http://ccso.eldoc.ub.rug.nl/ All papers prestented here are from the University of Groningen and are freely available for reading. References to the works gathered here should include the permanent webaddress (URL) that is presented with each paper. nl_NL We analyze corporate social responsibility (CSR) in a general equilibrium stock market model with uncertainty in production. Production generates non-market costs and consumers take this into account when they construct their portfolio. We deduce empirically testable hypotheses and analyze how CSR affects various financial performance indicators. We show that our model offers an excellent explanation of the seemingly contradictory findings in the existing empirical literature. We stress that our findings are not a result of assumptions on the operational level of the firm. We conclude that there is a clear and direct association between CSR and different measures of corporate financial performance. http://irs.ub.rug.nl/ppn/29768146X Sun, 01 Jan 2006 00:00:00 CET We model the development of world records of metric running events from the 100 meter dash to the marathon for men and women. First, we review methods to fit time-series curves of world records in general. We discuss methods to estimate curves and review candidate functional forms that fit the systematic shape of the progress of world records. Next, we fit the asymmetric Gompertz-curves for 16 events and compute implied limit values. In order to assess the implied limits we use the Francis (1943)-model to relate limit records and distance in a log-log specification. We compare men and women and conclude that there is a fixed difference in record times between the two sexes. Finally, using the log-log relationship between time and distance we calculate the development of the world record of the mile in a robustness check. http://irs.ub.rug.nl/ppn/297681613 Sun, 01 Jan 2006 00:00:00 CET This paper employs concepts from information theory in factor models. We show that in the exact factor model the whole distribution of eigenvalues of the covariance matrix contributes to the information and not only the largest ones. In addition, we derive the condition that the first q say eigenvalues diverge whereas the rest remain bounded in the static model rather than having to assume it. Finally, we calculate information in static and dynamic factor models, which can be used to find the dimensions of the factor space. We illustrate the concepts with simulation experiments. http://irs.ub.rug.nl/ppn/074155113 Sun, 01 Jan 2006 00:00:00 CET We present several methods for the maximization of expected profits when households are selected from a mailing list for a direct mail campaign. The response elicited from the campaign can vary over households, as is the case with fund raising or mail order selling. The decisions taken by the household are (a) whether to respond and, in the case of response, (b) the quantity of response, e.g. the sum donated or the monetary amount of the order. We jointly model both decisions and derive a number of profit maximizing selection methods. We empirically illustrate the methods using a data set from a charitable foundation. It appears that modeling both aspects of the response yields considerably higher profits relative to selection methods that are based on solely modeling the response probability. http://irs.ub.rug.nl/ppn/297681680 Sun, 01 Jan 2006 00:00:00 CET This paper examines the response of the economies of 11 EU countries, Japan, and the United States to shocks in housing and equity prices. The effects are assessed with a Structural Vector Auto Regressive (SVAR) model, and four key findings emerge. First, the impacts of asset price shocks are heterogeneous across countries. Second, these heterogeneous responses are systematically related to cross-country variation in financial structure, and we are thus able to document the importance of a wealth/balance sheet channel for consumption and an equity finance channel for investment. Third, for a given country, housing shocks have a much greater impact than equity shocks. Fourth, variance decompositions indicate that monetary policy reacts to equity price shocks but not to housing price shocks. These results highlight the important role played by asset prices on real activity, and fuel the debate about the inclusion of asset prices in the formulation of monetary policy. http://irs.ub.rug.nl/ppn/294542108 Thu, 01 Jan 2004 00:00:00 CET Generally, a currency crisis is defined to occur if an index of currency pressure exceeds a threshold. This paper compares several currency crisis dating methods adopting different definitions of currency pressure indexes and ad-hoc and extreme value based thresholds. We illustrate the methods with data of six East Asian countries for the January 1970–December 2002 period, and evaluate the methods on the basis of the IMF chronology of the Asia crisis in 1997-1998. http://irs.ub.rug.nl/ppn/294543538 Thu, 01 Jan 2004 00:00:00 CET Multinational enterprises (MNEs) play a dominant role in the international business (IB) literature. Traditionally, by far the majority of IB studies deal