Sebastian Vollmer

Competitiveness: A Comparison of China and Mexico

Felicitas Nowak-Lehmann et al. — Wed, 28 Dec 2011 16:56:34 PST

The Free Trade Agreement between Chile and the EU: Its Potential Impact on Chile's Export Industry

Felicitas Nowak-Lehmann et al. — Wed, 28 Dec 2011 16:49:53 PST

Bilateral Free Trade Agreements have been used extensively by Chile to expand its exports and improve its competitive position in the world markets. It is the objective of this paper to analyze the role of trade agreements, price competitiveness, real income, per capita income differences and transport costs in Chilean export trade with the EU. To this end, Chile's most important export sectors are investigated using panel data from Chile's main trading partners in the EU over the period 1988-2002. The econometric model used in the simulations is a refined augmented gravity model. It is found that the FTA would strongly boost Chile's food related exports which face high protection in the EU market.

Industrial policy for rural areas can be harmful to economic development

Sebastian Vollmer — Wed, 28 Dec 2011 16:42:59 PST

Unit Values, Productivity, and Trade: Determinants of Spanish Export Strength

Sebastian Vollmer et al. — Tue, 27 Dec 2011 16:21:12 PST

In this paper we assess the current relevance of different sources of international competitiveness. Relative prices, labor costs, and productivity are evaluated as determinants of a country’s international competitiveness at the industry level. Working with detailed data on unit values and with industry data on productivity, we empirically implement a MacDougall-type model for Spanish and French trade to Brazil, China, Japan, and the U.S. The period under study is 1980 to 2001 and we distinguish in our analysis between homogenous, reference-priced, and differentiated goods. Our results indicate that cost competitiveness factors are only valid for explaining trade with developing countries while other factors are of importance for developed economies. Overall price competitiveness is of importance, but for differentiated goods, factors distinct from prices seem to determine export success.

Modelling the dynamics of market shares in a pooled data setting: econometric and empirical issues

Felicitas Nowak-Lehmann et al. — Tue, 27 Dec 2011 16:16:58 PST

The objective of this article is twofold. First, it is to study the applicability of the widely used Autoregressive Distributed Lag Model (ARDL) in a pooled data setting. Second, it is to analyse Chile's market shares in the EU during the period 1988 to 2002, pointing to application problems that might jeopardize the model and searching for estimation methods that deal with the problem of inter-temporal and cross-sectional correlation of the disturbances. To estimate the coefficients of the ARDL model, Feasible Generalized Least Squares (FGLS) is utilized within the Three-Stage Least Squares (3SLS) and the nonstandard Generalized Method of Moments (GMM) frameworks. A computation of errors is added to highlight the susceptibility of the model to problems related to the underlying model assumptions.

Gender-Specific Migration from East to West Germany: Where Have All The Young Women Gone?

Steffen Kröhnert et al. — Thu, 17 Nov 2011 03:26:20 PST

With the fall of the Berlin Wall in 1989, open migration from East to West Germany became possible. Between 1989 and 2007, roughly ten percent of the East’s population at the time of unification migrated from East to West. The emigrants were predominantly young and female. This selective migration pattern led to a tremendous deficit of females in the 18-to-29-year-old age group in East Germany. Overall, the sex ratio in that age group is as low as 89 females per 100 males in the East. In some rural counties, the sex ratio is 80 females per 100 males. We find that excess female emigration at the county level is associated with gender disparities in educational attainment favoring women, a labor market structure that favors men, and lower availability of potential partners with similar levels of education in East Germany.

A Global Growth Incidence Analysis

Sebastian Vollmer et al. — Fri, 11 Nov 2011 07:57:06 PST

We extend the literature on world income distribution, in particular Sala-i-Martin (2006), by including the important issue of growth incidence analysis. We estimate the world income distribution for 1970 to 2003 and produce estimates for poverty and inequality which are in line with previous studies. We then estimate growth incidence curves both for the world and four developing regions. It turns out that the poverty reduction during the last decades has been facilitated by the 9th to 63rd percentile of the initial world income distribution, which experienced above average annual growth rates. However, globally only in the late 1970s and early 1980s the rate of pro-poor growth has been higher than the growth rate of the mean and the mean of growth rates. This is likely due to the fact that the initially poorest percentiles also experienced the lowest growth rates.

