La production des biens et services destines a reduire la pollution incombe actuellement souvent a des firmes specialisees qui forment ce que l'on appelle maintenant l'« eco-industrie ». Cette note reconsidere les taxes pigouviennes dans ce contexte. Il est demontre que la taxe optimale sur les emissions polluantes divergera du cout social marginal de la pollution selon les pouvoirs de marche relatifs des pollueurs et des entreprises environnementales. Keywords: Pigouvian taxes, environment industry, taxes pigouviennes, industries de l'environnement JEL: H23 L13 Date: 2005-04-01 URL: http://d.repec.org/n?u=RePEc:cir:cirwor:2005s-21&r=all 6. Sobre los Efectos de la Politica Monetaria en Colombia Luis Fernando Melo Velandia Alvaro Jose Riascos Villegas En este documento estudiamos algunos canales, mecanismos de amplificacion y los efectos cuantitativos de la politica monetaria en Colombia. Adicionalmente, sugerimos una metodologia completa, consistente teoricamente con la teoria del Equilibrio General y practica para el analisis de politica y pronosticos de variables economicas de interes.En este documento estudiamos algunos canales, mecanismos de amplificacion y los efectos cuantitativos de la politica monetaria en Colombia. Adicionalmente, sugerimos una metodologia completa, consistente teoricamente con la teoria del Equilibrio General y practica para el analisis de politica y pronosticos de variables economicas de interes.En este documento estudiamos algunos canales, mecanismos de amplificacion y los efectos cuantitativos de la politica monetaria en Colombia. Adicionalmente, sugerimos una metodologia completa, consistente teoricamente con la teoria del Equilibrio General y practica para el analisis de politica y pronosticos de variables economicas de interes.En este documento estudiamos algunos canales, mecanismos de amplificacion y los efectos cuantitativos de la politica monetaria en Colombia. Adicionalmente, sugerimos una metodologia completa, consistente teoricamente con la teoria del Equilibrio General y practica para el analisis de politica y pronosticos de variables economicas de interes.En este documento estudiamos algunos canales, mecanismos de amplificacion y los efectos cuantitativos de la politica monetaria en Colombia. Adicionalmente, sugerimos una metodologia completa, consistente teoricamente con la teoria del Equilibrio General y practica para el analisis de politica y pronosticos de variables economicas de interes.En este documento estudiamos algunos canales, mecanismos de amplificacion y los efectos cuantitativos de la politica monetaria en Colombia. Adicionalmente, sugerimos una metodologia completa, consistente teoricamente con la teoria del Equilibrio General y practica para el analisis de politica y pronosticos de variables economicas de interes.En este documento estudiamos algunos canales, mecanismos de amplificacion y los efectos cuantitativos de la politica monetaria en Colombia. Adicionalmente, sugerimos una metodologia completa, consistente teoricamente con la teoria del Equilibrio General y practica para el analisis de politica y pronosticos de variables economicas de interes.En este documento estudiamos algunos canales, mecanismos de amplificacion y los efectos cuantitativos de la politica monetaria en Colombia. Adicionalmente, sugerimos una metodologia completa, consistente teoricamente con la teoria del Equilibrio General y practica para el analisis de politica y pronosticos de variables economicas de interes. Date: 2004-02-09 URL: http://d.repec.org/n?u=RePEc:col:000070:000176&r=all 7. Antecedentes Historicos de la Deuda Colombiana La Renegociacion de la Deuda Externa de Colombia en los 1930 y 1940. Primera Ronda 1934-1937 Mauricio Avella Gomez En este ensayo se discute la primera ronda del proceso de renegociacion de la deuda externa colombiana adelantado durante los treinta y cuarenta. La materia de renegociacion estuvo constituida por los contratos de deuda firmados con inversionistas britanicos desde principios de la centuria, y con inversionistas estadounidenses en la segunda mitad de los veinte. En este ensayo se discute la primera ronda del proceso de renegociacion de la deuda externa colombiana adelantado durante los treinta y cuarenta. La materia de renegociacion estuvo constituida por los contratos de deuda firmados con inversionistas britanicos desde principios de la centuria, y con inversionistas estadounidenses en la segunda mitad de los veinte. En este ensayo se discute la primera ronda del proceso de renegociacion de la deuda externa colombiana adelantado durante los treinta y cuarenta. La materia de renegociacion estuvo constituida por los contratos de deuda firmados con inversionistas britanicos desde principios de la centuria, y con inversionistas estadounidenses en la segunda mitad de los veinte. En este ensayo se discute la primera ronda del proceso de renegociacion de la deuda externa colombiana adelantado durante los treinta y cuarenta. La materia de renegociacion estuvo constituida por los contratos de deuda firmados con inversionistas britanicos desde principios de la centuria, y con inversionistas estadounidenses en la segunda mitad de los veinte. En este ensayo se discute la primera ronda del proceso de renegociacion de la deuda externa colombiana adelantado durante los treinta y cuarenta. La materia de renegociacion estuvo constituida por los contratos de deuda firmados con inversionistas britanicos desde principios de la centuria, y con inversionistas estadounidenses en la segunda mitad de los veinte. En este ensayo se discute la primera ronda del proceso de renegociacion de la deuda externa colombiana adelantado durante los treinta y cuarenta. La materia de renegociacion estuvo constituida por los contratos de deuda firmados con inversionistas britanicos desde principios de la centuria, y con inversionistas estadounidenses en la segunda mitad de los veinte. En este ensayo se discute la primera ronda del proceso de renegociacion de la deuda externa colombiana adelantado durante los treinta y cuarenta. La materia de renegociacion estuvo constituida por los contratos de deuda firmados con inversionistas britanicos desde principios de la centuria, y con inversionistas estadounidenses en la segunda mitad de los veinte. En este ensayo se discute la primera ronda del proceso de renegociacion de la deuda externa colombiana adelantado durante los treinta y cuarenta. La materia de renegociacion estuvo constituida por los contratos de deuda firmados con inversionistas britanicos desde principios de la centuria, y con inversionistas estadounidenses en la segunda mitad de los veinte. Date: 2004-02-29 URL: http://d.repec.org/n?u=RePEc:col:000070:000239&r=all 8. IDENTIFIABILITY OF ACOINCIDENT INDEX MODEL FOR THE COLOMBIAN ECONOMY Fabio H. Nieto In this theoretical report, the identifiability property of a coincident index model is studied. As a result, characterization of the identifiability conditions solves a model specification problem, which was detected in the design of an earlier index for the Colombian economy.In this theoretical report, the identifiability property of a coincident index model is studied. As a result, characterization of the identifiability conditions solves a model specification problem, which was detected in the design of an earlier index for the Colombian economy.In this theoretical report, the identifiability property of a coincident index model is studied. As a result, characterization of the identifiability conditions solves a model specification problem, which was detected in the design of an earlier index for the Colombian economy.In this theoretical report, the identifiability property of a coincident index model is studied. As a result, characterization of the identifiability conditions solves a model specification problem, which was detected in the design of an earlier index for the Colombian economy.In this theoretical report, the identifiability property of a coincident index model is studied. As a result, characterization of the identifiability conditions solves a model specification problem, which was detected in the design of an earlier index for the Colombian economy.In this theoretical report, the identifiability property of a coincident index model is studied. As a result, characterization of the identifiability conditions solves a model specification problem, which was detected in the design of an earlier index for the Colombian economy.In this theoretical report, the identifiability property of a coincident index model is studied. As a result, characterization of the identifiability conditions solves a model specification problem, which was detected in the design of an earlier index for the Colombian economy.In this theoretical report, the identifiability property of a coincident index model is studied. As a result, characterization of the identifiability conditions solves a model specification problem, which was detected in the design of an earlier index for the Colombian economy. Keywords: Coincident Economic Index, Date: 2003-05-31 URL: http://d.repec.org/n?u=RePEc:col:000070:000301&r=all 9. EXPECTATIVAS DE ACTIVIDAD ECONOMICA EN COLOMBIA Y ESTRUCTURA A PLAZO: UN POCO MAS DE EVIDENCIA Luis Eduardo Arango Luz Adriana Florez Se presenta evidencia clara a favor de la hipotesis de que la estructura a plazo real contiene informacion sobre las expectativas de la actividad economica en Colombia para los plazos entre 6 y 12, 6 y 24, y 12 y 24 meses adelante. Los signos de los coeficientes estimados son, en todos los casos, los que predice la teoria. La capacidad de pronostico del modelo es mejor para el periodo entre 6 y 12 meses adelante que para periodos superiores.Se presenta evidencia clara a favor de la hipotesis de que la estructura a plazo real contiene informacion sobre las expectativas de la actividad economica en Colombia para los plazos entre 6 y 12, 6 y 24, y 12 y 24 meses adelante. Los signos de los coeficientes estimados son, en todos los casos, los que predice la teoria. La capacidad de pronostico del modelo es mejor para el periodo entre 6 y 12 meses adelante que para periodos superiores.Se presenta evidencia clara a favor de la hipotesis de que la estructura a plazo real contiene informacion sobre las expectativas de la actividad economica en Colombia para los plazos entre 6 y 12, 6 y 24, y 12 y 24 meses adelante. Los signos de los coeficientes estimados son, en todos los casos, los que predice la teoria. La capacidad de pronostico del modelo es mejor para el periodo entre 6 y 12 meses adelante que para periodos superiores.Se presenta evidencia clara a favor de la hipotesis de que la estructura a plazo real contiene informacion sobre las expectativas de la actividad economica en Colombia para los plazos entre 6 y 12, 6 y 24, y 12 y 24 meses adelante. Los signos de los coeficientes estimados son, en todos los casos, los que predice la teoria. La capacidad de pronostico del modelo es mejor para el periodo entre 6 y 12 meses adelante que para periodos superiores.Se presenta evidencia clara a favor de la hipotesis de que la estructura a plazo real contiene informacion sobre las expectativas de la actividad economica en Colombia para los plazos entre 6 y 12, 6 y 24, y 12 y 24 meses adelante. Los signos de los coeficientes estimados son, en todos los casos, los que predice la teoria. La capacidad de pronostico del modelo es mejor para el periodo entre 6 y 12 meses adelante que para periodos superiores.Se presenta evidencia clara a favor de la hipotesis de que la estructura a plazo real contiene informacion sobre las expectativas de la actividad economica en Colombia para los plazos entre 6 y 12, 6 y 24, y 12 y 24 meses adelante. Los signos de los coeficientes estimados son, en todos los casos, los que predice la teoria. La capacidad de pronostico del modelo es mejor para el periodo entre 6 y 12 meses adelante que para periodos superiores.Se presenta evidencia clara a favor de la hipotesis de que la estructura a plazo real contiene informacion sobre las expectativas de la actividad economica en Colombia para los plazos entre 6 y 12, 6 y 24, y 12 y 24 meses adelante. Los signos de los coeficientes estimados son, en todos los casos, los que predice la teoria. La capacidad de pronostico del modelo es mejor para el periodo entre 6 y 12 meses adelante que para periodos superiores.Se presenta evidencia clara a favor de la hipotesis de que la estructura a plazo real contiene informacion sobre las expectativas de la actividad economica en Colombia para los plazos entre 6 y 12, 6 y 24, y 12 y 24 meses adelante. Los signos de los coeficientes estimados son, en todos los casos, los que predice la teoria. La capacidad de pronostico del modelo es mejor para el periodo entre 6 y 12 meses adelante que para periodos superiores. Keywords: Estructura a plazo, JEL: E43 Date: 2004-08-31 URL: http://d.repec.org/n?u=RePEc:col:000070:000616&r=all 10. ANTECEDENTES HISTORICOS DE LA DEUDA PUBLICA COLOMBIANA, EL PAPEL DE LA DEUDA PUBLICA INTERNA BAJO ESCENARIOS Mauricio Avella Gomez Aunque Colombia no participo directamente en las hostilidades de la segunda guerra mundial, las consecuencias internacionales del conflicto ejercieron una clara influencia en las politicas macroeconomicas de la epoca. Este ensayo explora el papel jugado por la deuda publica interna en los diferentes escenarios macroeconomicos surgidos durante la guerra, asi como en los primeros anos de la posguerra.Aunque Colombia no participo directamente en las hostilidades de la segunda guerra mundial, las consecuencias internacionales del conflicto ejercieron una clara influencia en las politicas macroeconomicas de la epoca. Este ensayo explora el papel jugado por la deuda publica interna en los diferentes escenarios macroeconomicos surgidos durante la guerra, asi como en los primeros anos de la posguerra.Aunque Colombia no participo directamente en las hostilidades de la segunda guerra mundial, las consecuencias internacionales del conflicto ejercieron una clara influencia en las politicas macroeconomicas de la epoca. Este ensayo explora el papel jugado por la deuda publica interna en los diferentes escenarios macroeconomicos surgidos durante la guerra, asi como en los primeros anos de la posguerra.Aunque Colombia no participo directamente en las hostilidades de la segunda guerra mundial, las consecuencias internacionales del conflicto ejercieron una clara influencia en las politicas macroeconomicas de la epoca. Este ensayo explora el papel jugado por la deuda publica interna en los diferentes escenarios macroeconomicos surgidos durante la guerra, asi como en los primeros anos de la posguerra.Aunque Colombia no participo directamente en las hostilidades de la segunda guerra mundial, las consecuencias internacionales del conflicto ejercieron una clara influencia en las politicas macroeconomicas de la epoca. Este ensayo explora el papel jugado por la deuda publica interna en los diferentes escenarios macroeconomicos surgidos durante la guerra, asi como en los primeros anos de la posguerra.Aunque Colombia no participo directamente en las hostilidades de la segunda guerra mundial, las consecuencias internacionales del conflicto ejercieron una clara influencia en las politicas macroeconomicas de la epoca. Este ensayo explora el papel jugado por la deuda publica interna en los diferentes escenarios macroeconomicos surgidos durante la guerra, asi como en los primeros anos de la posguerra.Aunque Colombia no participo directamente en las hostilidades de la segunda guerra mundial, las consecuencias internacionales del conflicto ejercieron una clara influencia en las politicas macroeconomicas de la epoca. Este ensayo explora el papel jugado por la deuda publica interna en los diferentes escenarios macroeconomicos surgidos durante la guerra, asi como en los primeros anos de la posguerra.Aunque Colombia no participo directamente en las hostilidades de la segunda guerra mundial, las consecuencias internacionales del conflicto ejercieron una clara influencia en las politicas macroeconomicas de la epoca. Este ensayo explora el papel jugado por la deuda publica interna en los diferentes escenarios macroeconomicos surgidos durante la guerra, asi como en los primeros anos de la posguerra. Date: 2004-11-30 URL: http://d.repec.org/n?u=RePEc:col:000070:000841&r=all 11. Pobreza, crimen y crecimiento regional en Colombia. ( Version para comentarios). Ricardo Ernesto ROCHA GARCIA Hermes Fernando MARTINEZ Se trata de un trabajo exploratorio de la validez de la conexion pobreza-criminalidad-crecimiento economico desde una perspectiva de la literatura del desarrollo economico, donde las privaciones de la poblacion y el menor costo de oportunidad asociado a las menores dotaciones fevorecen la criminalidad, al cual tiene repercusiones adversas sobre los procesos de ahorro- inversion.Se trata de un trabajo exploratorio de la validez de la conexion pobreza-criminalidad-crecimiento economico desde una perspectiva de la literatura del desarrollo economico, donde las privaciones de la poblacion y el menor costo de oportunidad asociado a las menores dotaciones fevorecen la criminalidad, al cual tiene repercusiones adversas sobre los procesos de ahorro- inversion.Se trata de un trabajo exploratorio de la validez de la conexion pobreza-criminalidad-crecimiento economico desde una perspectiva de la literatura del desarrollo economico, donde las privaciones de la poblacion y el menor costo de oportunidad asociado a las menores dotaciones fevorecen la criminalidad, al cual tiene repercusiones adversas sobre los procesos de ahorro- inversion.Se trata de un trabajo exploratorio de la validez de la conexion pobreza-criminalidad-crecimiento economico desde una perspectiva de la literatura del desarrollo economico, donde las privaciones de la poblacion y el menor costo de oportunidad asociado a las menores dotaciones fevorecen la criminalidad, al cual tiene repercusiones adversas sobre los procesos de ahorro- inversion.Se trata de un trabajo exploratorio de la validez de la conexion pobreza-criminalidad-crecimiento economico desde una perspectiva de la literatura del desarrollo economico, donde las privaciones de la poblacion y el menor costo de oportunidad asociado a las menores dotaciones fevorecen la criminalidad, al cual tiene repercusiones adversas sobre los procesos de ahorro- inversion.Se trata de un trabajo exploratorio de la validez de la conexion pobreza-criminalidad-crecimiento economico desde una perspectiva de la literatura del desarrollo economico, donde las privaciones de la poblacion y el menor costo de oportunidad asociado a las menores dotaciones fevorecen la criminalidad, al cual tiene repercusiones adversas sobre los procesos de ahorro- inversion.Se trata de un trabajo exploratorio de la validez de la conexion pobreza-criminalidad-crecimiento economico desde una perspectiva de la literatura del desarrollo economico, donde las privaciones de la poblacion y el menor costo de oportunidad asociado a las menores dotaciones fevorecen la criminalidad, al cual tiene repercusiones adversas sobre los procesos de ahorro- inversion.Se trata de un trabajo exploratorio de la validez de la conexion pobreza-criminalidad-crecimiento economico desde una perspectiva de la literatura del desarrollo economico, donde las privaciones de la poblacion y el menor costo de oportunidad asociado a las menores dotaciones fevorecen la criminalidad, al cual tiene repercusiones adversas sobre los procesos de ahorro- inversion. Keywords: crecimiento Date: 2003-07-13 URL: http://d.repec.org/n?u=RePEc:col:000107:000413&r=all 12. Yet another lagging, coincident and leading index for the Colombian economy. Carlos Alberto CASTRO IRAGORRI This paper sums up the results of an ongoing research on the construction of indexes for Colombian economic activity and the characteristics of the business cycle. The author uses the statistical framework known as the generalized dynamic factor model (Forni, Lippi, Hallin, Reichlin, 2000) to build a lagging, coincident, and leading quarterly index for Colombian economic activity.This paper sums up the results of an ongoing research on the construction of indexes for Colombian economic activity and the characteristics of the business cycle. The author uses the statistical framework known as the generalized dynamic factor model (Forni, Lippi, Hallin, Reichlin, 2000) to build a lagging, coincident, and leading quarterly index for Colombian economic activity.This paper sums up the results of an ongoing research on the construction of indexes for Colombian economic activity and the characteristics of the business cycle. The author uses the statistical framework known as the generalized dynamic factor model (Forni, Lippi, Hallin, Reichlin, 2000) to build a lagging, coincident, and leading quarterly index for Colombian economic activity.This paper sums up the results of an ongoing research on the construction of indexes for Colombian economic activity and the characteristics of the business cycle. The author uses the statistical framework known as the generalized dynamic factor model (Forni, Lippi, Hallin, Reichlin, 2000) to build a lagging, coincident, and leading quarterly index for Colombian economic activity.This paper sums up the results of an ongoing research on the construction of indexes for Colombian economic activity and the characteristics of the business cycle. The author uses the statistical framework known as the generalized dynamic factor model (Forni, Lippi, Hallin, Reichlin, 2000) to build a lagging, coincident, and leading quarterly index for Colombian economic activity.This paper sums up the results of an ongoing research on the construction of indexes for Colombian economic activity and the characteristics of the business cycle. The author uses the statistical framework known as the generalized dynamic factor model (Forni, Lippi, Hallin, Reichlin, 2000) to build a lagging, coincident, and leading quarterly index for Colombian economic activity.This paper sums up the results of an ongoing research on the construction of indexes for Colombian economic activity and the characteristics of the business cycle. The author uses the statistical framework known as the generalized dynamic factor model (Forni, Lippi, Hallin, Reichlin, 2000) to build a lagging, coincident, and leading quarterly index for Colombian economic activity.This paper sums up the results of an ongoing research on the construction of indexes for Colombian economic activity and the characteristics of the business cycle. The author uses the statistical framework known as the generalized dynamic factor model (Forni, Lippi, Hallin, Reichlin, 2000) to build a lagging, coincident, and leading quarterly index for Colombian economic activity. Keywords: generalized dynamic factor model Date: 2003-09-09 URL: http://d.repec.org/n?u=RePEc:col:000107:000424&r=all 13. Construccion de una Matriz de Contabilidad Social Financiera para Colombia. Gustavo Adolfo HERNANDEZ En el presente trabajo se presenta una metodologia para la construccion de una Matriz de Contabilidad Social Financiera para Colombia. En particular, esta se centra en la construccion de esta clases de matrices para incorporarla dentro del modelo IMMPA (Integrated Macroeconomic Model for Poverty Analysis) desarrollado por el Banco Mundial.En el presente trabajo se presenta una metodologia para la construccion de una Matriz de Contabilidad Social Financiera para Colombia. En particular, esta se centra en la construccion de esta clases de matrices para incorporarla dentro del modelo IMMPA (Integrated Macroeconomic Model for Poverty Analysis) desarrollado por el Banco Mundial.En el presente trabajo se presenta una metodologia para la construccion de una Matriz de Contabilidad Social Financiera para Colombia. En particular, esta se centra en la construccion de esta clases de matrices para incorporarla dentro del modelo IMMPA (Integrated Macroeconomic Model for Poverty Analysis) desarrollado por el Banco Mundial.En el presente trabajo se presenta una metodologia para la construccion de una Matriz de Contabilidad Social Financiera para Colombia. En particular, esta se centra en la construccion de esta clases de matrices para incorporarla dentro del modelo IMMPA (Integrated Macroeconomic Model for Poverty Analysis) desarrollado por el Banco Mundial.En el presente trabajo se presenta una metodologia para la construccion de una Matriz de Contabilidad Social Financiera para Colombia. En particular, esta se centra en la construccion de esta clases de matrices para incorporarla dentro del modelo IMMPA (Integrated Macroeconomic Model for Poverty Analysis) desarrollado por el Banco Mundial.En el presente trabajo se presenta una metodologia para la construccion de una Matriz de Contabilidad Social Financiera para Colombia. En particular, esta se centra en la construccion de esta clases de matrices para incorporarla dentro del modelo IMMPA (Integrated Macroeconomic Model for Poverty Analysis) desarrollado por el Banco Mundial.En el presente trabajo se presenta una metodologia para la construccion de una Matriz de Contabilidad Social Financiera para Colombia. En particular, esta se centra en la construccion de esta clases de matrices para incorporarla dentro del modelo IMMPA (Integrated Macroeconomic Model for Poverty Analysis) desarrollado por el Banco Mundial.En el presente trabajo se presenta una metodologia para la construccion de una Matriz de Contabilidad Social Financiera para Colombia. En particular, esta se centra en la construccion de esta clases de matrices para incorporarla dentro del modelo IMMPA (Integrated Macroeconomic Model for Poverty Analysis) desarrollado por el Banco Mundial. Keywords: Matrices de Contabilidad Social Financieras Date: 2003-05-02 URL: http://d.repec.org/n?u=RePEc:col:000107:000433&r=all 14. Modelos de pronostico de la produccion bovina. Constanza MARTINEZ VENTURA Una aproximacion a la evolucion de este sector pecuario se presenta para Colombia, bajo el contexto de los ciclos ganaderos en el sacrificio. Las diferentes dinamicas de la produccion ganadera por genero confirman la existencia de una oferta permanente de machos y una oferta ciclica e irregular para el sacrificio de hembras, que responde de manera inversa a los cambios en los precios de ganado en ferias.Una aproximacion a la evolucion de este sector pecuario se presenta para Colombia, bajo el contexto de los ciclos ganaderos en el sacrificio. Las diferentes dinamicas de la produccion ganadera por genero confirman la existencia de una oferta permanente de machos y una oferta ciclica e irregular para el sacrificio de hembras, que responde de manera inversa a los cambios en los precios de ganado en ferias.Una aproximacion a la evolucion de este sector pecuario se presenta para Colombia, bajo el contexto de los ciclos ganaderos en el sacrificio. Las diferentes dinamicas de la produccion ganadera por genero confirman la existencia de una oferta permanente de machos y una oferta ciclica e irregular para el sacrificio de hembras, que responde de manera inversa a los cambios en los precios de ganado en ferias.Una aproximacion a la evolucion de este sector pecuario se presenta para Colombia, bajo el contexto de los ciclos ganaderos en el sacrificio. Las diferentes dinamicas de la produccion ganadera por genero confirman la existencia de una oferta permanente de machos y una oferta ciclica e irregular para el sacrificio de hembras, que responde de manera inversa a los cambios en los precios de ganado en ferias.Una aproximacion a la evolucion de este sector pecuario se presenta para Colombia, bajo el contexto de los ciclos ganaderos en el sacrificio. Las diferentes dinamicas de la produccion ganadera por genero confirman la existencia de una oferta permanente de machos y una oferta ciclica e irregular para el sacrificio de hembras, que responde de manera inversa a los cambios en los precios de ganado en ferias.Una aproximacion a la evolucion de este sector pecuario se presenta para Colombia, bajo el contexto de los ciclos ganaderos en el sacrificio. Las diferentes dinamicas de la produccion ganadera por genero confirman la existencia de una oferta permanente de machos y una oferta ciclica e irregular para el sacrificio de hembras, que responde de manera inversa a los cambios en los precios de ganado en ferias.Una aproximacion a la evolucion de este sector pecuario se presenta para Colombia, bajo el contexto de los ciclos ganaderos en el sacrificio. Las diferentes dinamicas de la produccion ganadera por genero confirman la existencia de una oferta permanente de machos y una oferta ciclica e irregular para el sacrificio de hembras, que responde de manera inversa a los cambios en los precios de ganado en ferias.Una aproximacion a la evolucion de este sector pecuario se presenta para Colombia, bajo el contexto de los ciclos ganaderos en el sacrificio. Las diferentes dinamicas de la produccion ganadera por genero confirman la existencia de una oferta permanente de machos y una oferta ciclica e irregular para el sacrificio de hembras, que responde de manera inversa a los cambios en los precios de ganado en ferias. Keywords: produccion ganadera Date: 2004-09-28 URL: http://d.repec.org/n?u=RePEc:col:000107:000760&r=all 15. Elasticidades de sustitucion Armington para Colombia. Carolina LOZANO KARANAUSKAS Este documento presenta una estimacion de las elasticidades Armington para 14 sectores de la economia colombiana. La estimacion se realizo mediante un Modelo de Rezagos Distribuidos y se obtuvieron elasticidades de corto plazo variando entre 0.2 y 0.9, con un promedio de 0.5 y elasticidades de largo plazo variando entre 0.3 y 2.1, con un promedio de 1.0. Este documento presenta una estimacion de las elasticidades Armington para 14 sectores de la economia colombiana. La estimacion se realizo mediante un Modelo de Rezagos Distribuidos y se obtuvieron elasticidades de corto plazo variando entre 0.2 y 0.9, con un promedio de 0.5 y elasticidades de largo plazo variando entre 0.3 y 2.1, con un promedio de 1.0. Este documento presenta una estimacion de las elasticidades Armington para 14 sectores de la economia colombiana. La estimacion se realizo mediante un Modelo de Rezagos Distribuidos y se obtuvieron elasticidades de corto plazo variando entre 0.2 y 0.9, con un promedio de 0.5 y elasticidades de largo plazo variando entre 0.3 y 2.1, con un promedio de 1.0. Este documento presenta una estimacion de las elasticidades Armington para 14 sectores de la economia colombiana. La estimacion se realizo mediante un Modelo de Rezagos Distribuidos y se obtuvieron elasticidades de corto plazo variando entre 0.2 y 0.9, con un promedio de 0.5 y elasticidades de largo plazo