The Scandinavian Journal of Economics
- Publication date:
- Nbr. 122-4, October 2020
- Nbr. 122-3, July 2020
- Nbr. 122-2, April 2020
- Nbr. 122-1, January 2020
- Nbr. 121-4, October 2019
- Nbr. 121-3, July 2019
- Nbr. 121-2, April 2019
- Nbr. 121-1, January 2019
- Nbr. 120-4, October 2018
- Nbr. 120-3, July 2018
- Nbr. 120-2, April 2018
- Nbr. 120-1, January 2018
- Nbr. 119-4, October 2017
- Nbr. 119-3, July 2017
- Nbr. 119-2, April 2017
- Nbr. 119-1, January 2017
- Nbr. 118-4, October 2016
- Nbr. 118-3, July 2016
- Nbr. 118-2, April 2016
- Nbr. 118-1, January 2016
- Offshoring Brains? Evidence on the Complementarity between Manufacturing and R&D in Danish Firms*
By employing a firm‐level linked employer–employee dataset for Danish manufacturing firms, this paper investigates whether offshoring is complementary to, or a substitute for, research and development (R&D) activities. Offshoring is instrumented with world export supply to circumvent the inherent endogenous nature of the firm's decision to offshore. Results suggest that firms with increased offshoring do in fact tend to engage in further R&D activities at home. Moreover, they also tend to reallocate R&D resources toward product R&D, possibly at the expense of process R&D.
- Recessions and Potential Output: Disentangling Measurement Errors, Supply Shocks, and Hysteresis Effects*
This paper investigates expert revisions of potential output (PO) estimates following recessions. Using data from the Organisation for Economic Co‐operation and Development (OECD), we show that downward revisions are substantial, permanent, and mostly driven by supply shocks. In contrast, PO estimates do not significantly react to demand shocks. Revisions are also partly caused by mismeasurement of PO before recessions. In particular, we show that the length of the preceding boom and pre‐recession values of the current account balance and credit volumes are correlated with post‐recession PO revisions. Our results call for improved methods for estimating PO and provide evidence against the existence of substantial hysteresis following demand shocks.
- Monetary Policy, Financial Frictions, and Heterogeneous R&D Firms in an Endogenous Growth Model*
Motivated by empirical facts, I construct an endogenous growth model in which heterogeneous research and development (R&D) firms are financially constrained and use cash to finance R&D investments. I also examine the optimal monetary policy. The effects of financial constraint crucially depend on whether R&D firms are homogeneous or heterogeneous regarding R&D productivity. If R&D firms are homogeneous, then the zero nominal interest rate (i.e., the Friedman rule) is always optimal under severe financial constraint. Heterogeneity in R&D productivity leads to the opposite result. With heterogeneity, severe financial constraint makes the strictly positive nominal interest rate welfare‐improving under a plausible condition.
- Prospect Theory, Fairness, and the Escalation of Conflict at a Negotiation Impasse*
We study a bilateral negotiation set‐up where, at a bargaining impasse, the disadvantaged party chooses whether to escalate the conflict or not. Escalation is costly for both parties, and it results in a random draw of the winner of the escalated conflict. We derive the behavioral predictions of a simple social utility function, which is convex in disadvantageous inequality, thus connecting the inequity aversion and the prospect theory models. Our causal laboratory evidence is, to a large extent, consistent with the predicted effects. Among other things, the model predicts that the escalation rate is higher when escalation outcomes are riskier, and that the disagreement rate is lower when the cost of escalating the conflict is higher.
- Demographic Transition and Fertility Rebound in Economic Development*
Recent evidence on the “fertility rebound” offers credence to the idea that, from the onset of early industrialization to the present day, the dynamics of fertility can be represented by an N‐shaped curve. An overlapping generations model with parental investment in human capital can account for these observed movements in fertility rates during the different stages of demographic change. A demographic transition with declining fertility emerges at the intermediate stage, when parents engage on a child quantity–quality trade‐off. At later stages, however, the process of economic growth generates sufficient resources so that households can rear more children while still providing the desirable amount of education investment per child.
- A Common Base Answer to the Question “Which Country Is Most Redistributive?”*
We believe that what most authors have in mind when referring to the “most redistributive country” is a tax and transfer schedule that is most redistributive across all pre‐tax and transfer income distributions. In order to measure each country's tax and transfer redistribution according to the same baseline, we suggest using the transplant‐and‐compare method of Dardanoni and Lambert (2002, Journal of Public Economics 86, 99–122) to establish a common base. The redistributive effects of countries’ tax and transfer schedules are illustrated by employing microdata on eight countries from the Luxembourg Income Study (LIS). Of these eight countries, Finland is found to be the most redistributive country, according to the common base method.
- Entrepreneurial Skills, Technological Progress, and Firm Growth*
Using cross‐country establishment‐level data, I show that employment profiles over a firm's life cycle are flatter in fast‐growing economies than in slow‐growing economies. The difference in average employment over the firm's life cycle increases with plant age. I propose a frictionless overlapping‐generations model with exogenous technological progress. Firm productivity also depends on entrepreneurs’ skills. Entrepreneurs can increase their skills over their life cycle, but the growth of the vintage component of younger cohorts’ skills is higher in fast‐growing economies than in slow‐growing economies. This model is able to explain most of the differences observed in the sample between fast‐growing and slow‐growing economies.
