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Scottish Journal of Political Economy

Impact factor: 0.367 5-Year impact factor: 0.575 Print ISSN: 0036-9292 Online ISSN: 1467-9485 Publisher: Wiley Blackwell (Blackwell Publishing)

Subjects: Economics, Political Science

Most recent papers:

  • Democracy, Geography and Model Uncertainty.
    Doris A. Oberdabernig, Stefan Humer, Jesus Crespo Cuaresma.
    Scottish Journal of Political Economy. October 13, 2017
    We analyse the nature of robust determinants of differences in democracy levels across countries taking explicitly into account uncertainty in the choice of covariates and spatial spillovers. We make use of recent developments in Bayesian model averaging to assess the effect of a large number of potential factors affecting democratisation processes and account for several specifications of spatial linkages. Our results indicate that spatial spillovers are present in the data even after controlling for a large number of geographical covariates. Addressing the determinants of democracy without modelling such spillovers may lead to flawed inference about the nature of the determinants of democratisation processes. In particular, our results emphasise the role played by Muslim religion, population size, trade volumes, English language, natural resource rents, GDP per capita, being a MENA country and the incidence of armed conflicts as factors affecting democracy robustly.
    October 13, 2017   doi: 10.1111/sjpe.12140   open full text
  • Have money and credit data releases helped markets to predict the interest rate decisions of the European Central Bank?
    Alexander Jung.
    Scottish Journal of Political Economy. October 12, 2017
    This paper examines whether money and credit data releases by the European Central Bank (ECB) have provided markets with additional clues about the future course of its monetary policy. It conducts a novel econometric approach, as suggested by El‐Shagi and Jung (Eur J Polit Econ 39:222–234, 2015), based on a combination of an Ordered Probit model explaining future policy rate changes (sample 2000–2014) and the Vuong test for model selection. Overall, our empirical results support the view that information contained in money and credit aggregates is used by markets when assessing forthcoming interest changes of the ECB.
    October 12, 2017   doi: 10.1111/sjpe.12143   open full text
  • The difference, system and ‘Double‐D’ GMM panel estimators in the presence of structural breaks.
    Rosen Azad Chowdhury, Bill Russell.
    Scottish Journal of Political Economy. October 10, 2017
    The effects of structural breaks in dynamic panels are more complicated than in time series models as the bias can be either negative or positive. This paper focuses on the effects of mean shifts in otherwise stationary processes within an instrumental variable panel estimation framework. We show the sources of the bias and a Monte Carlo analysis calibrated on United States bank lending data demonstrates the size of the bias for a range of auto‐regressive parameters. We also propose additional moment conditions that can be used to reduce the biases caused by shifts in the mean of the data.
    October 10, 2017   doi: 10.1111/sjpe.12142   open full text
  • The influence of media use on layperson monetary policy knowledge in Germany.
    Bernd Hayo, Edith Neuenkirch.
    Scottish Journal of Political Economy. October 10, 2017
    We analyse German citizens’ knowledge about monetary policy and the European Central Bank (ECB), as well as the public's use of mass communication media to obtain information about the ECB. We find that a person's own desire to be informed about the ECB, together with the use of various media channels to keep informed, are decisive for both (1) own perception of knowledge about the ECB and (2) actual level of knowledge. The media‐related influence varies with a person's level of education and is stronger for subjective knowledge. Women are significantly less interested in or knowledgeable about both topics.
    October 10, 2017   doi: 10.1111/sjpe.12141   open full text
  • Long‐Term Unemployment and the Great Recession: Evidence from UK Stocks and Flows.
    Carl Singleton.
    Scottish Journal of Political Economy. July 19, 2017
    Long‐term unemployment more than doubled during the United Kingdom's Great Recession. Only a small fraction of this persistent increase can be accounted for by the changing composition of unemployment across personal and work history characteristics. Through extending a well‐known stocks‐flows decomposition of labour market fluctuations, the cyclical behaviour of participation flows can account for over two‐thirds of the high level of long‐term unemployment following the financial crisis, especially the procyclical flow from unemployment to inactivity. The pattern of these flows and their changing composition suggest a general shift in the labour force attachment of the unemployed during the downturn.
    July 19, 2017   doi: 10.1111/sjpe.12139   open full text
  • Prior Commitment and Uncertainty in Complex Economic Systems: Reinstating History in the Core of Economic Analysis.
    John Foster.
    Scottish Journal of Political Economy. July 05, 2017
    Conventional ‘neoclassical’ economics is very useful in understanding how prices are determined but less so as a general basis for understanding the economic behaviour we observe. What is not taken into account is that economic systems are dissipative structures that are complex, but incompletely connected, networks of rules. It is explained why a degree of prior commitment in decision‐making is inevitable in complex economic systems and the implications of this are examined. It is argued that economic analysis must begin with the reality that choices are made in relation to pre‐existing commitments, both with regard to economic structures built in the past and to prevailing systems of belief, when deciding what to do in a future characterised by uncertainty. It is explained how conventional economic incentives can be dealt with in such a complex historical context building upon the neoclassical perspective of Alfred Marshall over a century ago. It is argued that econometric modelling remains viable and useful in understanding behaviour in complex economic systems. It is shown how we can design and interpret time series econometric modelling from a complex systems perspective.
    July 05, 2017   doi: 10.1111/sjpe.12138   open full text
  • Pre‐sale information and hammer prices for Australian Indigenous art.
    Lisa Farrell, Tim R.L. Fry.
    Scottish Journal of Political Economy. July 05, 2017
    Using sales data from 1987–2011 we investigate the role that pre‐sale price information plays in determining hammer prices for Australian Indigenous artworks. Importantly, we control for the degree of market concentration as this might influence buyers’ perceptions of fairness in relation to price estimates which are provided by auction houses. Auction houses therefore act as important intermediaries between art sellers and art buyers. The results suggest that pre‐sale estimates and market concentration have a differential impact on hammer prices, depending on the point in the conditional realised price distribution under examination.
