Economies

27 pages, 781 KiB

Open AccessArticle

Application of Taylor Rule Fundamentals in Forecasting Exchange Rates

by Joseph Agyapong

Economies 2021, 9(2), 93; https://doi.org/10.3390/economies9020093 - 21 Jun 2021

Cited by 4 | Viewed by 4976

This paper examines the effectiveness of the Taylor rule in contemporary times by investigating the exchange rate forecastability of selected four Organisation for Economic Co-operation and Development (OECD) member countries vis-à-vis the U.S. It employs various Taylor rule models with a non-drift random [...] Read more.

This paper examines the effectiveness of the Taylor rule in contemporary times by investigating the exchange rate forecastability of selected four Organisation for Economic Co-operation and Development (OECD) member countries vis-à-vis the U.S. It employs various Taylor rule models with a non-drift random walk using monthly data from 1995 to 2019. The efficacy of the model is demonstrated by analyzing the pre- and post-financial crisis periods for forecasting exchange rates. The out-of-sample forecast results reveal that the best performing model is the symmetric model with no interest rate smoothing, heterogeneous coefficients and a constant. In particular, the results show that for the pre-financial crisis period, the Taylor rule was effective. However, the post-financial crisis period shows that the Taylor rule is ineffective in forecasting exchange rates. In addition, the sensitivity analysis suggests that a small window size outperforms a larger window size. Full article

(This article belongs to the Special Issue International Financial Markets and Monetary Policy)

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26 pages, 3131 KiB

Open AccessArticle

Do Jumps Matter in Both Equity Market Returns and Integrated Volatility: A Comparison of Asian Developed and Emerging Markets

by Hassan Zada, Arshad Hassan and Wing-Keung Wong

Economies 2021, 9(2), 92; https://doi.org/10.3390/economies9020092 - 16 Jun 2021

Cited by 9 | Viewed by 3169

Abstract

In this paper, we examine whether jumps matter in both equity market returns and integrated volatility. For this purpose, we use the swap variance (SwV) approach to identify monthly jumps and estimated realized volatility in prices for both developed and emerging markets from [...] Read more.

In this paper, we examine whether jumps matter in both equity market returns and integrated volatility. For this purpose, we use the swap variance (SwV) approach to identify monthly jumps and estimated realized volatility in prices for both developed and emerging markets from February 2001 to February 2020. We find that jumps arise in all equity markets; however, emerging markets have more jumps relative to developed markets, and positive jumps are more frequent than negative jumps. In emerging markets, the markets with average volatility earn higher returns during jump periods; however, highly volatile markets earn higher returns during jump periods in developed markets. Furthermore, markets with low continuous returns and high volatility are more adversely affected during periods of negative jumps. The average ratio of jump variations to total variation shows considerable variations due to jumps. Integrated volatility is high during periods of negative jumps, and this pattern is consistent in both developed and emerging markets. Moreover, the peak volatility of stock markets is observed during periods of crises. The implication of this study is useful in the asset pricing model, risk management, and for individual investors and portfolio managers for both developed and emerging markets. Full article

(This article belongs to the Special Issue Asset Pricing, Investment, and Trading Strategies)

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22 pages, 4455 KiB

Open AccessArticle

The Dynamic Spillover Effects of Macroeconomic and Financial Uncertainty on Commodity Markets Uncertainties

by Hedi Ben Haddad, Imed Mezghani and Abdessalem Gouider

Economies 2021, 9(2), 91; https://doi.org/10.3390/economies9020091 - 15 Jun 2021

Cited by 10 | Viewed by 3665

Abstract

The present paper has two main objectives: first, to accurately estimate commodity price uncertainty; and second to analyze the uncertainty connectedness among commodity markets and the macroeconomic uncertainty, using the time-varying vector-autoregressive (TVP-VAR) model. We use eight main commodity markets, namely energy, fats [...] Read more.

The present paper has two main objectives: first, to accurately estimate commodity price uncertainty; and second to analyze the uncertainty connectedness among commodity markets and the macroeconomic uncertainty, using the time-varying vector-autoregressive (TVP-VAR) model. We use eight main commodity markets, namely energy, fats and oils, beverages, grains, other foods, raw materials, industrial meals, and precious metals. The sample covers the period from January 1960 to June 2020. The estimated commodity price uncertainties are proven to be leading indicators of uncertainty rather than volatility in commodity markets. In addition, the time-varying connectedness analysis indicates that the macroeconomic uncertainty has persistent spillover effects on the commodity uncertainty, especially during the recent COVID-19 pandemic period. It has also found that the energy uncertainty shocks are the main drivers of connectedness among commodity markets, and that fats and oils uncertainty is the influence driver of uncertainty spillovers among agriculture commodities. The achieved results are of important significance to policymakers, firms, and investors to build accurate forecasts of commodity price uncertainties. Full article

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9 pages, 219 KiB

Open AccessFeature PaperArticle

A Model of Product Life Cycle Cost Management Based on the Example of the Spartan Multimedia Shooting Training System

by Waldemar Swiderski and Wieslawa Rolek

Economies 2021, 9(2), 90; https://doi.org/10.3390/economies9020090 - 11 Jun 2021

Cited by 1 | Viewed by 3421

Abstract

Cost management is a process that contributes to increases in efficiency that have an impact on a finished product. Comprehensive cost management uses information that is created by the cost accounting system and new concepts of measurement and valuation of product manufacturing costs. [...] Read more.

