We exploit the census of Romanian firms to provide a microfounded analysis of the sources of regional disparities in the country. To this extent, we adapt to the regional case a decomposition of firm-level output dynamics based on semi-parametric productivity estimates. The methodology, robust to different techniques of TFP estimation, allows us to analyze the sources of regional disparities controlling for the heterogeneity in firms?characteristics. In particular, we measure various compositional effects of multinational enterprises (MNEs)on regional growth, finding that regional disparities are to a large extent endogenous to the interaction between firm-level dynamics and initial market conditions.
{"title":"Firm Heterogeneity and Endogenous Regional Disparities","authors":"C. Altomonte, Italo Colantone","doi":"10.2139/ssrn.881536","DOIUrl":"https://doi.org/10.2139/ssrn.881536","url":null,"abstract":"We exploit the census of Romanian firms to provide a microfounded analysis of the sources of regional disparities in the country. To this extent, we adapt to the regional case a decomposition of firm-level output dynamics based on semi-parametric productivity estimates. The methodology, robust to different techniques of TFP estimation, allows us to analyze the sources of regional disparities controlling for the heterogeneity in firms?characteristics. In particular, we measure various compositional effects of multinational enterprises (MNEs)on regional growth, finding that regional disparities are to a large extent endogenous to the interaction between firm-level dynamics and initial market conditions.","PeriodicalId":181797,"journal":{"name":"European Economics eJournal","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134411521","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Both older and recent literature on transfer pricing is not unified about the opinion whether optimal transfer price should be equal to marginal cost of supplying company and set by centralized decision (of vertically integrated multibusiness enterprise headquarters) or whether it should be set by negotiation or even set on level of market (arms-length) price. Those, who argue for setting transfer price by negotiation or at the market price base their arguments on market imperfections like information asymmetry, motivation of managers, et cetera. This paper deals inter alia with problem of methodology transfer pricing mathematical modelling. We prove that optimal transfer price should be equal to average cost of the supplying division plus part (or whole) economic profit of the multibusiness enterprise (hereinafter “MBE”), independent on the market conditions at the market of either intermediate or final product. Setting transfer price on the level of marginal cost is inefficient and would earlier or later lead to loss of MBE’s ability to compete its rivals.
{"title":"Economics of Transfer Pricing Reviewed","authors":"Tomáš Buus, Jaroslav Brada","doi":"10.2139/ssrn.954333","DOIUrl":"https://doi.org/10.2139/ssrn.954333","url":null,"abstract":"Both older and recent literature on transfer pricing is not unified about the opinion whether optimal transfer price should be equal to marginal cost of supplying company and set by centralized decision (of vertically integrated multibusiness enterprise headquarters) or whether it should be set by negotiation or even set on level of market (arms-length) price. Those, who argue for setting transfer price by negotiation or at the market price base their arguments on market imperfections like information asymmetry, motivation of managers, et cetera. This paper deals inter alia with problem of methodology transfer pricing mathematical modelling. We prove that optimal transfer price should be equal to average cost of the supplying division plus part (or whole) economic profit of the multibusiness enterprise (hereinafter “MBE”), independent on the market conditions at the market of either intermediate or final product. Setting transfer price on the level of marginal cost is inefficient and would earlier or later lead to loss of MBE’s ability to compete its rivals.","PeriodicalId":181797,"journal":{"name":"European Economics eJournal","volume":"245 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133614318","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Not everybody in the West knows that Russia has operational local self-government with municipalities and democratically elected bodies practically all over the federation. Local self-government is in charge of key public services to citizens. This article describes how that system has developed and how it currently functions.
{"title":"Russian Local Self-Government Today","authors":"Timo Linkola","doi":"10.1111/1467-9426.00274","DOIUrl":"https://doi.org/10.1111/1467-9426.00274","url":null,"abstract":"Not everybody in the West knows that Russia has operational local self-government with municipalities and democratically elected bodies practically all over the federation. Local self-government is in charge of key public services to citizens. This article describes how that system has developed and how it currently functions.","PeriodicalId":181797,"journal":{"name":"European Economics eJournal","volume":"85 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-06-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124005848","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Although Russia is not an applicant for membership of the European Union, it is linked to European integration in many ways. The EU Tacis programme, started at the beginning of the 1990s, provided early assistance for Russia's transition to a market economy and market-oriented international integration. The Partnership and Cooperation Agreement (PCA) between the EU and Russia, which came into force in 1997, was a milestone, as were mutual cooperation strategies developed by each of the sides at the end of the 1990s. Naturally, Russia's internal reform progress and its preparation for WTO membership are also significant for EU-Russia relations. Current steps towards creation of the Common European Economic Space, uniting the EU and Russia, represent a new level of cooperation. In addition to EU programmes and projects, which are purely Russia-related, Russia also figures large in the so-called Northern Dimension (ND) policy of the EU. The role of the ND in the network of EU-Russia institutions and programmes, where the above-mentioned general elements are only small parts of the whole, needs further clarification. It so happens that the most promising opportunities and demanding challenges of the ND policy begin with the letter "e". Omitting some key areas, such as economy and education, sub-sections of this article will be devoted to energy, environment, eDimension, enterprises and EU enlargement.
