Search

There is much variation in ownership concentration among entrepreneurial firms cross-sectionally and over time. Growth potential, risk-sharing, and demand for external capital seem to be the main reasons behind the choice of low ownership concentration, and firms with diluted ownership show strong growth. After controlling for the firm fixed effects or the sample selection bias, we do not find any evidence suggesting a link between ownership concentration and other dimensions of firm performance. Therefore, the trade-off between growth aspiration and retention of dominant control of the firms may be critical in ownership structure decisions among entrepreneurial firms.

The dependence of Islamic bank rates on the conventional bank rate violates the religiosity principle and the fundamentals of an efficient market due to the possibility of arbitrage profit from the rate differences. This study tests such dependency in a dual banking system by considering monthly data from January 2009 to April 2018 on Malaysian banks using several ARDL tests, supplemented by robustness tests using a 12-month correlation of the rolling standard deviation and causality models based on the Toda-Yamamoto approach to investigate the short- and long-run dependency of rates. The study finds that Malaysia's Islamic bank deposit and financing rates are influenced by both the conventional and Bank Negara Malaysia's policy rates. Results imply that Islamic banks do serve profit-driven customers. We suggest that Islamic banks are forced to benchmark their rates to conventional rates because of the trade-off between religious and economic fundamentals by profit-driven customers. The study demonstrates that the question of Islamic legitimacy of Islamic banks needs to be addressed considering the correct profiling of the customer-base and the regulatory environment in which Islamic banks operate. We discuss implications for Islamic rate-setting behavior in the presence of monetary shocks in a dual banking system.

This paper proposes a vector error correction model to investigate the relationship between polluting emissions and GDP levels in Japan, in the period 1970-2014, and tests the validity of the Environmental Kuznets Curve (EKC) hypothesis driven by tourist arrivals. Our results validate the existence of two different causality channels among the selected variables. In particular, we find that a trade-off might exist between increasing the number of tourists, which drives economic growth, and the pattern of a sustainable development, due to the increase of polluting emissions. The analysis allows us to propose appropriate policy strategies to promote a robust and sustainable long run economic growth.

In this paper, we argue that the roles of public policies concerning COVID‐19 can be better understood in light of the past discussions on the Great Inflation of the 1970s and the 1980s. Like the Phillips Curve in macroeconomics, the pandemic presents a trade‐off between economic activities and something undesirable, which is, in this case, infection. Like the Phillips Curve, this apparent output‐infection trade‐off is an elusive one and it is lost in the long run. Containing infections calls for decisive policy action. This paper shows that we could design a reaction function, which sets the level of economic activity as a function of the state of infection, in such a way that the possibility of an infection explosion would be eliminated. Our empirical analysis suggests that Tokyo, New York, and London since September 2020 do not satisfy this desirable property.

This paper quantitatively analyzes the trade-off between job losses and the spread of COVID-19 in Japan. We derive an empirical specification from the social planner’s resource constraint under the susceptible, infected, recovered, and deaths (SIRD) model and estimate how job losses and the case growth rate are related to people’s mobility using the Japanese prefecture-level panel data on confirmed cases, involuntary job losses, people’s mobility, and teleworkability. Our findings are summarized as follows. First, we find that a decrease in mobility driven by containment policies is associated with an increase in involuntary job separations, but the high teleworkability mitigates the negative effect of decreased mobility on job losses. Second, estimating how the case growth is related to people’s mobility and past cases, we find that the case growth rate is positively related to an increase in people’s mobility but negatively associated with past confirmed cases. Third, using these estimates, we provide a quantitative analysis of the trade-off between job losses and the number of confirmed cases. Taking Tokyo in July 2020 as a benchmark, we find that the cost of saving 1 job per month is 2.3 more confirmed cases per month in the short run of 1 month. When we consider a trade-off for 3 months from July to September of 2020, protecting 1 job per month requires 6.6 more confirmed cases per month. Therefore, the trade-off becomes worse substantially in the longer run of 3 months, reflecting the exponential case growth when the people’s mobility is high.

