Understanding the economic dynamics behind growth-inequality relationships

In this paper, a dynamic general equilibrium (DGE) model of growth–inequality relationships, with missing credit markets, knowledge spillover and self-employed agents, is calibrated to New Zealand data. The model explains how two distinct policy shocks involving redistribution and immigration imply, subsequently, two completely opposite outcomes. Agents’ inability to borrow aggravates a negative macroeconomic effect of heterogeneity on growth. Redistribution mitigates that effect but creates microeconomic disincentives on saving and work-effort. Consequently, immigration shocks that perturb variance of efficiency induce a negative growth–inequality relationship, while redistribution shocks, in New Zealand’s case, produce larger fluctuations in incentives than in macro benefits, implying a positive growth–inequality relationship.

Volatility linkages and spillovers in stock and bond markets : some international evidence

This study investigates the transmission of market-wide volatility between the equity markets and bond markets of Japan, Germany, the U. K., and the U. S. To measure the volatility transmission, the BEKK- a decomposition approach to the multivariate GARCH (1,1) model, is used to examine the cross-market contemporaneous effect of information arrival. Our results suggest that within the domestic cross markets, the volatility transmission is undirectional from the stock market to the bond market. Evidence from international cross-market analysis is mixed, with strong evidence on volatility spillover among these international stock markets, but weak evidence between international stock and bond markets. In addition, there are significant bi-directional volatility transmissions between stock markets in Germany and the U. K., and between Germany and the U. S. The volatility transmissions among these markets suggest that the international diversification of bonds is not prevalent.

Volatility transmissions between stock and bond markets : evidence from Japan and the U.S.

This study attempts to investigate the transmission of market-wide volatility between the equity markets and bond markets of Japan and the U.S. To measure the volatility transmission, the BEKK (Baba, Engle, Kraft and Kroner, 1990) method, a decomposition approach of the multivariate GARCH (1,1) model, is used to examine the cross-market contemporaneous effect of information arrival. The time series analysis provides evidence to the long-run phenomena of causality in conditional variances of paired assets within the local and international markets. Within various pairings, some evidence of bi-directional volatility transmissions such as informational linkages have been observed. Our empirical results suggest that within the domestic cross markets, the volatility transmission is unidirectional from the stock market to the bond market. Evidence from international cross-market analysis is mixed, with strong evidence on volatility spillover among these international stock markets, but weak evidence between international stock and bond markets. In addition, there are significant directional volatility transmissions between DJI index and FTSE100 index, and between DJI index and DAX200 index. The volatility transmission between these two markets indicates that the international diversification of bonds is not prevalent.

Volatility transmission between stock and bond markets : evidence from US and Australia

This paper investigates the cross-market informational dependence between these assets under disparate interest rate conditions of the U.S and Australia. With conditional variance as a proxy for volatility, we use the BEKK – a matricular decomposition of the bivariate GARCH (1,1) model to examine the cross-market contemporaneous effect of information arrival. Applying the model to the stock and bond indices of both countries, we find evidence of volatility spillover, thereby supporting the notion of informational dependence between each market

Beyond the usual suspects: complexity of fragility and analytical framework

Development in so-called ‘fragile states’ has become a key priority for the international community over the past few years, but international actors have not yet adequately incorporated sufficiently nuanced understandings of fragility into policies or practices. The increasing proportion of the world’s poor living in fragile contexts, the depth of human need in these contexts, and the potential regional spillover implications of this fragility, all make this an urgent concern. This chapter examines this growing need and discusses the origins and methodological approach in this volume, before setting up the rest of the book with definitions and an analysis framework. The chapter concludes with a summary of the book chapters and contributions.

Quotas, spillovers, and the transfer paradox in an economy with tourism

This paper examines the welfare implications of quotas for an economy that is small in terms of traditionally traded goods and has monopoly power over the trade of goods consumed by tourists. Inbound tourism converts local nontraded goods into tradable goods, creating a tourism terms-of-trade effect for the touristreceiving economy. Through this effect, quotas result in a spillover to the nontraded sector. Hence, in the presence of tourism, the traditional free-trade prescription for the small open economy is no longer valid. This lends support to the setting of import quotas. Using the optimal quota as a benchmark, we further examine the welfare effect of tied aid. If tied aid brings about an excessive supply of importable goods, then the transfer paradox of the immiserization of the tourist- receiving economy may occur.