with issues at the micro level of the individual MNE, or at the meso level of a sample of individual MNEs. This paper focuses on a macro-level issue: the impact of MNE behavior through foreign direct investment (FDI) on international trade, and vice versa. In so doing, this study responds to a recent plea for more macro-level studies in IB into the effect of MNE behavior on the macroeconomic performance of countries as a whole, particularly developing and emerging economies. In this way, IB research would inform the heated debate about the pros and cons of globalization, where antiglobalization rhetoric emphasizes the negative consequences of the increased dominance of MNEs for the world at large and the Third World in particular. In the current study, we focus on the largest developing or emerging economy of all: China. Applying sophisticated econometric techniques, we unravel the causality and direction of FDI – trade linkages for the Chinese economy in the 1980 – 2003 period. http://irs.ub.rug.nl/ppn/294544186 Thu, 01 Jan 2004 00:00:00 CET Inter-generational externalities associated with the conservation of the environment are usually tackled through fiscal policy. The recent increase in socially responsible investment funds creates a potential role for the stock market to deal with these environmental externalities. We study this alternative approach in an overlapping generations model in which agents choose between investing in clean or polluting technologies. Since agents are short-lived, they do not account for the long-term effects of pollution. We show that when firm property rights are traded separately on a forward looking stock market, proper firm valuation can resolve the conflict between current and future generations. http://irs.ub.rug.nl/ppn/294538070 Sun, 01 Jan 2006 00:00:00 CET This paper examines the dynamic linkages among financial markets in Thailand and Indonesia. In particular, we focus on the cross-border relationship in individual markets and on the relationship between finan- cial markets within each country. We find that while tight monetary policy pursued by Thailand authorities helped to defend the exchange rate at the outbreak of the financial crisis, it had little consequences for Indonesia at the end of 1998. The correlations between countries within each of the financial market reveals a certain degree of interde- pendence among countries, which is lower during crises. http://irs.ub.rug.nl/ppn/294538585 Sun, 01 Jan 2006 00:00:00 CET This paper contributes to the empirical finance-growth literature by examining the relationship between financial depth, banking sector development, stock market development and economic growth in China. After an extensive survey on recent financial reforms in China, we apply Granger (non-)causality tests for non-stationary variables to examine long-run and short-run causality between economic growth and financial development. We find positive relationships between financial depth, banking sector development and growth. However, stock market development does not seem to have a positive effect on long-run economic growth. http://irs.ub.rug.nl/ppn/292133391 Sat, 01 Jan 2005 00:00:00 CET The industrial revolution is mostly seen as a supply side phenomenon. Ever since Gilboy stated that factors of demand may have been equally important, scholars have stressed the importance of investments and technological change. This paper re-considers Gilboy’s ideas, using the dataset of the Dutch historical national accounts for the nineteenth century. Using a counterfactual VAR analysis, it is investigated to what extent changes in (determinants of) consumer demand may have affected patterns of industrial development. http://irs.ub.rug.nl/ppn/287894738 Sat, 01 Jan 2005 00:00:00 CET The industrial revolution is mostly seen as a supply side phenomenon. Ever since Gilboy stated that factors of demand may have been equally important, scholars have stressed the importance of investments and technological change. This paper re-considers Gilboy’s ideas, using the dataset of the Dutch historical national accounts for the nineteenth century. Using a counterfactual VAR analysis, it is investigated to what extent changes in (determinants of) consumer demand may have affected patterns of industrial development. http://irs.ub.rug.nl/ppn/287807770 Sat, 01 Jan 2005 00:00:00 CET Indicators of financial crisis generally do not have a good track record. This paper presents an early warning system (EWS) for six countries in Asia in which indicators do work. Our binary choice model, which has been estimated for the period 1970:01–2001.12, has the following features. We extract a full list of currency crisis indicators from the literature, apply factor analysis to combine the indicators, and introduce dynamics. The quality of the EWS is assessed both in-sample and out-of-sample. We find that money growth (M1 and M2), national savings, and import growth correlate with currency crises. http://irs.ub.rug.nl/ppn/287806588 Sat, 01 Jan 2005 00:00:00 CET Real-time macroeconomic data are typically incomplete for today and the immediate past (‘ragged edge’) and subject to