Template-type: ReDIF-Paper 1.0 Author-Name: Adamos Adamou Author-Name: Sofronis Clerides Author-Name: Theodoros Zachariadis Title: Designing Carbon Taxation Schemes for Automobiles: A Simulation Exercise for Germany Keywords: CO2 emissions, German automobile market, feebates, carbon taxation Abstract: Vehicle taxation based on CO2 emissions is increasingly being adopted worldwide in order to shift consumer purchases to low-carbon cars, yet little is known about the effectiveness and overall economic impact of these schemes. We focus on feebate schemes, which impose a fee on high-carbon vehicles and give a rebate to purchasers of low-carbon automobiles. We estimate a discrete choice model of demand for automobiles in Germany and simulate the impact of alternative feebate schemes on emissions, consumer welfare, public revenues and firm profits. The analysis shows that a well-designed scheme can lead to emission reductions without reducing overall welfare. Length: 32 pages Creation-Date: 2012-01 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/01-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:01-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Ioannis Kasparis Author-Name: Peter C.B. Phillips Author-Name: Tassos Magdalinos Title: Non-linearity Induced Weak Instrumentation Keywords: Instrumental variables, Integrable function, Integrated process, Invariance principle, Local time, Mixed normality, Stationarity, Nonlinear cointegration, Unit roots, Weak Instruments. Abstract: In regressions involving integrable functions we examine the limit properties of IV estimators that utilise integrable transformations of lagged regressors as instruments. The regressors can be either I(0) or I(1) processes. We show that this kind of nonlinearity in the regression function can significantly affect the relevance of the instruments. In particular, such instruments become weak when the signal of the regressor is strong, as it is in the I(1) case. Instruments based on integrable functions of lagged I(1) regressors display long range dependence and so remain relevant even at long lags, continuing to contribute to variance reduction in IV estimation. However, simulations show that OLS is generally superior to IV estimation in terms of MSE, even in the presence of endogeneity. Estimation precision is also reduced when the regressor is nonstationary. Length: 37 pages Creation-Date: 2012-01 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/02-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:02-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Christos Koutsampelas Author-Name: Panos Tsakloglou Title: The distribution of full income in Greece Keywords: income distribution, imputed rent, in-kind public transfers. Abstract: Non-cash incomes from either private or public sources can have substantial effects on the distribution of economic welfare. However, standard approaches to inequality measurement either neglect them or take into account only selected non-monetary items. Using data for Greece in the mid 2000s we show that it is possible to incorporate a comprehensive list of non-monetary components into the analysis of income inequality. The results indicate that inequality declines sharply when we move from the distribution of disposable monetary income to the distribution of full income, that includes both cash and non-cash incomes. Both private and public non-cash incomes are far more equally distributed than monetary income, but the inequality-reducing effect of publicly provided in-kind services is stronger. The structure of inequality changes when non-cash incomes are included in the concept of resources, but the effects are not dramatic. Non-cash incomes appear to accrue more heavily to younger and older individuals, thus reducing differences across age groups. Length: 23 pages Creation-Date: 2012-03 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/03-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:03-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Adamos Adamou Author-Name: Sofronis Clerides Author-Name: Theodoros Zachariadis Title: Assessment of CO2-Oriented Vehicle Tax Reforms: A Case Study of Greece Keywords: CO2 emissions, automobile market, feebates, carbon taxation. Abstract: Vehicle taxation based on a car’s CO2 emission levels is increasingly adopted in countries around the world. This paper describes a model of oligopolistic competition in markets with differentiated products, simulating automobile demand and supply under alternative tax regimes. The objective is to perform simulations in order to evaluate policies that could shift consumer purchases towards low-CO2 cars and thus lead to the reduction of fuel use and CO2 emissions. Focusing on an analysis of the car market of Greece, we assess the environmental and economic implications of alternative carbon-based tax schemes. Our findings, which are relevant for other European countries as well, illustrate that careful policy design, supported by an appropriate model, can bring about substantial environmental benefits without losing control of economic parameters such as public finances or firm profits. In some cases vehicle taxation can have adverse (though unintended) environmental consequences. Length: 31 pages Creation-Date: 2012-03 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/04-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:04-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Pandelis Mitsis Title: Effects of minimum wages on total employment where the legislative coverage is limited: Evidence from Cyprus time series data Keywords: minimum wages, matching models, time series models. Abstract: Empirical labour market studies on the effects of minimum wages are typically confined to the sector or the worker group directly affected. Also, they often address the cases where the legislative coverage of the minimum wage is universal or almost universal. This study