Template-type: ReDIF-Paper 1.0 Author-Name: Paris Cleanthous Title: Does Openness Lead to More or Less Development? The Case of Health Deterioration Keywords: Health, Public Health Expenditure, Government Expenditure, Openness Abstract: This paper is an attempt to test country claims on the social costs of openness especially in the case of poor developing countries. The intent of this paper is to extend the research on the costs and benefits of economic openness by trying to look at one dimension in particular, health, and to answer two distinct but linked questions. How does openness affect government spending? What are the true determinants behind public health spending? The paper finds a positive relationship between openness and government size for poor, less developed countries, and negative in the case of rich, developed economies. The paper also finds that poor, less developed countries rank healthcare spending lower than defense but higher than education in government spending allocation and are, therefore, spending more than proportionately on healthcare than they are spending on defense and less than proportionately than on education. Length: 66 pages Creation-Date: 2011-01 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/01-11.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:01-2011 Template-type: ReDIF-Paper 1.0 Author-Name: Paris Cleanthous Title: Welfare Effects of Pharmaceutical Informative Advertising Keywords: Advertising, Health, Information, Moral Hazard, Pharmaceuticals, Welfare Abstract: Pharmaceutical markets are characterized by a high degree of innovation, complexity and uncertainty, especially markets of idiosyncratic symptomatolgy and response to treatment such as the antidepressant market. It may, therefore, be unreasonable to assume that consumers are aware of all antidepressants for sale at the time of purchase, as is the case in traditional models of consumer choice. Such an assumption will bias demand curves towards being more elastic and the evaluation of consumer welfare downwards. This paper, therefore, aims at analyzing and evaluating the effects of promotions by pharmaceutical firms on patient welfare taking into account the interaction of multiple agents (patients, physicians, insurance companies and pharmaceutical companies) in the decision process. I present an empirical discrete-choice model of limited information, where advertising influences the set of drugs from which a purchase choice is made. The estimation technique incorporates both macro- and micro-level data. Estimation results indicate that pharmaceutical firms use advertising media to target high-income households and households with more comprehensive prescription drug insurance schemes through their physicians or directly. Model comparison shows that limited information leads to less elastic demand curves and larger estimates of patient welfare due to pharmaceutical innovation that exacerbate the moral hazard issue that coexists with insurance coverage. Length: 58 pages Creation-Date: 2011-01 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/02-11.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:02-2011 Template-type: ReDIF-Paper 1.0 Author-Name: Paris Cleanthous Title: Evaluating Innovation and Moral Hazard in Pharmaceuticals Keywords: Health, Innovation, Moral Hazard, Pharmaceuticals, Welfare Abstract: This paper formulates an empirical methodology that evaluates pharmaceutical innovation in the American antidepressant market by quantifying patient welfare benefits from innovation. While evaluating pharmaceutical innovation in antidepressants, I uncover and address the moral hazard issue that arises due to the existence of prescription drug insurance coverage. A combination of market-level data, drug and patient characteristics are used to estimate demand for all antidepressants between 1980 and 2001. The paper estimates large and varied patient welfare gains due to innovation and helps explain a detected divergence between social and private patient benefits by the existence of insurance. Length: 49 pages Creation-Date: 2011-01 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/03-11.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:03-2011 Template-type: ReDIF-Paper 1.0 Author-Name: Michael S. Michael Author-Name: Sajal Lahiri Author-Name: Panos Hatzipanayotou Title: Domestic and Trade Tax Reforms in the Presence of a Public Good and Different Neutrality Conditions Keywords: Indirect tax reforms, Government tax revenue, Public good, Welfare Abstract: This paper develops a perfectly-competitive general-equilibrium model of a small open economy with production of private traded goods and of a public good which is financed by revenues from trade and domestic taxes. Within this framework we consider the effects on public good provision and on welfare of the following tax reforms: (i) a producer-price-neutral reduction in export taxes and a corresponding increase in production taxes, (ii) a consumer-price-neutral reduction in tariffs and a corresponding increase in consumption taxes, and (iii) a partial tax-revenue-neutral reform in trade and domestic taxes. Length: 25 pages Creation-Date: 2011-01 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/04-11.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:04-2011 Template-type: ReDIF-Paper 1.0 Author-Name: Slobodan Djajic Author-Name: Michael S. Michael Title: Guest Worker Programs: A Theoretical Analysis of Welfare of the Host and Source Countries Keywords: Temporary Migration, Remittances, Migration Policy Abstract: This paper examines the interaction between migration policies of the host and source countries in the context of a model of guest-worker migration. For the host, the objective is to provide low-cost labor for its employers while avoiding illegal immigration. It optimizes over these objectives by setting the time limit of a guest-worker permit. The source country seeks remittance flows and return migration by offering fiscal benefits to returnees. Within this framework, we solve for the Nash equilibrium values of the migration policy instruments and compare them, to the extent possible, with the ones that emerge in a cooperative setting. Length: 34 pages Creation-Date: 2011-01 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/05-11.