This paper investigates the trade-off between economics and ethics applying them to “lockdowns” as a policy measure to counter the Covid-19-pandemic. This is an academic research on the nature and mechanism of trade-offs in so far as they apply to decision making. In the course of the line of inquiry pursued here, several different ways of trading off are assessed. In applying them to the pandemics, each yield a different answer to the adequacy of lockdowns as measures against the pandemic. The economic trade-off found “optimalcy” conditions, the utilitarian-ethical trade-off failed to do so revealing that there is a problem using “scientific evidence” as basis for such a trade-off. The value-ethical trade-off found out that lockdowns do not pass the test of proportionality within the usual constitutional framework.

Pandemics attack the primary asset (labor) of peasant households and the rural poor. Peasant households must simultaneously allocate labor between farm and household activities, where the demand for agricultural labor is seasonal, which limits intra-temporal substitution, without perfect foresight. A pandemic reduces the supply of labor, through deaths and morbidity, with the scale of reductions in labor supply depending on the seasons in which a pandemic occurs. The analyses, using a recursive dynamic economy-wide model for Bhutan, demonstrate that outbreaks in high labor demand seasons cause increases in wage rates almost three times as high as for outbreaks in low labor demand seasons. Increases in wage rates induce peasant households to reallocate labor time between farm and household activities through the labor-leisure trade-off mechanism. Such changes in the allocation of labor time are important elements of peasants’ mitigation responses, and can reduce the negative economic implications of a pandemic. © 2021 The International Input--Output Association.

Research aim : This study aimed to strengthen empirical evidence that the trade-off (TOT) and pecking order (POT) theories in Indonesia are non-mutually exclusive. Design/methodology/approach : This study employed a sample of 636 manufacturing companies from 2014 to 2018. Research finding : The results revealed that companies in Indonesia used a Capital Structure consistent (CS) with the TOT and POT, or in other words, the TOT and POT theories are non-mutually exclusive. Theoretical contribution/originality : This study is different from previous research on data analysis strengthened by separating underleveraged and overleveraged companies. Practitioner/Policy implication : CS in Indonesia is following the TOT if it is underleveraged and according to POT if it is overleveraged. Research limitation/implication : This study has the limitation of only using a sample of manufacturing companies in Indonesia. Subsequent research can provide comprehensive results by increasing the sample of all companies excludes the financial sector.

We propose testing asset pricing models using multihorizon returns (MHRs). MHRs effectively generate a new set of test assets that is endogenous to the model and that identifies a broad set of possible conditional misspecifications. We apply MHR-based testing to prominent linear factor models and show that these models typically do a poor job of pricing longer-horizon returns, with pricing errors that are similar in magnitude to the risk premiums they were designed to explain. We trace the errors to the conditional factor dynamics. Explicitly incorporating factor timing into the models often makes mispricing worse, thereby posing a challenge for future research.

The past several decades have seen a significant and sustained increase in income inequality across many countries. Against this backdrop, some policymakers and economists are calling for distributive policies to address the rising inequality directly. Yet, there has been little systematic analysis of whether and how redistribution affects economic growth. To our knowledge, this is the first paper that systematically analyzes and presents evidence in a large panel of countries over 1965–2010 that redistribution can involve a non-trivial “trade-off” between equity and growth. Making it richer and more interesting, evidence also shows that the degree of trade-off between equity and growth tends to vary with the initial level of market income inequality and the size of redistribution itself. Extensive robustness checks confirm the results.

This paper analyzes the effect of working time reduction (WTR) on the Spanish economy. Using microdata from the Economically Active Population Survey (EAPS) and the Wage Structure Survey (WSS), we estimate the changes in employment, worked hours, wages and salaries, and the labour share driven by a 5-hour reduction of the ordinary work week in full-time contracts (from 40 hours to 35 hours), without a wage reduction. According to our results, this WTR would mean the liberation of private sector hours that are equivalent to 1.2 million full-time jobs. To calculate job creation, we consider the occupations and technical conditions of production (based on the European Working Conditions Survey). Consequently, had the WTR taken place in 2017, it would have created 560 thousand jobs, thus causing the unemployment rate to fall by 2.6 p.p. Moreover, women are found to be the group most affected by this measure. As for the effect on wages, these would have increased by 3.7%, implying a labour share increase of 2.1 p.p. Finally, we study the macroeconomic effects, through an extended version of the single-equations Bhaduri–Marglin model using quarterly data from 1995Q1 until 2017Q4. Our results show that a WTR of 5 hours leads to an increase of 1.4% in GDP.

