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ECONOMIC ISSUES

Volume 23 (2018)

Part 1, March

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Articles

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Part 2, September

Available from September 2018.

Part 1, March

Revisiting Firm-Specific Determinants of Dividend Policy: Evidence from Turkey (p.3)

by B Al-Najjar and E Kilincarslan

Abstract: This study investigates the effects of firm-specific factors on the dividend policies of Turkish publicly listed firms in the post-2003 period. The paper focuses on this period because, starting in fiscal year 2003, Turkish authorities and regulators implemented various major economic and structural reforms for market integration and made significant changes in the regulatory framework of cash dividend policy rules. We analyse a panel dataset of 264 firms traded on the Istanbul Stock Exchange (ISE) over the period 2003–2012. Our results reveal that profitability, debt, growth, firm age and firm size are the most important firm-specific characteristics determining cash dividend payment decisions of ISElisted firms. The findings, thus, suggest that more profitable, more mature and larger firms are more likely to pay dividends (and distribute higher dividends), whereas firms with higher growth (investment opportunities) and more debt are less likely to pay dividends (and distribute lower dividends) in the Turkish market. Overall, we detect that the firm-specific determinants that affect the corporate dividend policies of ISE firms do follow similar patterns of dividend policy factors in more developed economies after the implementation of major developments in the post-2003 period, and hence such reforms make Turkish firms comparable to their counterparts in developed markets in terms of dividend policy setting.

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Stochastic Frontier Analysis of Trade Efficiency for the New EU Member States: Implications of Brexit (p.35)

by M M Stack, E J Pentecost and G Ravishankar

Abstract: Examining the trade performance for the new European Union (EU) member states is an important issue in the context of the enlargement process – and in a new era of membership contraction with the likely exit of the United Kingdom from the EU. Typically, the degree of trade integration is assessed by comparing actual trade volumes with potential trade volumes projected from the gravity model parameters, estimated for a reference group of countries that best represent normal trade relations. This approach, however, does not compare trade levels against a maximum level of trade defined by a stochastic frontier. In this paper, a stochastic frontier specification of the gravity model is used to identify the efficiency of trade integration relative to maximum trade levels. The findings, based on a panel dataset of bilateral exports from 18 Western European countries to the 13 new member states over the 1995–2022 period, indicate a high degree of trade integration, close to two-thirds of frontier estimates. Using forecast data for 2017–2022, trade efficiency should remain broadly stable and even increase for the larger countries in the likely post-Brexit phase.

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Long-phased Marx-Goodwin profit- and wage-squeeze cycles in wage-led economies (p.55)

by M Charpe, P Flaschel and C R Proaño

Abstract: A widely debated issue in heterodox economics is the question of whether macroeconomic activity reacts positively or negatively to increases in the wage share, i.e. whether it is wage- or profit-led. In the present paper, from an empirical perspective, we show that this question is of secondary importance for Marx’s model of the distributive cycle. Our analysis starts with the traditional Goodwin (1967) model – which describes the dynamic interaction between the wage share and the employment rate – to which we add an effective demand function to cover the utilisation of the capital stock (thus a Keynes-component to the original supply-side dynamics). In this extended Goodwin model we show that the Goodwin story remains, qualitatively, akin to Marx’s supply side model, although the distributive cycle will now also depend on the state of effective demand. Here we find that the question of whether the capacity utilisation of firms is driven by a profit-led or a wage-led goods-market regime is irrelevant if a mild elasticity condition in the case of a positive dependence of the capacity utilisation rate on the wage share is met. We illustrate this result from an empirical perspective.

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Inequality of Opportunity and Economic Performance: Empirical Evidence from Indian States (p.67)

by C Sharma

Abstract: This study tests the effects of inequality of opportunity on the economic
performance of Indian states. This is first such attempt using Indian data, and
the case is relevant because Indian society is divided into different castes and
religious groups. Using two rounds of employment survey data conducted from
the National Sample Survey (NSS), a state-level analysis is performed. The paper
employs the recently-developed method proposed by Ferreira and Gignoux
(2011), and computes a state-level analysis of inequality of opportunity in income
due to caste, religion and gender. Results suggest that there is wide heterogeneity
among Indian states in inequality of opportunity. Models overcoming the
endogeneity problem in the estimation confirm the effects of inequality of
opportunity on economic performance. Specifically, the results of the analysis
suggest that the impact is negative and moderate on per capita income. These
findings validate the theoretical argument that a greater equity of opportunities
leads to enhanced productivity and efficiency. Conversely, a high level of
inequality of opportunity in the job market is likely to hurt economic performance.

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