Free lunch or vital support? Export promotion in The Netherlands

Purpose The purpose of this paper is to add to the debate concerning the merits of export promotion efforts by governments by investigating the effect of export promotion program (EPP) participation on the export performance of Dutch small and medium-sized enterprises (SMEs). Design/methodology/approach The authors confront participation data of an EPP targeting SMEs with rich firm-level data and use propensity score matching techniques combined with regression analysis. Findings The authors show that exports generated by participants do generally rise in the years after program entry, however, export growth does not outpace that of comparable, but unsupported firms. Nonetheless, there is some evidence suggesting that export shares in sales rise faster among program entrants, particularly in the first and second years after participation. Furthermore, the authors present evidence suggesting that the probability of becoming a permanent exporter is higher for participants relative to beginning exporters that did not receive support from the program. Originality/value The analysis contributes to the still relatively small literature dealing with the impact of government export promotion instruments on export performance using firm-level micro-data. The subject of analysis are Dutch small businesses. SMEs, particularly operating in advanced economies, are a group that is not frequently considered separately in this respect.

Temporary layoffs, short-time work and COVID-19: the case of a dual labour market

Purpose This paper aims to study the type of short-time work (STW) schemes implemented in Spain to preserve jobs and workers’ incomes during the COVID-19 crisis and the corresponding labour market outcomes. Design/methodology/approach A dynamic macroeconomic model of job creation and destruction of the search and matching type in a dual labour market. Findings The model shows that the availability of STW schemes does not necessarily prevent a large increase in unemployment and job destruction. The quantitative effects depend on the degree of subsidization of payroll taxes and on the design of the policy. A scenario with a moderate degree of subsidization and where the subsidy is independent of the reduction in hours worked is the least harmful for both welfare and fiscal deficit. The cost of such a strategy is a higher unemployment rate. Concerning heterogeneous effects, the unemployed are the ones who experience the strongest distributional changes. Originality/value The effectiveness of STW schemes in dual labour markets using a search and matching model in the context of the COVID-19 crisis has not been analysed elsewhere. The literature has emphasized the importance of dynamics, labour market institutions and workers’ heterogeneity to understand workforce adjustment decisions in the face of temporary shocks to de- mand especially when firms’ human capital is relevant. These elements are present in the model. In addition, this paper computes welfare and distributional effects and the cost of these policies.

The role of foreign direct investment in growth: Spain, 1964–2013

Purpose Foreign direct investment (FDI) has played a major role in the deep process of transformation experienced by the Spanish economy since the first 1960s, which even intensified, following the integration with the now European Union in 1986. This paper aims to analyse the long-run effects of FDI in Spain by estimating a production function including the foreign capital stock over the period 1964–2013. Design/methodology/approach The author estimates a production function including the foreign capital stock over the period 1964–2013, from which the contributions of the different explanatory variables on the accumulated growth of gross domestic product (GDP) are computed. Next, the author tested for the possible presence of structural change in the previously estimated equation, by means of the tests of Bai and Perron, re-estimating the production function for the different subperiods delimited by the structural breaks found. Finally, the analysis is completed by performing Granger-causality tests on the variables GDP and foreign capital stock in a multivariate setting. Findings The author finds a significant contribution of foreign capital on the accumulated growth of GDP over the period of analysis, which seems however to have been greater during the first years of the period analysed. Foreign capital can play a positive role in the economic growth of an economy, provided that FDI inflows are stable and permanent enough, but this effect on growth seems to be more important in the first stages of a growth process. Originality/value The author presents a comprehensive analysis of the relationship between FDI and growth for a particular country, which seems to be a more promising empirical approach rather than the approach based on panel regressions, where sometimes some dissimilar experiences are added together. The Spanish economy can provide a relevant case study, given the substantial process of growth it enjoyed starting from the early 1960s, characterized by the arrival of vast inflows of foreign capital.

