A spatial J-test for model specification against a single or a set of non-nested alternatives

Spatial models, Non-nested J-test, Model specification, C01, C12,

Asymmetric competition in the setting of diesel excise taxes in EU countries

This paper tests new implications of the asymmetric tax competition model on diesel excise taxes. We extend the standard tax competition model by replacing the unit demand assumption with iso-elastic demand. As a result, not only the level of the equilibrium tax, but also the slope of the tax reaction function depends positively on the size of the country. The new implication is tested on panel data in first differences for 16 countries of Western Europe. The results provide strong evidence for strategic interaction in the setting of diesel excises and confirm the effect of country size on the response to tax changes in neighbouring countries. Strategic interaction between EU countries intensified in the mid-1990s and drove small European countries to set lower diesel tax rates. These results explain why the EU’s minimum tax policy has failed to harmonise diesel tax rates

Change in the Concentration of Employment in Computer Services: Spatial Estimation at the U.S. Metro County Level

This article models the concentration of computer services activity across the U.S. with factors that incorporate spatial relationships. Specifically, we enhance the standard home-area study with an analysis that allows conditions in neighboring counties to affect the concentration of employment in the home county. We use county-level data for metropolitan areas between 1990 and 1997. To measure change in employment concentration, we use the change in location quotients for SIC 737, which captures employment concentration changes caused by both the number of firms and the scale of their activity relative to the national average. After controlling for local demand for computer services, our results support the importance of the presence of a qualified labor supply, interindustry linkages, proximity to a major airport, and spatial processes in explaining changes in computer services employment concentration, finding little support for the influence of cost factors. Our enhanced model reveals interjurisdictional relationships among these metro counties that could not be captured with standard estimates by state, metropolitan statistical area (MSA), or county. Using counties within MSAs, therefore, provides more general results than case studies but still allows measurement of local interactions. Copyright 2007 Blackwell Publishing.

BLUP in the panel regression model with spatially and serially correlated error components

Error component model, Spatial and Serial autocorrelation, Best linear unbiased prediction,

Does Transparency Pay?

This paper studies whether transparency (measured by accuracy and frequency of macroeconomic information released to the public) leads to lower borrowing costs in sovereign bond markets. We analyze the data generated during 1999–2002 when the International Monetary Fund (IMF) instituted new ways for countries to increase their transparency—by publishing the IMF's assessment of their policies and committing to release more accurate data more frequently. The IMF's preexisting internal timetable for country reports introduced exogenous variation when countries were faced with the option to become more transparent. We exploit this time variation and construct instruments to estimate the impact of transparency on bond yields in a way that is free from endogeneity bias. We find that countries experience a statistically significant decline in borrowing costs (11 percent reduction in credit spreads on average) when they choose to become more transparent. The magnitude of the decline is inversely related to the initial level of transparency and the size of the debt market. IMF Staff Papers (2007) 55, 183–209; doi:10.1057/palgrave.imfsp.9450028; published online 22 January 2008