Review of Economic Analysis <p><em>Review of Economic Analysis</em> is an open access, peer reviewed economic journal. We are committed to open exchange of ideas and information. Unlike many open-access journals, we charge neither submission nor publication fees. We aim to become a leading general interest journal. We accept submissions from all fields of economics and offer rigorous refereeing process and wide dissemination.</p> <p>Papers published in open access journals are read and cited more and have greater impact than those published in fee-based journals.</p> <p>We are the official journal of the International Centre for Economic Analysis (</p> Research Centre for Economic Analysis en-US Review of Economic Analysis 1973-3909 <p>The Review of Economic Analysis is committed to the open exchange of ideas and information.&nbsp;<br><br>Unlike traditional print journals which require the author to relinquish copyright to the publisher, The Review of Economic Analysis requires that authors release their work under Creative Commons Attribution Non-Commercial license. This license allows anyone to copy, distribute and transmit the work provided the use is non-commercial and appropriate attribution is given.&nbsp;<br><br><a href="">A 'human-readable' summary of the licence is&nbsp;here</a> and t<a href="">he full legal text is&nbsp;here</a>.</p> The Welfare State and Economic Growth – Econometric Evidence from Germany <p class="7Abstract"><span lang="EN-US">This paper attempts to analyze the growth effects of social security expenditures in Germany from a time series perspective. Therefore, a regression model based on standard determinants of growth is specified and estimated as a vector error correction model. Results show that there is a bidirectional relationship between growth and social security expenditures. In the short run, social security expenditures and growth rates are inversely related. Lower or even negative growth rates cause higher expenditures of the welfare state. In the long run, there is also an inverse relationship, but the direction of causality changes. Higher social security spending triggers lower growth rates. Robustness tests confirm the stability of the results.</span></p> Richard Reichel Copyright (c) 2022 Richard Reichel 2022-10-25 2022-10-25 14 3 343 360 The Impact of Enterprise Zones on the Incubation and Evolution of Technology and Manufacturing Businesses in New York State <p>The START-UP NY program is a creation-based entrepreneurial policy that sets up enterprise zones in several New York counties. The purpose of this study is to test the hypothesis that the program does not affect entrepreneurial activity in the industrial sectors it targets: manufacturing and high technology. Unlike many of the studies in the literature, which use indirect measures of entrepreneurial activity (e.g., unemployment rates, poverty rates, local economic growth, etc.), this analysis employs a direct measure—the number of firms that are targeted by the policy. Complicating the analysis is the state’s subsequent tax reforms, which were implemented to promote creation- and discovery-based entrepreneurship in all parts of the state. To test our hypothesis, we control for this reform (and other factors) in a multiple equation difference-in-differences model. The results show that START-UP NY increases the number of ‘micro’ and ‘small’ firms in the targeted sectors by between 16.7% and 19.7% in the five years after the program was enacted.</p> Hal Wesley Snarr Dan Friesner Copyright (c) 2021 Hal Wesley Snarr, Dan Friesner 2022-10-25 2022-10-25 14 3 361 379 10.15353/rea.v13i3.3510 Role of Social Media in Socioeconomic Development: Case of Facebook <p>To study the role of Information and Communication Technology (ICT) on countries’ socioeconomic development, the paper investigates the case of Facebook penetration on improving their standing as measured via GNI per capita PPP (Gross National Income per capita based on purchasing power parity). We use four macro factors categories (political, economic, demographic, and technological) in addition to Facebook penetration per capita in order to measure the potential influence of various factors on the socioeconomic level of countries. While the analyses of ICT effect on development has been the focus of many papers in the past, the specific analysis of social media is scarce. Compared to previous studies investigating social media role, we use a large dataset covering all classes of countries and examine holistically many types of determinants using different models. In addition, we distinguish our paper using the economic classification of countries according to the World Bank. Our study indicates that Facebook penetration has a significant positive role on the socioeconomic level of countries, but such role varies depending on the countries’ classification level. Besides, there is a decreasing marginal effect showing the importance for policy makers to assess the complex dynamic behind the characteristic of each country.