# Empirical Economics

Online ISSN: 1435-8921
Recent publications
Article
This study first presents Nash–Cournot and Lindahl models predicated on the demand system to test whether the public goods allocation process is Nash–Cournot or Lindahl in the case of North Atlantic Treaty Organization (NATO) allies. The Pesaran–Deaton non-nested test is used. The results indicate that neither of these is supported in any NATO allies but the USA, and that the Nash–Cournot allocation process is supported only in the USA. Second, this study tests the relative explanatory power of these two models using the Vuong non-nested test. This test is useful when neither allocation process is supported. Testing results indicate that in small allies, the Nash–Cournot model has better explanatory power than the Lindahl model, whereas in large allies, the two models either have equivalent explanatory power or the Nash–Cournot model has worse explanatory power than the Lindahl model.

Article
We test the bank lending channel of monetary policy in Africa and examine the role of bank cost efficiency in this relationship. We use the stochastic metafrontier approach to estimate cost efficiency scores of 447 commercial banks in Africa. The fixed effect (FE) estimator is used as the baseline estimation method. The 2SLS instrumental variables (IV) and two-step system GMM approaches are used as main estimation techniques to control for endogeneity. The results consistently show the existence of the bank lending channel in Africa: thus, bank credit responds to changes in monetary policy rate. Again, we find strong evidence to show that higher cost efficiency leads to higher loan growth. The results further show that cost-efficient banks are less responsive to monetary policy shocks. The evidence suggests that bank cost efficiency weakens the bank lending channel. This implies that the effect of monetary policy on bank lending depends not only on bank size, capitalization, and liquidity as espoused in the literature but also on bank efficiency. The results are robust in formal sample-splitting. Policy implications are discussed.

Article
This paper estimates the policy effect of a compulsory schooling reform in Britain in 1972 on women’s marriage outcomes. Using a regression discontinuity design and data from the General Household Survey 1982–2001, I find that although the reform reduced women’s probability of marriage as a teenager, it has no effects on their probability of never being married. For ever married women, I find that the effects of the reform on their probability of being divorced or separated are not statistically significant. Moreover, for currently married women, I find that the reform reduces the age gap between husband and wife by about 0.3 to 0.4 years. To explore the mechanisms, I find that the reform increases women’s probability of marrying a similarly aged husband by about 4.8 to 5.8 percentage points, implying that the reform strengthens assortative mating in terms of age. Overall, the findings imply that compulsory schooling reforms aimed at improving citizens’ educational attainment can also have substantial impacts on their marriage outcomes.

Article
This study examines asymmetry in loss functions of consumer’s perceived and expected consumer price index inflation in Japan. We find strong upward bias of perceived and one-year-ahead inflation expectations, and evidence against rationality under symmetric loss functions. We find considerable evidence of asymmetric loss in perceived and expected inflation and support for rationality upon assuming asymmetric loss functions. Strong biases in consumers’ perceived and expected inflation result from asymmetric loss rather than irrationality. Using epidemiology models, we find that expected inflation is strongly related to perceived inflation with no significant role for actual inflation. Moreover, consumers gradually incorporate central bank forecasts, but not professional forecasts, into their inflation expectations. This indicates that asymmetric loss in perceived inflation is important in forming inflation expectation. The central bank should take into consideration the asymmetric loss in consumers’ inflation expectations and the close relationship between the inflation expectations and perceived inflation in formulating monetary policy.

Article
This study examines the direct and indirect impact (via educational achievement) of student work during secondary education on later employment outcomes. To this end, we jointly model student work and later schooling and employment outcomes as discrete choices, while correcting for these outcomes’ unobserved determinants. Using unique longitudinal Belgian data, we find that pupils who work during the summer holidays are more likely to be employed three months after leaving school. This premium to student work in secondary education is higher when pupils also work during the school year. Decomposing this total effect shows that the direct return to student work during secondary education overcompensates its non-positive indirect effect via educational achievement. This effect is also found to decline over time, with the premium to a combination of work during the summer and the school year becoming statistically insignificant five years after graduation.

Article
We examine the response of covered interest parity (CIP) deviations in emerging markets (EMs) to output-enhancing technology shocks. Our model emphasizes three possible scenarios. First, if gains in domestic output are affected more strongly by external technology shocks than by domestic technology shocks, CIP deviations enlarge (i.e., basis widens). Second, if domestic output gains are supported more strongly by domestic technology shocks than by external technology shocks, CIP deviations shrink (i.e., basis tightens). Third, if domestic output gains emanate from equally domestic and foreign technology shocks, then CIP deviations vanish (i.e., magnitude of basis shrinks to zero). In the empirical part, we find that the response of CIP deviations to technology shocks is mostly positive across tenors but sometimes mixed. This positive response is consistent with the second scenario: Technology shocks that enhance domestic output and tighten the basis in EM are more domestic than external.

