloyal members, providing what is essentially a technology for measuring loyalty in environments where group leaders cannot reliably measure group members' loyalty. The model demonstrates that loyalty can be signalled through acts that are seemingly irrelevant to the group's core objectives and identity.

  March 18, 2015   doi: 10.1111/boer.12045   open full text
• Forecasting Us Inflation Using Dynamic General‐To‐Specific Model Selection.
  George Bagdatoglou, Alexandros Kontonikas, Mark E. Wohar.
  Bulletin of Economic Research. February 14, 2015
  We forecast US inflation using a standard set of macroeconomic predictors and a dynamic model selection and averaging methodology that allows the forecasting model to change over time. Pseudo out‐of‐sample forecasts are generated from models identified from a multipath general‐to‐specific algorithm that is applied dynamically using rolling regressions. Our results indicate that the inflation forecasts that we obtain employing a short rolling window substantially outperform those from a well‐established univariate benchmark, and contrary to previous evidence, are considerably robust to alternative forecast periods.

  February 14, 2015   doi: 10.1111/boer.12041   open full text
• The Determinants Of Price In Online Auctions: More Evidence From Quantile Regression.
  Chia‐Hung D. Sun, Yi‐Bin Chiu, Ming‐Fei Hsu.
  Bulletin of Economic Research. January 20, 2015
  This study explores how seller reputations affect auction prices and concludes that earlier findings may be biased due to the misspecification of seller reputation. This paper contributes to the literature by offering significant empirical evidence using Taiwanese internet auction data. Our study reveals that the influence of seller reputations on auction prices is significant, irrespective of the assumptions of linear or non‐linear relationships with price. However, failure to consider the non‐linear setting of seller reputation leads us to underestimate the impact of reputation when the seller's reputation score is low, but overestimates it when the seller's reputation becomes high. Using quantile regression, this study finds evidence of considerable differences in their impact on auction prices that are dependent on the distribution of price levels.

  January 20, 2015   doi: 10.1111/boer.12040   open full text
• ON THE CONCAVITY AND QUASICONCAVITY PROPERTIES OF (σ,μ) UTILITY FUNCTIONS.
  Fatma Lajeri‐Chaherli.
  Bulletin of Economic Research. January 13, 2015
  Concavity and quasiconcavity have always been important properties in financial economics particularly in decision problems when an objective function has to be maximized over a convex set. Both properties have mainly been used as purely technical assumptions. In this paper, we link concavity and quasiconcavity of a (σ,μ) utility function to the basic concepts of risk aversion, prudence, risk vulnerability and temperance. We show that concavity means the agent is more risk vulnerable than prudent. In particular, we can see when a function is both concave and quasiconcave and when it is only quasiconcave.

  January 13, 2015   doi: 10.1111/boer.12039   open full text
• R&D Cooperation Between Impatient Rivals.
  Zhiyong Yao, Bingyong Zheng.
  Bulletin of Economic Research. December 02, 2014
  We analyse R&D cooperation between product‐market competitors within a repeated‐game framework with imperfect monitoring. When firms are patient enough, R&D cooperation is attainable without product‐market collusion. However, if firms are less patient, we show that collusion in the product market is necessary to sustain R&D cooperation. Moreover, consumers can be better off when collusion is allowed in this case.

  December 02, 2014   doi: 10.1111/boer.12037   open full text
• Central Planning Legacies: The Lingering Effects Of The Great Leap Forward In China.
  Qichun He, Meng Sun.
  Bulletin of Economic Research. September 10, 2014
  The Great Leap Forward (GLF) (1958–61) in China was a natural experiment that removed private property rights to achieve rapid growth via central planning, producing immediate famine and death. Using three measures for the GLF, we find that it still exerts a significant negative effect on output per worker in 2004 across Chinese provinces. This result is robust to the use of political factors from the GLF period as instruments. The causal relationship persists after controlling for climate conditions and initial output per capita. Moreover, the causal relationship exists when we change the dependent variable to output per worker in 1978, which refutes the notion that market‐oriented reforms alone explain the difference in income in 2004. Therefore, the GLF has had a lasting, negative effect on output.

  September 10, 2014   doi: 10.1111/boer.12034   open full text
• Who Votes Expressively, And Why? Experimental Evidence.
  Alvin Etang, David Fielding, Stephen Knowles.
  Bulletin of Economic Research. August 18, 2014
  Experiments have shown that some people behave more altruistically in collective decisions than they do in individual ones, which could be interpreted as an ‘expressive voting’ effect. However, there is substantial variation in the behaviour of experimental participants. We conduct experiments to explore the reasons for this variation, and find that certain characteristics are sometimes associated with a propensity for expressive voting. However, the strength of these effects depends on the ordering of individual and collective choices. The ‘warm glow’ of expressive voting can influence subsequent individual decisions, and the ‘cold shower’ of individual selfishness can influence subsequent collective decisions.

  August 18, 2014   doi: 10.1111/boer.12033   open full text
• The Relationship Between Export Status And Productivity In Services: A Firm‐Level Analysis For Spain.
  Asier Minondo.
  Bulletin of Economic Research. May 08, 2014
  This paper analyses the relationship between export status and productivity in a major service exporter, Spain, during 2001–07. I find that exporters in the services sector are 45 percent more productive than non‐exporters. This productivity premium is larger for firms that supply non‐internet‐related services than for firms that supply internet‐related services. The results show that exporters were more productive than non‐exporters before beginning to export, and also that exporting increases productivity growth; however, this positive shock vanishes quickly.

  May 08, 2014   doi: 10.1111/boer.12029   open full text
• Who Wants Paternalism?
  Sofie Kragh Pedersen, Alexander K. Koch, Julia Nafziger.
  Bulletin of Economic Research. May 08, 2014
  Little is known about the demand side of paternalism. We investigate attitudes towards paternalism among Danish students. The main question is whether demand for paternalism is related to self‐control, either because people with self‐control problems seek commitment devices to overcome these problems, or because people with good self‐control want those who lack it to change their behaviours. We find no evidence linking self‐control to attitudes towards weak forms of paternalism (e.g., nudges or information about health consequences). But respondents with good self‐control are significantly more favourable towards strong paternalism (e.g., restricting choices or sin taxes) than those struggling with self‐control.

  May 08, 2014   doi: 10.1111/boer.12030   open full text
• Macroeconomic Volatility And International Integration.
  Marta Arespa.
  Bulletin of Economic Research. April 21, 2014
  This paper explores the effects that varying degrees of international openness have on macroeconomic volatility. The analysis is conducted for a two‐symmetric‐country world under three levels of international integration: that of a closed economy, a financial autarky, and full financial integration. Different degrees of trade openness are considered in the form of home biases, while the economy is left vulnerable to total factor productivity and innovation shocks. Full financial integration is found to reduce firm‐size volatility and volatility in the mass of operative firms following a productivity shock and to increase them after an innovation shock. Moreover, the interaction between international sharing of profits and terms of trade transmissions determines the non‐linear behaviour of consumption‐to‐output ratio volatility found in empirical studies.

  April 21, 2014   doi: 10.1111/boer.12028   open full text
• Entry And Quality Signalling When Only Some Consumers Are Informed Of The Entrant's Quality.
  Fulan Wu.
  Bulletin of Economic Research. March 04, 2014
  This paper focuses on competition between an incumbent and an entrant when only the entrant's quality is unknown to (some) consumers. The incumbent may or may not know the entrant's quality. The model reveals a separating equilibrium where the entrant's high price signals its high quality when the proportion of informed consumers is at some intermediate value. The case in which the incumbent knows the entrant's quality generates two additional equilibria. When the proportion of informed consumers is large enough, firms choose their prices as in the complete information case. The entrant's high price in combination with the incumbent's low price signals the entrant's high quality. When the proportion of informed consumers is at some intermediate value, the incumbent's high price signals the entrant's low quality, while its low price signals the entrant's high quality. Interestingly, we find that entry may be facilitated with informational product differentiation.