Cost management is a process that contributes to increases in efficiency that have an impact on a finished product. Comprehensive cost management uses information that is created by the cost accounting system and new concepts of measurement and valuation of product manufacturing costs. This paper presents the product life cycle costing (LCC) method and the target cost method as concepts used in cost management based on the example of the SPARTAN system. SPARTAN is a stationary training system designed to train, monitor and evaluate sighting and shooting techniques for small arms. The LCC method refers to the estimated cost of a product (in our case, the SPARTAN system) life cycle and it is calculated as the sum of the acquisition costs, ownership costs and operating costs. Having taken into account costs of acquisition, ownership and operation, the results of the LCC analysis were obtained, which show that, keeping in mind the whole life cycle cost, it will be more profitable to purchase the modernized version of the SPARTAN system despite its higher acquisition costs. Full article

19 pages, 1843 KiB

Open AccessArticle

The Financial Integration in the European Capital Market Using a Clustering Approach on Financial Data

by Jakub Danko and Erik Suchý

Economies 2021, 9(2), 89; https://doi.org/10.3390/economies9020089 - 7 Jun 2021

Cited by 7 | Viewed by 3902

Abstract

In 2009, when the effects of the economic crisis were fully felt, countries around the world experienced negative impacts, starting from the USA, where the crisis began, through Europe to Asia. Economic cycles, fluctuations, and crises are a common part of the financial [...] Read more.

In 2009, when the effects of the economic crisis were fully felt, countries around the world experienced negative impacts, starting from the USA, where the crisis began, through Europe to Asia. Economic cycles, fluctuations, and crises are a common part of the financial market, for example, the crisis in 1929 and the crisis in 2000. The recovery of the economy is a key factor in this process. Due to the increasingly powerful process of globalization and the growth of the interconnectedness of individual economies to each other, not to mention an increasing pressure on the formation of integration clusters, the creation and emergence of new financial crises with supranational and transnational character are highly likely in the future. It is possible that a one-day crisis reaches and expands with global reach, but it is important for us to be prepared through effective tools. In this article, we will be dealing with financial indicators within the European Union that define and create the capital market. Based on cluster analysis, we create groups of countries that are similar to each other. We determine which countries are the leaders and which, on the contrary, lag behind the rest of Europe. Full article

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18 pages, 1057 KiB

Open AccessArticle

Impact of Changes to Procedures on the Evaluation of the Effectiveness of Forms of Professional Activation in Poland

by Beata Bieszk-Stolorz and Krzysztof Dmytrów

Economies 2021, 9(2), 88; https://doi.org/10.3390/economies9020088 - 3 Jun 2021

Cited by 1 | Viewed by 3208

Abstract

Active labour market policy is connected with the necessity to account for the funds allocated for it. The conducted analysis forms a part of research on the evaluation of the effects of changes introduced by legal regulations. The aim of this research is [...] Read more.

Active labour market policy is connected with the necessity to account for the funds allocated for it. The conducted analysis forms a part of research on the evaluation of the effects of changes introduced by legal regulations. The aim of this research is to assess the impact of changes to the methodology of calculating on values of the cost and employment effectiveness of basic forms of economic activation in Poland. They were introduced in 2015 in connection with ongoing discussion regarding the effectiveness of the evaluation methods used. The Ministry of Economic Development, Labour and Technology is currently responsible for activating the unemployed in Poland, and funds come from the Labour Fund. The analysis used is the regression discontinuity design. This analysis showed that significant changes occurred only in the slope of the regression line for cost effectiveness after 2015 for both procedures of its calculation. This shows that the new, introduced methods of calculating effectiveness were cosmetic in nature and did not significantly affect their values. A good recommendation for improving the method of evaluating forms of economic activation of the unemployed could be to extend the time of required employment. Full article

(This article belongs to the Special Issue Nexus between Politics and Economics in the Emerging Countries)

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15 pages, 476 KiB

Open AccessArticle

Determining the Household Consumption Expenditure’s Resilience towards Petrol Price, Disposable Income and Exchange Rate Volatilities

by Thomas Habanabakize

Economies 2021, 9(2), 87; https://doi.org/10.3390/economies9020087 - 1 Jun 2021

Cited by 7 | Viewed by 8764

Abstract

One of the core objectives of economic development is to improve people’s standards of living. However, both standards of living and consumption expenditures are often determined by disposable income, crude oil prices and exchange rate volatility. The current paper employed quarterly time series [...] Read more.

One of the core objectives of economic development is to improve people’s standards of living. However, both standards of living and consumption expenditures are often determined by disposable income, crude oil prices and exchange rate volatility. The current paper employed quarterly time series data from 2002 to 2020 to analyse the responsiveness of household consumption expenditure to the petrol price, disposable income and exchange rate volatility in South African. The empirical outcome suggested that a long-run relationship exists between variables under consideration. Additionally, the current level of consumption expenditure was found to be determined by income level and exchange rate volatility whilst changes in petrol price had no significant effect on short-term consumption expenditure. Based on these findings, the study suggests that the South African policymakers and government authorities implement policies and strategies that enhance both household income and exchange rate. Those strategies may include strengthening the country’s currency, production improvement, inflation rate reduction, and the creation of job opportunities. Full article

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16 pages, 1984 KiB

Open AccessArticle

Can Economic Factors Improve Momentum Trading Strategies? The Case of Managed Futures during the COVID-19 Pandemic

by Renata Guobužaitė and Deimantė Teresienė

Economies 2021, 9(2), 86; https://doi.org/10.3390/economies9020086 - 28 May 2021

Cited by 4 | Viewed by 5640

Abstract

Systematic momentum trading is a prevalent risk premium strategy in different portfolios. This paper focuses on the performance of the managed futures strategy based on the momentum signal across different economic regimes, focusing on the COVID-19 pandemic period. COVID-19 had a solid but [...] Read more.

Systematic momentum trading is a prevalent risk premium strategy in different portfolios. This paper focuses on the performance of the managed futures strategy based on the momentum signal across different economic regimes, focusing on the COVID-19 pandemic period. COVID-19 had a solid but short-lived impact on financial markets, and therefore gives a unique insight into momentum strategies’ performance during such critical moments of market stress. We offer a new approach to implementing momentum strategies by adding macroeconomic variables to the model. We test a managed futures strategy’s performance with a well-diversified futures portfolio across different asset classes. The research concludes that constructing a portfolio based on academically/economically sound momentum signals with its allocation timing based on broader economic factors significantly improves managed futures strategies and adds significant diversification benefits to the investors’ portfolios. Full article

(This article belongs to the Special Issue Asset Pricing, Investment, and Trading Strategies)

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11 pages, 543 KiB

Open AccessArticle

R&D Investment, Financial and Environmental Performance Nexuses via Bootstrap Fourier Quantiles Granger Causality Test

by Feng-Li Lin

Economies 2021, 9(2), 85; https://doi.org/10.3390/economies9020085 - 28 May 2021

Cited by 4 | Viewed by 3174

Abstract

This study investigated the relationship between R&D investments and financial and environmental performance. The direction, size, and significance of various phases of these variables were generated using the bootstrap Fourier quantiles Granger causality test. In our results, a positive relationship between R&D investment [...] Read more.

