Search

Currency unions have been promoted as a means to increase trade, investment and growth. A crucial issue in giving up the domestic currency is the loss of a mechanism to absorb real external shocks. High real exchange volatility between countries considering such a policy would suggest that a currency union could be quite costly in terms of large, persistent misalignment and thus balance of payments imbalances. Von Hagen and Neumann (1994) assessed the readiness of nine European countries for Euro-zone membership by examining real exchange rate variability. In this paper we analyze their predictions, and find them to be quite accurate for Europe. All of the nations which appeared ready for the Euro have joined. Of the three which did not appear prepared, two have retained their own currency, and the third has experienced real appreciation and stagnant exports. Given the prescience of this method, we apply it to nine Latin American nations. A number of countries in this region have begun to form a currency union by unilaterally adopting the U.S. dollar. The Von Hagen-Neumann method finds very high real exchange rate variability between the U.S. and the Latin American nations-indeed much higher than that between Germany and the countries which would later adopt the Euro-so adopting the dollar could cause very painful adjustment in Latin America. [ABSTRACT FROM AUTHOR]

This paper studies wage structure characteristics and their incentive effects within one firm. Based on personnel records and an employee survey, we provide evidence that wages are attached to jobs and that promotions play a dominant role as a wage determinant. We furthermore show that a promotion affects both intrinsic and extrinsic motivation significantly, though in two different ways: An expected promotion increases extrinsic motivation whereas intrinsic motivation is highest subsequent to a realized promotion. The relationship between extrinsic motivation and expected promotions implies that promotions have a clear incentive effect, consistent with a key – not yet tested – prediction of the tournament model. [ABSTRACT FROM AUTHOR]

This paper investigates the role of television in producing higher material aspirations, by enhancing both adaptation and positional effects. Using a large sample of individuals from the World Values Survey, we find that the effect of income on both life and financial satisfaction is significantly smaller for heavy television viewers than for occasional viewers. This finding is robust to a number of specification checks and alternative interpretations. The results suggest an additional explanation for the income-happiness paradox: the pervasive and increasing role of television viewing in contemporary society, by raising material aspirations, contributes to offset the effect of higher income on individual happiness. [ABSTRACT FROM AUTHOR]

The AEL (aid effectiveness literature) studies the macroeconomic effects of development aid using cross-country or panel data econometrics. It contains 97 papers of which 43 study whether development aid leads to increasing accumulation. The aggregate results of the 43 studies are that aid increases investment with about 25% of the aid, while most of the remaining 75% of the effect is crowded out by a fall in savings. However, these aggregate results are so variable that it is dubious if accumulation rises. [ABSTRACT FROM AUTHOR]

The past few decades have witnessed a widening of the digital divide among countries in the world. Bridging this global digital divide has now become an important development policy of many governments in the developing world. Differing from previous studies that look at the Internet's popularity, this paper focuses on the speed of diffusion of such technologies over the period from 1997 to 2002 in order to highlight its role as a critical driving force in enhancing the social learning of a country. Our empirical results show that a country with better social learning can harmonize its heterogeneous populations, promote the sharing of knowledge as a result of using such technologies, and finally speed up the rate of information technology diffusion. [ABSTRACT FROM AUTHOR]

Structural Funds are the most intensively used policy instrument by the European Union to promote economic growth in its member states and to speed up the process of convergence. This paper empirically explores the effectiveness of European Structural Funds by means of a panel data analysis for 13 countries in the European Union. We show that – on average – Structural Funds are ineffective. For countries with a ‘proper’ institutional framework, however, Structural Funds are effective. The latter result is obtained for a wide range of conditioning variables, such as openness, institutional quality, corruption and indicators for good governance. It is robust to a wide range of robustness tests. [ABSTRACT FROM AUTHOR]

