How Large is Large? Preliminary and relative guidelines for interpreting partial correlations in economics

An essential part of empirical economics research is the identification of the size of an empirical effect. Partial correlations offer a convenient statistically based measure of the strength of an economic relationship. A key question arises in their interpretation: When is a partial correlation large? This paper draws upon the observed distribution of 22,000 partial correlations from a diverse group of economics fields. The median absolute partial correlation from these fields is 0.173, which under Cohen’s (1988) conventional guidelines for zero order correlations is a small to moderate effect. The paper develops new guidelines for key qualitative categories (small, medium and large). According to the new guidelines, partial correlations that are larger than ± 0.33 can be deemed to be large. This is considerably different to Cohen’s guideline of ±0.50 for zero order correlations. Researchers and meta-analysts should exercise caution when applying Cohen’s guidelines to describe the importance of partial correlations in economics.partial correlations; guidelines; empirical economics; meta-analysis

The Aid Effectiveness Literature: The Sad Results of 40 Years of Research

The aid effectiveness literature (AEL) consists of empirical macro studies of the effects of development aid. By the end of 2004, it had reached 97 econometric studies of three families, which have been analyzed in one study for each family using meta-analysis. The AEL is an ideal subject for meta-analysis as it uses only a few formally similar models which try to catch precisely the same effects. Also, it is an area with strong beliefs – often generated by altruism – and interests. In this survey of the AEL, we shows that when the whole of the literature is examined, a clear pattern emerges in the results: after 40 years of development aid, the evidence indicates that aid has not been effective. We show that the distribution of results is significantly asymmetrical in a way that reflects the reluctance of the research community to publish negative results. The Dutch Disease effect of aid has been ignored but is a plausible explanation for aid ineffectiveness

The Allocation of Development Aid Assistance: Do new donors have old motives?

The aid allocation literature explores the motives behind development aid assistance. This literature is enormous, yet surprisingly, the extant empirical studies have in the main only focused on the motives of established donors. Consequently, relatively little is known of the motives of new donors. This paper explores the aid allocation motives of three relatively new DAC donors: Greece, Luxembourg, and Portugal. Both OLS and Tobit two-way effects estimators are used to model their aid allocation process. The results indicate that humanitarian concerns are not an important factor for these three donors. Greece contributes aid predominately to its neighbors and to transitional East European nations. Portugal is motivated by commercial interests and former colony status. The bandwagon effect exists in reverse for Portugal. Commercial interests operate also for Luxembourg. Additionally, Luxembourg appears to donate to smaller more developed countries and is less inclined to donate to East European nations.foreign aid allocation, bilateral aid, economic development, humanitarian concerns.

Unions, Innovation, and Technology Adoption: New insights from the cross-country evidence

There is currently no consensus regarding the effect of unions on technology. We apply meta-regression analysis to the extant econometric studies and find that unions depress investment in new technology. However, this adverse effect has been declining over time and is moderated by country differences in industrial relations and regulations: The adverse effect appears to increase with labor market flexibility. Unions also have an adverse effect on technology adoption. The paper considers both the direct and indirect effects of unions and shows that their effect on technology is larger than their effect on profitability and physical capital. The size of the union effect on technology is compared to the effects of human capital, industry concentration, firm size, growth, profitability, and physical capital.unions, R&D, innovation, technology adoption, regulation, meta-regression analysis

Substitution and Complementarity in the Creation and Communication of Australian University Research

The generation of research is one of the major functions of the University sector. In most disciplines, journal articles continue to be the main outlet for the communication of research findings. However, in Australia, government induced distortions have rewarded refereed conference papers an equal status to refereed journal papers. The aim of this paper is to explore the association between research published in journals and research published in conference proceedings. We use a panel dataset of the research output of 36 Australian universities, for the period 1995-2004. Cobb-Douglas research production functions are estimated, as well as a system of research production functions that allows for simultaneity. The results indicate that journals and conferences are contemporaneous substitutes – an expansion in conference publications displaces journal publications. There is also a “DEST effect”. On average, conference papers are not converted into subsequent journal papers. The DEST effect is found also through analysis of the publication histories of 152 business and law academics. Post-graduate enrollments are shown to contribute only to conferences and have no effect on journal publications. Research income has a positive effect on both conferences and journal publications.Journals, conferences, DEST effect, research production functions, Australian

Realized Volatility and Correlation in Grain Futures Markets: Testing for Spill-Over Effects

Fluctuations in commodity prices are a major concern to many market participants. This paper uses realized volatility methods to calculate daily volatility and correlation estimates for three grain futures prices (corn, soybean and wheat). The realized volatility estimates exhibit the properties consistent with the stylized facts observed in earlier studies. According to the realized correlations and regression coefficients, the spot returns from the three grain futures are positively related. The realized estimates are then used to evaluate the degree of volatility transmissions across grain future prices. The impulse response analysis is conducted by fitting the vector autoregressive model to realized volatility and correlation estimates, using the bootstrap method for statistical inference. The results indicate that there exist rich dynamic interactions among the volatilities and correlations across the grain futures markets.Volatility Transmission, Vector Autoregressive Model, Impulse Response Analysis, Bootstrap

Are Estimates of the Value of a Statistical Life Exaggerated?

The magnitude of the value of a statistical life (VSL) is critical to the evaluation of many health and safety initiatives. To date, the large and rigorous VSL research literature has not explicitly accommodated publication selectivity bias (i.e., the reduced probability that insignificant or negative VSL values are reported). This study demonstrates that doing so is essential. For studies that employ hedonic wage equations to estimate VSL, correction for selection bias reduces the average value of a statistical life by seventy to eighty percent. Our meta-regression analysis also identifies several sources for the wide heterogeneity found among reported VSL estimates.Value of statistical life; meta-regression analysis; selectivity bias

Pay for Performance and Corporate Governance Reform

Directors’ pay and corporate governance continue to generate public outrage and calls for reform. Our meta-regression analysis of all comparable UK pay-for-performance estimates finds little, if any, meaningful association between directors’ pay and corporate performance. However, there is evidence of the effectiveness of past ‘comply-or-explain’ rules, especially the Cadbury Report. Unfortunately, the effects of past reform efforts tend to erode over time. The paper also explores differences between pay-performance estimates, finding that these are largely explained by how pay and performance are measured by a given study.Directors’ pay, governance reform, meta-regression analysis

Input Usage, Ouput Mix and Industry Deregulation: An Analysis of the Australian Dairy Manufacturing Industry

In this paper we estimate a Translog output distance function for a balanced panel of state level data for the Australian dairy processing sector. We estimate a fixed effects specification employing Bayesian methods, with and without the imposition of monotonicity and curvature restrictions. Our results indicate that Tasmania and Victoria are the most technically efficient states with New South Wales being the least efficient. The imposition of theoretical restrictions marginally affects the results especially with respect to estimates of technical change and industry deregulation. Importantly, our bias estimates show changes in both input use and output mix that result from deregulation. Specifically, we find that deregulation has positively biased the production of butter, cheese and powders.deregulation, output distance function, Bayesian