This study investigated the relationship between R&D investments and financial and environmental performance. The direction, size, and significance of various phases of these variables were generated using the bootstrap Fourier quantiles Granger causality test. In our results, a positive relationship between R&D investment and CO₂ emission reductions was found at two tails of quantiles. Additionally, we observed a significantly positive relationship between financial performance and CO₂ emission reductions at the 0.5 quantile and above. The correlation between R&D investment and financial performance was identified to be positive under the 0.3, 0.4, 0.5 and 0.9 quantiles and negative under the 0.5 and 0.6 quantiles. The changing linkages among R&D investment, environmental performance and financial performance found in this study provide important information for policy makers, aiding in the development of R&D strategies to upgrade financial and environmental performance simultaneously. Full article

(This article belongs to the Special Issue Challenges in Environmental and Resource Economics)

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20 pages, 2535 KiB

Open AccessArticle

Mapping Online Geographical Indication: Agrifood Products on E-Commerce Shelves of Mercosur and the European Union

by Guilherme Silva Fracarolli

Economies 2021, 9(2), 84; https://doi.org/10.3390/economies9020084 - 28 May 2021

Cited by 3 | Viewed by 4176

Abstract

The agrifood products market has never before contained as many niches than it does at this moment in history. The use of geographical indication (GIs) is one of the oldest ways of granting protection for and promoting these goods. Although they date back [...] Read more.

The agrifood products market has never before contained as many niches than it does at this moment in history. The use of geographical indication (GIs) is one of the oldest ways of granting protection for and promoting these goods. Although they date back thousands of years, only since the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement has there been a common understanding in regard to their use. Although the GI system has the same structure globally, each region shows different performance. Therefore, the influence of institutions in this market is still an enigma to be explored. In this work, we sought to compare the performance of Mercosur and the European Union in relation to GI products and categories in this exchange arena by analyzing e-retail supermarkets. To do so, we collected data from 44 online supermarkets from both economic blocs and analyzed the relevant attributes of the products offered. Then, we compared both blocs through the use of graphics and economic sociology tools. We present novel results relating to differences in GI performance, discuss the reasons for such differences and examine the construction of the market. Our results show that the EU had significantly more products than Mercosur and had a wider variety of GI products on e-retail shelves. Moreover, in the EU, the advertised products originated mainly from within the economic bloc, whereas the majority of GI products advertised in Mercosur originated primarily from abroad. This difference indicates to dominance of the EU’ systems, demonstrating that its institutions are effective in terms of trade and commerce development mechanisms. However, in both blocs, a restricted number of categories and registers were found. Full article

(This article belongs to the Special Issue Economic Factors of the Development of Agricultural Markets and Rural Areas)

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14 pages, 268 KiB

Open AccessArticle

What Factors in Nepal Account for the Rural–Urban Discrepancy in Human Capital? Evidence from Household Survey Data

by Satis Devkota, Shankar Ghimire and Mukti Upadhyay

Economies 2021, 9(2), 83; https://doi.org/10.3390/economies9020083 - 25 May 2021

Cited by 5 | Viewed by 3172

Abstract

We analyze the factors that determine human capital formation in the rural and urban sectors of Nepal and decompose the intersectoral difference into variables underlying supply and demand for human capital. In particular, we examine the role of access to primary and secondary [...] Read more.

We analyze the factors that determine human capital formation in the rural and urban sectors of Nepal and decompose the intersectoral difference into variables underlying supply and demand for human capital. In particular, we examine the role of access to primary and secondary schools as well as the socioeconomic, demographic, and geographic characteristics of households. Our results are based on Nepal Living Standards Survey data for 2004 and 2011. We find that access to schooling has a significant impact on the level of human capital, especially in rural areas. Our Blinder–Oaxaca decomposition attributes a large portion of the rural–urban gap to socioeconomic and demographic variables. Yet, the results reinforce our claim that an improvement in schooling access and road infrastructure is also necessary, particularly in the vast rural sector of Nepal, if human capital development is to provide a greater contribution to national welfare. Full article

21 pages, 318 KiB

Open AccessArticle

Intangible Assets and Labor Productivity Growth

by Carolina Hintzmann, Josep Lladós-Masllorens and Raul Ramos

Economies 2021, 9(2), 82; https://doi.org/10.3390/economies9020082 - 24 May 2021

Cited by 15 | Viewed by 4617

Abstract

We examine the contribution to labor productivity growth in the manufacturing sector of investment in different intangible asset categories—computerized information, innovative property, and economic competencies—for a set of 18 European countries between 1995 and 2017, as well as whether this contribution varies between [...] Read more.