This paper analyzes the impact of institutions upon happiness through their intermediary impact upon individual trust. The empirical work is based on Eurobarometer data covering the 15 countries of the EU prior to its expansion in 2004. With respect to trust, we present evidence that, although it is endogenous with respect to the performance of the institution, changes in the individual's personal circumstances can also have an impact, indicating that trust is not simply learned at an early age. Hence unemployed people tend to have lower levels of trust not only in the main economic institutions – government and the Central Bank – but in other state institutions too such as the police and the law. Trust also differs in a systematic manner with respect to education and household income, increases (decreases) in either increase (decrease) trust in most institutions. If we assume that more educated people make better judgments, this suggests that on average people tend to have too little trust in institutions. However, it is also possible that both of these variables impact on the interaction between institutions such as the police and other government agencies and the citizen, with prosperous, well educated people being at an advantage and possibly able to command more respect. Age too impacts on institutional trust. For the UN, the unions, big business, voluntary organizations and the EU, trust first declines and then increases with the estimated turning points ranging between 44 and 56 years. For most other organizations trust significantly increases with age. Turning to subjective well-being, we find the standard set of socio-economic variables to be significant. But the focus here is on the impact of institutional trust. We find that trust (mistrust) in the European Central Bank, the EU, national government, the law and the UN all impact positively (negatively) on well-being. Hence overall our results support the conclusion that happiness does not solely lie within the realm of the individual, but that institutional performance also has a direct impact upon subjective well-being. [ABSTRACT FROM AUTHOR]

This paper discusses how simulation models based on game-theoretic foundations can be used to arrive at an estimate of the net benefits of the merger control legislation. We illustrate our method using the Dutch new merger control legislation that was introduced in 1998. We analyse the effects of proposed mergers in four markets where 26 firms are operating and use a sample period of 5 years. Based on the results of these cases and using a cost benefit analysis, we estimate the net benefits of Dutch merger control at about a little more than €100 million a year during the first five years of merger control in The Netherlands. [ABSTRACT FROM AUTHOR]

This paper suggests that, while medieval cathedrals served many purposes and, indeed, were some of the greatest technical achievements of their time, they served a rational economic purpose as well. Protestant entry into the market for Christian religion finally materialized in the early sixteenth century. The Roman Catholic Church did not make a ‘mistake’ in failing to forestall entry. We argue that the Church made a conscious rational effort to do so by supplying excess capacity and particular forms of capital in medieval cathedrals. While the attempt to forestall entry was ultimately unsuccessful, the extent of cathedral building helps explain why some areas of Europe remained Catholic and alternative forms of Christianity took hold in other locales. [ABSTRACT FROM AUTHOR]

Are private firms more efficient than public ones? Does privatisation improve performance? In order to answer these questions, it is necessary to disentangle the impact of ownership and competition upon business performance. This paper presents empirical evidence relating to the hypothesis that public ownership and competition are determinants of firms' productivity. It concludes that public ownership has a significant negative effect on productivity and also that privatisation has a positive impact on efficiency. Furthermore, increased competition is found to have a positive effect on productivity. These results are interpreted as confirming that privatisation is effective as a means of increasing firms' efficiency, at least in a non-regulated and relatively competitive sector, such as manufacturing. [ABSTRACT FROM AUTHOR]

Investment incentives targeted at attracting multinational firms have been extensively researched, and empirical evidence has shown them to be influential. The same is not true of exit restrictions. Yet, as recent theory suggests, there may be a trade-off between entry incentives and ease of exit. This paper focuses on that trade-off in the case of US multinationals in 33 host countries. An indicator of labour market regulations is used as a measure of ease of exit. Results suggest that both entry incentives and labour market regulations are important and ignoring the latter neglects an important dimension in firms' location decision. [ABSTRACT FROM AUTHOR]

This paper explores the conflict of real and monetary convergence during the EMU run-up of the Central and Eastern European member states. Using a Balassa-Samuelson model of productivity driven inflation, we find a high probability of higher inflation in the new member states. We compare the policy options which make the compliance possible, i.e. fiscal tightening and nominal appreciation within the ERM2 band. Nominal appreciation within ERM2 seems the better option to achieve the compliance with the Maastricht criteria, as no discretionary government intervention is necessary, and losses in terms of real growth are smaller. Having once opted for nominal appreciation by fixing the ERM2 entry rate as the central rate (Irish model), a high degree of flexibility is provided in coping with erratic short-term capital inflows. The strategy of setting the ERM2 entry rate above the central rate (Greek model) implies a clear exchange rate path within ERM2 and thereby less exchange rate volatility. Despite the merits of nominal appreciation, countries committed to hard euro pegs, or with high budget deficits, may choose fiscal contraction as a solution. [ABSTRACT FROM AUTHOR]

