Analysing the impact of public capital stock using the NEG wage equation: a panel data approach

This paper examines the relationship between the level of public infrastructure and the level of productivity using panel data for the Spanish provinces over the period 1984-2004, a period which is particularly relevant due to the substantial changes occurring in the Spanish economy at that time. The underlying model used for the data analysis is based on the wage equation, which is one of a handful of simultaneous equations which when satisfied correspond to the short-run equilibrium of New Economic Geography theory. This is estimated using a spatial panel model with fixed time and province effects, so that unmodelled space and time constant sources of heterogeneity are eliminated. The model assumes that productivity depends on the level of educational attainment and the public capital stock endowment of each province. The results show that although changes in productivity are positively associated with changes in public investment within the same province, there is a negative relationship between productivity changes and changes in public investment in other regions.

Les traces de pneumatiques en sciences forensiques : de l'analyse chimique à l'évaluation de la force probante

This work is focused on the development of a methodology for the use of chemical characteristic of tire traces to help answer the following question: "Is the offending tire at the origin of the trace found on the crime scene?". This methodology goes from the trace sampling on the road to statistical analysis of its chemical characteristics. Knowledge about the composition and manufacture of tread tires as well as a review of instrumental techniques used for the analysis of polymeric materials were studied to select, as an ansi vi cal technique for this research, pyrolysis coupled to a gas Chromatograph with a mass spectrometry detector (Py-GC/MS). An analytical method was developed and optimized to obtain the lowest variability between replicates of the same sample. Within-variability of the tread was evaluated regarding width and circumference with several samples taken from twelve tires of different brands and/or models. The variability within each of the treads (within-variability) and between the treads (between-variability) could be quantified. Different statistical methods have shown that within-variability is lower than between-variability, which helped differentiate these tires. Ten tire traces were produced with tires of different brands and/or models by braking tests. These traces have been adequately sampled using sheets of gelatine. Particles of each trace were analysed using the same methodology as for the tires at their origin. The general chemical profile of a trace or of a tire has been characterized by eighty-six compounds. Based on a statistical comparison of the chemical profiles obtained, it has been shown that a tire trace is not differentiable from the tire at its origin but is generally differentiable from tires that are not at its origin. Thereafter, a sample containing sixty tires was analysed to assess the discrimination potential of the developed methodology. The statistical results showed that most of the tires of different brands and models are differentiable. However, tires of the same brand and model with identical characteristics, such as country of manufacture, size and DOT number, are not differentiable. A model, based on a likelihood ratio approach, was chosen to evaluate the results of the comparisons between the chemical profiles of the traces and tires. The methodology developed was finally blindly tested using three simulated scenarios. Each scenario involved a trace of an unknown tire as well as two tires possibly at its origin. The correct results for the three scenarios were used to validate the developed methodology. The different steps of this work were useful to collect the required information to test and validate the underlying assumption that it is possible to help determine if an offending tire » or is not at the origin of a trace, by means of a statistical comparison of their chemical profile. This aid was formalized by a measure of the probative value of the evidence, which is represented by the chemical profile of the trace of the tire. - Ce travail s'est proposé de développer une méthodologie pour l'exploitation des caractéristiques chimiques des traces de pneumatiques dans le but d'aider à répondre à la question suivante : «Est-ce que le pneumatique incriminé est ou n'est pas à l'origine de la trace relevée sur les lieux ? ». Cette méthodologie s'est intéressée du prélèvement de la trace de pneumatique sur la chaussée à l'exploitation statistique de ses caractéristiques chimiques. L'acquisition de connaissances sur la composition et la fabrication de la bande de roulement des pneumatiques ainsi que la revue de techniques instrumentales utilisées pour l'analyse de matériaux polymériques ont permis de choisir, comme technique analytique pour la présente recherche, la pyrolyse couplée à un chromatographe en phase gazeuse avec un détecteur de spectrométrie de masse (Py-GC/MS). Une méthode analytique a été développée et optimisée afin d'obtenir la plus faible variabilité entre les réplicas d'un même échantillon. L'évaluation de l'intravariabilité de la bande de roulement a été entreprise dans sa largeur et sa circonférence à l'aide de plusieurs prélèvements effectués sur douze pneumatiques de marques et/ou modèles différents. La variabilité au sein de chacune des bandes de roulement (intravariabilité) ainsi qu'entre les bandes de roulement considérées (intervariabilité) a pu être quantifiée. Les différentes méthodes statistiques appliquées ont montré que l'intravariabilité est plus faible que l'intervariabilité, ce qui a permis de différencier ces pneumatiques. Dix traces de pneumatiques ont été produites à l'aide de pneumatiques de marques et/ou modèles différents en effectuant des tests de freinage. Ces traces ont pu être adéquatement prélevées à l'aide de feuilles de gélatine. Des particules de chaque trace ont été analysées selon la même méthodologie que pour les pneumatiques à leur origine. Le profil chimique général d'une trace de pneumatique ou d'un pneumatique a été caractérisé à l'aide de huitante-six composés. Sur la base de la comparaison statistique des profils chimiques obtenus, il a pu être montré qu'une trace de pneumatique n'est pas différenciable du pneumatique à son origine mais est, généralement, différenciable des pneumatiques qui ne sont pas à son origine. Par la suite, un échantillonnage comprenant soixante pneumatiques a été analysé afin d'évaluer le potentiel de discrimination de la méthodologie développée. Les méthodes statistiques appliquées ont mis en évidence que des pneumatiques de marques et modèles différents sont, majoritairement, différenciables entre eux. La méthodologie développée présente ainsi un bon potentiel de discrimination. Toutefois, des pneumatiques de la même marque et du même modèle qui présentent des caractéristiques PTD (i.e. pays de fabrication, taille et numéro DOT) identiques ne sont pas différenciables. Un modèle d'évaluation, basé sur une approche dite du likelihood ratio, a été adopté pour apporter une signification au résultat des comparaisons entre les profils chimiques des traces et des pneumatiques. La méthodologie mise en place a finalement été testée à l'aveugle à l'aide de la simulation de trois scénarios. Chaque scénario impliquait une trace de pneumatique inconnue et deux pneumatiques suspectés d'être à l'origine de cette trace. Les résultats corrects obtenus pour les trois scénarios ont permis de valider la méthodologie développée. Les différentes étapes de ce travail ont permis d'acquérir les informations nécessaires au test et à la validation de l'hypothèse fondamentale selon laquelle il est possible d'aider à déterminer si un pneumatique incriminé est ou n'est pas à l'origine d'une trace, par le biais d'une comparaison statistique de leur profil chimique. Cette aide a été formalisée par une mesure de la force probante de l'indice, qui est représenté par le profil chimique de la trace de pneumatique.