    July 05, 2017   doi: 10.1111/sjpe.12136   open full text
  • Waste management regulation: policy solutions and policy shortcomings.
    Wolfram Berger, Yoko Nagase.
    Scottish Journal of Political Economy. June 12, 2017
    A model of packaging waste management is presented to explore the policy options available to governments to implement waste regulation in light of the Extended Producer Responsibility (EPR). Our model endogenizes the packaging design as an additional determinant for the overall amount of waste jointly with consumers’ sorting effort and producers’ output decisions. The model shows that the policies that yield the first‐best allocation may not find public support. Furthermore, if the set of available policy instruments is limited, production and consumption of the good is likely to settle on a sub‐optimal level even though the optimal allocation may be achievable. Finally, the model demonstrates that a landfill tax may actually increase landfill waste in the presence of tradable credits for recycling activities. The results shed light on some shortcomings of existing regulatory schemes such as the Producer Responsibility Obligations (Packaging Waste) Regulations of the UK.
    June 12, 2017   doi: 10.1111/sjpe.12137   open full text
  • Entry into exit: insolvency in English professional football.
    Stefan Szymanski.
    Scottish Journal of Political Economy. May 23, 2017
    This study uses a unique database of financial accounts for English football clubs between 1974 and 2010 to examine the process by which firms fail, which in this context means entering insolvency proceedings. From the data it is possible to estimate shocks to demand and productivity and to show that failing firms typically experience a series of negative shocks. This is consistent with the standard IO theory models of exit.
    May 23, 2017   doi: 10.1111/sjpe.12134   open full text
  • Catastrophe theory and the financial crisis.
    Dennis Wesselbaum.
    Scottish Journal of Political Economy. May 23, 2017
    This paper develops and estimates catastrophe‐augmented models of the financial crisis. We employ catastrophe theory to explain discontinuous jumps in state variables of dynamic systems. We estimate an augmented bank failure model showing that the buildup of risk and an increase in the Federal Funds rate combined with low reserves (negative insurance effect) have been the main drivers of the financial crisis. Therefore, macroprudential policy and rating agencies play a key role in preventing the buildup of (systemic) risk and preventing the economy from entering a bifurcation area.
    May 23, 2017   doi: 10.1111/sjpe.12133   open full text
  • A conduct parameter model of price discrimination.
    Levent Kutlu.
    Scottish Journal of Political Economy. May 23, 2017
    We consider a conduct parameter model where firms price discriminate based on the consumers’ willingness to pay. For any conduct, the average price is invariant to the extent of price discrimination. Moreover, when the number of prices goes to infinity, there is a linear relationship between market power, measured by conduct, and range of offered prices. Hence, when the firms face competition, some of the high valuation customers are charged below their valuations, which contrasts with perfect price discrimination results for a monopoly.
    May 23, 2017   doi: 10.1111/sjpe.12135   open full text
  • Growth in a time of austerity: evidence from the UK.
    Juergen Amann, Paul Middleditch.
    Scottish Journal of Political Economy. April 20, 2017
    This paper uses an empirical approach to test the specific causal relationship between debt and growth in the UK, in the context of the debate surrounding the use of a policy known as austerity measures. This time series perspective makes use of more recent Granger causality and cointegration tests that allow for non‐stationarity in macroeconomic time series data in the presence of structural breaks. Controlling for exogenous shocks associated with the period around the financial crisis, we find no evidence of a causal relationship between economic growth and public debt for the UK.
    April 20, 2017   doi: 10.1111/sjpe.12132   open full text
  • Effect of ageing on the ownership of durable goods.
    Anikó Bíró.
    Scottish Journal of Political Economy. April 20, 2017
    I analyse how ageing affects the demand for non‐housing durable goods. Based on the English Longitudinal Study of Ageing, individual characteristics, cohort and time effects can explain most of the age variation in the ownership and purchase of durable goods. A life‐cycle model is derived to capture the complex relation between ageing and the demand for non‐housing durable goods. Decreasing survival probability, deteriorating health and changing preferences are jointly reflected in the age gradient of demand. Simulations indicate that higher chances of survival increase the ownership ratio of the durable items.
    April 20, 2017   doi: 10.1111/sjpe.12131   open full text
  • Optimal Capital Income Taxation with Means‐tested Benefits.
    Cagri S. Kumru, John Piggott.
    Scottish Journal of Political Economy. April 10, 2017
    This paper studies the interaction between capital income taxation and a means‐tested age pension. Our results document that the existence of a social insurance program financed from general revenue puts an upward pressure on the optimal tax rate. We also show that there is a negative relation between taper (benefit‐reduction) and optimal capital income tax rates. The potential welfare gain from optimizing capital taxation in the presence of a universal retirement transfer system is relatively higher. However, when the transfer is substantially means tested, the gain is lower, because the means test effectively operates as a tax on retirement capital.
    April 10, 2017   doi: 10.1111/sjpe.12130   open full text
  • Sanctions for repeat offenders: a question of wealth?
    Wolfgang Eggert, Steffen Minter, Maximilian Stephan, Handirk Ungern‐Sternberg.
    Scottish Journal of Political Economy. April 06, 2017
    In a two‐period standard law‐enforcement model, individuals observe or break the law. In addition, individuals may offend accidentally. When sanctions are limited by individual wealth constraints, the government chooses appropriate sanctions for first and repeat offenders and the level of monitoring. We assume a welfare‐oriented government and derive subgame‐perfect equilibria for constant, increasing and decreasing sanctions depending on the individual wealth level.
    April 06, 2017   doi: 10.1111/sjpe.12126   open full text
  • Employment expectations and uncertainties ahead of the new German minimum wage.
    Mario Bossler.