revision. To enable more timely forecasts the recent missing data have to be dealt with. In the context of the U.S. leading index we assess four alternatives,paying explicit attention to publication lags and data revisions. http://irs.ub.rug.nl/ppn/283535911 Sat, 01 Jan 2005 00:00:00 CET The literature on international transfers largely ignores the fact that transfers are often given in the form of money. We analyze both the welfare consequences of financial transfers for the donor and the recipient, and their impact on the current account. Under normal circumstances transfer paradoxes do not occur, the donor's current account deteriorates and the recipient's current account improves. http://irs.ub.rug.nl/ppn/241065135 Fri, 01 Jan 1999 00:00:00 CET Under the standard neo-classical growth framework, conditional convergence studies assume that a country with a higher initial human capital among others 'performs' better. Nevertheless the growth implications of health, another component of human capital, compared to education, have not been investigated thoroughly within the optimum growth framework yet. The aim of this study is to show rigorously the positive association between per capita income and health status of an economy and thereby provide a theoretical background for using 'health' variables in conditional convergence analyses. This positive relationship between health and per capita output is first shown in the standard neo-classical growth framework where the health status is exogenously given. Endogenising health then enables us to analyse the impact of optimal expenditure on health care on steady state growth and transition dynamics http://irs.ub.rug.nl/ppn/241229782 Fri, 01 Jan 1999 00:00:00 CET The Kyoto Protocol incorporates emissions trading, joint implementation and the clean development mechanism to help Annex I countries to meet their Kyoto targets at a lower overall cost. This paper aims to estimate the size of the potential market for all three flexibility mechanisms under the Kyoto Protocol over the first commitment period 2008-2012, both on the demand side and on the supply side. Based on the national communications from 35 Annex I countries, the paper first estimates the potential demand in the greenhouse gas offset market. Then, the paper provides a quantitative assessment for the implications of the EU proposal for concrete ceilings on the use of flexibility mechanisms for the division of abatement actions at home and abroad. Finally, using the 12-region's marginal abatement cost-based model, the paper estimates the contributions of three flexibility mechanisms to meet the total emissions reductions required of Annex I countries under the four trading scenarios respectively. Our results clearly demonstrate that the fewer the restrictions on trading the gains from trading are greater. The gains are unevenly distributed, however, with Annex I countries that have the highest autarkic marginal abatement costs tending to benefit the most. With respect to developing countries, their net gains are highest when trading in hot air is not allowed, and China and India account for about three-quarters of the total developing countries' exported permits to Annex I regions. http://irs.ub.rug.nl/ppn/241133033 Fri, 01 Jan 1999 00:00:00 CET This paper provides a star comparison of manufacturing productivity levels in China, India, Indonesia, South Korea and Taiwan with the US as the reference country for the period 1963-1993. South Korea and Taiwan showed prolonged catch up in labour productivity with the US, whereas the other countries had long periods of relative stagnation. This is reflected in relative performance of seven detailed manufacturing branches. Physical capital per hour worked in the Asian countries is still well below the US level and there are abundant opportunities for further capital intensification. Relative total factor productivity levels in South-Korean and Taiwanese manufacturing are much lower than in the US in all manufacturing branches. The same is true for India and Indonesia compared to South Korea and Taiwan. Hence, late industrializers do not automatically benefit from the increasing global pool of technologies. http://irs.ub.rug.nl/ppn/241132975 Fri, 01 Jan 1999 00:00:00 CET We attempt to assess the effect of monetary policy in a panel model for 16 OECD countries. To answer the question whether central banks actively create political business cycles we focus on the short-term interest rate as a proxy for the use of monetary instruments. Our results indicate that central banks do not create political business cyles. This conclusion holds no matter whether central banks are independent or not or are constrained by the exchange rate system in force. http://irs.ub.rug.nl/ppn/241132940 Fri, 01 Jan 1999 00:00:00 CET This paper analyzes equilibrium rationing on credit markets in the case of gains from waiting to acquire information about the future profitability of investment. We compare the competitive outcome with the socially optimal level of investment. We show that the opportunity to postpone investment changes the nature of the inefficiencies of the