Article
Urban poverty arises from the uneven distribution of poor populations across neighborhoods of a city. We study the trend and drivers of urban poverty across American cities over the last 40 years. To do so, we resort to a family of urban poverty indices that account for features of incidence, distribution, and segregation of poverty across census tracts. Compared to the universally-adopted concentrated poverty index, these measures have a solid normative background. We use tract-level data to assess the extent to which demographics, housing, education, employment, and income distribution affect levels and changes in urban poverty. A decomposition study allows to single out the effect of changes in the distribution of these variables across cities from changes in their correlation with urban poverty. We find that demographics and income distribution have a substantial role in explaining urban poverty patterns, whereas the same effects remarkably differ when using the concentrated poverty indices.

Article
This paper focuses on the spillover dynamics of shocks originating in China during the last two decades. More specifically, the paper compares the effects of a shock to China’s GDP and exchange rate using early 2000s trade patterns with those of two decades later. We use a global vector autoregressive (GVAR) model as it allows to consider trade interactions as well as financial linkages through interest rates, stock prices, and exchange rates. Our results indicate that the shock spillovers from China have become more pronounced over the past two decades. While the world has become more exposed to China’s economy, it has become more susceptible to Chinese economic shocks. This paper contributes to the literature by evaluating the dynamics of China’s spillover effects and highlights the structural changes in trade between major global trade players.

Article
The objective of this study is to explore the impact of commodity price volatility on the governments’ fiscal balance. Using a dynamic panel data model for 108 countries from 1993 to 2018, this study finds that governments’ fiscal balance deteriorates with commodity price volatility, especially for commodity-exporting economies. A one standard deviation increase in commodity price volatility leads to a reduction of approximately 0.04 units in the fiscal balance as a percentage of gross domestic product. Further, we examine the role of real interest rates in influencing the relationship between commodity price volatility and fiscal balance. The empirical results suggest that the negative impact of commodity price volatility on fiscal balance can be mitigated with a lower real interest rate. This implies under the sticky price assumption, an accommodative monetary policy could be effective in moderating the negative effect of commodity price volatility on fiscal balance.

Article
Import competition has been proxied by tariff protection in the extant literature on the impact of import competition on quality upgrading. This paper argues that allowing for non-tariff barriers as well as tariffs in measuring trade protection offers a more accurate measure of import competition. It investigates how the relationship between import competition and quality upgrading is affected by how import competition is measured by whether import competition is measured by overall protection rather than by tariff protection only. The import competition–quality upgrading relationship is shown to be sensitive to how import competition is measured, as well as the sample of countries and the measure of quality used in the empirical analysis. Tariff protection is found to be an inadequate measure for import competition for those products where non-tariff measures are also applied to protect against imports. Our study shows that import competition needs to be measured with care, especially in a world where tariffs are a relatively less important and non-tariff measures a relatively more important form of protection.

Article
Nonlinear adjustments of consumption to housing prices, stock prices, income, and interest rates were investigated by employing panel data from 25 countries, spanning the period 2000 to 2016. This is the first study which STAR family models and nonlinear impulse response functions based on the local projections employed alternatively. We present three main pieces of evidence: (1) housing prices, stock prices, interest rates, and income exposures of consumption show time-varying and asymmetric behaviours across all countries, (2) housing wealth effects show stronger persistency and are generally larger than financial wealth effects in most of the countries, and (3) time-varying housing and financial wealth effects are high (low) during expansionary (recessionary) periods across all countries. We suggest to consider both monetary and fiscal policies, as well as the asymmetric and time-varying nature of house prices, stock prices, income, and interest rates on the top of any potential impact of the level of transition in these variables.

Article
This study uses a counterfactual analysis to investigate, from the Brazilian experience, the "perfect storm" resultant from the combination of economic policies on economic growth. Specifically, we analyze whether the combination of economic policies that neglect fiscal balance and low and stable inflation with the adoption of strategies to stimulate economic growth without considering the side effects on the economy harmed economic growth. Our findings, robust to several placebo tests, show Brazil's growth rate is approximately 2.8 pp below the "synthetic Brazil" growth rate. Furthermore, comprehending the great shocks in the period under investigation, the complementary empirical analysis supports the view that the "perfect storm" is the main factor explaining the underperformance of the Brazilian economic growth. Supplementary information: The online version contains supplementary material available at 10.1007/s00181-021-02167-4.

