Empirical Economics

Pierani, Pierpaolo; Tiezzi, Silvia

doi: 10.1007/s00181-008-0220-3pmid: N/A

This paper adopts a multi-commodity habit formation model to study whether unhealthy behaviors are related, i.e. whether there are contemporaneous and inter-temporal complementarities between alcohol and tobacco consumptions in Italy. To this aim time series data of per-capita expenditures and prices during the period 1960 to 2002 are used. Own price elasticities are negative and tobacco appears to be more responsive than alcohol demand, although both responses are less than unity. Cross price elasticities are also negative and asymmetric thus suggesting complementarity. A “double dividend” could then be exploited, because public policy needs to tackle the consumption of only one good to control the demand of both. These results show that the optimal strategy for maximizing public revenues would be to raise alcohol taxation more than tobacco taxation. Finally, past consumption of one addictive good does not significantly reinforce current consumption of the other.

Monastiriotis, Vassilis

doi: 10.1007/s00181-008-0221-2pmid: N/A

This paper addresses an important empirical question for spatial economics that has so far attracted little attention in the literature, namely, how patterns of spatial association differ across socio-economic indicators. This issue is examined here with a large socio-economic dataset from the Greek prefectures. We start by identifying spatial patterns of association in the data through an exploratory spatial data analysis and then explore the persistence of spatial clustering across socio-economic indicators through the application of a number of simple statistical tests. Greece presents an interesting case for examination, given its complex nature of geographical disparities and spatial heterogeneity. The derived results are important for Greek regional policy, as they help highlight yet another dimension of the challenges it faces for regional development, but they are also of particular relevance for applied spatial analysis, as they offer new insights in the analysis of spatial processes.

Hart, Robert; Malley, James; Woitek, Ulrich

doi: 10.1007/s00181-008-0222-1pmid: N/A

In the time domain, the observed cyclical behavior of the real wage hides a range of economic influences that give rise to cycles of differing lengths and strengths. This may serve to produce a distorted picture of wage cyclicality. Here, we employ frequency domain methods that allow us to assess the relative contribution of cyclical frequency bands on real wage earnings. Earnings are decomposed into standard and overtime components. We also distinguish between consumption and production wages. Frequency domain analysis is carried out in relation to wages alone and to wages in relation to output and employment cycles. Our univariate analysis suggests that, in general, the dominant cycle followed by output, employment, real consumer and producer wages and their components is 5–7 years. Consistent with previous findings reported in the macro-level literature, our bi-variate results show that the various measures of the wage are generally not linked to the employment cycle. However, and in sharp contrast with previous macro-level studies we find strong procyclical links between the consumer wage and its overtime components and the output cycle, especially at the 5–7 years frequency. Observed real wages are not constant over the cycle, but neither do they exhibit consistent pro- or counter-cyclical movements. This suggests that any attempt to assign systematic real wage movements a central role in an explanation of business cycles is doomed to failure. (lucas 1977)

Miyakoshi, Tatsuyoshi; Okubo, Masakatsu; Shimada, Junji

doi: 10.1007/s00181-008-0223-0pmid: N/A

This paper measures and investigates the welfare costs, other effects and recovery process of the 1997 Asian crisis, and evaluates the impact of the policy program supported by the International Monetary Fund (IMF). The main findings are as follows. First, the ratio of ‘whole cost’ to the level of consumption in a hypothetical economy is high: 50% for Indonesia, 39% for Hong Kong, 36% for Korea, 30% for Thailand and 18% for Malaysia. Second, the dynamic process of ‘cost at period t’ quickly converges to 40% immediately after the crisis, though the costs for Indonesia and Hong Kong gradually increase toward 100%. Third, the IMF-supported programs in Thailand, Indonesia and Korea were implemented straight after the peak cost. Finally, the cost of the IMF-supported program was relatively inexpensive compared with the welfare cost of the crisis.