competitive outcome fundamentally. Without the option to wait, high risk firms tend to invest and the outcome is characterized by a situation of underinvestment. If firms can wait high risk firms benefit the most from waiting. In this case low risk firms tend to invest immediately and a situation of overinvestment will result, since from the banks' point of view firms do not delay enough. http://irs.ub.rug.nl/ppn/241132908 Fri, 01 Jan 1999 00:00:00 CET In this paper we analyze the dynamics of Dutch economic growth for the period 1815-1997. By applying a simple econometric technique, important braking points in the timeseries are traced. It seems that three phases of growth can be discerned and that these phases are characterized by different types of technology (steam, electricity as well as information and communication technology). The Dutch economy has not generated an overall productivity improvement from the first and third technological phase, but has been successful in exploiting the technological opportunities of the second phase. http://irs.ub.rug.nl/ppn/241132819 Fri, 01 Jan 1999 00:00:00 CET This paper attempts to explain the growth of labour productivity by (inter)national spillovers from R&D and patenting. We develop a model that is tested for Germany, France, the United Kingdom and the United States of America using a new set of panel data for the period 1955 until 1991. The results indicate that domestic R&D has an indirect and, for Germany, a positive impact on productivity growth. http://irs.ub.rug.nl/ppn/241132770 Fri, 01 Jan 1999 00:00:00 CET When the parameters of the model describing consumers' reaction to a mailing are known, addresses for a future mailing can be selected in a profit-maximizing way. Usually, these parameters are unknown and are to be estimated. Standard estimation are based on a quadratic loss function. In the present context an alternative loss function is suggested by the mailing company's profit function. This leads to different estimators and higher expected profit. http://irs.ub.rug.nl/ppn/241132738 Fri, 01 Jan 1999 00:00:00 CET The effectiveness of policies to reduce the use of energy depend on the elasticity of substitution between the various inputs and on the rate of technological progress. This paper presents a theoretical model emphasising energy investments' characteristics of uncertainty and irreversibility that result in testable hypotheses concerning the relative values of substitution parameters and rates of technological change in periods of high and increasing energy prices and in periods of low prices. Estimation results for a panel of sectors of the Dutch economy show that the elasticity of substitution between energy and other inputs is low in periods of low energy prices, whereas it is significantly higher in the preceding period of high and increasing energy prices. Furthermore, energy-saving technological progress in periods of high and increasing energy prices is also significantly higher than if energy prices are low and falling. The regression results suggest that, due this asymmetric response of firms to changes in energy prices, taxing energy in the current period of low energy prices will not yield substantial reductions in energy use of Dutch industry. http://irs.ub.rug.nl/ppn/241132657 Fri, 01 Jan 1999 00:00:00 CET We study the role of takeover threats as a corporate control mechanism using Aghion and Tirole's (1997) model of formal and real authority. Shareholders do not monitor the manager's actions, since ownership is widely dispersed. A corporate raider may monitor, and steps in if a profit opportunity exists. In our model, a takeover threat decreases the manager's effort and does not benefit shareholders. The effect of a takeover threat on the expected value of the firm is ambiguous. It is in the interest of the corporate raider if severance payments the manager receives upon being fired are high. Shareholders, however, prefer them to be low. http://irs.ub.rug.nl/ppn/241132576 Fri, 01 Jan 1999 00:00:00 CET A dynamic overlapping-generations model of a small open economy with imperfect competition in the goods market is constructed. A tariff increase reduces output and employment and leads to an appreciation of the real exchange rate both in the impact period and in the new steady state. The tariff shock has significant intergenerational distribution effects. Old existing generations gain less than both younger existing generations and future generations. Bond policy neutralizes the intergenerational inequities and allows the computation of first-best and second-best optimal tariff rates. The first-best tariff exploits national market power, but the second-best tariff contains a correction to account for the existence of a potentially suboptimal product subsidy. http://irs.ub.rug.nl/ppn/24106502X Fri, 01 Jan 1999 00:00:00 CET The well-known Klein-Monti model of bank behavior considers a monopolistic bank. We demonstrate that this model's results on the comparative static effects of a change in the exogenous interbank market interest rate do not necessarily hold in oligopolistic Cournot or Stackelberg