We examine the contribution to labor productivity growth in the manufacturing sector of investment in different intangible asset categories—computerized information, innovative property, and economic competencies—for a set of 18 European countries between 1995 and 2017, as well as whether this contribution varies between different groups of countries. The motivation is to go a step further and identify which single or combination of intangible assets are relevant. The main findings can be summarized as follows. Firstly, all the three different categories of intangible assets contribute to labor productivity growth. In particular, intangible assets related to economic competences together with innovative property assets have been identified as the main drivers; specifically, advertising and marketing, organizational capital, research and development (R&D) investment, and design. Secondly, splitting the sample of European Union (EU) member states into three groups—northern, central and southern Europe—allows for the identification of a significant differentiated behavior between and within groups, in terms of the effects of investment in intangible assets on labor productivity growth. We conclude that measures promoting investment in intangibles at EU level should be accompanied by specific measures focusing on each country’s needs, for the purpose of promoting labor productivity growth. The obtained evidence suggests that the solution for the innovation deficit of some European economies consist not only of raising R&D expenditure, but also exploiting complementarities between different types of assets. Full article

7 pages, 386 KiB

Open AccessCommunication

Do Operating Profits Induce a Wage Premium Equally Shared among Employees Earning High or Low Incomes?

by Jarle Aarstad and Olav A. Kvitastein

Economies 2021, 9(2), 81; https://doi.org/10.3390/economies9020081 - 22 May 2021

Cited by 5 | Viewed by 2547

Abstract

Panel data show that between 2001 and 2014 Norwegian industries’ increasing aggregated operating profits per employee increased average wages and wage inequality. The data imply that increasing profits, perhaps unsurprisingly, induce a wage premium. The data further imply that employees earning high incomes [...] Read more.

Panel data show that between 2001 and 2014 Norwegian industries’ increasing aggregated operating profits per employee increased average wages and wage inequality. The data imply that increasing profits, perhaps unsurprisingly, induce a wage premium. The data further imply that employees earning high incomes at the outset had the highest wage increase percentage-wise. Decreasing operating profits per employee had opposite but less robust effects on average wages and wage inequality. Panel data Granger causality tests finally showed that average wages, but not wage inequality, reversely and positively affect operating profits per employee. Full article

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13 pages, 647 KiB

Open AccessArticle

The DEA Method and Its Application Possibilities for Measuring Efficiency in the Public Sector—The Case of Local Public Employment Services

by Ewa Cichowicz, Ewa Rollnik-Sadowska, Monika Dędys and Maria Ekes

Economies 2021, 9(2), 80; https://doi.org/10.3390/economies9020080 - 20 May 2021

Cited by 6 | Viewed by 3433

Abstract

Public Employment Services (PES) are identified as important institutions in the process of improving the match between supply and demand in the labor market, which, despite their importance, still do not achieve the desired efficiency. The indicated problem is partly due to the [...] Read more.

Public Employment Services (PES) are identified as important institutions in the process of improving the match between supply and demand in the labor market, which, despite their importance, still do not achieve the desired efficiency. The indicated problem is partly due to the lack of appropriate evaluation methods for the applied labor market policy instruments. This paper aims to verify the possibility of using the two-stage Data Envelopment Analysis (DEA) method in measuring the efficiency of public sector entities. The authors focused on 39 PES operating in Mazovia province, Poland in 2019. In the first stage, the model of technical efficiency of local PES included six variables (four inputs and two outputs). Only seven PES obtained full efficiency. The inefficiency of analyzed PES varied from about 1% to 80%. In the second stage, the attention focuses on the relationship between true unknown efficiency and its determinants (five environmental variables, both demand and supply oriented). Then, the regression coefficients and confidence intervals showed that three out of five variables influence the efficiency results, the share of the long-term unemployed, the share of the unemployed under 30, and the share of the unemployed over 50 in the total number of unemployed. Full article

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24 pages, 1221 KiB

Open AccessArticle

On the Political Decision of Audit Market Regulation: Empirical Evidence of Audit Firm Tenure and Maximum Durations within the European Union

by Markus Widmann, Florian Follert and Matthias Wolz

Economies 2021, 9(2), 79; https://doi.org/10.3390/economies9020079 - 20 May 2021

Cited by 1 | Viewed by 3309

Abstract

After almost every economic crisis and corporate scandal, political actors announce the need for stricter regulatory measures for financial markets and companies, in an attempt to appease their voters and defend their political agenda. Regarding the latest international financial crisis, the EU responded, [...] Read more.

After almost every economic crisis and corporate scandal, political actors announce the need for stricter regulatory measures for financial markets and companies, in an attempt to appease their voters and defend their political agenda. Regarding the latest international financial crisis, the EU responded, among other things, with comprehensive regulation of the European audit market. In the context of auditor rotation, after 17 June 2016, the duration of audit engagements should not exceed a maximum of 10 years. In this paper, we therefore investigate whether there is empirical evidence behind the 10-year threshold—or is it simply arbitrary? Our aim is to evaluate the audit market reform by the European Union (EU) (Regulation (EU) No 537/2014 and Directive, 2014/56/EU) related to the objective of improving the quality of audits. Therefore, our article addresses the most crucial element of this reform, the implementation of a mandatory audit firm rotation for public interest entities (Regulation (EU) No 537/2014, Article 17). Based on a unique dataset of 11,834 firm observations from all listed companies within the EU between 2008 and 2017, we provide for the first time a discussion basis for the assessment of audit market interventions by the EU. Hence, we compare the new maximum durations with average audit tenure in the particular member states. Even where we present only descriptive results, our results at least indicate that the “magic number” 10 (years) could be more the result of a political process—i.e., a consent between the European institutions—rather than evidence based. Therefore, our findings shall serve as a first starting point in the discussion of a vast and interdisciplinary research field. Full article

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64 pages, 646 KiB

Open AccessArticle

Disclosure of Non-Current Tangible Assets Information in Private Sector Entities Financial Statements: The Case of Lithuania

by Rasa Kanapickiene, Greta Keliuotyte-Staniuleniene and Deimante Teresiene

Economies 2021, 9(2), 78; https://doi.org/10.3390/economies9020078 - 18 May 2021

Cited by 3 | Viewed by 3865

Abstract

The research aims to examine and evaluate the accounting information disclosure (AID) quality of the non-current tangible assets in the annual financial statements of private sector entities of Lithuania and identify characteristics of these enterprises that have an impact on the AID quality. [...] Read more.

