All seminars meet in Room 2.12 Sir William Duncan Building, 130 Rottenrow, Glasgow G4 0GE on Wednesdays at 16:15 unless otherwise noted.
Giuseppe De Feo, University of Strathclyde
TITLE
Competition for FDI and undesired effects of the non-discrimination principle (joint with Oscar Amerighi)
ABSTRACT
There is a general perception that tax competition to attract foreign direct investments (FDI) may be harmful for (already distressed) public finances if governments were permitted to discriminate and offer different tax arrangements to different firms (see for example OECD 1998, 2000; and EU state aid rules).
The aim of the present work is to investigate the effectiveness of this non-discrimination principle in preventing a race to the bottom on corporate taxes in a theoretical framework where governments compete to attract FDI from heterogeneous multinational enterprises which differ in the relative before-tax profitability of the investment in alternative locations.
Our results show that tax discrimination improves the efficiency of the location choice which would be distorted by differences in statutory tax rates. Moreover, in the short run, tax discrimination may even be beneficial for the region as a whole in terms of tax revenues, while in the long run, when all firms are mobile, we show that tax discrimination represents a powerful tool to sustain cooperative agreements on (high) corporate tax rates and prevents wasteful and inefficient competition between countries on statutory tax rates.
Tim Worrall, University of Manchester
TITLE
Dynamic relational contracts under risk aversion
ABSTRACT
This paper presents a dynamic version of the hold-up problem where agents are risk averse and the environment is uncertain. In each period agents invest in a joint project but also have outside options generated by the opportunity to expropriate part of the current output. The question asked is how to structure the investments and division of the surplus over time so as to avoid expropriation. A companion paper (Thomas-Worrall, 2010) has considered the case where agents are risk neutral. In that paper it is shown quite generally how payoffs and actions of one agent are backloaded in an initial phase and that there is convergence with probability one to a stationary phase in which both agents underinvest or efficiently investment depending on the state of nature and other parameter values. With risk-averse agents such extreme backloading is unlikely to remain optimal. In the current paper we consider the case where agents are risk averse but have quasi-linear preferences. We show that there is convergence to a unique invariant distribution independent of the initial conditions. We show that where a given state is repeated, and if surplus is not already maximal given constraints, then actions are changed to increase the current net surplus. If the first-best is feasible, then this result holds even when the environment changes so that whenever a state recurs, surplus is higher at a later date. When the first-best is not feasible, the result will fail.
Alex Dickson, University of Strathclyde
TITLE
The effects of entry in thin markets
Download the paper here - Dickson
ABSTRACT
The purpose of this paper is to study the effects of entry of additional firms into the market for a single commodity in which both sellers and buyers are permitted to interact strategically. It is shown that the market is quasi-competitive: the inclusion of an additional seller lowers the price and increases the volume of trade, as expected. Contrary to the conventional wisdom, however, it may be the case that existing sellers' profit increases. The conditions under which entry by new sellers raises equilibrium profits of existing sellers are derived. These depend in an intuitive way on the elasticity of a strategic analog of demand and the market share of existing sellers, and encompass entirely standard economic environments.
Vifill Karlsson, University of Akureyri, Iceland
TITLE
Interregional migration, transportation improvements, and gender
Download the paper here - Karlsson
ABSTRACT
This paper examines the relationship between migration and transportation improvements. More precisely: will transportation improvements between central business districts and rural areas make migration trends more favourable in rural areas? Due to household utility geographical differentials, there are interregional migration. Thus, it is resaonable to believe that transportation improvements that increases the access of rural population to the labour and the service market of CBD’s will influence interregional migration in rural areas positively. I will examine whether this is true for Iceland, a thinly populated area with two central business districts. A macro panel data set from Iceland will be used. It represents several essential varaibles of the house market for 79 municipalities in Iceland during the period from 1986 to 2006. Furthermore, I will investigate whether there are any gender aspects regarding the matter.
Juergen Bracht, University of Aberdeen
TITLE
Moral Emotions and Partnership
ABSTRACT
Actual behaviour is influenced in important ways by moral emotions, for instance guilt or shame (see among others Tangney et al., 2007). Belief-dependant models of social preferences using the framework of psychological games aim to consider such emotions to explain other-regarding behaviour. Our study links recent advances in psychological theory on moral emotions to belief-dependant models in economics. We find that - in addition to the positive effect of second-order beliefs and promises - individuals' disposition to guilt (their proneness to respond in an evaluative way to personal transgressions) is an important determinant of kind behaviour. This applies to private as well as public settings.
