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1281. Alternative Models of Dynamics in Binary Time-Series-Cross-Section Models: The Example of State Failure

Author:
Nathaniel Beck, David Epstein, Simon Jackman, and Sharyn O'Halloran
Publication Date:
08-2001
Content Type:
Working Paper
Institution:
Institute for Social and Economic Research and Policy at Columbia University
Abstract:
This paper investigates a variety of dynamic probit models for time-series–cross-section data in the context of explaining state failure. It shows that ordinary probit, which ignores dynamics, is misleading. Alternatives that seem to produce sensible results are the transition model and a model which includes a lagged latent dependent variable. It is argued that the use of a lagged latent variable is often superior to the use of a lagged realized dependent variable. It is also shown that the latter is a special case of the transition model. The relationship between the transition model and event history methods is also considered: the transition model estimates an event history model for both values of the dependent variable, yielding estimates that are identical to those produced by the two event history models. Furthermore, one can incorporate the insights gleaned from the event history models into the transition analysis, so that researchers do not have to assume duration independence. The conclusion notes that investigations of the various models have been limited to data sets which contain long sequences of zeros; models may perform differently in data sets with shorter bursts of zeros and ones.
Topic:
Economics and Industrial Policy
Political Geography:
Europe and France

1282. Price Level Convergence, Relative Prices, and Inflation in Europe

Author:
John H. Rogers
Publication Date:
03-2001
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
If price levels are initially different across the euro area, convergence to a common level of prices would imply that inflation will be higher in countries where prices are initially low. Price level convergence thus provides a potential explanation for recent cross-country differences in European inflation, a worrisome development under the ECBs "one-size-fits-all" monetary policy. I present direct evidence on price level convergence in Europe, using a unique data set, and then investigate how much of the recent divergence of national inflation rates can be explained by price level convergence. I show that between 1990 and 1999 prices did become less dispersed in the euro area. Convergence is especially evident for traded goods, and more in the first half of the 1990s than the second half. By some measures, traded goods price dispersion across the euro area is now close to that across U.S. cities. Despite an on-going process of convergence, deviations from the law of one price are large. Finally, I find a statistically-significant and robust negative relationship between the 1999 price level and 2000 inflation rate in Europe, and that the contribution of price level convergence to explaining inflation differentials is often quite important economically. Still, factors other than price convergence explain most of the cross-country inflation differences.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
Europe

1283. Meet Me Halfway but don't Rush—Absorptive capacity and strategic R investment revisited

Author:
Leo A. Grünfeld
Publication Date:
12-2001
Content Type:
Working Paper
Institution:
Norwegian Institute of International Affairs
Abstract:
In this paper, we analyse how R investment decisions are affected by R spillovers between firms, taking into consideration that more R investment improves the ability to learn from competing firms - the so-called absorptive capacity effect of R The model in this paper is an extension of d'Aspremont and Jacquemin (1988), where they show that exogenous R spillovers reduce the incentive to invest in R when firms compete in a Cournot duopoly. Our model treats R spillovers as endogenous, being a function of absorptive capacity effects. Contrary to earlier studies, we show that absorptive capacity effects do not necessarily drive up the incentive to invest in R This only happens when the market size is small or the absorptive capacity effect is weak. Otherwise firms will actually chose to cut down on R Furthermore, absorptive capacity effects also increase the critical rate of spillovers that determines whether participating in research joint ventures leads to lower or higher R investment. Finally, we show that strong learning effects of own R are not necessarily goodfor welfare. Moreover, if the market size is large, welfare will be at its highest when the learning effect is small.
Topic:
Economics, Industrial Policy, and International Trade and Finance
Political Geography:
Europe

1284. Firms' export decisions—fixed trade costs and the size of the export market

Author:
Hege Medin
Publication Date:
10-2001
Content Type:
Working Paper
Institution:
Norwegian Institute of International Affairs
Abstract:
This article presents two models of international trade under monopolistic competition. In increasing returns sectors firms face fixed, in addition to variable, trade costs, therefore both exporters and non-exporters may coexist. While nonexporters benefit from access to large domestic markets, exporters benefit from access to large foreign markets. Consequently, a small country has a higher share of exporting firms than a large one. In contrast to standard models, increasing returns sectors turn out more open in small countries than in large ones, and small countries may be net exporters of such commodities, despite the disadvantage of a smaller home market.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe

1285. Recent Advances in Growth Theory. A Comparison of Neoclassical and Evolutionary Perspectives

Author:
Per Botolf Maurseth
Publication Date:
05-2001
Content Type:
Working Paper
Institution:
Norwegian Institute of International Affairs
Abstract:
Research on economic growth has experienced remarkable progress the last decade. The neoclassical perspective has benefited from development of new mathematical methods and new approaches to market structure, economics of scale and spillover effects. At the same time evolutionary theories on economic development have appeared, partly competing but also complementary to neoclassical theorising. In this paper, the development of the two perspectives on economic growth is reviewed and they are compared with each other. Despite evident differences there seems to be convergence between the two traditions. The two perspectives therefore do not belong to different paradigms in the Kuhnian sense and they can hardly be categorised as two isolated research programmes in the sense of Imre Lakatos. Evolutionary and neoclassical growth economics draw inspiration from similar sources, they are overlapping and to some extent complementary. The two traditions also interact with each other.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
Europe