generalizations. Introducing asymmetries in the cost functions of the banks, or in their way of conduct, may imply counterintuitive effects on the individual banks' volumes of loans and deposits. http://irs.ub.rug.nl/ppn/241064929 Fri, 01 Jan 1999 00:00:00 CET This paper provides a brief overview of the "state of the art" on research on the sources of long term economic growth. It is argued that, despite the enormous progress in development of the theory and empirics on long term economic growth, we are still not able to unambiguously distinguish between the determinants of growth. The distinction between accumulation, productivity and technology is a useful device to structure the debate, as the former two tend to emphasize the importance of investment and increased efficiency in use of resources, whereas the latter puts the contribution of invention and innovation change into the spotlight. However, the most powerful explanations of economic growth are those which combine these various aspects of growth with an explicit focus on historical, institutional and political factors in the growth process. To strengthen empirical research, the paper recommends greater attention for reconstruction of historical national accounts, the development of a broad range of technology indicators. http://irs.ub.rug.nl/ppn/241064155 Fri, 01 Jan 1999 00:00:00 CET This paper employs an overlapping generations model to explore the impact of public abatement on private investment and the intergenerational distribution of welfare. Whereas public abatement benefits old generations in terms of non-environmental welfare, future generations gain most in terms of environmental welfare. The overall benefits tend to be smallest for generations born at the time of the unanticipated policy shock. Public debt policy, however, can be employed to ensure that welfare gains are distributed more equally across the various generations. Such a policy implies that natural capital crowds out man-made capital. http://irs.ub.rug.nl/ppn/241063302 Fri, 01 Jan 1999 00:00:00 CET This paper analyses the role of bank lending in the monetary transmission process in Germany. We follow a sectoral approach by distinguishing corporate lending and household lending. We find that banks respond to a monetary contraction by adjusting their securities holdings, rather than reducing their loans portfolio. Most lending categories even show an increase following a monetary tightening. The main implication of our results is that a bank lending channel is not an important transmission mechanism. On the contrary, by insulating their loans portfolio from monetary shocks, banks are more likely to weaken than to strengthen the impact of monetary policy. http://irs.ub.rug.nl/ppn/24106323X Fri, 01 Jan 1999 00:00:00 CET Belgium and The Netherlands share a lot of common characteristics in historical development, geographical location, political and institutional structure and in the size and degree of the openness of their economies. However, detailed comparisons of economic development of Belgium and The Netherlands have been largely neglected until now. This paper presents a comparative description of the development of labour productivity in Belgian and Dutch manufacturing for the period 1921-1990. Three comparative benchmark estimates of output and productivity for the years 1937, 1960 and 1987 were calculated, mainly based on census information. Levels of manufacturing productivity are extended backward and forward by linking time series of productivity change from 1921 to 1990 to the benchmarks. http://irs.ub.rug.nl/ppn/241062853 Fri, 01 Jan 1999 00:00:00 CET Often it is maintained that economic freedom may further high levels of economic growth. This paper compares various indicators for economic freedom. It is concluded that although these measures differ somewhat in their coverage, they show similar rankings for the countries covered. Some elements in these measures are, however, questionable. The robustness of the relationship between freedom and growth is also examined. Our main conclusion is that more economic freedom fosters economic growth. http://irs.ub.rug.nl/ppn/241059690 Fri, 01 Jan 1999 00:00:00 CET This paper investigates the effect of uncertainty on economic growth. We construct measures of export uncertainty, government policy uncertainty and price uncertainty to augment a growth model, and using econometric techniques we test for robustness of the effects of these measure on economic growth in a cross-section of 138 developing and developed economies during 1970-1995. The result clearly shows a robust and negative effect of uncertainty on economic growth. These results underline the importance of export stability and policy credibility. http://irs.ub.rug.nl/ppn/241005248 Fri, 01 Jan 1999 00:00:00 CET Using data from a survey of 1097 Dutch firms we investigate the relation between growth of the firm and uncertainty. We focus on the impact of uncertainty on various types of investment, employment demand, and expected maturity of the firm. The special feature of the survey is that it includes data on non-listed (small) firms. We include uncertainty