    Scottish Journal of Political Economy. March 31, 2017
    This article analyzes announcement effects of the new statutory minimum wage on employment expectations and uncertainties in Germany. Using a difference‐in‐differences approach applied to the IAB Establishment Panel, employers affected by the minimum wage show an increased employment uncertainty and a 0.9% points drop in their expected employment growth. Using the same identification strategy with data from 2015, the treatment effect on actual employment growth of affected employers matches the employers' expectation. Hence, an analysis of employer expectations seems to be promising to detect employment effects of policy changes before they come into force.
    March 31, 2017   doi: 10.1111/sjpe.12127   open full text
  • The impact of Africa‐China's diplomatic visits on bilateral trade.
    Faqin Lin, Wenshou Yan, Xiaosong Wang.
    Scottish Journal of Political Economy. March 13, 2017
    This article documents that African leaders’ state visits to China could stimulate China's exports to Africa in capital intensive manufacturing goods. We further find that state visits significantly increase official aid and exports by state‐owned enterprises to African countries which contribute to the trade growth after state visits.
    March 13, 2017   doi: 10.1111/sjpe.12128   open full text
  • An economic rationale for dismissing low‐quality experts in trial.
    Chulyoung Kim.
    Scottish Journal of Political Economy. March 13, 2017
    The history of the admissibility standard for expert testimony in American courtrooms reveals that the standard has gradually increased to a high level following a series of important decisions by the Supreme Court. Whether such a stringent standard for expert testimony is beneficial or detrimental to the American justice system is still under fierce debate, but there has been scant economic analysis of this issue. This paper attempts to fill the gap by presenting a game‐theoretic argument showing that a stringent admissibility standard operates to increase the accuracy of judicial decision‐making in certain situations. More precisely, when the judge faces uncertainty regarding an expert's quality, the admissibility standard may provide the judge with information about the quality of expert testimony, thereby increasing the accuracy of judicial decision‐making by mitigating the judge's inference problem. I show the ways in which this effect dominates at trial and discuss related issues.
    March 13, 2017   doi: 10.1111/sjpe.12129   open full text
  • A simple endogenous growth model with endogenous fertility and environmental concern.
    Simone Marsiglio.
    Scottish Journal of Political Economy. February 20, 2017
    We analyze the implications of endogenous fertility choices on both economic and environmental performances in a stylized AK‐type growth model. Differently from what traditionally assumed in the growth and environment literature, we allow pollution to be not only a by‐product of productive activities by firms but also a result of households’ behavior, as suggested by the celebrated IPAT equation. We show that along the balanced growth path equilibrium, economic growth may be non‐monotonically related to the population growth rate as agents care for the environment; moreover, demographic policies can be used both to achieve win‐win outcomes (simultaneously fostering economic growth and improving environmental quality) and to stabilize the otherwise non‐monotonic economic and population growth relationship.
    February 20, 2017   doi: 10.1111/sjpe.12125   open full text
  • Does Institutional Linkage of Bank‐MFI Foster Inclusive Financial Development Even in the Presence of MFI Frauds?
    Shirley J. Ho, Sushanta K. Mallick.
    Scottish Journal of Political Economy. January 19, 2017
    Growing reports indicate the presence of frauds in microfinance institutions (MFIs), as it can occur in any organization in countries where there are weak institutions, weak rule of law, and fraudulent behavior of MFI officers for personal gain. While there are increasing calls to launch financial governance of these NGO MFIs, there are concerns as to whether frauds of this nature can damage MFIs’ contributions to the credit market, particularly in the bank‐linkage program where the NGO MFIs act as third party intermediary. The purpose of this study was to analyze the collusion decisions faced by MFIs and their impact on the bank‐linkage program, which has been offered as a solution to help overcome adverse selection and moral hazard problems in the credit market by harnessing local information via MFIs. Our results show that even when there is a chance of collusion between MFI and the borrower, the linkage between MFI and bank can still increase the probability that the borrower puts in full effort, and therefore decreases the probabilities of both credit rationing and strategic default. Such linkage in financing viable projects can make micro‐financing more effective in achieving inclusive financial development and thereby poverty reduction in rural areas.
    January 19, 2017   doi: 10.1111/sjpe.12124   open full text
  • Sick pay reforms and health status in a unionised labour market.
    Laszlo Goerke.
    Scottish Journal of Political Economy. December 19, 2016
    We theoretically analyse the effects of sick pay and employees' health on collective bargaining, assuming that individuals determine absence optimally. If sick pay is set by the government and not paid for by firms, it induces the trade union to lower wages. This mitigates the positive impact on absence. Moreover, a union may oppose higher sick pay if it reduces labour supply sufficiently. Better employee health tends to foster wage demands. If the union determines both wages and sick pay, we identify situations in which it will substitute wages for sick pay because adverse absence effects can be mitigated.
    December 19, 2016   doi: 10.1111/sjpe.12123   open full text
  • Art Auctions and Art Investment in the Golden Age of British Painting.
    Federico Etro, Elena Stepanova.
    Scottish Journal of Political Economy. November 14, 2016
    We analyse the evolution of the price of paintings in London auctions with a unique data set of over 200,000 sales in the period 1780–1840. We build a price index for the representative painting through hedonic regressions controlling for the characteristics of auctions and paintings and for the artists’ fixed effects. The emergence of an efficient secondary art market was an important opportunity for portfolio diversification. Estimating a CAPM model for art investment suggests that British paintings could deliver a higher return compared to imported paintings and an attractive source of diversification relative to the contemporary stock market. This contributed to increase the demand for British art and, possibly, to promote the innovations of its Golden Age. While the representative painting of the British school was initially undervalued, new British painters reached foreign prices by the beginning of 1800s.
    November 14, 2016   doi: 10.1111/sjpe.12122   open full text
  • Consumer confusion, obfuscation and price regulation.
    Yiquan Gu, Tobias Wenzel.