examines the relationship of the total employment with the minimum wage in the special case where only a number of occupations are covered by the relative legislation. A theoretical background is provided by a recently developed search and matching model and empirical evidence is provided by analysing time series data from Cyprus, one of the few countries in the world, and the only country in the European Union, where the minimum wage coverage is limited to only a small number of occupations. The analysis is done by carefully addressing the issues of stationarity, dynamic specification and endogeneity that most of the existing literature ignores. In order to ensure the estimated results are valid, the stability of the series is examined, using unit root tests under exogenous and endogenous structural breaks. Evidence is found of a significant and negative relationship between the minimum wage and total employment, despite the limited coverage of the minimum wage legislation. This suggests the existence of significant spillover effects to the occupations that are not covered by the minimum wage legislation. Length: 59 pages Creation-Date: 2012-03 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/05-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:05-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Colin P. Green Author-Name: John S. Heywood Author-Name: Nikolaos Theodoropoulos Title: Performance Pay and Ethnic Wage Differences in Britain Keywords: Performance Pay; Ethnic Earnings Differentials Abstract: In the first study using British data, we show that the average wage advantage of holding a performance pay job is greater for minorities than that for Whites. This generates a smaller ethnic wage gap among performance pay jobs than among time rate jobs. Yet, this pattern is driven by those receiving bonuses not those receiving performance related pay and it is evident only for Asians and for those in managerial jobs. Moreover, it is partially driven by sorting in which the more able take bonus jobs. Nonetheless, the basic results persist with diminished magnitude in fixed effect estimates. These findings differ dramatically from those for United States in which bonuses appear to increase racial differentials especially at the top of the earnings distribution. Length: 40 pages Creation-Date: 2012-05 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/06-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:06-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Elena Andreou Author-Name: Constantinos Kourouyiannis Author-Name: Andros Kourtellos Title: Volatility Forecast Combinations using Asymmetric Loss Functions Keywords: asymmetric loss functions, forecast combinations, realized volatility, volatility forecasting. Abstract: The paper deals with the problem of model uncertainty in forecasting volatility using forecast combinations and a flexible family of asymmetric loss functions that allow for the possibility that an investor would attach different preferences to high vis-a-vis low volatility periods. Using daily as well as 5 minute data for US and major international stock market indices we provide volatility forecasts by minimizing the Homogeneous Robust Loss function of the Realized Volatility and the combined forecast. Our findings show that forecast combinations based on the homogeneous robust loss function significantly outperform simple forecast combination methods, especially during the period of the recent financial crisis. Length: 29 pages Creation-Date: 2012-05 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/07-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:07-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Elena Andreou Author-Name: Eric Ghysels Author-Name: Constantinos Kourouyiannis Title: Robust volatility forecasts in the presence of structural breaks Keywords: forecast combinations, volatility, structural breaks Abstract: Financial time series often undergo periods of structural change that yield biased estimates or forecasts of volatility and thereby risk management measures. We show that in the context of GARCH diffusion models ignoring structural breaks in the leverage coefficient and the constant can lead to biased and inefficient AR-RV and GARCH-type volatility estimates. Similarly, we find that volatility forecasts based on AR-RV and GARCH-type models that take into account structural breaks by estimating the parameters only in the post-break period, significantly outperform those that ignore them. Hence, we propose a Flexible Forecast Combination method that takes into account not only information from different volatility models, but from different subsamples as well. This methods consists of two main steps: First, it splits the estimation period in subsamples based on estimated structural breaks detected by a change-point test. Second, it forecasts volatility weighting information from all subsamples by minimizing a particular loss function, such as the Square Error and QLIKE. An empirical application using the S&P 500 Index shows that our approach performs better, especially in periods of high volatility, compared to a large set of individual volatility models and simple averaging methods as well as Forecast Combinations under Regime Switching. Length: 75 pages Creation-Date: 2012-05 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/08-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:08-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Delia Furtado Author-Name: Nikolaos Theodoropoulos Title: Immigrant Networks and the Take-Up of Disability Programs: Evidence from US Census Data Keywords: Social Security Disability Insurance, Supplementary Security Income, Networks, Immigrants Abstract: This paper examines the role of ethnic networks in disability program take-up among working-age immigrants in the United States. We find that even when controlling for country of origin and area of residence fixed