Theory presents two channels through which profit sharing can cause workers to increase their coworkers' productivity: greater cooperation and increased peer pressure. This paper argues that these generate opposite influences on coworker relations, and that which dominates varies according to circumstances and type of worker. Using German data, we show that, for non-supervisory men, profit sharing increases cooperation, but that for those who highly value success on the job, it has no influence on cooperation, and for supervisors it reduces cooperation. Moreover, the findings show striking gender differences in the effect of profit sharing. We contend these patterns fit with underlying theoretical expectations. [ABSTRACT FROM AUTHOR]

There is a growing interest in the academic and policy making communities in understanding the effects of sectoral specialisation on labour market performance. The existing empirical evidence, mainly based on US data, generally finds a positive correlation between sectoral specialisation and labour market indicators such as wages and unemployment. The policy implication one can draw from these results is that fostering sectoral diversification may reduce unemployment. However, this lesson may not hold for all countries. In particular, in the case of Europe, the diversity of labour market institutions may play a distinct role in shaping the relationship between sectoral specialisation and labour market performance. In this paper, we investigate the relationship between regional sectoral specialisation and regional unemployment rate in the context of different collective bargaining institutions in the EU countries. We find that collective bargaining institutions do play a role in shaping the unemployment rate differentials across regions belonging to the same country. Furthermore, the relationship between regional specialisation and the regional unemployment rate is stronger in countries with intermediate and decentralised collective bargaining institutions in comparison to countries with centralised collective bargaining institutions. Our results suggest that labour market institutions are likely to influence the outcome of policies aiming at fostering regional diversification. While such policies may result in reducing regional unemployment in countries with decentralised and intermediate levels of collective bargaining, they may not make a big difference in countries with centralised collective bargaining institutions. [ABSTRACT FROM AUTHOR]

The paper reviews and evaluates some recent contributions on modeling entrepreneurship within a neoclassical framework, analyzing how, and to what extent, the fundamental ingredients suggested in the social science literature were captured. It is shown how these approaches are important in stressing the main elements of a complex picture, without being able to fully describe it. Each modeling attempt focuses only on one specific feature of entrepreneurship, and the entrepreneurial function, broadly perceived, eludes analytical tractability. As a consequence, the models can be useful in analyzing the effect of entrepreneurial behavior at an aggregate level, but not at explaining individual choices. From these observations, it is highlighted how a simplistic interpretation of the existing mainstream approaches incorporating entrepreneurship runs the risk of leading to distortionary policy interventions. [ABSTRACT FROM AUTHOR]

This paper proposes a new method for constructing R&D capital stocks developed to avoid the common assumption of a constant rate of knowledge depreciation, which implies wear and tear of knowledge. The method models the development of R&D capital stocks as a process of creative destruction linking the depreciation of knowledge to the emergence of new knowledge. A first empirical assessment of the new method – measuring the influence of R&D capital stocks on production in the manufacturing sectors of 12 OECD countries – produces plausible and robust results. [ABSTRACT FROM AUTHOR]

This paper investigates the empirical relation between consumer and expert expectations about macroeconomic conditions in Germany. Using data from the EU Consumer Confidence Survey and the ZEW business expectations, static models and error-correction models are estimated explaining consumer expectations as functions of expert expectations, consumer retrospections, and lagged consumer expectations. It's found that consumer expectations are only weakly related to expert expectations, but strongly influenced by consumers' retrospections. Consumers primarily extrapolate perceptions about current economic conditions in the future. However, during national election campaigns, the relation between consumer and expert expectations is stronger. [ABSTRACT FROM AUTHOR]

Science is a winner-take-all profession in which only a few contributions get excessive attention and the large majority of papers receive scant or no attention. This so-called ‘waste’, together with all the competitive strategies of scientists seeking attention, is part and parcel of every creative profession and not a worrisome fact, as the price society pays for human ingenuity is extremely small: 0.0006 percent of world income goes into the publication of scientific research. The more worrisome features of competition in academic economics do not reveal themselves through ordinary citation or publication statistics or competitive attention seeking strategies, like starting fads and networking. Badly designed uses of market principles, in which citations and publications have become the sole measuring rod of scientific ‘productivity’, deserve more attention instead of the excessive focus on being uncited. To detect the real story of scientific progress, or to judge academic work, ‘reality economics’ or ‘learning by asking and watching’ should complement citation and publication statistics. [ABSTRACT FROM AUTHOR]

The article focuses on three strategies which could help to keep in touch with the present rapid changes of the environment, the microelectronic revolution, globalization and liberalization, neoliberalism and privatization and so forth. This changed environment may lead to fundamental changes in macroeconomic assumptions and policy problems. Robert Skidelsky, the author of an impressive three volume biography of economist John Maynard Keynes and a great admirer of Keynes, in one of his papers remarks on the enormous changes that have taken place since the "General Theory," adding that in view of them, a "new Keynes" is needed.