Long-Run Trends of Human Aging and Longevity

Holger Strulik et al. — Wed, 24 Aug 2011 06:12:43 PDT

Over the last 200 years humans experienced a huge increase of life- expectancy. These advances were largely driven by extrinsic improvements of their environment (for example, the available diet, disease prevalence, vaccination, and the state of hygiene and sanitation). In this paper we ask whether future improvements of life-expectancy will be bounded from above by human life-span. Life-span, in contrast to life-expectancy, is conceptualized as a biological measure of longevity driven by the intrinsic rate of bodily deterioration. In order to pursue our question we first present a modern theory of aging and show that immutable life-span would put an upper limit on life-expectancy. We then show for a sample of developed countries that human life-span thus defined was indeed constant until the 1950s but increased since then by about eight years in sync with life-expectancy. In other words, we find evidence for manufactured life-span.

Does improved sanitation reduce diarrhea in children in rural India?

Santosh Kumar et al. — Tue, 16 Aug 2011 11:39:00 PDT

Almost nine million children under five years of age die every year. Diarrhea is considered to be the second leading cause of under-five mortality in developing countries. About one out of five deaths is caused by diarrhea. In this paper, we use the newly available data set DLHS-3 to quantify the impact of access to improved sanitation on diarrheal morbidity for children under five years of age in India. Using Propensity Score Matching (PSM), we find that access to improved sanitation reduces the risk of contracting diarrhea by 2.2 percentage points. There is considerable heterogeneity in the impacts of improved sanitation. We neither find statistically significant treatment effects for children in low or middle socioeconomic status (SES) households nor for girls, however, boys and children in high (SES) households experienced economically significant treatment effects. The magnitude of the treatment effect also differs largely by behavior.

Testing for Heterogeneous Treatment Effects in Experimental Data: False Discovery Risks and Correction Procedures

Günther Fink et al. — Mon, 25 Jul 2011 11:30:11 PDT

Randomization has emerged as preferred empirical strategy for researchers in a variety of fields over the past years. While the advantages of RCTs in terms of identification are obvious, the statistical analysis of experimental data is not without challenges. In this paper we focus on multiple hypothesis testing as one statistical issue commonly encountered in economic research. In many cases, researchers are not only interested in the main treatment effect, but also want to investigate the degree to which the impact of a given treatment varies across specific geographic or socio-demographic groups of interest. In order to test for such heterogeneous treatment effects, researchers generally either use subsample analysis or interaction terms. While both approaches have been widely applied in the empirical literature, they are generally not valid statistically, and, as we demonstrate in this paper, lead to an almost linear increase in the likelihood of false discoveries. We show that the likelihood of finding one out of ten interaction terms statistically significant in standard OLS regressions is 42%, and that two thirds of statistically significant interaction terms using PROGRESA data can be presumed to represent false discoveries. We demonstrate that applying correction procedures developed in the statistics literature can fully address this issue, and discuss the implications of multiple testing adjustments for power calculations and experimental design. While multiple testing corrections do require large sample sizes ex-ante, the adjustments necessary to preserve power when corrections are applied appear relatively small.

R Package: bimodalitytest

Florian Schwaiger et al. — Fri, 06 May 2011 20:11:33 PDT

The package bimodalitytest for the statistical software R implements the likelihood ratio test for bimodality of Holzmann and Vollmer (2008). The function bimodality.test performs the test. The function dmixnor returns the density of a normal mixture for given parameters, and the function rmixnor creates random numbers of a normal mixture for given parameters. Finally, is.unimodal returns whether the density of a two component normal mixture is bimodal or unimodal, and plot_bimodalityregion plots the region of bimodality.

Inequality and Growth: Evidence from Panel Cointegration

Dierk Herzer et al. — Mon, 28 Feb 2011 19:34:26 PST

This paper uses heterogeneous panel cointegration techniques to estimate the long-run effect of income inequality on per-capita income for 46 countries over the period 1970–1995. We find that inequality has a negative long-run effect on income, both for the sample as a whole and for important sub-groups within the sample (developed countries, developing countries, democracies, and non-democracies). The effect is economically important, with a magnitude about half as high as the magnitude of an increase in the investment share.

Distribution Dynamics of Regional GDP per Employee in Unified Germany

Sebastian Vollmer et al. — Sun, 14 Nov 2010 09:52:56 PST

We investigate to what extent convergence in production levels per worker has been achieved in Germany since unification. To this end, we model the distribution of GDP per employee across German districts using two-component normal mix- tures. While in the first year after unification, the two component distributions were clearly separated and bimodal, corresponding to the East and West German districts, respectively, in the following years they started to merge showing only one mode. Still, using the recently developed EM-Test for homogeneity in normal mixtures, the hypothesis of just a single normal component for the whole distribu- tion is clearly rejected for all years. A Posterior analysis shows that about a third of the East German districts were assigned to the richer component in 2006, thus catching up to levels of the West. The growth rate of a mover district is about one percentage point higher than the growth rate of a non-mover district which had the same initial level of GDP per employee.