  March 04, 2014   doi: 10.1111/boer.12026   open full text
• Asian Real Exchange Rates And Oil Prices: A Cointegration Analysis Under Structural Breaks.
  Salah A. Nusair, Khalid M. Kisswani.
  Bulletin of Economic Research. February 27, 2014
  We examine the long‐run relationship between Asian real exchange rates and oil prices in the presence of structural breaks. The relevance of considering breaks is demonstrated by utilizing the Johansen et al. procedure that allows for up to two predetermined breaks. Using conventional tests that do not consider breaks reveals no evidence of cointegration. However, the Johansen et al. procedure clearly demonstrates the importance of considering breaks and provides strong support for a stable long‐run relationship in all but Japan and the Philippines. Moreover, the results suggest evidence of bi‐directional causality in Malaysia and Thailand, uni‐directional causality from exchange rates to oil prices in Korea, the Philippines, and Singapore, uni‐directional causality from oil prices to the exchange rate in Indonesia, and no evidence of causality in Japan.

  February 27, 2014   doi: 10.1111/boer.12027   open full text
• Paradigm Shift: A Mean Field Game Approach.
  Damien Besancenot, Habib Dogguy.
  Bulletin of Economic Research. February 13, 2014
  This paper analyses the consequences of young researchers' scientific choice on the dynamics of sciences. We develop a simple two state mean field game model to analyse the competition between two paradigms based on Kuhn's theory of scientific revolution. The dynamics of the model are driven by the scientific choice of young researchers at the beginning of their career. Despite the possibility of multiple equilibria, the model exhibits at least one stable solution in which both para digms coexist. The occurrence of shocks on the parameters may induce the shift from one paradigm to the other. During this shift, researchers' choice is proved to be having a great impact on the evolution of sciences.

  February 13, 2014   doi: 10.1111/boer.12024   open full text
• The Consideration Of Hub‐And‐Spoke Status In Fta Formation.
  Jiyun Cao.
  Bulletin of Economic Research. February 11, 2014
  This paper extends the literature on the determinants of free trade area (FTA) taking hub‐and‐spoke status and hub status‐seeking into account. The analysis is based on purely cross‐sectional data and the main findings are different from previous studies. First, the hub‐and‐spoke status and hub status‐seeking are two important determinants of FTA. Moreover, the hub‐and‐spoke status and hub status‐seeking have greater partial effects on the response probabilities than other determinants. Second, the probability of forming an FTA between a pair of economies is higher if they share a common language. Finally, the probability of forming an FTA between a pair of economies falls at first but eventually increases as the difference in their relative factor endowments increases.

  February 11, 2014   doi: 10.1111/boer.12025   open full text
• On The Sustainability Of Collusion In A Differentiated Oligopoly With A Cartel And A Fringe.
  Marc Escrihuela‐Villar, Jorge Guillén.
  Bulletin of Economic Research. February 06, 2014
  We discuss the effects of the existence of non‐colluding (fringe) firms on cartel sustainability. We obtain, using trigger strategies, that with product differentiation collusion is always more easily sustained when firms compete in prices than when firms compete in quantities. This is true basically because (i) price competition is more intense than quantity competition, and (ii) fringe firms exacerbate the fact that cartel firms have more incentives to deviate from the agreement under quantity competition. This result reverses previous findings where, in the absence of fringe firms, product differentiation plays a crucial role in determining the effectiveness of price or quantity competition in sustaining collusion.

  February 06, 2014   doi: 10.1111/boer.12023   open full text
• The Impact Of Domestic And Foreign Competition On Sectoral Growth: A Cross‐Country Analysis.
  Wolszczak‐Derlacz Joanna.
  Bulletin of Economic Research. January 23, 2014
  This paper examines the impact of competition on the total factor productivity (TFP) of 21 manufacturing sectors in eighteen OECD countries over the period of time 1990–2006. We assume that the source of TFP growth can be either domestic or foreign innovation or technology transfer from the technological frontier. Trade openness, R&D, and human capital can have two effects: a direct effect on TFP (e.g., through innovation) and an indirect effect depending on the productivity gap between a given country and the technological frontier. We find that tougher domestic competition is always associated with higher sectoral productivity. Both import and export penetrations are positively associated with an increase of TFP. However, the channels through which higher TFP is materialized are different: export penetration works through level effect, while import penetration acts mainly when conditional on the level of technological development. The economical magnitude of the effect is not trivial.

  January 23, 2014   doi: 10.1111/boer.12022   open full text
• The Potential For Short‐Run Shifting Of A Corporate Profits Tax.
  J. Richard Aronson, Peter J. Lambert, Victor J. Tremblay.
  Bulletin of Economic Research. January 22, 2014
  Can the owners of a firm shift a corporate profits tax to consumers? Not in the short run if the tax is stated as a proportion of profits and the firm is a profit maximizer. But what if the firm wishes to pursue a strategy other than profit maximization, say revenue maximization subject to a profit constraint? Under such a condition the firm's reaction to a tax or tax increase might be a price rise that captures part of the foregone profits. We show that firms which operate at a point on their demand curve that differs from profit maximization have an incentive to raise price in response to the tax – and that high cost firms have a greater incentive to raise price than do low cost firms. Our empirical analysis of the US beer industry confirms this finding, and sheds light on the Krzyzaniak–Musgrave analysis of the 1960s which suggested that the corporation income tax produced significant short‐run shifting.

  January 22, 2014   doi: 10.1111/boer.12019   open full text
• Non‐Rigid Wages And Merger Profitability Reversal Under Convex Costs And Centralized Unionization.
  Luciano Fanti, Nicola Meccheri.
  Bulletin of Economic Research. January 21, 2014
  Can a merger from duopoly to monopoly be detrimental for profits? This paper deals with this issue by focusing on the interaction between decreasing returns to labour (which imply firms’ convex costs) and centralized unionization. First, it is highlighted that a wage ‘non‐rigidity’ result applies: the post‐merger wage is higher than in the pre‐merger equilibrium. Second, it is shown that a ‘reversal result’ in relation to merger profitability actually realizes when the union is sufficiently oriented towards wages. Moreover, the higher the reservation wage, the degree of product differentiation, and the union's relative bargaining power, the higher the probability that a merger reduces profits.

  January 21, 2014   doi: 10.1111/boer.12020   open full text
• Moral Hazard, Risk Aversion, And Efficiency.
  Oliver Gürtler.
  Bulletin of Economic Research. January 15, 2014
  This note revisits the classic moral‐hazard model, but assumes that the output distribution has moving support and punishments are limited. The results show that the principal can implement an efficient solution if the agent is sufficiently risk averse.

  January 15, 2014   doi: 10.1111/boer.12021   open full text
• Ridge Estimators For Probit Regression: With An Application To Labour Market Data.
  Håkan Locking, Kristofer Månsson, Ghazi Shukur.
  Bulletin of Economic Research. November 20, 2013
  In this paper we propose ridge regression estimators for probit models since the commonly applied maximum likelihood (ML) method is sensitive to multicollinearity. An extensive Monte Carlo study is conducted where the performance of the ML method and the probit ridge regression (PRR) is investigated when the data are collinear. In the simulation study we evaluate a number of methods of estimating the ridge parameter k that have recently been developed for use in linear regression analysis. The results from the simulation study show that there is at least one group of the estimators of k that regularly has a lower mean squared error than the ML method for all different situations that have been evaluated. Finally, we show the benefit of the new method using the classical Dehejia and Wahba dataset which is based on a labour market experiment.

  November 20, 2013   doi: 10.1111/boer.12015   open full text
• Export And Hedging Decisions Under Correlated Revenue And Exchange Rate Risk.
  Kit Pong Wong.
  Bulletin of Economic Research. November 20, 2013
  This paper examines the behaviour of a competitive exporting firm under joint revenue and exchange rate risk. The firm can trade unbiased currency futures contracts for hedging purposes. We show that neither the separation theorem nor the full‐hedging theorem holds when the revenue shock prevails. If the correlation between the revenue shock and the random spot exchange rate is non‐positive, the firm optimally produces less than the benchmark level when the revenue shock is absent. If, in addition, the firm is prudent, the optimal futures position is an under‐hedge. Finally, we derive sufficient conditions under which the firm's optimal output level is higher in the presence than in the absence of the revenue shock. Operational hedging and financial hedging as such interact in a complicated way to better cope with the multiple sources of uncertainty faced by the firm.