Official Central Bank Interventions in the Foreign Exchange Markets: A DCC Approach with Exogenous Variables

This paper assesses the impact of official central bank interventions (CBIs) on exchange rate returns, their volatility and bilateral correlations. By exploiting the recent publication of intervention data by the Bank of England, this study is able to investigate fficial interventions by a total number of four central banks, while the previous studies have been limited to three (the Federal Reserve, Bundesbank and Bank of Japan). The results of the existing literature are reappraised and refined. In particular, unilateral CBI is found to be more successful than coordinated CBI. The likely implications of these findings are then discussed.

Modeling U.S. Inflation Dynamics: A Bayesian Nonparametric Approach

This paper uses an infinite hidden Markov model (IIHMM) to analyze U.S. inflation dynamics with a particular focus on the persistence of inflation. The IHMM is a Bayesian nonparametric approach to modeling structural breaks. It allows for an unknown number of breakpoints and is a flexible and attractive alternative to existing methods. We found a clear structural break during the recent financial crisis. Prior to that, inflation persistence was high and fairly constant.

The regional electricity generation mix in Scotland: A portfolio selection approach

Standalone levelised cost assessments of electricity supply options miss an important contribution that renewable and non-fossil fuel technologies can make to the electricity portfolio: that of reducing the variability of electricity costs, and their potentially damaging impact upon economic activity. Portfolio theory applications to the electricity generation mix have shown that renewable technologies, their costs being largely uncorrelated with non-renewable technologies, can offer such benefits. We look at the existing Scottish generation mix and examine drivers of changes out to 2020. We assess recent scenarios for the Scottish generation mix in 2020 against mean-variance efficient portfolios of electricity-generating technologies. Each of the scenarios studied implies a portfolio cost of electricity that is between 22% and 38% higher than the portfolio cost of electricity in 2007. These scenarios prove to be “inefficient” in the sense that, for example, lower variance portfolios can be obtained without increasing portfolio costs, typically by expanding the share of renewables. As part of extensive sensitivity analysis, we find that Wave and Tidal technologies can contribute to lower risk electricity portfolios, while not increasing portfolio cost.

