Applied Economics and Public Policy

by Iain Begg , Brian Henry

• ISBN13: 9780521624145
• ISBN10: 0521624142
• Format: Hardcover
• Copyright: 1998-03-28
• Publisher: Cambridge University Press

Summary

Applied economics is both an art and a science. It requires a sound knowledge of economic theory, statistical techniques and data sources, together with an appreciation that behavioural changes can alter apparently established economic relationships. In this book leading economists illustrate the diversity of the subject, and present a series of studies that demonstrate a range of techniques and their applications to economic policy. It contains chapters which explore approaches to macroeconomic modelling analyses of corporate performance, new estimates of the evolution of incomes in the UK since the eighteenth century and assessments of the role of applied economics in guiding macroeconomic policy. All the chapters were specially commissioned to mark the fiftieth anniversary of the Department of Applied Economics at the University of Cambridge, and the contributions to the book are a fitting tribute to the work instigated by Sir Richard Stone and carried forward by his successors.

Table of Contents

List of figures	xi	(2)
List of tables	xiii	(3)
List of contributors	xvi	(3)
Foreword	xix
1 Introduction	1	(12)
Iain Begg
Brian Henry
1.1 The DAE contribution to applied economics	2	(2)
1.2 Applied economics in practice	4	(2)
1.3 The use of models for policy purposes	6	(4)
1.4 The way forward: a research agenda	10	(3)
Part One MODELLING AND FORECASTING METHODS	13	(92)
2 Large-scale energy-environment-economy modelling of the European Union	15	(26)
Terry Barker
2.1 Introduction	15	(1)
2.2 Approaches to large-scale E3 modelling	16	(8)
2.3 The roles of theory and data	24	(5)
2.4 Equilibrium and the model solution	29	(3)
2.5 Aggregation and model size	32	(4)
2.6 Model complexity, integration and linkage	36	(2)
2.7 Conclusions	38	(3)
3 Measurement errors and data estimation: the quantification of survey data	41	(18)
Alastair W. F. Cunningham
Richard J. Smith
Martin R. Weale
3.1 Introduction	41	(1)
3.2 The survey structure	42	(1)
3.3 An econometric model of survey information	43	(2)
3.4 Estimation	45	(7)
3.5 An application to UK manufacturing output: 1977Q1-1995Q4	52	(5)
3.6 Evaluation and future research	57	(2)
4 Social accounting matrices and applied general equilibrium models	59	(29)
Timothy J. Kehoe
4.1 Introduction	59	(3)
4.2 An aggregated Spanish SAM	62	(2)
4.3 A simple applied GE model	64	(7)
4.4 Calibration and simulation	71	(4)
4.5 The applied GE model of Spain	75	(3)
4.6 Comparisons with actual data, 1985-86	78	(5)
4.7 Concluding remarks	83	(5)
5 The development of econometric methods at the DAE	88	(17)
Ron Smith
5.1 Introduction	88	(2)
5.2 Origin and objectives	90	(1)
5.3 Activities	91	(1)
5.4 Time series	92	(3)
5.5 Cross-section and distributions	95	(1)
5.6 Links to statistics	96	(1)
5.7 Computing	97	(2)
5.8 The move away from econometric methods	99	(2)
5.9 The development of other methods	101	(1)
5.10 Conclusion	102	(3)
Part Two COMBINING DATA AND ANALYTIC TECHNIQUES	105	(118)
6 Takeovers, institutional investment and the persistence of profits	107	(38)
Andy Cosh
Alan Hughes
Kevin Lee
Ajit Singh
6.1 Introduction	107	(2)
6.2 Post-merger performance, pre-merger characteristics of institutional investors and regression to the norm: conceptual issues and previous results	109	(5)
6.3 Modelling the effects of merger on company profitability	114	(7)
6.4 Merger sample and variable definitions	121	(1)
6.5 Takeovers in the sample: an overview	122	(11)
6.6 Regression results	133	(6)
6.7 Conclusion	139	(6)
7 Semi-parametric estimation of the company size-growth relation	145	(36)
Andy Cosh
Alan Hughes
Hyehoon Lee
Stephen Pudney
7.1 Introduction	145	(1)
7.2 Alternative approaches	146	(4)
7.3 Estimation techniques	150	(4)
7.4 Data	154	(6)
7.5 Parametric estimation results	160	(3)
7.6 Semi-parametric estimation results	163	(10)
7.7 The implied distribution of firm growth	173	(1)
7.8 Conclusions	174	(4)
Appendix 7A: Definition of industries	178	(3)
8 Wage-earnings in Great Britain during the Industrial Revolution	181	(28)
Charles H. Feinstein
8.1 Introduction	181	(1)
8.2 Deane and Cole's estimates and Crafts's revisions	182	(2)
8.3 New estimates of nominal full-employment earnings	184	(10)
8.4 The new series and comparison with other estimates	194	(6)
8.5 Real wages and per capita GDP, Great Britain, 1780-1830	200	(2)
Appendix 8A: Estimates of full-employment weekly earnings, Great Britain, 1778-1881	202	(7)
9 Company failure and hysteresis	209	(14)
Andrew Goudie
Geoff Meeks
9.1 Introduction	209	(1)
9.2 The macro-micro model of the effect of alternative macroeconomic conditions upon the financial statements of individual companies	210	(2)
9.3 Modelling company failure in alternative states of the world	212	(2)
9.4 The contribution of exchange rate changes to particular failures of UK companies	214	(5)
9.5 Summary and conclusion	219	(1)
Appendix 9A: The sample of larger listed failing companies	220	(3)
Part Three USING MODELS TO GUIDE POLICY	223	(41)
10 On the equilibrium properties of macroeconomic models	225	(22)
Andrew Britton
Peter Westaway
10.1 Introduction	225	(1)
10.2 Economic theory and methodology	226	(3)
10.3 Economics and history	229	(1)
10.4 The equilibrium structure of a Walrasian macroeconomic model	230	(4)
10.5 Imperfect competition	234	(2)
10.6 Nominal inertia and the determination of prices	236	(1)
10.7 The National Institute model	237	(2)
10.8 Short-run and long-run equilibrium in the Institute model	239	(6)
10.9 Conclusions	245	(2)
11 Empirical analysis as an underpinning to policy	247	(11)
John Llewellyn
11.1 Introduction	247	(1)
11.2 Theory or applied?	247	(2)
11.3 Whole-economy modelling	249	(1)
11.4 Gaining self-confidence	249	(1)
11.5 Multi-country modelling	250	(2)
11.6 Two principal roles	252	(1)
11.7 The third oil shock	253	(1)
11.8 But be careful	254	(1)
11.9 So empirical models are useful	255	(1)
11.10 But the issues move on	255	(1)
11.11 Final conclusion	256	(2)
12 Using figures to guide macroeconomic policy	258	(6)
Wynne Godley
12.1 Context	258	(1)
12.2 Perspective	258	(1)
12.3 Brass tacks	258	(3)
12.4 Comment	261	(1)
12.5 Some negative views	261	(1)
12.6 Evaluation	262	(2)
Bibliography	264	(25)
Index	289