  November 20, 2013   doi: 10.1111/boer.12016   open full text
• Output–Employment Relationship Across Sectors: A Long‐ Versus Short‐Run Perspective.
  Afşin Şahin, Aysit Tansel, M. Hakan Berument.
  Bulletin of Economic Research. November 20, 2013
  This paper investigates the nature of the output–employment relationship by using the Turkish quarterly data for the period 1988–2008. Even if we fail to find a long‐run relationship between aggregate output and total employment, there are long‐run relationships for the aggregate output with non‐agricultural employment and sectoral employment levels for seven of nine sectors that we consider. However, a further investigation for the output and employment relationship within a short‐run perspective does not reveal statistically significant relationships for either total employment or non‐agriculture employment, or eight of the nine sectors that we consider. Although there are various long‐run relationships between output and employment, the short‐run links between demand and employment are weak. The various implications of this for the economy and the labour market are discussed. As a result, maintaining high levels of output in the long‐run creating demand is essential for employment generation.

  November 20, 2013   doi: 10.1111/boer.12017   open full text
• Minimum Wage Hikes And The Wage Growth Of Low‐Wage Workers.
  Joanna K. Swaffield.
  Bulletin of Economic Research. November 15, 2013
  This paper presents difference‐in‐differences estimates of the impact of the British minimum wage on the wage growth of low‐wage employees. Estimates of the probability of low‐wage employees receiving positive wage growth have been significantly increased by the minimum wage upratings or hikes. However, whether the actual wage growth of these workers has been significantly raised or not depends crucially on the magnitude of the minimum wage hike considered. Findings are consistent with employers complying with the legally binding minimum wage but holding down or offsetting the wage growth that they might have awarded in periods of relatively low minimum wage hikes.

  November 15, 2013   doi: 10.1111/boer.12018   open full text
• Defence And Non‐Defence Spending In The Usa: Stimuli To Economic Growth? Comparative Findings From A Semiparametric Approach.
  Christos Kollias, Suzanna‐Maria Paleologou.
  Bulletin of Economic Research. September 18, 2013
  Given its significant policy implications, the nexus between public expenditures and economic growth has been the subject of an extensive and often emotive theoretical and empirical debate. In this paper, a semiparametric model is used to explore the link between GDP and defence and non‐defence government spending in the USA over the period 1929–2009. Evidence reported herein indicates that the latter represents a greater stimulus vis‐à‐vis the former.

  September 18, 2013   doi: 10.1111/boer.12011   open full text
• Universal Access, Parallel Trade, And Incentives To Innovate.
  Rajat Acharyya, María D. C. García‐Alonso.
  Bulletin of Economic Research. September 17, 2013
  Governments often subsidize poorer groups in society to ensure their access to new drugs. We analyse the optimal income‐based price subsidies in a strategic environment. We show that universal access is less likely to arise when price arbitrage prevents international price discrimination. When this is not the case, under some income ranges, bilateral universal coverage can be supported by equilibrium subsidies together with bilateral partial provision. In such a case, international health policy coordination becomes relevant. We also show that asymmetric universal access to medicines across countries can arise, even when countries are ex ante symmetric, when international price discrimination is possible and governments cannot design subsidies proportional to either income or quality.

  September 17, 2013   doi: 10.1111/boer.12013   open full text
• Dynamics Of Productivity And Cost Of Labour In Italian Manufacturing Firms.
  Giulio Bottazzi, Marco Grazzi.
  Bulletin of Economic Research. August 23, 2013
  This paper studies the impact of size on labour cost and productivity for Italian manufacturing firms. The distributions of both labour cost and productivity display a wide support, even when disaggregated by sector of industrial activity. Further, both labour cost and productivity, when considered alone, are growing with the size of the firm. We investigate this relationship on a new set of data and we are able to show that once productivity differences among firms have been accounted for, size still retains a positive effect on cost of labour in most of the sectors considered.

  August 23, 2013   doi: 10.1111/boer.12014   open full text
• Employment Effects Of Health Shocks: The Role Of Fringe Benefits.
  David M. Zimmer.
  Bulletin of Economic Research. August 23, 2013
  This paper examines whether health shocks influence labour supply. Estimates rely on detailed health measures that not only are more homogeneous than commonly‐used self‐reported health measures, but they also can be interpreted as plausibly exogenous with respect to labour supply. Further, this paper investigates the unique role that certain fringe benefits, namely health insurance and paid sick leave, play in the link between health shocks and subsequent employment activity. Results show that, compared to commonly‐used self‐reported measures of health, health problems defined by the US government as ‘priority’ conditions correlate with smaller labour supply shifts, but non‐work‐related injuries lead to larger shifts. Second, the arrival of a health shock appears to reduce the probability of remaining employed full time, while also increasing the likelihood of quitting work. Relatively few full‐time workers who acquire health problems switch to part‐time employment. Third, in the event of a health shock, sick leave appears to facilitate reductions in employment activities, while employer‐provided insurance appears to hinder such adjustments.

  August 23, 2013   doi: 10.1111/boer.12010   open full text
• N‐Firm Oligopoly With General Iso‐Elastic Demand.
  Rodney Beard.
  Bulletin of Economic Research. May 14, 2013
  In this note oligopoly with iso‐elastic demand is analysed. Unlike previous studies we consider general iso‐elastic demand rather than the case of unit elasticity. An n‐firm Nash‐Cournot equilibrium for the case of heterogeneous constant marginal costs is derived. The main result is a closed‐form solution that shows the dependency of the equilibrium on the elasticity of demand and the share of industry costs. The result has applications to a wide range of areas in oligopoly theory by allowing comparisons across markets with different elasticities of demand.

  May 14, 2013   doi: 10.1111/boer.12009   open full text
• Incentive And Insurance Effects Of Income Taxation.
  Torben M. Andersen.
  Bulletin of Economic Research. May 02, 2013
  Tax distortions cause a trade‐off between efficiency and equity. However, taxes not only affect incentives; they also provide implicit insurance, and this may critically affect the efficiency–equity relationship. For a standard labour supply problem it is shown that the insurance effect mutes the sensitivity of labour supply to taxes, which tends to reduce tax distortions and lower the marginal costs of public funds. The relation between incentives and insurance and thus efficiency and equity is flattened by the insurance effect and it may even be non‐monotone. However, the optimal utilitarian policy implies that there is always a trade‐off between efficiency and equity on the margin.

  May 02, 2013   doi: 10.1111/boer.12006   open full text
• Home Market Effects In The Chamberlinian–Ricardian World.
  Yo‐Yi Huang, Cheng‐Te Lee, Deng‐Shing Huang.
  Bulletin of Economic Research. April 22, 2013
  According to conventional home market effects, free trade tends to shrink the market share for a smaller economy in differentiated manufacturing goods, and in the extreme, leads to a complete hollowing out of the industry. Departing from the original Helpman–Krugman modelling assumptions behind the home market effects, we introduce a technology advantage in terms of the difference in fixed cost and/or marginal cost between trading partners and prove that home market effects will be offset and even reverse if a small economy has better technology than another country. With a higher elasticity of substitution, the marginal cost advantage becomes more important if it is to dominate the home market effect. We also show that even with an identical country size, the intra‐industry trade addressed in the existing literature may not occur; it will occur only if the technology differential lies within a certain range that is positively affected by the level of transport cost.

  April 22, 2013   doi: 10.1111/boer.12008   open full text
• Immediate Settlement Or Enduring A Strike: The Choice Of Signals.
  Zhiyong Yao.
  Bulletin of Economic Research. April 04, 2013
  Some labour contract negotiations involve strikes while most conclude with immediate settlement. This article offers a model of union‐firm negotiation with private information to show that either strikes or immediate settlement will take place in the equilibrium. Different from most signalling literature where the signals are exogenously given, this article endogenizes the choice of signals. We compare two signals, the employment level and the strategic delay. We show that the low‐revenue firm will choose the signal which gives it higher payoff while separating itself from the high‐revenue firm.