John McHale, National University of Ireland, Galway
TITLE
Selecting Economic Immigrants: A Statistical Approach
ABSTRACT
There is growing international interest in a Canadian-style points system for selecting economic immigrants. Although existing points systems are influenced by the human capital literature, the findings have traditionally been incorporated in an ad hoc way. This paper explores a formal method for designing a points system based on a human capital earnings regression for predicting immigrant economic success. The method is implemented for Canada using the IMDB, a longitudinal database that combines information on immigrants’ characteristics at arrival with their subsequent income performance as reported on tax returns. We demonstrate the feasibility of the method by developing an illustrative points system. We also explore how the selection system can be improved by incorporating additional information such as country-of-origin characteristics and intended occupations. We discuss what our findings imply for the debate about the relative merits of points- and employment-based systems for selecting economic immigrants.
James Mitchell, University of Leicester
TITLE
Efficient Aggregation of Panel Qualitative Survey Data (joint with Richard J. Smith (Cambridge) and Martin Weale (MPC, Bank of England))
Download the paper here - Mitchell
ABSTRACT
Qualitative business survey data are used widely to provide indicators of economic activity ahead of the publication of official data. Traditional indicators exploit only aggregate survey information, namely the proportions of respondents who report "up" and "down". This paper examines disaggregate or firm-level survey responses. It considers how the responses of the individual firms should be quantified and combined if the aim is to produce an early indication of official output data. Having linked firms' categorical responses to official data using ordered discrete-choice models, the paper proposes a statistically efficient means of combining the disparate estimates of aggregate output growth which can be constructed from the responses of individual firms. An application to firm-level survey data from the Confederation of British Industry shows that the proposed indicator can provide early estimates of output growth more accurately than traditional indicators.
Richard Harris, University of Glasgow
TITLE
R&D, Innovation & Exporting
Download the paper here, Harris
ABSTRACT
This study considers the determinants of whether a firm exports, undertakes R&D and/or innovates, and, in particular, the contemporaneous links between these variables using three waves of the UK Community Innovation Survey. An instrumental variables procedure is employed to overcome problems of endogeneity. Given the key role of R&D, innovation and exporting in determining productivity, it is important that government understands these complex interactions between R&D, innovation and exporting and takes advantage of them when devising and implementing productivity-enhancing policies at the micro-level.
Please note the location for this seminar is the Lighthouse, Mitchell Lane
Massimo Giuliodori, University of Amsterdam
Download the paper here - Giuliodori
TITLE
Co-movements of European interest spreads before and after the start of the debt crisis (with Roel Beetsma and Frank de Jong and Daniel Widijanto)
ABSTRACT
We investigate how the European debt crisis affects domestic interest spreads and how it propagates to other countries, thereby distinguishing between the so-called GIIPS countries and other countries. We make original use of the Eurointelligence newsflash to construct “crisis variables” based on the amount of news that is released on a country on a given date. We find that more news on average raises the domestic interest spread of GIIPS countries since around mid-2009. In addition, we find that it leads to an increase in the interest spreads of other GIIPS countries. The magnitude of the news effects is related to the bank holdings across countries. A split of news into good and bad news shows that the upward pressure on domestic and foreign interest spreads is driven by bad news. We also find spill-overs of bad news from GIIPS countries onto non-GIIPS countries since mid-2009. However, the magnitude of these spill-overs is substantially smaller than those to other GIIPS countries.
Masayuki Kudamatsu, Stockholm University
TITLE
“Connections and Political Selection in China” (with Ruixue Jia and David Seim)
ABSTRACT
Who becomes the top politicians in China? We answer this question by looking at what determines the promotion of provincial leaders to high office in the central government for the period of 1993-2009. In particular we focus on the role of social connections to top politicians and of performance as a provincial leader such as provincial GDP growth. We measure promotion and social connections by using the biography data of Chinese politicians. We find that connections and GDP growth are complementary: connected provincial leaders are more likely to get promoted if their province's GDP grows quicker while for those unconnected their chance of promotion does not depend on their province's GDP growth.
