nep-mic New Economics Papers
on Microeconomics
Issue of 2011‒02‒19
seventeen papers chosen by
Vaishnavi Srivathsan
Indian Institute of Technology

  1. Low-Income Mothers’ Material Hardship and Children’s Socioemotional WellBeing By Afshin Zilanawala; Natasha V. Pilkauskas
  2. Indicatori de măsurare a integrării financiare europene. Literature review By Avadanei, Andreea
  3. Structuring the Smartphone Industry. Is the Mobile Internet OS Platform the Key? By Martin Kenney; Bryan Pon
  4. Real effects of inflation uncertainty in the US By Mustafa Caglayan; Ozge Kandemir; Kostas Mouratidis
  5. The leadership of schools in three regions in Portugal based on the findings of external evaluation By Quintas, Helena; Gonçalves, José Alberto
  6. What Regulatory Policies Work for Emerging Markets? By Ping, Luo
  7. Forecasting the term structure of the Euro Market using Principal Component Analysis By Dauwe, Alexander; Moura, Marcelo L.
  8. Trade union structure with environmental concern and firms' technological choice By Asproudis, Elias
  9. A closer look at financial development and income distribution By Céline Gimet; Thomas Lagoarde-Segot
  10. Endogenous Selection of Comparison Groups, Human Capital Formation, and Tax Policy By Stark, Oded; Hyll, Walter; Wang, Yong
  11. The Desire for (Danish) Quality in High and Low Income Countries By Daniel X. Nguyen
  12. Monetary policy shocks in a DSGE model with a shadow banking system By Fabio Verona; Manuel M. F. Martins; Inês Drumond
  13. Social Exclusion and Jobs Reservation in India By Borooah, Vani / K
  14. Financial Fragility in a General Equilibrium Model: the Brazilian case By Benjamin M. Tabak; Daniel O. Cajueiro; Dimas M. Fazio
  15. The non-monetary side of the global disinflation By Gregor Schwerhoff; Mouhamadou Sy
  16. Lower bounds rule! By R. I. LUTTENS
  17. Residual-based tests for cointegration and multiple deterministic structural breaks: A Monte Carlo study By Matteo Mogliani

  1. By: Afshin Zilanawala (Columbia University); Natasha V. Pilkauskas (Columbia University)
    Abstract: Research suggests that children from low-income families are more likely to exhibit behavioral problems than children from wealthier families and these adverse behaviors have long-term detrimental effects on academic outcomes, health and earnings. In this paper, we examine the relationship between material hardship, an economic indicator that describes concrete adversities, and child behavior. Specifically, we use data from the Fragile Families and Child Wellbeing Study to examine the following questions; (a) Is material hardship associated with child socioemotional behavior, (b) Are particular hardships associated with socioemotional outcomes, and (c) Are there stronger effects for more recent or long lasting hardships? We find that children in households experiencing material hardship score significantly higher on aggressive, withdrawn, and anxious/depressed behaviors. Additionally, we find that a mother‘s inability to pay bills, having utilities cut off, and having unmet medical needs have particular adverse affects on child behavior.
    Keywords: low-income families, behavioral problems, children, academic outcomes, health, earnings, long-term detrimental effects, child behavior
    JEL: I32 H51 D31 D63 H31
    Date: 2011–02
  2. By: Avadanei, Andreea
    Abstract: The purpose of this paper is to highlight the level of European financial integration, based on the academic literature analyzing a comprehensive set of indicators and methodologies. We structured our research on sections that present a theoretical approach of the instruments that will be used in order to evaluate the progress of financial integration and their limits; the evolution of this process from EMU to the global crisis and beyond by studying financial integration indicators according to Adam et al. (2002) classification, and some considerations about the developments in the European Union new member states. Our concluding remarks outline the widespread use of quantitative and price-based indicators, as well as the different degree of integration from one financial sector to another.