  April 04, 2013   doi: 10.1111/boer.12007   open full text
• Redistributive Politics And Government Debt In A Borrowing‐Constrained Economy.
  Ryo Arawatari, Tetsuo Ono.
  Bulletin of Economic Research. March 07, 2013
  We develop a two‐period, three‐class of income model where low‐income agents are borrowing constrained because of capital market imperfections, and where redistributive expenditure is financed by tax and government debt. When the degree of capital market imperfection is high, there is an ends‐against‐the‐middle equilibrium where the constrained low‐income and the unconstrained high‐income agents favour low levels of government debt and redistributive expenditure; these agents form a coalition against the middle. In this equilibrium, the levels of government debt and expenditure might be below the efficient levels, and the spread of income distribution results in a lower debt‐to‐GDP ratio.

  March 07, 2013   doi: 10.1111/boer.12005   open full text
• On The Price Effects Of Horizontal Mergers: A Theoretical Interpretation.
  Emilie Dargaud, Carlo Reggiani.
  Bulletin of Economic Research. March 06, 2013
  Horizontal mergers are usually under the scrutiny of antitrust authorities due to their potential undesirable effects on prices and consumer surplus. Ex‐post evidence, however, suggests that these effects do not always take place and even relevant mergers may end up having negligible price effects. The analysis of mergers in the context of non‐localized spatial competition may offer a further interpretation to the ones proposed in the literature: in this framework both positive and zero price effects are possible outcomes of the merger activity.

  March 06, 2013   doi: 10.1111/boer.12004   open full text
• Comparative Statics Of A Monopolistic Firm Facing Rate‐Of‐Return And Command‐And‐Control Pollution Constraints.
  Michael R. Caputo, Dmitriy Popov.
  Bulletin of Economic Research. March 05, 2013
  The intrinsic comparative statics properties of a general rate‐of‐return regulated, profit‐maximizing model of a monopolist facing a command‐and‐control pollution constraint are derived. Recent advances in the theory of comparative statics are used to derive the basic comparative statics of the model, which are contained in an observable negative semi‐definite matrix and possess the form of Slutsky‐like expressions. We consider several command‐and‐control pollution constraints that are commonly implemented in practice, and conclude that the intrinsic comparative statics properties of the model are qualitatively invariant to the type of command‐and‐control pollution constraint imposed. We compare our results with those extant, and find that several basic results from the standard A–J model no longer hold in our model.

  March 05, 2013   doi: 10.1111/boer.12003   open full text
• Equivalent Option Price With Supply Uncertainty.
  Aric P. Shafran.
  Bulletin of Economic Research. February 06, 2013
  This paper compares two ex ante measures of the benefits of a project with supply uncertainty: compensating option price, the willingness to pay for a project, and equivalent option price, the willingness to accept to forego a project. The paper shows that compensating option price does not generally rank three or more projects correctly, even when the projects only impose a change in a single good. Equivalent option price, like equivalent variation with certain outcomes, always ranks three or more projects correctly. This paper also presents a method to empirically estimate equivalent option price using estimates of the benefits of certain changes. This approach is practically important so that the same study results can be used to estimate equivalent option price even as new projects are developed or as changes occur in the scientific information regarding the probabilities of various project outcomes. An application of the empirical method estimates the benefits of a policy to improve air and water quality when there is uncertainty about the effectiveness of the policy.

  February 06, 2013   doi: 10.1111/boer.12000   open full text
• Investment Behaviour, Corporate Control, And Private Benefits Of Control: Evidence From A Survey Of Ukrainian Firms.
  Dariya Mykhayliv, Klaus G. Zauner.
  Bulletin of Economic Research. February 06, 2013
  We analyse the impact of ownership and corporate control on firms’ investment using the 2001 survey of Yacoub et al. on Ukrainian firms. The model explains investment by output, financial and soft budget constraints, and corporate control (and ownership) categories potentially enjoying private benefits of control. We find that the corporate control model fits better than the ownership model, a negative relationship between state and employee control and firms’ investment, and evidence for the presence of soft budget constraints. A negative relationship between firms’ investment and the relative size of non‐monetary transactions strengthens the conclusion of private benefits of control impacting investment.

  February 06, 2013   doi: 10.1111/boer.12001   open full text
• From Discrete To Continuous‐Time Transition Matrices In Intra‐Distribution Dynamics Analysis: An Application To Per Capita Wealth In Europe.
  María Hierro, Adolfo Maza.
  Bulletin of Economic Research. February 06, 2013
  Previous studies focusing on the intra‐distribution dynamics analysis have usually computed, in a Markov chain framework, discrete‐time transition matrices. Such an approach, however, can involve some limitations, especially when using stock variables. In order to illustrate the importance of the time‐scale issue when estimating transition matrices, this paper applies both discrete and continuous‐time approaches to a set of cross‐national European data on per capita wealth for the period 2000–10. The results reveal, on the one hand, that the continuous‐time estimation provides a most accurate estimation of transition probabilities and, on the other, that the differences between both approaches are especially remarkable in the long‐term equilibrium distribution.

  February 06, 2013   doi: 10.1111/boer.12002   open full text
• What Determines Religious School Choice? Theory And Evidence From Rural Bangladesh.
  M Niaz Asadullah, Rupa Chakrabarti, Nazmul Chaudhury.
  Bulletin of Economic Research. January 24, 2013
  This paper looks at the determinants of school selection in rural Bangladesh, focusing on the choice between registered Islamic and non‐religious schools. Using a unique dataset on secondary school‐age children from rural Bangladesh, we find that madrasah enrolment falls as household income increases. At the same time, more religious households, and those that live further away from a non‐religious school are more likely to send their children to madrasahs. However, in contrast to the theory, we find that Islamic school demand does not respond to the average quality of schools in the locality.

  January 24, 2013   doi: 10.1111/j.1467-8586.2012.00476.x   open full text
• Maximum Sustainable Government Debt In The Perpetual Youth Model.
  Neil Rankin.
  Bulletin of Economic Research. January 22, 2013
  The overlapping‐generations model of Blanchard, based on a constant probability of death, is used to study the maximum level of government debt consistent with the existence of a steady state equilibrium. In both a small open and a closed economy it is shown that maximum sustainable debt robustly occurs where the consumption of individual households reaches zero, the limit of its feasible range. Taxation absorbs all of the household's labour income here. In a closed economy, at this point the real interest rate also hits a ‘ceiling’ given by a simple combination of preference parameters and the death probability.

  January 22, 2013   doi: 10.1111/j.1467-8586.2012.00475.x   open full text
• Are Long‐Term Inflation Expectations Well‐Anchored? Evidence From The Euro Area And The United States.
  Tsvetomira Tsenova.
  Bulletin of Economic Research. November 01, 2012
  This paper analyses the stability of long‐term inflation expectations and uncertainty, based on their sensitivity to innovations to observed inflation, short‐ and medium‐term forecast news. News is defined in a subjective sense and derived from revisions to shorter‐term fixed‐target forecasts. The assessment tests for presence of non‐linear effects, including regime changes during disinflation in the USA in the 1990s and the recent financial crisis. Stability is also investigated in terms of level evolution, based on a structural non‐linear and non‐Gaussian learning model to uncover the presence of a common trend underlying the long‐term dynamics of inflation, individual expectations, and uncertainty.

  November 01, 2012   doi: 10.1111/j.1467-8586.2012.00474.x   open full text
• Scale Economies And Heterogeneity In Business Money Demand: The Italian Experience.
  Piero Ganugi, Luigi Grossi, Giancarlo Ianulardo.
  Bulletin of Economic Research. October 05, 2012
  This paper investigates the demand for money by firms and the existence of economies of scale in the Italian manufacturing industry. We estimate a model for cash elaborated by Fujiki and Mulligan using a different estimation procedure from the previous literature. We then introduce an iterative procedure based on backward exclusion of firms from model estimation which points out the high heterogeneity of Italian companies in money demand. Our estimates show that the Italian manufacturing industry, considered as a whole, does not enjoy scale economies in money demand. However, our iterative procedure points out that the cause of this result has to be ascribed to small firms which are characterized by thin cash money holdings and a consequent very modest opportunity cost.