Non-profit firms are often seen as workplaces where people not only work for money, but also find substantial satisfaction in the kind of work they do. Studies looking at compensating wage differentials, however, have only found limited support for this notion. In this paper, a novel approach is undertaken to compare the utilities of non-profit and for-profit employees, by using measures of job satisfaction. The results show that in both the United States and Great Britain over the 1990's, non-profit workers were generally more satisfied with their jobs than for-profit workers. The robustness of the results is explored in detail, and implications for the governance of non-profit firms are shortly discussed. [ABSTRACT FROM AUTHOR]

This paper discusses the recent literature on the role of the state in economic development. It concludes that government incentives to enact sound policies are key to economic success. It also discusses the evidence on what happens after episodes of economic and political liberalizations, asking whether political liberalizations strengthen government incentives to enact sound economic policies. The answer is mixed. Most episodes of economic liberalizations are indeed preceded by political liberalizations. But the countries that have done better are those that have managed to open up the economy first, and only later have liberalized their political system. [ABSTRACT FROM AUTHOR]

Both the economic theory of federalism and international environmental economics are interested in finding conditions under which countries or groups of countries would like to start cooperation with other countries. In the framework of the standard public-good model this paper presents a criterion for individually rational and thus voluntary international cooperation aiming at the provision of an international public good. This basic criterion can be traced back to Wicksell and Rawls and reflects the idea of reciprocity. In a further step, it is used to specify determinants that affect the decision of a group of countries to enter a coalition. It turns out that in this context the adjustment behavior of the original coalition members as well as that of the remaining outsiders is of particular importance. Finally the theoretical considerations are confronted with actual behavior of countries and groups of countries (as the EU, US and the developing countries) in the Kyoto process leading to a discussion of further prospects for global climate-change policy. [ABSTRACT FROM AUTHOR]

This paper distinguishes four types of‘Prisoners’ Dilemma games– provision, the commons, selfishness, and altruism– based on the public character of benefits and costs. Although each of these four games has the same 2× 2 ordinal game form, each differs in terms of strategic, dynamic, and policy implications. Similar differences characterize the n-person representations of the four games. When paired in 3× 3 representations, the least-desirable Nash equilibrium of the two embedded 2× 2 games results. The four types of PD games also have different evolutionary and informational requirements for cooperation. Applications include the environment, biology, counterterrorism, and international relations. [ABSTRACT FROM AUTHOR]

‘Policymakers’ efforts to boost trend output growth may be hampered by the presence of a trade-off between productivity gains and job creation. This paper presents empirical evidence that the negative relationship between productivity growth and employment growth that prevailed in the 1960s and 1970s has disappeared since then. This finding is robust to using alternative measures and including other explanatory variables. The improved trade-off may be good news for policymakers who aim at raising the‘speed limit’ of the economy. [ABSTRACT FROM AUTHOR]

Why did peacetime government shares of total spending double in a number of Western economies between 1910 and 1938? The widely separated dates for the introduction of universal manhood suffrage and the evidence of a rise in protection during the inter-war period indicate that neither democracy nor globalization can explain this development. This paper reexamines two other explanations, namely, (1) a shift in the demand for public goods and (2) a war-induced willingness to share with one's fellow citizens. By introducing into Schelling's (1978) Multi-Person Dilemma a learning game whose payoffs change endogenously, we provide theoretical explanations for this transformation. We then test the resulting propositions with data on public spending as a share of GNP for the U.S., Canada, the U.K., Germany and Denmark, from the 1870s to the 1930s. In each case, we find no unit root but a break in trend, a result shown to favor explanation (2) over (1). [ABSTRACT FROM AUTHOR]

Comments on David Laband and Robert Tollison's (2003) analysis of the productivity of economic research. Suggestion that the increased investment made in economic research since the mid-1970s has gone to reward rent-seeking and is therefore wasted; Failure of the evidence to support the hypothesis; Investment in research and the proportion of dry holes; Determination of how often a paper is cited during the five years immediately following its publication.