Article
This study investigates the role of institutions in shaping international differences in economic complexity-a novel measure of productive capabilities. More specifically, economic complexity corresponds to an enhanced capacity to produce and export a diverse range of sophisticated (high-productivity) products. This paper hypothesizes that there exists a positive association between institutional quality and economic complexity. The underlying intuition is that well-functioning institutions fundamentally drive structural transformation towards productive activities via strengthening incentives for innovative entrepreneurship, fostering human capital accumulation, and deploying human resources in acquiring productive capabilities. Employing data for up to 115 countries, I consistently obtain precise estimates of the positive effect of institutional quality, measured by the Economic Freedom of the World Index, on economic complexity. The main findings advocate for establishing a pro-development institutional environment, which helps attenuating the persistence of underdevelopment by fostering economic complexity.

Article
Financial inclusion is recognized by policy makers as one of the main tools of promoting household income and economic development. Recently, increasing attention has been focused on proposing reliable indicators to quantify financial inclusion by country. In this research, we adopt a composite index approach for that purpose. The main distinguishing feature of our empirical exercise is its data-driven spirit; in particular, we make very few assumptions about the nature of the composite index. Moreover, we define financial inclusion from three main dimensions making use of both demand and supply side data and recognize that financial technology and digital finance are playing an increasing role in boosting financial inclusion. Next, we analyze financial inclusion changes over time by distinguishing between catching-up and environment change effects. The latter allows us to verify whether policy makers have succeeded in creating an environment that has fostered financial inclusion and quantify the scope for policy interventions. Finally, we take the heterogeneity between countries into consideration by partitioning countries into income per capita categories. Our empirical exercise reveals important patterns useful in understanding financial inclusion differences and designing future policy implementations.

Article
This paper investigates the determinants of outward foreign direct investment (OFDI) of British multinational firms in the European Union (EU) and the European Free Trade Association members across 2009–2019 using Bayesian model averaging. We find evidence that supports the existence and dynamic behavior of the East–West structure of FDI between three groups of countries: core-EU, Central and Eastern European economies (CEE), and the Nordics. Further, we document the importance of relative market size, urbanization, the rule of law in attaining horizontal FDI in the core-EU economies. In turn, infrastructure spending and enhanced political stability are the most important drivers for FDI in CEE (post-2000 accession). Finally, our results highlight the negative effects of the Eurozone crisis and Brexit anticipation on British OFDI activity in the region. The findings remain robust when accounting for potential MNE profit shifting to partners such as Ireland, Luxembourg, and alike.

Article
We propose a novel risk measure that is built on comparing high-frequency time-varying volatility and low-frequency return spillover estimates. This measure permits to identify the markets that are epidemic in their complex interdependence. We conjecture that initially a highly volatile market experiences episodes of risk transmission, but only later absorbs risk and becomes an epidemic market. Moreover, we can detect newly emerging ‘contagion’ in the system. We examine the behaviour of 30 global equity markets and compare spillover measures, which encapsulate many large and small crises episodes. Instead of relying on ex post crisis information, our model identifies crises periods. An important implication of the proposed approach is that highly interrelated markets, such as China, are less likely to transmit a global economic crisis under the current interdependence setting.

Article
This paper applies a new proposed multivariate score-type test against spurious long memory to a group of cryptocurrency market returns. The test statistic developed by Sibbertsen et al. (J Econ 203(1): 33–49, 2018) is based on the multivariate local Whittle likelihood function and is proven to be consistent against the alternative two cases of random level shifts and smooth trends. We apply the test to the returns, absolute returns, and modified absolute returns. Overall, the recently developed test statistic fails to reject the null hypothesis of true long memory for most cryptocurrencies, except for the Stellar market. Therefore, applying the new test statistic supports the argument that the long memory in the cryptocurrency markets is real and is not a spurious one. Our results are further supported by applying other consistent local Whittle methods that allow for the estimation of the memory parameter by accounting for the presence of perturbations or low-frequency contaminations.

Article
• Mihai Mutascu
• Alexandre Sokic
The paper examines the link between money and output in the U.S. by using wavelet analysis. The time span covers the period from 1960Q1 to 2021Q1. The main results evidence that money positively leads real output from the late 1960s to 1982, at medium frequency, with the interest rate playing an important role. In contrast, we reveal that real output negatively leads money, at the same medium frequency, but from the late 1990s to 2021. The COVID-19 pandemic generates significant co-movements in the short and medium frequencies, over the period from 2020 to 2021, with output negatively leading money. We underline that Federal Reserve monetary policy operating procedures play an essential role in explaining these findings. The results support using the federal funds rate operating procedure as countercyclical monetary policy measures and implementing unconventional monetary policy tools in times of the effective lower bound. Finally, no relationship between money and output is observed in the long term, while the short term (i.e. high frequency) reveals rather chaotic co-movements. The results remain robust to alternative wavelet tools, higher-frequency datasets, and a Hodrick–Prescott filtered quarterly sample.