  October 05, 2012   doi: 10.1111/j.1467-8586.2012.00470.x   open full text
• Asymmetric Information And Exchange Of Information About Product Differentiation.
  António Brandão, Joana Pinho.
  Bulletin of Economic Research. October 05, 2012
  We introduce asymmetric information about consumers’ transportation costs (i.e., the degree of product differentiation) in the model of Hotelling. When transportation costs are high, both firms have lower profits with asymmetric information than with perfect information. Contrarily, if transportation costs are low, both firms may prefer the asymmetric information scenario (the informed firm always prefers the informational advantage, while the uninformed firm may or may not prefer to remain uninformed). Information exchange is ex‐ante advantageous for both firms, but ex‐post damaging if transportation costs turn out to be low. If the information is unverifiable, the informed firm does not represent a reliable source of information, since it always prefers to announce that transportation costs are high and there is no contract that induces truthful revelation.

  October 05, 2012   doi: 10.1111/j.1467-8586.2012.00472.x   open full text
• How Can Public Spending Help You Grow? An Empirical Analysis For Developing Countries.
  Nihal Bayraktar, Blanca Moreno‐Dodson.
  Bulletin of Economic Research. October 05, 2012
  Although many studies indicate that both the level and composition of public spending are significant for economic growth, the results in the empirical literature are mixed. This paper suggests that the country sample selection and expenditure classification are important in explaining these conflicting results. The empirical analysis shows that the link between growth and public spending, especially its core component, is strong only for countries with macroeconomic stability and fast GDP per capita growth dynamics, which are also capable of using public funds for productive purposes.

  October 05, 2012   doi: 10.1111/j.1467-8586.2012.00473.x   open full text
• Calculating Welfare Costs Of Inflation In A Search Model With Preference Heterogeneity: A Calibration Exercise.
  Pedro de Araujo.
  Bulletin of Economic Research. September 24, 2012
  Using US cross‐sectional data, this paper calculates the welfare cost of a 10 percent inflation for different individuals and finds that the difference in cost between the poorest 20 percent, measured by their net worth, and the richest 20 percent is in the order of 102 percent. That is, a poor person is on average willing to forgive 102 percent more of their total consumption in order to have inflation reduced from 10 percent to 0. In absolute terms this represents a cost of 0.461 percent of consumption for the poorest and 0.228 percent for the richest. I accomplish this by introducing preference heterogeneity in a monetary search model first developed by Lagos and Wright, and calibrate the model to match each agent’s type of cash holdings, approximated by their holdings in transactional accounts that bear almost no interest, as a fraction of their net worth using data from the Survey of Consumer Finances. I also show that this welfare difference increases to 130 percent (2.28 percent for the poorest 20 percent and 0.992 percent for the richest 20 percent) whenever frictions in the use of money are imposed (holdup problem). This distributional effect is further augmented if more frictions in the terms of trade are present. The ability to explicitly model these frictions is the advantage of using this model. Hence, inflation in this framework, as other studies have shown, acts as a regressive consumption tax; and this regressiveness is augmented with the holdup problem.

  September 24, 2012   doi: 10.1111/j.1467-8586.2012.00471.x   open full text
• Strategic Outsourcing Under Economies Of Scale.
  Yutian Chen, Debapriya Sen.
  Bulletin of Economic Research. September 13, 2012
  We show that economies of scale in upstream production can lead both the disintegrated downstream firm as well as its vertically integrated rival to outsource offshore for intermediate goods, even if offshore production has a moderate cost disadvantage compared to in‐house production of the vertically integrated firm.

  September 13, 2012   doi: 10.1111/j.1467-8586.2012.00467.x   open full text
• The Risk‐Free Rate In A Finite Horizon Model With Bequests.
  Xiaoyong Cui, Liutang Gong.
  Bulletin of Economic Research. July 03, 2012
  This paper studies the risk‐free rate in an overlapping generations economy with bequests. It is shown that the risk‐free rate depends on risk aversion, the elasticity of intertemporal substitution, the share of wealth invested in human wealth, life expectancy, and the preference for bequests. In a standard life‐cycle context, mortality increases the subjective time rate of discount, and thus increases the compensation required to postpone consumption. This latter effect is offset in a bequest‐driven model of the type considered here, leading to much more powerful income effects. In this sense, the model provides a bequest‐motive explanation for the risk‐free rate puzzle put forward by Weil in 1989.

  July 03, 2012   doi: 10.1111/j.1467-8586.2012.00456.x   open full text
• Adverse Selection In Dynamic Matching Markets.
  Klaus Kultti, Eeva Mauring, Juuso Vanhala, Timo Vesala.
  Bulletin of Economic Research. July 03, 2012
  We study the Akerlofian adverse selection problem in a dynamic matching model where the competitive situation varies across different meetings. The ‘lemons principle’ is shown to limit the high quality sales within a wider range of quality distributions than in the Walrasian benchmark. High quality goods can nevertheless be traded, albeit less frequently than the low quality goods. For certain quality distributions, there exists a ‘partially pooling’ steady state where high quality sellers are active whenever at least two buyers compete for the good. Otherwise, the model features cycles in a sense that high quality goods are traded only in non‐consecutive periods.

  July 03, 2012   doi: 10.1111/j.1467-8586.2012.00464.x   open full text
• Endogenous Flexibility In The Flexible Manufacturing System.
  Toshihiro Matsumura, Daisuke Shimizu.
  Bulletin of Economic Research. July 03, 2012
  We investigate the flexible manufacturing system (FMS) by using the spatial price discrimination framework of Pal. The degree of flexibility when producing variants can be increased by increasing the investment or production cost and is endogenously determined. Our result is that private incentives for increasing flexibility are excessive from a social welfare perspective.

  July 03, 2012   doi: 10.1111/j.1467-8586.2012.00458.x   open full text
• Endogenous Timing In A Mixed Duopoly With Endogenous Vertical Differentiation.
  Lin Liu, Yuanzhu Lu.
  Bulletin of Economic Research. July 02, 2012
  We consider a game of endogenous timing with observable delay in a mixed duopoly with endogenous vertical differentiation in the context of sequential quality and price choice. We find that a simultaneous play in the first opportunity at each stage turns out to be the unique subgame perfect Nash equilibrium, which contrasts with the endogenous timing in a purely private duopoly.

  July 02, 2012   doi: 10.1111/j.1467-8586.2012.00454.x   open full text
• Unions’ Relative Concerns And Strikes In Wage Bargaining.
  A. Mauleon, Vincent Vannetelbosch, Cecilia Vergari.
  Bulletin of Economic Research. July 02, 2012
  We consider a model of wage determination with private information in an oligopoly. We investigate the effects of unions having relative concerns on the negotiated wage and the strike activity. We show that an increase of unions’ relative concerns has an ambiguous effect on the strike activity.

  July 02, 2012   doi: 10.1111/j.1467-8586.2012.00455.x   open full text
• Markups And Welfare Costs Of Business Cycles In Turkey.
  Ensar Yılmaz.
  Bulletin of Economic Research. June 08, 2012
  The paper, using a simple theory‐based measure of the variations in aggregate economic efficiency in a New Keynessian structure, analyses the nature of the business fluctuations and estimates their welfare costs in Turkey during the period 1998–2009. The measure contains two components: a price markup and a wage markup. It seems that the latter mainly drives the fluctuations in Turkey. The paper also shows that inefficient fluctuations in the allocation of resources do generate moderate welfare costs on average. However, the aggregate efficiency costs increase much more during deep recessions.

  June 08, 2012   doi: 10.1111/j.1467-8586.2012.00451.x   open full text
• Subsidization And Bargaining In Mixed Oligopolies.
  Cai Dapeng, Li Jie.
  Bulletin of Economic Research. June 07, 2012
  In this paper, we consider political interaction in a mixed oligopoly by characterizing how a subsidy is endogenously determined through the bargaining process between firms and politicians. We discuss how the nature of the political equilibrium changes with the type of competition, the specification of the cost function, and the timing of the game. We show that when bargaining between firms and politicians takes place, the resulting social welfare may be even worse than that under a public firm monopoly.