effects, immigrants residing amidst a large number of co-ethnics are more likely to receive disability payments when their ethnic groups have higher take-up rates. Although this pattern can be partially explained by cross-group differences in satisfying the work history or income and asset requirements of the disability programs, we also find that social norms and, to a lesser extent, information sharing play important roles. Length: 51 pages Creation-Date: 2012-06 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/09-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:09-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Sofia N. Andreou Author-Name: Panos Pashardes Title: Consumers’ Valuation of Level and Egalitarian Education Attainment of Schools in England Keywords: Consumer Valuation, Egalitarian Education, School Quality, Hedonic Analysis, Contextual Value Added Abstract: This paper investigates the willingness of households to pay for level (mean score) and egalitarian (deprivation compensating) components of the Contextual Value Added (CVA) indicator of school quality, which is used in England. Semi-parametric and parametric analysis shows that consumers are willing to pay for houses in the catchment area of primary and secondary schools with high academic achievement as measures by mean score; whereas, the component of the CVA indicating egalitarian education attainment is found to have zero and negative valuation at primary and secondary education levels, respectively. The implications of our findings for recently proposed changes in school funding policy to combat education inequalities are discussed. Length: 24 pages Creation-Date: 2012-06 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/10-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:10-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Michael S. Michael Author-Name: Panos Hatzipanayotou Title: Pollution and Reforms of Domestic and Trade Taxes towards Uniformity Keywords: Domestic and trade tax reforms, Production and consumption generated pollution, Government tax revenues, Welfare Abstract: This paper builds a small open economy trade model where there is pollution from the production and consumption of goods. In the presence of production and consumption pollution, we examine a piecemeal consumer-price-neutral reform of the tariff and consumption tax and a piecemeal producer-price-neutral reform of the export and production taxes on a specific good. The paper identifies sufficient conditions under which the above tax reforms improve welfare and increase government tax revenues. Length: 22 pages Creation-Date: 2012-06 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/11-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:11-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Slobodan Djajic Author-Name: Michael S. Michael Author-Name: Alexandra Vinogradova Title: Migration of Skilled Workers: Policy Interaction between Host and Source Countries Keywords: Temporary Migration, Skilled Labor, Immigration Policy Abstract: This paper examines the interaction between policies of the host and source countries in the context of a model of skilled-worker migration. The host country aims to provide low-cost labor for its employers while also taking into consideration the fiscal burden of providing social services to migrant workers and their dependants. It optimizes by setting a time limit on the duration of a guest-worker's permit. The source country seeks to maximize its own welfare by optimally choosing the amount of training it offers to its citizens, some of whom may end up working abroad. Within this framework, we solve for the Nash equilibrium values of the policy instruments and compare them with the case where both countries cooperate to maximize joint welfare. Length: 36 pages Creation-Date: 2012-06 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/12-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:12-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Christos Koutsampelas Title: Immigration and Poverty: Findings from Cyprus Keywords: Poverty, Immigration, Cyprus, Imputed rents Abstract: In this paper we employ the 2009 Family Expenditure Survey conducted by the Statistical Service of Cyprus in order to measure the poverty risk among immigrants in Cyprus. Results show that immigrants face a higher risk and depth of poverty than the native population. Large intra-group variation exists. Poverty risk is considerably higher for non-Europeans and, within the group of Europeans, migrants from Western Europe are better off than those from Eastern Europe. Econometric analysis shows that the worst position of immigrants cannot be explained solely by socioeconomic characteristics, suggesting that this is the outcome of discriminatory practices in the income-generating process. Moreover, we found that the results of the analysis are sensitive to the definition of income. In particular, the inclusion of imputed rent in the notion of income increases the measured poverty gap between natives and immigrants even further, due to the lower incidence of homeownership among immigrants. Length: 36 pages Creation-Date: 2012-08 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/13-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:13-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Ioannis Kasparis Author-Name: Elena Andreou Author-Name: Peter C. B. Phillips Title: Nonparametric Predictive Regression Keywords: Functional regression, Nonparametric predictability test, Nonparametric regression, Stock returns, Predictive regression Abstract: A unifying framework for inference is developed in predictive regressions where the predictor has unknown integration properties and may be stationary or nonstationary. Two easily implemented nonparametric F-tests are proposed. The test statistics are related to those of Kasparis and Phillips (2012) and are obtained by kernel regression. The