with respect to expected sales and Return on Investment (ROI). We find that sales uncertainty, measured by the conditional variance, has a negative impact on various investment decisions. We include an analysis of financial structure and firm size on the growth-uncertainty relation http://irs.ub.rug.nl/ppn/241229499 Sat, 01 Jan 2000 00:00:00 CET This paper investigates the implications of progressively broadening the scope of the market of tradable permits from no emissions trading to full global trading. We start with the no emissions trading case where each Annex I country must individually meet its Kyoto targets. Next, we consider a case where trading of emissions permits is limited to Annex I countries only. We then expand the scope of the market to include all the non-Annex I countries but China. Finally, to investigate the role China plays in bringing down Annex I countries' compliance costs, we further broaden the market to include China into full global trading. Our results clearly demonstrate that the gain of the OECD as a whole increases as the market expands. Our results also show that developing countries themselves benefit from such an expansion too because it not only provides them for additional financial resources, but also helps to cut their baseline carbon emissions by a big margin. By contrast, the former Soviet Union tends to become worse off as the market expands. The potential conflict of interest between the former Soviet Union and developing countries underlines the importance of establishing clear rules of procedure about admitting new entrants before emissions trading begins. http://irs.ub.rug.nl/ppn/241229332 Sat, 01 Jan 2000 00:00:00 CET This paper deals with international comparisons of the contribution of information and communication technology (ICT) to growth during the 1990s. It makes a distinction between ICT-producing industries and services on the one hand and industries and services that are intensive users of ICT on the other. The paper presents measures of output and employment shares and of the contribution of the ICT-producing and ICT-using sectors to output, employment and labour productivity growth. The main findings are that the differences between the United States and European countries are largely explained by the larger and more productive ICT-producing industry in the United States. The differences in the contribution of ICT using industries and services to growth are much smaller and more subtle between Europe and the USA. The paper also reviews recent evidence on ICT investment and capital. It appears that the growth contribution of ICT-use increased during the second half of the 1990s, but so far the effects are visible only in the United States. It also argued that many European countries have so far not succeeded to generate positive employment effects from intensive ICT-use. http://irs.ub.rug.nl/ppn/241228662 Sat, 01 Jan 2000 00:00:00 CET This paper provides a rationale for a firm to adopt either an integrated or a separated divisional structure, which is based on the interplay between the structure of authority and the costs and benefits of integration vis-a-vis separation. We use the framework of Aghion and Tirole (1997) to explain the structure of authority. This framework captures the notion of managerial initiatives. It shows that monitoring by the head office decreases divisional managers' effort levels. We incoporate this framework into the analysis of costs and benefits of integrating or separating divisions. Integration will be beneficial for the head office if it generates synergy gains. The larger the synergy gains are, the more appealing integration will be. Consequently, the head-office's incentive to monitor increases. Due to a more intense monitoring, managers exert lower effort levels. For managers, integration entails costs and benefits. If the benefits outweigh the costs, managers will be motivated to exert high effort levels in an integrated divisional structure. The optimality of integrating or separating divisions will then be determined by the trade-off between synergy gains and the managerial effort elicitation http://irs.ub.rug.nl/ppn/241228506 Sat, 01 Jan 2000 00:00:00 CET We extend the citizen candidate framework by allowing for endogenous party formation. When a party is formed, any member of that party that wants to be a candidate in the election, first has to run in the primary election of her party. We show that in equilibrium one left-wing and one right-wing party will be formed. Also, there may be a range of tiny centrist parties. At most one group of extreme citizens may not be a member of any party. For each party, at most one candidate runs in its primary election. There is a range of equilibria in which one candidate runs in the general election, but we find a unique two-candidate equilibrium. We thus show that allowing for parties to form severely restricts the range of possible equilibria in the citizen candidate model. http://irs.ub.rug.nl/ppn/241228255 Sat, 01 Jan 2000 00:00:00 CET The paper considers the estimation of the coefficients of a single equation in the presence of dummy intruments. We