The research aims to examine and evaluate the accounting information disclosure (AID) quality of the non-current tangible assets in the annual financial statements of private sector entities of Lithuania and identify characteristics of these enterprises that have an impact on the AID quality. The research model of the AID quality in the financial statements is created. Based on the national accounting standards’ legal requirements, the original checklists were structured, and the disclosure quality indexes (DQIs) allowing evaluation of AID (both mandatory and voluntary) quality were formed. The empirical results show that Lithuanian enterprises’ AID quality was sufficient and average during the investigation period. The significant AID quality change was not observed during the short term (2007–2008), i.e., when Lithuania was going through a significant change in the economy, where the rapid growth was followed by the financial crisis. In addition, it was investigated whether significant changes were observed during the long term (2007–2016) when Lithuania was transforming from a developing to a developed country. The results show that during this period the disclosure of mandatory (for all enterprises) and voluntary information did not change significantly, while additional (for large and medium) AID quality increased. Multiple panel regression analysis showed that the enterprise’s characteristics (such as its size, debt-paying capacity, indebtedness, tangible assets, and profitability) appeared to have a statistically significant effect on the AID quality. The research findings could contribute to helping shareholders, potential investors or creditors, financial analysts, and other stakeholders when making decisions in regard to the evaluation of the AID quality as well as helping regulators to increase standards for information transparency and comparability. Full article

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13 pages, 275 KiB

Open AccessArticle

Some Results on the Control of Polluting Firms According to Dynamic Nash and Stackelberg Patterns

by George E. Halkos and George J. Papageorgiou

Economies 2021, 9(2), 77; https://doi.org/10.3390/economies9020077 - 17 May 2021

Cited by 1 | Viewed by 2150

Abstract

In this paper we model the conflict between the group of polluting firms in a country and any social planner in the same country who attempts to control the volume of emissions generated during the production process. Both players of the game have [...] Read more.

In this paper we model the conflict between the group of polluting firms in a country and any social planner in the same country who attempts to control the volume of emissions generated during the production process. Both players of the game have their own control policies, i.e., the rate of emissions on behalf of the polluting firms and the rate of pollution control (e.g., pollution abatement or environmental taxation) on behalf of the home country. The common state variable of the model is the number of polluting firms, which aims to be minimized via the country’s control policy, but on the polluters’ side it is beneficial to be maximized. Regarding the game model, its setup belongs to the special class of differential games, which are called ‘state separable differential games’. An important property of these games is that the open-loop Nash equilibrium coincides with the Markovian (closed-loop) equilibrium and, in the case of hierarchical moves, analytical solutions are easily obtained. The game proposed here is analyzed for both types of equilibrium, i.e., Nash and Stackelberg. In the simultaneous move game (i.e., the Nash game) we find the equilibrium’s analytical expressions of the controls for both players, as well as the stationary value of the stock of polluting firms. A sensitivity analysis of the model’s crucial variables takes place. In the hierarchical move game (i.e., the Stackelberg game) we find the equilibrium values of the controls, as well as of the state variable. As a result, a comparison between the two types of equilibrium for the game takes place. The analysis of the comparison reveals that the conflict is more intensive (since both controls have greater values) for the case in which the polluting firms act as the leader in the hierarchical move game. Full article

(This article belongs to the Special Issue Current Issues in Natural Resource and Environmental Economics)

15 pages, 713 KiB

Open AccessArticle

The Impact of Economic Specialization on Regional Economic Development in the European Union: Insights for Formation of Smart Specialization Strategy

by Giedrė Dzemydaitė

Economies 2021, 9(2), 76; https://doi.org/10.3390/economies9020076 - 13 May 2021

Cited by 10 | Viewed by 5949

Abstract

The smart specialization concept was implemented in the EU in 2014, stating that regions have to specify specialization areas for development of innovations. Economic specialization reveals a comparative advantage in that field. However, there are different arguments linking specialization to economic development. This [...] Read more.

The smart specialization concept was implemented in the EU in 2014, stating that regions have to specify specialization areas for development of innovations. Economic specialization reveals a comparative advantage in that field. However, there are different arguments linking specialization to economic development. This study analyzes these arguments and aims to investigate the impact of economic specialization on regional economic development and to give insights into identifying prospective areas in regional economies. A panel fixed effect estimation of industry-level regional data suggests that economic specialization in broader regional employment, called relative specialization, is ambiguously associated with economic development. Our findings suggest that neither economic specialization nor economic diversity are a clear-cut solution for ensuring economic growth. Economic structure in EU regions differs, and there is no one answer for which approach is better for economic development. Specialization measures, particularly the location quotient, cannot fully capture the dynamics in the industry structure that could be essential for formation of regional development strategy. Full article

(This article belongs to the Special Issue The Role of Smart Specialization Promoting Sustainable and Inclusive Growth – Towards RIS2.0)

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34 pages, 1124 KiB

Open AccessFeature PaperArticle

Sustainable HRM Practices in Corporate Reporting

by Štěpánka Hronová and Miroslav Špaček

Economies 2021, 9(2), 75; https://doi.org/10.3390/economies9020075 - 13 May 2021

Cited by 15 | Viewed by 15757

Abstract

Shaped by the current turbulent era of macroeconomic forces, inclusive of the technological challenges of Industry 4.0, and ubiquitous uncertainties, the business environment and its stakeholders hold high expectations for sustainable organizational practices, including harmonized and comprehensible sustainability reporting. Increasingly, responsible behavior towards [...] Read more.

Shaped by the current turbulent era of macroeconomic forces, inclusive of the technological challenges of Industry 4.0, and ubiquitous uncertainties, the business environment and its stakeholders hold high expectations for sustainable organizational practices, including harmonized and comprehensible sustainability reporting. Increasingly, responsible behavior towards internal stakeholders comes from within organizations, valuing employees as a key asset and introducing sustainable human resource management (S-HRM) practices to motivate their workforce. Reporting on these S-HRM practices and sustainability is in the highest interests of managers and investors alike. Focusing on the involved parties, employees most particularly, the paper contributes to the stakeholder theory. The literature review, previous S-HRM studies’ interpretation and their critical assessment, the GRI standards’ comparative analysis, and Lawshe’s content validity approach have been applied as the methodological framework. With the purpose to extend the scientific literature on S-HRM and its reporting, the authors aim to close the gap between purely theoretical S-HRM treaties and more practically oriented studies on reporting. The findings on the key areas of S-HRM practices give rise to the S-HRM Practices Model, the main goal of this study. This comprehensible model may serve as a harmonized instrument for sustainable HRM reporting analysis and auditing for academia and practitioners alike. Full article

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10 pages, 438 KiB

Open AccessArticle

Economics of Waste Prevention: Second-Hand Products in Germany

by Henning Wilts, Marina Fecke and Christine Zeher

Economies 2021, 9(2), 74; https://doi.org/10.3390/economies9020074 - 12 May 2021

Cited by 8 | Viewed by 3937

Abstract

Reuse is still seen as a “niche phenomenon” and consumers seem to waste economic opportunities linked to buying and selling second-hand products. For this reason, this paper focuses on incentives and barriers to sell and buy second-hand products, as indicated in the literature, [...] Read more.