  June 07, 2012   doi: 10.1111/j.1467-8586.2012.00453.x   open full text
• Self‐Reported Economic Condition And Home Production: Intra‐Household Allocation In Italy.
  Lucia Mangiavacchi, Chiara Rapallini.
  Bulletin of Economic Research. May 28, 2012
  This paper applies a collective model of intra‐household welfare distribution using individual self‐reported data. The model accounts for household production, and self‐reported information on economic condition is used to identify the sharing rule governing the bargaining process in the family. The theoretical framework implies a broad concept of full income, which includes household production as time allocated to domestic activities. We find that self‐reported data on economic status are useful in recovering individual shares of household income and that both wages and non‐strictly‐economic individual variables play an important role in the bargaining process determining the sharing rule in Italy.

  May 28, 2012   doi: 10.1111/j.1467-8586.2012.00446.x   open full text
• A Note On Pricing Of Product Quality For Status Concerns.
  Kangsik Choi.
  Bulletin of Economic Research. May 28, 2012
  The paper analyses the optimal pricing of the product quality scheme when concerns for relative standing exist among consumers. We demonstrate that if the proportion of high‐value consumers is over (respectively, under) 1/2 of the total consumers, a firm has an incentive to select a large (respectively, small) quality gap among products. Therefore, there exists a cut‐off level for status concerns, which eliminates quality differences, and the firm assigns the same quality to all the consumers. These results indicate that consumers’ qualities will reflect distortions at the top and bottom. Accordingly, the firm's profit depends on which consumer category is larger.

  May 28, 2012   doi: 10.1111/j.1467-8586.2012.00449.x   open full text
• The Persistence Of Income Poverty And Lifestyle Deprivation: Evidence From Italy.
  Francesco Devicienti, Valentina Gualtieri, Mariacristina Rossi.
  Bulletin of Economic Research. May 25, 2012
  This article estimates poverty persistence over an individual's lifetime, using two definitions: income poverty and a multidimensional index of lifestyle deprivation. We stress the ability of the two definitions to provide a generally consistent characterization of poverty persistence risks faced by various population subgroups, but also the additional insights to be gained by analysing the two definitions in parallel in a longitudinal context. The results of multiple‐spell hazard rate models highlight the weaknesses of the Italian labour market, the insufficiencies of the existing social security system, and the deep territorial dualism in generating persistent poverty for certain groups of the population.

  May 25, 2012   doi: 10.1111/j.1467-8586.2012.00444.x   open full text
• Partisan Advocates.
  Chulyoung Kim.
  Bulletin of Economic Research. April 30, 2012
  This paper studies the problem of an uninformed decision maker who acquires expert advice prior to making a decision. I show that it is less costly to hire partisan agents than impartial agents, especially under advocacy, and that the decision maker prefers partisan advocacy to other forms of institutions. I also extend the literature, originating with Dewatripont and Tirole (1999), to a setting with contracts that condition on information provided and not just the decision made.

  April 30, 2012   doi: 10.1111/j.1467-8586.2012.00448.x   open full text
• Some Observations On The High‐Frequency Versions Of A Standard New‐Keynesian Model.
  Reiner Franke, Stephen Sacht.
  Bulletin of Economic Research. April 13, 2012
  In a small‐scale New‐Keynesian model with a hybrid Phillips curve and IS equation, the paper is concerned with an arbitrary frequency of the agents’ synchronized decision making. It investigates the validity of a fundamental methodological precept according to which no substantive prediction or explanation of a well‐defined macroeconomic period model should depend on the real time length of the period. While this principle is basically satisfied as the period goes to zero, the impulse – response functions of the high‐frequency versions can qualitatively as well as quantitatively be fairly dissimilar from their quarterly counterpart. The result proves to be robust under variations of the degree of price stickiness. The main conclusion is that DSGE modelling may be more sensitive to its choice of the agents’ decision interval.

  April 13, 2012   doi: 10.1111/j.1467-8586.2012.00440.x   open full text
• A Dynamic Entry And Price Game With Capacity Indivisibility.
  Massimo A. De Francesco.
  Bulletin of Economic Research. April 13, 2012
  Strategic market interaction is here modelled as a two‐stage game in which potential entrants choose capacities and next active firms compete in prices. Due to capital indivisibility, the capacity choice is made from a finite grid and there are economies of scale. In the simplest version of the model with a single production technique, the equilibrium turns out to depend on the ratio between the level of total output at the long‐run competitive equilibrium and the firm’s minimum efficient scale: if that ratio is sufficiently large (the market is sufficiently ‘large’), then the competitive price emerges at a subgame‐perfect equilibrium of the capacity and price game; if not, then the firms randomize in prices on the equilibrium path. The role of the market size for the competitive outcome is shown to be even more important if there are several available production techniques.

  April 13, 2012   doi: 10.1111/j.1467-8586.2012.00435.x   open full text
• Human Capital Distribution, Growth And Trade.
  Cheng‐Te Lee, Deng‐Shing Huang.
  Bulletin of Economic Research. April 13, 2012
  Distribution differences in human capital matter for a country's growth and trade. While the existing literature considers only the diversity difference in talent distribution, we argue that the kurtosis difference is also an important factor. In a two‐sector equilibrium growth model, where the production function is supermodular for the consumption‐good sector and submodular for the R&D sector, we prove that the diversity effect and kurtosis effect are opposite to each other. A country endowed with more diverse but leptokurtic talent distribution may have lower growth rate and import submodular goods, opposite to the conventional result from considering only the diversity difference.

  April 13, 2012   doi: 10.1111/j.1467-8586.2012.00442.x   open full text
• An Evaluation Of The Greek Universities’ Economics Departments.
  Stelios Katranidis, Theodore Panagiotidis, Costas Zontanos.
  Bulletin of Economic Research. April 02, 2012
  This study provides a ranking of Economics Departments of Greek universities. Contrary to the existing literature, we look directly at the citations of the faculty members as a measure of academic performance and avoid the classification of journals. Additionally, the country of the PhD studies was found to be a significant variable that can explain the productivity of Greek economists. PhD holders from US and UK universities are characterized by higher productivity compared to those from other countries.

  April 02, 2012   doi: 10.1111/j.1467-8586.2012.00434.x   open full text
• The Effect Of Government Spending On Economic Growth: Testing The Non‐Linear Hypothesis.
  Tamoya Christie.
  Bulletin of Economic Research. April 02, 2012
  Theoretical models suggest a non‐linear relationship between government size and long‐run economic growth. However, testing this hypothesis empirically in cross‐country studies is complicated by the endogeneity of government spending and the accurate identification of inflexion points. This paper examines the non‐linear hypothesis by incorporating threshold analysis in a cross‐country growth regression. The methodology utilizes a sample‐splitting framework and follows an objective strategy for identifying and testing changes in the slope. The results provide evidence in support of the non‐linear hypothesis for a broad panel of countries.

  April 02, 2012   doi: 10.1111/j.1467-8586.2012.00438.x   open full text
• The Impact Of Manufacturing Firms’ Use Of Academic Workers On Their Productivity Level.
  Pål Børing.
  Bulletin of Economic Research. March 20, 2012
  We examine how firms’ productivity level, measured by the total factor productivity (TFP), is affected by their use of academic workers. A panel dataset of Norwegian manufacturing firms is used. Firms’ production level is shown to be negatively affected by their share of academic workers, but we find no clear relationship between this share and the TFP. If we account for the fact that there is an interaction between the share of academic workers and the capital stock, we find that this share has a non‐significant effect on the production level.

  March 20, 2012   doi: 10.1111/j.1467-8586.2012.00432.x   open full text
• Wealth, Asset Portfolio, Money Demand And Policy Rule.
  Ricardo M. Sousa.
  Bulletin of Economic Research. March 05, 2012
  I look at the linkages between monetary policy and asset wealth using quarterly data for the USA. I show that a positive interest rate shock leads to a fall in aggregate wealth and an important change in portfolio composition: housing wealth gradually decreases, but the effects are very persistent; and financial wealth quickly shrinks, but the impact is short‐lived. I also find that the money market can be characterized as follows: (i) the money demand has a large interest elasticity and a small output elasticity; and (ii) the estimated monetary policy reaction function highlights the special focus given by the central bank to developments in monetary aggregates. These features call for an approach whereby monetary authorities put more emphasis on tracking wealth developments, in particular, given the asset portfolio rebalancing between money holdings and financial and/or housing assets.