The idea of a single-owner who owns the opposing interests of a dispute has been suggested in the literature to make the Coase Theorem operational in resolving dispute. This paper points out that the idea implicitly assumes the existence of an overriding authority, e.g., the Courts, to implement the solution. When such an overriding authority does not exist, a different rationale must be employed to make the single-owner apparatus work. This insight is explored and then applied to help resolve the Taiwan Strait Conflict. Specifically, a‘One China, Two Republics’ policy is proposed and its implications illustrated. [ABSTRACT FROM AUTHOR]

The empirical literature on border effects suggests that national borders substantially reduce the level of economic transactions. This paper adds another piece of evidence to the significance of border effects by applying a new data set which is completely independent of the data sets of previous studies. Our data refer to domestic and international passenger departures from German airports. The econometric results indicate that the German border reduces passenger air traffic by a factor of four to five. This magnitude is in line with the results of previous studies for trade and investment flows. [ABSTRACT FROM AUTHOR]

This paper examines the relationship between intra-firm wage dispersion and firm performance in large Belgian firms using a unique matched employer-employee data set. On the basis of the Winter-Ebmer and Zweimüller's (1999) methodology, we find a positive and significant relationship between intra-firm wage dispersion and profits per capita, even when controlling for individual and firm characteristics and addressing potential simultaneity problems. Results also suggest that the intensity of this relationship is stronger for blue-collar workers and within firms with a high degree of monitoring. These findings are more in line with the‘tournament’ models than with the‘fairness, morale and cohesiveness’ models. [ABSTRACT FROM AUTHOR]

This paper provides systematic evidence for both the cross-country and sector-independent validation of political-economic theories used to explain changes in national property rights arrangements. A political-economic model for privatization will be developed and then tested on progress in large-scale and small-scale privatizations in 14 Central and Eastern European transition economies between 1994 and 2000. It will be proven that divergent levels of progress in large-scale privatization can be explained to a large extent by the structural and financial constraints on political decision-makers and varying national interest group constellations. Small-scale privatization is not significantly determined by political constraints and interest group pressure. This finding supports the assumption that the relative merits of different theories to explain changes in property rights arrangements depend crucially on the specific conditions of initial property arrangements. [ABSTRACT FROM AUTHOR]

There is widespread belief among economists that the separation of ownership and control tends to reduce the performance of companies while competition tends to improve it. Irrespective of their theoretical appeal these assumptions have not been tested very often. Using an unbalanced panel of about 300 German wineries (compiled from four different editions of a highly respected and widely used wine guide), the paper shows that firms run by ‘managing directors’ produce higher quality and more expensive wines than otherwise identical owner-managed firms. Since firms have identical production functions and due to the intense competition in the sector under consideration it is very likely that differences in human capital explain the observed productivity differences. [ABSTRACT FROM AUTHOR]

This paper investigates the relationship between making additional payments to the state for student loan (via the Higher Education Contribution Scheme) and child support (via the Child Support Scheme) and compliance with tax law. Data are taken from the Community Hopes, Fears, and Actions Survey based on a random sample of 2040 individuals. Additional payments were found to pose a compliance problem for tax authorities. At the same time, this study demonstrated that perceived deterrence, moral obligation and possible trustworthiness play significant roles in reducing tax evasion. An important finding to emerge from this study is that tax evasion is more likely to accompany additional payments when personal income and belief in trust norms are low. The finding of greater tax evasion among economically marginalized groups has been demonstrated in other contexts, but the adverse effects of becoming irreconcilably socially marginalized from legal authority has tended to be both undervalued and under-theorized in the taxation compliance literature. [ABSTRACT FROM AUTHOR]

A common finding of recent theoretical and empirical literature is that corruption has a negative effect on economic growth. In the paper, through growth regression analysis, we estimate the direct and indirect effects of corruption on economic growth. The indirect transmission channels, specifically investments, trade policy, schooling, and political stability, analysed in our study prove to be significant in explaining the deleterious effect of corruption on growth rates. We find that one standard deviation increase in the corruption index is associated with a decrease in investments of 2.46 per centage points, which in turn decreases economic growth by 0.34 per cent per year. The second, by importance, transmission channel is openness: a standard deviation increase in the corruption index is associated with a decrease of the openness index by 0.19, resulting in a decrease in economic growth by 0.30 percent per year. Jointly, the transmission channels explain 81 per cent of the effect of corruption on growth. While combating corruption is a long-term task, an understanding of the transmission channels, through which corruption affects the economy, may suggest ways to limit corruption's negative, but indirect, effects on growth. [ABSTRACT FROM AUTHOR]