{"title":"The Northern Dimension - One Pillar of the Bridge between Russia and the EU","authors":"U. Kivikari","doi":"10.1111/1467-9426.00249","DOIUrl":"https://doi.org/10.1111/1467-9426.00249","url":null,"abstract":"Although Russia is not an applicant for membership of the European Union, it is linked to European integration in many ways. The EU Tacis programme, started at the beginning of the 1990s, provided early assistance for Russia's transition to a market economy and market-oriented international integration. The Partnership and Cooperation Agreement (PCA) between the EU and Russia, which came into force in 1997, was a milestone, as were mutual cooperation strategies developed by each of the sides at the end of the 1990s. Naturally, Russia's internal reform progress and its preparation for WTO membership are also significant for EU-Russia relations. Current steps towards creation of the Common European Economic Space, uniting the EU and Russia, represent a new level of cooperation. In addition to EU programmes and projects, which are purely Russia-related, Russia also figures large in the so-called Northern Dimension (ND) policy of the EU. The role of the ND in the network of EU-Russia institutions and programmes, where the above-mentioned general elements are only small parts of the whole, needs further clarification. It so happens that the most promising opportunities and demanding challenges of the ND policy begin with the letter \"e\". Omitting some key areas, such as economy and education, sub-sections of this article will be devoted to energy, environment, eDimension, enterprises and EU enlargement.","PeriodicalId":181797,"journal":{"name":"European Economics eJournal","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-06-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121776459","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Although it already existed in Central and Eastern Europe during Soviet times, the irregular economy has boomed in the last dozen years, while undergoing a dramatic change of structure. This boom has sometimes been used to justify the claim that "transitional depression" has been grossly overestimated and, consequently, that growth rates have been underestimated. This paper presents some quantitative estimates in different countries, including Russia. The data show a remarkable difference in the size of the irregular economy in different countries, which calls for explanation. The paper warns against the easy conclusion that the large size of the irregular economy is a synonym for bad official statistics. This warning is then translated into a statistical exercise applied to Hungarian data that offers an evaluation of statistical underestimation and its consequences for growth rates.
{"title":"The Irregular Economy in Systemic Transformation","authors":"B. Dallago","doi":"10.1111/1467-9426.00272","DOIUrl":"https://doi.org/10.1111/1467-9426.00272","url":null,"abstract":"Although it already existed in Central and Eastern Europe during Soviet times, the irregular economy has boomed in the last dozen years, while undergoing a dramatic change of structure. This boom has sometimes been used to justify the claim that \"transitional depression\" has been grossly overestimated and, consequently, that growth rates have been underestimated. This paper presents some quantitative estimates in different countries, including Russia. The data show a remarkable difference in the size of the irregular economy in different countries, which calls for explanation. The paper warns against the easy conclusion that the large size of the irregular economy is a synonym for bad official statistics. This warning is then translated into a statistical exercise applied to Hungarian data that offers an evaluation of statistical underestimation and its consequences for growth rates.","PeriodicalId":181797,"journal":{"name":"European Economics eJournal","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-06-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115688834","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper the accuracy of a wide range of German business cycle forecasters is assessed for the past 10 years. For this purpose, a data set is used comprising forecasts published on a monthly basis by Consensus Economics. The application of several descriptive as well as statistical measures reveals that the accuracy of the 2-years forecasts is low relative to a simple naive forecast. This observation can mainly be explained by a systematic overestimation of the growth rates by the forecasters. Moreover, the lack of accuracy can also be explained partly by insufficient information efficiency as well as imitation behaviour. Finally, it is shown that notwithstanding the common errors which affected the accuracy of all forecasters mainly because of their systematic overestimation, they differ significantly in their forecast accuracy.