Reuse is still seen as a “niche phenomenon” and consumers seem to waste economic opportunities linked to buying and selling second-hand products. For this reason, this paper focuses on incentives and barriers to sell and buy second-hand products, as indicated in the literature, and applies a theoretical framework of transaction costs to explain the existing consumption patterns. For this paper, a representative online survey was conducted in which 1023 consumers in Germany participated, age 16 and older. The data were analyzed for statistically significant deviations between different groups of economic actors selling or buying second-hand products. Results show that valuable unused products exist in households, but barriers such as uncertainties about the reliability of the buyer or the quality of the product hinder the transition into sustainable consumption. Different forms of transaction costs are important explanatory variables to explain why consumers nevertheless predominantly buy new products, although they are aware that second-hand would save money and make an individual contribution to climate protection. Full article

(This article belongs to the Special Issue Current Issues in Natural Resource and Environmental Economics)

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19 pages, 1741 KiB

Open AccessArticle

From a Recession to the COVID-19 Pandemic: Inflation–Unemployment Comparison between the UK and India

by Vijay Victor, Joshy Joseph Karakunnel, Swetha Loganathan and Daniel Francois Meyer

Economies 2021, 9(2), 73; https://doi.org/10.3390/economies9020073 - 7 May 2021

Cited by 23 | Viewed by 23632

Abstract

The recession in India and the UK peaked in 2017 due to the implications of new policy initiatives. The outbreak of the COVID-19 pandemic at the beginning of 2020 intensified the crisis, causing a drastic decline in aggregate demand and output. India and [...] Read more.

The recession in India and the UK peaked in 2017 due to the implications of new policy initiatives. The outbreak of the COVID-19 pandemic at the beginning of 2020 intensified the crisis, causing a drastic decline in aggregate demand and output. India and the UK have resorted to monetary and fiscal stimulus packages to face the economic crisis. This study investigated the inflation–unemployment dynamics during the recession and COVID-19 times in India and the UK. Using a generalized additive model (GAM), the results of this study revealed that the recession had given way to stagflation in India. In contrast, in the UK, it has led to a more severe recession in the short-run. During the downturn, policy initiatives aggravate the recession and eventually turn to stagflation in India due to inflation caused by the weak supply side. However, in the UK, the policy initiatives during this downturn pushed the economy into a deeper recession due to reduced demand. The outbreak of the COVID-19 pandemic has had a similar recessionary impact on both economies. A time horizon based recovery plan is suggested to help the economies recover from stagflation and even deeper recession. This framework could enable policymakers to choose the right path of recovery within the shortest possible time. Full article

(This article belongs to the Special Issue Nexus between Politics and Economics in the Emerging Countries)

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20 pages, 591 KiB

Open AccessArticle

A Proposal of Spatial Measurement of Peer Effect through Socioeconomic Indices and Unsatisfied Basic Needs

by Gregorio Gimenez, Denisa Ciobanu and Beatriz Barrado

Economies 2021, 9(2), 72; https://doi.org/10.3390/economies9020072 - 6 May 2021

Cited by 7 | Viewed by 3092

Abstract

This paper investigates peer effects in the academic achievement of Costa Rican students. Two measures of peer effects are used: (1) a measure of a schools’ average socioeconomic status and (2) a measure of unsatisfied basic needs at district level. The estimation of [...] Read more.

This paper investigates peer effects in the academic achievement of Costa Rican students. Two measures of peer effects are used: (1) a measure of a schools’ average socioeconomic status and (2) a measure of unsatisfied basic needs at district level. The estimation of a three-level hierarchical model allows us to deal with selection bias and unobserved heterogeneity. Results show that socioeconomic peer effect, both at school and district levels, positively and significantly correlates with academic achievement. An increase in one standard deviation in the socioeconomic index has the same effect on academic achievement as an additional year of schooling; two years if the improvement occurs in the index of unsatisfied basic needs. These results are robust for mathematics, reading and science. Results from quantile regression reveal that students with high academic achievement take greater advantages from studying in schools with higher socioeconomic status (mathematics and reading). Meanwhile, students with low academic achievement are the most affected by studying in poorer districts (mathematics and science). These results show the strong feedback between educational and social inequity and constitute a good example of how poverty traps can persist in developing countries. Full article

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18 pages, 1558 KiB

Open AccessReview

India’s Road to Independence in Manufacturing Active Pharmaceutical Ingredients: Focus on Essential Medicines

by Jerin Jose Cherian, Manju Rahi, Shubhra Singh, Sanapareddy Eswara Reddy, Yogendra Kumar Gupta, Vishwa Mohan Katoch, Vijay Kumar, Sakthivel Selvaraj, Payal Das, Raman Raghunathrao Gangakhedkar, Amit Kumar Dinda, Swarup Sarkar, Puroshottambhai Devshibhai Vaghela and Balram Bhargava

Economies 2021, 9(2), 71; https://doi.org/10.3390/economies9020071 - 3 May 2021

Cited by 16 | Viewed by 10413

Abstract

Background: Active Pharmaceutical Ingredient (API) manufacturing is an important segment of the Indian pharma industry. India ranks third in terms of volume of medicines produced, and is a major global supplier of generic medicines. However, India depends heavily on the import of several [...] Read more.

