Threshold Effects of Dismissal Protection Regulation and the Emergence of Temporary Work Agencies

Labour market regulations aimed at enhancing job-security are dominant in several OECD countries. These regulations seek to reduce dismissals of workers and fluctuations in employment. The main theoretical contribution is to gauge the effects of such regulations on labour demand across establishment sizes. In order to achieve this, we investigate an optimising model of labour demand under uncertainty through the application of real option theory. We also consider other forms of employment which increase the flexibility of the labour market. In particular, we are modelling the contribution of temporary employment agencies (Zeitarbeit) allowing for quick personnel adjustments in client firms. The calibration results indicate that labour market rigidities may be crucial for understanding sluggishness in firms´ labour demand and the emergence and growth of temporary work.

The long run relationship between stock prices and goods prices: new evidence from panel cointegration

We examine the long run relationship between stock prices and goods prices to gauge whether stock market investment can hedge against inflation. Data from sixteen OECD countries over the period 1970-2006 are used. We account for different inflation regimes with the use of sub-sample regressions, whilst maintaining the power of tests in small sample sizes by combining time-series data across our sample countries in a panel unit root and panel cointegration econometric framework. The evidence supports a positive long-run relationship between goods prices and stock prices with the estimated goods price coefficient being in line with the generalized Fisher hypothesis.

Firms in Scottish High Technology Clusters: software, life sciences, microelectronics, optoelectronics and digital media – preliminary evidence and analysis on firm size, growth and optimality

This paper reports on: (a) new primary source evidence on; and (b) statistical and econometric analysis of high technology clusters in Scotland. It focuses on the following sectors: software, life sciences, microelectronics, optoelectronics, and digital media. Evidence on a postal and e-mailed questionnaire is presented and discussed under the headings of: performance, resources, collaboration & cooperation, embeddedness, and innovation. The sampled firms are characterised as being small (viz. micro-firms and SMEs), knowledge intensive (largely graduate staff), research intensive (mean spend on R&D GBP 842k), and internationalised (mainly selling to markets beyond Europe). Preliminary statistical evidence is presented on Gibrat’s Law (independence of growth and size) and the Schumpeterian Hypothesis (scale economies in R&D). Estimates suggest a short-run equilibrium size of just 100 employees, but a long-run equilibrium size of 1000 employees. Further, to achieve the Schumpeterian effect (of marked scale economies in R&D), estimates suggest that firms have to grow to very much larger sizes of beyond 3,000 employees. We argue that the principal way of achieving the latter scale may need to be by takeovers and mergers, rather than by internally driven growth.

Corruption and the Military in Politics: Theory and Evidence from around the World

Recent theoretical developments and case study evidence suggests a relationship between the military in politics and corruption. This study contributes to this literature by analyzing theoretically and empirically the role of the military in politics and corruption for the first time. By drawing on a cross sectional and panel data set covering a large number of countries, over the period 1984-2007, and using a variety of econometric methods substantial empirical support is found for a positive relationship between the military in politics and corruption. In sum, our results reveal that a one standard deviation increase in the military in politics leads to a 0.22 unit increase in corruption index. This relationship is shown to be robust to a variety of specification changes, different econometric techniques, different sample sizes, alternative corruption indices and the exclusion of outliers. This study suggests that the explanatory power of the military in politics is at least as important as the conventionally accepted causes of corruption, such as economic development.

Corruption and Financial Intermediation in a Panel of Regions: Cross-Border Effects of Corruption

The importance of financial market reforms in combating corruption has been highlighted in the theoretical literature but has not been systemically tested empirically. In this study we provide a first pass at testing this relationship using both linear and nonmonotonic forms of the relationship between corruption and financial intermediation. Our study finds a negative and statistically significant impact of financial intermediation on corruption. Specifically, the results imply that a one standard deviation increase in financial intermediation is associated with a decrease in corruption of 0.20 points, or 16 percent of the standard deviation in the corruption index and this relationship is shown to be robust to a variety of specification changes, including: (i) different sets of control variables; (ii) different econometrics techniques; (iii) different sample sizes; (iv) alternative corruption indices; (v) removal of outliers; (vi) different sets of panels; and (vii) allowing for cross country interdependence, contagion effects, of corruption.