Article
This paper considers the role of grandparental childcare in explaining China’s extraordinarily high female labor market participation rate and low wage penalty. Using a novel and high-quality dataset combined with a creative new identification strategy, we find that grandparental childcare reduces young women’s drop-out from the labor market, especially those with a higher education level living in an urban area, and it also improves mothers’ labor income. We further show that grandparents’ marriage status and home location do not affect the feasibility of grandparental childcare. Our research reveals that grandparental childcare, as a remedy for insufficient supply of public childcare services, supports mothers in the labor market, sustaining high mobility in the labor market in China.

Article
This paper empirically studies public debt sustainability with the penalized panel splines approach for 25 EU economies from 2000 to 2019 by estimating the response of the primary surplus to lagged debt relative to GDP, respectively. A positive coefficient on average indicates sustainable policies, which is supported by all our results. Moreover, we show that this relationship is not homogeneous across the distribution of the debt ratios but varies with the magnitude of public debt to GDP. The estimations reveal a strongly increasing reaction for small and high debt ratios while it is rather flat for intermediate levels. This holds for normal times, too, whereas during years of economic crisis a monotonously increasing response can be observed. Additionally, for a cluster consisting of smaller EU economies, there is an indication of ‘fiscal fatigue’, meaning that the effort of active fiscal counter-steering peters out for high ratios of public debt to GDP. The same effect can be observed for the whole sample and a sample including the large EU economies, once Greece is removed.

Article
This paper estimates and contrasts the effects of contractionary monetary policy shocks on output in South Africa and South Korea, using a sign restriction VAR approach. I use quarterly data spanning 1980Q1 to 2010Q3. I investigate how much output movements are induced by monetary policy shocks. The main findings reveal that contractionary monetary policy shock significantly depresses real output for many quarters in South Africa. However, output declines insignificantly and transitorily in South Korea, indicating monetary neutrality. I attribute this difference to the transitory responses of both the monetary aggregate M2 and the exchange rate to a monetary policy shock in South Korea compared to South Africa. This implies that each country, despite targeting inflation, has a different monetary policy reaction function. Evidence shows that the monetary policy shocks explain a large portion of fluctuations in output in these emerging market economies compared to those reported for advanced countries by Uhlig (J Monet Econ 52(2):381–419, 2005) and Rafiq and Mallick (J Macroecon 30:1756–1791, 2008). Lastly, I examined the reasonableness of the estimated monetary policy shocks. Evidence indicates that the estimated monetary policy disturbances capture certain monetary policy activities based on selected major historical and recent real-time macroeconomic shocks.

Article
They do. Partly. We identify credit supply shocks via sign restrictions in a Bayesian VAR and separate them into positive and negative. Using local projections, we find that positive credit supply shocks leave notably different prints in private debt, mortgage debt, and debt-to-GDP, as opposed to negative credit supply shocks. This pattern is caused by the response of household mortgage debt. Furthermore, we find evidence that positive credit supply shocks are the driving force behind boom-bust cycles. Yet, developments behind the boom-bust cycle cannot explain the strong and persistent response in debt; but house prices tend to. However, if we abstract from potential asymmetries, we get rather mild results, which underestimate the true effects of credit supply shocks.

Article
The degree of persistence of the real gross domestic product per capita, total factor productivity and labour productivity has been examined in a group of 23 developed and developing nations, as well as the overall Euro Area, by evaluating the order of integration of the macroeconomic series over the annual period from 1890 to 2019. As against the conventional use of using integer degrees of differentiation (i.e. 0 for stationary processes and 1 in case of unit roots), fractional values have been utilized. The empirical findings provide evidence for mean reversion in both total factor productivity and the real gross domestic product per capita in Chile, Germany, the Netherlands and New Zealand. The results further suggest that mean reversion only occurs in labour productivity of Australia. The non-linearity analysis shows that non-linearity is also present in the majority of the series. The policy implications of the results are enumerated in the body of the paper.

Article
In spatial panel data modeling, researchers often need to choose a spatial weights matrix from a pool of candidates, and decide between static and dynamic specifications. We propose observed-data deviance information criteria to resolve these specification problems in a Bayesian setting. The presence of high dimensional latent variables (i.e., the individual and time fixed effects) in spatial panel data models invalidates the use of a deviance information criterion (DIC) formulated with the conditional and the complete-data likelihood functions of spatial panel data models. We first show how to analytically integrate out these latent variables from the complete-data likelihood functions to obtain integrated likelihood functions. We then use the integrated likelihood functions to formulate observed-data DIC measures for both static and dynamic spatial panel data models. Our simulation analysis indicates that the observed-data DIC measures perform satisfactorily to resolve specification problems in spatial panel data modeling. We also illustrate the usefulness of the proposed observed-data DIC measures using an application from the literature on spatial modeling of the house price changes in the US.

