Testing stock market convergence: a non-linear factor approach

This paper applies the Phillips and Sul (Econometrica 75(6):1771–1855, 2007) method to test for convergence in stock returns to an extensive dataset including monthly stock price indices for five EU countries (Germany, France, the Netherlands, Ireland and the UK) as well as the US between 1973 and 2008. We carry out the analysis on both sectors and individual industries within sectors. As a first step, we use the Stock and Watson (J Am Stat Assoc 93(441):349–358, 1998) procedure to filter the data in order to extract the long-run component of the series; then, following Phillips and Sul (Econometrica 75(6):1771–1855, 2007), we estimate the relative transition parameters. In the case of sectoral indices we find convergence in the middle of the sample period, followed by divergence, and detect four (two large and two small) clusters. The analysis at a disaggregate, industry level again points to convergence in the middle of the sample, and subsequent divergence, but a much larger number of clusters is now found. Splitting the cross-section into two subgroups including euro area countries, the UK and the US respectively, provides evidence of a global convergence/divergence process not obviously influenced by EU policies

An empirical analysis of patents flows and R&D flows around the world

In this article, we empirically investigate the effect of Research and Development (R&D) flows on patent flows around the world. We do this using an unbalanced panel consisting primarily of Organization for Economic Co-operation and Development (OECD) countries that have both patent and R&D expenditure information broken down by domestic and foreign sources. Our analysis shows that even among a fairly homogeneous group of countries, the sources of patents and R&D differ substantially. Using a dynamic panel framework, we find that domestic R&D per capita increases domestic patents per capita only for the European Patent Convention (EPC) countries that already have a decentralized approach to innovation. Foreign R&D per capita increases foreign patents per capita in all countries even though foreign R&D constitutes a very small fraction of total R&D. We find that some of these differences can be attributed to the locations of the patent applications, including those to the European Patent Office (EPO), United States Patent and Trademark Office (USPTO) and triadic patent applications to the EPO, USPTO and Japan Patent Office (JPO) simultaneously

The Dynamics of Democracy, Development and Cultural Values

Over the past decades many countries have experienced rapid changes in their economies, their democratic institutions and the values of their citizens. Comprehensive data measuring these changes across very different countries has recently become openly available. Between country similarities suggest common underlying dynamics in how countries develop in terms of economy, democracy and cultural values. We apply a novel Bayesian dynamical systems approach to identify the model which best captures the complex, mainly non-linear dynamics that underlie these changes. We show that the level of Human Development Index (HDI) in a country drives first democracy and then higher emancipation of citizens. This change occurs once the countries pass a certain threshold in HDI. The data also suggests that there is a limit to the growth of wealth, set by higher emancipation. Having reached a high level of democracy and emancipation, societies tend towards equilibrium that does not support further economic growth. Our findings give strong empirical evidence against a popular political science theory, known as the Human Development Sequence. Contrary to this theory, we find that implementation of human-rights and democratisation precede increases in emancipative values

Agglomeration, Inequality and Economic Growth (WP)

The impact of income inequality on economic growth is dependent on several factors, including the time horizon considered, the initial level of income and its initial distribution. Yet, as growth and inequality are also uneven across space, it is also pertinent to consider the effects of the geographical agglomeration of economic activity. Moreover, it would also seem pertinent to consider not just the levels of inequality and agglomeration, but also the changes they undergo -i.e., their within-country evolution- and how these two processes interact with each other. By applying different econometric specifications and by introducing different measures of agglomeration at country level -specifically, urbanization and urban concentration rates-, this study analyzes how inequality and agglomeration -both their levels and their evolution- influence economic growth in function of the country’s level of development and its initial income distribution. Our results suggest, in line with previous studies, that while high inequality levels are a limiting factor for long-run growth, increasing inequality and increasing agglomeration have the potential to enhance growth in low-income countries where income distribution remains relatively equal, but can result in congestion diseconomies in high-income countries, especially if income distribution becomes particularly unequal

Classic and spatial shift-share analysis of state-level employment change in Brazil