1286. Mercosur/European Union — Tariff Talks

Publication Date:
07-2001
Content Type:
Policy Brief
Institution:
Oxford Analytica
Abstract:
The outlook for trade ties between the EU and Mercosur. EU-Mercosur trade negotiations earlier this month gave a vigorous push to commercial negotiations between the two regions. The EU presented a detailed proposal for liberalising EU-Mercosur trade during the next ten years. Trade talks between the EU and Mercosur have now reached a more advanced stage than the talks on the Free Trade Area of the Americas (FTAA).
Topic:
Economics and Politics
Political Geography:
Europe

1287. Strengthening Local Administration of Social Assistance in Russia

Author:
Raymond J. Struyk and L. Jerome Gallagher
Publication Date:
11-2001
Content Type:
Working Paper
Institution:
Urban Institute
Abstract:
A hallmark of the administration of social assistance under the socialist regimes in Eastern Europe and the USSR was the universal nature of eligibility for benefits, either to all citizens or to categories of deserving citizens, e.g., the physically handicapped. During the transition period since the collapse of the Soviet Union, the Russian Federation has taken limited steps to improve the targeting of benefits. The challenge to improvement is acute because the administration of the great majority of programs rests with agencies of local government. The question addressed here is how amenable local program administration is to improved targeting and more progressive program administration in general. Presented is an analysis of the results of assessments of two pilot programs implemented in two Russian cities in 2000–2001. The “school lunch pilot” introduced means testing in the school lunch program on a citywide basis; eligible families receive cash payments and all children pay the same price for their lunches in cash. The “jobs pilot” is a new, local means-tested program that provides cash support to families while unemployed workers search for work; continued receipt of funds is conditional on a minimum job search effort. We find that both programs were successfully implemented and that there was little resistance to the sharper targeting. On the other hand, a variety of problems with program administration were identified—problems that need to be addressed if program integrity and credibility are to be maintained.
Topic:
Economics, Government, and Human Welfare
Political Geography:
Russia, Europe, and Asia

1288. Russian Nonprofits as Contracted Providers of Municipal Social Services: Initial Experience

Author:
Raymond J. Struyk and Kirill Chagin
Publication Date:
08-2001
Content Type:
Working Paper
Institution:
Urban Institute
Abstract:
In the Russian Federation the delivery of social services to deserving population groups is mostly the responsibility of municipalities and other local governments. Services are delivered by municipal agencies. One way to inject competition into the delivery system is for local government to hold competitions to contract for social service delivery. The competitions can be open to nonprofit organizations (NPOs), some of which have been providing assistance in recent years to needy individuals and families similar to those that would be contracted.
Topic:
Economics, Human Welfare, and Non-Governmental Organization
Political Geography:
Russia, Europe, and Asia

1289. Do Affluent Countries Face an Incomes-Jobs Tradeoff?

Author:
Lane Kenworthy
Publication Date:
10-2001
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
A commonly-held view suggests that affluent nations face a tradeoff between incomes and jobs. According to this view, in the United States pay for workers at the bottom of the earnings distribution (relative to those in the middle) is very low and government unemployment-related benefits (the “replacement rate”) are stingy, but this facilitates the creation of lots of new jobs and encourages such individuals to take those jobs. The result is a high rate of employment and low unemployment. In much of Western Europe relative pay levels are higher for those at the bottom and benefits are more generous, but this is said to discourage job creation and to reduce the willingness of the unemployed to accept low-wage jobs. The consequence is low employment and high unemployment. I undertake a comparative assessment of this tradeoff view, based on pooled cross-section time-series analyses of 14 OECD countries in the 1980s and 1990s. The findings suggest that greater pay equality and a higher replacement rate do reduce employment growth in low-productivity private-sector service industries and in the economy as a whole. However, these effects are relatively weak. The results point to a variety of viable options for countries wishing to maintain or move toward a desirable combination of jobs and equality.
Topic:
Economics and International Trade and Finance
Political Geography:
United States and Europe

1290. The Effects of Convergence: Internationalisation and the Changing Distribution of Net Value Added in Large German Firms

Author:
Anke Hassel and Jürgen Beyer
Publication Date:
11-2001
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
The paper examines whether and how the increasing internationalisation of firms impacts on the operation of a co-ordinated market economy. Following the tenets of agency theory it assumes that an emerging market for corporate control changes the monitoring mechanisms that oversee management. Since Anglo- American forms of monitoring are usually associated with a higher return for investors compared with Continental European firms, a change in the distribution of the net value added of firms is expected. Using financial data on 59 large German companies, the paper shows that the emerging convergence of German corporate governance practices to Anglo-American standards has had a weak, but significant, impact on the distribution of net value added. This is in contrast to the impact of the internationalisation of firms on product markets, which does not have an effect. Since the market for corporate control is, however, still underdeveloped in Germany, the main effects remain to be seen.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
America, Europe, and Germany