Article
The COVID-19 pandemic has increased the need for timely and granular information to assess the state of the economy in real time. Weekly and daily indices have been constructed using higher-frequency data to address this need. Yet the seasonal and calendar adjustment of the underlying time series is challenging. Here, we analyse the features and idiosyncracies of such time series relevant in the context of seasonal adjustment. Drawing on a set of time series for Germany—namely hourly electricity consumption, the daily truck toll mileage, and weekly Google Trends data—used in many countries to assess economic development during the pandemic, we discuss obstacles, difficulties, and adjustment options. Furthermore, we develop a taxonomy of the central features of seasonal higher-frequency time series.

Article
In the absence of panel data, researchers have devised alternative methods for estimating synthetic poverty dynamics using repeated cross section surveys. These methods are not only salient in the absence of panel data, but also in contexts where there are concerns over the quality of panel data and/or the panel data are of insufficient length to analyse medium- to long-term mobility trends. Both of these issues afflict the longitudinal element of the European Survey on Income and Living Conditions (EU-SILC) (Hérault and Jenkins, J Econ Inequ 17(1):51–76, 2019). Using the longitudinal element of EU-SILC, this paper assesses the accuracy of the synthetic panel approach put forth by Dang and Lanjouw (2021). For most conventional poverty lines, the DL approach is found to be highly accurate when the true $$\rho$$ ρ is known. Similar to Hérault and Jenkins (J Econ Inequ 17(1):51–76, 2019) the pseudo-panel approach for estimating $$\rho$$ ρ is found to be highly sensitive to cohort definition. The longitudinal element of EU-SILC, however, offers a unique route for overcoming this shortcoming.

Article
We estimate the elasticities of the most important tax categories using a new quarterly database of discretionary tax measures for the USA, Germany, and the United Kingdom over the period 1980Q1 to 2018Q2. Employing Romer and Romer’s (2009) narrative approach, we construct a policy-neutral dataset based on revenue figures from governmental records. Using this quantitative information, we are able to subtract policy-induced changes, which often are not considered in the literature. Furthermore, we estimate state-dependent elasticities. Our conclusions are as follows. (i) In Germany and the UK, long-term tax-to-base elasticities are generally higher than short-term elasticities, whereas results for the USA are mixed. (ii) Short-term base-to-output elasticities tend to be smaller than unity, whereas long-term elasticities are close to unity. (iii) German and UK tax-to-output elasticities in the short term are lower than long-term elasticities, with mixed results for the USA. (iv) For tax-to-base elasticities, we find business-cycle asymmetries across countries but not within countries. (v) For base-to-output elasticities, our results suggest few asymmetries across countries and more asymmetries across tax types. (vi) Typically, the above conclusions do not hold for corporate income tax.

Article
This paper revisits the real interest rate parity (RIP) hypothesis for the Pacific Rim countries under considerations of structural breaks in the auxiliary regression. To this end, we make use of a set of state-of-the-art unit root tests. We find strong evidence in favor of the RIP hypothesis by using the unit root tests considering smooth structural breaks. The empirical results are almost unchanged using the unit root test incorporating abrupt structural breaks. The smooth-break models have better goodness of fit than the abrupt-break models in characterizing the long-run trend of real interest rate differentials of the countries examined. The results of the simulation experiments show that the smooth-break unit root test can capture the feature of the abrupt unit root test, but not vice versa. Empirical evidence reveals a high degree of market integration for the Pacific Rim countries over time allowing for structural breaks.

Article
We use data from two representative US household surveys, the Medical Expenditure Panel Survey (MEPS) and the Health and Retirement Study (RAND-HRS) to estimate transition probability matrices between health states over the lifecycle from age 20–95. We compare nonparametric counting methods and parametric methods where we control for individual characteristics as well as time and cohort effects. We align two year transition probabilities from HRS with one-year transition probabilities in MEPS using a stochastic root method assuming a Markov structure. We find that the nonparametric counting method and the regression specifications based on ordered logit models produce similar results over the lifecycle. However, the counting method overestimates the probabilities of transitioning into bad health states. In addition, we find that young women have worse health prospects than their male counterparts but once individuals get older, being female is associated with transitioning into better health states with higher probabilities than men. We do not find significant differences of the conditional health transition probabilities between African Americans and the rest of the population. We also find that the lifecycle patterns are stable over time. Finally, we discuss issues with controlling for time effects, sample attrition, the Markov assumption, and other modeling issues that can arise with categorical outcome variables.