limit distribution of these predictive tests holds for a wide range of predictors including stationary as well as non-stationary fractional and near unit root processes. In this sense the proposed tests provide a unifying framework for predictive inference, allowing for possibly nonlinear relationships of unknown form, and offering robustness to integration order and functional form. Under the null of no predictability the limit distributions of the tests involve functionals of independent ÷² variates. The tests are consistent and divergence rates are faster when the predictor is stationary. Asymptotic theory and simulations show that the proposed tests are more powerful than existing parametric predictability tests when deviations from unity are large or the predictive regression is nonlinear. Some empirical illustrations to monthly SP500 stock returns data are provided. Length: 49 pages Creation-Date: 2012-09 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/14-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:14-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Robert Duval-Hernandez Author-Name: Ferran Martinez i Coma Title: Immigrants' rights and benefits. A public opinion analysis for Spain Keywords: Public Opinion, Immigration, Political Economy, Spain Abstract: We study the preferences of natives for granting immigrants a set of rights. With a simple political economy model, we predict that unskilled natives oppose granting immigrants access to publicly provided goods when immigrants are relatively unskilled because of the associated competition for these goods. Alternatively, skilled natives oppose granting voting rights out of fear of costly redistributive fiscal policies. The opposite predictions are obtained if immigrants are more skilled than natives. We test these predictions with a dataset of public opinion on immigration in Spain, exploiting individual and regional variation in the data. The data supports these hypotheses in the case of public health services and voting rights. For public education, the results suggest that other considerations may matter more than the fiscal concerns captured in the model. Length: 51 pages Creation-Date: 2012-09 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/15-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:15-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Pandelis Mitsis Title: Is there an Environmental Kuznets Curve in the Carbon Dioxide Emissions? Keywords: Environmental Kuznets Curve; Model uncertainty; Income inequality Abstract: The environmental Kuznets curve (EKC) is a relationship across countries between the level of environmental pollution and per capita GDP. This paper investigates the strength of empirical evidence in favour of the existence for an EKC in carbon dioxide emissions, accounting for the model uncertainty created by the numerous candidate regressors proposed in the literature. Using model averaging methods, I find strong evidence in favour of the existence of EKC in carbon dioxide emissions. In contrast, evidence in favour of the significance of many of the additional regressors disappears once model uncertainty is accounted for and robustness is examined. The conclusion reached is that social policy may influence environmental degradation, for which an eventual deterioration is signalled. Length: 43 pages Creation-Date: 2012-10 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/16-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:16-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Andri Chassamboulli Author-Name: Theodore Palivos Title: A Search-Equilibrium Approach to the Effects of Immigration on Labor Market Outcomes Keywords: Immigration, Search, Unemployment, Skill-heterogeneity Abstract: We analyze the impact of the skill-biased immigration influx that took place during the years 2000-2009 in the United States, within a search and matching model that allows for skill heterogeneity, differential search cost between immigrants and natives, capital-skill complementarity and possibly endogenous skill acquisition. Within such a framework, we find that although the skill-biased immigration raised the overall net income to natives, it may have had distributional effects. Specifically, unskilled native workers gained in terms of both employment and wages. Skilled native workers, on the other hand, gained in terms of employment but may have lost in terms of wages. Nevertheless, in one extension of the model, where skilled workers and immigrants are imperfect substitutes, we find that even the skilled wage may have risen. Length: 88 pages Creation-Date: 2012-12 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/17-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:17-2012 Template-type: ReDIF-Paper 1.0 Author-Name: Christos Bilanakos Title: Consumers’ Heterogeneity, Publicness of Goods and the Size of Public Sector Keywords: Impure public good, perfect competition and monopoly, subsidy, inequality, Nash Bargaining Abstract: This article studies the relationship between the level of consumers’ inequality (or heterogeneity) and the size of government for the case of an impure public good. It is shown that the size of redistribution (represented by the level of subsidy provided to the firm) increases with the publicness of the good but may decrease with the level of consumers’ inequality. Under the assumption of Nash bargaining between consumers and producers with respect to the level of subsidy, it is also shown that the actual size of government will be inefficiently small if the level of inequality is relatively low but can be inefficiently large (implying that the good will be overproduced in equilibrium) if the level of inequality is relatively low and the publicness of the good is high enough. Length: 20 pages Creation-Date: 2012-12 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/18-12.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:18-2012