    Scottish Journal of Political Economy. October 10, 2016
    This paper studies firms’ obfuscation choices in a duopoly setting where two firms differ in their marginal costs of production. We show that the high‐cost firm chooses maximum obfuscation while the low‐cost firm chooses minimal (maximal) obfuscation if the cost advantage is large (small). We argue that in this setting there is a new role for price regulation as it leads to more transparent pricing. Moreover, a price cap benefits social welfare as it shifts production to the more efficient low‐cost firm.
    October 10, 2016   doi: 10.1111/sjpe.12121   open full text
  • Business Cycle Accounting for Peripheral European Economies.
    Petre Caraiani.
    Scottish Journal of Political Economy. July 27, 2016
    Using the Business Cycle Accounting methodology, this paper analyzes the dynamics of the EMU‐periphery economies before and during what was called the sovereign debt crisis. TFP dynamics and the labor wedge explain most of the dynamics before and during the crisis. The bond wedge, corresponding to the risk premium, made a low contribution, moving counter‐cyclically. The capital wedge made a modest contribution to the fall in output during the crisis. Additional evidence links the dynamics of the TFP and the labor wedge with changes in the interest rates and a spike in import prices at the onset of the crisis, corresponding to the general mechanisms of the large capital inflows, in the wake of the introduction of the Euro, followed by sudden stops.
    July 27, 2016   doi: 10.1111/sjpe.12119   open full text
  • The effects of works councils on overtime hours.
    Rafael Gralla, Kornelius Kraft, Stanislav Volgushev.
    Scottish Journal of Political Economy. July 20, 2016
    This study analyzes the relation between works councils and overtime hours in Germany. The estimated effects differ considerably in dependence of standard contracted working time. Furthermore, we find differences across the quantiles of the overtime hours distribution and these differences between quantiles also vary between employees of establishment with and without works councils. By considering contracted working time effects and comparing conditional quantiles we find in some quantiles that employees of establishments with a works council have a higher amount of overtime hours if an employee regularly works 35 hours per week. This effect diminishes with increasing quantiles of the distribution of overtime hours. If an employee of a codetermined establishment regularly works 40 hours per week, overtime hours are reduced. This reduction becomes larger if higher quantiles are analyzed.
    July 20, 2016   doi: 10.1111/sjpe.12120   open full text
  • A Rational Explanation for the Redistribution Paradox. Theory and Empirical Evidence.
    Roberto Antonietti, Francesco Farina, Fulvio Fontini.
    Scottish Journal of Political Economy. June 29, 2016
    The paper provides a rational explanation for the redistribution paradox, whereby low‐income individuals seeking more social security prefer a lower taxation although this might imply a reduced welfare. A simple model of tax transfer and redistribution is presented, with various agents facing two different unemployment probabilities. We investigate how the preferred tax rate changes with the probability of being unemployed. We show that, when the probability of unemployment for the less‐skilled correlates negatively with that of the highly skilled, the relationship with the tax rate is not monotonic and depends on the level of risk aversion. This theoretical framework is confirmed in an empirical investigation based on microeconomic data, and in a robustness test based on macroeconomic data.
    June 29, 2016   doi: 10.1111/sjpe.12118   open full text
  • An Observable Delay Game with Unionised Managerial Firms.
    Luciano Fanti.
    Scottish Journal of Political Economy. April 14, 2016
    The endogenous order of moves is analysed in a unionised Cournot duopoly with managerial delegation and firm‐specific unions, where firms choose whether to set quantities sequentially or simultaneously. It is shown that, in contrast to the standard duopoly with profit‐maximising firms where both firms prefer to be the leader and thus simultaneously chosen quantities emerge as an endogenous equilibrium, a rich set of equilibrium outcomes may occur. In particular, the result of sequential choices, which reverses the conventional wisdom in regard to Cournot duopolies, emerges as the endogenous equilibrium when the union's wage orientation is sufficiently high.
    April 14, 2016   doi: 10.1111/sjpe.12117   open full text
  • How the Ageing Population Contributes to UK Economic Activity: A Microsimulation Analysis.
    Tony Lawson.
    Scottish Journal of Political Economy. February 15, 2016
    In the United Kingdom, as in several other countries, increasing life expectancy is leading to a shift in the age distribution of the population. Meanwhile, at the level of individuals, spending patterns change as people age. This paper investigates the extent to which demographic change is likely to affect household spending patterns by combining the techniques of dynamic microsimulation with an imputation method known as random assignment. While there has been significant concern about the economic cost of the ageing population, this paper finds a potentially beneficial effect in the form of an increase in total spending for most expenditure categories.
    February 15, 2016   doi: 10.1111/sjpe.12106   open full text
  • Union decline in Britain: does gender have anything to do with it?
    Getinet Astatike Haile.
    Scottish Journal of Political Economy. February 15, 2016
    The paper examines if workplace gender diversity offers some explanation for the decline of unions in Britain. Using the WERS2004 linked employer–employee data and alternative econometric estimators it reports an inverse relationship between workplace union density and gender diversity. Gender and ownership status based sub‐group analyses suggest the inverse relationship to be stronger for male union members and those in the private sector. Gender group size‐based analysis reveals a positive link between workplace union density and gender diversity in workplaces with a female majority. The findings in this paper may mean that unions may need to embrace the changing workplace demography genuinely to improve their fate.
    February 15, 2016   doi: 10.1111/sjpe.12116   open full text
  • Non‐Scale Endogenous Growth with R&D and Human Capital.
    Creina Day.
    Scottish Journal of Political Economy. January 21, 2016
    This paper examines the conditions under which increasing knowledge, encapsulated in ideas for new technology through R&D and embodied in human capital through education, sustains economic growth. A general model is developed where, consistent with recent literature, growth is non‐scale (not increasing in population size) and endogenous (generated by factors within R&D and education). Recent models feature the counterfactual assumption of constant returns to existing knowledge and restrict the substitutability of inputs within R&D and education. We find that non‐scale endogenous growth is possible under less stringent conditions. The findings reconcile sustained economic growth with evidence of diminishing marginal returns in education and R&D, which suggests an ambiguous role for R&D policy.