Background: Active Pharmaceutical Ingredient (API) manufacturing is an important segment of the Indian pharma industry. India ranks third in terms of volume of medicines produced, and is a major global supplier of generic medicines. However, India depends heavily on the import of several raw materials used to produce some of these medicines. Main Body: This paper highlights how the situation emerged, as well as the various steps taken by the government to reduce import dependency and promote domestic manufacturing of APIs. Through various consultations with government officials, policy analysts and academicians, and interactions with key industry experts, the paper also highlights the public health perspectives of such dependence, especially regarding the secure access to essential medicines. India needs a conducive ecosystem to capitalize on the full potential of its API manufacturing capabilities, which may require some short-term and some mid/long-term interventions. Conclusions: It concludes by providing certain short-, medium- and long-term recommendations in the policy, fiscal and technology domains, to promote API independence. It also summarizes the various steps taken by the government in moving towards domestic manufacturing of APIs. Full article

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28 pages, 656 KiB

Open AccessArticle

The Relationship between the Company’s Value and the Tone of the Risk-Related Narratives: The Case of Portugal

by Michele Gendelsky de Oliveira, Graça Azevedo and Jonas Oliveira

Economies 2021, 9(2), 70; https://doi.org/10.3390/economies9020070 - 1 May 2021

Cited by 7 | Viewed by 4671

Abstract

The present study aims to identify the impact of the tone of risk reporting narratives on company market value. The paper uses a sample of 34 Portuguese non-finance companies with shares traded at the Euronext Lisbon stock exchange market. The paper conducts an [...] Read more.

The present study aims to identify the impact of the tone of risk reporting narratives on company market value. The paper uses a sample of 34 Portuguese non-finance companies with shares traded at the Euronext Lisbon stock exchange market. The paper conducts an automated content analysis of the risk reporting narratives included in the risk and risk management sections of the annual reports for 2018 by using the software DICTION 7 (Digitext, Inc., Austin, TX, USA) to retrieve the speech tone. Main findings indicate that the tone category “activity” is associated negatively with the company’s market value. This result shows that investors misprice risk information that incorporates traces of overconfidence, narcissistic self-confidence and heroic leadership. The present study extends prior literature by analyzing the economic incentives of the tone of risk reporting narratives, not yet studied. Findings are both relevant to investors to support their decision-making processes and managers to strategically manage their risk communication tactics and benefit from the advantages emanated from them. Limitations related to the research setting do not undermine the generalization of findings because the automated algorithm provided by DICTION assures the content analysis’s reliability. The sample used corresponds to the population of the Portuguese non-finance listed companies. Full article

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15 pages, 611 KiB

Open AccessArticle

National and Sub-National Social Distancing Responses to COVID-19

by Terrence Iverson and Edward Barbier

Economies 2021, 9(2), 69; https://doi.org/10.3390/economies9020069 - 1 May 2021

Cited by 6 | Viewed by 2937

Abstract

We examine the effectiveness of sub-national actions to control a novel disease, such as COVID-19, in the absence of national policy. Evidence shows that countries where sub-national governments have undertaken unilateral social distancing measures to combat the pandemic with little or no coordination [...] Read more.

We examine the effectiveness of sub-national actions to control a novel disease, such as COVID-19, in the absence of national policy. Evidence shows that countries where sub-national governments have undertaken unilateral social distancing measures to combat the pandemic with little or no coordination have performed less well in controlling the spread of the disease. We explore analytically whether agreement on a common social distancing policy among sub-national governments, i.e., states or provinces, can lead to a better outcome than if each state or province pursues its own social distancing policy in isolation. A key feature of our model is that it accounts for the inter-jurisdictional spillover effects of each sub-national jurisdiction’s policy choice with respect to social distancing. Our results show that, in the absence of a national mandatory agreement, a sub-national agreement with sufficient coordination of social distancing policy among states yields a more effective and efficient control of a pandemic compared to states choosing policy unilaterally. These findings strongly support calls for greater cooperation among and assistance for sub-national governments to improve the effectiveness of their social distancing efforts in controlling the pandemic. Full article

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14 pages, 331 KiB

Open AccessArticle

Exploration of the Factors that Influence the Implementation of Environmental Management Systems—The Case of Slovakia

by Eva Petrová, Tomáš Štofa and Michal Šoltés

Economies 2021, 9(2), 68; https://doi.org/10.3390/economies9020068 - 1 May 2021

Cited by 4 | Viewed by 2832

Abstract

Considering internationally accepted voluntary standards of an environmental management system (EMS) as tools that can help businesses meet the agenda for sustainable development and environmental wellbeing, this study aims to examine selected firm characteristics and financial performance that are potentially related to decisions [...] Read more.

Considering internationally accepted voluntary standards of an environmental management system (EMS) as tools that can help businesses meet the agenda for sustainable development and environmental wellbeing, this study aims to examine selected firm characteristics and financial performance that are potentially related to decisions of business entities in the matter of voluntary EMS implementation. We conduct empirical research based on logistic regression to study Slovak firms that are or are not certified according to ISO 14001 and EMAS standards. Our results suggest that there are several factors potentially determining the positive company choice to adopt voluntary EMS. We have confirmed the positive effect of firm size and research and development, however, we were not able to confirm the effects of foreign ownership and profitability effects. In the case of indebtedness, we have found a stronger negative effect of long-term debt. Our results also suggest a positive effect of owning a website, where companies can share information about their certificates. On the other side, especially younger companies tend to be interested in voluntary EMS. Full article

18 pages, 2071 KiB

Open AccessArticle

Dynamics of Human Capital Development in Economic Development Cycles

by Yulia Gruzina, Irina Firsova and Wadim Strielkowski

Economies 2021, 9(2), 67; https://doi.org/10.3390/economies9020067 - 1 May 2021

Cited by 41 | Viewed by 8663

Abstract

Our paper focuses on the dynamics of development of human capital in economic development cycles (as described, for example, in the works of Becker or Barro). In the course of this research, we created an econometric model based on the modified Mankiw‒Romer‒Weil equation [...] Read more.