    Keywords: financial integration; common currency; the law of one price; beta convergence; home bias
    JEL: F30 G15 E40 F36
    Date: 2011–02–08
  3. By: Martin Kenney; Bryan Pon
    Abstract: Until the introduction of the iPhone, cellular telephony and the Internet were essentially separate. The Internet was a PC-based service, while mobile telephony was conducted on a telephone. Though there were mobile products that provided communication services such as email, web access and other Internet services were either unavailable or inferior to those available on a PC. The “smartphone” cate-gory redefined by Apple meant the convergence of traditional mobile telephony, Internet services, and personal computing. As these sectors merge into a single device, formerly separate industry architec-tures and their constituent firms are being forced into direct competition. We test theories of industry architecture and technological platforms regarding their ability to explain the strategies of key entrants in navigating the transition. We analyze in detail the actions and strategies of four major competitors, including Apple, Google, Microsoft, Nokia, and, more briefly, Research in Motion and HP/Palm, from the framework of technological platform theory. Our analysis suggests that currently some competitors are following traditional platform strategies, but that Google and Apple appear to have adopted strate-gies at odds with platform literature. We examine how the dynamics of this convergence may lead to a reconsideration of certain tenets of platform theory.
    Keywords: platforms, industry structure, smart phones, Android, iPhone
    Date: 2011–02–10
  4. By: Mustafa Caglayan; Ozge Kandemir; Kostas Mouratidis (Department of Economics, The University of Sheffield)
    Abstract: We empirically investigate the effects of inflation uncertainty on output growth for the US using both monthly and quarterly data over 1985-2009. Employing a Markov regime switching approach to model output dynamics, we show that inflation uncertainty obtained from a Markov regime switching GARCH model exerts a negative and regime dependant impact on output growth. In particular, we show that the negative impact of inflation uncertainty on output growth is almost 4.5 times higher during the low growth regime than that during the high growth regime. We verify the robustness of our findings using quarterly data
    Keywords: Growth, inflation uncertainty, Markov-switching modeling, Markov-switching GARCH
    JEL: E31 E32
    Date: 2011–02
  5. By: Quintas, Helena (University of Algarve); Gonçalves, José Alberto (University of Algarve)
    Abstract: School leadership has significant effects on the learning, development and academic success of the pupils and on the quality of educational organisations, so, to a large extent, the effectiveness of the school depends upon the way in which leadership is carried out. It is on this basis that we undertook our study which led in this article. In it we sought to characterise the leadership of schools and school clusters in the regions of the Algarve, Alentejo and Lisbon and Tagus Valley, globally and specifically, based on the analysis of the content of external evaluation reports produced by teams from the General Inspectorate of Education during the 2006/2007, 2007/2008 and 2008/2009 academic years. This analysis was carried out as part of the research project FSE/CED/83489/2008 under the responsibility of the Centre for Sociology Research and Studies from the Lisbon University Institute, the University of the Algarve and the Barafunda Association, and we were part of the respective research team. By analysing the data we have been able to establish a joint and per region “profile” of the leaderships in the schools and school clusters that were evaluated, although we onsider that their results cannot be extrapolated, given he imits in the wording of the valuation reports and the fact at these reports were produced by different teams from egion to region and even within the regions themselves
    Keywords: external evaluation of schools; external evaluation reports of schools; leadership of schools; exercising of leadership in schools
    JEL: I21
    Date: 2010–12–30
  6. By: Ping, Luo (Asian Development Bank Institute)
    Abstract: <p>This paper discusses the banking regulatory and supervisory practices in People’s Republic of China (PRC) with reference to the international standard for banking supervision, namely, the Basel Core Principles for Effective Banking Supervision (BCPs). While the PRC has incorporated many sound practices advocated by the BCPs, there are quite a few areas where significant differences can be observed with respect to qualification review of senior management, broader regulation at the product level, prescriptive rules, and guidance for risk management. Broadly speaking, the PRC adopts a rules-based approach to regulation; in many cases, regulations are prescriptive or even intrusive. In building a robust supervisory system, the PRC finds specific guidance more helpful than sole reliance on principles-based approaches. <p>The paper argues that general principles and a principle-based approach to regulation do not seem to work well for emerging markets. Indeed, the current financial crisis has revealed some shortcomings in the existing international standards on banking supervision. Perhaps this standard can be improved by greater specificity and by incorporating more aspects of the experiences in emerging markets.
    Keywords: banking regulatory supervisory practices prc; international standard banking supervision; basel core banking supervision; bcps
    JEL: G20 G28
    Date: 2011–02–10
  7. By: Dauwe, Alexander; Moura, Marcelo L.
    Date: 2011–10
  8. By: Asproudis, Elias
    Abstract: I investigate the influence of the union structure on firms' environmental technological choice when the unions care for the environmental protection. Specifically, I compare the decentralised with the centralised structure under a Cournot duopoly. I show that the decentralised structure could always provide higher incentives to the firms for the adoption of a better (less polluting) technology. In addition, the firms prefer the decentralised unionisation than the centralised although the unions prefer the centralised structure. Furthermore, there is an inverse U-shape relation between the firm's emissions and the size of the market. Finally, the emissions could be less under the centralised case compared to the decentralised for relatively low market's size.
