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

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

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

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

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

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

Migration outflows and optimal migration policy: rules versus discretion

We study the effects of more open borders on return migration and show that migrants are more likely to return to the origin country when migration rules are softened, because this implies that they could more easily re-migrate if return migration is unsuccessful. As a result, softening migration rules leads to lower net inflows than is generally acknowledged. We show that if government follows rules to shape the optimal migration policy, it will choose more open “borders” than were its behaviour to be discretionary. However, this requires an appropriate commitment technology. We show that electoral accountability may be a solution to the commitment problem. As a matter of fact, observed softer immigration rules in western countries suggest the effectiveness of such a mechanism.info:eu-repo/semantics/publishedVersio

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