Our paper focuses on the dynamics of development of human capital in economic development cycles (as described, for example, in the works of Becker or Barro). In the course of this research, we created an econometric model based on the modified Mankiw‒Romer‒Weil equation of the Cobb‒Douglas function which takes into account the factor of convergence/divergence and differentiation due to changes in the size of territories, population, volume of economies, and other parameters of the studied states and societies. The applied Theil index makes it possible (since it can be used as a “transition key”) to compare the dynamic time series of human capital development in the early industrial and post-industrial, knowledge, as well as the information cycles of economic development. Drawing on the historical experience of four industrial revolutions, our paper finds that, contrary to popular belief, which considers early industrialization to be a largely unfettered process and human capital development to be a by-product, the Industrial Revolutions actually contributed to the formation of human capital by fostering new technologies and opening up opportunities for personal development for a large number of people, as well as creating a large numbers of new jobs and significantly increasing productivity and wages. Our approach makes it possible to calculate the development of human capital for each cycle of economic development according to separate formulas and then compare them in one dynamic series. Our results might be relevant for stakeholders and policy-makers in the countries largely relying upon the export of their natural resources who might want to attempt changing their dependency and to invest in the formation of a knowledge-based economy based on the high-quality human capital. Full article

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16 pages, 958 KiB

Open AccessArticle

The Determinants of FDI Sectoral Structure in the Central and East European EU Countries

by Mario Pečarić, Tino Kusanović and Pavle Jakovac

Economies 2021, 9(2), 66; https://doi.org/10.3390/economies9020066 - 27 Apr 2021

Cited by 17 | Viewed by 4471

Abstract

The EU model of market integration, based on financial openness, leads to divergence and sectoral specialization, which makes the convergence of Central and East European EU countries (CEE) in the EU questionable. The idea of the paper is that forms of foreign direct [...] Read more.

The EU model of market integration, based on financial openness, leads to divergence and sectoral specialization, which makes the convergence of Central and East European EU countries (CEE) in the EU questionable. The idea of the paper is that forms of foreign direct investment (FDI) have a differential effect on the growth and development of countries—i.e., it is assumed that FDI inflows into the manufacturing sector have a greater intensity and impact on economic growth than inflows into the services sector. Therefore, the aim of this paper is to analyze the system determinants and transmission mechanisms of the sectoral structure of FDI inflows on the sample of 10 CEE for the period 1995–2019. Following a critical analysis of previous research, a panel model was constructed in the empirical section. A developed credit market and the purchasing power of residents lead to greater capital inflows into the services sector, while a higher GDP growth rate and a depreciated real exchange rate lead to higher inflows into the manufacturing sector. The conclusion of the paper is that changing the structure of the domestic economy based on clear industrial and investment policies is the best way to attract developmentally efficient FDI. Full article

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9 pages, 304 KiB

Open AccessArticle

Collective Action Problems and Direct Democracy: An Analysis of Georgia’s 2010 Trauma Care Funding Amendment

by Joshua C. Hall, Jeremy Horpedahl and E. Frank Stephenson

Economies 2021, 9(2), 65; https://doi.org/10.3390/economies9020065 - 26 Apr 2021

Cited by 1 | Viewed by 1950

Abstract

In 2010, Georgians voted on a proposed constitutional amendment that would have increased motor vehicle licensing fees by USD 10 with the proceeds dedicated to maintaining and expanding the state’s trauma care centers. This paper examines voter support for the referendum across counties [...] Read more.

In 2010, Georgians voted on a proposed constitutional amendment that would have increased motor vehicle licensing fees by USD 10 with the proceeds dedicated to maintaining and expanding the state’s trauma care centers. This paper examines voter support for the referendum across counties and finds (1) that counties located near trauma centers in neighboring states had significantly lower support for the amendment and (2) that counties already having trauma centers had higher support for the amendment. These results are, respectively, consistent with free-riding and rent-seeking on the part of voters. Full article

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22 pages, 630 KiB

Open AccessReview

Comparative Economics of Conventional, Organic, and Alternative Agricultural Production Systems

by Timothy C. Durham and Tamás Mizik

Economies 2021, 9(2), 64; https://doi.org/10.3390/economies9020064 - 25 Apr 2021

Cited by 54 | Viewed by 17431

Abstract

Agricultural production systems are a composite of philosophy, adoptability, and careful analysis of risks and rewards. The two dominant typologies include conventional and organics, while biotechnology (GM) and Integrated Pest Management (IPM) represent situational modifiers. We conducted a systematic review to weigh the [...] Read more.

Agricultural production systems are a composite of philosophy, adoptability, and careful analysis of risks and rewards. The two dominant typologies include conventional and organics, while biotechnology (GM) and Integrated Pest Management (IPM) represent situational modifiers. We conducted a systematic review to weigh the economic merits—as well as intangibles through an economic lens—of each standalone system and system plus modifier, where applicable. Overall, 17,485 articles were found between ScienceDirect and Google Scholar, with 213 initially screened based on putative relevance. Of those, 82 were selected for an in-depth analysis, with 63 ultimately used. Economically, organic generally outperformed conventional systems. This is largely due to their lower production costs and higher market price. However, organic farms face lower yields, especially in the fruit, vegetable, and animal husbandry sectors. With that said, organic farming can provide significant local environmental benefits. Integrated pest management (IPM) is a potentiator of either core system. As a risk reduction and decision-making framework, it is labor intensive. However, this can be offset by input reductions without yield penalty compared to a conventional baseline. Biotechnology is a rapidly emerging production system, notably in developing countries. The use of GM crops results in lower production cost and higher yields. As a conventional modifier, its major advantage is scale-neutrality. Thus, smaller and lower income farmers may achieve higher gross margin. The main source of environmental benefits is reduced pesticide use, which implies a decreased need for fuel and labor. Barring external influences such as subsidies and participation in prescriptive labeling programs, farmers should focus on an a la carte approach (as opposed to discrete system adoption) to optimize their respective enterprises. Full article

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Economies, Volume 9, Issue 2 (June 2021) – 52 articles

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