Template-type: ReDIF-Paper 1.0 Author-Name: Marina Glushenkova Author-Name: Marios Zachariadis Title: Understanding Law-of-One-Price Deviations across Europe Before and After the Euro Keywords: micro prices, law-of-one-price, euro, integration, price advantage Abstract: We use a panel of thousands of good-level prices before and after the euro in order to compare the determinants and understand the evolution of goods price dispersion across Europe during these two periods. We find that tradeability plays a substantially smaller role in lowering cross-country dispersion after the adoption of the euro as compared to before, and that the role of non-traded inputs in raising price dispersion is also reduced after the euro. We then compare the overall and country-level distributions of law-of-one-price (LOP) deviations at the early and late part of our sample to inform us about the degree of integration across European economies before and after the euro. Our tests reveal that the distributions after the euro are significantly different than those before, consistent with a greater degree of integration. Utilizing our panel to trace the location of individual goods in the distribution of LOP deviations, we ask how the price advantage or disadvantage of individual economies evident in these price distributions has been shifting over time, and whether goods characteristics play a role for the persistence of these LOP deviations. LOP deviations for these goods are highly correlated, on average, over five or ten year horizons, but much less so over twenty-year or longer horizons. These correlations are greater for homogeneous as compared to differentiated goods, and vary across countries. Finally, for the great majority of these European economies and goods, price advantage is typically revealed to be more persistent than price disadvantage. Length: 27 pages Creation-Date: 2014-01 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/01-14.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:01-2014 Template-type: ReDIF-Paper 1.0 Author-Name: Elena Andreou Author-Name: Bas J.M. Werker Title: Residual-based Rank Specification Tests for AR-GARCH type models Keywords: Conditional heteroskedasticity, Linear and quadratic residual autocorrelation tests, Model misspecification test, Nonlinear time series, Parameter constancy, Residual symmetry tests Abstract: This paper derives the asymptotic distribution for a number of rank-based and classical residual specification tests in AR-GARCH type models. We consider tests for the null hypotheses of no linear and quadratic serial residual autocorrelation, residual symmetry, and no structural breaks. For these tests we show that, generally, no size correction is needed in the asymptotic test distribution when applied to AR-GARCH type residuals obtained through QMLE estimation. To be precise, we give exact expressions for the limiting null distribution of the test statistics applied to residuals, and find that standard critical values often lead to conservative tests. For this result, we give simple sufficient conditions. Simulations show that our asymptotic approximations work well for a large number of AR-GARCH models and parameter values. We also show that the rank-based tests often, though not always, have superior power properties over the classical tests, even if they are conservative. We thereby provide a useful extension to the econometrician's toolkit. An empirical application illustrates the relevance of these tests to the AR-GARCH models for the weekly stock market return indices of some major and emerging countries. Length: 52 pages Creation-Date: 2014-01 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/02-14.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:02-2014 Template-type: ReDIF-Paper 1.0 Author-Name: Manthos D. Delis Author-Name: Sotirios Kokas Author-Name: Steven Ongena Title: Foreign ownership and market power in banking: Evidence from a world sample Keywords: Bank market power, Competition, Foreign banks, World sample Abstract: Ownership and competition in the banking sector are policy concerns around the world that are rarely comprehensively examined. For 131 countries and 13 years we match bank ownership with over 50,000 bank-year estimates of individual bank market power. At the individual bank level, ownership does not explain market power. At the country level, on the other hand, foreign bank ownership has a positive and significant impact on bank market power because foreign banks enter through mergers or acquisitions and not through greenfield investments. We also find that the positive effect of foreign bank presence on market power is considerably weaker in countries with well-capitalized banks. Length: 59 pages Creation-Date: 2014-02 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/03-14.