variando entre 0.3 y 2.1, con un promedio de 1.0. Este documento presenta una estimacion de las elasticidades Armington para 14 sectores de la economia colombiana. La estimacion se realizo mediante un Modelo de Rezagos Distribuidos y se obtuvieron elasticidades de corto plazo variando entre 0.2 y 0.9, con un promedio de 0.5 y elasticidades de largo plazo variando entre 0.3 y 2.1, con un promedio de 1.0. Este documento presenta una estimacion de las elasticidades Armington para 14 sectores de la economia colombiana. La estimacion se realizo mediante un Modelo de Rezagos Distribuidos y se obtuvieron elasticidades de corto plazo variando entre 0.2 y 0.9, con un promedio de 0.5 y elasticidades de largo plazo variando entre 0.3 y 2.1, con un promedio de 1.0. Este documento presenta una estimacion de las elasticidades Armington para 14 sectores de la economia colombiana. La estimacion se realizo mediante un Modelo de Rezagos Distribuidos y se obtuvieron elasticidades de corto plazo variando entre 0.2 y 0.9, con un promedio de 0.5 y elasticidades de largo plazo variando entre 0.3 y 2.1, con un promedio de 1.0. Este documento presenta una estimacion de las elasticidades Armington para 14 sectores de la economia colombiana. La estimacion se realizo mediante un Modelo de Rezagos Distribuidos y se obtuvieron elasticidades de corto plazo variando entre 0.2 y 0.9, con un promedio de 0.5 y elasticidades de largo plazo variando entre 0.3 y 2.1, con un promedio de 1.0. Keywords: Elasticidades Date: 2004-10-12 URL: http://d.repec.org/n?u=RePEc:col:000107:000857&r=all 16. La ciencia y sus tensiones: ?un nuevo contrato social de la ciencia? Hernan Jaramillo Manuel Rey Date: 2003-09-06 URL: http://d.repec.org/n?u=RePEc:col:000116:000381&r=all 17. Crecimiento y convergencia: a proposito de Quah Jhon James Mora Este articulo discute los resultados del trabajo de Quah sobre la convergencia entre paises. Los resultados muestran que aunque el trabajo de Quah es demoledor en torno a la convergencia tipo beta y sigma, la estimacion del nucleo estocastico es bastante discutible y, por lo tanto, la transicion entre paises queda reducida a una cadena de Markov de un paso. Este articulo discute los resultados del trabajo de Quah sobre la convergencia entre paises. Los resultados muestran que aunque el trabajo de Quah es demoledor en torno a la convergencia tipo beta y sigma, la estimacion del nucleo estocastico es bastante discutible y, por lo tanto, la transicion entre paises queda reducida a una cadena de Markov de un paso.Este articulo discute los resultados del trabajo de Quah sobre la convergencia entre paises. Los resultados muestran que aunque el trabajo de Quah es demoledor en torno a la convergencia tipo beta y sigma, la estimacion del nucleo estocastico es bastante discutible y, por lo tanto, la transicion entre paises queda reducida a una cadena de Markov de un paso. Este articulo discute los resultados del trabajo de Quah sobre la convergencia entre paises. Los resultados muestran que aunque el trabajo de Quah es demoledor en torno a la convergencia tipo beta y sigma, la estimacion del nucleo estocastico es bastante discutible y, por lo tanto, la transicion entre paises queda reducida a una cadena de Markov de un paso.Este articulo discute los resultados del trabajo de Quah sobre la convergencia entre paises. Los resultados muestran que aunque el trabajo de Quah es demoledor en torno a la convergencia tipo beta y sigma, la estimacion del nucleo estocastico es bastante discutible y, por lo tanto, la transicion entre paises queda reducida a una cadena de Markov de un paso. Este articulo discute los resultados del trabajo de Quah sobre la convergencia entre paises. Los resultados muestran que aunque el trabajo de Quah es demoledor en torno a la convergencia tipo beta y sigma, la estimacion del nucleo estocastico es bastante discutible y, por lo tanto, la transicion entre paises queda reducida a una cadena de Markov de un paso.Este articulo discute los resultados del trabajo de Quah sobre la convergencia entre paises. Los resultados muestran que aunque el trabajo de Quah es demoledor en torno a la convergencia tipo beta y sigma, la estimacion del nucleo estocastico es bastante discutible y, por lo tanto, la transicion entre paises queda reducida a una cadena de Markov de un paso. Este articulo discute los resultados del trabajo de Quah sobre la convergencia entre paises. Los resultados muestran que aunque el trabajo de Quah es demoledor en torno a la convergencia tipo beta y sigma, la estimacion del nucleo estocastico es bastante discutible y, por lo tanto, la transicion entre paises queda reducida a una cadena de Markov de un paso. Keywords: Crecimiento JEL: C1 Date: 2003-08-20 URL: http://d.repec.org/n?u=RePEc:col:000117:000195&r=all 18. SALVE UNA VIDA: “DONE SANGRE” FRANCISCO VELASQUEZ VAZQUEZ CARLOS ALBERTO CAICEDO CARLOS ANDRES TABARES Vivimos en un pais con un alto indice de accidentalidad, criminalidad y urgencias medicas por traumas violentos, solamente en el Valle del Cauca la principal causa de muerte en personas entre los 15 y 44 anos de edad es la violencia, por cada muerte violenta se presentan entre 8 y 10 personas que requieren de hemoderivados para salvar su vida. Vivimos en un pais con un alto indice de accidentalidad, criminalidad y urgencias medicas por traumas violentos, solamente en el Valle del Cauca la principal causa de muerte en personas entre los 15 y 44 anos de edad es la violencia, por cada muerte violenta se presentan entre 8 y 10 personas que requieren de hemoderivados para salvar su vida.Vivimos en un pais con un alto indice de accidentalidad, criminalidad y urgencias medicas por traumas violentos, solamente en el Valle del Cauca la principal causa de muerte en personas entre los 15 y 44 anos de edad es la violencia, por cada muerte violenta se presentan entre 8 y 10 personas que requieren de hemoderivados para salvar su vida. Vivimos en un pais con un alto indice de accidentalidad, criminalidad y urgencias medicas por traumas violentos, solamente en el Valle del Cauca la principal causa de muerte en personas entre los 15 y 44 anos de edad es la violencia, por cada muerte violenta se presentan entre 8 y 10 personas que requieren de hemoderivados para salvar su vida.Vivimos en un pais con un alto indice de accidentalidad, criminalidad y urgencias medicas por traumas violentos, solamente en el Valle del Cauca la principal causa de muerte en personas entre los 15 y 44 anos de edad es la violencia, por cada muerte violenta se presentan entre 8 y 10 personas que requieren de hemoderivados para salvar su vida. Vivimos en un pais con un alto indice de accidentalidad, criminalidad y urgencias medicas por traumas violentos, solamente en el Valle del Cauca la principal causa de muerte en personas entre los 15 y 44 anos de edad es la violencia, por cada muerte violenta se presentan entre 8 y 10 personas que requieren de hemoderivados para salvar su vida. Vivimos en un pais con un alto indice de accidentalidad, criminalidad y urgencias medicas por traumas violentos, solamente en el Valle del Cauca la principal causa de muerte en personas entre los 15 y 44 anos de edad es la violencia, por cada muerte violenta se presentan entre 8 y 10 personas que requieren de hemoderivados para salvar su vida. Vivimos en un pais con un alto indice de accidentalidad, criminalidad y urgencias medicas por traumas violentos, solamente en el Valle del Cauca la principal causa de muerte en personas entre los 15 y 44 anos de edad es la violencia, por cada muerte violenta se presentan entre 8 y 10 personas que requieren de hemoderivados para salvar su vida. Date: 2004-03-02 URL: http://d.repec.org/n?u=RePEc:col:000117:000779&r=all 19. GIROS & FINANZAS: UNA HISTORIA DE EXITO CONTINUO EN EL MERCADO DE CAMBIOS HECTOR OCHOA JUAN CARLOS GOMEZ LAGUADO JOSE ORLANDO INFANTE DIAZ El negocio de las remesas es tan importante para Colombia ue para el ano 2004 es la segunda fuente de divisas, despues del petroleo. Debido a esta situacion, los principales grupos financieros colombianos han decidido entrar al negocio. Este caso contempla el analisis economico, social y de mercado del negocio de las remesas en Colombia y deja planteada su evolucion. El negocio de las remesas es tan importante para Colombia ue para el ano 2004 es la segunda fuente de divisas, despues del petroleo. Debido a esta situacion, los principales grupos financieros colombianos han decidido entrar al negocio. Este caso contempla el analisis economico, social y de mercado del negocio de las remesas en Colombia y deja planteada su evolucion.El negocio de las remesas es tan importante para Colombia ue para el ano 2004 es la segunda fuente de divisas, despues del petroleo. Debido a esta situacion, los principales grupos financieros colombianos han decidido entrar al negocio. Este caso contempla el analisis economico, social y de mercado del negocio de las remesas en Colombia y deja planteada su evolucion. El negocio de las remesas es tan importante para Colombia ue para el ano 2004 es la segunda fuente de divisas, despues del petroleo. Debido a esta situacion, los principales grupos financieros colombianos han decidido entrar al negocio. Este caso contempla el analisis economico, social y de mercado del negocio de las remesas en Colombia y deja planteada su evolucion.El negocio de las remesas es tan importante para Colombia ue para el ano 2004 es la segunda fuente de divisas, despues del petroleo. Debido a esta situacion, los principales grupos financieros colombianos han decidido entrar al negocio. Este caso contempla el analisis economico, social y de mercado del negocio de las remesas en Colombia y deja planteada su evolucion. El negocio de las remesas es tan importante para Colombia ue para el ano 2004 es la segunda fuente de divisas, despues del petroleo. Debido a esta situacion, los principales grupos financieros colombianos han decidido entrar al negocio. Este caso contempla el analisis economico, social y de mercado del negocio de las remesas en Colombia y deja planteada su evolucion.El negocio de las remesas es tan importante para Colombia ue para el ano 2004 es la segunda fuente de divisas, despues del petroleo. Debido a esta situacion, los principales grupos financieros colombianos han decidido entrar al negocio. Este caso contempla el analisis economico, social y de mercado del negocio de las remesas en Colombia y deja planteada su evolucion. El negocio de las remesas es tan importante para Colombia ue para el ano 2004 es la segunda fuente de divisas, despues del petroleo. Debido a esta situacion, los principales grupos financieros colombianos han decidido entrar al negocio. Este caso contempla el analisis economico, social y de mercado del negocio de las remesas en Colombia y deja planteada su evolucion. Keywords: Remesas Date: 2004-04-05 URL: http://d.repec.org/n?u=RePEc:col:000117:000794&r=all 20. BC Bootstrap Confidence Intervals for Random Effects Panel Data Models Andres Carvajal We study the application of bootstrap procedures to the problem of constructing confidence intervals for the coefficients of random effects panel data models, based on GLS point estimation. The central problem is the one of adequately resampling from the estimated residuals of the model, avoiding violations of the structural features of the random shocks.We study the application of bootstrap procedures to the problem of constructing confidence intervals for the coefficients of random effects panel data models, based on GLS point estimation. The central problem is the one of adequately resampling from the estimated residuals of the model, avoiding violations of the structural features of the random shocks.We study the application of bootstrap procedures to the problem of constructing confidence intervals for the coefficients of random effects panel data models, based on GLS point estimation. The central problem is the one of adequately resampling from the estimated residuals of the model, avoiding violations of the structural features of the random shocks.We study the application of bootstrap procedures to the problem of constructing confidence intervals for the coefficients of random effects panel data models, based on GLS point estimation. The central problem is the one of adequately resampling from the estimated residuals of the model, avoiding violations of the structural features of the random shocks.We study the application of bootstrap procedures to the problem of constructing confidence intervals for the coefficients of random effects panel data models, based on GLS point estimation. The central problem is the one of adequately resampling from the estimated residuals of the model, avoiding violations of the structural features of the random shocks.We study the application of bootstrap procedures to the problem of constructing confidence intervals for the coefficients of random effects panel data models, based on GLS point estimation. The central problem is the one of adequately resampling from the estimated residuals of the model, avoiding violations of the structural features of the random shocks.We study the application of bootstrap procedures to the problem of constructing confidence intervals for the coefficients of random effects panel data models, based on GLS point estimation. The central problem is the one of adequately resampling from the estimated residuals of the model, avoiding violations of the structural features of the random shocks.We study the application of bootstrap procedures to the problem of constructing confidence intervals for the coefficients of random effects panel data models, based on GLS point estimation. The central problem is the one of adequately resampling from the estimated residuals of the model, avoiding violations of the structural features of the random shocks. Date: 2004-01-14 URL: http://d.repec.org/n?u=RePEc:col:000129:000417&r=all 21. Comment on 'The Value of Tax Shields is NOT Equal to the Present Value of Tax Shields', Including an Arbitrage Opportunity Nicholas X. Wonder Paul Fieten Lutz Kruschwitz In a forthcoming paper, Fernandez (2002) claims to derive a formula for the valuation of debt tax shields for firms with cash flows that grow perpetually at a constant rate. We show that his formula is incorrect and provide an example where his valuation would admit arbitrage. In a forthcoming paper, Fernandez (2002) claims to derive a formula for the valuation of debt tax shields for firms with cash flows that grow perpetually at a constant rate. We show that his formula is incorrect and provide an example where his valuation would admit arbitrage.In a forthcoming paper, Fernandez (2002) claims to derive a formula for the valuation of debt tax shields for firms with cash flows that grow perpetually at a constant rate. We show that his formula is incorrect and provide an example where his valuation would admit arbitrage. In a forthcoming paper, Fernandez (2002) claims to derive a formula for the valuation of debt tax shields for firms with cash flows that grow perpetually at a constant rate. We show that his formula is incorrect and provide an example where his valuation would admit arbitrage.In a forthcoming paper, Fernandez (2002) claims to derive a formula for the valuation of debt tax shields for firms with cash flows that grow perpetually at a constant rate. We show that his formula is incorrect and provide an example where his valuation would admit arbitrage. In a forthcoming paper, Fernandez (2002) claims to derive a formula for the valuation of debt tax shields for firms with cash flows that grow perpetually at a constant rate. We show that his formula is incorrect and provide an example where his valuation would admit arbitrage.In a forthcoming paper, Fernandez (2002) claims to derive a formula for the valuation of debt tax shields for firms with cash flows that grow perpetually at a constant rate. We show that his formula is incorrect and provide an example where his valuation would admit arbitrage. In a forthcoming paper, Fernandez (2002) claims to derive a formula for the valuation of debt tax shields for firms with cash flows that grow perpetually at a constant rate. We show that his formula is incorrect and provide an example where his valuation would admit arbitrage. Keywords: Present value of tax shield, perpetuities JEL: G31 G32 H43 Date: 2003-12-31 URL: http://d.repec.org/n?u=RePEc:col:000135:000501&r=all 22. A FORMAL PROOF OF THE FACTOR PRICE EQUALIZATION THEOREM Hernan Vallejo This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” (1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems. This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” 1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems.This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” (1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems. This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” (1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems.This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” (1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems. This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” (1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems.This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” (1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems. This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” (1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems. Keywords: International Trade JEL: F1 Date: 2004-02-01 URL: http://d.repec.org/n?u=RePEc:col:000138:000692&r=all 23. ANALISIS COMPARATIVO EN LA ESTIMACION DE MODELOS DE REGRESION JUAN BYRON CORREA FONNEGRA El objetivo del documento es analizar los problemas que se pueden generar al estimar modelos de regresion en los cuales las variables de interes presentan tendencias estocasticas con base en las variables Consumo total e Ingreso personal disponible para el periodo 1950 – 1995, datos tomados de las bases de datos del banco de la Republica [Grupo GRECO].El objetivo del documento es analizar los problemas que se pueden generar al estimar modelos de regresion en los cuales las variables de interes presentan tendencias estocasticas con base en las variables Consumo total e Ingreso personal disponible para el periodo 1950 – 1995, datos tomados de las bases de datos del banco de la Republica [Grupo GRECO].El objetivo del documento es analizar los problemas que se pueden generar al estimar modelos de regresion en los cuales las variables de interes presentan tendencias estocasticas con base en las variables Consumo total e Ingreso personal disponible para el periodo 1950 – 1995, datos tomados de las bases de datos del banco de la Republica [Grupo GRECO].El objetivo del documento es analizar los problemas que se pueden generar al estimar modelos de regresion en los cuales las variables de interes presentan tendencias estocasticas con base en las variables Consumo total e Ingreso personal disponible para el periodo 1950 – 1995, datos tomados de las bases de datos del banco de la Republica [Grupo GRECO].El objetivo del documento es analizar los problemas que se pueden generar al estimar modelos de regresion en los cuales las variables de interes presentan tendencias estocasticas con base en las variables Consumo total e Ingreso personal disponible para el periodo 1950 – 1995, datos tomados de las bases de datos del banco de la Republica [Grupo GRECO].El objetivo del documento es analizar los problemas que se pueden generar al estimar modelos de regresion en los cuales las variables de interes presentan tendencias estocasticas con base en las variables Consumo total e Ingreso personal disponible para el periodo 1950 – 1995, datos tomados de las bases de datos del banco de la Republica [Grupo GRECO].El objetivo del documento es analizar los problemas que se pueden generar al estimar modelos de regresion en los cuales las variables de interes presentan tendencias estocasticas con base en las variables Consumo total e Ingreso personal disponible para el periodo 1950 – 1995, datos tomados de las bases de datos del banco de la Republica [Grupo GRECO].El objetivo del documento es analizar los problemas que se pueden generar al estimar modelos de regresion en los cuales las variables de interes presentan tendencias estocasticas con base en las variables Consumo total e Ingreso personal disponible para el periodo 1950 – 1995, datos tomados de las bases de datos del banco de la Republica [Grupo GRECO]. Keywords: Modelos de Regresion Date: 2004-01-20 URL: http://d.repec.org/n?u=RePEc:col:000141:000621&r=all 24. METODOLOGIA PARA DETERMINAR LOS PAGOS DE LA INTERACCION ENTRE UNA ENTIDAD DE CONTROL AMBIENTAL Y UN GRUPO DE INTERES Fabio Alberto Arias Arbelaez En este trabajo se revisa la literatura sobre grupos de interes, en especial la interaccion entre grupos de interes y una entidad de conservacion ambiental, para estudiar las posibilidades de corroboracion empirica de los equilibrios predichos por estos modelos e indicar formas de contrastar si la politica publica, en conservacion ambiental, se ajusta a la teoria del interes publico o de la teoria del grupo de interes.En este trabajo se revisa la literatura sobre grupos de interes, en especial la interaccion entre grupos de interes y una entidad de conservacion ambiental, para estudiar las posibilidades de corroboracion empirica de los equilibrios predichos por estos modelos e indicar formas de contrastar si la politica publica, en conservacion ambiental, se ajusta a la teoria del interes publico o de la teoria del grupo de interes.En este trabajo se revisa la literatura sobre grupos de interes, en especial la interaccion entre grupos de interes y una entidad de conservacion ambiental, para estudiar las posibilidades de corroboracion empirica de los equilibrios predichos por estos modelos e indicar formas de contrastar si la politica publica, en conservacion ambiental, se ajusta a la teoria del interes publico o de la teoria del grupo de interes.En este trabajo se revisa la literatura sobre grupos de interes, en especial la interaccion entre grupos de interes y una entidad de conservacion ambiental, para estudiar las posibilidades de corroboracion empirica de los equilibrios predichos por estos modelos e indicar formas de contrastar si la politica publica, en conservacion ambiental, se ajusta a la teoria del interes publico o de la teoria del grupo de interes.En este trabajo se revisa la literatura sobre grupos de interes, en especial la interaccion entre grupos de interes y una entidad de conservacion ambiental, para estudiar las posibilidades de corroboracion empirica de los equilibrios predichos por estos modelos e indicar formas de contrastar si la politica publica, en conservacion ambiental, se ajusta a la teoria del interes publico o de la teoria del grupo de interes.En este trabajo se revisa la literatura sobre grupos de interes, en especial la interaccion entre grupos de interes y una entidad de conservacion ambiental, para estudiar las posibilidades de corroboracion empirica de los equilibrios predichos por estos modelos e indicar formas de contrastar si la politica publica, en conservacion ambiental, se ajusta a la teoria del interes publico o de la teoria del grupo de interes.En este trabajo se revisa la literatura sobre grupos de interes, en especial la interaccion entre grupos de interes y una entidad de conservacion ambiental, para estudiar las posibilidades de corroboracion empirica de los equilibrios predichos por estos modelos e indicar formas de contrastar si la politica publica, en conservacion ambiental, se ajusta a la teoria del interes publico o de la teoria del grupo de interes.En este trabajo se revisa la literatura sobre grupos de interes, en especial la interaccion entre grupos de interes y una entidad de conservacion ambiental, para estudiar las posibilidades de corroboracion empirica de los equilibrios predichos por estos modelos e indicar formas de contrastar si la politica publica, en conservacion ambiental, se ajusta a la teoria del interes publico o de la teoria del grupo de interes. Keywords: Grupos de interes Date: 2005-02-20 URL: http://d.repec.org/n?u=RePEc:col:000141:000928&r=all 25. A FORMAL PROOF OF THE FACTOR PRICE EQUALIZATION THEOREM Hernan Vallejo This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” (1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems. This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” 1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems.This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” (1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems. This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” (1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems.This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” (1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems. This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” (1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems.This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” (1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems. This paper provides a formal proof of the Factor Price Equalization Theorem within the Heckscher Ohlin model derived by Ronald W. Jones in “The Structure of Simple General Equilibrium Models” (1965), where formal proof is provided for the Heckscher Ohlin, Stolper Samuelson and Rybczynski Theorems. Keywords: International Trade JEL: F1 Date: 2004-02-01 URL: http://d.repec.org/n?u=RePEc:col:000145:000692&r=all 26. TESTING THE EXISTENCE OF CLUSTERING IN THE EXTREME VALUES Jose Olmo This paper introduces an estimator for the extremal index as the ratio of the number of elements of two point processes defined by threshold sequences un, vn and a partition of the sequence in different blocks of the same size. The first point process is defined by the sequence of the block maxima that exceed un. This paper introduces a thinning of this point process, defined by a threshold vn with vn > un, and with the appealing property that under some mild conditions the ratio of the number of elements of both point processes is a consistent estimator of the extremal index. The method supports a hypothesis test for the extremal index, and hence for testing the existence of clustering in the extreme values. Other advantages are that it allows some freedom to choose un, and it is not very sensitive to the choice of the partition. Finally, the stylized facts found in financial returns clustering, skewness, heavy tails) are tested via the extremal index, in this case for the DaX returns Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:cte:werepe:we051809&r=all 27. A HALF-GRAPH DEPTH FOR FUNCTIONAL DATA Sara Lopez-Pintado Juan Romo A recent and highly attractive area of research in statistics is the analysis of functional data. In this paper a new definition of depth for functional observations is introduced based on the notion of “half-graph” of a curve. It has computational advantages with respect to other concepts of depth previously proposed. The half-graph depth provides a natural criterion to measure the centrality of a function within a sample of curves. Based on this depth a sample of curves can be ordered from the center outward and L-statistics are defined. The properties of the half-graph depth, such as the consistency and uniform convergence, are established. A simulation study shows the robustness of this new definition of depth when the curves are contaminated. Finally real data examples are analyzed. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:cte:wsrepe:ws051603&r=all 28. Ex Post Implementation Dirk Bergemann (Cowles Foundation, Yale University) Stephen Morris (Cowles Foundation, Yale University) We analyze the problem of fully implementing a social choice set in ex post equilibrium. Weidentify an ex post monotonicity condition that is necessary and -- in economic environments -- sufficient for full implementation in ex post equilibrium. We also identify an ex post monotonicityno veto condition that is sufficient. Ex post monotonicity is satisfied in all single crossing environments with strict ex post incentive constraints. In many economically significant environments, ex post implementation can be achieved in the direct mechanism. We show by means of two classic examples that ex post monotonicity does not imply nor is it implied by Maskin monotonicity (necessary and almost sufficient for complete information implementation). The single unit auction with interdependent valuations is shown to satisfy ex post monotonicity but not Maskin monotonicity. Ex post implementation in the direct mechanism is also possible in this case. We describe an example where the Pareto correspondence fails ex post monotonicity but Maskin monotonicity is satisfied. Keywords: Ex post equilibrium, Implementation, Single crossing, Interdependent values JEL: C79 D82 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1502&r=all 29. Coordination Failure in Repeated Games with Almost-Public Monitoring George J. Mailath (Dept. Economics, University of Pennsylvania) Stephen Morris (Cowles Foundation, Yale University) Some private-monitoring games, that is, games with no public histories, can have histories that are almost public. These games are the natural result of perturbing public-monitoring games towards private monitoring. We explore the extent to which it is possible to coordinate continuation play in such games. It is always possible to coordinate continuation play by requiring behavior to have bounded recall (i.e., there is a bound L such that in any period, the last L signals are sufficient to determine behavior). We show that, in games with general almost- public private monitoring, this is essentially the only behavior that can coordinate continuation play. Keywords: Repeated games, Private monitoring, Almost-public monitoring, Coordination, Bounded recall JEL: C72 C73 D82 Date: 2004-09 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1479r&r=all 30. Operations on (ordered)interval sets Brock, E.O. de (Groningen University) Intervals play an important role in various kinds of database- applications in practice, for example in historical, spatial, and temporal databases. As a consequence, there is a practical need for a clear and proper treatment of various useful operations on intervals and interval sets in a database context. However, the semantics of some important operations on interval sets are not always treated or not treated very clearly in the literature; e.g. often they are defined in an algorithmic rather than a declarative manner. Moreover, implementation proposals are often not as straightforward as they could be. This paper presents a declarative treatment of various operations on interval sets, also introducing some new notions (such as ordered interval sets, their visible points, and their surface). Then the paper formally links such (mathematical) intervals to their database representations. Finally the paper provides straightforward translations from these formal database representations to standard SQL, without the need for SQL extensions. Date: 2004 URL: http://d.repec.org/n?u=RePEc:dgr:rugsom:04a23&r=all 31. Fast Ejection Chain Algorithms for Vehicle Routing with Time Windows Sontrop,H.M.J. Horn,S.P.,van der Teeuwen,G. Uetz,M. (METEOR) This paper introduces new ejection chain strategies to effectively target vehicle routing problems with time window constraints (VRPTW). Ejection chain procedures are based on the idea of compound moves that allow a variable number of solution components to be modified within any single iteration of a local search algorithm. The yardstick behind such procedures is the underlying reference structure, which is the structure that is used to coordinate the moves that are available for the local search algorithm. The main contribution of the paper is a new reference structure that is particularly suited in order to handle the asymmetric aspects in a VRPTW. The new reference structure is a generalization of the doubly rooted reference structure introduced by Glover, resulting in a new, powerful neighborhood for the VRPTW. We use tabu search for the generation of the ejection chains. On a higher algorithmic level, we study the effect of different meta heuristics to steer the tabu chain ejection process. Computational results confirm that our approach leads to very fast algorithms that can compete with the current state of the art algorithms for the VRPTW. Keywords: operations research and management science; Date: 2005 URL: http://d.repec.org/n?u=RePEc:dgr:umamet:2005012&r=all 32. Banking Sector Strenght and the Transmission of Currency Crises Allard Bruinshoofd Bertrand Candelon Katharina Raabe We show that, complementary to trade and financial linkages, the strength of the bankingsector helps explain the transmission of currency crises. Specifically, we demonstrate that the Mexican, Thai, and Russian crises predominantly spread to countries with weaknesses in their banking sectors. At the same time, the role of banking sector strength varies per crisis; where the Mexican crisis spread to countries with a strong presence of foreign banks in domestic credit provision, the Thai crisis disproportionately contaminated countries where the banking sector was most sensitive to currency realignments, while the Russian crisis spread to countries with inefficiencies in the banking sector. Keywords: Banking Sector Strength; Currency Crisis; Transmission Channels. JEL: F30 F32 F34 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:dnb:dnbwpp:032&r=all 33. Private Label Price Rigidity during Holiday Periods Georg Muller Mark Bergen Shantanu Dutta Daniel Levy Using weekly retail transaction scanner price data from a large U.S supermarket chain, we find significantly higher retail price rigidity for private label products than for nationally branded products during the Christmas and Thanksgiving holiday periods relative to the rest of the year. The finding cannot be explained by changes in holiday period promotional practices because we find that private label promotions appear to diminish at least as much as national brands. The increased rigidity of private label products relative to national brands is only partially accounted for by increased rigidity of wholesale prices. After ruling out other potential explanations, we suggest that the higher private label price rigidity might be due to the increased emphasis on social consumption during holiday periods, raising the customers’ value of nationally branded products relative to the private labels. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:emo:wp2003:0512&r=all 34. Asymmetric Wholesale Pricing: Theory and Evidence Sourav Ray Haipeng (Allan) Chen Mark Bergen Daniel Levy Asymmetric pricing is the phenomenon where prices rise more readily than they fall. We articulate, and provide empirical support for, a theory of asymmetric pricing in wholesale prices. In particular, we show how wholesale prices may be asymmetric in the small but symmetric in the large, when retailers face costs of price adjustments. Such retailers will not adjust prices for small changes in their costs. Upstream manufacturers then see a region of inelastic demand where small wholesale price changes do not translate into commensurate retail price changes. The implication is asymmetric – small wholesale increases are more profitable because manufacturers will not lose customers from higher retail prices; yet, small wholesale decreases are less profitable, because these will not create lower retail prices, hence no extra revenue from greater sales. For larger changes, this asymmetry at wholesale vanishes as the costs of changing prices are compensated by increases in retailers’ revenue that result from correspondingly large retail price changes. We first present a formal economic model of a channel with forward looking retailers facing costs of price adjustment to derive the testable propositions. Next, we test these on manufacturer prices in a supermarket scanner dataset to find support for our theory. We discuss the contributions of the results for the asymmetric pricing, distribution channels and cost of price adjustment literatures, and implications for public policy. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:emo:wp2003:0513&r=all 35. Foreign Technology Transfer and Productivity: Evidence from a Matched Sample Mahmut Yasar Catherine J. Morrison Paul This study examines the causal effects of alternative forms of foreign technology transfer on the productivity of manufacturing plants. We use propensity score matching techniques that limit implicit assumptions about plant homogeneity imbedded in standard estimates of such effects, and methods for estimating total factor productivity that accommodate simultaneity and selection biases. We find positive impacts of technology transfer through foreign direct investment and exporting on both total factor and labor productivity of these plants, and using both nearest neighbor and kernel matching methods. Technology transfer through importing, by contrast, impacts labor but not total factor productivity. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:emo:wp2003:0514&r=all 36. Social Europe Sjef Ederveen (CPB Netherlands Bureau for Economic Policy Analysis) Ruud De Mooij (CPB Netherlands Bureau for Economic Policy Analysis) Date: 2003-11 URL: http://d.repec.org/n?u=RePEc:epr:enepop:05&r=all 37. Is playing alone in the darkness sufficient to prevent informational cascades? Annamaria Fiore Andrea Morone Models of herd behaviour and informational cascades were theoretically developed in 1992 respectively by Banerjee (A simple model of herd behavior) and Bikhchandani, Hirshleifer and Welch (A Theory of Fads, Fashion, Custom and Cultural Change as Informational Cascades). Both articles pointed out the existence of an information externality that causes a welfare loss, and both proposed the idea that destroying an amount of information may turn out in a social improvement. Although this is an old idea and in the last years many features of herd behaviour and informational cascades were studied, this particular aspect was never developed or extensively analysed. In this article we will try to investigate this hypothesis both theoretically and experimentally. Keywords: Informational Cascades, Individual Decision Making, Experiments, Information Externality JEL: C92 URL: http://d.repec.org/n?u=RePEc:esi:discus:2005-09&r=all 38. Early versus Late Coalition Announcement in Experimental Democracies Robert E. Goodin Rupert Sausgruber Werner Guth Sometimes parties decide ahead of an election with whom they would (if possible) join in a coalition together. Other times they leave it completely open, until after the election, with whom they would coalesce. Observations from the political arena itself do not allow us to determine the differing effects of coalition forming before or after the election. We therefore explore the question experimentally, in a situation with three parties and seven voters. There are striking effects regarding party behaviour: coalitions formed before the election are much more likely to be ideologically better-connected but larger than necessary and contain superfluous parties. Voters, however, seem not to vote strategically more often in cases of preannounced coalition intentions in ways we might expect. URL: http://d.repec.org/n?u=RePEc:esi:discus:2005-10&r=all 39. Understanding the role of entrepreneurship for economic growth Martin Carree Roy Thurik Keywords: entrepreneurship, small firms, economic growth, economic development JEL: M13 O10 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:esi:egpdis:2005-10&r=all 40. Higher Order Expectations in Asset Pricing Philippe BACCHETTA (Study Center of Gerzensee, University of Lausanne and CEPR) Eric VAN WINCOOP (University of Virginia and NBER) In this paper, we examine formally Keynes' idea that higher order beliefs can drive a wedge between an asset price and its fundamental value based on expected future payoffs. In a dynamic noisy rational expectations model, higher order expectations add an additional term, which we call the higher order wedge, to a standard asset pricing equation. Consistent with Keynes' reasoning we show that investment decisions are based not just on expected future payoffs, but also on anticipated future expectational errors made by the market. The latter are captured by the higher order wedge. We show that the expectation of future expectational errors by the market is perfectly rational when investors have both noisy public and private information. The main effect of this additional asset pricing term is to disconnect the price from the present value of future payoffs. We show that this effect can be quantitatively significant. Keywords: Beauty contest; Heterogeneous information JEL: G12 G14 D82 Date: 2004-05 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp110&r=all 41. The Integration of Securitized Real Estate and Financial Assets Severine CAUCHIE (HEC-University of Geneva) Martin HOESLI (HEC-University of Geneva, FAME and University of Aberdeen (School of Business)) Empirical evidence suggests that U.S. REITs are integrated with common stocks, but not with bonds. The design of the real estate security is likely to impact upon results, however, and it would seem important to analyze the topic of integration for another type of real estate security. Swiss real estate funds constitute an ideal candidate for such an examination as their institutional and legal setup differs substantially from that of other countries. We analyze the integration of such funds with both the stock and bond markets using an APT framework. We employ both the Xu (2003) method and an innovative procedure to determine endogenous and exogenous factors, respectively. Integration is assessed by means of two alternative tests. Our results suggest that Swiss real estate funds are more integrated with stocks than with bonds. Further, we show that the degree of integration between real estate and stocks is due to a stock market factor and changes in expected inflation. No integrating factor is found between real estate and bond funds. Finally, it is found that unexpected inflation is a segmenting factor between real estate securities and financial assets. Keywords: Securitized Real Estate; Statistical APT; Macroeconomic APT; Market Integration; Risk Factors JEL: G12 Date: 2004-06 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp111&r=all 42. Nonparametric Estimation of Conditional Expected Shortfall Olivier SCAILLET (HEC-University of Geneva and FAME) We consider a nonparametric method to estimate conditional expected shortfalls, i.e. conditional expected losses knowing that losses are larger than a given loss quantile. We derive the asymptotic properties of kernal estimators of conditional expected shortfalls in the context of a stationary process satisfying strong mixing conditions. An empirical illustration is given for several stock index returns, namely CAC40, DAX30, S&P500, DJI, and Nikkei225. Keywords: Nonparametric; Kernel; Time series; Conditional VAR; Conditional expected shortfall; Risk management; Loss severity distribution JEL: C14 D81 G10 G21 G22 G28 Date: 2004-05 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp112&r=all 43. Geographic Versus Industry Diversification: Contraints Matter Paul EHLING (Penn State University, Smeal College) Sofia B. RAMOS (ISCTE Business School) This research addresses whether geographic diversification provides benefits over industry diversification in a sample of European country and industry indexes. The methodology allows performance comparisons with short-selling constraints, upper and lower bounds, and many benchmarks. In the absence of constraints, no empirical evidence is found to support the argument that country diversification is a superior approach. In the case of realistic weights on portfolios such as short-selling, and lower or upper bonds, geographic diversification performs (sig- nificantly) better. The contrary results appear to be attributable to the fact that industry portfolios are better suited to eliminate the single dominant factor risk in stock returns. Further out-of-sample analysis shows that geographic diversification performs better, although the tests do not show statistical significance. Keywords: Diversification gains; EMU; Geographic diversification; Industry diversification JEL: G11 G15 Date: 2004-08 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp113&r=all 44. Further Evidence on Debt-Equity Choice Philippe GAUD (HEC - University of Geneva) Martin HOESLI (HEC - University of Geneva, FAME and University of Aberdeen (School of Business)) Andre BENDER (HEC - University of Geneva & FAME) Using a large sample of 5,365 European firms,we document the driving factors of debt-equity choices. Adjustments to a target debt level play a modest role except when debt exceeds an upper barrier, a result that underlines the importance of debt capacity. Preference for internal financing, leverage deficit prior to equity issues, as well as a high level of slack of firms seeking to reduce equity constitute further evidence in favor of pecking order models. It is also found that managers try to time the market by issuing shares when returns are high, but that there is a link between financing and investment activities as predicted by agency models. Keywords: Dynamic capital structure; Debt-equity choice; Tradeoff models; Pecking order models JEL: G32 Date: 2004-05 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp114&r=all 45. Predicting Tail-related Risk Measures: The Consequences of Using GARCH Filters for non-GARCH Data Amine JALAL (HEC-University of Lausanne and FAME) Michael ROCKINGER (HEC-University of Lausanne, FAME and CEPR) We investigate the consequences for value-at-risk and expected short-fall purposes of using a GARCH filter on various mis- specified processes. We show that careful investigation of the adequacy of the GARCH filter is necessary since under mis- specifications a GARCH filter appears to do more harm than good. Using an unconditional non filtered tail estimate appears to perform satisfactorily for dependent data with a degree of dependency corresponding to actual market conditions. Keywords: Extreme value theory; Value at Risk (VaR); Expected shortfall; GARCH; Markov switching; Jump diffusion; Backtesting. JEL: G12 C32 Date: 2004-06 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp115&r=all 46. Equity Returns and Integration: Is Europe Changing? Kpate ADJAOUTE Author-Workplace-Name: HSBC Private Bank ( Suisse) SA and FAME Jean-Pierre DANTHINE (HEC-University of Lausanne, CEPR and FAME) This paper analyses the consequences of the process of financial and economic integration on European equity markets. It documents significant changes in fundamentals, notably an increased synchronisation of macroeconomic activities, and a non-negligible evolution in pricing, with a decrease in the cost of capital and converging equity premia. As to equity returns themselves, in the face of what could turn out to be long run upward trends in the correlations among both country and sector returns and a narrowing of the superiority of country factors, the stakes of searching for diversification opportunities at a higher level of disaggregation appear to be higher than ever. Keywords: European integration; Equity markets; Diversification JEL: F36 G10 G15 Date: 2004-10 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp117&r=all 47. Real Asset Returns and Components of Inflation: A Structural VAR Analysis Matthias HAGMANN (HEC-University of Lausanne and FAME) Carlos LENZ (University of Basel, Department of Economics) We shed new light on the negative relationship between real stock returns or real interest rates and (i) post inflation, (ii) expected inflation, (iii) unexpected inflation and (iv) changes in expected inflation. Using the structural vector autoregression methodology, we propose a decomposition of those series into economically interpretable components driven by aggregate supply, real demand and money market shocks. Our empirical results support Fama’s ‘proxy hypothesis’ and the predictions of several general equilibrium models. Concerning the negative relation between the real rate of interest and inflation, we find that the Mundell-Tobin model and the explanation of Fama and Gibbons (1982) are not competitors: both add insight in their own way about the reasons for the negative correlation between those variables. However, the importance of the latter explanation decreased since the 1980’s. Keywords: Real stock returns; Real rate of interest; Expected and unexpected inflation; 'Fisher hypothesis'; Structural VAR JEL: E44 G1 Date: 2004-10 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp118&r=all 48. A Kolmogorov-Smirnov Type Test for Positive Quadrant Dependence Olivier Scaillet (HEC, University of Geneva and FAME) We consider a consistent test, that is similar to a Kolmogorov- Smirnov test, of the complete set of restrictions that relate to the copula representation of positive quadrant dependence. For such a test we propose and justify inference relying on a simulation based multiplier method and a bootstrap method. We also explore the finite sample behaviour of ^ both methods with Monte Carlo experiments. A first empirical illustration is given for US insurance claim data. A second one exemines the presence of positive quadrant dependence in life expectancies at birth of males and females among countries. Keywords: Nonparametric; Positive Quadrant Dependence; Copula; Risk Management; Loss Severity Distribution; Bootstrap; Multiplier Method; Empirical Process JEL: C12 D81 G10 G21 G22 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp128&r=all 49. House Prices, Fundamentals and Inflation Angela Black (University of Aberdeen Business School) Patricia Fraser (University of Aberdeen Business School) Martin Hoesli This paper studies actual house prices relative to fundamental house prices. Using UK data and a time-varying present value approach, we find that deviations of house prices fromtheir fundamental value (as warranted by real disposable income) are significant but not dominated by speculative activity; the driving force appears to be over-sensitivity to expectations over fundamentals. Our findings suggest that inflation (excluding house prices) responds asymmetrically with more impact on future inflation from turning points at peaks of overevaluation compared to turning points at troughs of underevaluation; and the turning points appear to have independent forecasting ability for inflation. This suggests that house prices have information about inflation which could be exploited by the MOnetary Policy Committee (MPC). Keywords: House Prices, Fundamentals, Inflation, Monetary Policy JEL: E52 E58 R31 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp129&r=all 50. Financial Intermediation and the Costs of Trading in an Opaque Market Richard C. Green (Tepper School of Business, Carnegie Mellon University) Burton Hollifield (Tepper School of Business, Carnegie Mellon University) Norman Schurhoff (HEC, University of Lausanne and FAME) Municipal bonds trade in opaque, decentralized broker-dealer markets in which price information is costly to gather. Whether dealers in such a market operate competitively is an empirical issue, but a difficult one to study. Data in such markets is generally not centrally recorded. We analyze a comprehensive database of all trades between broker-dealers in municipal bonds and their customers. The data is only released to the public with a substancial lag, and thus the market was relativela opaque to the traders themselves during our sample period. We find that dealers earn lower average markups on larger trades, even though larger trades lead the dealers to bear more risk of losses. We formulate and estimate a simple structural bargaining model that allows us to estimate mesures of dealer bargaining power and it relate it to the characteristics of the trades. The results suggest dealers exercise substancial market power. Our mesures of market power decrease in trade size and increase in variables that indicate the complexity of the trade for the dealer. Keywords: Municipal Bonds, Fixed Income Dealer, Transaction Costs, Liquidity, Transparency, Market Power JEL: D40 G14 G24 G28 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp130&r=all 51. Capital Gains Taxes, Irreversible Investment, and Capital Structure. Norman Schurhoff (HEC, University of Lausanne, FAME.) This paper studies the corporate policy distortions caused by realization-based capital gains taxation at the personal level in a dynamic trade-off theory model. The Lock-in effect of embedded capital gains creates severe conflicts of interest between incumbent and new investors. The firm's optimal policy exhibits path-dependency and non-stationarity, since the taxe basis of the firm's owners is a valuable conditioning variable for corporate decisions. Ex-ante identical firms follow very different investment and financial policies depending on their stock price evolution. Firms delay irreversible investment further the lower tax basis of their owners falls. The reason is the investment hedge provided by personal tax loss offsets weakens as investors reset their basis. Capital gains taxation also creates incentives to time equitzy issues. Firms employ more equity in their capital structure the higher the stock price-to-basis ratio, since locked- in investors with out-of-the-money tax timing options value the firm less than the market. The value gain from conditioning on the owner's tax basis is substantial. Using simulated data I show the combined effects are consistent with recent empirical evidence on the relation between leverage, Tobin's Q, and past performance. Keywords: Capital Gains Taxation, Real Options, Capital Structure, Trade-off Theory, Market Timing. JEL: G3 G32 H24 H32 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp131&r=all 52. Conditional Asset Allocation under Non-Normality: How Costly is the Mean-Variance Criterion? Eric Jondeau (HEC Lausanne and FAME) Michael Rockinger (HEC Lausanne and FAME) We evaluate how departure from normality may affect the conditional allocation of wealth. The expected utility function is approximated by a forth-order Taylor expansion that allows for non-normal returns. Market returns are characterized by a joint model that captures the time dependency and the shape of the distribution. We show that under large departure from normality, the mean-variance criterion can lead to portfolio weights that differ signifficantly from those obtained using the optimal strategy accounting for non-normality. In addition, the opportunity cost for a risk-adverse investor to use the sub- optimal mean-variance criterion can be very large. Keywords: C22; C51; G12 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp132&r=all 53. Are European Corporate Bond and Default Swap Markets Segmented? Didier Cossin (IMD International) Hongze Lu (IMD International, HEC, University of Lausanne) Market prices of corporate bond spreads and of credit default swap (CDS) rates do not match each other. In this paper, we argue that the liquidity premium, the cheapest-to-deliver (CTD) option and actual market segmentation explain the pricing differences. Using the European transaction data from Reuters and Bloomberg, we estimate a liquidity premium that is time-varying and firm- specific. We show that when time-dependent liquidity premiums are considered, corporate bond spreads and CDS rates behave in a much closer way than previous studies have shown. We also find that high equity volatility drives pricing differences that can be explained by the CTD option. Keywords: credit default swap; corporate bond yields; liquidity premium; cheapest-to-deliver options; debt-CDS arbitrage JEL: C13 G12 G13 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp133&r=all 54. Do Major Financial Crises Provide Information on Sovereign Risk to the Rest of the World? A Look at Credit Default Swap Markets. Didier Cossin (IMD International and FAME) Gero Jung (Graduate Institute of International Studies) The financial innovations of the late 1990s have led to the emergence of a significant number of new instruments, in particular in the market for hedging credit risk. This paper, based on an original dataset of transactions and quotes, looks at credit default swaps drawn on sovereign countries. The study of the credit default swap market around major financial crises leads to several results: Markets' consideration of ratings around the world changes dramatically after major financial crises, even for those countries that are not in crisis. While ratings seem suddenly to matter more, pricing uncertainty increases as well. Thus large financial crises appear to create strong information uncertainty, rather than resolve previous uncertainty. After a major crisis event, there is significant ‘flight-to-quality’ that is accompanied by a strong relative rise of demand for sovereign credit protection. We also document the extra-significance of transaction data compared to quote data in an OTC market. Overall, sovereign ratings appear to be the pricing tool of last resort when crises disturb markets. Keywords: Credit Default Swaps, Sovereign Risk, Financial Crises, Event Study JEL: G13 F34 G15 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp134&r=all 55. Indirect Robust Estimation of the Short-term interest Rate Process Veronika Czellar (Dept. of Econometrics, University of Geneva) G. Andrew Karolyi (Fisher College of Business, Ohio State University) Elvezio Ronchetti (Dept. Econometrics, University of Geneva) We introduce Indirect Robust Generalized Method of Moments ( IRGMM), a new simulation-based estimation methodology, to model short-term interest rate processes. The primary advantage of IRGMM relative to classical estimators of the continuous-time short-rate diffusion processes is that it corrects both errors due to discretization and the errors due to model misspecification. We apply this new approach to various monthly and weekly Eurocurrency interest rate series. Keywords: GMM and RGMM estimators; CKLS one factor model; indirect inference JEL: G10 G12 C10 C22 C15 C53 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp135&r=all 56. Direct Preference Wealth in Aggregate Household Portfolios Pascal St-Amour (Hec, University of Lausanne) According to standard theory, wealth should have no intrinsic value. Yet, conventional wisdom, recent theories, and data suggest it might. We verify whether or not households have direct preferences over wealth in selecting assets. The fully structural econometric model focuses on a multivariate Brownian motion in optimal consumption, portfolios and wealth. Using aggregate portfolio data, we find that wealth (i) is directly valued, (ii) reduces marginal utility and (iii) reduces risk aversion, while we reject the HARA, and CRRA restrictions. Consequently, wealth- dependent utility generates a larger IMRS risk, justifying a larger, more predictable risk premium and a lower risk-free rate. Keywords: Portfolio choice; Wealth-dependent preferences; Preference for status; Asset pricing; Equity premium; Risk-free rate; Predictability JEL: G11 G12 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp136&r=all 57. On the Demand for Budget Constrained Insurance Richard Watt (Universidad Autonoma de Madrid) Henri Louberge (University of Geneva and FAME) Much of the traditional economic theory of insurance is based on the assumption that the risk against which insurance is to be purchased is entirely exogenous. This is usually modelled by simply allowing the individual to include insurance as a mechanism of covering risk, without any real analysis of how this insurance is paid for. However, in almost all real-life consumer insurance, the size of the risk is itself a choice variable (the type of car to purchase, the type of employment to take, the amount to invest in an insurable asset, etc.), and decisions are made taking budget constraints explicitly into account. While an enormous number of interesting theorems can be derived in the standard model, these results are typically not robust to the extention of making risk an endogenous choice variable and the explicit inclusion of a budget constraint. Here, we use a simple two state model of the demand for insurance in which we explicitly introduce a budget constraint and in which the insurable risk itself is a choice variable. In the model, we find that the standard result of full coverage being demanded if and only if the premium is such that the insurer earns an expected profit of 0 no longer holds as such, and it turns out that in a simple two state setting some of the ambiguity of the standard model’s comparative statics is avoided. Keywords: insurance coverage; risk aversion; normality; Giffen good; actuarially fair premium JEL: D11 D80 G22 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp137&r=all 58. Growth Options in General Equilibrium: Some Asset Pricing Implications Julien Hugonnier (University of Lausanne and FAME) Erwan Morellec (University of Lausanne, FAME and CEPR) Suresh Sundaresan (Graduate School of