{"title":"Accuracy and Properties of German Business Cycle Forecasts","authors":"Steffen Osterloh","doi":"10.2139/ssrn.955765","DOIUrl":"https://doi.org/10.2139/ssrn.955765","url":null,"abstract":"In this paper the accuracy of a wide range of German business cycle forecasters is assessed for the past 10 years. For this purpose, a data set is used comprising forecasts published on a monthly basis by Consensus Economics. The application of several descriptive as well as statistical measures reveals that the accuracy of the 2-years forecasts is low relative to a simple naive forecast. This observation can mainly be explained by a systematic overestimation of the growth rates by the forecasters. Moreover, the lack of accuracy can also be explained partly by insufficient information efficiency as well as imitation behaviour. Finally, it is shown that notwithstanding the common errors which affected the accuracy of all forecasters mainly because of their systematic overestimation, they differ significantly in their forecast accuracy.","PeriodicalId":181797,"journal":{"name":"European Economics eJournal","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133778011","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper analyses the implications of real wage rigidities in a stochastic two-country general equilibrium model. It is shown how real wage rigidities in one country affect welfare in both countries. Assuming that the choice of whether or not to adopt flexible wages is in the hands of labour unions within each country, it is found that wages will be flexible in either no, one or both countries. Hence, even in this symmetric model flexible wages in one country and rigid wages in the other may be an equilibrium. Since there are international spillover effects of the choice of wage setting regime, the utilitarian solution is also considered. Interestingly, this does not necessarily entail more real wage flexibility than in the Nash equilibrium.
{"title":"International Spill-Over Effects of Labour Market Rigidities","authors":"Morten Spange","doi":"10.2139/ssrn.430041","DOIUrl":"https://doi.org/10.2139/ssrn.430041","url":null,"abstract":"This paper analyses the implications of real wage rigidities in a stochastic two-country general equilibrium model. It is shown how real wage rigidities in one country affect welfare in both countries. Assuming that the choice of whether or not to adopt flexible wages is in the hands of labour unions within each country, it is found that wages will be flexible in either no, one or both countries. Hence, even in this symmetric model flexible wages in one country and rigid wages in the other may be an equilibrium. Since there are international spillover effects of the choice of wage setting regime, the utilitarian solution is also considered. Interestingly, this does not necessarily entail more real wage flexibility than in the Nash equilibrium.","PeriodicalId":181797,"journal":{"name":"European Economics eJournal","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116957837","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Governments throughout the world are requiring greater use of economic analysis as a way of informing key policy decisions. The European Union now requires that an impact assessment be done for all major policy initiatives. An evaluation of the EU system could provide lessons for the U.S. and determine whether the EU is allocating resources for analysis efficiently. This paper provides a comprehensive analysis of the use of impact assessment in the European Union since its inception, using the largest available dataset. We score these assessments using a number of objective measures of quality, such as whether a particular assessment provides information on costs, benefits, or alternatives. In addition, we provide the first empirical evaluation of the EU principle of proportionate analysis, which calls for the application of more rigorous analytical standards to important policy initiatives. In general, we find that recent EU impact assessments include more economic information, but many important items are still missing. We also provide evidence that the quality of EU impact assessment increases with the expected cost of the proposal, which is consistent with the proportionality principle. Furthermore, while we find that the average quality of EU assessments lags behind U.S. assessments, we cannot reject the hypothesis that the analysis done for important initiatives in the EU is of similar quality to the analysis done in the U.S. Finally, we offer concrete suggestions on how the EU and U.S. might improve their evaluation processes by learning from each other.