The Importance of Graduates for the Scottish Economy: A “Micro-to-Macro” Approach

There have been numerous attempts to assess the overall impact of Higher Education Institutions on regional economies in the UK and elsewhere. There are two disparate approaches focussing on: demand-side effects of HEIs, exerted through universities’ expenditures within the local economy; HEIs’ contribution to the “knowledge economy”. However, neither approach seeks to measure the impact on regional economies that HEIs exert through the enhanced productivity of their graduates. We address this lacuna and explore the system-wide impact of the graduates on the regional economy. An extensive and sophisticated literature suggests that graduates enjoy a significant wage premium, often interpreted as reflecting their greater productivity relative to non-graduates. If this is so there is a clear and direct supply-side impact of HEI activities on regional economies through the employment of their graduates. However, there is some dispute over the extent to which the graduate wage premium reflects innate abilities rather than the impact of higher education per se. We use an HEI-disaggregated computable general equilibrium model of Scotland to estimate the impact of the growing proportion of graduates in the Scottish labour force that is implied by the current participation rate and demographic change, taking the graduate wage premium in Scotland as an indicator of productivity enhancement. We conduct a range of sensitivity analyses to assess the robustness of our results. While the detailed results do, of course, vary with alternative assumptions about future graduate retention rates and the size of the graduate wage premium, for example, they do suggest that the long-term supply-side impacts of HEIs provide a significant boost to regional GDP. Furthermore, the results suggest that the supply-side impacts of HEIs are likely to be more important than the expenditure impacts that are the focus of most “impact” studies.

Spatial Interactions in Hedonic Pricing Models: The Urban Housing Market of Aveiro, Portugal

Spatial heterogeneity, spatial dependence and spatial scale constitute key features of spatial analysis of housing markets. However, the common practice of modelling spatial dependence as being generated by spatial interactions through a known spatial weights matrix is often not satisfactory. While existing estimators of spatial weights matrices are based on repeat sales or panel data, this paper takes this approach to a cross-section setting. Specifically, based on an a priori definition of housing submarkets and the assumption of a multifactor model, we develop maximum likelihood methodology to estimate hedonic models that facilitate understanding of both spatial heterogeneity and spatial interactions. The methodology, based on statistical orthogonal factor analysis, is applied to the urban housing market of Aveiro, Portugal at two different spatial scales.

Adaptive Continuous time Markov Chain Approximation Model to General Jump-Diusions

We propose a non-equidistant Q rate matrix formula and an adaptive numerical algorithm for a continuous time Markov chain to approximate jump-diffusions with affine or non-affine functional specifications. Our approach also accommodates state-dependent jump intensity and jump distribution, a flexibility that is very hard to achieve with other numerical methods. The Kolmogorov-Smirnov test shows that the proposed Markov chain transition density converges to the one given by the likelihood expansion formula as in Ait-Sahalia (2008). We provide numerical examples for European stock option pricing in Black and Scholes (1973), Merton (1976) and Kou (2002).

Large Time-Varying Parameter VARs

In this paper we develop methods for estimation and forecasting in large timevarying parameter vector autoregressive models (TVP-VARs). To overcome computational constraints with likelihood-based estimation of large systems, we rely on Kalman filter estimation with forgetting factors. We also draw on ideas from the dynamic model averaging literature and extend the TVP-VAR so that its dimension can change over time. A final extension lies in the development of a new method for estimating, in a time-varying manner, the parameter(s) of the shrinkage priors commonly-used with large VARs. These extensions are operationalized through the use of forgetting factor methods and are, thus, computationally simple. An empirical application involving forecasting inflation, real output, and interest rates demonstrates the feasibility and usefulness of our approach.

The marginal utility of money: A modern Marshallian approach to consumer choice

We reformulate neoclassical consumer choice by focusing on lambda, the marginal utility of money. As the opportunity cost of current expenditure, lambda is approximated by the slope of the indirect utility function of the continuation. We argue that lambda can largely supplant the role of an arbitrary budget constraint in partial equilibrium analysis. The result is a better grounded, more flexible and more intuitive approach to consumer choice.