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:03-2014 Template-type: ReDIF-Paper 1.0 Author-Name: Sofia Andreou Author-Name: Christos Koutsampelas Author-Name: Panos Pashardes Title: Estimating the Value and Distributional Effects of Free State Schooling Keywords: Education, Inequality, Poverty, Consumer demand Abstract: The effects of free of charge state education on income distribution are often studied by allocating government education outlays to households, assuming that these outlays equal the benefit which households attach to state schooling. This paper proposes a demand analysis approach to estimating the ‘true’ value of state education as perceived by consumers, and uses the results to assess the inefficiency of public provision. Empirical analysis based on data from Cyprus suggests that state schooling costs twice the amount households are willing to pay for. The implications of this finding for the equality and anti-poverty effects of state education are illustrated. Length: 7 pages Creation-Date: 2014-04 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/04-14.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:04-2014 Template-type: ReDIF-Paper 1.0 Author-Name: Dimitrios Xefteris Author-Name: Nicholas Ziros Title: A Spatial Model of Perfect Competition Keywords: Spatial model; Market locations; Strategic market games; Perfect competition. Abstract: This paper employs the theory of strategic market games (enhanced with a spatial dimension) in order to study the issue of market location in a perfectly competitive setup. In this framework, each player decides strategically where and what quantities she wishes to trade and, hence, the market structure (or simply the distribution of the active trading posts and prices) emerges endogenously. We conduct a comprehensive analysis for a class of simple games with a continuum of traders and we show that (i) not all market structures can support a Nash equilibrium, (ii) at least some multi-market structures can support a Nash equilibrium and (iii) prices in a multi-market Nash equilibrium, generically, diverge. Length: 31 pages Creation-Date: 2014-05 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/05-14.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:05-2014 Template-type: ReDIF-Paper 1.0 Author-Name: Christos Bilanakos Author-Name: Colin P. Green Author-Name: John S. Heywood Author-Name: Nikolaos Theodoropoulos Title: Do Dominant Firms Provide More Training? Keywords: Specific training, Cross-training, Product market competition, Panel data Abstract: This paper examines the relationship between firm-specific training and product market competition. A canonical Cournot competition model shows that the profitability of training investments increases as the number of competitors decreases. Empirical evidence from British establishments in 1998, 2004 and 2011 confirms that a critical form of specific training, cross-training, is far more extensive in less competitive product markets. This persists within all three separate cross-sections and in two separate panel estimates and suggests that a dominant product market position increases the incentives to invest in specific human capital. Length: 42 pages Creation-Date: 2014-05 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/06-14.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:06-2014 Template-type: ReDIF-Paper 1.0 Author-Name: Andros Kourtellos Author-Name: Christa Marr Author-Name: Chih Ming Tan Title: Robust Determinants of Intergenerational Mobility in the Land of Opportunity Keywords: intergenerational mobility, income persistence, BMA, model uncertainty Abstract: This paper revisits the influential work by Chetty, Hendren, Kline, and Saez (2014) who attempt to explain the variation in intergenerational mobility across commuter zones in the US (i.e., spatial mobility) using nine classes of variables. We employ Bayesian model averaging methods that allow for model uncertainty to identify robust predictors of spatial mobility. In doing so we pay special attention to the specification of model and parameter priors. We also investigate the heterogeneous effects of these predictors on spatial mobility across commuter zones in different average income quintiles. Our findings suggest a more nuance and complex characterization of the spatial mobility process than that proposed by Chetty, Hendren, Kline, and Saez. Length: 58 pages Creation-Date: 2014-10 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/07-14.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:07-2014 Template-type: ReDIF-Paper 1.0 Author-Name: Christos Bilanakos Author-Name: John S. Heywood Author-Name: John Sessions Author-Name: Nikolaos Theodoropoulos Title: Worker Training and Competing on Product Quality Keywords: Training, Product Quality, Demand Elasticity, Monopolistic Competition Abstract: We examine the relationship between firm-sponsored training and the sensitivity of product demand to product quality. A quality-adjusted model of monopolistic competition shows the conditions under which the intensity of training increases as product demand becomes more sensitive to quality. Empirical estimates from two cross sections and a panel of British establishments as well as from two matched employee cross sections confirm that training is more intensive when product demand is more sensitive to quality. Length: 32 pages Creation-Date: 2014-10 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/08-14.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:08-2014