Since quite some time, economists have been aware of the fact that also the behavior of economists generates questions that need to be answered. Why, for example, do economists use an alphabetic ordering of names when they co-author an article? And what determines the success of an academic economist? Or, how does studying economics affect behavior? At the same time, economists have also noticed that the economics profession generates data that can be used to test theoretical ideas proposed by economists. In this paper, the author gives an overview of such research that takes economists and their behavior as a subject of study. He will focus on three topics: the education of economists, the publication habits of economists and the labor market of economists. [ABSTRACT FROM AUTHOR]

This paper explores a unique new source of social valuation: a market for bodies. The internet hosts a number of large synthetic worlds which users can visit by piloting a computer-generated body, known as an avatar. Avatars can have an asset value, in that users can spend time to increase their skills; these asset values can be directly observed in online markets. Auction data for avatars from the synthetic fantasy world of EverQuest are used here to explore a number of questions involving the relative value of different body characteristics. Hedonic analysis of the auction price data suggests that the ‘level’, a game-design metric that indicates the overall functionality or power of the avatar, is by far the most important attribute of the body. Other attributes that show significant price effects include: sex and class (i.e. being a wizard rather than warrior type of character). The male-female price difference is interesting because there are actually no sex-based differences in the abilities of the avatar bodies, by design. Price differences here must be caused by some other aspect of buyer preferences, ones unrelated to power or functionality of the avatar itself. [ABSTRACT FROM AUTHOR]

Most social scientists' views of conflict and cooperation in society are shaped by very elementary, one-off, two by two symmetric simultaneous move games like prisoner's dilemma, chicken, assurance or stag hunt. We think that this diet of examples leads to biased accounts in particular of distributional conflict, and therefore suggest that asymmetry in payoffs and move structure be taken into account systematically. In this paper a new paradigm of asymmetric games to study basic distributional conflicts is introduced, illustrated numerically and discussed theoretically. The results of exploratory experiments on the empirical side of the matter are also reported. [ABSTRACT FROM AUTHOR]

This article describes and analyzes the Euro cash changeover process. The European Monetary Union, EMU, is a unique event in history, although other monetary unions were formed and existed long before. Still, this giant experiment makes it possible to study changes in the monetary environment from a unique and new position. The article tries to find factors that can help to explain the different pace of transition between the countries participating in the third stage of the EMU. Even though it was common knowledge that the national currency would lose its status as legal tender at a predetermined point in time, the speed of acceptance of the new monetary standard could not be directly controlled by the relevant authorities. Hence, the whole changeover process was formed as much by the authorities as by the public. The paper focuses on four types of factors that may help to explain the differences in the pace of transition pattern between the countries: network related reasons, technical and logistic reasons, characteristics of the financial and payment systems and psychological reasons. It is found that the initial supply of Euro bank notes (so-called frontloading), the size of the population of the country, the length of the period when the national currency and Euro bank notes were used side by side, and the number of bank branches (per capita) together can help to explain a large part of the variation in the pace of adoption of the new monetary standard across the countries. The first two of these factors support the idea that currency is a network good. Psychological factors, such as nationalism, have not been found to significantly influence the outcome. [ABSTRACT FROM AUTHOR]

This paper analyses a 2002 survey of the Czech and Slovak Republics, and more limited surveys of Hungary and Poland to conclude that tax evasion is lowest among those who believe that they are getting good quality government services for the taxes they pay. A 20% increase in perceived quality of government services could lead to a 13% drop in the frequency of tax evasion. The present analysis is the first of this sort to indicate that quality of government services influences the willingness to pay taxes. Governments in transition countries who suffer from weak tax collection apparatus may wish to transmit clear information on the quality of their services in order to cut down on evasion. [ABSTRACT FROM AUTHOR]

The expansion of economics to ‘non-market topics’ has received increased attention in recent years. The economics of sports (football) is such a sub-field. This paper reports empirical evidence of team and referee performances in the FIFA World Cup 2002. The results reveal that being a hosting nation has a significant impact on the probability of winning a game. Furthermore, the strength of a team measured with the FIFA World Ranking does not play the important role presumed, which indicates that the element of uncertainty is working. The findings also indicate that the influence of a referee on the game result should not be neglected. Finally, the previous World Cup experiences seem to have the strongest impact on referees' performances during the game. [ABSTRACT FROM AUTHOR]