Article
Methane emissions are the second most important contributor to global warming. Knowledge about the dynamics of methane emissions facilitates the formulation of climate policies and the understanding of their consequences. We investigate whether methane emissions released from production and embodied in consumption converge within and across regions. Our estimates rely on global panel data on methane per capita and methane intensities over 1997-2014. We find that emissions converge within countries. The short half-lives show that the emissions of countries are close to their steady states. There is no evidence for international convergence of aggregate emissions. Yet, convergence of emissions across regions occurs in a number of economic sectors. Our results highlight the difficulties to achieve methane abatement in the medium run. The formulation of climate policies should take into account the sectoral specificity of the dynamics of methane emissions. Supplementary information: The online version supplementary material available at 10.1007/s00181-021-02162-9.

Article
The European Single Market created a common market for millions of Europeans. However, 30 years after its introduction, it appears that the benefits of the common European project are occasionally being questioned at least by some parts of the population. Others, by contrast, strive for deeper integration. Against this background, we empirically gauge the growth effect that arose from the Single Market. Using the synthetic control method, we establish the growth premium for the Single Market overall and for its founding members. Broadly in line with the predictions made by Richard Baldwin at the onset of the Single Market project, we find significantly higher real GDP per capita for the overall Single Market area of around 12–22 %. In comparison, smaller EU Member States seem to have benefited somewhat more compared to larger countries. The estimated growth effects underline the case for further deepening and broadening the Single Market where possible.

Article
The consequences of poverty and inequality for growth have long preoccupied academics and policy-makers. This paper revisits the inequality-growth and poverty-growth links. Using a panel of 158 countries between 1960 and 2010, we find that the correlation of growth with poverty is consistently negative: A 10 p.p. decrease in the headcount poverty rate is associated with a subsequent increase in per capita GDP between 0.5 and 1.2% per year. In contrast, the correlation of growth with inequality is empirically fragile—it can be positive or negative, depending on the empirical specification and econometric approach employed. However, the indirect effect of inequality on growth through its correlation with poverty is robustly negative. Closer inspection shows that these results are driven by the sample observations featuring high poverty rates.

Article
This study empirically investigated the dynamic aspects of antidumping. It focuses on the antidumping measures imposed by the United States on Chinese imports. To capture the dynamic effects, we employ a local projection method and monthly US import data. We document that the trade depression effect (decreased imports from China, the named country) of antidumping exists dynamically. Statistically significant and persistent decrease in Chinese imports begin when the preliminary duty is levied. Additionally, the trade diversion effect is illustrated by the statistically significant increase in imports from non-named countries when the final duty is imposed. Lastly, we demonstrate that a substantial bias could occur if the preliminary or the final duty is used as an antidumping measure in isolation, without considering anticipated parts of these measures.

Article
There is a growing literature documenting that the persistence of time series may change over time, and as a consequence, shifts in the long-run equilibrium of macroeconomic variables are expected. An important example is the significant increase in public debt in certain periods of time due to increases in government expenditures which are not matched by revenue counterparts. In this paper, new residual-based Wald-type tests are proposed which are designed to detect segmented cointegration, i.e., subsamples during which equilibrium relations exist. We derive the asymptotic properties of the tests, tabulate critical values for models with different deterministic components, and show by simulations that the tests display good finite sample performance in many relevant setups. Our empirical application provides a thorough examination of the main components of US governments’ budgets at two administrative levels (Federal, and State and Local) and concludes that until Bill Clinton’s presidency government budgets components never moved together.

Article
Overconfident CEOs speed up (slow down) adjusting firm leverage if it is above (below) target leverage. In addition, overconfident CEOs speed up (slow down) adjusting firm cash holdings if it is below (above) the optimal balance. Our results imply overconfident CEOs are associated with high cash holdings and low leverage. Additional tests suggest that the results do not imply cash and (negative) debt are substitutable. We also find overconfident CEOs sometimes reduce firm leverage unexpectedly. The observation is consistent with the view that overconfident CEOs are strong-willed individuals who dislike being monitored. Thus, besides the tendency to overestimate their ability and underestimate risk, overconfident CEOs are affected by additional aspects of their behavioral traits in decision making.

Article
Utilizing a randomized controlled trial (RCT) in traditional clusters of apparel and textile firms in Vietnam, this paper investigates peer effects on firm managers’ decisions to participate in seminars on export promotion. We invited 131 randomly selected firm representatives to three one-day seminars on export promotion. We use the number of randomly invited peers to identify peer effects. We further decompose the invited peers into peers invited to the same seminar, those invited to the earlier seminars, and those invited to the later seminars. We find that the former has a positive effect on firms' participation, whereas the latter two have no significant effect. These results imply that peer effects on participation primarily arise from the benefits of face-to-face interactions. The presence of positive peer effects suggests that multiple equilibria in terms of the share of participants within each village of firms may emerge, which is also consistent with our observations.

