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On the cost of rent-seeking by government bureaucrats in a Real-Business-Cycle framework
Full text linkThis paper studies the wasteful e ffect of bureaucracy on the economy by addressing the
link between rent-seeking behavior of government bureaucrats and the public sector
wage bill, which is taken to represent the rent component. In particular, public o fficials are modeled as individuals competing for a larger share of those public funds. The
rent-seeking extraction technology in the government administration is modeled as in
Murphy et al. (1991) and incorporated in an otherwise standard Real-Business-Cycle
(RBC) framework with public sector. The model is calibrated to German data for the
period 1970-2007. The main fi ndings are: (i) Due to the existence of a signi ficant public sector wage premium and the high public sector employment, a substantial amount
of working time is spent rent-seeking, which in turn leads to signifi cant losses in terms
of output; (ii) The measures for the rent-seeking cost obtained from the model for the
major EU countries are highly-correlated to indices of bureaucratic ineffi ciency; (iii)
Under the optimal scal policy regime,steady-state rent-seeking is smaller relative to
the exogenous policy case, as the government chooses a higher public wage premium,
but sets a much lower public employment, thus achieving a decrease in rent-seeking
Partner Selection into Policy Relevant Field Experiments
Full text linkThis study investigates the issue of self-selection of stakeholders into participation
and collaboration in policy-relevant experiments. We document and test the implications of self-selection in the context of randomised policy experiment we conducted in primary schools in the UK. The main questions we ask are (1) is there evidence of selection on key observable characteristics likely to matter for the outcome of interest and (2) does selection matter for the estimates of treatment eff ects. The experimental work consists in testing the e ffects of an intervention aimed at encouraging children to make more healthy choices at lunch. We recruited schools through local authorities and randomised schools across two incentive treatments and a control group. We document the selection taking place both at the level of local authorities and at the school level. Overall we nd mild evidence of selection on key observables such as obesity levels and socio-economic characteristics. We find evidence of selection along indicators of involvement in healthy lifestyle programmes at the school level, but the magnitude is small. Moreover, We do not find signifi cant di erences in the treatment e ffects of the experiment between variables which, albeit to a mild degree, are correlated with selection into the experiment. To our knowledge, this is the rst study providing direct evidence on the magnitude of self-selection in fi eld experiments
Ecological-economic modelling of interactions between wild and commercial bees and pesticide use
Full text linkThe decline in extent of wild pollinators in recent years has been partly associated with
changing farm practices and in particular with increase of pesticide use. In this paper
we combine ecological modelling with economic analysis of a single farm output under the assumption that both pollination and pest control are essential inputs. We show that the drive to increase farm output can lead to a local decline in the wild bee population. Commercial bees are often considered an alternative to wild pollinators, but we show that their introduction can lead to further decline and finally local extinction of wild bees. The
transitions between different outcomes are characterised by threshold behaviour and are
potentially difficult to predict and detect in advance. Small changes in economic (input
prices) and ecological (wild bees carrying capacity and effect of pesticides on bees) can move the economic-ecological system beyond the extinction threshold. We also show that increasing the pesticide price or decreasing the commercial bee price might lead to reestablishment of wild bees following their local extinction. Thus, we demonstrate the importance of combining ecological modelling with economics to study the provision of ecosystem services and to inform sustainable management of ecosystem service providers
Consumption Expenditures in Economic Impact Studies: An Application to University Students
Full text linkThis paper examines how appropriately to attribute economic impact to consumption
expenditures. Consumption expenditures are often treated as either wholly endogenous or
wholly exogenous, following a distinction from Input-Output analysis. For many applications,
such as those focusing on the impacts of tourism or benefits systems, such binomial
assumptions are not satisfactory. We argue that consumption is neither wholly endogenous
nor wholly exogenous but that the degree of this distinction is rather an empirical matter. We
set out a general model for the treatment of consumption expenditures and illustrate its
application through the case of university students. We examine individual student groups and
how the impacts of students at particular institutions. Furthermore we take into account the
binding budget constraint of public expenditures (as is the case for devolved regions in the UK)and examine how this affects the impact attributed to students' consumption expenditures
The relationship between public education expenditure and economic growth: The case of India