Hanck, Christoph

doi: 10.1007/s00181-008-0224-zpmid: N/A

We employ a multiple testing technique to identify the countries for which purchasing power parity (PPP) held over the last century. The approach controls the multiplicity problem inherent in simultaneously testing for PPP on several time series, thereby avoiding spurious rejections. It has higher power than traditional multiple testing techniques by exploiting the dependence structure between the countries with a bootstrap approach. Our results show that, plausibly, thus controlling for multiplicity leads to a number of rejections of the null that is intermediate between that of traditional multiple testing techniques and that which results if one tests the null on each single time series at some level α.

Muga, Luis; Santamaría, Rafael

doi: 10.1007/s00181-008-0225-ypmid: N/A

This paper shows that the momentum effect appears in the wake of both up-market and down-market states in the Spanish stock market, although in the first of these cases it is followed by return reversal. This evidence, which contradicts the predictions of Cooper et al. (2004), provides the rationale for taking into account the disposition effect among the possible explanatory factors behind the momentum effect in a behavioral theory context.

Huh, Hyeon-seung; Lee, Hyun; Lee, Namkyung

doi: 10.1007/s00181-008-0226-xpmid: N/A

The US Phillips curve is modeled with a logistic smooth transition autoregression specification that allows various nonlinear shapes. Using this, the paper derives model-consistent estimates of the NAIRU. The NAIRU is defined as the level of unemployment rate that would correspond to a forecast of no inflation changes over the policy horizon. This paper also investigates the implications of nonlinearities in the Phillips curve for deriving optimal monetary policy rules. The optimal policy rule for interest rates and implied sacrifice ratios are found to be nonlinear as well.

Gao, Weiyu; Hartley, Peter; Sickles, Robin

doi: 10.1007/s00181-008-0227-9pmid: N/A

We model the economically optimal dynamic oil production decisions for a stylized oilfield resembling the largest developed field in Saudi Arabia, Ghawar, paying particular attention to the engineering aspects of oil production. Specifically, we begin with a fluid dynamics model composed of differential equations describing the dynamics of fluid flow as a function of fluid pressure, formation characteristics, water injection, new wells, and how these parameters change as oil extraction occurs. We then link this physical description of the field to an intertemporal optimizing economic model. The cost and revenue functions are based on data from a number of sources. We use tensor splines to approximate the value function. The optimal solution depends on exogenous variables, such as the discount rate or the timing of breakthroughs in the cost of alternative energy sources, which are uncertain. We examine solutions under a number of scenarios to account for these uncertainties.

Li, Hong; Daly, Vince

doi: 10.1007/s00181-008-0229-7pmid: N/A

We investigate whether China’s experience during 1952–2004 supports the balanced growth entailment of the neoclassical growth model. Estimation of long-run relations among output, consumption and investment for the full period reject the balanced growth hypothesis for both the national and regional economies. When the economic reforms of the late 1970s are modelled as a structural break by the methods of Johansen et al. (Economet J 3(2):216–249, 2000) and Perron (Econometrica 57(6):1361–1401, 1989), we find some evidence of balanced growth in the pre-break period but in the post-break period the ‘great ratios’ are trend-stationary, precluding fully balanced growth, though permitting a common (stochastic) productivity trend.

Dustmann, Christian; Micklewright, John; Soest, Arthur

doi: 10.1007/s00181-008-0230-1pmid: N/A

In many industrialised countries, teenagers have a significant spending power, and they are important customers for specialised industries. The income of teenagers still in full time education comes from two major sources: parental pocket money and earnings from part-time jobs. Little is known about the way these sources interact, and how they depend on parental, school and family characteristics. In this paper, we analyse labour supply of 16 year old British teenagers together with the cash transfers made to them by their parents. We first develop a theoretical model, where labour supply and transfers are jointly determined. We then estimate labour supply and transfers jointly, using unique data on labour supply of teenagers, the wages they receive, and the transfers from their parents. We show how these two processes depend on each other, and how transfers and labour supply react to changes in wages.