    January 21, 2016   doi: 10.1111/sjpe.12115   open full text
  • Is Happiness Infectious?
    John Knight, Ramani Gunatilaka.
    Scottish Journal of Political Economy. January 08, 2016
    The paper uses an appropriate survey from rural China to answer the question: is happiness infectious, i.e. does the happiness of an individual depend positively on the happiness of his or her reference group? The evidence is consistent with this hypothesis, but the challenge is to solve the ‘reflection problem’, i.e. is the apparent effect of neighbours’ happiness on own happiness a causal one or merely a reflection? A ‘quasi‐panel’ approach is adopted, treating villages as groups and individuals as multiple observations within each group, and using an error components 2SLS estimator. The results suggest that the relationship might be largely causal. The normative and policy implications are briefly considered.
    January 08, 2016   doi: 10.1111/sjpe.12105   open full text
  • Inflation convergence in Central and Eastern Europe vs. the Eurozone: Non‐linearities and long memory.
    Juan Carlos Cuestas, Luis A. Gil‐Alana, Karl Taylor.
    Scottish Journal of Political Economy. January 08, 2016
    In this paper, we consider inflation rate differentials between seven Central and Eastern European Countries (CEECs) and the Eurozone. We test for convergence in the inflation rate differentials, incorporating non‐linearities in the autoregressive parameters, fractional integration with endogenous structural changes, and also consider club convergence analysis for the CEECs over the period 1997 to 2015 based on monthly data. Our empirical findings suggest that the majority of countries experience non‐linearities in the inflation rate differential; however, there is only evidence of a persistent difference in some countries. Complementary to this analysis we apply the Phillips and Sul (2007) test for club convergence and find that there is evidence that most of the CEECs converge to a common steady state.
    January 08, 2016   doi: 10.1111/sjpe.12114   open full text
  • Monetary Reference Points of Managers – Empirical Evidence of Status Quo Preferences and Social Comparisons.
    Christian Grund, Johannes Martin.
    Scottish Journal of Political Economy. November 06, 2015
    We explore whether monetary reference points affect managers′ job satisfaction. These reference points include a manager′s own status quo and the incomes of comparable managers within the same firm and also at the market level. Making use of a unique panel data set of managers in the German chemical sector, we find that social comparisons of compensation do affect reported job satisfaction. Both the relative income position within a manager's own firm and a manager's wage rank on the market have positive relations with job satisfaction. There is no evidence of the relevance of status quo considerations once we control for firm‐related pay variables.
    November 06, 2015   doi: 10.1111/sjpe.12103   open full text
  • Testing the Participation Constraint in the Executive Labour Market.
    Ian Gregory‐Smith, Brian G. M. Main.
    Scottish Journal of Political Economy. October 19, 2015
    This paper tests the participation constraint by examining the workings of the executive labour market in a panel of UK listed companies over a period of 14 years. Directors are found to move jobs regularly – both within companies and between companies. Consistent with agency theory, directors who are underpaid relative to their comparable peers are particularly likely to leave for higher paying jobs in other companies. Those who move between companies secure more favourable terms than those who move within their firm – even when the move does not involve promotion, calling into question the managerial power perspective of this area of employment.
    October 19, 2015   doi: 10.1111/sjpe.12102   open full text
  • Tax Evasion, Corruption and Market Entry.
    André Seidel, Marcel Thum.
    Scottish Journal of Political Economy. October 05, 2015
    We analyze the impact of tax policy on the market entry of firms in the presence of corruption and tax evasion. In a world with corruption, firms must bribe corrupt officials to enter the market. For a given level of bribes, higher tax rates and stricter enforcement of taxation decrease tax evasion but typically reduce market entry. However, when the level of bribes reacts to tax policy, higher taxes and stricter enforcement of taxation can have a double benefit. Up to a certain threshold, for which we develop a simple rule, stricter enforcement increases market entry and reduces tax evasion.
    October 05, 2015   doi: 10.1111/sjpe.12100   open full text
  • Competition Among National Football Leagues. Does It Exist? Should We Regulate?
    Yvon Rocaboy.
    Scottish Journal of Political Economy. October 05, 2015
    It is often supposed that the stakeholders of a national football league draw more satisfaction from their sport if the league is balanced, that is, if a large number of clubs have a reasonable chance of winning. This is the so‐called Competitive balance hypothesis. This hypothesis can be challenged, however, in the context of international competition like the European champions league. It could be that the utility of national leagues' stakeholders would be higher if the probability of victory for their nation's club at the international level were higher. If this were the case, a league's governing body intending to maximize the quality of the national league by making use of redistributive schemes would face a trade‐off between national competitive balance and international performance of the national representative club. We propose a simple microeconomic framework to model this trade‐off. If a non‐cooperative game exists among the national league governing bodies, whether it is a Nash or a Stackelberg one, this game would result in inefficient redistributive policies. We find ‘soft’ empirical evidence of such a competition among the big 5 football leagues in Europe. This result supports the idea of the creation of an international regulatory body. We derive the conditions under which the international regulatory body should ensure that the leagues' governing bodies implement redistributive schemes guaranteeing the respect of the national competitive balance. We also emphasize the risk of experiencing a drop in the quality of leagues if one of them becomes too big relatively to the others, what we call the tragedy of the wealthy.
    October 05, 2015   doi: 10.1111/sjpe.12101   open full text
  • Immanuel Kant and Endogenous Growth Theory.
    Gabriel Fagan, Vitor Gaspar, Peter McAdam.