This paper combines classic and spatial shift-share decompositions of 1981 to 2006 employment change across the 27 states of Brazil. The classic shift-share method shows higher employment growth rates for underdeveloped regions that are due to an advantageous industry-mix and also due to additional job creation, commonly referred to as the competitive effect. Alternative decompositions proposed in the literature do not change this broad conclusion. Further examination employing exploratory spatial data analysis (ESDA) shows spatial correlation of both the industry-mix and the competitive effects. Considering that until the 1960s economic activities were more concentrated in southern regions of Brazil than they are nowadays, these results support beta convergence theories but also find evidence of agglomeration effects. Additionally, a very simple spatial decomposition is proposed that accounts for the spatially-weighted growth of surrounding states. Favourable growth in northern and centre-western states is basically associated with those states’ strengths in potential spatial spillover effect and in spatial competitive effect

Identification and characterization of a novel non-structural protein of bluetongue virus

Bluetongue virus (BTV) is the causative agent of a major disease of livestock (bluetongue). For over two decades, it has been widely accepted that the 10 segments of the dsRNA genome of BTV encode for 7 structural and 3 non-structural proteins. The non-structural proteins (NS1, NS2, NS3/NS3a) play different key roles during the viral replication cycle. In this study we show that BTV expresses a fourth non-structural protein (that we designated NS4) encoded by an open reading frame in segment 9 overlapping the open reading frame encoding VP6. NS4 is 77–79 amino acid residues in length and highly conserved among several BTV serotypes/strains. NS4 was expressed early post-infection and localized in the nucleoli of BTV infected cells. By reverse genetics, we showed that NS4 is dispensable for BTV replication in vitro, both in mammalian and insect cells, and does not affect viral virulence in murine models of bluetongue infection. Interestingly, NS4 conferred a replication advantage to BTV-8, but not to BTV-1, in cells in an interferon (IFN)-induced antiviral state. However, the BTV-1 NS4 conferred a replication advantage both to a BTV-8 reassortant containing the entire segment 9 of BTV-1 and to a BTV-8 mutant with the NS4 identical to the homologous BTV-1 protein. Collectively, this study suggests that NS4 plays an important role in virus-host interaction and is one of the mechanisms played, at least by BTV-8, to counteract the antiviral response of the host. In addition, the distinct nucleolar localization of NS4, being expressed by a virus that replicates exclusively in the cytoplasm, offers new avenues to investigate the multiple roles played by the nucleolus in the biology of the cell

An empirical analysis of organized crime, corruption and economic growth

In a companion study, Blackburn et al. (Econ Theory Bull, 2017), we have developed a theoretical framework for studying interactions between organized crime and corruption, with the view of examining the combined effects of these phenomena on economic growth. The analysis therein illustrates that organized crime has a negative effect on growth, but that the magnitude of the effect may be either enhanced or mitigated in the presence of corruption. In this paper we tackle the ambiguity produced by the coexistence of the two illicit activities with an empirical investigation using a panel of Italian regions for the period 1983–2009. We find that organized crime distorts growth less when it coexists with corruption and show our results to be robust to different specifications, measures of organized crime, and estimation techniques

The growth effects of education in Australia

In this article, we estimate the growth effect of human capital with country-specific time series data for Australia. In doing so, we extended the Solow (1956) growth model by using educational attainment as a measure of human capital developed by Barro and Lee (2010). The extended Solow (1956) model performs well after allowing for the presence of structural changes. Our results, based on alternative time series methods, show that educational attainment has a small and significant permanent effect on the growth rate of per worker output in Australia

Nonlinear Models of Convergence

A sufficient issue in studies of economic development is whether economies (countries, regions of a country, etc.) converge to one another in terms of per capita income. In this paper, nonlinear asymptotically subsiding trends of income gap in a pair of economies model the convergence process. A few specific forms of such trends are proposed: log-exponential trend, exponential trend, and fractional trend. A pair of economies is deemed converging if time series of their income gap is stationary about any of these trends. To test for stationarity, standard unit root tests are applied with non-standard test statistics that are estimated for each kind of the trends

Monetary Expansion and Converging Speed in a Growing Economy

This paper explores the effect of monetary policy on the speed of convergence. Using a neoclassical monetary growth model with a cash-in-advance constraint, we conduct numerical evaluation of the effect of changes in the growth rate of money supply on the converging speed of the economy. We find that, in contrast to fiscal actions, a change in monetary policy may produce little impact on the converging speed. This result indicates that the growth effect of inflation established in the theoretical models of money and growth would be extremely small, if we evaluated it quantitatively