The paper revisits the theory of the quantity–quality trade-off and demonstrates that the relationship between quantity and health of children is subject to occupational variation in physical energ...

INTRODUCTION: Preference-based instruments measuring health status express the value of specific health states in a single number. One method used is time trade-off (TTO). Health-status values are key elements in calculating quality-adjusted life years (QALYs) and are pertinent for resource allocation. Since they are used in economic evaluations of healthcare, searching for a theoretical foundation of TTO in economics is justified. AREA COVERED: This paper provides an overview of TTO, including its relation to economic theory, and discusses biases and distortions, compiled from recent and older research. Inconsistencies between TTO and random utility theory were detected; The TTO is confounded by time preferences and by respondents' life expectancies. TTO is cognitively challenging, therefore guidance during the interviews is needed, producing interview effects. TTO does not measure one thing at a time, nor are the values independent of other states that are being valued in the same task. That is, TTO does not exhibit theoretical measurement properties such as unidimensionality and the invariance principle. EXPERT OPINION: We conclude that the TTO may be a pragmatic method of eliciting health state values, but the limitations in regard to measurement theory and practical elicitation problems makes it prone to inconsistencies and arbitrariness.

In this paper, I revisit the central trade-off between insurance and incentives in the design of unemployment insurance policies. The generosity of unemployment insurance benefits differs not only across countries, but also across workers within countries. After illustrating some important dimensions of heterogeneity in a cross-country analysis, I extend the standard Baily–Chetty formula to identify the key empirical moments and elasticities required to evaluate the differentiated unemployment policy within a country. I also review some prior work and aim to provide guidance for future work trying to inform the design of unemployment policies.

The objective of this paper is to show that there is a trade-off between global inequality (between countries) and national inequality (within countries). We observed that when the former declines, the latter increases. Empirically, it is possible to observe a shift from higher global inequality to lower global inequality levels (and higher national inequality levels) since the last quarter of the previous century. From a historical perspective, my thesis is that when the main drivers of economic growth are technology and means of transportation, inequality is mostly between countries (higher global inequality). In contrast, when the main driver of economic growth is labour (and related factors such as human capital, skills, knowledge exploitation), then inequality is mostly within countries (higher national inequality). Limitations of data availability did not allow for testing these historical trends. However, the trends of global and national inequalities over the last three to four decades confirm such a thesis. Key words: Global inequality, Income inequality, Capital accumulation, Technological progress, Labour. JEL: I14, D31, F6, F43, E24.

The paper brings together two distinct strands of literature that discuss the process of convergence in the EU and the impact of public debt on growth. It makes a contribution to both literatures, ...

The objective of this research is to assess the impact on growth of reallocating migrant remittances for savings/investment purposes. It focuses on two countries in the West African Economic and Monetary Union (WAEMU)' zone (Burkina Faso and Senegal). The methodological approach adopted is dynamic Computable General Equilibrium (CGE) modeling that integrates a procedure for reallocating remittances. Simulation results show that an increase in the propensity to save as a result of reallocation of remittances received by households for savings purposes leads to an increase in economic growth.

This article asks whether the strengthened, institutionalised role that some European agencies play in delegated decision-making endangers their actual independence. In some particular sensitive policy domains, such as pharmaceuticals security, financial markets and energy, European agencies exist which are formal agenda-setters in delegated decision-making, meaning that the European Commission can either accept or reject their proposals but is hardly allowed to change them. These procedures were established to guarantee particularly expert-based decision-making. However, the article argues that under these conditions, the Commission will be eager to interfere with the agencies’ proposal preparation to ensure that the proposal is in line with its position, thereby weakening the de facto independence of agencies. Such procedures come, therefore, with unexpected effects in practice. However, the article demonstrates that these effects vary with organisational resources on the agencies’ and the Commission’ side and the expected constraining effects of the decisions taken.

