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The distributional consequences of tax reforms under market distortions
Get PDFIn this paper we examine the importance of imperfect competition
in product and labour markets in determining the long-run welfare
e¤ects of tax reforms assuming agent heterogeneneity in capital hold-
ings. Each of these market failures, independently, results in welfare
losses for at least a segment of the population, after a capital tax cut
and a concurrent labour tax increase. However, when combined in a
realistic calibration to the UK economy, they imply that a capital tax
cut will be Pareto improving in the long run. Consistent with the the-
ory of second-best, the two distortions in this context work to correct
the negative distributional e¤ects of a capital tax cut that each one,
on its own, creates
On Measuring the Efficiency of Monetary Policy
Get PDFCecchetti et al. (2006) develop a method for allocating macroeconomic performance changes among the structure of the economy,
variability of supply shocks and monetary policy. We propose a dual approach of their method by borrowing well-known tools from production theory, namely the Farrell measure and the Malmquist index.
Following FÄare et al (1994) we propose a decomposition of the efficiency of monetary policy. It is shown that the global efficiency changes can be rewritten as the product of the changes in macroeconomic performance, minimum quadratic loss, and efficiency frontier
Multilevel Modelling with Spatial Effects
Get PDFIn multilevel modelling, interest in modeling the nested structure of hierarchical data has been accompanied by increasing attention to different forms of spatial interactions across
different levels of the hierarchy. Neglecting such interactions is likely to create problems of inference, which typically assumes independence. In this paper we review approaches to multilevel modelling with spatial effects, and attempt to connect the two literatures,
discussing the advantages and limitations of various approaches
Inequality and Risk-Taking Behaviour
Get PDFThis paper investigates social influences on attitudes to risk and offers an evolutionary explanation of risk-taking by young low-ranked males. Becker, Murphy
and Werning (2005) found that individuals about to participate in a status tournament may take fair gambles even though they are risk averse in both wealth and status. Here their model is generalised by use of the insight of Hopkins and Kornienko (2010) that in a tournament or status competition one can consider equality in terms of the status or rewards available as well as in initial endowments. While Becker et al. found that risk-taking is increasing in the equality of
initial endowments, it is found here that it is increasing in the inequality of rewards in the tournament. Further, it is shown that the poorest will be risk loving if the lowest level of status awarded is sufficiently low. Thus, the disadvantaged
in society rationally engage in risky behavior when social rewards are sufficiently
unequal. Finally, as greater inequality in terms of social status induces gambling,
it can cause greater inequality of wealth
A Comparison Of Forecasting Procedures For Macroeconomic Series: The Contribution Of Structural Break Models
Get PDFThis paper compares the forecasting performance of different models which
have been proposed for forecasting in the presence of structural breaks. These models differ in their treatment of the break process, the parameters defining the model which applies in each regime and the out-of-sample probability of a break occurring. In an extensive empirical evaluation involving many important macroeconomic time series, we demonstrate the presence of structural breaks and their importance for forecasting in the vast majority of cases. However, we find no single forecasting model consistently works best in the presence
of structural breaks. In many cases, the formal modeling of the break process is important in achieving good forecast performance. However, there are also many cases where simple, rolling OLS forecasts perform well
The effects of agglomeration on wages: evidence from the micro-level
Get PDFThis paper estimates individual wage equations in order to test two rival non-nested theories of economic agglomeration, namely New Economic Geography (NEG), as represented by the NEG wage equation and urban economic (UE) theory , in which wages relate to employment density. The paper makes an original contribution by evidently being the first empirical paper to
examine the issue of agglomeration processes associated with contemporary theory working with micro-level data, highlighting the role of gender and other individual-level characteristics. For male respondents, there is no significant evidence that wage levels are an outcome of the mechanisms
suggested by NEG or UE theory, but this is not the case for female respondents. We speculate on the reasons for the gender difference
Pension reform in a rapidly ageing country: the case of Ukraine
Get PDFUkraine has a rapidly ageing and declining population. A dynamic forward-looking
Computable General Equilibrium (CGE) model
with an explicitly modelled Pay‐As‐You-Go pension scheme is constructed to perform simulations of different pension reform
scenarios and investigate the impact
of population ageing on a wide range of
macroeconomic variables.
It is shown that, changes in age structure will result in a significant negative
impact on the economy and stability of the
pension system.
Analysis of the potential changes to the pension system is limited to modelling an increase of the pension age, keeping either the workers’ contribution rate or replacement rate constant
Estimation of the Spatial Weights Matrix under Structural Constraints
Get PDFWhile estimates of models with spatial interaction are very sensitive to the choice of spatial weights, considerable uncertainty surrounds de nition of spatial weights in most studies with cross-section
dependence. We show that, in the spatial error model the spatial weights matrix is only partially identi ed, and is fully identifi ed under the structural constraint of symmetry. For the spatial error model, we
propose a new methodology for estimation of spatial weights under the assumption of symmetric spatial weights, with extensions to other important spatial models. The methodology is applied to regional
housing markets in the UK, providing an estimated spatial weights matrix that generates several new hypotheses about the economic and socio-cultural drivers of spatial di¤usion in housing demand
Corruption and Financial Intermediation in a Panel of Regions: Cross-Border Effects of Corruption
Get PDFThe importance of financial market reforms in combating corruption has been
highlighted in the theoretical literature but has not been systemically tested empirically.
In this study we provide a first pass at testing this relationship using both linear and nonmonotonic forms of the relationship between corruption and financial intermediation. Our study finds a negative and statistically significant impact of financial intermediation on
corruption. Specifically, the results imply that a one standard deviation increase in
financial intermediation is associated with a decrease in corruption of 0.20 points, or 16 percent of the standard deviation in the corruption index and this relationship is shown to be robust to a variety of specification changes, including: (i) different sets of control
variables; (ii) different econometrics techniques; (iii) different sample sizes; (iv) alternative corruption indices; (v) removal of outliers; (vi) different sets of panels; and (vii) allowing for cross country interdependence, contagion effects, of corruption
The regional employment impacts of renewable energy expenditures: The case for modelling
Get PDFOne aspect of the case for policy support for renewable energy developments is the wider economic benefits that are expected to be generated. Within Scotland, as with other regions of the UK, there is a focus on encouraging domestically‐based renewable technologies. In this paper, we use a regional computable general equilibrium framework to model the impact on the Scottish economy of expenditures relating to marine energy installations. The results illustrate the potential for (considerable) ‘legacy’ effects after expenditures cease. In identifying the specific sectoral expenditures with the largest impact on (lifetime) regional employment, this approach offers important policy guidance