  March 05, 2012   doi: 10.1111/j.1467-8586.2011.00431.x   open full text
• Analysis Of Poverty And Efficiency: An Earnings Frontier Approach.
  Somnath Chattopadhyay.
  Bulletin of Economic Research. February 20, 2012
  The paper introduces the concept of an earnings frontier in explaining monthly consumption expenditure (a proxy for income) in terms of human capital and endowments of a household. Individuals who translate their potential earning into actual earnings enjoy a fully efficient position. In contrast, individuals who earn less than their potential earnings suffer from some kind of earnings inefficiency. The paper estimates an earnings frontier using the Corrected Ordinary Least Square (COLS) method and classifies households in terms of efficiency scores. Splitting the sample into an efficient and an inefficient part based on the estimated frontier and a bench mark efficiency score, the status of poverty in the two parts (groups) is studied. The poverty gap between the groups is then decomposed into a characteristics effect and a coefficients effect using the familiar Oaxaca decomposition methodology. The paper also tries to establish a link between the notion of efficiency and the coefficients effect in the Oaxaca decomposition methodology. The results obtained are interpreted in light of the poor but efficient hypothesis.

  February 20, 2012   doi: 10.1111/j.1467-8586.2011.00426.x   open full text
• Downwards Wage Rigidity, Endogenous Separations And Firm Training.
  Wolfgang Lechthaler.
  Bulletin of Economic Research. February 20, 2012
  This paper analyses the effect of downwards wage rigidity on wage setting, wage compression and firm training. It is shown that downwards wage rigidity in future periods induces a wage penalty and increases wage compression in the present period. However, contrary to previous work this is not sufficient to increase firms’ training investments. The reason lies in the endogeneity of separations, which become more frequent.

  February 20, 2012   doi: 10.1111/j.1467-8586.2011.00427.x   open full text
• Price Floors And Quality Choice.
  Volodymyr Bilotkach.
  Bulletin of Economic Research. January 18, 2012
  This paper studies effects of price floors in a simple model of vertical product differentiation. We find that even non‐binding price floor (i.e., minimum price set below the lowest Nash equilibrium price in the baseline model) can increase quality on the market, if the cost of quality is sufficiently low. Where a binding price floor does not increase the equilibrium quality, it makes consumers worse off. There is also a possibility of over‐investment into quality as a result of the binding minimum price.

  January 18, 2012   doi: 10.1111/j.1467-8586.2011.00422.x   open full text
• Costs Of Housing Crises: International Evidence.
  Christian Aßmann, Jens Boysen‐Hogrefe, Nils Jannsen.
  Bulletin of Economic Research. December 09, 2011
  This paper analyses the costs of housing crises in terms of GDP growth and the economic conditions under which crises are particularly costly. Housing crises are often followed by recessions that are longer than other recessions. According to empirical estimates, a housing crisis reduces the GDP growth rate in the following year on average by two percentage points and has still a considerable negative impact in the second year. One important channel through which the effect of housing crises is passed on seems to be the banking sector. In addition, our results suggest that negative wealth effects possibly cause further reductions in GDP growth.

  December 09, 2011   doi: 10.1111/j.1467-8586.2011.00408.x   open full text
• Endogenous Timing And Strategic Choice: The Cournot‐Bertrand Model.
  Victor J. Tremblay, Carol Horton Tremblay, Kosin Isariyawongse.
  Bulletin of Economic Research. December 09, 2011
  Cournot establishes a Nash equilibrium to a duopoly game under output competition; Bertrand finds a different Nash equilibrium under price competition. Both treat the strategic choice variable (output versus price) and the timing of play as exogenous. We investigate Cournot‐Bertrand models where one firm competes in output and the other competes in price in both static and dynamic settings. We also develop a general model where both the timing of play and the strategic choice variables are endogenous. Consistent with the conduct of Honda and Scion, we show that Cournot‐Bertrand behaviour can be a Nash equilibrium outcome.

  December 09, 2011   doi: 10.1111/j.1467-8586.2011.00411.x   open full text
• Job Market Signalling With Two Dimensions Of Private Information.
  Wei Zhang.
  Bulletin of Economic Research. December 07, 2011
  We study an extension of job market signalling by introducing another dimension of private information. When two dimensions of attribute are intertwined in parameterizing preferences, the single crossing property no longer holds globally. In seeking the equilibrium prediction, the intuitive criterion and then the more stringent perfect sequentiality refinement are applied. The result depends on the extent to which the second characteristic affects the ability of education to signal. If the effect is mild, the equilibrium acquired is comparable to the separating outcome of the unidimensional benchmark. Otherwise, pooling must occur. This demonstrates that the problem of information transmission is more acute in a multidimensional environment.

  December 07, 2011   doi: 10.1111/j.1467-8586.2011.00416.x   open full text
• R&D Efficiency And The National Innovation System: An International Comparison Using The Distance Function Approach.
  Jin‐Li Hu, Chih‐Hai Yang, Chiang‐Ping Chen.
  Bulletin of Economic Research. December 07, 2011
  This paper applies the distance function approach for stochastic frontier analysis (SFA) to compare research and development (R&D) efficiency across 24 nations during 1998–2005. In this multiple input–output framework, R&D expenditure stock and R&D manpower were inputs, while patents, scientific journal articles, and royalties and licensing fees (RLF) were outputs. Intellectual property rights protection, technological cooperation among business sectors, knowledge transfer between business sectors and higher education institutions, agglomeration of R&D facilities, and involvement of the government sector in R&D activities significantly improve national R&D efficiency.

  December 07, 2011   doi: 10.1111/j.1467-8586.2011.00417.x   open full text
• Environmental Dynamics And The Links Between Growth, Volatility And Mortality.
  Dimitrios Varvarigos.
  Bulletin of Economic Research. November 24, 2011
  I construct a model of a growing economy with pollution. The analysis of the model shows that the interactions between capital accumulation, endogenous lifetime and environmental quality determine both the long‐run growth rate and the pattern of convergence (i.e., monotonic or cyclical) towards the balanced growth path. I argue that such interactions can provide a possible explanatory factor behind the, empirically observed, negative correlation between growth and volatility. Furthermore, the model may capture the observed pattern whereby economic growth and mortality rates appear to be negatively related in the long run, but positively related in the short run.

  November 24, 2011   doi: 10.1111/j.1467-8586.2011.00410.x   open full text
• The Cost Of Social Pacts.
  Nicola Acocella, Giovanni Bartolomeo.
  Bulletin of Economic Research. November 16, 2011
  The paper deals with the various institutions capable of improving the macroeconomic performance in a situation of conflict between unions and the government. In particular, we discuss the difficulty of agreeing with a cooperative solution and the need for some kind of explicit or implicit compensation for unions in signing a social pact. A cooperative solution encapsulating the operation of the different mechanisms designed to cope with the conflict and including the various elements of compensation is presented. The model shows that the amount of the explicit compensation depends on the extent of the strategic conflict between the parties as well as on the factors that determine the implicit compensation (i.e., unions’ inflation aversion, partisanship) or are partial substitutes for it (i.e., the conservative central banker). Finally, the role played by external anticipated and unanticipated shocks is also discussed.

  November 16, 2011   doi: 10.1111/j.1467-8586.2011.00405.x   open full text
• A Note On The Property Rights Theory And The Ex Ante Value Of Information.
  Vijay Mohan.
  Bulletin of Economic Research. November 16, 2011
  This paper examines the ex ante value of information in the property rights model where the possibility exists that an investing agent can be provided with relevant information before investments are undertaken. When contracts are incomplete, from an ex ante perspective, informing the investing agent does not necessarily increase the expected surplus resulting from a relationship between two economic agents. The paper highlights the fact that the second‐best nature of the problem that arises from contractual incompleteness can ensure this.