Ron Davies, University College Dublin
TITLE
A Race to the Bottom in Labour Standards? An Empirical Investigation
ABSTRACT
Among the many concerns over globalization is that as nations compete for mobile firms, they will relax labor standards as a method of lowering costs and attracting investment. Using spatial estimation on panel data for 148 developing countries over 18 years, we find that the labor standards in one country are positively correlated with the labor standards elsewhere (i.e. a cut in labor standards in other countries reduces labor standards in the country in question). For low income countries, this interdependence is most evidenced in labor practices (i.e. the enforcement of labor laws) whereas for middle income countries the competition is concentrated in labor laws. High income countries, meanwhile, appear to compete in both. Since there has been a decline in the labor standards of both types across all three groups, this is suggestive of a race to the bottom as nations compete for investment.
James Rockey, University of Leicester
TITLE
Political Competition Increases Turnout
ABSTRACT
Much analysis has focused on why individuals vote at all. This paper focuses on why turnout varies across elections and across districts. A simple micro-founded measure of policy based party competition is developed and calculated for every district at every election in 15 European countries over the period 1947-1998. Our results suggest that a large proportion of the within-district inter- election variance in turnout levels can be attributed to differences in the intensity of district-level of political competition.
Maurizio Zanardi, ECARES, Université Libre de Bruxelles
TITLE
“Policy Makers’ Horizon and Trade Reforms”
Download the paper here - Zanardi
ABSTRACT
Does policymakers’ horizon affect their willingness to support economic reforms? Voting in the U.S. Congress provides an ideal setting to address this
question. Differences between the House and Senate, in which members serve two-year and six-year mandates respectively, allow to examine the role
of term length; the staggered structure of the Senate allows to compare the behavior of different "generations" of senators and study the impact of election
proximity. Considering all major trade liberalization reforms undertaken by the U.S. since the early 1970’s, we find that Senate members are more likely to
support them than House members. However, inter-cameral differences disappear for third-generation senators, who face re-election at the same time
as House members. Considering Senate votes alone, we find that the last generation is more protectionist than the previous two, a result that holds both
when comparing different senators voting on the same bill and individual senators voting on different bills. Inter-generational differences disappear
instead for senators who hold safe seats or have announced their retirement, indicating that the protectionist effect of election proximity is driven by
legislators’ fear of losing office.
Markus Eberhardt, University of Nottingham
TITLE
The long-run effect of public debt on economic growth
ABSTRACT
Despite solid theoretical foundations and renewed interest in the international policy arena the empirical validation of policies for debt restructuring, debt forgiveness or fiscal adjustment as well as more generally of an adverse relationship between public debt and development is rather weak. Existing work has either focused exclusively on external debt or on a limited set of countries while commonly following the wider cross-country growth literature in adopting pooled specifications investigated using estimators developed for firm-level panel data. Our paper makes three contributions to the literature: firstly, we employ a unifying econometric framework to analyse the relationship between all forms of public debt (domestic, external, total) and economic growth. Secondly, we employ methods from the recent panel time series literature which investigate and accommodate the dynamic and cross-section dependence properties of the data and furthermore allow for different long-run relationships between debt and development across countries. Thirdly, we investigate potential sources for this heterogeneity and test competing channels through which debt has been argued to constrain economic growth and development.
Juergen Bracht, University of Aberdeen
TITLE
TBA
ABSTRACT
TBA
Daniel Bernhofen, University of Nottingham
Download the paper here - Bernhofen
TITLE
Estimating the effects of containerization on world trade
ABSTRACT
World trade has grown tremendously since World War II. The two main contenders for this growth are policy-led trade liberalizations and reductions in transportation costs. The transportation literature and prominent economic commentators –like Paul Krugman- have attributed a large role to the introduction of the container. However, despite the container's alleged impact on the increase in world trade, quantitative evidence on the effects of the container is still missing. Our paper aims to fill this gap in the literature. We capture technological change via containerization by cross-sectional and time series variation in country‟s adoption of port and railway container facilities. This allows us to apply a treatment approach to estimate the effects of the container on bilateral trade flows during 1962-1990. Applying a variety of fixed effects specifications, we find containerization to have statistically significant and economically large effects on the volume of bilateral trade at the aggregate product level. We find that containerization led to an average increase of between 75% and 100% in trade flows and that the effects were more than twice as large as the effects of trade policy variables. In addition, we find that containerization had a larger effect on North-South than on North-North trade.