Institutional Quality and FDI to the South An Analytical Approach

We ask whether MNEs’ experience of institutional quality and political risk within their “home” business environments influences their decisions to enter a given country. We set out an explicit theoretical model that allows for the possibility that firms from South source countries may, by virtue of their experience with poor institutional quality, derive a competitive advantage over firms from North countries with respect to investing in destinations in the South. We show that the experience gained by such MNEs of poorer institutional environments may result in their being more prepared to invest in other countries with correspondingly weak institutions.

The system-wide impacts of the external benefits to higher education on the Scottish economy: An exploratory “micro-to-macro” approach

The private market benefits of education, i.e. the wage premia of graduates, are widely studied at the micro level, although the magnitude of their macroeconomic impact is disputed. However, there are additional benefits of education, which are less well understood but could potentially drive significant macroeconomic impacts. Following the taxonomy of McMahon (2009) we identify four different types of benefits of education. These are: private market benefits (wage premia); private non market benefits (own health, happiness, etc.); external market benefits (productivity spillovers; and external non-market benefits (crime rates, civic society, democratisation, etc.). Drawing on available microeconometric evidence we use a micro-to-macro simulation approach (Hermannsson et al, 2010) to estimate the macroeconomic impacts of external benefits of higher education. We explore four cases: technology spillovers from HEIs; productivity spillovers from more skilled workers in the labour market; reduction in property crime; and the potential overall impact of external and private non-market benefits. Our results suggest that the external economic benefits of higher education could potentially be very large. However, given the dearth of microeconomic evidence this result should be seen as tentative. Our aim is to illustrate the links from education to the wider economy in principle and encourage further research in the field.

The Impact of Population Ageing on House Prices: A Micro-simulation Approach

This paper attempts to estimate the impact of population ageing on house prices. There is considerable debate about whether population ageing puts downwards or upwards pressure on house prices. The empirical approach differs from earlier studies of this relationship, which are mainly regression analyses of macro time-series data. A micro-simulation methodology is adopted that combines a macro-level house price model with a micro-level household formation model. The case study is Scotland, a country that is expected to age rapidly in the future. The parameters of the household formation model are estimated with panel data from the British Household Panel Survey covering the period 1999-2008. The estimates are then used to carry out a set of simulations. The simulations are based on a set of population projections that represent a considerable range in the rate of population ageing. The main finding from the simulations is that population ageing—or more generally changes in age structure—is not likely a main determinant of house prices, at least in Scotland.

Pareto or log-normal? A recursive-truncation approach to the distribution of (all) cities

Traditionally, it is assumed that the population size of cities in a country follows a Pareto distribution. This assumption is typically supported by nding evidence of Zipf's Law. Recent studies question this nding, highlighting that, while the Pareto distribution may t reasonably well when the data is truncated at the upper tail, i.e. for the largest cities of a country, the log-normal distribution may apply when all cities are considered. Moreover, conclusions may be sensitive to the choice of a particular truncation threshold, a yet overlooked issue in the literature. In this paper, then, we reassess the city size distribution in relation to its sensitivity to the choice of truncation point. In particular, we look at US Census data and apply a recursive-truncation approach to estimate Zipf's Law and a non-parametric alternative test where we consider each possible truncation point of the distribution of all cities. Results con rm the sensitivity of results to the truncation point. Moreover, repeating the analysis over simulated data con rms the di culty of distinguishing a Pareto tail from the tail of a log-normal and, in turn, identifying the city size distribution as a false or a weak Pareto law.

When to Quit Under Uncertainty? A real options approach to smoking cessation

This paper models the decision to quit smoking like an investment decision where the quitter incurs a sunk withdrawal cost today and forgoes their consumer surplus from cigarettes (invests) and hopes to reap an uncertain reward of better health and therefore higher utility in the future (return). We show that a risk-averse mature smoker who expects to benefit from quitting may still rationally choose to delay quitting until they are more confident that quitting is the right decision for them. Such a decision by the smoker is due to the value associated with keeping their option of whether or not to quit open as they learn more about the damage that smoking will have on their future utility. Policies which reduce a smoker’s uncertainty about the damage that smoking with have on their future utility is likely to make them quit earlier.