    Scottish Journal of Political Economy. September 25, 2015
    Despite the modern origins of endogenous growth theory, we argue that the ‘Idea for a Universal History with a Cosmopolitan Aim’ written by Immanuel Kant in 1784 provides an early and coherent example of such a theory. Kant's endogenous growth mechanism is driven by the inherent rivalry that exists between agents which increases effort and strengthens the accumulation of knowledge, which in turn is carried through generations. In an exercise in ‘rational reconstruction’, we present a mathematical model of Kant's mechanism. We use the model to contribute to the contemporary policy debate as to whether ‘keeping up with the Joneses’ leads to excessive effort.
    September 25, 2015   doi: 10.1111/sjpe.12099   open full text
  • Endorse or Not to Endorse: Understanding the Determinants of Newspapers’ Likelihood of Making Political Recommendations.
    Fernanda Leite Lopez Leon.
    Scottish Journal of Political Economy. September 10, 2015
    This article investigates the determinants of newspapers’ provision for political opinion. I empirically examine the role of newspapers’ political preferences and market competition on newspapers’ decision to make endorsements. Regression results suggest that market competition turns newspapers more likely to make endorsements. Results from a simple model show that newspapers’ ideology determine their endorsements, making partisan papers more likely to make political recommendations and endorse challengers than non‐partisan newspapers.
    September 10, 2015   doi: 10.1111/sjpe.12098   open full text
  • Does Tax Competition Reduce Corruption?
    Yu‐Bong Lai.
    Scottish Journal of Political Economy. August 11, 2015
    A vast literature asserts that competition among jurisdictions can mitigate corruption. However, empirical studies do not fully support such a conventional view. This paper points out a drawback of the conventional view, that is, it ignores the role played by the owners of immobile factors. Within a standard tax competition model, we amend the conventional view by incorporating the lobbying of the immobile factor owners, and show that fiscal decentralization can aggravate corruption. We also demonstrate that social welfare can be higher under decentralization than under centralization in some cases, whereas the immobile factor owners' lobbying will prevent such a superiority of decentralization from being the outcome. Moreover, we provide an example to show that a better policy outcome and a higher level of corruption can co‐exist, which contrasts with the general belief.
    August 11, 2015   doi: 10.1111/sjpe.12096   open full text
  • Fairness Considerations in Labor Union Wage Setting – A Theoretical Analysis.
    Matthias Strifler, Thomas Beissinger.
    Scottish Journal of Political Economy. June 26, 2015
    We consider a theoretical model in which unions not only take the outside option into account, but also care about the performance of the firm and base their wage‐setting decisions on a firm internal reference, called the fairness reference. Two references, which measure the earnings situation of the firm, are considered – productivity and profits per worker. Wage and employment outcomes as well as the degree of wage rigidity depend on the size of the fairness reference relative to the outside option. A high fairness reference leads to wage pressure and real wage rigidity, whereas a low fairness reference leads to wage moderation and real wage flexibility. An increase in the weight on the fairness reference amplifies these deviations from the standard model.
    June 26, 2015   doi: 10.1111/sjpe.12094   open full text
  • Fiscal Illusion and Cyclical Government Expenditure: State Government Expenditure in the United States.
    Andrew Abbott, Philip Jones.
    Scottish Journal of Political Economy. June 24, 2015
    A well‐established literature argues that fiscal illusion increases the level of government expenditure. This paper focuses on the proposition that fiscal illusion also influences the cyclicality of government expenditure. Predictions are formed with reference to government reliance on high income‐elasticities of indirect tax revenues and on intergovernmental transfers. Predictions are tested with reference to the expenditures of 36 states in the United States from 1980 to 2000. Government expenditures are more likely to be procyclical when citizens systematically under‐estimate the cost of taxation.
    June 24, 2015   doi: 10.1111/sjpe.12093   open full text
  • Service Deregulation, Competition, and the Performance of French and Italian Firms.
    Francesco Daveri, Rémy Lecat, Maria Laura Parisi.
    Scottish Journal of Political Economy. June 23, 2015
    This article reports estimates of the impact of service regulation reform on the productivity of French and Italian firms in retail, transports and professional services over the period 1998–2007. We implement a two‐stage least squares estimation: the first‐stage instruments mark‐ups, a financial measure of rents, with barriers to entry and the second stage estimates the impact of instrumented mark‐ups on total factor productivity (TFP), a real measure of firm efficiency. We find that entry barriers lower firm productivity by raising mark‐ups and rents. These estimates imply that, if French and Italian regulators had adopted the OECD best practices in terms of entry barriers, firms in these sectors would have increased their TFP level by five percentage points. We do not find any robust evidence of a non‐linear relation between mark‐up and productivity.
    June 23, 2015   doi: 10.1111/sjpe.12092   open full text
  • A Spatial Stochastic Frontier Model with Spillovers: Evidence for Italian Regions.
    Efthymios G. Tsionas, Panayotis G. Michaelides.
    Scottish Journal of Political Economy. June 13, 2015
    Efficiency measurement using stochastic frontier models is well established in applied econometrics. However, no published work seems to be available on efficiency analysis using spatial data dealing with possible spatial dependence between regions. This article considers a stochastic frontier model with decomposition of inefficiency into an idiosyncratic and a spatial, spillover component. Exact posterior distributions of parameters are derived, and computational schemes based on Gibbs sampling with data augmentation are proposed to conduct simulation‐based inference and efficiency measurement. The new method is illustrated using production data for Italian regions (1970–1993). Clearly, further theoretical and empirical research on the subject would be of great interest.
    June 13, 2015   doi: 10.1111/sjpe.12081   open full text
  • Entry Threats and Inefficiency in ‘Efficient Bargaining’.
    Rupayan Pal, Bibhas Saha.