Business, Columbia University) We develop a general equilibrium model of a production economy which has a risky production technology as well as a growth option to expand the scale of the productive sector of the economy. We show that when confronted with growth options, the representative consumer may sharply alter consumption rates to improve the likelihood of investment. This reduction in consumption is accompanied by an erosion of the option value of waiting to invest, leading to investment near the zero NPV threshold. It also has important consequences for the evolution of risk aversion, asset prices and equilibrium interest rates which we characterize in this paper. One interesting prediction of the model is that we get time varying risk aversion and equity returns by virtue of the presence of growth option. We also find that the moneyness of the growth option is the key factor which determines the extent to which the book to market ratios will influence the conditional moments of equity returns. Keywords: G10; G11; G12; G31 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp138&r=all 59. Trading Volumes in Dynamically Efficient Markets Tony Berrada (HEC Montreal, CIRANO and CREF) Julien Hugonnier (University of Lausanne, CIRANO and FAME) Marcel Rindisbacher (Rotman School of Management, University of Toronto and CIRANO) The classic Lucas asset pricing model with complete markets stresses aggregate risk and, hence, fails to investigate the impact of agents heterogeneity on the dynamics of the equilibrium quantities and measures of trading volume. In this paper, we investigate under what conditions non-informational heterogeneity, i.e. differences in preferences and endowments, leads to non trivial trading volume in equilibrium. Our main result comes in form of a non-informational no trade theorem which provides necessary and sufficient conditions for zero trading volume in a dynamically efficient, continuous time Lucas market model with multiple goods and securities. Keywords: General Equilibrium, Trading Volume; heterogenous agents; multiple goods; incomplete markets; no-trade theorem. JEL: D51 D52 G11 G12 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp139&r=all 60. Playing Hardball: Relationship Banking in the Age of Credit Derivatives Stefan ARPING, (University of Lausanne) This paper develops a contracting framework in order to explore the effects of credit derivatives on banks’ incentives to monitor loans, their incentives to intervene, and, ultimately, borrowers’ incentives to perform. We show that (i) credit derivatives with short term maturity strengthen incentives to intervene, incentives to monitor, and managerial incentives to perform; (ii) while credit derivatives with long term maturity weaken incentives to intervene, intervention incentives can be maintained by sourcing more short term credit insurance; (iii) long term credit insurance nevertheless weakens managerial incentives through a dilution effect. These findings suggest that properly designed credit derivatives strengthen monitoring incentives and result in efficiency gains, rather than impeding economic efficiency. URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp49&r=all 61. What Factors Determine International Real Estate Security Returns? Foort HAMELINK (Lombard Odier & Cie, Vrije Universiteit and FAME) Martin HOESLI (HEC-University of Geneva, FAME and University of Aberdeen) We use constrained cross-section regressions to disentangle the effects of various factors on international real estate security returns. Besides a common factor, pure country, property type, size, and value/growth factors are considered. The value/growth measure that is used in this paper provides for each security the relative importance of the value and growth components, rather than a binary classification. The value/growth factor is found to be volatile and to have a substantial effect on returns over the analyzed period February 1990-April 2003. Country factors are the dominant factors, and size is shown to have a negative impact on returns. Statistical factors derived by means of cluster analysis explain about one third of specific returns on international real estate securities. The implication for portfolio managers is that failing to recognize the importance of the various factors leads to the portfolio being exposed to systematic risk. Keywords: securitized real estate, international diversification, multi-factor model, value/growth JEL: C21 G11 G15 Date: 2003-07 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp50&r=all 62. The Determinants of Stock Returns in a Small Open Economy Severine CAUCHIE (HEC-University of Geneva) Martin HOESLI (HEC-University of Geneva; FAME; University of Aberdeen (Business School)) Dusan ISAKOV (HEC-University of Geneva and FAME) This paper examines the determinants of stock returns in a small open economy using an APT framework. The analysis is conducted for the Swiss stock market which has the particularity of including a large proportion of firms that are exposed to foreign economic conditions. Both a statistical and a macroeconomic implementation of the model are performed for the period 1986- 2002 with monthly returns on industrial sector indices. The results show that the statistically determined factors yield a better representation of the determinants of stock returns than the macroeconomic variables and that stock returns are influenced by both global and local economic conditions. This suggests that the Swiss stock market is an internationally imperfectly integrated market. Keywords: Statistical APT, Macroeconomic APT, Market integration, Risk factors JEL: G12 G15 Date: 2003-05 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp54&r=all 63. International Evidence on Real Estate as a Portfolio Diversifier Martin Hoesli (HEC-University of Geneva, FAME and University of Aberdeen School of Business) Jon Lekander (Aberdeen Property Investors Nordic Region) Witold Witkiewicz (Europa Capital Partners) This paper provides an international comparison of the benefits of including real estate assets – both domestic and international – in mixed-asset portfolios. Data from seven countries on three continents are considered for a common time period (1987-2001) to facilitate comparisons. Real estate returns are desmoothed using a variant of the Geltner (1993) approach, and Bayes-Stein estimators are used to increase the stability of portfolio weight estimations. Both unhedged and hedged analyses are conducted. Real estate is found to be an effective portfolio diversifier, and even more so when both domestic and international real estate assets are considered. The optimal allocation to real estate is in the 15 to 25% range, and remains remarkably constant in the various analyses. The breakdown of the real estate allocation between domestic and non-domestic assets, however, is found to vary substantially across countries and depending on whether returns are hedged or not. Date: 2003-07 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp70&r=all 64. On the Consequences of State Dependent Preferences for the Pricing of Financial Assets Jean-Pierre Danthine (Universite de Lausanne, FAME and CEPR) John B. Donaldson (Columbia University) Christos Giannikos (Baruch College, City University of New York) Hany Guirguis (Manhattan College) This paper introduces state dependent utility into the standard Mehra and Prescott (1985) economy by allowing the representative agent’s coefficient of relative risk aversion to vary with the underlying economy’s growth rate. Existence of equilibrium is proved and its asymptotic properties analyzed. This generalization leads to level dependent marginal rates of substitution, a property that sharply distinguishes this model from the standard construct. For very low coefficients of relative risk aversion, the equilibrium risk free and risky security returns are demonstrated to have volatilities and an associated equity premium that substantially exceed what is found in the data. This provides a contrasting perspective on the classic “equity premium puzzle.” Keywords: state dependent utility; equity premium; equity premium puzzle JEL: D91 E21 G00 G12 Date: 2004-06 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp73&r=all 65. What’s in a View? Steven C. Bourassa (School of Urban and Public Affairs, University of Louisville) Martin Hoesli (HEC-University of Geneva, FAME and University of Aberdeen Business School) Jian Sun (School of Urban and Public Affairs, University of Louisville) The impact of views on property values has not been the specific focus of as much research as has the impact of other externalities on property values. When the impact of views is assessed, it is usually done by adding a single dummy variable to a hedonic regression equation. This paper provides a detailed literature review as well as an empirical analysis of the impact of a view on residential property values using a very rich database of nearly 5,000 sales in Auckland, New Zealand. Several dimensions of a view are analyzed: type of view, scope of view, distance to coast, appearance of immediately surrounding improvements, average quality of landscaping in the neighborhood, and average quality of structures in the neighborhood. It is found that wide views of water add an average of 59% to the value of a waterfront property, but that this effect diminishes quite rapidly as the distance from the coast increases. Attractive buildings in a property’s neighborhood on average add 37% to value relative to properties in neighborhoods with only average quality structures. Particularly attractive improvements in the immediate surroundings of a property add another 27% to value on average. On the other hand, properties in neighborhoods with only poor quality landscaping on average experience a -51% impact on price. Our results lead to the conclusion that aesthetic externalities are multi-dimensional and can have a substantial impact on residential property values. Date: 2003-11 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp79&r=all 66. On the Way to Recovery: A Nonparametric Bias Free Estimation of Recovery Rate Densities Olivier RENAULT (Standard and Poor’s Risk Solutions) Olivier SCAILLET (HEC-University of Geneva and FAME) In this paper we analyse recovery rates on defaulted bonds using the Standard and Poor’s/PMD database for the years 1981-1999. Due to the specific nature of the data (observations lie within 0 and 1), we must rely on nonstandard econometric techniques. The recovery rate density is estimated nonparametrically using a beta kernel method. This method is free of boundary bias, and Monte Carlo comparison with competing nonparametric estimators show that the beta kernel density estimator is particularly well suited for density estimation on the unit interval. We challenge the usual market practice to model parametrically recovery rates using a beta distribution calibrated on the empirical mean and variance. This assumption is unable to replicate multimodal distributions or concentration of data at total recovery and total loss. We evaluate the impact of choosing the beta distribution on the estimation of credit Value-at-Risk. Keywords: default, recovery, kernel estimation, credit risk JEL: C13 C14 C51 G18 G21 G33 Date: 2003-05 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp83&r=all 67. Start-ups Defined as Portfolios of Embedded Options Pascal BOTTERON (Institute of Banking and Finance, HEC- University of Lausanne and Ernst & Young Ltd.) Jean-Francois CASANOVA (Strategic Risk Management) In this paper we show the advantages of staged investments for venture capitalists. We develop an option-pricing model that enables to evaluate the flexibility acquired by a venture capitalist when he stages his investment process. Instead of investing a fixed amount at the beginning of the investment, the venture capitalist proceeds to a staged investment (one first investment and a second investment). The second investment will be triggered by a successful achievement of the first investment. Should the first investment be unsuccessful, the second investment will not be executed. Staging the investment in two phases enables the investor to reduce its uncertainty at the beginning of the project. As it will be demonstrated in the paper, the decision to proceed to the second investment can be modelled as a portfolio of a call option and a binary option. Keywords: real options, staged investments, structured products, embedded options JEL: G12 G30 G31 G32 G34 M13 Date: 2003-05 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp85&r=all 68. Portfolio Diversification in Europe Kpate ADJAOUTE (HSBC Republic Bank (Suisse) SA & FAME) Jean-Pierre DANTHINE (HEC-University of Lausanne, CEPR & FAME) Dusan ISAKOV (HEC-University of Geneva & FAME) Have the euro and accompanying measures of financial integration had a discernable impact on the degree of diversification of European investors? This is an empirical question that this paper tries to answer by exploring four alternative avenues. First we focus on the final outcome: If European investors are indeed better diversified, their consumption should be increasingly correlated. Second we check more directly what is known about the composition of Europeans’ portfolios. A third perspective focuses on the evolution of returns and prices. If indeed European investors are attempting to exploit new arbitrage opportunities opened up by the euro and European financial integration, then it is likely that these behavioral changes will be matched by significant changes in returns or in the nature of the return generating process. Finally, we explore the possibility that the answer to our question may be better revealed by examining the changes that have taken place in the investment process itself. Keywords: Risk sharing, Portfolio holdings, financial market integration, cross sectional dispersion JEL: F2 F36 G15 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp86&r=all 69. Maximum Drawdown and the Allocation to Real Estate Foort HAMELINK (Lombard Odier Darier Hentsch, Vrije Universiteit and FAME) Martin HOESLI (HEC-University of Geneva, FAME, and University of Aberdeen (School of Business)) We investigate the role of real estate in a mixed-asset portfolio when the maximum drawdown (hereafter MaxDD), rather than the standard deviation, is used as the measure of risk. In particular, we analyse whether the discrepancy between the optimal allocation to real estate and the actual allocation by institutional investors is less when a Return/MaxDD framework is used. The empirical analysis is conducted from the perspective of a Swiss investor using international data for the period 1979- 2002. We show that most portfolios optimised in Return/MaxDD space, rather than in Return/Standard Deviation space, yield a much lower MaxDD, while only a slightly higher standard deviation for the same level of return). The reduction in MaxDD is highest for portfolios situated half-way on the efficient frontier, typically close to those held by pension funds. Also, the reported weights for real estate are much more in line with the actual weights to real estate by institutional investors. Keywords: Maximum Drawdown, Downside Risk, Portfolio Diversification, Real Estate JEL: G11 Date: 2003-11 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp87&r=all 70. The Macroeconomics of Delegated Management Jean-Pierre Danthine (HEC-University of Lausanne, CEPR & FAME) John B. Donaldson (Columbia University) We are interested in the macroeconomic implications of the separation of ownership and control. An alternative decentralized interpretation of the stochastic growth model is proposed, one where shareholders hire a self-interested manager who is in charge of the firm’s hiring and investment decisions. Delegation is seen to give rise to a generic conflict of interests between shareholders and managers. This conflict fundamentally results from the different income base of the two types of agents, once aggregate market clearing conditions are taken into account. An optimal contract exists resulting in an observational equivalence between the delegated management economy and the standard representative agent business cycle model. The optimal contract, however, appears to be miles away from standard practice: the manager’s remuneration is tied to the firm’s total income net of investment expenses, abstracting totally from wage costs. In order to align the interest of a manager more conventionally remunerated on the basis of the firm’s operating results to those of stockholder-workers, the manager must be made nearly risk neutral. We show the limited power of convex contracts to accomplish this goal and the necessity, if the manager is too risk averse (log or higher than log), of considerably downplaying the incentive features of his remuneration. The difficulty in reconciling the viewpoints of a manager with powers of delegation and of a representative firm owner casts doubt on the descriptive validity of the macro- dynamics highlighted in the representative agent macroeconomic model. Keywords: business cycles, delegated management, contracting JEL: E32 E44 Date: 2003-06 URL: http://d.repec.org/n?u=RePEc:fam:rpseri:rp88&r=all 71. Spot Market Power and Future Market Trading Stephen Shore Alexander Muermann ... ... When a spot market monopolist participates in the futures market, he has an incentive to adjust spot prices to make his futures market position more pro.table. Rational futures market makers take this into account when they set prices. Spot market power thus creates a moral hazard problem which parallels the adverse selection problem in models with inside information. This moral hazard not only reduces the optimal amount of hedging for those with and without market power, but also makes complete hedging impossible. When market makers cannot distinguish orders placed by those with and without market power, market power provides a venue for strategic trading and market manipulation. The monopolist will strategically randomize his futures market position and then use his market power to make this position pro. table. Furthermore, traders without market power can manipulate futures prices by hiding their orders behind the monopolist.s strategic trades. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp531&r=all 72. The more we know, the less we agree: public announcements and higher-order expectations Peter Kondor The stylized fact that public announcements in financial markets are followed by intense trading, high trading volume and volatile prices, is widely perceived as the sign of increasing disagreement due to the announcement. However, it is common to argue that this would be inconsistent with Bayesian-learning and common priors. In this paper, we not only show that — with certain information structures — increasing disagreement is possible in a Bayesian model, but we also argue that with the assumption that traders trade for resale — so they try to second guess future traders’ guesses — there are information structures which are simple, intuitive and plausible and result in increasing disagreement even in a standard, multi-period Grossman—Stiglitz model. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp532&r=all 73. Rational Trader Risk Peter Kondor Allowing for a richer information structure than usual, we show that rational traders’ calculation with short-term price fluctuations may heavily influence their behaviour even if the interim price is not influenced by non-rational agents i.e. there is no noise trader risk. Instead, traders expect that new rational entrants with different information in the interim period will drive the price against them. Consequently, rational traders in the first period will hesitate to trade on their private information or - in the extreme - will trade against their private information i.e. buy more of the risky asset when they consider it worse. In the first part we develop a microstructure model with learning where the above effect will result in severe inefficiency and mispricing. In the second part, we discuss the critical properties of the information structure which are expected to result in similar findings in general models. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp533&r=all 74. Estimating Structural Bond Pricing Models via Simulated Maximum Likelihood Max Bruche This paper describes how structural bond pricing models can be estimated using a Simulated Maximum Likelihood procedure developed by Durbin and Koopman (1997). The approach has the advantage that price dated on any traded claim (such as bonds, equity, and credit default swaps), as well as information about the balance sheet (e.g. accounting data) can be used in the estimation, improving efficiency. Monte Carlo evidence as well as a small application to real data indicates that this approach is superior to both traditional estimation methods and recently proposed versions of Maximum Likelihood Estimation (Ericsson, Reneby 2002) Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp534&r=all 75. IMF concern for reputation and conditional lending failure: theory and empirics Silvia Marchesi Laura Sabani One possible explanation for the unsatisfactory implementation of IMF conditionality has been attributed to the lack of credibility of the IMF threat of interrupting financial assistance in case of non compliance with the negotiated conditions. In this paper we suggest that such lack of credibility might be due to the dual role played by the IMF which acts at the same time as a creditor and a monitor of economic reforms. We show that the IMF incentive to hide its surveillance failures, in order to preserve its reputation of being a good monitor, may actually distort its lending decisions towards greater laxity (relative to social optimum) in punishing non- compliance with economic reforms. We have empirically tested such theoretical result by supposing that larger departures from efficiency of the IMF lending rule are associated with a longer relationship between a country and the IMF. The longer this relationship, the stronger the IMF reputation will be affected in case it ultimately decides to stop lending. Specifically, we have empirically investigated whether IMF disbursements are affected by the IMF own share of debt, which is taken as a proxy for the duration of the relationship between the Fund and a country. Our empirical results show that a higher IMF debt share does increase IMF disbursements. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp535&r=all 76. Financial Tunnelling and the Revenge of the Insider System Jeremy Grant Thomas Kirchmaier In this paper, we document how European companies can use financial tunnelling to the disadvantage of minority shareholders, despite improved legislation directed at eliminating such activities. In four case studies, two German and two Italian, we document how newly established corporate governance standards were successfully circumvented by dominant shareholders, major financial institutions, politicians, and in the worst case the regulator. These cases demonstrate that for effective Corporate Governance to work, one not only has to change the law, but even more importantly, one has to ensure the widespread acceptance of new rules. The litmus test of corporate governance reforms in any country is whether the rules are applied objectively in situations where powerful elites perceive they are disadvantaged under the new regulations. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp536&r=all 77. (UBS Pensions Series 035) Asset Pricing with Limited Risk Sharing and Heterogeneous Agents Francisco Gomes Alex Michaelides We solve a model with incomplete markets and heterogeneous agents that generates a large equity premium, while simultaneously matching stock market participation and individual asset holdings. The high risk premium is driven by incomplete risk sharing among stockholders, which results from the combination of borrowing constraints and (realistically) calibrated life-cycle earnings profiles, subject to both aggregate and idiosyncratic shocks. We show that it is challenging to simultaneously match aggregate quantities (asset prices) and individual quantities (asset allocations). Furthermore, limited participation has a negligible impact on the risk premium, contrary to the results of models where it is imposed exogenously. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp537&r=all 78. Bargaining Power and Enforcement in Credit Markets Garance Genicot (Georgetown University) and Debraj Ray (New York University) (Department of Economics, Georgetown University) In a credit market with enforcement constraints, we study the effects of a change in the outside options of a potential defaulter on the terms of the credit contract, as well as on borrower payoffs. The results crucially depend on the allocation of “bargaining power” between the borrower and the lender. We prove that there is a crucial threshold of relative weights such that if the borrower has power that exceeds this threshold, her expected utility must go up whenever her outside options come down. But if the borrower has less power than this threshold, her expected payoff must come down with her outside options. In the former case a deterioration in outside options brought about, say, by better enforcement, must create a Lorenz improvement in state- contingent consumption. In particular, borrower consumption rises in all “bad” states in which loans are taken. In the latter case, in contrast, the borrower’s consumption must decline, at least for all the bad states. These disparate findings within a single model permit us to interpret existing literature on credit markets in a unified way. Classification-JEL Codes: O120, O160, G190 Keywords: credit, no commitment, enforcement, bargaining power URL: http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~05-05-09&r=all 79. Who Is Against Immigration? A Cross-Country Investigation of Individual Attitudes towards Immigrants Anna Maria Mayda (Georgetown University) (Department of Economics, Georgetown University) This paper empirically analyzes both economic and non-economic determinants of attitudes towards immigrants, within nd across countries. The two individual-level survey data sets used, covering a wide range of developed and developing countries, make it possible to test for interactive effects between individual characteristics and country-level attributes. In particular, trade and labor-economics theories of labor markets predict that the correlation between proimmigration attitudes and individual skill should be related to the skill composition of natives relative to immigrants in the destination country. Skilled individuals should favor immigration in countries where natives are more skilled than immigrants and oppose it in the other countries. Results based on both direct and indirect measures of the relative skill composition of natives to immigrants are consistent with these predictions. Individual skill and pro- immigration attitudes are positively correlated in countries where the skill composition of natives relative to immigrants is high. Individuals with higher levels of skill are more likely to be pro-immigration in high per capita GDP countries and less likely in low per capita GDP countries. Non-economic variables also appear to be correlated with immigration attitudes but they don’t seem to alter significantly the results on the economic explanations. Classification-JEL Codes: F22, F1, J61 Keywords: Immigration Attitudes, International Migration, Political Economy URL: http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~05-05-10&r=all 80. Why are some people (and countries) more protectionist than others? Anna Maria Mayda (Georgetown University) and Dani Rodrik ( Harvard University) (Department of Economics, Georgetown University) We analyze two cross-country data sets that contain information on attitudes toward trade as well as a broad range of socio- demographic and other indicators. We find that pro-trade preferences are significantly and robustly correlated with an individual's level of human capital, in the manner predicted by the factor endowments model. Preferences over trade are also correlated with the trade exposure of the sector in which an individual is employed: individuals in nontraded sectors tend to be the most pro-trade, while individuals in sectors with a revealed comparative disadvantage are the most protectionist. Third, an individual's relative economic status has a very strong positive association with pro-trade attitudes. Finally, non- economic determinants, in the form of values, identities, and attachments, play an important role in explaining the variation in preferences over trade. High degrees of neighborhood attachment and nationalism/patriotism are associated with protectionist tendencies. Classification-JEL Codes: F1 Keywords: Immigration Attitudes, International Migration, Political Economy URL: http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~05-05-11&r=all 81. Incitamentsreglering av monopol med styckvis linjar approximation av efterfragan Lantz, Bjorn (Department of Business Administration, School of Economics and Commercial Law, Goteborg University) One anonymous mechanism for monopoly regulation is the Chord- approximation Adjustment Process, CAP, suggested by Vogelsang ( 1988) where the change in consumer surplus is approximated as an average between a Laspeyres and a Paasche index. The main drawback of this method is an incentive for strategic pricing behaviour so that the price will not converge to marginal cost whenever demand is not linear. This paper shows how the change in consumer surplus under a non-linear demand curve can be approximated piecewise linearly based on solely verifiable information which removes the incentive for strategic behaviour.
Keywords: Monopoly regulation; incentive regulation Date: 2005-03-29 URL: http://d.repec.org/n?u=RePEc:hhb:gunwba:2005_407&r=all 82. What Can A Service Logic Offer Marketing Theory Christian, Gronroos (Swedish School of Economics and Business Administration) The goods-dominated marketing model has major shortcomings as a guiding marketing theory. Its marketing mix approach is mainly geared towards buying and does not include consumption as an integral part of marketing theory. Although it is during the process of consuming goods and services that value is generated for customers and the foundation for repeat purchasing and customer relationships are laid, this process is left outside the scope of marketing.