Purchasing power parity in GIIPS countries: evidence from unit root tests with breaks and non-linearity

Purpose This paper aims to test purchasing power parity (PPP) hypothesis for Greece, Italy, Ireland, Portugal and Spain, which are known as the GIIPS countries. Design/methodology/approach The authors conduct a comprehensive analysis by using unit root approaches without and with structural breaks and non-linearity. Findings The PPP is valid for the GIIPS countries. Considering structural breaks in non-linear framework plays a crucial role. Originality/value There is no empirical study testing PPP hypothesis by focusing on the GIIPS countries. This study further takes into account for structural breaks and non-linearity in the real exchange rates of these countries.

Government public infrastructure investment and economic performance in Spain (1980-2016)

Purpose The authors estimate the multiplier effect of government public infrastructure investment in Spain. This paper aims to use annual data of the 17 Spanish autonomous communities for the 1980–2016 period. Design/methodology/approach The authors use dynamic acyclic graphs and the heterogeneous panel structural vector autoregressive (P-SVAR) method of Pedroni (2013). This method is robust to cross-sectional heterogeneity and dependence, which are present in the data. Findings The findings suggest that an increase in the level of government public infrastructure investment generates a positive and persistent effect on the level of output. Five years after the fiscal expansion, the multiplier effects of government public infrastructure investment reach values above one. This confirms that government public infrastructure investment expansions have Keynesian effects. The authors also find that the multiplier effects differ between autonomous communities with above-average and below-average GDP per capita. Originality/value To the best of the authors’ knowledge, no research uses dynamic acyclic graphs and heterogeneous P-SVAR techniques to estimate fiscal multipliers of government public investment in Spain by using subnational data.

Job creation and investment in imperfect financial and labor markets

Purpose This paper aims to weigh the restrictions to job creation imposed by labor market imperfections with respect to financial market imperfections. The authors want to see which restriction is more severe, and thus assess which is more powerful in creating permanent employment if it were removed. Design/methodology/approach A structural estimation is performed. The policy rules of the dynamic programming model are integrated into a simulated maximum likelihood procedure by which the model parameters are recovered. Data come from the CBBE (Balance Sheet data from the Bank of Spain). Identification of key parameters comes mainly from the observation of debt variation and sluggish adjustment to permanent labor. Findings Long-run permanent employment increases up to 69% when financial constraints are removed, whereas permanent employment only increases up to 54% when employment protection or firing costs are eliminated. The main finding of this paper is that the long-run expansion of permanent employment is larger when financial imperfections are removed than when firing costs are removed, even when there are important wage increases that moderate these employment expansions. Social implications The removal of firing costs has been suggested by several economists as a result of the analysis of labor market imperfections. These policies, however, face the strong opposition of labor unions. This paper shows that the goals of permanent job creation can be accomplished without removing employment protection but by means of enhancing financial access to firms. Originality/value The connection between financial constraints and employment has been studied in recent years, motivated by the Great Recession. However, there is no assessment of how financial and labor market imperfections compare with each other to restrict permanent job creation. This comparison is crucial for policy analysis. This study is an attempt to fill out this gap in the economic literature. No previous research has attempted to perform this very important comparison.

TFP determinants in the manufacturing sector: the case of Ecuadorian firms

Purpose Using a large firm-level data set, this paper examines total factor productivity (TFP) and its determinants in the Ecuadorian manufacturing sector in the period 2007–2018. Design/methodology/approach I analyze the role played by traditional TPF determinants, including internal firm characteristics, international trade activities, financial constraints and competition intensity. I contribute to the literature by presenting quantile regression results. Moreover, I analyze industry patterns, distinguishing between industries according to their technological intensity (following the organisation for economic co-operation and development classification). Findings My results confirm that firm age is positively related to TFP level but negatively related to TFP growth. I also find that being an exporter and an importer at the same time is associated with higher TFP levels and that this effect is higher than when being only an exporter or an importer. Additionally, l find that credit is positively related to TFP levels. Finally, I find that more competition is positively related to productivity in lower quantiles of output. Practical implications The results are the source of tools to propose policy recommendations, which are stated in the present document. Originality/value This paper aims to reopen the debate of firm productivity determinants in a developing country such as Ecuador. The authors use a set of covariates less analyzed in this issue.

