More evidence on income distribution and growth

Inequality is often regarded as a necessary evil that has to be tolerated to allow growth, says the author. The view that inequality is necessary for the accumulation of wealth, and contains the seeds of eventual increases in everyone's income, is evident in trickle down economic theories, where societal acceptance of inequality allows the rich to earn a greater rate of return on their assets. Others argue that inequality slows growth - because increased inequality causes more conflict over distributional issues, thereby encouraging greater economic intervention and higher taxes. According to the author, the empirical evidence shows that: Inequality is negatively, and robustly, correlated with growth. This result is robust to many different assumptions about the exact form of the cross-country growth regression. Although statistically significant, the magnitude of the relationship between inequality and growth is relatively small. Decreasing inequality from one standard deviation above to one standard deviation below the mean increases the long-term growth rate by about 1.3 percentage points a year. Inequality has a similar effect in democracies and non-democracies. When an interaction term between the type of regime and inequality is included in the base regression, it is insignificant at conventional significance levels. The cross-country data on inequality follows Kuznets'inverted-U shape. Care should be taken in interpreting these results. Although inequality is negatively correlated with growth, this does not necessarily imply that soak-the-rich policies will improve long-term growth. First, theoretical work on inequality and growth stresses thatthis negative correlation is caused by high levels of inequality provoking high levels of government economic intervention. Soak-the-rich policies may be less necessary where there is less inequality. Second, although the partial correlation is robust, the direction of causality has not been determined and the effects of specific income distribution policies have not been tested. Finally, if policies designed to decrease inequality result in greater government consumption and the cost of increased government consumptions outweighs the benefits of greater equality, long-term growth may be harmed. But for certain: inequity is not a prerequisite for growth.Inequality,Governance Indicators,Poverty Impact Evaluation,Achieving Shared Growth,Economic Theory&Research

Do government policies that promote competition encourage or discourage new product and process development in low and middle-income countries?

Previous work has shown that firms in low and middle-income countries in Eastern Europe and Central Asia that feel greater pressure to innovate from their competitors are more likely to introduce new products and services than firms that donot feel pressure (Carlin and others 2001; World Bank 2004). However, competition also appears to affect innovation in other ways. In particular, firms in these countries that face greater price competition appear to be less likely to innovate than other firms (Carlin and others 2001). The author assesses how competition and trade policy affect these different aspects of competition and, consequently, assesses their net impact on innovation. He finds that reducing tariffs and enacting and enforcing competition laws modestly increases both the pressure that firms feel regarding innovation and the level of price competition in the domestic economy. The net impact that lower tariffs have on new product and process development appears to be negative but small-for the most part the opposing effects cancel out. In contrast, stricter competition laws and better enforcement of those laws appear to increase the likelihood of new product and process development, especially when competition is treated as endogenous to innovation.Environmental Economics&Policies,Markets and Market Access,Labor Policies,ICT Policy and Strategies,Economic Theory&Research,Environmental Economics&Policies,ICT Policy and Strategies,Economic Theory&Research,Markets and Market Access,Access to Markets

Fractal Measures and Nonlinear Dynamics of Overcontact Binaries

Overcontact binary stars are systems of two stars where the component stars are in contact with each other. This implies that they share a common envelope of gas. In this work we seek signatures of nonlinearity and chaos in these stars by using time series analysis techniques. We use three main techniques, namely the correlation dimension,f (\alpha) spectrum and the bicoherence. The former two are calculated from the reconstructed dynamics, while the latter is calculated from the Fourier transforms of the time series of intensity variations(light curves) of these stars. Our dataset consists of data from 463 overcontact binary stars in the Kepler field of view [1]. Our analysis indicates nonlinearity and signatures of chaos in almost all the light curves. We also explore whether the underlying nonlinear properties of the stars are related to their physical properties like fill-out-factor, a measure of the extend of contact between the components of an overcontact binary system . We observe that significant correlations exist between the fill out factor and the nonlinear quantifiers. This correlation is more pronounced in specific subcategories constructed based on the mass ratios and effective temperatures of the binaries. The correlations observed can be indicative of variations in the nonlinear properties of the star as it ages. We believe that this study relating nonlinear and astrophysical properties of binary stars is the first of its kind and is an important starting point for such studies in other astrophysical objects displaying nonlinear dynamical behaviour.Comment: 17 pages, 12 figures, submitted to Communications in Nonlinear Science and Numerical Simulatio

Bank procyclicality, credit crunches, and asymmetric monetary policy effects: a unifying model