    Scottish Journal of Political Economy. June 08, 2015
    We study limit pricing in a model of entry with asymmetric information, where the incumbent firm's wage is endogenously determined through ‘efficient bargaining’ with its union. In the presence of entry threat, the incumbent firm‐union pair may face a conflict between rent sharing and transmitting its cost information. When the wage is not observable to outsiders and employment is the only signalling instrument, over‐employment features in all entry deterring contracts. When the wage is also observable, information transmission becomes easier. Most of the time, then, but not always, the efficient contract deters (induces) entry against the low (high) cost incumbent.
    June 08, 2015   doi: 10.1111/sjpe.12091   open full text
  • Let's Get Messi? Top‐Scorer Productivity in the European Champions League.
    Tim R. L. Fry, Guillaume Galanos, Alberto Posso.
    Scottish Journal of Political Economy. May 05, 2014
    Getting a player like Lionel Messi in the squad would seem like a dream come true for a professional football manager, but is it always best to have top‐quality players? We study the determinants of top goal‐scorers’ productivity in the UEFA Champions League. We find evidence of a concave relationship between age and productivity and uncover an inverted‐U relationship between performance and minutes played. Finally, we find a positive effect on height, being left footed and being a striker on the probability of scoring a goal. The results have important implications for managers both in looking to sign on new players and to maximise their potential during a competitive match.
    May 05, 2014   doi: 10.1111/sjpe.12044   open full text
  • Competition Between Exclusive Religions: The Counter‐Reformation As Entry Deterrence.
    Mario Ferrero.
    Scottish Journal of Political Economy. May 05, 2014
    This article sets forth a theory of competition between exclusive religions as an entry deterrence game, in which the incumbent may find it profitable not to accommodate but to deter the competitor's entry by precommitting to sufficient capacity expansion in the event of entry. If entry costs are high enough, deterrence is optimal and the incumbent remains a monopolist, although the entry threat distorts its effort upward. The model is then applied to the Catholic Church's reaction to the Protestant Reformation. It is argued that the model provides a better fit to the historical data of the Counter‐Reformation than the price‐cutting model proposed by economists Ekelund, Hébert and Tollison (, ).
    May 05, 2014   doi: 10.1111/sjpe.12045   open full text
  • Babbage's Legacy: The Origins of Microeconomics in On the Economy of Machinery and Manufactures.
    Mustafa Erdem Ozgur.
    Scottish Journal of Political Economy. May 05, 2014
    British mathematician Charles Babbage (1791–1871) spent immense energy to build mechanical calculating engines. Hoping that it might help him in designing and building his engines, he visited numerous workshops and factories in both England and Continental Europe. One of the consequences of these visits was his On the Economy of Machinery and Manufactures, published in 1832. Through his observations, Babbage grasped the advantages of machinery and economies of scale. In micro terms, he acknowledged the cost‐reducing features of economies of location, vertical integration, and division of labor – beyond Adam Smith's analysis – as well as the efficacy of clustering. He also pointed out the relationship between firm size, economic crisis, and innovation.
    May 05, 2014   doi: 10.1111/sjpe.12047   open full text
  • Tax Enforcement Policy and the Provision of Public Goods with the Presence of Tax Havens.
    Hsun Chu.
    Scottish Journal of Political Economy. May 05, 2014
    A tax competition model is presented to investigate the effects of tax havens on the public good provision. We show that when countries facing a rise in tax havens change their tax enforcement strategies in response, the existence of tax havens may result in a higher level of equilibrium public good provision as compared to the case with no tax havens. Accordingly, tax havens could be welfare enhancing for non‐haven countries. This result offers a possible explanation for the recent empirical evidence that the corporate tax revenues in high‐tax countries have actually increased with the growth in the flow of foreign direct investment to tax havens.
    May 05, 2014   doi: 10.1111/sjpe.12046   open full text
  • Bayesian Unconditional Quantile Regression: An Analysis of Recent Expansions in Wage Structure and Earnings Inequality in the US 1992–2009.
    Michel Lubrano, Abdoul Aziz Junior Ndoye.
    Scottish Journal of Political Economy. March 15, 2014
    We develop Bayesian inference for an unconditional quantile regression model. Our approach provides better estimates in the upper tail of the wage distribution as well as valid small sample confidence intervals for the Oaxaca–Blinder decomposition. We analyze the recent changes in the US wage structure using data from the CPS Outgoing Rotation Group from 1992 to 2009. We find that the largest part of the recent changes is explained mainly by differences in returns to education while the decline in the unionization rate has a small impact, and that earnings inequality is rising more at the top end of the wage distribution.
    March 15, 2014   doi: 10.1111/sjpe.12038   open full text
  • A Golden Formula in Neoclassical‐Growth Models with Brownian‐Motion Shocks.
    Darong Dai.
    Scottish Journal of Political Economy. March 06, 2014
    In the paper, a Golden Formula, which does not depend on the specification of production and preference functions, is established to reveal that time‐average of the growth rate of optimal capital accumulation will converge to a constant, which is endogenously determined by relevant parameters, almost surely. The Golden Formula naturally implies surprisingly interesting and also intrinsic economic relations between some important macroeconomic variables; for example, it serves as a direct bridge between the modified Golden Rule and the modified Ramsey Rule. Furthermore, it indeed subsumes and hence substantially extends the classical Golden Rule in deterministic theory.
    March 06, 2014   doi: 10.1111/sjpe.12042   open full text
  • Feasibility, Stability, and Multiple Research Joint Ventures.
    Zhiyong Yao, Bingyong Zheng.
    Scottish Journal of Political Economy. March 06, 2014
    We study multiple research joint ventures (RJVs) using a repeated game with imperfect monitoring. Compared with the single joint venture case, we show that cooperation in multiple joint ventures creates two advantages for participating firms. First, by linking decisions together across all joint ventures firms can mitigate the likelihood of cooperation breakdowns following bad R&D outcomes. Second, as the incentive cost to sustain cooperation is independent of the number of joint ventures, the economy of scale effect reduces the efficiency loss due to imperfect monitoring.
    March 06, 2014   doi: 10.1111/sjpe.12041   open full text
  • Adam Smith on Monopoly Theory. Making good a lacuna.