An analysis of sectoral equity and CDS spreads

In this paper, we find that CDS return shocks are important in explaining the forecast error variance of sectoral equity returns for the USA. The CDS return shocks have different effects on equity returns and return volatility in the pre-crisis and crisis periods. It is the post-Lehman crisis period in which the effects of CDS return shocks are the most dominant. Finally, we construct a spillover index and find that it is time-varying and explains a larger share of total forecast error variance of sectoral equity and CDS returns for some sectors than for others.

The role of positive and negative affectivity on job satisfaction and life satisfaction

This study examines the relationship between positive affectivity, negative affectivity, job satisfaction, and life satisfaction using a sample of 558 urban employees from Dalian. Positive and negative affectivity were measured with Watson's PANAS scale, job satisfaction was measured with Spector's JSS scale, and life satisfaction was measured with the International Wellbeing Group's PWI scale. All the scales are well established multi-item scales that have been validated both in English speaking populations and in China. The statistical analysis found that affectivity is a source of both job satisfaction and life satisfaction. Job satisfaction is positively related to life satisfaction, supporting the spillover theory. Job satisfaction partly mediates the relationship between affectivity and life satisfaction. The practical implications for managers is that because of the dispositional source of job and life satisfaction, managers need to put more emphasis on improving job satisfaction and subjective quality of life by improving the workplace environment. ©2009 IEEE.

Resource distribution influences positive edge effects in a seagrass fish

According to conceptual models, the distribution of resources plays a critical role in determining how organisms distribute themselves near habitat edges. These models are frequently used to achieve a mechanistic understanding of edge effects, but because they are based predominantly on correlative studies, there is need for a demonstration of causality, which is best done through experimentation. Using artificial seagrass habitat as an experimental system, we determined a likely mechanism underpinning edge effects in a seagrass fish. To test for edge effects, we measured fish abundance at edges (0-0.5 m) and interiors (0.5-1 m) of two patch configurations: continuous (single, continuous 9-m2 patches) and patchy (four discrete 1-m2 patches within a 9-m2 area). In continuous configurations, pipefish (Stigmatopora argus) were three times more abundant at edges than interiors (positive edge effect), but in patchy configurations there was no difference. The lack of edge effect in patchy configurations might be because patchy seagrass consisted entirely of edge habitat. We then used two approaches to test whether observed edge effects in continuous configurations were caused by increased availability of food at edges. First, we estimated the abundance of the major prey of pipefish, small crustaceans, across continuous seagrass configurations. Crustacean abundances were highest at seagrass edges, where they were 16% greater than in patch interiors. Second, we supplemented interiors of continuous treatment patches with live crustaceans, while control patches were supplemented with seawater. After five hours of supplementation, numbers of pipefish were similar between edges and interiors of treatment patches, while the strong edge effects were maintained in controls. This indicated that fish were moving from patch edges to interiors in response to food supplementation. These approaches strongly suggest that a numerically dominant fish species is more abundant at seagrass edges due to greater food availability, and provide experimental support for the resource distribution model as an explanation for edge effects.

Foreign direct investment spillovers in Portugal: additional lessons from a country study

This paper investigates the impact of FDI on the productivity of Portuguese manufacturing sectors. Model specification is improved by considering the choice of the most appropriate interval of the technological gap for spillovers diffusion. We also allow for sectoral variation in the coefficients of the spillover effect; idiosyncratic sectoral factors are identified by means of a fixed effects model. Inter-sectoral positive spillover effects are examined. Significant spillovers require a proper technological differential between foreign and domestic producers and favourable sectoral characteristics. They may occur in modern industries in which the foreign firms have a clear, but not too sharp, edge on the domestic ones. Agglomeration effects are also one pertinent specific influence.

Foreign direct investment spillovers: what can we learn from portuguese data?