</p> Nawel Amrouche Moez Hababou Copyright (c) 2021 Nawel Amrouche, Moez Hababou 2022-10-25 2022-10-25 14 3 381 417 10.15353/rea.v13i3.4054 The Nexus between Causal Macroeconomic Relations in Japan <p>Japan achieved phenomenal economic growth after WWII. Starting in the early 1990s, however, the Japanese economy began experiencing a prolonged deflation-stagnation period widely known as the “Lost Decades”. Based on data from the World Bank and the Federal Reserve Bank of Saint Louis, this paper employs an autoregressive distributed lags (ARDL) model to find evidence of a long run relation among the real GDP, real imports, the real exchange rate, and the public debt-to-GDP ratio for Japan. Once cointegration is established with the Bounds Test, Granger Causality tests are performed by employing an estimated Vector Autoregressive (VAR) model with the same variables. The empirical results support Granger causality in all directions. In particular, we found real imports and public debt-to-GDP ratio to directly cause real GDP. Interestingly, the real exchange rate causes real GDP indirectly via imports. The public debt had a negative effect on GDP but did not wreak havoc on the Japanese economy. The study also examines whether former Prime Minister Shinzō Abe’s unprecedented macroeconomic policies and structural reforms launched in 2013, known as Abenomics, are pulling Japan out of its economic doldrums.</p> George K Zestos Yixiao Jiang Ryan Patnode Copyright (c) 2021 George K Zestos, Yixiao Jiang, Ryan Patnode 2022-10-25 2022-10-25 14 3 419 440 10.15353/rea.v14i1.4017 Foreign Direct Investment and the Robustness of Host-Country Commitment <p>This paper presents a model of a forward-looking government wooing foreign direct investment by enacting policies that reflect its commitment to the foreign enterprise. The ease with which the government is able to spend or carry out economic reform to complement the foreign venture evolves over time and influences the likelihood of its sustained commitment. The domestic and external strength of the government, the stability and not necessarily the level of returns from the project, venture-specificity of government spending or reform, and public and elite attitudes toward foreign commercial entry determine how invested the government remains in the long term success of the enterprise. More committed governments tend to be stronger and prefer robust investor-regime relationships. Reform that is not designed too narrowly to favor the investor is also less likely to be reversed later. Like pro-FDI public sentiment, a noisy policy environment induces deeper government commitment.</p> Shaikh Shahnawaz Copyright (c) 2021 Shaikh Shahnawaz 2022-10-25 2022-10-25 14 3 441 469 10.15353/rea.v14i1.3582 COVID-19 effects on the Canadian term structure of interest rates <div class="page" title="Page 1"> <div class="layoutArea"> <div class="column"> <p><span style="font-size: 10.000000pt; font-family: 'CMR10';">In Canada, COVID-19 pandemic triggered exceptional monetary policy interventions by the central bank, which in March 2020 made multiple unscheduled cuts to its target rate. In this paper we assess the extent to which Bank of Canada interventions affected the determinants of the yield curve. In particular, we apply Functional Principal Component Analysis to the term structure of interest rates. We find that, during the pandemic, the long-run dependence of level and slope components of the yield curve is unchanged with respect to previous months, although the shape of the mean yield curve completely changed after target rate cuts. Bank of Canada was effective in lowering the whole yield curve and correcting the inverted hump of previous months, but it was not able to reduce the exposure to already existing long-run risks. </span></p> </div> </div> </div> Federico Severino Marzia A. Cremona Éric Dadié Copyright (c) 2022 Federico Severino, Marzia A. Cremona, Éric Dadié 2022-10-25 2022-10-25 14 3 The (non) impact of education on marital dissolution <p>Despite the relevant role attributed to education on marital outcomes, literature does not show a generalized consensus regarding a positive or negative effect from education on marital decisions. In this paper the impact of education on marriage dissolution is analysed exploiting a change in the length of compulsory education in Mexico in 1993 as an instrument for education. The federal government increased compulsory education from completion of primary school, sixth grade, to completion of secondary school, ninth grade, at a national level. In the first part of the analysis, the probit models reveal that education is significant and negatively related to the probability of marital breakdown. An additional year of education is associated with a decrease between 0.6 and 0.9 percentage points in the probability of marital disruption for the 2002-2012 period. However, the results using the instrumental variables methodology indicate that an additional year of schooling has no effect on the probability of marriage dissolution. This finding demonstrates that the relationship between education and divorce is not causal and suggests that although higher levels of education are an undeniable trait observed in non-broken marriages, it is not education by itself one of the mechanisms leading to better marriage outcomes.