The focus in service marketing is not on a product but on interactions in service encounters. Consumption has become an integral part of a holistic marketing model. Other than standardized goods-based value propositions can be better understood when taking a servicebased approach. It is concluded that marketing based on a goods logic is but a special case of marketing based on a service logic and applicable only in certain contexts with standardized products. Keywords: Service marketing; marketing logic; relationship Date: 2005-04-05 URL: http://d.repec.org/n?u=RePEc:hhb:hanken:0508&r=all 83. Optimal Environmental Road pricing Johansson-Stenman, Olof (Department of Economics, School of Economics and Commercial Law, Goteborg University) An optimal first-best road charge should not only be differentiated with respect to factors that affect the direct external environmental and time costs from the road-user himself. Indirect effects, such as the fact that other cars will be more polluting when congestion increases, should also be taken into account.
Keywords: Road pricing; environmental costs; externalities; indirect effects JEL: Q58 R41 R48 Date: 2005-03-31 URL: http://d.repec.org/n?u=RePEc:hhs:gunwpe:0168&r=all 84. Valdsutvecklingen i Sverige - En presentation och analys av sjukvardsdata Estrada, Felipe (Institute for Futures Studies) In Scandinavia as in many other parts of Europe, violence constitutes an important focus for the public and political debate on crime. Much of what is said in the public debate, and done in the field of criminal policy, stems from a perception that violence is on the increase. This paper presents a new social indicator of trends in violence – Swedish hospital admissions resulting from acts of violence – and evaluates this measure in the light of more traditional indicators of violence – crime statistics, victim surveys and homicide statistics. The hospital data comprise 90,000 admissions from the years 1974-2002. The results show that admissions caused by violence are more numerous in the 1970s and 1990s and fewer in the 1980s. Nothing in the hospital data indicates an increase in hospital admissions resulting from serious violent incidents over this period. No increase is noted in either fractures or knife and gunshot wounds. Thus the continuous upward trend noted in crime statistics is not verified. Instead the hospital data serve to verify the more stable trends indicated by victim surveys and lethal violence statistics. Keywords: Valdsutveckling i Sverige; sjukvardsdata JEL: K00 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:hhs:ifswps:2005_004&r=all 85. Equity, Justice, Interdependence: Intergenerational Transfers and the Ageing Population Rydell, Ingrid (Institute for Futures Studies) The increase in the ratio of the elderly to the working age population as the demographic transition of low fertility and low mortality proceeds, has spurred a discussion concerning the equity of intergenerational transfers. The central question is if and how the state can afford the pensions and healthcare costs for growing older populations, and who should carry the burden. To a large extent, focus has been on public transfers while neglecting private transfers within families. There is also an obvious tendency of considering the impact of ageing in terms of pensions while health care has gained a lot less attention. A gender approach shows to be fruitful in the analysis of the costs and benefits of intergenerational transfers. Keywords: equity; justice; interdependence; intergenerational transfers; ageing population JEL: D63 J00 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:hhs:ifswps:2005_005&r=all 86. Trust in surveys and games - a matter of money and location? Holm, Hakan (Department of Economics, Lund University) Nystedt, Paul (Department of Economics, Lund University) This paper explores methods to study trust. Answers to survey questions and choices in a trust game are obtained from subjects approached by mail executing their tasks at home as well as from classroom subjects. No discernable differences between the results obtained by these methods were observed. Furthermore, one group of subjects played the trust game with hypothetical payments. This changed trust behavior dramatically, whereas trustworthiness was unaffected. Subjects without financial incentives exhibited less trust. Trust choices with hypothetical payments were significantly correlated with survey trust answers whereas there was no such correlation for the corresponding choices with real payments. Keywords: Trust; Financial incentives; Location; Survey answers JEL: C72 C81 C90 C93 Date: 2005-04-07 URL: http://d.repec.org/n?u=RePEc:hhs:lunewp:2005_026&r=all 87. After outsourcing – the outsourced unit: Dependence, capabilities and strategy Sanner, Leif (Department of Business, Economics, Statistics and Informatics) Outsourcing is in this study defined as the transfer of responsibility and activities, including relevant assets and resources, from a user to a legally separate party, that becomes a vendor to the user. An outsourcer transfers activities to an outsourced unit. The situation of the outsourced unit becomes problematic in its provision of goods or services to both the outsourcer and other buyers. Specifically, the outsourced unit after outsourcing has ample and tight bonds to the outsourcer and there is a need to strike a balance between dependence and independence towards the outsourcer. The investigated problem reported in this article is: How can the outsourced unit strategically handle its situation after the outsourcing? Issues at stake for the outsourced unit are: How to hand le dependence on the outsourcer. How to use and develop competitive advantages, capabilities and resources. How to develop and implement business strategy.
Dependence can reside in asset specificity: Relationships with the outsourcer and business partners, need for the exchange partner’s competence, joint governance systems, the relative volume of goods/services provided and/or specialization of goods/services towards the exchange partner. The structure of the market may make it more or less possible to substitute one exchange partner for another.
For sustainable competitive advantage, the possession of or access to strategic capabilities and resources is needed, which the outsourced unit accumulates and deploys. The firm must meet the demand with a supply based on its capabilities and resources. The outsourced unit obviously starts with resources collected and capabilities developed by the out sourcer. It is its management’s task to identify and muster the resources and strategic capabilities of the firm. Inherited capabilities and resources may thus need to be developed into capabilities that are important for the outsourcer’s new role and position.
In two in-depth cases outsourced units are studied with focus on dependence on the outsourcer, the units’ guiding competitive advantages, their capabilities and resources. Two distinct strategies are identified. A strategy of conjunction with the outsourcer is to make use of competitive advantages, align capabilities and resources towards the outsourcer’s needs and to build on dependence by holding specific assets of interest for the outsourcer. A strategy of disjunction implies reducing dependence on the outsourcer by seeking new alliances and markets outside the outsourcer-outsourced relation. Disharmony with either of the strategies is discussed as a reason for strategic change. Keywords: Outsourcing; business relations; strategy JEL: M10 Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:hhs:oruesi:2005_002&r=all 88. Benchmarking business practices in Swedish manufacturing firms Sanner, Leif (Department of Business, Economics, Statistics and Informatics) Regional benchmarking studies were conducted on business practices in manufacturing plants in three regions in Sweden. The studies were designed to determine their use of best practices and thus enable firms to identify areas in which they need to make improvements. The questionnaire contained around 200 questions to which 452 firms responded. In analysing the results, questions and responses were grouped into six categories. Two indices were developed.
The studies classified firms scoring high as leaders, and firms scoring low as laggers. The studies showed inter alia that the gap in performance between leaders and laggers is particularly wide in Information & benchmarking and Innovation & technology. Conclusions are that improving benchmarking processes is a strategic step towards improving the firm’s business practices. Keywords: Benchmarking; business relations; strategy JEL: M10 Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:hhs:oruesi:2005_003&r=all 89. Does permanent income determine the vote? Lind, Jo Thori (Dept. of Economics, University of Oslo) I study to what extent voters are forward looking and how future income affects
the voting decision. Particularly, I estimate the effect of both transitory and permanent income on preferences for different parties using a panel data set from the Norwegian Election Study. To construct a proxy for permanent income, I use stated expectations about the future economic situation and an estimate of how this affects future income. It turns out that once we include the proxy for permanent income, transitory income has no explanatory power on voting behaviour, supporting the hypothesis of forward looking voting. As expected, a high expected permanent income leads to Conservative voting and a low income to Socialist voting. Keywords: Voting; permanent income; redistribution JEL: C25 D31 D72 D91 H11 H53 Date: 2005-04-06 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2004_023&r=all 90. Local autonomy and interregional equality Cappelen , Alexander W. (Dept. of Economics, University of Oslo) Tungodden, Bertil (Norwegian School of Economics and Business Administration and Chr. Michelsen) This paper shows how two important interregional transfer schemes,the foundation grant and the power equalization grant, can be seen as two different interpretations of equal opportunity ethics. It provides characterizations of both transfer schemes by the use of basic liberal egalitarian principles. Both the foundation grant and the power equalization grant scheme make use of specific reference levels. The paper also shows how reasonable requirements on the transfer schemes restrict the set of possible reference levels. Keywords: transfer schemes; foundation grant; power equalization grant; liberal egalitarian principles JEL: E62 Date: 2004-11-24 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2004_024&r=all 91. Moral hazard and moral motivation: Corporate social responsibility as labor market screening Brekke, Kjell Arne (The Ragnar Frisch Centre for Economic Research) Nyborg, Karine (The Ragnar Frisch Centre for Economic Research) Morally motivated individuals behave more cooperatively than predicted by standard theory. Hence,if a firm can attract workers who are strongly motivated by ethical concerns, moral hazard problems like shirking can be reduced. We show that employers may be able to use the firm’s corporate social responsibility profile as a screening device to attract more productive workers. Both pooling and separating equilibria are possible. Even when a substantial share of the workers have no moral motivation whatsoever, such screening may in fact drive every firm with a low social responsibility profile out of business. Keywords: Self-image; teamwork; shirking; voluntary abatement JEL: D21 D62 D64 J31 Q50 Z13 Date: 2005-04-06 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2004_025&r=all 92. Can a carbon permit system reduce Spanish unemployment? F?hn, Taran (Research Department, Statistics Norway,) Gomez-Plana, Antonio G. (Dept. of Economics, University of Oslo) Kverndokk, Snorre (Ragnar Frisch Centre for Economic Research) This paper analyses whether recycling revenues from carbon emission permit auctions can reduce unemployment in the Spanish economy. Spain's deviation from EU's intermediate emission goals is more serious than for most other EU countries, and the unemployment is also well above the EU average. We use a CGE model that includes a matching model with two types of labour, and which allows for different pricing rules and returns-to-scale assumptions. We find that abatement reduces unemployment due to beneficial impacts of recycling the revenue from permit sales. Unemployment is more effectively abated when revenues are used to reduce labour taxes rather than indirect taxes. Contrary to other studies of Europe, we find that the best option is to reduce payroll taxes on skilled labour. This reform is the most successful both in increasing demand and in dampening the supply response to rising wages. All the recycling schemes also generate dividends in terms of welfare, but none offset the abatement costs entirely. Keywords: Spanish unemployment; Tax reform; Emission Permit Auctions; Employment dividend; Matching functions; Increasing returns to scale; Computable general equilibrium models JEL: D58 J68 Q38 Date: 2005-12-15 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2004_026&r=all 93. Consumption and population age structure Erlandsen, Solveig (Norges Bank) Nymoen, Ragnar (Dept. of Economics, University of Oslo) In this paper the effects on aggregate consumption of changes in the age distribution of the population are analysed empirically. Economic theories predict that age influences individuals’ saving and consumption behaviour. Despite this, age structure effects are rarely controlled for in empirical consumption functions. Our findings suggest that they should. By analysing Norwegian quarterly time series data we find that changes in the age distribution of the population have significant and life cycle consistent effects on aggregate consumption. Furthermore, controlling for age structure effects stabilizes the other parameters of the consumption function and reveals significant real interest rate effects. Simulation experiments show that the numerical effect on the savings rate of age structure changes is substantial when the indirect effects via wealth and income are accounted for. Keywords: Consumption; demography; savings; time series models; cointegration. JEL: C51 C53 E21 J10 Date: 2005-04-06 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2004_027&r=all 94. Electricity prices in a mixed thermal and hydropower system Hoel, Michael (Dept. of Economics, University of Oslo) When a monopolistic hydro producer interacts with a competitive thermal fringe, the short-run revenue function of the hydro monopolist is non-concave. This implies that even if the demand function is stationary, equilibrium prices may fluctuate through the year. For given capacities, both hydro and thermal producers are better off under such an outcome than under the competitive outcome with constant prices, while consumers are worse off. Prices may fluctuate through the year also in the long-run equilibrium where capacities are endogenous. In such an equilibrium the hydropower monopoly will get a lower profit than it would have gotten had it been a price taker. Keywords: Electricity prices; Hydropower JEL: L12 L13 L94 Q25 Date: 2004-11-29 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2004_028&r=all 95. A Whiter Shade of Pale: on the Political Economy of Regulatory Instruments Baldursson, Fridrik M (University of Iceland) von der Fehr, Nils-Henrik M (Dept. of Economics, University of Oslo) We consider an intertemporal policy game between changing governments that differ in their attitudes towards a particular feature of market outcomes, exemplified with environmental pollution. When in power, a government will choose policy instruments and set strictness of regulation with a view to influencing the policy of future, possibly different, governments. We demonstrate that a ‘brown’ government favours emission quotas over effluent taxes, as quotas establish property rights that are costly to reverse. Conversely, a ‘green’ government prefers to regulate by taxes, in order to limit the incentives of future ‘brown’ governments to ease regulations. Strategic behaviour tends to exaggerate policy differences (making ‘green’ governments ‘greener’ and ‘brown’ governments ‘browner’) compared to when such strategic considerations were not an issue. Keywords: regulation; political economy; effluent taxes; tradable quotas; property rights; commitment; environmental management JEL: D81 H23 L51 Q28 Q38 Date: 2004-12-04 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2004_029&r=all 96. Financing of Media Firms: Does Competition Matter? Kind, Hans Jarle (Norwegian School of Economics and Business Administration) Nilssen, Tore (Dept. of Economics, University of Oslo) Sorgard, Lars (Norwegian Competition Authority) This paper analyses how competition between media firms influences the way they are financed. In a setting where monopoly media firms choose to be completely financed by consumer payments, competition may lead the media firms to be financed by advertising as well. The closer substitutes the media firms’ products are, the less they rely on consumer payment and the more they rely on advertising revenues. If media firms can invest in programming, they invest more the less differentiated the media products are perceived to be. Keywords: Media; Advertising; Two-sided markets JEL: L22 L82 L86 M37 Date: 2005-04-06 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2005_001&r=all 97. Majority voting leads to unanimity Asheim , Geir B. (Dept. of Economics, University of Oslo) Claussen , Carl Andreas (Norges Bank) Nilssen, Tore (Dept. of Economics, University of Oslo) We consider a situation where society decides, through majority voting in a secret ballot, between the alternatives of ‘reform’ and ‘status quo’. Reform is assumed to create a minority of winners, while being efficient in the Kaldor-Hicks sense. We explore the consequences of allowing binding transfers between voters conditional on the chosen alternative. In particular, we establish conditions under which the winners wish to compensate all losers, thus leading to unanimity for reform, rather than compensating some losers to form a non-maximal majority. The analysis employs concepts from cooperative game theory. Keywords: voting; reform; status quo; Kaldor-Hicks sense; chosen alternative; unanimity for reform; cooperative game theory JEL: C71 D72 Date: 2005-01-07 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2005_002&r=all 98. Fighting against the odds Mehlum, Halvor (Dept. of Economics, University of Oslo) Moene, Karl (Dept. of Economics, University of Oslo) The fight for power is not only over immediate rents, but also over advantageous positions in future power struggles. When incumbency yields an extra fighting edge, current struggles involve high stakes as a victory today may guarantee the victory also tomorrow. Such an incumbency edge may stem from the control of the army, the police and other instruments reserved for the government. The conclusions drawn from static conflict models are turned on their head when the fight is also over the incumbency edge. A sharper incumbency edge increases the implicit prizes of winning. The fighting intensity may therefore rise when the strength of each side becomes more unequal. Unbalanced fights can last long and become particularly severe. This is in contrast to the standard result that equal strengths give the most intense fighting. Keywords: Violent conflicts; Rent-seeking games; contests JEL: C70 D23 D74 Date: 2005-01-15 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2005_003&r=all 99. Dominant Agent and Intertemporal Emissions Trading Hagem , Cathrine (Dept. of Economics, University of Oslo) Westskog, Hege (CICERO, Center for International Climate and Environmental Research,) In this paper we analyze how restricting intertemporal trading by prohibiting borrowing of emission permits affects the ability of a dominant agent to exploit its market power, and the consequences this has for the cost-effectiveness of implementing an emissions target. We show that the monopolist could take advantage of the constraint on borrowing by distributing the sale of permits ineffectively across periods, and moreover that this inefficiency is influenced by the way permits are initially allocated between agents. A cost-effective distribution of abatement across periods can be achieved by an appropriate distribution of the total endowments of permits over time for each agent. Keywords: pollution permits; intertemporal trading; market power; borrowing constraint JEL: D92 H74 Q52 Date: 2005-04-06 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2005_004&r=all 100. The Kyoto agreement and Technology Spillovers Golombek, Rolf (The Ragnar Frisch Centre for Economic Research) Hoel, Michael (Dept. of Economics, University of Oslo) A significant reduction in global greenhouse gas emissions will require development of new technologies if such reductions are to be achieved without excessive costs. An important question is whether an agreement of the Kyoto type, which does not include elements related to research and development (R&D) of new technologies, will give sufficient incentives to develop such new technologies. On the one hand, since greenhouse gas emissions will become costly for countries and private producers, countries and individual producers will have incentives to undertake effort and costs to develop new technologies. On the other hand, R&D in one country is not only advantageous for this country, but usually also for other countries. The reason for this is that producers in these countries in many cases will learn from the R&D project, for example, through(informal) networks, journals, and in some cases through the import of goods from the country where the new technology is developed. The purpose of the paper is to discuss properties of an international climate agreement of the Kyoto type when R&D investments undertaken in one country are beneficial also for other countries. We examine whether a Kyoto type of agreement can provide the correct social amount of aggregate emissions and R&D investments in new technologies. We argue that the outcome of a Kyoto type agreement will differ from the social optimum. In particular, for a given level of abatement a Kyoto type agreement provides too little R&D investments relative to the social optimum. Keywords: Climate policy; Kyoto; international environmental agreements; R&D; technology spillovers. JEL: P28 Q54 Date: 2005-04-06 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2005_005&r=all 101. Labor supply when tax evasion is an option Jorgensen, Oystein (Dept. of Economics, University of Oslo) Ognedal, Tone (Dept. of Economics, University of Oslo) Strom, Steinar (Dept. of Economics, University of Oslo) We estimate labor supply when tax evasion is an option, using a discrete choice model on pooled Norwegian survey data from 1980 and 2001. Direct labor supply elasticities, conditional on sectors, are in the range of 0.2-0.4. The elasticities are higher for work that is not registered for taxation, than for registered work. Overall wage increases have a positive impact on the supply of registered work and a negative impact on supply of unregistered work. In addition to economic factors such as wages and tax rates, also social norms and opportunities for tax evasion at the work place have an impact on the supply of unregistered labor. The model is used to simulate the impact on labor supply of changes in the tax structure, such as the lowering of marginal tax rates. The fraction of the population who did unreported work was reduced from 1980 to 2001. Lower and less progressive tax rates after 1980 have contributed to this reduction. Although taxes matter for supply of both reported and non-reported labor, the impact is not strong. Social norms and opportunities for tax evasion at the work place are also important in explaining the change. Keywords: Labor supply; tax evasion; survey data; microeconometrics JEL: C25 D12 D81 H26 J22 Date: 2005-04-06 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2005_006&r=all 102. Income inequality and the economic position of women in Norway 1970 - 2002 Bojer, Hilde (Dept. of Economics, University of Oslo) In the period from 1970 to 2002, Norwegian women moved out of the home and into the paid labour market. The paper investigates the e®ect of this social change on women's economic position and on individual income in-equality. It argues that the distribution of individual incomes is of equal interest to household incomes as targets of public policy. Inequality is measured by the generalised entropy measure. The data are taken from the triennial, later annual, surveys of income carried out by Statistics Norway in the period, giving reliable data on income for samples varying from 6000 to 30 000 women and men. Women's average income relative to that of men increased from 27 percent to 60 per cent. Total individual income inequality decreased strongly from 1970 to 1990, and decreased very slightly from 1990 to 2002. But this total covers very di®erent developments for women and men. Women's internal inequality decreased up to about 1990; the later trend is unclear. Men's internal inequality increased during the 1990s. However, the increase in men's inequality is shown to be mostly due to °uctuations in capital income. Inequality of employees remained unchanged during the whole period, both for women and men, when capital income is disregarded. Keywords: Income distribution; Women JEL: D31 Date: 2005-04-05 URL: http://d.repec.org/n?u=RePEc:hhs:osloec:2005_007&r=all 103. Ulysses and the Rent-Seekers: The Benefits and Challenges of Constitutional Constraints on Leviathan Kurrild-Klitgaard, Peter (University of Southern Denmark) . A constitutionally constrained government may be viewed as an attractive arrangement in that it may limit the rent-seeking behavior by narrowly motivated special interest groups and instead support policies of a Pareto-improving character. However, the introduction of constitutional constraints may themselves turn out to be problematic, since institutional solutions to suboptimal arrangements presuppose that the agents are capable of overcoming problems of the very nature that the solutions are intended to overcome in the first place. This makes it unlikely that general interest promoting constitutional constraints on governments will be successfully adopted. Keywords: rent-seeking; constitutions; institutions; self- interest; Prisoners' Dilemma; constraints JEL: D72 Date: 2005-04-06 URL: http://d.repec.org/n?u=RePEc:hhs:ratioi:0068&r=all 104. Bank Mergers, Competition and Liquidity Carletti, Elena (Center for Financial Studies) Hartmann, Philipp (European Central Bank) Spagnolo, Giancarlo (Stockholm School of Economics) We model the impact of bank mergers on loan competition, reserve holdings and aggregate liquidity. A merger creates an internal money market that affects reserve holdings and induces financial cost advantages, but also withdraws liquidity from the interbank market. Loan market competition modifies the heterogeneity in the size of banks, thus affecting aggregate liquidity. Mergers among large banks tend to increase aggregate liquidity needs and thus the liquidity provision in monetary operations by the central bank. Keywords: Credit market competition; bank reserves; internal money market; banking system liquidity JEL: D43 G21 G28 L13 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:hhs:rbnkwp:0182&r=all 105. Testing Near-Rationality using Detailed Survey Data Bryan, Michael F. (Federal Reserve Bank of Cleveland) Palmqvist, Stefan (Monetary Policy Department, Central Bank of Sweden) This paper considers the evidence of “near-rationality,” as described by Akerlof, Dickens, and Perry (2000). Using detailed surveys of household inflation expectations for the United States and Sweden, we find that the data are generally unsupportive of the near-rationality hypothesis. However, we document that household inflation expectations tend to settle around discrete and largely fixed “focal points,” suggesting that both U.S. and Swedish households gauge inflation prospects in rather broad, qualitative terms. Moreover, the combination of a low-inflation environment and an inflation target in Sweden has been accompanied by a disproportionately high proportion of Swedish households expecting no inflation. However, a similar low- inflation trend in the United States, which does not have an explicit inflation target, reveals no such rise in the proportion of households expecting no inflation. This observation suggests that the way the central bank communicates its inflation objective may influence inflation expectations independently of the inflation trend it actually pursues. Keywords: inflation expectations; rationality; inflation targeting; Phillips curve JEL: D10 D70 E60 Date: 2005-04-01 URL: http://d.repec.org/n?u=RePEc:hhs:rbnkwp:0183&r=all 106. On the Strategic Use of Debt and Capacity in Imperfectly Competitive Product Markets Leach, J. Chris (Leeds School of Business, University of Colorado at Boulder) Moyen, Nathalie (Leeds School of Business, University of Colorado at Boulder) Yang, Jing (California State University, Fullerton) In capital intensive industries, firms face complicated multi- stage financing, investment, and production decisions under the watchful eye of existing and potential industry rivals. We consider a two-stage simplification of this environment. In the first stage, an incumbent firm benefits from two first-mover advantages by precommiting to a debt financing policy and a capacity investment policy. In the second stage, the incumbent and a single-stage rival simultaneously choose production levels and realize stochastic profits. We characterize the incumbent's first-stage debt and capacity choices as factors in the production of an intermediate good we call "output deterrence." In our two-factor deterrence model, we show that the incumbent chooses a unique capacity policy and a threshold debt policy to achieve the optimal level of deterrence coinciding with full Stackelberg leadership. When we remove the incumbent's first- mover advantage in capacity, the full Stackelberg level of deterrence is still achievable, albeit with a higher level of debt than the threshold. In contrast, when we remove the incumbent's first-mover advantage in debt, the Stackelberg level of deterrence may no longer be achievable and the incumbent may suffer a dead-weight loss. Evidence on the telecommunications industry shows that firms have increased their leverage in a manner consistent with deterring potential rivals following the 1996 deregulation. Keywords: Industrial organization; Deregulation; Deterrence; Capital structure; Capacity; Telecommunications JEL: D43 G32 L13 L96 Date: 2004-03-15 URL: http://d.repec.org/n?u=RePEc:hhs:sifrwp:0033&r=all 107. Opportunities, Preferences and Incomes Nilsson, William (Department of Economics, Umea University) The distinction between circumstances that constrain an individual’s opportunities and the individual choices also affecting a particular outcome is the main idea of theories of equality of opportunity. In this study, equality of opportunity is analyzed for Swedish data using a large set of variables indicating different circumstances likely to affect an individual’s opportunities. A semiparametric model is estimated to allow for a possible nonlinear relation between parental income and the income of the adult child. The reason is a hypothesis that a constrained investment behavior would make the relationship nonlinear. The results indicate significant inequality of opportunities. However, they do not indicate a nonlinear relationship between parental income and the income of the adult child. Thus, the hypothesis that low income families will have a constrained investment behavior in human capital formation is brought into question as the explanation of intergenerational income correlation in Sweden. Keywords: equality of opportunity; intergenerational income mobility; preferences; tastes; semiparametric estimation JEL: C14 D63 J62 Date: 2005-04-08 URL: http://d.repec.org/n?u=RePEc:hhs:umnees:0649&r=all 108. Heterogeneity or True State Dependence in Poverty - The tale told by twins Nilsson, William (Department of Economics, Umea University) This study focuses on the persistence of poverty in Sweden. The purpose is to distinguish between two different reasons why poverty could persist on an individual level. By using a sample of identical twins, this study takes advantage of the similarity within pairs of twins to separate family specific heterogeneity from true state dependence, where the experience of poverty leads to a higher risk of future poverty. The results, based on a four variate probit model, show the importance of true state dependence in poverty. When using the information on whether an individual received social assistance as a measure of poverty, family specific heterogeneity explains between 24 and 31 percent of the poverty persistence in the sample. Keywords: poverty; heterogeneity; state dependence; twins; multivariate probit JEL: C35 D31 I32 Date: 2005-04-08 URL: http://d.repec.org/n?u=RePEc:hhs:umnees:0650&r=all 109. Unemployment, Splitting Up and Spousal Income Replacement Nilsson, William (Department of Economics, Umea University) This study focuses on the persistence of poverty in Sweden. The purpose is to distinguish between two different reasons why poverty could persist on an individual level. By using a sample of identical twins, this study takes advantage of the similarity within pairs of twins to separate family specific heterogeneity from true state dependence, where the experience of poverty leads to a higher risk of future poverty. The results, based on a four variate probit model, show the importance of true state dependence in poverty. When using the information on whether an individual received social assistance as a measure of poverty, family specific heterogeneity explains between 24 and 31 percent of the poverty persistence in the sample. Keywords: unemployment; divorce; spousal response; sample selection; panel data JEL: C33 J12 J22 Date: 2005-04-08 URL: http://d.repec.org/n?u=RePEc:hhs:umnees:0651&r=all 110. Equality of Opportunity, Heterogeneity and Poverty Nilsson, William (Department of Economics, Umea University) Paper [I] studies equality of opportunity in Sweden. The distinction between circumstances that constrain an individual’s opportunities and the individual choices also affecting a particular outcome is the main idea of theories of equality of opportunity. In this study, equality of opportunity is analyzed for Swedish data using a large set of variables indicating different circumstances likely to affect an individual’s opportunities. A semiparametric model is estimated to allow for a possible nonlinear relation between parental income and the income of the adult child. The reason is a hypothesis that a constrained investment behavior would make the relationship nonlinear. The results indicate significant inequality of opportunities. However, they do not indicate a nonlinear relationship between parental income and the income of the adult child. Thus, the hypothesis that low income families will have a constrained investment behavior in human capital formation is brought into question as the explanation of intergenerational income correlation in Sweden.