Housing bubbles and land planning corruption: evidence from Spain’s largest municipalities

Purpose The purpose of this paper is to quantify to what extent the housing bubble in the early-to-mid 2000s in Spain exacerbated land planning corruption among Spain’s largest municipalities. Design/methodology/approach The authors exploit plausibly exogenous variation in housing prices induced by changes in local mortgage market conditions; namely, the rapid expansion of savings banks (Cajas de Ahorros). Accounting for electoral competition in the 2003–2007 and 2007–2009 electoral cycles among Spanish municipalities larger than 25,000 inhabitants, the authors estimate a positive relationship between housing prices and land planning corruption in municipalities with variation in savings bank establishments using instrumental variables techniques. Findings A 1% increase in housing prices leads to a 3.9% points increase in the probability of land planning corruption. Moreover, absolute majority governments (not needing other parties’ support) are more susceptible to the incidence of corruption than non-majority ones. Two policy implications to address corruption emerge: enhance electoral competition and increase scrutiny over land planning decisions in sparsely populated. Originality/value First empirical evidence of a formal link between the 2000s housing bubble in Spain and land planning corruption.

Tax revenue instability and tax revenue in developed and developing countries

Purpose This paper aims to explore the effect of non-resource tax revenue instability on non-resource tax revenue in developed and developing countries. Design/methodology/approach The analysis has used an unbalanced panel data set of 146 countries over the period 1981–2016, as well as the two-step system generalized methods of moment approach. Findings The empirical analysis has suggested that non-resource tax revenue instability influences negatively non-resource tax revenue share of gross domestic product. The magnitude of this negative effect is higher in less developed countries than in relatively advanced countries. This negative effect materializes through public expenditure instability: non-resource tax revenue instability exerts a higher effect on non-resource tax revenue share as the degree of public expenditure instability increases. Finally, non-resource tax revenue instability exerts a higher negative effect on non-resource tax revenue share as economic growth volatility rises, inflation volatility increases and terms of trade instability increases. Research limitations/implications The main policy implication of this analysis is that policies that help ensure the stability of non-resource tax revenue also contribute to improving countries’ non-resource tax revenue share. For example, governments’ measures that help cope with or prevent the severe adverse effects of shocks on economies (shocks that could translate into higher tax revenue instability) would ultimately help enhance countries’ tax revenue performance. Practical implications The severity of the current COVID-19 pandemic shock (which is a supply and demand shock) and the macroeconomic uncertainty that it has generated – inter alia, in terms of economic growth instability, terms of trade instability, inflation volatility and public expenditure instability – are likely to result in severe tax revenue losses. Governments in both developed and developing countries would surely learn from the management of this crisis so as to prepare for possible future economic, financial and health crises with a view to dampening their adverse macroeconomic effects, including here their negative tax revenue effects. Originality/value To the best of the author’s knowledge, this topic is being addressed in the empirical literature for the first time.

Scale heterogeneity in hotel guests’ satisfaction relative to room rates

Purpose This paper aims to examine hotel guests’ satisfaction relative to room rates paying attention to the heterogeneity in the scale of satisfaction scores. Design/methodology/approach This paper studies guests’ post-purchase hotel evaluation using survey data from a sample of 14,879 tourists visiting a Northern Spanish region. This study estimates a Heteroskedastic Ordered Probit model in which both “cognitive” and “emotional” components of satisfaction are modelled. The model allows us to control for heterogeneity in the scale of the latent satisfaction scores. Findings This paper finds that satisfaction relative to rates (value for money) decreases with expenditure per person and day. Interestingly, this negative relationship mainly holds for those who do not prioritize prices at the time of choosing the hotel. Positive first impressions are positively associated with higher satisfaction. In addition, this study finds that the emotional component of satisfaction increases with hotel quality and hiring a full board, being also greater among women and elderly people. Originality/value Instead of using an overall measure of satisfaction, this paper uses one that gathers how the tourist assesses satisfaction in relation to cost (value for money).