</p> Edith Aguirre Copyright (c) 2021 Edith Aguirre 2022-09-28 2022-09-28 14 3 10.15353/rea.v14i1.1803 Demand for Money in Greece After Euro Area and Policy Uncertainties <p>This study examines the asymmetric effects of uncertainties in monetary policy on the demand for money in Greece. In doing so, it introduces and uses the monetary policy uncertainty (MPU) index, which can probably be a very appropriate and robust explanatory variable in <em>demand-for-money</em> <em>models</em>. Therefore, this study with this index differs from previous empirical studies that use conventional uncertainty-based independent variables. Empirical findings of both models indicate that changes in the MPU index have significant effects on Greek money demand. Additionally, compendious inferences of the nonlinear model for the Greek people’s financial preferences are as follow as: (<em>i</em>): <em>Greek people invest more in alternative financial instruments and/or spend their money rather than hold (demand) it when the </em><em>MPU</em> <em>index rises,</em> (<em>ii</em>): <em>Greek people’s money demand in both increases and decreases in </em><em>the</em> <em>MPU</em> <em>index is predominantly determined by longer-term bond rate changes. </em></p> Serdar Ongan Ismet Gocer Copyright (c) 2022 Serdar Ongan, Ismet Gocer 2022-10-25 2022-10-25 14 3 10.15353/rea.v14i1.4052 The Effect of Different Fields of Tertiary Education on Economic Growth <p>The purpose of this paper is to analyze empirically the contribution of tertiary level education by fields on economic growth for 29 developed and 25 developing countries over the period 1998-2012. Using the two-step System Generalized Method of Moments (GMM), we find that in the developed countries graduates from science faculties make the most contribution to economic growth, but in developing countries graduates from education, humanities and social sciences faculties contributed the most to economic growth. In addition, we focus on the effect of distribution of tertiary level graduates among different fields on economic growth and our results imply that, having human capital from different fields in both developed and developing countries positively affects economic growth.</p> Müzeyyen Merve Serifoglu Pelin Oge Guney Copyright (c) 2022 Müzeyyen Merve Serifoglu, Pelin Oge Guney 2022-10-25 2022-10-25 14 3 Energy Input Interaction in US Output <p>This paper estimates production functions for annual US output from 1949 to 2013 adding energy Btu input to fixed capital assets and the labor force.&nbsp; Interactions between inputs are parsimoniously introduced in the error correction estimates.&nbsp; Fixed capital assets successfully imbed technology.&nbsp; Energy and capital are weak substitutes or complements due to their positive interaction.&nbsp; Energy is substantially underpaid relative to its increasing productivity while labor is increasingly overpaid relative to its declining productivity.&nbsp; Factor price elasticities involving labor and the wage are noticeably strong.&nbsp; The nearly elastic own wage effect explains the challenges facing labor.</p> Cassandra Copeland Henry Thompson Copyright (c) 2022 Cassandra Copeland, Henry Thompson 2022-10-25 2022-10-25 14 3 The Canadian-Mexico Commodity Trade and Exchange Rate Uncertainty: An Asymmetric Analysis <p>A previous study assessed asymmetric effects of the real peso-dollar volatility on trade flows between Mexico and the U.S., two members of the former NAFTA. We now expand that analysis by considering the trade flows between Mexico and Canada. Estimating traditional linear models did not yield much significant effects of the real peso-Canadian dollar volatility on trade flows between the two countries. However, estimating a nonlinear model revealed that four out of 16 Canadian exporting industries to Mexico and 10 out of 21 Mexican industries to Canada were affected asymmetrically. While the export shares of four Canadian industries was 28.2%, that of 10 Mexican industries, with a non-linear model was 80%. Additionally, while increased volatility boosted exports of four US industries, it had no significant effects on the exports of 10 Mexican industries. In contrast, decreased volatility had no significant effects on the US exporting industries, but it had favorable impact on Mexican exporting industries.</p> Mohsen Bahmani-Oskooee Hanafiah Harvey Copyright (c) 2022 Mohsen Bahmani-Oskooee, Professor 2022-10-25 2022-10-25 14 3