This paper investigates the impact of foreign direct investment on the productivity performance of domestic firms in Portugal. The data comprise nine manufacturing sectors for the period 1992-95. Relatively to previous studies, model specification is improved by taking into consideration several aspects: the influence of the “technological gap” on spill-overs diffusion and the choice of its most appropriate interval; sectoral variation in the coefficients of the spill-overs effect; identification of constant, idiosyncratic sectoral factors by means of a fixed effects model; and the search for inter-sectoral positive spillover effects. The relationship between domestic firms productivity and the foreign presence does take place in a positive way, only if a proper technology differential between the foreign and domestic producers exists and the sectoral characteristics are favourable. In broad terms, spillovers diffusion is associated to modern industries in which the foreign owned establishments have a clear, but not too sharp, edge on the domestic ones. Besides, other specific sectoral influences can be pertinent; agglomerative location factors being one example.

Three essays on local demand for public services

Local provision of public services has the positive effect of increasing the efficiency because each locality has its idiosyncrasies that determine a particular demand for public services. This dissertation addresses different aspects of the local demand for public goods and services and their relationship with political incentives. The text is divided in three essays. The first essay aims to test the existence of yardstick competition in education spending using panel data from Brazilian municipalities. The essay estimates two-regime spatial Durbin models with time and spatial fixed effects using maximum likelihood, where the regimes represent different electoral and educational accountability institutional settings. First, it is investigated whether the lame duck incumbents tend to engage in less strategic interaction as a result of the impossibility of reelection, which lowers the incentives for them to signal their type (good or bad) to the voters by mimicking their neighbors’ expenditures. Additionally, it is evaluated whether the lack of electorate support faced by the minority governments causes the incumbents to mimic the neighbors’ spending to a greater extent to increase their odds of reelection. Next, the essay estimates the effects of the institutional change introduced by the disclosure on April 2007 of the Basic Education Development Index (known as IDEB) and its goals on the strategic interaction at the municipality level. This institutional change potentially increased the incentives for incumbents to follow the national best practices in an attempt to signal their type to voters, thus reducing the importance of local information spillover. The same model is also tested using school inputs that are believed to improve students’ performance in place of education spending. The results show evidence for yardstick competition in education spending. Spatial auto-correlation is lower among the lame ducks and higher among the incumbents with minority support (a smaller vote margin). In addition, the institutional change introduced by the IDEB reduced the spatial interaction in education spending and input-setting, thus diminishing the importance of local information spillover. The second essay investigates the role played by the geographic distance between the poor and non-poor in the local demand for income redistribution. In particular, the study provides an empirical test of the geographically limited altruism model proposed in Pauly (1973), incorporating the possibility of participation costs associated with the provision of transfers (Van de Wale, 1998). First, the discussion is motivated by allowing for an “iceberg cost” of participation in the programs for the poor individuals in Pauly’s original model. Next, using data from the 2000 Brazilian Census and a panel of municipalities based on the National Household Sample Survey (PNAD) from 2001 to 2007, all the distance-related explanatory variables indicate that an increased proximity between poor and non-poor is associated with better targeting of the programs (demand for redistribution). For instance, a 1-hour increase in the time spent commuting by the poor reduces the targeting by 3.158 percentage points. This result is similar to that of Ashworth, Heyndels and Smolders (2002) but is definitely not due to the program leakages. To empirically disentangle participation costs and spatially restricted altruism effects, an additional test is conducted using unique panel data based on the 2004 and 2006 PNAD, which assess the number of benefits and the average benefit value received by beneficiaries. The estimates suggest that both cost and altruism play important roles in targeting determination in Brazil, and thus, in the determination of the demand for redistribution. Lastly, the results indicate that ‘size matters’; i.e., the budget for redistribution has a positive impact on targeting. The third essay aims to empirically test the validity of the median voter model for the Brazilian case. Information on municipalities are obtained from the Population Census and the Brazilian Supreme Electoral Court for the year 2000. First, the median voter demand for local public services is estimated. The bundles of services offered by reelection candidates are identified as the expenditures realized during incumbents’ first term in office. The assumption of perfect information of candidates concerning the median demand is relaxed and a weaker hypothesis, of rational expectation, is imposed. Thus, incumbents make mistakes about the median demand that are referred to as misperception errors. Thus, at a given point in time, incumbents can provide a bundle (given by the amount of expenditures per capita) that differs from median voter’s demand for public services by a multiplicative error term, which is included in the residuals of the demand equation. Next, it is estimated the impact of the module of this misperception error on the electoral performance of incumbents using a selection models. The result suggests that the median voter model is valid for the case of Brazilian municipalities.