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:05-2011 Template-type: ReDIF-Paper 1.0 Author-Name: Andros Kourtellos Author-Name: Ioanna Stylianou Author-Name: Chih Ming Tan Title: Failure to Launch? The Role of Land Inequality in Transition Delays Keywords: growth takeoffs, schooling, duration analysis, model uncertainty, institutions. Abstract: Recent work in the growth literature has provided various explanations for transition delays and the great divergence. This paper provides empirical support for one theory of transition delays: initial land inequality. Our analysis is designed to elucidate the channels via which land inequality can affect long-run economic performance. Using a new historical data set for land inequality (Frankema (2009)) we employ duration analysis to investigate whether higher levels of land inequality lead to longer delays in the extension of primary schooling. We then investigate whether such delays affect long-run economic performance via their effect on contemporaneous schooling. Our findings suggest that land inequality is a key determinant of delays in schooling, and that such delays have a significant negative impact on long-run output. Length: 37 pages Creation-Date: 2011-05 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/6-2011.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:06-2011 Template-type: ReDIF-Paper 1.0 Author-Name: Christos Bilanakos Title: Career Concerns and Firm – Sponsored General Training Keywords: General Training, Career Concerns, Power. Abstract: This paper studies the provision of firm-sponsored general training in the presence of workers’ career concerns. We use a model building on the argument that the acquisition of general skills increases the worker’s bargaining power vis-a-vis the employer. In this context, we show that the worker’s implicit incentives to provide effort increase with the level of acquired general training. The employer takes this reciprocal effect into account and is thus more willing to invest in general human capital in the first place. When the positive effect of training on worker’s incentives is strong enough, the equilibrium outcome may even involve overinvestment in general training. It is also shown that a sharper increase in worker’s power associated with additional training may strengthen the employer’s investment incentives and have beneficial effects on welfare. Length: 35 pages Creation-Date: 2011-05 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/07-2011.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:07-2011 Template-type: ReDIF-Paper 1.0 Author-Name: Christos Bilanakos Title: Optimal Contracts and Investment in General Human Capital under Common Agency Keywords: General Human Capital, Common Agency, Contracts. Abstract: This paper studies contracts and incentives to invest in general human capital under common agency. Both the worker and the employer have too weak investment incentives in equilibrium. The employer’s underinvestment results from his failure to internalize the positive impact of his investment on other firms’ productivity as well as from the fact that he gives a share of output to the worker in order to induce a higher effort contribution. The worker anticipates that she will not be the full residual claimant of benefits and underinvests in equilibrium, too. A benevolent government will choose a set of subsidies such that the worker’s investment relative to the employer is equal to the first-best relative investment intensity. If the number of employers is small, then the worker’s investment level is relatively low and the government must give a relatively higher subsidy to the worker in order to stimulate her investment incentives. Length: 22 pages Creation-Date: 2011-05 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/08-2011.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:08-2011 Template-type: ReDIF-Paper 1.0 Author-Name: Sofia Andreou Author-Name: Panos Pashardes Author-Name: Nicoletta Pashourtidou Title: A Consumer Demand Approach to Estimating the Education Quality Component of Housing Cost Keywords: Consumer demand, hedonic analysis, school quality Abstract: A consumer demand-based approach is proposed for estimating the shadow price of education relative to housing for households with children in state schools. This approach can be used together with or in place of a hedonic approach in countries where the location of households is not disclosed in publicly available data. An empirical illustration is provided using UK data from the family expenditure surveys. Length: 13 pages Creation-Date: 2011-06 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/09-2011.