    Keywords: trade unions; environmental concern; emissions; technological choice
    JEL: O30 Q5 J51
    Date: 2011–01–24
  9. By: Céline Gimet (Université de Lyon, Lyon, F-69003, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Thomas Lagoarde-Segot (Euromed Management, School of Management, Marseille & DEFI ; University of Aix-Marseille, France)
    Abstract: This paper analyzes the under-investigated relationship uniting financial development and income distribution. We use a novel approach taking into account for the first time the specific channels linking banks, capital markets and income inequality, the time-varying nature of the relationship, and reciprocal causality. We construct a set of annual indicators of banking and capital market size, robustness, efficiency and international integration. We then estimate the determinants of income distribution using a panel Bayesian structural vector autoregressive (SVAR) model, for a set of 49 countries over the 1994-2002 period. We uncover a significant causality running from financial sector development to income distribution. In addition, the banking sector seems to exert a stronger impact on inequality. Finally, the relationship appears to depend on characteristics of the financial sector, rather than on its size.
    Keywords: finance, income distribution, SVAR
    JEL: C33 D63 G15 O16
    Date: 2011
  10. By: Stark, Oded; Hyll, Walter; Wang, Yong
    Abstract: This paper considers a setting in which the acquisition of human capital entails a change of location in social space that causes individuals to revise their comparison groups. Skill levels are viewed as occupational groups, and moving up the skill ladder by acquiring additional human capital, which in itself is rewarding, leads to a shift in the individualâs inclination to compare himself with a different, and on average better-paid, comparison group, which in itself is penalizing. The paper sheds new light on the dynamics of human capital formation, and suggests novel policy interventions to encourage human capital formation in the aggregate and, at the same time, reduce inter-group income inequality.
    Keywords: Human capital formation, Skill levels as occupational groups, Interpersonal comparisons, Relative deprivation, Tax policy, Subsidization, Labor and Human Capital, D11, H24, H30, J24,
    Date: 2011–01
  11. By: Daniel X. Nguyen (Department of Economics, University of Copenhagen)
    Abstract: We estimate the correlation between firm prices and sales within a CN8 product-country-year market. We do this for every market to which at least 16 different Danish firms exported between 1999 and 2006. Approximately 60% of Danish exports are to markets in which the price is negatively correlated with sales. These correlations are significantly different across destination countries within product categories, but across years for a given product-destination pair. While some existing theories perform better than others at predicting these patterns, none can reconcile the variation across countries. To fully explain the patterns, We introduce a model in which the price-sales correlation can be interpreted as the market's desire for high quality goods over low cost substitutes. We discover an inverted U shaped relation between a country's desire for quality and its per capita GDP, which we term a Quality Kuznets Curve. This curve has a turning point around 10 000 Euros for Danish exports. The Quality Kuznets Curve appears both when looking across products and within products.
    Keywords: exports; firm heterogeneity; quality; productivity; Kuznets
    JEL: F12
    Date: 2011–02
  12. By: Fabio Verona (Universidade do Porto, Faculdade de Economia and CEF.UP); Manuel M. F. Martins (Universidade do Porto, Faculdade de Economia and CEF.UP); Inês Drumond (Universidade do Porto, Faculdade de Economia and CEF.UP, and GPEARI-MFAP)
    Abstract: This paper is motivated by the recent financial crisis and addresses whether a “too low for too long” interest rate policy may generate a boom-bust cycle. We suggest a model in which a microfounded shadow banking sector is included in an otherwise state-of-the-art DSGE model. When faced with perverse incentives, financial intermediaries within the shadow banking sector can divert a fraction of stockholders’ profits for their own benefits and extend credit at a discounted rate. The model predicts that long periods of accommodative monetary policy do create the preconditions for, but do not cause per se, a boom-bust cycle. Rather, it is the combination of a persistent monetary ease with microeconomic distortions in the financial system that causes a boom-bust.