The Long-Run Determinants of Fertility: One Century of Demographic Change 1900-1999

Dierk Herzer et al. — Wed, 10 Nov 2010 14:22:48 PST

We examine the long-run relationship between fertility, mortality, and in- come using panel cointegration techniques and the available data for the last century. Our main result is that mortality changes and growth of income per capita account for a major part of the fertility change characterizing the demographic transition. The fertility reduction triggered by falling mortality, however, is not enough to overcom- pensate the positive effect of falling mortality on population growth. This means that growth of income per capita is essential to explain the observed secular decline of population growth. These results are robust against alternative estimation methods, potential outliers, sample selection, different measures of mortality, and the sample period. In addition, our causality tests suggest that fertility changes are both cause and consequence of economic development.

Peaks vs. Components

Sebastian Vollmer et al. — Wed, 10 Nov 2010 14:21:06 PST

We analyze the cross-national distribution of GDP per capita and its evolution from 1970 to 2003. We argue that peaks are not a suitable measure for distinct growth regimes, because the number of peaks is not invariant under strictly monotonic transformations of the data (e.g. original vs. log scale). Instead, we model the distribution as a finite mixture, and determine its number of components (and hence of distinct growth regimes) from the data by rigorous statistical testing. We find that the distribution appears to have only two components in 1970-1975, but consists of three components from 1976 onwards. The level of GDP per capita stagnated in the poorest component, and the richest component grew much faster than the medium component. These findings empirically confirm the predictions of the unified growth theory.

The Fertility Transition Around the World: 1950-2005

Holger Strulik et al. — Wed, 10 Nov 2010 14:19:25 PST

In this paper we analyze the distribution of fertility rates across the world using parametric mixture models. We demonstrate the existence of twin peaks and the division of the world's countries in two distinct components: a high-fertility regime and a low fertility regime. Whereas the significance of twin peaks vanishes over time, the two fertility regimes continue to exists over the whole observation period. In 1950 about two thirds of the world's countries belonged to the high-fertility regime and the rest constituted the low-fertility regime. By the year 2005 this picture has reversed. Within both the low- and the high-fertility regime the average fertility rate declined, with a larger absolute decline within the high-fertility regime. Visually, the two peaks moved closer together. For the low fertility-group we find both beta- and sigma- convergence but we cannot establish any convergence pattern for the high fertility regime. Overall our findings are difficult to reconcile with the standard view of a fertility trap but they support the 'differentiated take-off' view established in the Unified Growth literature.

A Likelihood Ratio Test for Bimodality in Two-Component Mixtures with Application to Regional Income Distribution in the EU

Hajo Holzmann et al. — Fri, 13 Feb 2009 01:15:44 PST

We propose a parametric test for bimodality based on the likelihood principle by using two-component mixtures. The test uses explicit characterizations of the modal structure of such mixtures in terms of their parameters. Examples include the univariate and multivariate normal distributions and the von Mises distribution. We present the asymptotic distribution of the proposed test and analyze its finite sample performance in a simulation study. To illustrate our method, we use mixtures to investigate the modal structure of the cross-sectional distribution of per capita log GDP across EU regions from 1977 to 1993. Although these mixtures clearly have two components over the whole time period, the resulting distributions evolve from bimodality toward unimodality at the end of the 1970s.

The Impact of a Customs Union between Turkey and the EU on Turkey’s Exports to the EU

Felicitas Nowak-Lehmann et al. — Fri, 13 Feb 2009 01:08:46 PST

This article investigates Turkey's sectoral trade flows to the EU based on panel data from the period 1988 to 2002. Turkey's 16 most important export sectors are analysed. Emphasis is placed on the role of price competition, EU protection and transport costs in the export trade between Turkey and the EU. The empirical model used is an extended version of the gravity model. This study is also a contribution to the current discussion of whether Turkey should be granted full EU membership or a privileged partnership with the EU, which for Turkey would mean improved access to the EU market for its products, among other benefits. Our investigation focuses on the latter policy outcome: the impact of deepening the customs union between Turkey and the EU and applying the common agricultural policy (CAP) to Turkish agricultural exports. To this end, the impact of the 1996 customs union covering most industrial goods and processed agricultural goods, is evaluated on a sectoral level. We also perform simulations to quantify the impact of the potential inclusion of agricultural goods, as well as iron and steel and products thereof, into the full customs union between Turkey and the EU which is still to come.