Analysis of the effects of public financing on private investment in R & D has been the object of numerous applied studies without it having been possible to arrive at a definite conclusion. In this paper the results of a meta-regression of econometric evidence on the relationship between public funding of R & D and private R & D expenditures is presented. After the creation of a data-base including all relevant studies and their results and characteristics, a meta-analysis was carried out to examine whether the characteristics of the applied analysis influence the results and explain the differences in the empirical literature on this subject. [ABSTRACT FROM AUTHOR]

Transnational Corporations are often accused by non-governmental organisations of ignoring fundamental democratic rights, such as civil liberties and political rights, in the countries of their investments. This paper attempts to explore empirically the complex relationship between foreign investment and democracy in a systematic way, using different econometric techniques. In contrast to the public discussion over recent years and the view held by non-governmental organisations, the results show that enhanced democratic rights are associated with higher foreign investment in the 1990s. Interestingly, this positive link does not hold for the 1970s and 1980s, when a substantial portion of foreign investment went to countries with repressive governments. [ABSTRACT FROM AUTHOR]

This paper studies the effect of institutions on trade flows, using a gravity model approach. Standard gravity equations incorporate factors such as geographical proximity, language, trade policy and common history as explanatory factors for variation in bilateral trade that reflect the costs of trade across geographical and cultural distance. We extend this type of analysis by focusing on the relevance of the quality of governance and the extent of familiarity with the resulting framework of rules and norms in explaining variation in bilateral trade patterns. More specifically, we test whether institutional homogeneity and institutional quality have an independent impact on the trade volume between pairs of countries. We find that having a similar institutional framework promotes bilateral trade by 13%, on average. Furthermore, a better quality of formal institutions tends to coincide with more trade. Depending on being either importer or exporter, an increase in overall institutional quality of one standard deviation from the mean leads to an estimated increase of 30–44% in bilateral trade. [ABSTRACT FROM AUTHOR]

In the context of an emerging focus on highly skilled migration throughout the OECD area, the question under which circumstances migrants can be expected to be relatively skilled is of particular importance. Borjas has analysed the relation between the income distribution and the skills of migrants. His self-selection model predicts that immigrants from countries with a higher income inequality tend to be negatively selected (i.e., less skilled than the average worker in both host and source countries). According to other models based on the human capital theory of migration, however, migrants can be expected to be relatively skilled. Empirical tests of Borjas' much-disputed negative self-selection hypothesis generally rely on immigration data, particularly to the US, and may therefore be biased due to host-country specifics such as network migration and the impact of migration policy. This paper analyses the relationship between country-specific emigration propensities and each country's score on various indices of income inequality with a rich international microdata set. The main result is that highly-skilled persons are more inclined to migrate, though a higher income inequality attenuates the positive selectivity. [ABSTRACT FROM AUTHOR]

The 50 U.S. states differ considerably in the extent to which political processes are swayed by special-interest groups. Pressure groups regularly wield overwhelming influence on policymaking in nine states (Alabama, Alaska, Florida, Louisiana, Mississippi, New Mexico, South Carolina, Tennessee, and West Virginia); they play lesser policymaking roles elsewhere, ranging from complementing other political actors to being completely subordinate to them. This paper exploits an independently constructed, five-category taxonomy of interest-group influence to explore the cross-sectional impact of rent-seeking on the distribution of income. The empirical estimates produce a consistent rank-ordering of the states in which income inequality is an increasing function of interest-group power. In particular, holding educational attainment, median income, state government expenditures relative to gross state product, population density, face and other factors constant, we find that income inequality is significantly greater (the Gini coefficient is more than one standard deviation higher) in the nine states where interest groups dominate the political process. Interest groups have smaller, but still marginally significant impacts on the income distribution in another 17 states where they are classified as dominant/complementary. We also find that greater levels of educational attainment tend to increase income inequality, as do exports. On the other hand, jurisdictions with higher median incomes, those with larger public sectors and more racially homogeneous populations exhibit greater income equality. Given that, other things being the same, incomes tend to be distributed more equally in states where government spending is higher, we conclude that it is mainly through off-budget channels that special interest groups operate to promote income inequality. But in any case, greater income inequality is yet another item to be added to the list of the social welfare costs of rent-seeking. [ABSTRACT FROM AUTHOR]