Article
We use nationally representative survey data and propensity score matching to investigate the impact of remittances from labor migrants on households’ wedding expenditures. The investigation provides evidence that remittance-receiving households spend a smaller share of their budget on wedding ceremonies. Since lavish wedding ceremonies serve the purpose of increasing households' social status through conspicuous displays of wealth, the study concludes that remittance-recipient households are less likely to be engaged in conspicuous consumption than are households that do not receive remittances.

Article
Air pollution is an important factor affecting the quality and green and sustainable development of China's economy, and urban sprawl is also a typical fact of non-intensive development of urban land. At the same time, Chinese-style fiscal decentralization promotes urban sprawl through top-down yardstick competition, which has a serious impact on air pollution. Therefore, to explore the effect of fiscal decentralization and urban sprawl on air pollution is of great significance for regulating local government behavior, curbing urban sprawl, and accurately identifying the causes of air pollution. The dynamic spatial Durbin model with economic geography weight matrix is employed to analyze the direct and interaction effects of fiscal decentralization and urban sprawl on air pollution on the basis of 269 prefecture-level cities in China from 2004 to 2018. The results show that air pollution has a significant retarded time effect and space spillover effect. Both fiscal decentralization and urban sprawl have contributed significantly to air pollution. The interaction between urban sprawl and fiscal decentralization on air pollution is significantly positive. From the short-term effect, the coefficients of the total spillover effect, direct spillover effect, and indirect spillover effect of urban sprawl and fiscal decentralization on air pollution are significantly positive respectively. In terms of long-term effects, the total spatial spillover effect of urban sprawl and fiscal decentralization on air pollution is significantly negative, while the direct and indirect effects of those are negative but not significant. Further research finds that there is significant regional heterogeneity in the influence of urban sprawl and fiscal decentralization on air pollution.

Article
Since the Aid for Trade (AfT) Initiative was launched in 2005, there have been many studies investigating the effects of AfT on trade and foreign direct investment (FDI). Most studies have found positive effects of AfT on exports and imports of recipient countries, as well as on aggregate FDI flows to recipient countries. Lee and Ries (World Dev 84: 206–218, 2016) and Ly-My and Lee (World Econ 42: 2120–2143, 2019) found positive effects of AfT particularly on greenfield FDI to recipient countries. Noting that there are two entry modes of FDI (greenfield and M&A), this study fills a gap in the literature by investigating the effects of AfT on cross-border M&A flows to recipient countries. By using the system GMM estimator with a dataset of 102 countries for 2003–2016, this paper finds evidence that AfT has a positive and significant effect on the US dollar value of M&A investment flows to recipient countries. Specifically, we find that AfT results in an increase in the dollar value of M&A FDI inflows because it increases both the extensive and intensive margins of M&A deals as well as source countries. Our results add to the beneficial effects of AfT on the recipient countries, as there is ample evidence of the benefits of M&A FDI.

Article
This paper researches two volatility transmission phenomena that take place within (‘heat wave’) and between (‘meteor shower’) spot and futures markets of four precious metals—gold, silver, platinum and palladium. We create conditional volatilities by considering three types of Markov switching GARCH models in combination with three different distribution functions. Conditional volatilities are subsequently embedded in Markov switching mean model. We find that ‘heat wave’ effect is more intense than ‘meteor shower’ effect, and this applies for both spot and futures markets of all precious metals. The results indicate that ‘heat wave’ effect is more intense in high than in low volatility periods, and also this effect is stronger in futures markets than in spot markets. ‘Meteor shower’ effect is stronger in low volatility regime than in high volatility regime, which is particularly true for the futures markets. Rolling regression results are in line with switching parameters. In addition, we find that ‘meteor shower’ effect, from futures to spot market, is stronger when short-term futures are analysed vis-à-vis long-term futures.

Article
The link between democracy and within-country income inequality remains an unresolved quest in the literature of political economy. To look into this debate, I propose exploring the implications of electoral systems, rather than political regimes, on income inequality. I surmise that proportional representation systems should be associated with lower income inequality than majoritarian or mixed systems. Further, I conjecture that the relationship between electoral systems and income inequality hinges on the de facto distribution of real political power, namely political equality. I use data on 85 countries covering the period 1960–2016 and specify models able to capture the persistence and mean reversion of income inequality. The estimates fail to significantly associate democracy with income inequality, and find other political institutions to significantly shape income inequality. The paper finds a robust association between more proportional systems and lower income inequality. However, this association depends on political equality. Changes towards proportional representation systems seem to lower income inequality at low and medium levels of political equality. Strikingly, instrumental variable estimates show that changes in electoral systems in political equal societies increases income inequality.

