Camilla Mastromarco

Regional business cycles in Italy

There is clear evidence for differences in the structure of the Italian regional business cycle in the period 1951-2004: the relationship with the national business cycle is closer in the North than in the South. The interaction between regional cycles shows considerable variation over time. There is a change in the timing of the turning points and the strength of the relationship. In the 1950s and the early 1960s, the cycle in the North leads the cycle in the South. Comovement is strongest in the period 1965-1975. After 1975, the cycles start to drift out of phase, again with the North leading the South.

Rule changes and competitive balance in Formula One motor racing

This article provides an economic explanation of the frequent rule changes in the Formula One (F1) motor racing series. In a two-stage model, the FIA (the organizer of the F1) first decides whether to change the rules or not, and then the racing teams compete in a contest. It turns out that a rule change reduces the teams’ performances, but also improves competitive balance between the teams. The rule change is implemented, if the FIAs revenue gain from the latter effect overcompensates the FIAs revenue loss from the former effect. We provide empirical evidence from F1 seasons in the period 1950 to 2005, which supports the main implications of the model.

Globalisation and technological convergence in the EU

We employ a two-step approach in investigating the dynamic transmission chan- nels under which globalization factors foster technical efficiency by combining a dynamic efficiency analysis in the stochastic frontier framework, and a time series approach based on VAR and spectral analysis. Using the dataset of the 18 EU countries over 1970-2004, we find that both import and FDI are significant factors in spreading efficiency externalities and thus accelerating technology catch-up in the EU. In particular, the impacts of the import are more prominent in the short-run while those of FDI play a more important role over the longer-run. Furthermore, the impacts of the import are pro-cyclical only in the short-run whereas those of FDI are pro-cyclical mostly over the medium- to the long-run. This evidence is broadly consistent with the sample observation that the recent slowdown of the EU productivity has been closely related to the corresponding FDI decline espe- cially after 2000. Hence, any protection-oriented policy will be likely to be more detrimental for the EU.

Foreign Capital And Efficiency In Developing Countries

This paper uses stochastic frontier methodology to analyse foreign direct investment, imported capital goods and human capital as channels for increased efficiency in less-developed countries. Empirical investigation reveals that developing countries differ with respect to the efficiency with which they use frontier technology. Foreign direct investment and human capital play a significant and quantitatively important role in explaining these differences.

Poverty, Inequality and Growth in Albania

type=main xml:id=ecot12048-abs-0001> This article studies the distribution of well-being and, specifically, the degree of poverty and deprivation in Albania, in the years 2002 and 2005, using Living Standard Measurement Surveys (LSMS). The distribution analysis is performed by applying both one-dimensional and multidimensional approaches, in particular to better examine the link between economic growth, inequality and poverty in Albania. Furthermore, by estimating a non-monetary indicator, as proposed by Bossert et al. ( ), and a nonlinear principal component model together with a probit model, the paper focuses on the multidimensional measures of poverty to address the relationship between poverty and socio-economic factors. Our evidence shows that absolute poverty decreased from 2002 to 2005 while national relative poverty increased; economic growth reduced poverty in Albania over the observed period; and living in rural and mountain areas, being female, poorly educated and with a large family increased the probability of suffering from deprivation.

Cross‐Border Economic Activities, Human Capital and Efficiency: A Stochastic Frontier Analysis for OECD Countries

We study the growth effects of outward‐oriented economies by using stochastic frontier analysis to measure the efficiency externalities of three forms of economic cross‐border activities – international trade, foreign direct investment (FDI) and migration – for OECD countries. The study also examines whether the efficiency of these cross‐border activities is affected by the level of human capital in the host country. We find that international trade and FDI are important channels for improving efficiency, as is human capital accumulation, and that the positive effects of international trade, FDI, and migration depend crucially on the level of accumulated human capital. Our results show that the impact of human capital is important for increasing efficiency via international trade flows and FDI flows, while immigration into countries that are richer in human capital enhances their efficiency relatively more than immigration into countries with lower human capital. These results remain robust to alternate measures of human capital, controls on education levels among immigrants, and to a non‐parametric estimation of the model.

Is Globalization Driving Efficiency? A Threshold Stochastic Frontier Panel Data Modeling Approach

Recently, Mastromarco, Serlenga and Shin (2010) propose a two-step approach to examine dynamic transmission mechanism under which globalization factors fos- ter technology efficiency. In this paper, we extend the MSS model by combining panel threshold regression technique advanced by Hansen (1999). This threshold stochastic frontier panel data model enables us to analyze regime-specific stochas- tic frontiers and complex time-varying patterns of technical efficiencies in a robust manner. Using a dataset of 44 countries over 1970-2007, we find that income elas- ticities of labour and capital and time-varying common efficiencies are substantially different under superior and inferior frontiers. Capital and labour inputs are more productive under superior frontier. More importantly, common efficiencies have steadily increased under superior frontier, but technical efficiency has monotoni- cally decreased for low income countries, supporting the so-called club convergence hypothesis. Furthermore, the VAR-based impulse response analyses suggest that openness factors through FDI and trade help the countries improve production technology and efficiency position relative to the frontier only after the country has reached a certain level of development.

Exports, immigration and human capital in US states

ABSTRACT Using a Bayesian approach we estimate a stochastic frontier model to measure the productivity effects of state-level exports and immigration to each of the 50 US states. The results show that state productivity is affected positively by both state exports and immigrants arriving with embodied human capital. The efficiency model also reveals that the interaction of incoming immigrants with previously accumulated human capital in the host state improves state efficiency.

Multilateral Resistance and the Euro Effects on Trade Flows

Recently, an investigation of unobserved and time-varying multilateral resistance and omitted trade determinants has assumed a prominent role in order to precisely measure the Euro effects on trade. We implement two methodologies: the factor-based gravity model by Serlenga and Shin (The Euro Effect on Intra-EU Trade: Evidence from the Cross Sectionally Dependent Panel Gravity Models, Mimeo, University of York, 2013) and the spatial-based techniques by Behrens et al. (J Appl Econ 27:773–794, 2012), both of which allow trade flows and error terms to be cross-sectionally correlated. Applying these approaches to the dataset over 1960–2008 for 190 country-pairs of 14 EU and six non-EU OECD countries, we find that the Euro impact estimated by the factor-based model amounts to only 4–5 %, far less than the 20 % estimated by the spatial-based model. The cross-section dependency test results also confirm that the factor-based model is more appropriate in accommodating correlation between regressors, and unobserved individual and time effects. Overall we may conclude that the trade-creating effects of the Euro should be viewed in the proper historical and multilateral perspective rather than in terms of the formation of a monetary union as an isolated event.

Modelling in the Presence of Cross-sectional Error Dependence

Given the growing availability of big datasets which contain information on multiple dimensions and following the recent research trend on multidimensional modelling, we develop three-dimensional panel data models with threeway error components that allow for strong cross-sectional dependence (CSD) through unobserved heterogeneous global factors, and propose appropriate consistent estimation procedures. We also discuss the extent of CSD in 3D models and provide a diagnostic test for cross-sectional dependence. We provide the extensions to unbalanced panels and 4D models. The validity of the proposed approach is confirmed by the Monte Carlo simulation results. We also demonstrate the empirical usefulness through the application to the 3D panel gravity model of the intra-EU trade flows.