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:09-2011 Template-type: ReDIF-Paper 1.0 Author-Name: Philippe Andrade Author-Name: Marios Zachariadis Title: Global Versus Local Shocks in Micro Price Dynamics Keywords: global shocks, local shocks, micro shocks, macro shocks, price adjustment, micro-macro gap, price-setting models, micro prices Abstract: A number of recent papers point to the importance of distinguishing between the price reaction to micro and macro shocks in order to reconcile the volatility of individual prices with the observed persistence of aggregate inflation. We emphasize instead the importance of distinguishing between global and local shocks. We exploit a panel of 276 micro price levels collected on a semi-annual frequency from 1990 to 2010 across 88 cities in 59 countries around the world, that enables us to distinguish between different types (local and global) of micro and macro shocks. The persistence associated with each of these components and its relation with volatility of the different components, provides a number of new facts. Prices respond more slowly to global shocks as compared to local ones .in particular, prices respond faster to local macro shocks than to global micro ones .implying that the relatively slow response of prices to macro shocks documented in recent studies comes from global rather than local sources. In addition, more volatility in local conditions leads to more persistent relative price distortions due to slower response of prices to global shocks, with this local -global link more than twice as large as the corresponding micro-macro link. Finally, global shocks account for half of the volatility in prices. Overall, our results imply that global shocks are important when analyzing price dynamics or assessing price-setting models. Length: 43 pages Creation-Date: 2011-06 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/10-2011.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:10-2011 Template-type: ReDIF-Paper 1.0 Author-Name: Andros Kourtellos Title: Modeling parameter heterogeneity in cross-country regression models Keywords: Solow growth model, parameter heterogeneity, varying coefficient model, human development Abstract: We employ various local generalizations of the Solow growth model that model parameter heterogeneity using human development at the beginning of the period with adult literacy rates and life expectancy at birth as a proxy. The model takes the form of a semiparametric varying coefficient model along the lines of Hastie and Tibshirani (1992). The empirical results show substantial parameter heterogeneity in the cross-country growth process, a finding that is consistent with the presence of multiple steady state equilibria and the emergence of convergence clubs. Length: 25 pages Creation-Date: 2011-07 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/11-2011.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:11-2011 Template-type: ReDIF-Paper 1.0 Author-Name: Christos Koutsampelas Author-Name: Panos Tsakloglou Title: Short-run distributional effects of public education in Greece Keywords: public education, redistribution Abstract: The present paper examines the short-run distributional impact of public education in Greece using the micro-data of the 2004/5 Household Budget Survey. The aggregate distributional impact of public education is found to be progressive although the incidence varies according to the level of education under examination. In-kind transfers of public education services in the fields of primary and secondary education lead to a considerable decline in relative inequality, whereas transfers in the field of tertiary education appear to have a small distributional impact whose size and sign depend on the treatment of tertiary education students living away from the parental home. When absolute inequality indices are used instead of the relative ones, primary education transfers retain their progressivity, while secondary education transfers appear almost neutral and tertiary education transfers become quite regressive. The main policy implications of the findings are outlined in the concluding section. Length: 31 pages Creation-Date: 2011-10 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/12-2011.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:12-2011 Template-type: ReDIF-Paper 1.0 Author-Name: Andros Kourtellos Author-Name: Thanasis Stengos Author-Name: Chih Ming Tan Title: Structural Threshold Regression Keywords: nonlinear regression, endogenous threshold, sample split, regime shifts, inverse Mills ratio Abstract: This paper introduces the structural threshold regression model that allows for an endogeneous threshold variable as well as for endogenous regressors. This model provides a parsimonious way of modeling nonlinearities and has many potential applications in economics and .finance. Our framework can be viewed as a generalization of the simple threshold regression framework of Hansen (2000) and Caner and Hansen (2004) to allow for the endogeneity of the threshold variable and regime specific heteroskedasticity. Our estimation of the threshold parameter is based on a concentrated least squares method that involves an inverse Mills ratio bias correction term in each regime. We derive its asymptotic distribution and propose a method to construct bootstrap confidence intervals. We also provide inference for the slope parameters based on GMM. Finally, we investigate the performance of the asymptotic approximations and the bootstrap using a Monte Carlo simulation that indicates the applicability of the method in finite samples. Length: 50 pages Creation-Date: 2011-11 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/13-2011.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:13-2011 Template-type: ReDIF-Paper 1.0 Author-Name: Nicholas Ziros Title: Negotiation-proof correlated equilibrium Keywords: Correlated equilibrium, coalitions, negotiation, incomplete information Abstract: This article characterizes the set of correlated equilibria that result from open negotiations, which players make prior to playing a strategic game. A negotiation-proof correlated equilibrium is defined as a correlated strategy in which the negotiation process among all of the players prevents the formation of any improving coalitional deviation. Additionally, this notion of equilibrium is adapted to general games with incomplete information. Length: 17 pages Creation-Date: 2011-12 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/14-2011.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:14-2011