  November 16, 2011   doi: 10.1111/j.1467-8586.2011.00412.x   open full text
• Risk Perception And Equity Returns: Evidence From The Spx And Vix.
  Jianhua Gang, Xiang Li.
  Bulletin of Economic Research. November 07, 2011
  We use the semi‐nonparametric (SNP) model to study the relationship between the innovation of the Volatility Index (VIX) and the expected S&P 500 Index (SPX) returns. We estimate the one‐step‐ahead contemporaneous relation subject to leverage GARCH effect. Results agree with a body of newly established literature arguing non‐linearity, and asymmetries. In addition, the risk‐return behaviour depends on the signs as well as magnitudes of the perceived risk. We conclude that influence of fear or exuberance on the conditional market return is non‐monotonic and hump‐shaped. Very deep fear does not necessarily mean huge losses, instead, the loss may not be as bad as fears of normal levels. Results pass the robustness tests.

  November 07, 2011   doi: 10.1111/j.1467-8586.2011.00409.x   open full text
• The Effect Of Fdi On Local Education Expenditures: Evidence From The United States.
  Hong Zhuang.
  Bulletin of Economic Research. October 17, 2011
  The intense competition for foreign direct investment (FDI) by state and local governments within the United States has raised concerns among some that this leads to the underprovision of public services and possibly welfare losses for local communities. Economic analysis of this hypothesis yields mixed results. This paper investigates the impact of FDI on local education expenditures both theoretically and empirically. The theoretical model shows an ambiguous impact of FDI on local expenditures for education. Empirically using US state‐level data from 1991 to 2000 and the system‐GMM estimator that controls for fixed effects, times series issues and endogeneity, I find evidence that FDI is positively correlated with increased expenditures on education.

  October 17, 2011   doi: 10.1111/j.1467-8586.2011.00404.x   open full text
• Imperfect Substitutes For Perfect Complements: Solving The Anticommons Problem.
  Matteo Alvisi, Emanuela Carbonara.
  Bulletin of Economic Research. October 05, 2011
  An integrated monopoly, where two complements forming a composite good are offered by a single firm, is typically welfare superior to a complementary monopoly. This is ‘the tragedy of the anticommons’. We analyse the robustness of such result when competition is introduced for one or both complements. Particularly, competition in only one of the two markets may be welfare superior to an integrated monopoly if and only if the substitutes differ in their quality so that, as their number increases, average quality and/or quality variance increases. Then, absent an adequate level of product differentiation, favouring competition in some sectors while leaving monopolies in others may be detrimental for consumers and producers alike. Instead, competition in both markets may be welfare superior if goods are close substitutes and their number in each market is sufficiently high, no matter the degree of product differentiation.

  October 05, 2011   doi: 10.1111/j.1467-8586.2011.00407.x   open full text
• Hiv/Aids And Banking Stability In Developing Countries.
  Patrick L. Leoni.
  Bulletin of Economic Research. October 05, 2011
  We argue that the recent large increase in deposits’ turnover in many developing countries with high HIV/AIDS prevalence is associated with the spread of the disease. The point is that the need to pay for individual treatments force large‐scale withdrawals of households’ deposits, and that those large withdrawals put the banking industry at risk. In a standard demand‐deposit model where the HIV/AIDS prevalence among depositors is random, we show that (1) the probability of a large‐scale banking failure without a bank run increases as the odds of any prevalence level increases, and (2) it is always optimal to deposit, and thus to accept the risk of banking failure, to maintain long‐term investments in place.

  October 05, 2011   doi: 10.1111/j.1467-8586.2011.00401.x   open full text
• An Ultimatum Wage Bargaining Experiment On Trade Union Efficiency.
  Adamos Andreou, Sofia N. Andreou, Aurora García‐Gallego, Nikolaos Georgantzís.
  Bulletin of Economic Research. October 05, 2011
  We present an ultimatum wage bargaining experiment showing that a trade union facilitating non‐binding communication among workers, raises wages by simultaneously increasing employers’ posted offers and toughening the bargaining position of employees, without reducing overall market efficiency.

  October 05, 2011   doi: 10.1111/j.1467-8586.2011.00406.x   open full text
• A Note On Selection Effects Of The Hand Rule.
  Florian Baumann, Tim Friehe.
  Bulletin of Economic Research. August 25, 2011
  The famous Hand rule weighs the burden of precaution against the reduction in expected harm. The burden may be type‐specific, implying different standards of care for different injurer types. We show that this fact may be exploited by principals in their search for minimized individual costs. Principals may hire agents with high cost of care‐taking although other agents are available. This is shown in a unilateral‐care setting either with perfect or with asymmetric information. We therefore highlight a neglected downside of the negligence rule.

  August 25, 2011   doi: 10.1111/j.1467-8586.2011.00402.x   open full text
• Modelling Time Series Data Of Monetary Aggregates Using I(2) And I(1) Cointegration Analysis.
  Takamitsu Kurita.
  Bulletin of Economic Research. August 25, 2011
  The objective of this paper is to consider methodology for modelling time series data of monetary aggregates such as monetary base and broad money. A brief review is made with regard to the likelihood‐based cointegration analysis of I(2) (integrated of order 2) data and I(2)‐to‐I(1) transformations. The paper then investigates procedures for econometric modelling of monetary aggregates, which are in general deemed to be I(2) variables analogous to price indices. It is shown that I(2)‐to‐I(1) transformations centering on a money multiplier play an important role in the modelling procedures. Finally, the study presents an empirical illustration of the proposed methodology using monetary aggregate data from Japan.

  August 25, 2011   doi: 10.1111/j.1467-8586.2011.00400.x   open full text
• Soft Budget Constraint Reconsidered.
  Mehrdad Vahabi.
  Bulletin of Economic Research. July 27, 2011
  This paper demonstrates that Kornai's original concept of the soft budget constraint (SBC) as a theoretical innovation in micro‐theory disguises income redistributions that are essentially macroeconomic relationships. The SBC also postulates a competitive market economy as the benchmark of hard budget constraint (HBC) and efficiency. A recent formal theory explains the SBC as a component of profit‐maximizing strategic behaviour. From this perspective, the SBC can be integrated into the new microeconomics, but it loses its specific institutional connotation and its macroeconomic dimension. The SBC is thus included in ubiquitous market‐type relationships, particularly complete (optimal) contractual arrangements.

  July 27, 2011   doi: 10.1111/j.1467-8586.2011.00403.x   open full text
• Consumption–Leisure Trade‐Offs And Persistency In Business Cycles.
  Ilaski Barañano, M. Paz Moral.
  Bulletin of Economic Research. June 23, 2011
  This paper studies whether non‐separabilities between consumption and leisure may help to explain the observed persistence in GNP growth. We consider an extended version of Lucas's (1988) human capital investment model that includes labour adjustment costs and compare its performance under different utility specifications with different degrees of complementarity and substitutability between consumption and leisure. We find that when consumption and leisure are complements the model succeeds in matching not only the autocorrelation of output growth but also the important trend‐reverting component found in US data. These results hold even if low adjustment costs of labour are considered. Hence, we conclude that an arguably simple margin not considered conventionally can provide useful insights into observed business cycle patterns.

  June 23, 2011   doi: 10.1111/j.1467-8586.2011.00394.x   open full text
• An Example Of An Optimal Forecast Exhibiting Decreasing Bias With Increasing Forecast Horizon.
  Kevin Aretz, David A. Peel.
  Bulletin of Economic Research. April 04, 2011
  Motivated by a central banker with an inflation target, we show that the optimal forecast bias under non‐quadratic loss functions and non‐normal forecast errors can decrease or initially increase and then decrease with the forecast horizon. We initially proof that, if the variable to forecast can be described by a generalized Rayleigh distribution, its conditional mean does in general not constitute the optimal prediction under a symmetric target zone loss function. Subsequently, we approximate the target zone loss function to show the potential for variation in optimal bias over the forecast horizon.

  April 04, 2011   doi: 10.1111/j.1467-8586.2010.00383.x   open full text