derive pseudo ML and GMM estimators based on moment restrictions induced either by the structural form or by the reduced form of the model. The performance of the estimators is evaluated for the non-Gaussian case. We allow for heteroscedasticity. The asymptotic distributions are based on parameter sequences where the number of instruments increases at the same rate as the sample size. Relaxing the usual Gaussian assumption is shown to affect the normal asymptotic distributions. As a result also recently suggested new specification tests for the validity of instruments depend on Gaussianity. Monte Carlo simulations confirm the accuracy of the asymptotic approach. http://irs.ub.rug.nl/ppn/241227852 Sat, 01 Jan 2000 00:00:00 CET Exact inference on a single coefficient in a linear regression model, as introduced by Bekker (1997), is elaborated for the case of normally distributed heteroscedastic disturbances. Instead of approximate inference based on feasible generalized least squares, exact confidence sets are formulated based on partial rotational invariance of the distribution of the vector of disturbances. The approach is applied to the random-effects and fixed-effects models for panel data. http://irs.ub.rug.nl/ppn/241226325 Sat, 01 Jan 2000 00:00:00 CET This paper presents a theoretical model emphasising energy investments’ characteristics of uncertainty and irreversibility. The theoretical model suggests threshold effects. Firms are induced to substitute away from energy only if prices of energy exceed a certain threshold level and they reverse the technology only if energy prices are low enough. Estimating a simple investment relation using panel data for the Dutch economy, we find evidence for threshold effects. http://irs.ub.rug.nl/ppn/241226228 Sat, 01 Jan 2000 00:00:00 CET Most industrialized countries entered the 1980s with their public finances in disarray. At the time, persistent deficits pushed up public debt-to-GDP ratios. Despite such similarities, deficit spending varies substantially between countries and within countries over time. Recent theoretical and empirical research has considered how differences in political arrangements affecting national policy formation might explain variation in fiscal policies pursued. Using a panel of 22 OECD countries over the 1971-1996 period this paper extends previous literature on the effects of fragmented government on fiscal policy outcomes in various directions. First, we focus on data relating to central government instead of general government as all theories refer to central government. Second, not only do we analyze the effect of size fragmentation of government, we also examine government's position vis-à-vis parliament and government's political fragmentation. We find evidence that more fragmented government (defined in terms of the number of political parties in a coalition or the number of spending ministers) have higher deficits. There is also some evidence that governments that dispose of excess seats in parliament have lower deficits. Right-wing governments appear to have been fiscally more responsible in the seventies. Political fragmentation does not affect government's budget deficit. http://irs.ub.rug.nl/ppn/241226031 Sat, 01 Jan 2000 00:00:00 CET We present a model which combines elements of an auction and a rent-seeking contest. Players compete for a prize. Apart from exerting lobbying efforts, they also have to submit a bid which is payable only if they win the prize. First, we analyze the model if the returns-to-scale parameters of both bids and efforts are unity. We present a necessary and sufficient condition for the existence of a unique Nash equilibrium. In the equilibrium each player submits the same bid, while the sum of all efforts equals that bid. Second, we analyze the case in which the returns-to-scale parameters may differ from unity, and derive the implications of that specification. http://irs.ub.rug.nl/ppn/241225965 Sat, 01 Jan 2000 00:00:00 CET Recently, parallel to developments in the communication technology, online shopping has become increasingly popular for many products, like books, CDs, software, and computers. Most analysts conjecture that the future will witness a wider basket of products and a higher trade volume via the Internet. This paper investigates the economic implications of Internet shopping in a Ricardian equilibrium framework. First, it shows the necessary and sufficient condition for the shift to Internet shopping. Next, it indicates that macroeconomic variables like consumption and income rise when this shift takes place. Thus, this paper shows that the economic implications of Internet shopping will be higher than the current experience and Internet shopping will become an important element of the `new economy' when the bulky part of the shopping is done via the Internet. http://irs.ub.rug.nl/ppn/241225787 Sat, 01 Jan 2000 00:00:00 CET In this paper we reconstruct the non-residential capital stock of South Korea and Taiwan based on long-term series of investment in non-residential buildings and machinery and equipment. Secondly, we looked at the impact of capital input