    Keywords: monetary policy; DSGE model; shadow banking system; boom-bust
    JEL: E32 E44 E52 G24
    Date: 2011–02
  13. By: Borooah, Vani / K
    Abstract: This paper argues that social exclusion robs people of their "confidence" and this loss adversely affects their capacity to function effectively. We may not be able to define confidence precisely but we know it when we have it and also when we lack it. In a “just” society, no group should unfairly suffer from a “confidence deficit” or enjoy a “confidence surplus”. However, affirmative action policies to boost a deprived group's employment rate suffer from several defects. In particular, they may have only a small effect (as with Dalits in India) when the group's educational base is low. Consequently, another prong of policy could, indeed should, focus on improving the educational standards of Dalits. The root of the problem of poor Dalit achievement lies in the many dysfunctional primary and secondary schools in the villages and towns of India. Admittedly, tackling the problem at its roots will only yield results after a long delay. Nor does the emphasis on effective learning at school carry the glamour associated with being a putative graduate of the Indian Institute of Technology, the Indian Institute of Management, or the All-India Medical Institute. But, before the vast mass of educationally and economically deprived children in India (many of whom are Dalits) can meaningfully enter the portals of Universities and Institutes of Higher Education they need to go to good schools.
    Keywords: Dalits; Discrimination; Social Exclusion; Deprivation
    JEL: J71 J15 K31
    Date: 2010–12–25
  14. By: Benjamin M. Tabak; Daniel O. Cajueiro; Dimas M. Fazio
    Abstract: This paper employs a general equilibrium approach to model the Brazilian financial system. We show that the model is able to replicate the main characteristics of the data and to predict short-term trends. The model is calibrated for the 2002-2006 period. Empirical results suggest that the financial system is improving in terms of financial stability over time. Furthermore, the model has been proven useful to model the Brazilian banking system and could be employed to evaluate the impact of changes in financial regulation on the banking system.
    Date: 2010–12
  15. By: Gregor Schwerhoff (BGSE - Bonn Graduate School of Economics - BGSE); Mouhamadou Sy (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: The dramatic decline in inflation across the world over the last 20 years has been largely credited to improved monetary policy. The universal nature of the phenomenon and its simultaneity with globalization however indicate that there might also be a “real” side to it. We build a model based on Melitz (2003) in which falling transport cost lead to greater openness, higher productivity and lower inflation. Following a decline in transport cost openness increases and firm selection eliminates the least productive domestic firms. The consequent increase in average productivity leads to falling relative prices for goods. A cash-in-advance constraint allows to analyse how falling relative prices can lead to lower inflation. Using a dataset of macroeconomic variables for 107 countries from all world regions we are able to show that openness-induced productivity growth leads to a significant decline in inflation world wide.
    Keywords: globalization ; openness ; productivity ; disinflation
    Date: 2010–10
  16. By: R. I. LUTTENS
    Abstract: We propose two axioms that introduce lower bounds into resource monotonicity require- ments for rules for the problem of adjudicating conicting claims. Suppose the amount to divide increases. The …rst axiom requires that two claimants whose lower bound changes equally experience an equal change in awards. The second axiom requires that extra re- sources are divided only among those claimants who experience a strictly positive change in their lower bound. We show that, in the two-claimant case, Concede-and-Divide is the only rule that satis…es both axioms when the axioms are de…ned over a large set of lower bounds that include the minimal rights lower bound and the secured lower bound. We also show that, in the n-claimant case where at least one claimant claims the total amount, the Minimal Overlap rule is the only rule that satis…es both axioms when the axioms are de…ned over the secured lower bound.
    Keywords: Claims problems, Lower bounds, Concede-and-Divide, Minimal Overlap rule.
    JEL: D63 D74
    Date: 2010–11
  17. By: Matteo Mogliani (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: The aim of this paper is to study the performance of residual-based tests for cointegration in the presence of multiple deterministic structural breaks via Monte Carlo simulations. We consider the KPSS-type LM tests proposed in Carrion-i-Silvestre and Sansò (2006) and in Bartley, Lee and Strazicich (2001), as well as the Schmidt and Phillips-type LM tests proposed in Westerlund and Edgerton (2007). This exercise allow us to cover a wide set of single-equation cointegration estimators. Monte Carlo experiments reveal a trade-off between size and power distortions across tests and models. KPSS-type tests display large size distortions under multiple breaks scenarios, while Schmidt and Phillips-type tests appear well-sized across all simulations. However, when regressors are endogenous, the former group of tests displays quite high power against the alternative hypothesis, while the latter shows severe low power.
    Keywords: cointegration ; single-equation ; structural breaks ; Monte Carlo simulations
    Date: 2010–08

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