Article
Using panel data on small, open economies, this paper analyses the effect of trade liberalization on economic growth, placing a particular focus on the mechanisms that can potentially explain the estimated effects. I categorize the countries into four different sub-groups based on their predominant exports (agriculture, manufacturing, mining, and services), to identify the subgroup of countries that have benefitted the most from trade liberalization. Based on the comparative case studies employed using the synthetic control method, it is evident that the sub-group of countries with a primary focus on manufacturing exports have experienced the highest benefits overall from trade liberalization. Resource-rich economies appear to have benefitted least from opening their economy. Findings also suggest that the group of countries that have performed well (i.e. manufacturing-oriented countries) also experience significant increases in manufacturing exports post-liberalization. Results remain robust to various tests employed.

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I use Chinese panel data to estimate the exogenous effect of economic growth on individuals’ smoking behavior. By instrumenting the endogenous provincial GDP growth rate with a dummy variable indicating whether the province has a new leader, my results show that a higher economic growth rate reduces overall cigarette consumption, but does not reduce the overall smoking participation rate. In addition, a higher economic growth rate reduces cigarette consumption of male but not female. It reduces cigarette consumption of the lower-middle and senior age males, but does not significantly change consumption among the young males. Of these three groups, only the middle-aged males show a decrease in their smoking participation rate with higher economic growth. Overall, the Chinese data show that economic expansion reduces men’s smoking amount. But the overall adjustment is intensive, rather than extensive.

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In this study, I examine the role of health insurance cover in improving access to healthcare services and consequently its role in improving health outcomes for dependent children. I utilize differences in temporal variation of insurance cover for dependent children and their cousins, within the same Indonesian household to estimate the effect. By comparing dependent children of different biological parents, living in the same household, this study avoids potential confounders for healthcare demand, such as health endowment due to nutrition and hygiene. I find that dependent children of government employees have increased access to health insurance. In terms of healthcare use, I find no impact of insurance in providing access to preventive care as an outpatient. Instead, insurance status positively impacted first time and repeat visits to private facilities for curative care only. Insured children were 4.4 per cent more likely, than uninsured cousins, to access first-time curative care and make 63 per cent more repeat visits as an outpatient. In contrast, for inpatient services, insured children sought care at public facilities. Insurance did not have a positive impact on health outcomes for dependents. The results are robust to an instrumental variable estimation, alongside household fixed effects, which addresses concerns on potential endogeneity of insurance cover.

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The literature acknowledges "Uncertainty of Outcome" (UO) as a major factor to explain the degree of interest that sporting competitions draw from fans and the general public. Uncertainty about the championship winner is crucial insofar as financial success depends on the capacity to attract potential consumers of spectacle. This paper focusses on one aspect of UO and examines to what extent reductions in the interest of followers is due to the removal of uncertainty about the world drivers' champion in Formula One. To study how certainty on the winner undermines the degree of attention generated by the Formula One world drivers' championship, we rely on two alternative indexes (similar although not identical) reported by Google Trends. Both of these appraisals are computed from data on users' search intensity in Google, where weekly records are normalized on the relative amount of searches per calendar year. Thus, as dependent variables for the empirical analysis we use two measures: Google Trends News (GTN), to capture the intensity with which individuals search news articles associated; and Google Trends Web (GTW), to get a wider overview based on all kind of Internet contents. The former empirical analysis is carried out on 10 years of available data; while the latter approach estimates the models for a larger period of 14 years. Our empirical strategy includes additionally adopting indicator saturation techniques to address this issue while controlling for outliers.

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This paper investigates the non-marital fertility evolution in the USA for the period between 1976 and 2016. Beyond the well-known determinants in this framework, we add and test for the Easterlin relative income hypothesis. Easterlin stresses the role of the material aspirations formed in childhood (denominator) relative to the current economic perspectives (numerator) of young men. That ratio defines the relative income. We employ panel dynamic techniques at the state level. We find a negative and statistically significant effect of the relative income in the share of children born out-of-wedlock. Most importantly, relative income is robust to the inclusion of marriage. The latter may imply a socio-economic mobility perspective.

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In this paper, we study the effect of television exposure on fertility. We exploit a natural experiment that took place in Germany after WWII. For topographical reasons, Western TV programs, which promoted one/no child families, could not be received in certain parts of East Germany. We find robust evidence that access to West German TV results in lower fertility. This conclusion is robust to alternative model specifications and different data sets. Using individual level information on TV consumption, we employ IV techniques to estimate the direct effect of Western TV consumption on fertility. By using aggregate level fertility data, we furthermore show the robustness of our analysis in a difference-in-difference setting. Our results suggest that individual fertility decisions are affected by role models or information about other ways of life promoted by media.

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