measures, using a stock as a well a flow measure of capital, on total factor productivity growth. Finally, to assess the potential for continued catch-up of the emerging economies towards productivity levels of the more advanced countries, we analyse capital-output ratios and the change in comparative levels of capital intensity and labour productivity. For both countries we find a rapid growth of the capital stock for the total economy and for manufacturing, with growth rates that peaked between the mid-1960s and the mid-1980s. In particular with capital inputs measured in terms of service flows, total factor productivity growth is low up to the mid 1980s. Since then TFP growth slightly improved which is related to the slowdown of labour input growth. Capital-output ratios continued to rise for the total economy. For manufacturing we found a strong rise in capital-output ratios in particular since the 1980s. In terms of comparative levels, there are still large gaps between the two East Asian countries and the USA in terms of capital-labour ratios and labour productivity. This indicates that despite the diminishing returns to capital goods, especially in manufacturing, opportunities for further growth on basis of accumulation are still far from exhausted. This remaining catch-up potential ought to be realised by complementing capital accumulation with productivity growth. http://irs.ub.rug.nl/ppn/24122571X Sat, 01 Jan 2000 00:00:00 CET We explain the development of stock markets by both legal and societal determinants and analyze the relevance of both determinants in the Levine-Zervos (1998) cross-sectional growth regressions. We argue that the legal indicators as developed by La Porta, Lopez-de-Silanes, Shleifer and Vishny (1998) are not covering all the aspects of alternatives to financial contracting as suggested by Levine (2000). The basic argument is that the legal classification of countries does not completely cover the cross-country variation in the societal desire to use contracting in financial transactions. After establishing the determinants of stock market development we analyze the impact of stock market development on economic growth. We use a 2SLS approach to correct for the endogeneity of stock market development. We contradict the positive view of Levine-Zervos on the impact of liquidity of stock markets on economic growth. Our conclusions are in line with Levine (2000) who argues that it is not financial structure but the development of the deep structural legal and societal characteristics that is instrumental to economic growth. http://irs.ub.rug.nl/ppn/241218950 Sat, 01 Jan 2000 00:00:00 CET This paper examines the investment-uncertainty relationship for a panel of Dutch firms. The uncertainty proxy is derived from daily stock market prices of individual firms. We show that some macro indicators, in combination with firm fixed effects, are able to give a reasonable explanation of the uncertainty a firm is faced with, and hence can be used to extract the exogenous component of uncertainty. The investment-uncertainty relationship appears to be non-linear: for low levels of uncertainty there is a positive effect on investment, whereas for high levels of uncertainty the effect becomes negative. http://irs.ub.rug.nl/ppn/241218462 Sat, 01 Jan 2000 00:00:00 CET Abstract This paper analyses the effect of rising wage rates and real interest rates on labour productivity and capital productivity in a situation of capital shortage. Furthermore, it shows the effect of rising wage rates and real interest rates on the capital intensity of the production process. This latter effect can not be determined unambiguously. http://irs.ub.rug.nl/ppn/241247322 Mon, 01 Jan 2001 00:00:00 CET Abstract We examine the effect of business group affiliation on corporate investment behavior in India. We use a data set containing 684 Indian listed companies for the 1989-1997 period. We estimate a simple investment equation and find evidence that cash flow has a positive effect on investment spending of stand-alone firms, whereas for group affiliates cash flow is either insignificant or has a much lower coefficient. This suggests that business group affiliates have better access to external funds than stand-alone firms. http://irs.ub.rug.nl/ppn/241247209 Mon, 01 Jan 2001 00:00:00 CET Abstract We contribute to the debate on the interpretation of investment-cash flow sensitivities by including uncertainty measures in both a simple theoretical investment model and an empirical illustration for Dutch firm-level data. Using a slightly modified version of the Kaplan-Zingales (1997) model we show that it is likely that firms facing high uncertainty rely more on cash flow. Next we illustrate this result using an investment panel data model of Dutch listed firms. Using a threshold estimator we determine the critical level of stock price, sales, and employment uncertainty. Next we apply a GMM-estimator to correct for the endogeneity of the regressors. The empirical results confirm the notion that higher uncertainty intensifies the use of cash flow. http://irs.ub.rug.nl/ppn/241235200 Mon, 01 Jan 2001 00:00:00 CET