- Wage Cyclicality and Composition Bias in the Norwegian Economy*
Using employer–employee register data, I estimate the real wage semi‐elasticity of aggregate unemployment for the years 1997–2014 in the Norwegian private sector. An increase of 1 percentage point in aggregate unemployment is associated with an average decrease of 2 percent in (total) daily wages. Although Norway has influential labor market institutions, wages in the Norwegian private sector are quite sensitive to business‐cycle fluctuations. Gender differences in wage cyclicality and compositional variation are considerable. Men have significantly more procyclical wages than women, and appear more likely to upgrade procyclically to better‐paying firms.
- A Simple Model of Corporate Bailouts in a Globalized Economy*
In this paper, we explore how globalization influences the decision of governments to rescue inefficient domestic firms when bailouts affect firms’ markup. We develop a model of international trade in which immobile domestic‐owned enterprises (DOEs) compete with foreign‐owned enterprises (FOEs) in an oligopolistic market. The decision to bail out DOEs leads to lower corporate tax revenues if FOEs are immobile, whereas tax revenues might increase if FOEs are mobile. Interestingly, the mobility of FOEs makes governments more prone to rescuing inefficient domestic firms because tax competition reduces the opportunity cost of a bailout policy in terms of public good provision.
- Making Partner*
Associates need reputation and financial resources to make partner at law firms, consultancies, and venture capital organizations. We provide a theory for how this prospect influences the business risk strategy they pursue and their execution effort. In our model, business risk affects how reputation evolves and the benchmark reputation for making partner through the impact of execution effort on the financial resources accumulated. We show that when business risk is observable, associates with good reputation take on high business risk, as opposed to low business risk, in order to protect their reputation. We also show that opening partner positions decreases the effort incentives of the associates with the best reputation. Finally, we conjecture that wage dispersion at the associate level should be higher when business risk is unobservable.
- Trading Goods or Human Capital: The Gains and Losses from Economic Integration
In this paper, I quantify the economic consequences of liberalizing migration in the OECD and compare them with those of a hypothetical liberalization of trade across the OECD. First, I investigate the bilateral migration and trade agreements between the EU and Australia, Canada, Japan, Turkey, and ...
- Higher Price, Lower Costs? Minimum Prices in the EU Emissions Trading Scheme
In this paper, we examine the introduction of a price floor in an emissions trading system (ETS) when some emissions are regulated outside the ETS. We theoretically characterize the conditions under which a price floor enhances welfare. Using a numerical simulation model of the European Union (EU), ...
- Impact of Low‐Skilled Immigration on Female Labour Supply
In this paper, segmenting the market by educational levels, we investigate which native‐born women are more affected by an increase of low‐skilled immigrants working in the household service sector. We present a model of individual choice with home production and, using a harmonized dataset (the...
- Optimal Social Security with Imperfect Tagging
Workers are exposed to the risk of permanent disability. We rely on a dynamic mechanism design approach to determine how imperfect information on health should optimally be used to improve the trade‐off between inducing the able to work and providing insurance against disability. The government...
- Intranational Price Convergence and Price Stickiness: Evidence from Denmark
We show that estimates of the half‐life of deviations from the law of one price are biased when their precision is not taken into account when aggregating data for different types of goods. Using a comprehensive dataset with monthly price data for 124 homogeneous products across regions in Denmark...
- Facilitating Consumer Learning in Insurance Markets: What Are the Welfare Effects?
We model a monopoly insurance market in which consumers can learn their accident risks at a cost c. We then examine the welfare effects of a policy that reduces c. If c is sufficiently small (c c*, marginally reducing c hurts the insurer and weakly benefits the consumer. Finally, a reduction in c ...
- Darlings and Orphans: Interactions across Donors in International Aid
We examine how the bilateral aid flows from an individual donor to a recipient depend on the aid flows from all other bilateral and multilateral donors to that recipient. Thereby, we assess to what extent issues including donor coordination, free‐riding, selectivity, specialization, and common...
- The Nobel Memorial Prize for William D. Nordhaus
William D. Nordhaus and Paul M. Romer received the 2018 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. This paper surveys Nordhaus’ contributions on “integrating climate change into long‐run macroeconomic analysis”, for which he was recognized with this Prize....
- Climatic Factors as Determinants of International Migration
We examine natural disasters and long‐run climatic factors as potential determinants of international migration, implementing a panel dataset of bilateral migration flows from 1960 to 2000. We find no direct effect of long‐run climatic factors on international migration across our entire sample....
- Endogenous Market Structures and International Trade: Theory and Evidence
Under constant elasticity of substitution (CES) preferences and Cournot (or Bertrand) competition, a larger market induces exits of domestic firms, lower prices, and larger production of surviving firms because of competition from more foreign firms, even without resorting to the selection effects...