    Neri Salvadori, Rodolfo Signorino.
    Scottish Journal of Political Economy. March 06, 2014
    This article analyses Adam Smith's views on monopoly by focusing on Book IV and V of The Wealth of Nations. It argues that the majority of scholars have assessed Smith's analysis of monopoly starting from premises different from those, actually though implicitly, used by Smith. We show that Smith makes use of the word ‘monopoly’ to refer to a heterogeneous collection of market outcomes, besides that of a single seller market, and that Smith's account of monopolists' behaviour is richer than that provided by later theorists. We also show that Smith was aware of the growth‐retarding effect of monopoly and urged State regulation.
    March 06, 2014   doi: 10.1111/sjpe.12040   open full text
  • Do Scarring Effects of Low‐Wage Employment and Non‐Employment Differ BETWEEN Levels of Qualification?
    Alexander Mosthaf.
    Scottish Journal of Political Economy. March 06, 2014
    This study investigates how the effects of low‐wage employment and non‐employment on wage prospects vary depending on qualification. Based on theories on signalling effects, human capital and job search, we discuss why there may be heterogeneity in state dependence in both labour market states. We find that episodes of low‐wage employment incur a significantly lower risk of future non‐employment than episodes of non‐employment for low‐qualified workers. In contrast, for workers with a middle or high level of qualification the risk of non‐employment is not significantly different when being low‐paid instead of not employed.
    March 06, 2014   doi: 10.1111/sjpe.12039   open full text
  • A Moral Hazard Approach to Wage Discounts under Informal Hiring.
    Miguel A. Duran, Antonio J. Morales.
    Scottish Journal of Political Economy. March 06, 2014
    This study discusses informal hiring in terms of a standard principal–agent model. We have developed an adverse selection model of the labour market where effort is not contractible and employers have the opportunity to use informal search channels for hiring purposes. This standard framework enables us to provide an effort‐based explanation of the wage gap associated with informal hiring. Besides the wage discount, another feature of the equilibrium is that low‐ability workers informally hired shirk.
    March 06, 2014   doi: 10.1111/sjpe.12037   open full text
  • Discounting, Distribution and Disaggregation: Discount Rates for the Rich and the Poor with Climate as a Source of Utility.
    Rintaro Yamaguchi.
    Scottish Journal of Political Economy. August 04, 2013
    To consider the implications of disaggregated consumption and discounting in the context of climate change, we study discounting in a world composed of the rich and the poor; a standard setting in the literature of cost–benefit analysis with distributional considerations. We derive several discount rates for different numéraires, which allow us to discuss intergenerational and intragenerational equity in common terms. In the example of CES‐CRRA utility, we also show that disaggregated discount rates may vary owing to several factors. One important parameter, inequality aversion, can be determined in the weighting of intergenerational and intragenerational concerns.
    August 04, 2013   doi: 10.1111/sjpe.12018   open full text
  • Is There a Gap in the Gap? Regional Differences in the Gender Pay Gap.
    Boris Hirsch, Marion König, Joachim Möller.
    Scottish Journal of Political Economy. August 04, 2013
    In this paper, we investigate regional differences in the gender pay gap both theoretically and empirically. Within a spatial model of monopsonistic competition, we show that more densely populated labour markets are more competitive and constrain employers’ ability to discriminate against women. Utilizing a large administrative data set for western Germany and a flexible semi‐parametric propensity score matching approach, we find that the unexplained gender pay gap for young workers is substantially lower in large metropolitan than in rural areas. This regional gap in the gap of roughly 10 percentage points remained surprisingly constant over the entire observation period of 30 years.
    August 04, 2013   doi: 10.1111/sjpe.12017   open full text
  • Distance to Frontier and New Import Growth.
    Purba Mukerji.
    Scottish Journal of Political Economy. August 04, 2013
    In a panel‐data study involving product‐level import data for 48 developing countries that underwent substantial trade liberalization between 1989 and 2001, this study finds that the growth of trade in new goods imported following major trade liberalization is related to the state of technology that existed just before liberalization. The study develops two new measures of the extensive margin. Findings indicate that greater is the distance of a country from the world technology frontier, the faster is its growth of new goods imports. This indicates a higher cost of trade protection for countries further away from the world technology frontier.
    August 04, 2013   doi: 10.1111/sjpe.12016   open full text
  • Why Has the Fraction of Nonstandard Workers Increased? A Case Study of Japan.
    Hirokatsu Asano, Takahiro Ito, Daiji Kawaguchi.
    Scottish Journal of Political Economy. August 04, 2013
    This paper explains the secular increase of nonstandard workers in Japan, whose share of employment increased from 17 to 34% between 1986 and 2008. Changes in labor force and industrial compositions account for one quarter of the increase of nonstandard workers. Product‐demand fluctuation and the introduction of information and communication technologies increased firms' usage of nonstandard workers, but its quantitative effects are limited. The increase of nonstandard workers was concentrated among new entrants to the labor market, male workers of younger cohorts, and female workers of all cohorts, suggesting that the declining importance of the long‐term employment relationship is a major cause for the increase of nonstandard workers.
    August 04, 2013   doi: 10.1111/sjpe.12015   open full text
  • An Economic Analysis of Maritime Piracy and its Control.
    Paul Hallwood, Thomas J. Miceli.
    Scottish Journal of Political Economy. August 04, 2013
    Modern‐day piracy on the high seas poses a serious threat to international shipping. This paper develops an economic of model of piracy that emphasizes the strategic interaction between the efforts of pirates to locate potential targets, and shippers to avoid contact. Implementation of optimal enforcement policies is complicated by the need for international cooperation in the apprehension and prosecution of pirates. Free riding and other problems therefore impede the effectiveness of current international laws against piracy.
    August 04, 2013   doi: 10.1111/sjpe.12014   open full text