Little is known on the existence of negative relative demand shocks against low-skilled workers on a 'US-style' deregulated labour market with a 'German-style' vocational (apprenticeship) education system. Switzerland provides an appealing testing ground to investigate this question. Traditionally a 'zero unemployment' economy, Switzerland has seen an unprecedented rise in joblessness in the 1990s, although unemployment fell again to a rather low level after 1997. This paper tests whether Switzerland experienced a negative relative demand shock against the low skilled during this period and whether this shock resulted in growing wage dispersion between education groups (like in the US) or in growing unemployment (like in continental Europe). It turns out that only workers with an educational level below apprenticeship were affected by a negative relative demand shock, which speaks in favour of the German-style vocational education system. The Swiss wage structure, however, did not react to the relative demand shock against low-skilled workers without apprenticeship, which resulted in higher relative unemployment for this group. [ABSTRACT FROM AUTHOR]

The paper explores the relationship between FDI and economic growth in eight transition countries - EU candidates - in the period 1994-2001. Surprisingly, statistically robust negative causal relationship between FDI and growth emerged implying that FDI hampered their real convergence with EU. This result can be explained by the form of FDI. In the observed period, acquisitions were the predominant form and the proceeds of the sales were spent on consumption and imports rather than enhancing productive assets. Indeed, current account and FDI were strongly linked; the bigger the inflow of FDI into a country, the higher its current account deficit and foreign debt. Small size of the host countries and concentration of FDI in trade and finance could weaken productivity spillovers while increased efficiency of the acquired firm could be more than offset by the reduction of economic links with local firms. FDI would also not automatically increase competition as it could force small emerging local competitors out of business. While foreign trade increased through FDI, multinationals contributed more to imports than to exports. Finally, while FDI might support human capital formation, this type of spillovers simply does not seem to be very relevant. [ABSTRACT FROM AUTHOR]

Many countries suffer from persistently high unemployment rates. The scope for labour market reforms is often limited to measures that hurt neither shareholders nor workers. This paper develops a policy proposal, which allows the government to reduce wage costs without changing the income positions as determined in the process of wage negotiations. It is shown that the introduction of public profit sharing, i.e., substituting profit shares for social security contributions, can boost employment both in the short run and the long run. Calibrating the model and comparing the results with recent empirical findings about the impact of labour taxation confirm the theoretical findings. [ABSTRACT FROM AUTHOR]

Proposes a market-based mechanism to formalize the access, circulation and feedback processes for pre-print papers by defining incentives for both the authors and reviewers, to be part of a scientific network. Mechanism for quality differentiation; Enabling of efficient and effective communications within the scientific community.

Most people would agree that democracy is the most favorable form of government. And nevertheless it is interesting to look at undemocratic governments for three good reasons. Firstly, when defining democracies, we realize that a lot of established democracies limit the franchise in various respects. Secondly, some undemocratic governments seem to be very stable, which needs an explanation. We have to ask ourselves if these governments really are inferior to democracies. And thirdly, although there is a rising number of so-called democracies (especially due to the shift of Russia and Latin America away from dictatorship), a large proportion of the world population is still under undemocratic rulership. The paper proceeds as follows: Section II takes a closer look at the definition of democracies and the limitation of franchise. Section III describes some intermediate cases between democratic and undemocratic governments, and how some countries with extremely limited franchise survived for a very long time. Section IV looks at different forms and organizations of autocracies. Finally, some conclusions are drawn. [ABSTRACT FROM AUTHOR]

This paper discusses the consequences of this conflict and suggests ways to overcome them. Section II identifies two popular reactions to the conflict between globalization and democracy. The first idealistically wants to establish a world government, and the second relies on global markets as the solution to all problems. But both ideas have major drawbacks. The first assumes that all politicians are benevolent, the second presumes that all actors behave purely egoistically and that competition is perfect. We contend that neither of these assumptions are valid. Section III discusses the political effects of globalization within a broader and more open behavioral framework which acknowledges that individuals are motivated by extrinsic as well as intrinsic influences, most importantly civic virtue, and there is a systematic interaction between extrinsic and intrinsic motivation. In such a framework, a major consequence of globalization is a deep-seated tension between established politicians (or the 'classe politique') and ordinary citizens. One manifestation is a fundamentalistic opposition against economic globalization. Another manifestation is that civic virtue on the part of both citizens and politicians tends to be crowded out. [ABSTRACT FROM AUTHOR]