Much concern has recently been expressed that both large, procyclical changes in bank assets and "credit crunches" caused by bank reluctance to expand loans during recessions contribute to economic instability. These effects are difficult to explain using the standard textbook model of deposit expansion in which deposits are constrained only by reserve requirements. However, these effects follow easily if the model is expanded to include a second, capital constraint.Bank assets ; Monetary policy

Bank privatization in Argentina : a model of political constraints and differential outcomes

Based on results from country case studies, many researchers have claimed that political constraints affect bank privatization transactions, which in turn affect the post-privatization performance of the banking sector. But no study has either econometrically tested how political constraints affect bank privatization transactions or theretically modeled the privatization transaction. The authors present a simple theoretical framework that models the inherent tradeoffs faced by governments and potential buyers in privatization transactions involving banks. The potential buyer is concerned about the probability that the bank will remain solvent, about the profits it will earn after privatization, and about the price paid for the assets and liabilities. The government is concerned about the price received for the assets, about layoffs, and about service coverage after privatization. The evidence from bank privatization transactions in Argentina in the 1990s supports several of their theoretical predictions. In particular, provinces with highfiscal deficits were willing to accept layoffs and to guarantee a larger part of the privatized banks'portfolio in return for a higher price. The tequila crisis (Mexico's economic crisis in 1994-95) meant that politicians could protect fewer jobs and had to assume a greater share of their public banks'assets. Evidence of better performance at banks privatized after Mexico's crisis suggests that, by tying politicians'hands, the crisis may have brought unforeseen benefits. This conjecture awaits further empirical validation, but the authors hope that by explicitly incorporating the incentives politicians face, analysis can begin to address the question of why some privatizations succeed more than others.Economic Theory&Research,International Terrorism&Counterterrorism,Banks&Banking Reform,Municipal Financial Management,Financial Crisis Management&Restructuring,Banks&Banking Reform,Municipal Financial Management,Economic Theory&Research,Financial Crisis Management&Restructuring,International Terrorism&Counterterrorism

Is banking a declining industry? A historical perspective

Banks and banking ; Bank assets ; Financial institutions

Analysis of a unidirectional composite containing broken fibers and matrix damage

An analytical solution is developed for the determination of the stresses and displacements in a unidirectional fiber-reinforced composite containing an arbitrary number of broken fibers as well as longitudinal yielding and splitting of the matrix. The solution is developed using a materials-modeling approach which is based on a shear-lag stress transfer mechanism. The equilibrium equation in the axial direction gives a pair of integral equations which are solved numerically. Excellent agreement is shown to exist between the solution and experimental results for notched unidirectional boron/aluminum laminates without splitting. For brittle matrix composites (i.e. epoxy) equally good results are indicated for both matrix yielding and splitting. For yielding without splitting the fracture strength depends on crack length while for large splitting it is crack length independent

A variant of nested dissection for solving n by n grid problems

Nested dissection orderings are known to be very effective for solving the sparse positive definite linear systems which arise from n by n grid problems. In this paper nested dissection is shown to be the final step of incomplete nested dissection, an ordering which corresponds to the premature termination of dissection. Analyses of the arithmetic and storage requirements for incomplete nested dissection are given, and the ordering is shown to be competitive with nested dissection under certain conditions

New shifted hybrid inflation

A new shifted hybrid inflationary scenario is introduced which, in contrast to the older one, relies only on renormalizable superpotential terms. This scenario is automatically realized in a concrete extension of the "minimal" supersymmetric Pati-Salam model which naturally leads to a moderate violation of Yukawa unification so that, for mu>0, the predicted b-quark mass is acceptable even with universal boundary conditions. It is shown that this extended model possesses a classically flat "shifted" trajectory which acquires a slope via one-loop radiative corrections and can be used as inflationary path. The constraints from the cosmic background explorer can be met with natural values of the relevant parameters. Also, there is no disastrous production of magnetic monopoles after inflation since the Pati-Salam gauge group is already broken on the "shifted" path. The relevant part of inflation takes place at values of the inflaton field which are not much smaller than the "reduced" Planck scale and, thus, supergravity corrections could easily invalidate inflation. It is, however, shown that inflation can be kept intact provided that an extra gauge singlet with a superheavy vacuum expectation value, which originates from D-terms, is introduced and a specific form of the Kaehler potential is used. Moreover, it is found that, although the supergravity corrections are sizable, the constraints from the cosmic background explorer can again be met by readjusting the values of the parameters which were obtained with global supersymmetry.Comment: 18 pages including 1 figure, uses JHEP3.cls, minor corrections, version to appear in JHE