We examine pension-cost crowd out of salary expenditures in the public sector using a 15-year data panel of state teacher pension plans spanning the Great Recession. While there is no evidence of salary crowd out prior to the Great Recession, there is a shift in the post-recession years such that a 1% (of salaries) increase in the annual required pension contribution corresponds to a decrease in total teacher salary expenditures of 0.24%. The effect operates through changes to the size of the teaching workforce, not changes to teacher wages. An explanation for the effect heterogeneity pre- and post-recession is that public employers are less able to shield the workforce from pension costs during times of fiscal stress. This problem is exacerbated because unlike other benefit costs, such as for health care, pension costs are countercyclical.

Recent evidence suggests that obesity and tobacco prevalence rates are moving in the opposite direction. This study examines the causal relationship between these variables in Argentina. The effects of tobacco consumption on body weight are estimated by using instrumental variables to address endogeneity problems. To this end, the entry into force of provincial laws on tobacco control at different times are exploited. Our results show that smoking has a negative impact on three weight measures (BMI, weight in kilograms, obesity rate). This finding suggests that anti-smoking measures should be complemented with nutritional controls and the promotion of physical exercise.

Stability of microbial cooperation through common goods is susceptible to cheating. Evidence suggests that cheating plays a less prominent role in many natural systems than hitherto predicted by models of eco-evolutionary dynamics and evolutionary game theory. While several cheater negating factors such as spatial segregation have been identified, most consider single-nutrient regimes. Here we propose a cheater-suppressing mechanism based on previous experimental observations regarding the biochemical trade-off between growth speed and delay in switching to alternative nutrients. As changing the nutrient source requires redistribution of enzymatic resources to different metabolic pathways, the advantage in speed is offset by lower agility due to longer time required for resource re-allocation. Using an in silico model system of sucrose utilisation by Saccharomyces cerevisiae, we find that a tradeoff between growth rate and diauxic lag duration can supress cheaters under fluctuating nutrient availability and thereby stabilise cooperation. The resulting temporal dynamics constrain cheaters despite their competitive benefit for the growth on the primary nutrient via avoided public goods synthesis costs. We further show that this speed-agility trade-off can function in synergy with spatial segregation to avoid the collapse of the community due to the cheaters. Taken together, the growth-agility trade-off may contribute to cheater suppression in microbial ecosystems experiencing fluctuating environments, such as plant root microbiota and gut microbiota.

We investigate the risk–return trade-off on the US and European stock markets. We investigate the non-linear risk–return trade-off with a special eye to the tails of the stock returns using quantile regressions. We first consider the US stock market portfolio. We find that the risk–return trade-off is significantly positive at the upper tail (0.9 quantile), where the upper tail is large positive excess returns. The positive trade-off is as expected from asset pricing models. For the lower tail (0.1 quantile), that is for large negative stock returns, the trade-off is significantly negative. Additionally, for the median (0.5 quantile), the risk–return trade-off is insignificant. These results are recovered for the US industry portfolios and for Eurozone stock market portfolios.

The recent coronavirus outbreak has made governments face an inconvenient trade-off choice, i.e. the choice between saving lives and saving the economy, forcing them to make immensely consequential decisions among alternative courses of actions without knowing what the ultimate results would be for the society as a whole. This paper attempts to frame the coronavirus trade-off problem as an economic optimization problem and proposes mathematical optimization methods to make rationally optimal decisions when faced with trade-off situations such as those involved in managing through the recent coronavirus pandemic. The framework introduced and the method proposed in this paper are on the basis of the theory of rational choice at a societal level, which assumes that the government is a rational, benevolent agent that systematically and purposefully takes into account the social marginal costs and social marginal benefits of its actions to its citizens and makes decisions that maximize the society's well-being as a whole. We approach solving this trade-off problem from a static as well as a dynamic point of view. Finally, we provide several numerical examples clarifying how the proposed framework and methods can be applied in the real-world context.