{"title":"An Evaluation of the Quality of Impact Assessment in the European Union with Lessons for the U.S. and the EU","authors":"C. Cecot, R. Hahn, A. Renda, Lorna Schrefler","doi":"10.2139/ssrn.984473","DOIUrl":"https://doi.org/10.2139/ssrn.984473","url":null,"abstract":"Governments throughout the world are requiring greater use of economic analysis as a way of informing key policy decisions. The European Union now requires that an impact assessment be done for all major policy initiatives. An evaluation of the EU system could provide lessons for the U.S. and determine whether the EU is allocating resources for analysis efficiently. This paper provides a comprehensive analysis of the use of impact assessment in the European Union since its inception, using the largest available dataset. We score these assessments using a number of objective measures of quality, such as whether a particular assessment provides information on costs, benefits, or alternatives. In addition, we provide the first empirical evaluation of the EU principle of proportionate analysis, which calls for the application of more rigorous analytical standards to important policy initiatives. In general, we find that recent EU impact assessments include more economic information, but many important items are still missing. We also provide evidence that the quality of EU impact assessment increases with the expected cost of the proposal, which is consistent with the proportionality principle. Furthermore, while we find that the average quality of EU assessments lags behind U.S. assessments, we cannot reject the hypothesis that the analysis done for important initiatives in the EU is of similar quality to the analysis done in the U.S. Finally, we offer concrete suggestions on how the EU and U.S. might improve their evaluation processes by learning from each other.","PeriodicalId":181797,"journal":{"name":"European Economics eJournal","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128470709","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The huge difference in the level and variance of student performance in the 2000 PISA study between Finland and Germany motivates this paper. It analyses why Finnish students performed so much better by estimating educational production functions for both countries. The difference in the reading proficiency scores is assigned to different effects, using Oaxaca-Blinder and Juhn-Murphy-Pierce decomposition techniques. The analysis shows that German students have on average a more favorable background except for the lowest deciles, but experience much lower returns to these background characteristics in terms of test scores than Finnish students. The results imply that early streaming in Germany penalizes students in lower school types and leads to a greater inequality of educational achievement. It remains unclear, however, if this can be attributed to the effect of school types per se or student background and innate ability that determine the allocation process of students into school types. Overall, the variation in test scores can be explained much better by the observable characteristics in Germany than in Finland.
{"title":"Pisa: What Makes the Difference? Explaining the Gap in Pisa Test Scores between Finland and Germany","authors":"Andreas Ammermüller","doi":"10.2139/ssrn.555954","DOIUrl":"https://doi.org/10.2139/ssrn.555954","url":null,"abstract":"The huge difference in the level and variance of student performance in the 2000 PISA study between Finland and Germany motivates this paper. It analyses why Finnish students performed so much better by estimating educational production functions for both countries. The difference in the reading proficiency scores is assigned to different effects, using Oaxaca-Blinder and Juhn-Murphy-Pierce decomposition techniques. The analysis shows that German students have on average a more favorable background except for the lowest deciles, but experience much lower returns to these background characteristics in terms of test scores than Finnish students. The results imply that early streaming in Germany penalizes students in lower school types and leads to a greater inequality of educational achievement. It remains unclear, however, if this can be attributed to the effect of school types per se or student background and innate ability that determine the allocation process of students into school types. Overall, the variation in test scores can be explained much better by the observable characteristics in Germany than in Finland.","PeriodicalId":181797,"journal":{"name":"European Economics eJournal","volume":"74 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-08-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124279016","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper assesses how the Dutch system of taxation, cash transfers and non-cash benefits redistributes between the rich and the poor. The approach in this paper deviates from the usual approach by incorporating the full life cycle in the measurements, rather than only the annual effects. Moreover, the coverage is larger than is usually the case: the paper takes account of both direct and indirect taxes and direct and indirect benefits. In order to obtain the measurements on redistribution, we use the level of educational attainment to classify the population. We therefore measure, in terms of present values, the average net benefit from government policies for an average representative person of each level of education. The results indicate a sizable redistribution from the rich to the poor and a significant reduction of welfare inequality. The net effect on welfare inequality is, however, substantially smaller than when measured on an annual basis.
{"title":"Measuring the Lifetime Redistribution Achieved by Dutch Taxation, Cash Transfer and Non-Cash Benefits Programs","authors":"Harry ter Rele","doi":"10.1111/j.1475-4991.2007.00233.x","DOIUrl":"https://doi.org/10.1111/j.1475-4991.2007.00233.x","url":null,"abstract":"This paper assesses how the Dutch system of taxation, cash transfers and non-cash benefits redistributes between the rich and the poor. The approach in this paper deviates from the usual approach by incorporating the full life cycle in the measurements, rather than only the annual effects. Moreover, the coverage is larger than is usually the case: the paper takes account of both direct and indirect taxes and direct and indirect benefits. In order to obtain the measurements on redistribution, we use the level of educational attainment to classify the population. We therefore measure, in terms of present values, the average net benefit from government policies for an average representative person of each level of education. The results indicate a sizable redistribution from the rich to the poor and a significant reduction of welfare inequality. The net effect on welfare inequality is, however, substantially smaller than when measured on an annual basis.","PeriodicalId":181797,"journal":{"name":"European Economics eJournal","volume":"149 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128185209","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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