Full text linkThe paper reviews the theoretical and the empirical case for public investment in education in India. Though the theoretical literature provides a backing for such a policy, the empirical literature fails to find a robust relation between education expenditure and growth. Expenditure on education is a necessary but not a sufficient condition for growth. It seems that the effectiveness of education expenditure depends on the institutional and labour market characteristics of the economy. The
effectiveness of education investments also depends on other factors such as trade openness. Due to these aforesaid factors, we argue that the empirical relation between education expenditure and growth for India has been inconsistent
On the time-varying relationship between EMU sovereign spreads and their determinants
Full text linkWe use a dynamic multipath general-to-specific algorithm to capture structural instability in the link between euro area sovereign bond yield spreads against Germany and their underlying determinants over the period January 1999 – August 2011. We offer new evidence suggesting a significant heterogeneity across countries, both in terms of the risk factors determining spreads over time as well as in terms of the magnitude of their impact on spreads. Our findings suggest that the
relationship between euro area sovereign risk and the underlying fundamentals is strongly timevarying, turning from inactive to active since the onset of the global financial crisis and further intensifying during the sovereign debt crisis. As a general rule, the set of financial and macro spreads’ determinants in the euro area is rather unstable but generally becomes richer and stronger in significance as the crisis evolves
Stock Market Liquidity and Macro-Liquidity Shocks: Evidence from the 2007-2009 Financial Crisis
Full text linkWe develop an empirical framework that links micro-liquidity, macro-liquidity and stock prices. We provide evidence of a strong link between macro-liquidity shocks and the returns of UK stock portfolios constructed on the basis of micro-liquidity measures between 1999-2012. Specifically, macro-liquidity shocks, which are extracted on the meeting days of the Bank of England Monetary Policy Committee relative to market expectations embedded in 3-month LIBOR futures prices, are transmitted in a differential manner to the cross-section of
liquidity-sorted portfolios, with liquid stocks playing the most active role. We also find that there is a significant increase in shares’ trading activity and a rather small increase in their trading cost on MPC meeting days. Finally, our results emphatically document that during the recent financial crisis the shocks-returns relationship has reversed its sign. Interest rate cuts during the crisis were perceived by market participants as a signal of deteriorating economic prospects and reinforced “flight to safety” trading
Local consumption and territorial based accounting for CO2 Emissions
Full text linkWe examine the complications involved in attributing emissions at a sub-regional
or local level. Speci cally, we look at how functional specialisation embedded
within the metropolitan area can, via trade between sub-regions, create intra-metropolitan emissions interdependencies; and how this complicates environmental policy implementation in an analogous manner to international trade at the national level. For this purpose we use a 3-region emissions extended
input-output model of the Glasgow metropolitan area (2 regions: city and surrounding suburban area) and the rest of Scotland. The model utilises data on commuter flows and household consumption to capture income and consumption flows across sub-regions. This enables a carbon attribution analysis at the
sub-regional level, allowing us to shed light on the signi cant emissions interdependencies that can exist within metropolitan areas
An Investigation of Housing Affordability in the UK Regions
Full text linkThe housing market has been extensively investigated in the literature; however there is a lack of understanding of the fundamentals a ffecting housing affordability across UK regions as measured by the price to income ratio. The aim of this paper is twofold; fi rstly we calculate the a ffordability ratio based on individuals' incomes. Second we set o f to ask which socio-economic factors could a affect this ratio. The analysis finds a strong influence coming from the
mortgage rate, the residents' age and academic quali fications. We also report a positive and signifi cant e ffect from foreign capital coming to the UK. Finally, we record a non-negligible degree of heterogeneity across the twelve regions
Unilateral Emissions Mitigation, Spillovers, and Global Learning
Full text linkWhat's the role of unilateral measures in global climate change mitigation in a
post-Durban, post 2012 global policy regime? We argue that under conditions of
preference heterogeneity, unilateral emissions mitigation at a subnational level may
exist even when a nation is unwilling to commit to emission cuts. As the fraction of
individuals unilaterally cutting emissions in a global strongly connected network of
countries evolves over time, learning the costs of cutting emissions can result in the
adoption of such activities globally and we establish that this will indeed happen
under certain assumptions. We analyze the features of a policy proposal that could
accelerate convergence to a low carbon world in the presence of global learning