This study examines the role of financial inclusion on the environment-economic performance in the top five Asian emerging economies. The data used for empirical investigation covers the time period from 1995 to 2019. Financial inclusion is measured through bank branches, bank credit, and insurance premiums. To check long-run associations, the panel-ARDL approach has been employed for empirical analysis. The empirical evidence confirms the significant associations between financial inclusion-GDP nexus and financial inclusion-CO2 nexus. The findings show that bank branches and bank credit have a significantly positive impact on economic growth and CO2 emissions in the long-run. However, insurance premium has no impact on economic growth but it exerts a significant negative impact on carbon emissions in the long-run. Furthermore, energy consumption is highly sensitive to economic growth and carbon emissions. The study delivers imperative points for pollution eradication and attaining sustained economic growth. There is a need for government-level efforts to align the targets of financial inclusion with economic growth and environmental policies.

As a part of the transition to a sustainable economy, China has set a cap on primary energy consumption for the first time, of 5.0 billion tonnes of standard coal equivalent by 2020. However, there is a debate on the cap feasibility and failure to adequately address the underlying equity-efficiency trade-off, which hampers achievement. This paper identifies some key challenges ahead, including the coal-dominant energy mix, declining financial support, inconsistent central-local goals, rising costs of energy-saving measures and quality of energy statistical data. By quantifying the preference of each providence toward equity-based or efficiency-based allocation schemes, the great disparity among provinces is revealed and the equity-efficiency trade-off relationship is confirmed. Developing regions, primarily located in central and western areas, tend to favor equity-based disaggregating schemes. Contrarily, developed coastal provinces strongly favor efficiency-based schemes. The present national disaggregation schemes are mainly based on historical energy consumption, but disregard the provincial development gap and efficiency factors. We conclude that this ambitious goal is likely within reach, but increased efforts and flexible instruments are needed.

The financial assistance provided by European Stability Mechanism during the recent European crisis was accompanied with severe austerity measures and strict reforms that changed significantly the economic environment in the countries that accepted it. The present study examines whether these changes affected the capital structure of the European firms in these countries. Using accounting data for firms in Cyprus, Greece, Ireland and Portugal, the researchers created a balanced panel database and applied the Shyam-Sunders and Myers (1999) methodology to investigate whether pecking order or trade-off hypotheses can better explain the financing decision of the firms in these countries during the period before and after the outset of the ESM financial assistance. The results indicate that the firms’ capital structure decisions are explained by both theories in Greece, Cyprus and Portugal before the beginning of the EMS program, while only by trade-off in Ireland. On the other hand, after the beginning of the ESM program the firms’ capital structures are better explained by trade-off hypothesis in Greece and Cyprus, while nothing changed in cases of Ireland and Portugal. The fact that Greek and Cypriot tax rates increased the most among the four examined countries may explain at least partially the above differentiations. So, the economic environment is a primary factor that affects the explanatory power of each capital structure theory. Moreover, a change in economic environment may lead to a change in the dominant capital structure theory.

This paper investigates flight-to-safety from stocks to bonds in six European markets. We use quantile regressions to identify flight-to-safety episodes. The conditional risk-return trade-off on the stock markets is negative. Flight-to-safety episodes strengthen the negative trade-off. The effects of flight-to-safety episodes on the trade-off are qualitatively similar for own country flight-to-safety episodes, for flight from own country stock market to the US bond market, and for US flight-to-safety episodes. The strength of the trade-off is strongest for US flight-to-safety episodes. Flight-from-safety has the opposite effect on the trade-off.

We investigate experimentally the relationship between risk and incentives in a principal–agent setting. In contrast to the existing empirical literature that describes such relationship as ‘tenuous’ or inconclusive, we find a clear negative relationship—supporting the prediction of the standard theoretical model. Specifically, we find that principals reduce the size of the offered piece rates with an increase in risk and instead provide positive fixed wages. Furthermore, we find no relationship between the variance in the performance and the effort choice of the agent, and a strong positive relationship between the effort choice of the agents and the offered piece rates as well as fixed wage, suggesting positive reciprocity. Finally, we find evidence of social projection by the principals regarding the agents’ degree of risk aversion.