Paper [II] focuses on the persistence of poverty in Sweden. The purpose is to distinguish between two different reasons why poverty could persist on an individual level. By using a sample of identical twins, this study takes advantage of the similarity within pairs of twins to separate family specific heterogeneity from true state dependence, where the experience of poverty leads to a higher risk of future poverty. The results, based on a four variate probit model, show the importance of true state dependence in poverty. When using the information on whether an individual received social assistance as a measure of poverty, family specific heterogeneity explains between 24 and 31 percent of the poverty persistence in the sample.
Paper [III] analyzes the consequences of unemployment for a Swedish sample of couples. The purpose is to estimate the possible income replacement that a spouse can provide. Unemployment can also affect the probability that the couples split up. Since not all couples remain in the analysis, a potential selection problem can occur. To deal with this problem, and also to take care of unobserved heterogeneity, a sample selection model for panel data is estimated. The results indicate that it is necessary to take into account the selection problem. A period in unemployment is found to be correlated with a higher female income only in the case of men who earned a fairly high income before becoming unemployed. Women who earned a fairly low income and were subject to a long period of unemployment are found to be compensated by a higher male income. Keywords: Keywords: equality of opportunity; semiparametric; poverty; heterogeneity; state dependence; twins; unemployment; divorce; spousal response; selection and panel data JEL: C14 C33 C35 D31 D63 I32 J12 J22 J62 Date: 2005-04-13 URL: http://d.repec.org/n?u=RePEc:hhs:umnees:0652&r=all 111. Externalities, Border Trade and Illegal Production: An Optimal Tax Approach to Alcohol Policy Aronsson, Thomas (Department of Economics, Umea University) Sjogren, Tomas (Department of Economics, Umea University) This paper deals with optimal income and commodity taxation in an economy, where alcohol is an externality-generating consumption good. In our model, alcohol can be bought domestically, imported (via border trade) or produced illegally. Border trade implies an incentive to set the domestic alcohol tax below the marginal social damage of alcohol, and to tax ( subsidize) commodities which are complementary with ( substitutable for) alcohol. In addition, since leisure and alcohol consumption are generally nonseparable, the income tax will also be used as a corrective instrument. On the other hand, the desire to reduce the illegal production may generally affect the optimal income and commodity taxes in either direction. One possible (and arguably realistic) outcome is, nevertheless, that the desire to avoid the illegal production works to reduce both the alcohol tax and the marginal income tax rate. Keywords: taxation; external effects; alcohol; border trade. JEL: D61 D62 H21 H23 Date: 2005-04-04 URL: http://d.repec.org/n?u=RePEc:hhs:umnees:0654&r=all 112. Bivariate Time Series Modelling of Financial Count Data Quoreshi, Shahiduzzaman (Department of Economics, Umea University) A bivariate integer-valued moving average (BINMA) model is proposed. The BINMA model allows for both positive and negative correlation between the counts. This model can be seen as an inverse of the conditional duration model in the sense that short durations in a time interval correspond to a large count and vice versa. The conditional mean, variance and covariance of the BINMA model are given. Model extensions to include explanatory variables are suggested. Using the BINMA model for AstraZeneca and Ericsson B it is found that there is positive correlation between the stock transactions series. Empirically, we find support for the use of long-lag bivariate moving average models for the two series. have significant effects for both series. Keywords: Count data; Intra-day; High frequency; Time series; Estimation; Long memory; Finance JEL: C13 C22 C25 C51 G12 G14 Date: 2005-04-14 URL: http://d.repec.org/n?u=RePEc:hhs:umnees:0655&r=all 113. An Empirical Model for Durations in Stocks Simonsen, Ola (Department of Economics, Umea University) This paper considers an extension of the univariate autoregressive conditional duration model to which durations from a second stock are added. The model is empirically used to study durations in two traded stocks, Ericsson B and AstraZeneca, on the Stockholm Stock Exchange. It is found that including durations from a second stock may add explanatory power to the univariate model. Ericsson B is Granger causing durations in AstraZeneca, while AstraZeneca is not Granger causing durations in Ericsson B. Volume, spread and trade intensity changes have significant effects for both series. Keywords: multivariate; duration; transaction data; market microstructure JEL: C12 C32 C41 G14 Date: 2005-04-05 URL: http://d.repec.org/n?u=RePEc:hhs:umnees:0657&r=all 114. Interest Rate Smoothing versus Serially Correlated Errors in Taylor Rules: Testing the Tests Welz, Peter (Department of Economics) Osterholm, Par (Department of Economics) This paper contributes to the recent debate about the estimated high partial adjustment coefficient in dynamic Taylor rules, commonly interpreted as deliberate interest rate smoothing on the part of the monetary authority. We argue that a high coefficient on the lagged interest rate term may be a consequence of an incorrectly specified central bank reaction function. Focusing on omitted variables, our Monte Carlo study first generates the well- known fact that all coefficients in the misspecified equation are biased in such cases. In particular, if relevant variables are left out from the estimated equation, a high partial adjustment coefficient is obtained even when it is in fact zero in the data generating process. Misspecification also leads to considerable size distortions in two tests that were recently proposed by English, Nelson, and Sack (2003) in order to distinguish between interest rate smoothing and serially correlated disturbances. Our results question the common interpretation of very slow partial adjustment as interest rate smoothing in estimated dynamic Taylor rules. Keywords: Monetary policy; Taylor rule; Interest rate smoothing; Serially correlated error term; Omitted variables JEL: C12 C15 E52 Date: 2005-03-31 URL: http://d.repec.org/n?u=RePEc:hhs:uunewp:2005_014&r=all 115. Crop Choice, Farm Income, and Political Relations in Myanmar Takashi Kurosaki Myanmar's agricultural economy is in transition from a planned to a market system. However, the economy does not seem to capture the full gains of productivity growth expected from such a transition. Using a micro dataset collected in 2001 and covering more than 500 households in eight villages with diverse agro- ecological environments, this paper shows that policy interventions in land use and agricultural marketing underlie the lack of income growth. Regression analyses focusing on within- village variations in cropping patterns show that the acreage share under nonlucrative paddy crops is higher for farmers who are under tighter control of the local administration. Keywords: reform, food policy, transitional economies, Asia, Myanmar Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d04-80&r=all 116. Small Sample Bias Propreties of the System GMM Estimator in Dynamic Panel Data Models Kazuhiko Hayakawa This paper examines analytically and experimentally why the system GMM estimator in dynamic panel data models is less biased than the first differencing or the level estimators even though the former uses more instruments. We find that the bias of the system GMM estimator is a weighted sum of the biases in opposite directions of the first differencing and the level estimator. We also find that an important condition for the system GMM estimator to have small bias is that the variances of the individual effects and the disturbances are almost of the same magnitude. If the variance of individual effects is much larger than that of disturbances, then all GMM estimators are heavily biased. To reduce such biases, we propose bias-corrected GMM estimators. On the other hand, if the variance of individual effects is smaller than that of disturbances, the system estimator has a more severe downward bias than the level estimator. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:hst:hstdps:d05-82&r=all 117. Inflation, Central Bank Independence and the Legal System. Bernd Hayo Stefan Voigt We argue that a higher degree of de facto independence of the legal system from the other government branches as well as public trust in the legal system may reduce the average inflation record of countries through a direct and an indirect channel. The direct channel works by affecting potential output, while the indirect channel helps to increase the de facto independence of the central bank. In the empirical section of the paper, we present evidence in favor of both channels in a sample containing both industrial and Third World countries. A model that contains legal trust in addition to de jure central bank independence, checks and balances within government, and openness can explain 60% of the variation in the logarithm of the inflation rate. Keywords: Judicial Independence; Legal Trust; Central Bank Independence; Inflation JEL: D D H K Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:icr:wpicer:02-2005&r=all 118. On convexity and supermodularity. Massimo Marinacci Luigi Montrucchio Concavity and supermodularity are in general independent properties. A class of functionals defined on a lattice cone of a Riesz space has the Choquet property when it is the case that its members are concave whenever they are supermodular. We show that for some important Riesz spaces both the class of positively homogeneous functionals and the class of translation invariant functionals have the Choquet property. We extend in this way the results of Choquet [1] and Konig [4]. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:icr:wpmath:3-2005&r=all 119. Non mean reverting affine processes for stochastic mortality. Elisa Luciano Elena Vigna In this paper we use doubly stochastic processes (or Cox processes) in order to model the random evolution of mortality of an individual. These processes have been widely used in the credit risk literature in modelling default arrival, and in this context have proved to be quite flexible, especially when the intensity process is of the affine class. We investigate the applicability of affine processes in describing the individual's intensity of mortality, and provide a calibration to the Italian and UK populations. Results from the calibration seem to suggest that, in spite of their popularity in the financial context, mean reverting processes are not suitable for describing the death intensity of individuals. On the contrary, affine processes whose deterministic part increases exponentially seem to be appropriate. As for the stochastic part, negative jumps seem to do a better job than diffusive components. Stress analysis and analytical results indicate that increasing the randomness of the intensity process results in improvements in survivorship. Keywords: doubly stochastic processes (Cox processes); stochastic mortality; affine processes JEL: G22 J11 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:icr:wpmath:4-2005&r=all 120. Bayesian Inference via Classes of Normalized Random Measures. Lancelot F. James Antonio Lijoi Igor Pruenster One of the main research areas in Bayesian Nonparametrics is the proposal and study of priors which generalize the Dirichlet process. Here we exploit theoretical properties of Poisson random measures in order to provide a comprehensive Bayesian analysis of random probabilities which are obtained by an appropriate normalization. Specifically we achieve explicit and tractable forms of the posterior and the marginal distributions, including an explicit and easily used description of generalizations of the important Blackwell-MacQueen Polya urn distribution. Such simplifications are achieved by the use of a latent variable which admits quite interesting interpretations which allow to gain a better understanding of the behaviour of these random probability measures. It is noteworthy that these models are generalizations of models considered by Kingman (1975) in a non- Bayesian context. Such models are known to play a significant role in a variety of applications including genetics, physics, and work involving random mappings and assemblies. Hence our analysis is of utility in those contexts as well. We also show how our results may be applied to Bayesian mixture models and describe computational schemes which are generalizations of known efficient methods for the case of the Dirichlet process. We illustrate new examples of processes which can play the role of priors for Bayesian nonparametric inference and finally point out some interesting connections with the theory of generalized gamma convolutions initiated by Thorin and further developed by Bondesson. Keywords: Bayesian Nonparametrics; Chinese restaurant process; Generalized gamma convolutions; Gibbs partitions; Poisson random measure Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:icr:wpmath:5-2005&r=all 121. Bank Ownership and Lending Behavior Alejandro Micco (Inter-American Development Bank) Ugo Panizza (Inter-American Development Bank) This paper examines whether bank ownership (public versus private, domestic versus foreign) is correlated with bank lending behavior over the business cycle. The paper finds that state- owned banks may play a useful credit-smoothing role because their lending is less responsive to macroeconomic shocks than the lending of private banks. The paper investigates whether this differential behavior is due to an explicit objective of stabilizing credit or to the presence of "lazy" public bank managers; evidence is found in support of the former hypothesis. In the case of foreign-owned banks, the paper finds that the results are less clear-cut and argues that this finding is in line with existing theoretical models. Keywords: State-owned banks; Foreign-owned banks; Credit cycle JEL: G21 H11 E44 Date: 2004-11 URL: http://d.repec.org/n?u=RePEc:idb:wpaper:1015&r=all 122. Bank Ownership and Performance Alejandro Micco (Inter-American Development Bank) Ugo Panizza (Inter-American Development Bank) Monica Yanez (Inter-American Development Bank) This paper builds a new dataset on bank ownership and bank performance covering approximately 50,000 observations for 119 countries over the 1995-2002 period. The paper then uses the dataset to reassess the relationship between bank ownership and bank performance, providing separated estimations for developing and industrial countries. It is found that, while ownership is strongly correlated with performance in developing countries, that ownership is not correlated with performance in industrial countries. In particular, the paper suggests that stateowned banks operating in developing countries tend to have lower profitability and higher costs than their private counterparts, and that the opposite is true for foreign-owned banks (which tend to be characterized by higher profitability and lower costs). We also find that, in developing countries, the entry of foreign banks plays a useful role by making domestic banks more efficient in terms of overhead cost and spreads, although we do not find any effect on profitability of domestic banks. Keywords: Banking; Privatization; Ownership; Performance JEL: G21 D21 Date: 2004-11 URL: http://d.repec.org/n?u=RePEc:idb:wpaper:1016&r=all 123. Food Insecurity in India: Causes and Dimensions Chakravarty Sujoy Dand Sejal A In this study we explore causes of the widespread food insecurity that prevails in India. It has been observed that even though the proportion of the malnourished fell by about 1 percent FAO, 2002) through the nineties in India, their absolute number increased by about 18 million. Thus the problem of food insecurity in India is not of general systemic failure that arises due to a supply shortage. It is in fact more a problem where certain sectors (mainly the rural agrarian population and the urban informal sector) suffer from a shortage of food in a general climate of increasing production. Delving deeper, we observe that the main determinants of food insecurity in India today are the shrinking of agrarian and informal sector incomes and failures (both due to policy framing as well as implementation) of support led measures to combat poverty. The latter include the near breakdown of the targeted public distribution system (TPDS) in most regions of the country. This study uses existing scholarly work in the area as well as conventional data sources in order to show the extent of food insecurity in India today and the logic of the different patterns of its causality. Date: 2005-04-11 URL: http://d.repec.org/n?u=RePEc:iim:iimawp:2005-04-01&r=all 124. Coffee, Tea or …? : Gender and Politeness in Computer Mediated Communication (CMC) Kaul Asha Kulkarni Vaibhavi Research shows that electronic communication has affected written language significantly. The increasing importance of use of Computer Mediated Communication (CMC) in organizations has multiple implications for use of written language at workplace. This study focuses on the influence of gender and politeness on writing style in CMC, specifically work related emails, in the Indian context. Grice’s Cooperative Principle (CP) and Leech’s maxims of Politeness have been used to analyze samples of 494 work related emails written by both men and women. On the basis of this analysis, an attempt has been made to study the relationship between gender, politeness and email content. On the basis of the data, it is concluded that: 1. Different politeness maxims across genders are used in work related emails. 2. Politeness maxims are used in clusters. 3. Variations in use of politeness maxims across genders are highest in directives. 4. Violations of politeness maxims are higher in men than in women. Date: 2005-04-12 URL: http://d.repec.org/n?u=RePEc:iim:iimawp:2005-04-02&r=all 125. 'El Nino' Effects and Biomass Endogeneity in a Harvest Function: The Chilean Jack Mackerel Fishery Julio Pena Torres (ILADES-Georgetown University, Universidad Alberto Hurtado) Claudio Agostini (ILADES-Georgetown University, Universidad Alberto Hurtado) Sebastian Vergara (Economic Commission for Latin America and the Caribbean (ECLAC)) The main goal of this paper consists in estimating the input parameters of an annual harvest function for the Chilean jack mackerel stock; particularly, the effects of biomass on catch. One of the main problems faced is that the biomass variable is possibly endogenous, which would bias the estimators if the problem remains unsolved. Our empirical strategy consists in estimating a per vessel harvest function using panel data, which allows us to control for vessels' unobserved heterogeneity, and episodes of 'El Nino' phenomenon as valid instrumental variable for biomass, which allows us to control for the potential biomass endogeneity. This strategy produces consistent estimates of the biomass coefficient. The results, using a panel of industrial vessels operating in the central-southern region of Chile during the period 1985-2002, show that the endogeneity of the biomass variable biases upwardly the magnitude of its coefficient in a Cobb-Douglas harvest function. In the case of our data, the endogeneity bias even changes the sign of the catch-to-biomass elasticity. A first contribution of the paper is to address the endogeneity of biomass in a harvest function, an issue often underestimated in the empirical literature. A second contribution is related to 'El Nino' effects on the Chilean jack mackerel stock. The results show that an oceanic 'El Nino' episode not only has negative contemporaneous effects on jack mackerel biomass but also negative biomass effects lasting for at least two additional years. Keywords: El Nino phenomenon; pelagic fisheries; Chilean jack mackerel; Instrumental variable estimation; marginal stock effects; endogenous biomass Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:ila:ilades:inv160&r=all 126. Are the poor too poor to demand health insurance? Rajeev Ahuja (Indian Council for Research on International Economic Rela) Johannes Jutting (Indian Council for Research on International Economic Rela) Community based micro insurance has aroused much interest and hope in meeting health care challenges facing the poor. In this paper we explore how institutional rigidities such as credit constraint impinge on demand for health insurance and how insurance could potentially prevent poor households from fallinginto poverty trap. In this setting, we argue that the appropriate public intervention in generating demand for insurance is not to subsidise premium but to remove these rigidities (easing credit constraint in the present context). Thus from insurance perspective as well, our analysis highlights the importance of having appropriate savings and borrowing instruments for the poor. Keywords: Micro-insurance, Micro-credit, Credit Constraint, Demand for Insurance Date: 2004-01 URL: http://d.repec.org/n?u=RePEc:ind:icrier:118&r=all 127. Impact of tariff reduction on exports: A quantitative assessment of Indian exports to US Aradhana Aggarwal (Indian Council for Research on International Economic Rela) This paper quantitatively assesses likely changes in market access opportunities for Indian exports owing to tariff reductions by the USA. The study identifies particular products for India at the ISIC 4-digit level of disaggregation, which could be considered tariff sensitive. Regression analysis of the relationship between MFN tariff rates and India's exports to the US was used to assess in quantitative terms the likely impact of tariff reduction that may be agreed in the Doha Round. This analysis suggests that tariff cuts are not expected to benefit India's exports to the US in a major way. With the full implementation of the Chairman's formula for tariff cuts, increase in India's exports to the US would amount to 1.2 or 0.6 depending on the value of the B coefficient in theChairman's formula. These findings are in all likelihood substantially due to the tariff diversion effect of NAFTA preferences in favour of suppliers in Mexico, which is a competing country in many traditional items. It is expected that reduction of MFN tariff would alleviate the trade diversion effect of the NAFTA.The study has also attempted to decompose changes in India's total exports due to tariff reductions in the US into the competitive and market effects. The analysis suggests that the increase in India's exports would be mainly due to the competitive effect. This leads the author to conclude that it is crucial for India to improve its competitiveness vis-a-vis its competitors in different markets. Date: 2004-01 URL: http://d.repec.org/n?u=RePEc:ind:icrier:120&r=all 128. Economic reforms: Policy and institutions some lessons from Indian reforms Arvind Virmani (Indian Council for Research on International Economic Rela) (Indian Council for Research on International Economic Rela) Economic policy and policy reform over the last few decades has been motivated by the need to accelerate growth or equivalently to reverse a decline in growth rate. The economic literature on the determinants of growth has burgeoned and disagreement has followed consensus on the policy prescriptions that need to befollowed to achieve this purpose. Sometimes the disagreement is exaggerated by the titans of the profession, so as to distinguish themselves from those constituting the conventional wisdom. The present paper moves the focus from this "macro"debate to concrete issues of policy formulation and policy change and explores the links between policy and institutions in the context of economic reforms. Thus successful introduction of new policies may require new institutions and the degree of success in changing policies may depend on the degree to which existing institutions are modified. The literature on Institutions and Development has dealt with questions of grand design such as the Constitution, the rule of law (personal safety), property rights and informal rules embodied in culture. These are matters that happen on a timescale of a quarter/half century or more and can be thought of as the "superstructure" of institutions. The quantitative work on institutions and growth has explored the linkage between these institutional issues and economic growth. In the current paper we focus on what may be called the "microstructure" of institutions, a smaller scale at which change can occur over a time frame of decades (or half decades). Among the issues that a rise in this context are how changing institutions requirechanges in policies. Keywords: Economic Reforms, India, Policy, Institutions JEL: O1 P41 Date: 2004-01 URL: http://d.repec.org/n?u=RePEc:ind:icrier:121&r=all 129. India's economic growth: From socialist rate of growth to Bharatiya rate of growth Arvind Virmani (Indian Council for Research on International Economic Rela) Paper reviews India's growth performance since independence. Phrases suchas "Hindu Rate of Growth," sometimes make a telling comment and expose obscureeconomic data to a wider audience, but they can just as readily obscure reality byfocussing attention on the wrong issue. There is nothing in the literature that suggeststhat this period of the "Hindu Rate of Growth" had anything to do with Hinduism per se.This paper shows that had a lot to do with the Indian version of Socialism. The 30-yearperiod from 1950-51 to 1979-80 is therefore better described as the "Indian-socialist" orperhaps "Hindu-socialist" period. The paper also identifies a truly disastrous 15-yearsub-period within this Indian-socialist period, the negative lessons of which have still notbeen fully understood or absorbed by academics, policy makers and political parties.One of the innovations in this paper is to take explicit account of rainfallvariations that play a very important role in the Indian economy. This allows us todetermine whether the Indian economy has become less dependent on the monsoons(`drought proof'). It also allows a statistically more accurate determination of thedifferent phases of Indian economic growth. The paper confirms that, what the authorhas earlier dubbed, the "Bharatiya Rate of Growth" phase began around 1980-81. Thepaper fills out the sector details of the various phases of development and the role thatgovernment and government monopoly has played in different sectors. The paper alsoexplores some of the growth puzzles in our economic history. Keywords: Indian Economy, Economic Growth, Development, Phases of Growth,Socialism, Government Monopoly, Bharatiya Rate of Growth JEL: N1 O1 O4 O5 P0 Date: 2004-01 URL: http://d.repec.org/n?u=RePEc:ind:icrier:122&r=all 130. Health insurance for the poor in India Ahuja, Rajeev (Indian Council for Research on International Economic Rela) Community based health insurance (CBHI) is more suited than alternate arrangements to providing health insurance to the low- income people living in developing countries. The universal health insurance scheme, launched recently by the Prime Minister of India, is only one of the forms that CBHI can take. While analysing the proposed scheme, we examine alternate forms of CBHI schemes prevalent in the country.The development of private health insurance market in the country will not leave the poor unaffected. Insurance sector reform can affect the poor through its effect on the provision of health services (i.e., cost, quality and access) used by the low-income people as well as through its access to financing of health care. In this paper we also explore how insurance sector reforms alter health insurance prospects facing the poor in India, and what changes on the health front affecting the poor have happened or are likely to happen as a result of insurance sector reforms. We conclude that in diverse settings of India all forms of CBHI have a role to play and therefore need to be encouraged by the government through appropriate interventions. Formal insurance providers can also be reigned to serve low-in comepopulation. At the same time, developments in formal health insurance market need to be guided so as to minimise cost escalation of health care provision Keywords: Health Insurance; Low-income people; poverty; risk and insurance; insurance schemes JEL: I1 I3 G1 Date: 2004-03 URL: http://d.repec.org/n?u=RePEc:ind:icrier:123&r=all 131. Stock return volatility patterns in India Batra, Amit (Indian Council for Research on International Economic Rela) Date: 2004-03 URL: http://d.repec.org/n?u=RePEc:ind:icrier:124&r=all 132. Investment climate and total factor productivity in manufacturing: Analysis of Indian states C.Veeramani (Indian Council for Research on International Economic Rela) B.N.Goldar (Indian Council for Research on International Economic Rela) Keywords: Investment climate, Total factor productivity, manufacturing, Indian states JEL: L D L URL: http://d.repec.org/n?u=RePEc:ind:icrier:127&r=all 133. Fiscal reforms at the sub-national level: The case of Punjab Upinder Sawhney (Punjab University) The importance and need for sub-national fiscal reforms is all too obvious in India where the states are facing severe fiscal imbalances since the beginning of the nineties. A decade of political strife in the eighties, followed by populist economic policies in the nineties led to a massive fiscal deterioration in Punjab, hampering its overall growth process. The Fiscal Reform Programme in the state was initiated in 1999 with the signing of a Memorandum of Understanding between the Government of India and the Punjab government. This was followed by the setting up of various committees and commissions to look into the problems of revenue mobilisation, expenditure management, public enterprises and the power sector. The more recent effort towards fiscal consolidation has been the enactment of Fiscal Responsibility and Budget Management Act, 2003. The assessment of the entire fiscal reform effort of the state reveals that the Punjab government is seized of the seriousness of the situation, admits the gravity of consequences but lacks the grit and determination to implement certain hard decisions for fiscal restructuring. The government is very much caught up in the web of populist policies and succumbs readily to political pressure against certain unpopular decisions for attaining fiscal stability. The success of the fiscal reform programme depends only on the administrative competence and political will of the government towards achieving longterm fiscal consolidation and restoration of fiscal balances in the state. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:ind:nipfwp:26&r=all 134. Contributory Infringement Rule and Network Langinier, Corinne Marcoul, Philippe The contributory infringement rule assesses liability to a third party that contributes to the infringement of a patent. Not only are firms that directly infringe liable, those who indirectly contribute are also liable. In the e-commerce world, this rule takes on an important dimension because of the network structure of the Internet. We investigate how the contributory infringement rule affects the creation of a network of members (membership program) and whether this rule is harmful to consumers and firms. We find that the enforcement of the contributory infringement rule does not induce more trials in equilibrium. However, because of the threat of trial, it decreases the network size, and then reduces the social welfare. Surprisingly we find that if the compensation paid by the indirect infringers is high, the contributory infringement rule does not benefit the patentholder and does not give enough R&D incentives ex ante. It is even possible to find a direct compensation for the patentholder that is socially preferable (as it increases the network size). JEL: K0 Date: 2005-04-11 URL: http://d.repec.org/n?u=RePEc:isu:genres:12268&r=all 135. Impact of Ownership Structure on the Performance of China’s Feed Mill Sector, The Fabiosa, Jacinto F. In the decade of the 1990s, China’s feed sector became increasingly privatized, more feed mills opened, and the scale of operation expanded. Capacity utilization remained low and multi- ministerial supervision was still prevalent, but the feed mill sector showed a positive performance overall, posting a growth rate of 11 percent per year. Profit margin over sales was within allowable rates set by the government of China at 3 to 5 percent. Financial efficiency improved, with a 20 percent quicker turnover of working capital. Average technical efficiency was 0.805, as more efficient feed mills increasingly gained production shares. This study finds evidence that the increasing privatization explains the improved performance of the commercial feed mill sector. The drivers that shaped the feed mill sector in the 1990s have changed with China’s accession to the World Trade Organization. With the new policy regime in place, the study foresees that, assuming an adequate supply of soy meal and an excess capacity in the feed mill sector, it is likely that China will allow corn imports up to the tariff rate quota (TRQ) of 7.2 mmt since the in-quota rate is very low at 1 percent. However, when the TRQ is exceeded, the import duty jumps to a prohibitive out-quota rate of 65 percent. With an import duty for meat of only 10 to 12 percent, China would have a strong incentive to import meat products directly rather than bringing in expensive corn to produce meat domestically. This would be further reinforced if structural transformation in the swine sector would narrow the cost differential between domestic and imported pork. Date: 2005-04-04 URL: http://d.repec.org/n?u=RePEc:isu:genres:12270&r=all 136. Impact of Ownership Structure on the Performance of China’s Feed Mill Sector, The Fabiosa, Jacinto F. In the decade of the 1990s, China’s feed sector became increasingly privatized, more feed mills opened, and the scale of operation expanded. Capacity utilization remained low and multi- ministerial supervision was still prevalent, but the feed mill sector showed a positive performance overall, posting a growth rate of 11 percent per year. Profit margin over sales was within allowable rates set by the government of China at 3 to 5 percent. Financial efficiency improved, with a 20 percent quicker turnover of working capital. Average technical efficiency was 0.805, as more efficient feed mills increasingly gained production shares. This study finds evidence that the increasing privatization explains the improved performance of the commercial feed mill sector. The drivers that shaped the feed mill sector in the 1990s have changed with China’s accession to the World Trade Organization. With the new policy regime in place, the study foresees that, assuming an adequate supply of soy meal and an excess capacity in the feed mill sector, it is likely that China will allow corn imports up to the tariff rate quota (TRQ) of 7.2 mmt since the in-quota rate is very low at 1 percent. However, when the TRQ is exceeded, the import duty jumps to a prohibitive out-quota rate of 65 percent. With an import duty for meat of only 10 to 12 percent, China would have a strong incentive to import meat products directly rather than bringing in expensive corn to produce meat domestically. This would be further reinforced if structural transformation in the swine sector would narrow the cost differential between domestic and imported pork. Date: 2005-04-04 URL: http://d.repec.org/n?u=RePEc:isu:genres:12271&r=all 137. Shocks and Business Cycles Frankel, David M. Burdzy, Krzysztof A popular theory of business cycles is that they are driven by animal spirits: shifts in expectations brought on by sunspots. A prominent example is Howitt and McAfee (AER, 1992). We show that this model has a unique equilibrium if there are payoff shocks of any size. This equilibrium still has the desirable property that recessions and expansions can occur without any large exogenous shocks. We give an algorithm for computing the equilibrium and study its comparative statics properties. This work generalizes Burdzy, Frankel, and Pauzner (2000) to the case of endogenous frictions and seasonal and mean-reverting shocks. JEL: C7 E3 Date: 2005-04-08 URL: http://d.repec.org/n?u=RePEc:isu:genres:12274&r=all 138. Labeling Regulations and Segregation of First- and Second- Generation Genetically Modified Products: Innovation Incentives and Welfare Effects Moschini, GianCarlo Lapan, Harvey E. We review some of the most significant issues and results on the economic effects of genetically modified (GM) product innovation, with emphasis on the question of GM labeling and the need for costly segregation and identity preservation activities. The analysis is organized around an explicit model that can accommodate the features of both first-generation and second- generation GM products. The model accounts for the proprietary nature of GM innovations and for the critical role of consumer preferences vis-a-vis GM products, as well as for the impacts of segregation and identity preservation and the effects of a mandatory GM labeling regulation. We also investigate briefly a novel question in this setting, the choice of “research direction”when both cost-reducing and quality-enhancing GM innovations are feasible. JEL: O3 D0 Q1 Date: 2005-04-11 URL: http://d.repec.org/n?u=RePEc:isu:genres:12275&r=all 139. Labeling Regulations and Segregation of First- and Second- Generation Genetically Modified Products: Innovation Incentives and Welfare Effects Moschini, GianCarlo Lapan, Harvey E. We review some of the most significant issues and results on the economic effects of genetically modified (GM) product innovation, with emphasis on the question of GM labeling and the need for costly segregation and identity preservation activities. The analysis is organized around an explicit model that can accommodate the features of both first-generation and second- generation GM products. The model accounts for the proprietary nature of GM innovations and for the critical role of consumer preferences vis-a-vis GM products, as well as for the impacts of segregation and identity preservation and the effects of a mandatory GM labeling regulation. We also investigate briefly a novel question in this setting, the choice of “research direction” when both cost-reducing and quality-enhancing GM innovations are feasible. Date: 2005-04-13 URL: http://d.repec.org/n?u=RePEc:isu:genres:12280&r=all 140. Fisheries Management with Stock Uncertainty and Costly Capital Adjustment: Extended Appendix Doyle, Matthew Singh, Rajesh Weninger, Quinn This Appendix is supplemntary to "Fisheries Management with Stock Uncertainty and Costly Capital Adjustment: An Application to Pacific Halibut" and "Fisheries Management with Stock Uncertainty and Costly Capital Adjustment" JEL: D2 Q2 Date: 2005-04-14 URL: http://d.repec.org/n?u=RePEc:isu:genres:12291&r=all 141. The Case Series in Management of Technology No. 3: Danfysik: Business Development at the Science-technology Interface. Jens Froslev Christensen Kenneth Husted This case is the third in a series of company cases on strategy, organization and management of technology headed by Jens Froslev Christensen at Department of Industrial Economics and Strategy, Copenhagen Business School. The objective of these cases is twofold: to generate empirical inputs from business practice to both ongoing research and case-teaching exercises within the field of Management of Technology. This case study does not pretend to give a full and final account of Danfysik A/S. The study provides a broad outline of the historical development of Danfysik, industrial and competitive context, strategy and organization, and management of technology. Primary attention is given to the issue of business development at the science- technology interface. The case builds on interviews with managers at Danfysik (a list of interviews and interviewees can be found in appendix A), internal reports and company material. We would like to extend our warmest thanks to Ejnar Jespersen, founder of Danfysik and former CEO, and Bjarne Roger Nielsen, Ph.d. CEO and former R&D manager who have made decisive inputs to this case. Support from CISTEMA (Center for Inter-disciplinary Studies in Technology Management), DRUID (Danish Research Unit for Industrial Dynamics) and the Department of Industrial Economics and Strategy is gratefully acknowledged. Keywords: case study; management of technology; strategy; technology based firms JEL: O32 M1 L2 URL: http://d.repec.org/n?u=RePEc:ivs:iivswp:00-9&r=all 142. Edith Penrose and the Penrosians - or, why there is still so much to learn from The Theory of the Growth of the Firm. Nicolai J. Foss Keywords: firm growth; capabilities; firm strategy JEL: L21 L22 M2 URL: http://d.repec.org/n?u=RePEc:ivs:iivswp:98-1&r=all 143. The Knowledge-Based Approach: An Organizational Economics Perspective Kirsten Foss Nicolai Foss Proponents of the emerging knowledge-based (resource-based, competence-based, etc.) theory of the firm have subjected more traditional economics of organization theories to strong critiques. Rather than directly answering this critique, we examine key ideas of the knowledge-based approach, and argue that these are not necessarily in conflict with basic ideas from organizational economics (particularly ideas relating to the property rights approach), but are either complementary to or consistent with these. In fact, property rights economics and other organizational economics ideas may at least to some extent constitute a much needed micro-foundation for the knowledge-based perspective. The purpose of this exercise is 1) to facilitate dialogue, 2) to dispel false claims of insurmountable differences between the two approaches, and 3) to establish what is genuinely different in the knowledge-based approach. Keywords: economic organization; firm knowledge, governance JEL: M21 B49 URL: http://d.repec.org/n?u=RePEc:ivs:iivswp:98-5&r=all 144. How Do Aspiration Levels come About? Bounded Rationality and Dynamic Search Mie Augier Volker Mahnke Although the Behavioral Theory of the Firm has served as continuing stimulus in diverse field of inquiry such as organizational learning, the theory of the firm, and decision making research more generally and there is good reason to expect that this influence continues to remain significant, the reach of the theory as it stands in situation of genuine uncertainty remains limited. This paper seeks to address this gap by taking steps towards extending the theory of search. A key departure from earlier approaches to the theory of search is the inclusion of the question How do aspiration levels come about? in addition to the received question How do aspiration levels change. This approach highlights the significance of an extended model of search in situations of Knightian uncertainty and Shacklian surprise. For instance, the concept of dynamic search sheds light on the role of 1) experimentation and play in the creation of aspirations, 2) creating disbelief in situations of lacking prior experience, and 3) disengaging limits of imagination. This paper develops aspects of the theoretical foundations of the concept of dynamic search and clarifies processes leading to new aspirations that guide subsequently firm adaptation. While many implications of dynamic search are still unexplored, building on insights from specifically the economists Shackle, Knight and the recent work of March and more generally from the ‘bounded rationality’ - tradition appears to be a promising avenue for new advances in organization science. URL: http://d.repec.org/n?u=RePEc:ivs:iivswp:98-8&r=all 145. The Changing Wage Return to an Undergraduate Education O'Leary, Nigel C. (WELMERC, University of Wales Swansea) Sloane, Peter J. (WELMERC, University of Wales Swansea and IZA Bonn) Between 1990/91 and 2000/01 the number of male undergraduates in Britain increased by over one-third while the number of female undergraduates has increased nearly twofold. Given this substantial increase in supply we would expect some impact on the wage premium for recent graduates unless demand has shifted in parallel. Following Katz and Murphy (1992), we adopt a simple supply and demand framework to analyse changes in earnings mark- ups across degree disciplines over time. Using a propensity score approach to match those graduates entering the labor market with an age balanced sample of individuals with two or more A-Levels from the Labour Force Survey, we find a significant decline in the markup for females, whilst no such change is apparent for males. These aggregate figures, however, mask a great deal of variation across degree subjects, with declines in those subjects in which women predominate and in the lowest quartile of the earnings distribution being identified. The results point to both supply and demand factors impacting on the graduate mark-up as theory would suggest. Keywords: education, wages JEL: I2 J0 J3 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1549&r=all 146. Part-Time Work in EU Countries: Labour Market Mobility, Entry and Exit Buddelmeyer, Hielke (Melbourne Institute of Applied Economic and Social Research and IZA Bonn) Mourre, Gilles (ECFIN, European Commission) Ward, Melanie (European Central Bank, CEPR and IZA Bonn) This paper looks at the role of part-time work in labour mobility for 11 European countries. We find some evidence of part- time work being used as a stepping stone into full-time employment, but for a small proportion of individuals (less than 5%). Part-time jobs are also found to be more frequently taken up as a means to enter the labour market than to leave it. Multinomial logit regression of the determinants of part-time work reveals household composition, past labour market history and country of residence as very important for both men and women in their decision to work part time. Random effects regression controlling for individual heterogeneity, and the comparison of results for Europe and the US, reveals that a significantly higher proportion of female workers in Europe prefer inactivity and a significantly lower percentage prefer full-time, over part- time employment, than in the US, with considerable variation across EU countries. Keywords: labour market mobility and flexibility, labour supply, full-time and part-time employment, unemployment, non- employment, gender, stepping stones, labour market entry and exit JEL: J21 J22 J16 J60 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1550&r=all 147. School-to-Career and Post-Secondary Education: Evidence from the Philadelphia Educational Longitudinal Study Furstenberg, Frank F. , Jr. (University of Pennsylvania) Neumark, David (Public Policy Institute of California, NBER and IZA Bonn) We study a set of programs implemented in Philadelphia high schools that focus on boosting post-secondary enrollment. These programs are less career oriented than traditional schoolto- work programs, but are consistent with the broadening of the goals of school-to-work to emphasize post-secondary education. The Philadelphia Longitudinal Educational Study (PELS) data set that we examine contains an unusually large amount of information on individuals prior to placement in STC programs. We use the detailed information in the PELS to study the process of selection into these programs and to examine their impact on a set of mainly schooling-related outcomes during and after high school, although we also consider their impact on non-academic outcomes. The data point to positive effects of these programs on high school graduation and on both academic and non-academic awards in high school, and similar negative effects on dropping out of high school. The results also suggest positive effects on aspirations for higher education and on college attendance. In addition, there is some evidence that these programs are more effective in increasing college attendance and aspirations among at-risk youths. Keywords: school-to-career, education JEL: I28 J24 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1552&r=all 148. The Labour Market Characteristics and Labour Market Impacts of Immigrants in Ireland Barrett, Alan (Economic and Social Research Institute, Dublin and IZA Bonn) Bergin, Adele (Economic and Social Research Institute, Dublin) Duffy, David (Economic and Social Research Institute, Dublin) The purpose of this paper is two-fold. We firstly produce a labour market profile of non-Irish immigrants who arrived in Ireland in the ten years to 2003. We then go on to use the labour market profile in estimating the impact of immigration (non-Irish) on the Irish labour market. Immigrants are shown to be a highly educated group. However, they are not all employed in occupations that fully reflect their education levels. The model of the labour market that we use to simulate the impact of immigration differentiates between low-skilled and high-skilled labour. This allows us to estimate the impact of immigrants (a) if they were employed at a level fitting their education and (b) if they were employed in occupations below their educational level. Our results show that under scenario (a) immigrants who arrived between 1993 and 2003 increased GNP by between 3.5 and 3.7%, largely by lowering skilled wages by around 6% and increasing Ireland’s competitiveness. Under scenario (b), the increase in GNP is reduced to 3% because the impact on skilled wages is lower. If we assume the immigration is primarily unskilled, the impact on earnings inequality is reversed. Keywords: immigrants, immigrant characteristics, immigrant impacts, Ireland JEL: J24 J31 J61 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1553&r=all 149. Wage Differences Between Men and Women in Austria: Evidence from 1983 and 1997 Boheim, Rene (University of Linz and IZA Bonn) Hofer, Helmut (Institute for Advanced Studies, Vienna) Zulehner, Christine (University of Vienna) In most OECD countries the wage gap between men and women has declined during the past two decades. Developments of the last 20 years, e.g. increased labour market attachment of women, changes in the bargaining structure, and the introduction of equal pay laws, may have reduced the gender wage gap. We investigate the extent, persistence, and socio-economic determinants of the gender wage gap in Austria, for the years 1983 and 1997. Using wage decomposition techniques, we find that the average gender wage gap was almost as high in 1997 as it was in 1983. Not accounting for differences, the gender wage gap dropped from 25.5 to 23.3 per cent. Taking observable differences between men and women into account, we estimate that the mean gender wage gap which cannot be explained, i.e. discrimination against women, dropped from 18 to 15.5 per cent of men’s wages. The drop in discrimination is the main reason for the narrowing of the gender wage gap. Keywords: wage differentials, wage inequality, decomposition JEL: J31 J71 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp1554&r=all 150. The Political Budget Cycle is Where You Can't See It: Transparency and Fiscal Manipulation James E. Alt (Department of Government, Harvard University) David Dreyer Lassen (Institute of Economics, University of Copenhagen) We investigate the effects of fiscal transparency and political polarization on the prevalence of electoral cycles in fiscal balance. The recent political economy literature on electoral cycles identifies such cycles mainly in weak and recent democracies. In contrast, we show, conditioning on a new index of institutional fiscal transparency, that electoral cycles in fiscal balance are a feature also of advanced industrialized economies. Using a sample of nineteen OECD countries in the 1990’s, we identify a persistent pattern of electoral cycles in low(er) transparency countries, while no such cycles can be observed in high(er) transparency countries. Furthermore, we find, in accordance with recent theory, that electoral cycles are larger in more politically polarized countries. Keywords: fiscal transparency; political polarization; fiscal policy; budget deficits; political budget cycles; electoral policy cycles JEL: D72 E62 H62 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:kud:epruwp:05-03&r=all 151. Extracting Information from the Data: A Popperian View on Empirical Macro Katarina Juselius (Institute of Economics, University of Copenhagen) Soren Johansen (Department of Mathematical Statistics, University of Copenhagen) The cointegrated VAR model is proposed as an empirically coherent framework for analyzing macroeconomic phenomena within a dynamic system of pulling and pushing forces. As an illustration we show how an economic theory for inflation and money demand gives rise to a number of hypotheses formulated as testable parameter restrictions on cointegrating relations and common trends. The procedure not only allows us to test prior theoretical hypotheses in a valid maximum likelihood framework but also provides additional empirical results suggesting how to modify or improve our theoretical understanding. The latter is important when theoretical implications fail to hold in the data. Keywords: cointegrated VAR; inflation; money growth; empirical methodology JEL: B41 C32 E40 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:kud:kuiedp:0505&r=all 152. The latent factor VAR model: Testing for a common component in the intraday trading process Nikolaus Hautsch (Institute of Economics, University of Copenhagen) In this paper, we propose a framework for the modelling of multivariate dynamic processes which are driven by an unobservable common autoregressive component. Economically motivated by the mixture-of-distribution hypothesis, we model the multivariate intraday trading process of return volatility, volume and trading intensity by a VAR model that is augmented by a joint latent factor serving as a proxy for the unobserved information flow. The model is estimated by simulated maximum likelihood using efficient importance sampling techniques. Analyzing intraday data from the NYSE, we find strong empirical evidence for the existence of an underlying persistent component as an important driving force of the trading process. It is shown that the inclusion of the latent factor clearly improves the goodness-of-fit of the model as well as its dynamical and distributional properties. Keywords: observation vs. parameter driven dynamics; mixture-of- distribution hypothesis; VAR model; efficient importance sampling JEL: C15 C32 C52 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:kud:kuiefr:200503&r=all 153. Why do parents their children work ? A test of peverty hypothesis in rural areas in Brukina Faso Dumas Christelle This article aims at testing whether child labor is caused by poverty. Tests are designed for rural areas in a setting characterized by the absence of a labor market. A model of rural household labor supply is developed that provides testable implications of two different poverty hypotheses. We test if child labor is due to a binding subsistence constraint and if child leisure is a luxury good. We find that, in rural Burkina Faso, children provide labor mostly because of labor market imperfections and not because of household subsistence needs and that child leisure is a normal good. Keywords: child labor, rural hoseholds, market imperfections, poverty hypothesis JEL: D13 I32 J22 O12 Q12 Date: 2004-06 URL: http://d.repec.org/n?u=RePEc:lea:leawpi:0411&r=all 154. Children education in Senegal : how does family background influence achievement Christelle Dumas Sylvie Lambert This paper aims at studying the relationship between schooling and family background characteristics. The econometric analysis uses an original survey conducted in 2003 in Senegal that, uniquely, provides instruments permitting to deal with the endogeneity of background variables. The estimated effect of father’s education more than doubles when its endogeneity is accounted for. We also present results suggesting that family background has as much impact after entry at school than at younger ages, and that parental education affects children schooling through its contribution to parental preferences (and not only through higher efficiency in the production of human capital). Keywords: schooling mobility, education demand JEL: D12 I21 O12 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:lea:leawpi:0503&r=all 155. "The Case for an Environmentally Sustainable Jobs Program" Mathew Forstater The job numbers in the United States and around the globe continue to look bleak. Not only are the absolute numbers dismal, but also job growth has dragged on with no hope for a substantial change in prospects. This situation supports the view that we are facing a long-term problem that requires critical and creative problem-solving responses. Since unemployment is the major cause of poverty, many of our most pressing social problems are directly or indirectly related to joblessness. I argue that not only the quantity but also the quality of jobs is at issue. Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:lev:levypn:pn05_1&r=all 156. "Manufacturing a Crisis: the Neocon Attack on Social Security" L. Randall Wray For seven decades, the far right has never veered from its avowed mission to gut America’s most comprehensive, successful, and popular safety net: Social Security.While it had won a few small battles (most notably, the Greenspan Commission’s huge 1983 payroll tax hikes and two-year increase in the normal retirement age), its efforts never gained much political traction before 2000. Ironically, the Clinton administration provided some much-needed support to the conservative think tanks’ preposterous claim that Social Security faces financial Armageddon. And candidate Al Gore’s only significant campaign issue involved maintaining "lockboxes" to protect the trust fund by dedicating a portion of projected 15-year budget surpluses to the program. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:lev:levypn:pn05_2&r=all 157. "How Fragile is the U.S. Economy?" Dimitri B. Papadimitriou Anwar M. Shaikh Claudio H. Dos Santos Gennaro Zezza As we projected in a previous strategic analysis, the U.S. economy experienced growth rates higher than 4 percent in 2004. The question we want to raise in this strategic analysis is whether these rates will persist or come back down. We believe that several signs point in the latter direction. In what follows, we analyze the evidence and explore the alternatives facing the U.S. economy. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:lev:levysa:sa_mar_05&r=all 158. "The Transmission Mechanism of Monetary Policy: A Critical Review" Greg Hannsgen Recently, many economists have credited the late-1990s economic boom in the United States for the easy money policies of the Federal Reserve. On the other hand, observers have noted that very low interest rates have had very little positive effect on the chronically weak Japanese economy. Therefore, some theory of how money affects the economy when it is endogenous would be useful. This paper pursues several such explanations, including the effects of interest rate changes on (1) investment; (2) consumer spending; (3) the exchange rate; and (4) financial markets. The theories of such authors as Kalecki, Keynes, Minsky, and J. K. Galbraith are discussed and evaluated, with an emphasis on the role of cash flow. Some of these theories turn out to be stronger than others when subjected to tests of logic and empirical evidence. Date: 2004-10 URL: http://d.repec.org/n?u=RePEc:lev:wrkpap:wp412&r=all 159. "Visions and Scenarios: Heilbroner's Worldly Philosophy, Lowe's Political Economics, and the Methodology of Ecological Economics" Mathew Forstater Ecological economics is a transdisciplinary alternative to mainstream environmental economics. Attempts have been made to outline a methodology for ecological economics and it is probably fair to say that, at this point, ecological economics takes a "pluralistic" approach. There are, however, some common methodological themes that run through the ecological economics literature. This paper argues that the works of Adolph Lowe and Robert Heilbroner can inform the development of some of those themes. Both authors were aware of the environmental challenges facing humanity from quite early on in their work, and quite ahead of time. In addition, both Lowe's Economics and Sociology (and related writings) and Heilbroner's "Worldly Philosophy" (itself influenced by this work of Lowe) recognized the endogeneity of the natural environment, the impact of human activity on the environment, and the implications of this for questions of method. Lowe and Heilbroner also became increasingly concerned with issues related to the environment over time, such that these issues became of prime importance in their frameworks. This work deals directly with ecological and environmental issues; both authors also dealt with other issues that relate to the environmental challenge, such as technological change. But it is not only their work that explicitly addresses the environment or relates to environmental challenges that is relevant to the concerns of ecological economists. Both Heilbroner's "Worldly Philosophy" and Lowe's "Political Economics" offer insights that may prove useful in developing a methodology of ecological economics. Ecological economists have taken a pluralistic approach to methodology, but the common themes in this work regarding the importance and nature of vision, analysis ( including structural analysis), scenarios, implementation, the necessity of working backwards, the role for imagination, rejecting the positive/normative dichotomy, and so on, all are issues that have been elaborated in Lowe's work, and in ways that are relevant to ecological economics. The goal of the paper is actually quite modest: to make ecological economists aware of the work of the two authors, and get them interested enough to explore the possible contribution of these ideas to their methodological approach. Date: 2004-10 URL: http://d.repec.org/n?u=RePEc:lev:wrkpap:wp413&r=all 160. "Household Wealth Distribution in Italy in the 1990s" Andrea Brandolini Giovanni D’Alessio Luigi Cannari Ivan Faiella This paper describes the composition and distribution of household wealth in Italy. First, the evolution of household portfolios over the last 40 years is described on the basis of newly reconstructed aggregate balance sheets. Second, the characteristics and quality of the main statistical source on wealth distribution, the Bank of Italy’s Survey of Household Income and Wealth, are examined together with the statistical procedures used to adjust for nonresponse, nonreporting and underreporting. The distribution of household net worth is then studied using both adjusted and unadjusted data. Wealth inequality is found to have risen steadily during the 1990s. The increased concentration of financial wealth was an important factor in determining this path. Date: 2004-11 URL: http://d.repec.org/n?u=RePEc:lev:wrkpap:wp414&r=all 161. "Measuring Capacity Utilization in OECD Countries: A Cointegration Method" Anwar M. Shaikh Jamee K. Moudud This paper derives measures of potential output and capacity utilization for a number of OECD countries, using a method based on the cointegration relation between output and the capital stock. The intuitive idea is that economic capacity (potential output) is the aspect of output that co-varies with the capital stock over the long run. We show that this notion can be derived from a simple model that allows for a changing capital-capacity ratio in response to partially exogenous, partially embodied, technical change. Our method provides a simple and general procedure for estimating capacity utilization. It also closely replicates a previously developed census-based measure of U.S. manufacturing capacity-utilization. Of particular interest is that our measures of capacity utilization are very different from those based on aggregate production functions, such as the ones provided by the IMF. Date: 2004-11 URL: http://d.repec.org/n?u=RePEc:lev:wrkpap:wp415&r=all 162. "Occupational and Industrial Mobility in the United States 1969–93" Eric Parrado Asena Caner Edward N. Wolff Using the Panel Study of Income Dynamics, we investigate occupational and industrial mobility of individuals over the 1969–80 and 1981–93 periods in the United States. We find that workers changed both occupations and industries more frequently in the later period. For example, occupational mobility for men ranged from 15 to 20 percent per year during the first period and from 20 to 25 percent per year over the second. We also find that, for men, occupational and industrial changes are associated with lower earnings, though this effect has lessened somewhat over time, while for women the results are mixed. Our results also indicate that older and less educated workers are less likely to shift occupation or industry, as are better paid men but not better paid women. Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:lev:wrkpap:wp416&r=all 163. "Determinants of Minority–White Differentials in Child Poverty" Yuval Elmelech This paper uses data from the 1993–2001 March Current Population Survey to estimate the extent to which child living arrangements, parental work patterns, and immigration attributes shape racial and ethnic variation in child poverty. Results from multivariate analyses and a standardization technique reveal that parental work patterns as well as child living arrangements are especially consequential for black and Puerto-Rican economic circumstances. Child immigration generation and parental length of residence seem to play a detrimental role in shaping poverty among Asian, Mexican, and Central/South American children. We also found that the extent to which differences in the composition of and returns to parental resources determine white- minority economic gaps varies substantially across racial and ethnic lines. The social and economic implications of the findings for understanding racial and ethnic inequality are discussed in the final section of the article. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:lev:wrkpap:wp417&r=all 164. "Asset Ownership along Gender Lines: Evidence from Thailand" Rania Antonopoulos Maria Sagrario Floro Gender differences have long been documented in earnings, employment opportunities, and time spent within the unpaid care economy. This paper joins the recent efforts in the economics literature on gender differences in asset ownership. Specifically, it investigates whether a gender-specific composition in asset ownership between heads of households and spouses can be detected among low-income, urban households in Bangkok, Thailand. The present case study explores this issue empirically, using a sample of 134 couples from a 2002 survey that collected data at the level of the individual respondent on accumulated physical and financial assets. Both husband and wife were interviewed separately and the data gathered from the interviews include pertinent household and individual information on employment, credit and household decision-making issues. The findings suggest that asset composition varies by gender, indicating that further investigation is warranted on this topic. Tobit and Probit tests are used to examine the factors that may affect this gendered pattern. Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:lev:wrkpap:wp418&r=all 165. "FDIC-Sponsored Self-Insured Depositors: Using Insurance to Gain Market Discipline and Lower the Cost of Bank Funding" Panos Konstas Insured depositors have no reason to care how their banks perform or how safe they are. Only uninsured depositors have that incentive. This paper offers a plan to replace some insured deposits with uninsured deposits. The plan: the FDIC would guarantee loan contracts if the loan takers deposited the proceeds exclusively in uninsured deposits and backed those deposits with equity. This would ensure that the loan takers could share the likely costs if any of their depositories failed. The loans made under FDIC guarantee would only require interest at the risk-free rate. Thus the loan takers could offer the proceeds at lower rates than the rates paid on current deposits. Accordingly, funding by banks would shift to the new deposits, and since the new “self-insured” depositors would have equity at stake, they would have no choice but to duly monitor their banks and impose rate premiums based on each bank’s indigenous risk. With these reforms, some very costly imperfections of current deposit insurance would be eliminated: the FDIC would now have in place a program that would dissuade banks from moral hazard and high risk and set the foundation for better disciplined, safer, and more cost-efficient banking. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:lev:wrkpap:wp419&r=all 166. "Is the Equalizing Effect of Retirement Wealth Wearing Off?" Edward N. Wolff Retirement wealth is often viewed as a great equalizer, offsetting the inequality in standard household net worth. One of the most dramatic changes in the retirement income system over the last two decades has been a decline in traditional Defined Benefit (DB) pension plans and a sharp rise in Defined Contribution (DC) pensions. Using data from the Federal Reserve Board’s Survey of Consumer Finances, I find that retirement wealth (the sum of pension and Social Security wealth) has a considerably weaker offsetting effect on wealth inequality in 2001 than in 1983. Whereas standard net worth inequality increased modestly between 1983 and 2001, the inequality of augmented wealth (the sum of retirement wealth and net worth) surged from 1983 to 2001, very much in line with income inequality. Moreover, whereas median net worth climbed substantially from 1983 to 2001, median augmented wealth actually fell over this period. Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_420&r=all 167. The determining factors of entry of new firms into industrial sectors: a survey Christian Garavaglia (Cattaneo University (LIUC)) Entry is a common feature of all industries and it represents a key aspect to be studied in order to understand the dynamics that characterise the evolution of industrial sectors. It is the purpose of this paper to analyse the process of entry of firms into markets and the nature of the factors that could play a role in determining it and in shaping the evolution of market structures. Different fields of economic literature examine the dynamic process of entry of new firms. In this paper, we focus our attention on the differences that characterise these approaches: the traditional approach, the technological regime theory, the role of “competence-enhancing” and “competence- destroying” technological change, the industry life cycle theory, the role of information and uncertainty, the organisational ecology approach and the psychological view. We claim that the relationship of the entry processes with the evolution of market structures, then, can be deeply understood only if we take into account the distinctions and the complementarities offered by these views. Date: 2004-03 URL: http://d.repec.org/n?u=RePEc:liu:liucec:144&r=all 168. Risk of the Chinese trade integration for the Italian trade specialisation Alessia Amighini Stefano Chiarlone The move towards export-oriented development strategies by China has increased concerns about the ability of Italian manifactures to effectively face price competition from emerging economies. This paper explores the hypothesis that the superior quality of Italian goods could support Italian competitiveness, using Spain as a benchmark. The data confirm that, although Italian and Chinese specialisation patterns are very similar, there is no widespread overlapping at the product level, and when there is, Italian goods show a higher quality level. Nonetheless, during the last decade, trade overlap increased and quality gap narrowed, suggesting that China is putting increasing competitive pressures on Italian manufacturing. In order to maintain its qualitative advantage, there is urgent need in Italy for an increase in investment in product upgrading and innovation. Date: 2004-06 URL: http://d.repec.org/n?u=RePEc:liu:liucec:150&r=all 169. Competition in Banking: Switching Costs and the Limits of Antitrust Enforcement Giovanni B. Ramello (Cattaneo University (LIUC)) Donatella Porrini (Cattaneo University (LIUC)) The antitrust intervention in banking has always been heavily influenced by considerations of stability. Regulation has historically given precedence to the stability objective, relegating thus competition to second place. In fact, in the case of banking, price competition tends to encourage overly speculative behaviours, which essentially entail acceptance of excessive risk, with a resultant volatility that could potentially harm depositors, and ultimately compromise the stability of the economic system as a whole. The consequence of this approach is that banking market becomes extremely rigid on the supply side and structurally not equipped for a competitive orientation, and banks come to occupy a privileged position vis- a-vis governments that--to a greater or lesser extent, depending on the countries and the situations--enables them to sidestep the antitrust authorities. In such a scenario, the trade-off between stability and competition cannot be totally resolved through traditional antitrust actions, which are sometimes at odds with the stability objective and hampered by the constraints of the previously defined regulatory framework. It is precisely these considerations, found in a significant portion of the literature, that provide the starting base for the hypothesis of this work and namely the proposal of a novel demand side perspective, i.e. one which focuses on the central role of consumers in the competitive process. If intervention on the supply side is hampered a priori by the regulatory framework, it is nevertheless possible to implement pro-competition actions on the demand side, for example by enhancing the ability of consumers to change from one provider to the other without impacting on the market structure. In operational terms, the proposed approach is to leverage consumer mobility in order to stimulate the currently weakened competition between firms. This would make it possible to pursue the traditional antitrust objectives of efficiency and welfare maximisation, without necessarily impacting on stability. Date: 2004-09 URL: http://d.repec.org/n?u=RePEc:liu:liucec:153&r=all 170. Intellectual property and the markets of ideas Giovanni B. Ramello (Cattaneo University (LIUC)) This paper attempts to systematise the law and economics theory as it relates to intellectual property rights, while at the same time suggesting new perspectives for analysis. The standard literature on IPRs relies essentially on the thesis of the incentive to create and/or disclose new ideas. However, although this argument doubtless remains valid in the general case, it fails to satisfactorily take into account various consequences arising from the new legal institutions and the specific technological context. One important such consequence is the dynamic effect of intellectual property rights on the market structure of the sectors involved, which can at times interfere with the original competitive processes, or even drastically alter them. An economic analysis based on these premises --though as yet fragmented and non systematic-- might reveal a different overall balance of welfare for the individual rights and therefore lead to different regulatory and policy indications Date: 2004-12 URL: http://d.repec.org/n?u=RePEc:liu:liucec:161&r=all 171. A talk about that thing called "economia" Giancarlo Origgi (Cattaneo University (LIUC)) It’s some time since the ensemble of the economical activities, namely the "system" of creating welfare once described as the "capitalistic production system", is now arousing criticism also in those who still are its supporters, despite of the enormous results reached in terms of welfare spreading. This criticism concerns two distinctive aspects: the disparity increase between "first" and "third" world and the excessive relevance on quantitative and measurable life aspects compared to the qualitative ones, known in the common language as "values". This analysis aims to uphold that this situation does not depend as much on the particular "production system" as on the fact that, if the economy in its aspect of existential "activity" tends to be economy by respecting its finality of wealth creator, then it necessarily has to come into conflict with the other two "practices" forming the framework of every social system, politics and ethic, and this same conflict will become more sharp if the economy appears as the winning "practice". Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:liu:liucec:163&r=all 172. Patterns of international fragmentation of production and the relative demand for labor Rodolfo Helg (Cattaneo University (LIUC)) Growing shares of international trade flows consist of intermediate and unfinished goods shipped from one country to another to combine manufacturing or services activities at home with those performed abroad. This configuration of the productive structure has been named “internationally fragmented.” The purpose of our work is to analyze the labor market effects of international fragmentation of production, looking at how it affects relative labor demand. Models of trade due to fragmentation of production suggest that when international fragmentation takes place we might observe a change in the factor proportion in the affected industries. We use outward-processing- trade data - specifically related to international fragmentation of production - to test if the shift in the ratio of skilled and unskilled labor employed in Italy and Germany during the 1990s is related to fragmentation. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:liu:liucec:167&r=all 173. Der Bruch der Theorie in der Praxis durch Not Schlicht, Ekkehart Lujo Brentano (1844-1931) hat sich als "realistischen" Okonomen verstanden. Im Bereich der Arbeitsmarkttheorie sind zwei Bereiche von besonderem Interesse: Seine Untersuchungen uber den Zusammenhang zwischen Lohn, Arbeitszeit und Arbeitsleistung und seine Uberlegungen zur Bildung von kollektiven Formen der Lohnsetzung. Diese beiden Themen werden unter Einbeziehung gesamtwirtschaftlicher und methodischer Aspekte unter Einbeziehung einiger moderner Gesichtspunkte diskutiert. JEL: J1 B1 J3 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:lmu:muenec:568&r=all 174. Human Capital and Marcroeconomic Growth: Austria and Germany 1960-1997. An Update Marin, Dalia Koman, Reinhard In an influential paper Mankiw, Romer, and Weil (1992) argue that the evidence on the international disparity in levels of per capita income and rates of growth is consistent with a standard Solow model, once it has been augmented to include human capital as an accumulable factor. In a study on Austria and Germany we augment the Solow model to allow for the accumulation of human capital. Based on a perpetual inventory estimation procedure we construct an aggregate measure of the stock of human capital of Austria and Germany by weighting workers of different schooling levels with their respective wage income. We obtain an estimate of the wage income of workers with different schooling from a Mincer type wage equation which quantifies how wages change with years of schooling. We find that the time series evidence on Austria and Germany is not consistent with a human capital augmented Solow model. Factor accumulation (broadly defined to include human capital) appears to be less (and not more) able to account for the cross-country growth performance of Austria and Germany when human capital accumulation is included in the analysis. Our results indicate that differences in technology are a driving factor in understanding cross country growth between these two neighboring countries with similar political and institutional background. JEL: O4 O3 O1 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:lmu:muenec:569&r=all 175. European Heights in the Early 18th Century Komlos, John Cinnirella, Francesco We estimate the height of various European populations in the first half of the 18th century. English and Irish male heights are estimated at c. 65 inches (165 cm), and c. 66 inches (168 cm) respectively. These values are below those obtained from the only other sample available for the period pertaining to British and Irish men, namely those of runaway indentured and convict servants in colonial North America, whose height is estimated as between 66.4 and 67.0 inches (168,7 and 170,2 cm). At c. 64.5 inches (164 cm) Saxon, German and Scotch military heights appear to be near the bottom of the European height distribution in this period. The English were about as tall as Bohemians and French, but shorter than the Irish and Hungarians. A large decline in English heights is evident among the birth cohorts of 1725-29, suggesting that the subsistence crisis of this period must have had a substantial lasting impact on the nutritional status of the cohort born during a time of nutritional deprivation. JEL: N93 N53 N33 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:lmu:muenec:572&r=all 176. On English Pygmies and Giants: the Physical Stature of English Youth in the late-18th and early-19th Centuries Komlos, John The physical stature of lower- and upper-class English youth are compared to one another and to their European and North American counterparts. The height gap between the rich and poor was the greatest in England, reaching 22 cm at age 16. The poverty- stricken English children were shorter for their age than any other European or North American group so far discovered, while the English rich were the tallest in their time: only 2.5 cm shorter than today?s US standards. Height of the poor declined in the late-18th century, and again in the 1830s and 1840s conforming to the general European pattern, while the height of the wealthy tended rather to increase until the 1840s and then levelled off. JEL: N93 N53 N33 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:lmu:muenec:573&r=all 177. Nonlinearity in the Term Structure D H Kim This paper investigates the nature of nonlinearities in the term structure using the flexible approach to nonlinear inference. The paper reports clear evidence of nonlinearity, in contrast to the affine term structure model and consistent with recent claims in the literature. We find that there is a threshold effect of volatility on the interest rate but this effect does not capture the entire nature of the nonlinearity. The quadratic term structure model recentlyproposed performs better for capturing the nonlinearity than the threshold model but the former model seems to miss some aspect of nonlinearity for short-term rates. However, our flexible nonlinear model which incorporates the threshold effect and the convexity of volatility into the quadratic model, generally performs well for all interest rates. The paper suggests that this model is a promising representation of nonlinearities and out-of-sample forecasts support the claim of nonlinearities. Date: 2005 URL: http://d.repec.org/n?u=RePEc:man:cgbcrp:51&r=all 178. Healthy Aging at Older Ages: Are Income and Education Important? Neil J. Buckley Frank T. Denton A. Leslie Robb Byron G. Spencer Being higher on the socioeconomic scale is correlated with being in better health, but is there is a causal relationship? Using three years of longitudinal data for individuals aged 50 and older from the Canadian Survey of Labour and Income Dynamics, we study the health transitions for those who were in good health in the first year, focussing especially on income and education. The initial good health restriction removes from the sample those whose incomes may have been affected by a previous history of poor health, thus avoiding a well known problem of econometric endogeneity. We then ask, for those in good health, whether later transitions in health status are related to socioeconomic status. We find that they are that changes in health status over the subsequent two years are related in particular to income and education. Keywords: aging, health, income, education JEL: I12 Date: 2004-12 URL: http://d.repec.org/n?u=RePEc:mcm:qseprr:392&r=all 179. Healthy Aging at Older Ages: Are Income and Education Important? Neil J. Buckley Frank T. Denton A. Leslie Robb Byron G. Spencer Being higher on the socioeconomic scale is correlated with being in better health, but is there is a causal relationship? Using three years of longitudinal data for individuals aged 50 and older from the Canadian Survey of Labour and Income Dynamics, we study the health transitions for those who were in good health in the first year, focussing especially on income and education. The initial good health restriction removes from the sample those whose incomes may have been affected by a previous history of poor health, thus avoiding a well known problem of econometric endogeneity. We then ask, for those in good health, whether later transitions in health status are related to socioeconomic status. We find that they are -- that changes in health status over the subsequent two years are related in particular to income and education. Keywords: aging, health, income, education JEL: I12 Date: 2004-12 URL: http://d.repec.org/n?u=RePEc:mcm:sedapp:123&r=all 180. Exploring the Use of a Nonparametrically Generated Instrumetal Variable in the Estimation of a Linear Parametric Equation Frank T. Denton The use of a nonparametrically generated instrumental variable in estimating a single-equation linear parametric model is explored, using kernel and other smoothing functions. The method, termed IVOS (Instrumental Variables Obtained by Smoothing), is applied in the estimation of measurement error and endogenous regressor models. Asymptotic and small-sample properties are investigated by simulation, using artificial data sets. IVOS is easy to apply and the simulation results exhibit good statistical properties. It can be used in situations in which standard IV cannot because suitable instruments are not available. Keywords: single equation models; nonparametric; instrumental variables JEL: C13 C14 C21 Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:mcm:sedapp:124&r=all 181. Borrowing Constraints, the Cost of Precautionary Saving, and Unemployment Insurance Thomas F. Crossley Hamish W. Low Job losers exhibit significant heterogeneity in wealth holdings and in the marginal propensity to consume transitory income. We consider potential sources of this heterogeneity, whether (some of) the unemployed face borrowing constraints, and the implications of this heterogeneity for unemployment insurance. We show theoretically how the optimal benefit can depend significantly on borrowing constraints, and on other (non- precautionary) savings motives. We report empirical evidence that i) a quarter of job losers cannot borrow for current consumption, (ii) this constraint is binding for a much smaller fraction, and iii) that "excess sensitivity" is not limited to the constrained. Keywords: unemployment, savings, credit constraints, life-cycle, consumption, unemployment insurance JEL: H53 D91 Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:mcm:sedapp:125&r=all 182. Entry Costs and Stock Market Participation Over the Life Cycle Sule Alan Several explanations for the observed limited stock market participation have been offered in the literature. One of the most promising one is the presence of market frictions mostly in the form of fixed entry and/or transaction costs. Empirical studies strongly point to a significant structural (state) dependence in the stock market entry decision, which is consistent with costs of these types. However, the magnitude of these costs are not yet known. This paper focuses on fixed stock market entry costs. I set up a structural estimation procedure which involves solving and simulating a life cycle intertemporal portfolio choice model augmented with a fixed stock market entry cost. Important features of household portfolio data (from the PSID) are matched to their simulated counterparts. Utilizing a Simulated Minimum Distance estimator, I estimate the coefficient of relative risk aversion, the discount factor and the stock market entry cost. Given the equity premium and the calibrated income process, I estimate a one-time entry cost of approximately 2 percent of (annual) permanent income. My estimated model matches the zero median holding as well as the hump-shaped age- participation profile observed in the data. Keywords: entry costs; stock market; structural estimation JEL: G11 D91 Date: 2005-01 URL: http://d.repec.org/n?u=RePEc:mcm:sedapp:126&r=all 183. Income Inequality and Self-Rated Health Status: Evidence from the European Community Household Panel Vincent Hildebrand Philippe Van Kerm We examine the effect of income inequality on individual self- rated health status in a pooled sample of 10 member states of the European Union using longitudinal data from the European Community Household Panel (ECHP) survey. Taking advantage of the longitudinal and cross-national nature of our data, and carefully modelling the self-reported health information, we avoid several of the pitfalls suffered by earlier studies on this topic. We calculate income inequality indices measured at two standard levels of geography (NUTS-0 and NUTS-1) and find consistent evidence that income inequality is negatively related to self- rate health status in the European Union for both men and women. However, despite its statistical significance, the magnitude of the impact on inequality on health is small. Keywords: self-rated health; income inequality; European Union; panel data JEL: D63 I12 I18 Date: 2005-02 URL: http://d.repec.org/n?u=RePEc:mcm:sedapp:127&r=all 184. Ouverture commerciale : condition de la contribution effective du capital humain a la croissance economique des pays en developpement Yves Abessolo (CEREG, Universite de Yaounde II) Dans la litterature actuelle une controverse persiste quant a la validation sur donnees de panel de l'hypothese selon laquelle le capital humain contribue a la croissance. Nous confirmons ce resultat a l'aide d'un echantillon comprenant 23 pays d'Afrique subsaharienne entre 1980 et 1997. Cependant, l'estimation sur ces memes donnees de panel de modeles a termes interactifs puis a coefficients variables suggere que la contribution du capital humain a la croissance depend du taux d'ouverture commerciale. Ce resultat peut s'expliquer par la variation de la remuneration des facteurs, liee d'une part aux changements de la demande de capital humain induits par les echanges et d'autre part aux changements de l'offre relative des facteurs, qui sont amplifies dans les economies fermees. Les distorsions qui en resultent dans l'affectation du capital humain aux diverses activites economiques sont susceptibles d'influer sur le taux de croissance. The innovation of this paper is the proof of the relationship between human capital and growth, using a sample of 23 subsaharian African countries and six time periods between 1980 and 1997. Nonetheless, calculations from both interactive and variable-coefficient models based on these same panel data suggest that the contribution of human capital to growth depends on the level of commercial opening. The result could be explained by the variation in factor returns linked, on one hand, to trade induced changes in labour demand and, on the other, to changes in relative factor supply which are amplified in closed economies. Distorsions of human-capital allocation are therefore likely to influence the rate of growth. (Full text in french) JEL: J24 F41 F43 O47 Date: 2004-11 URL: http://d.repec.org/n?u=RePEc:mon:ceddtr:109&r=all 185. Une analyse theorique de l’interaction entre l’emploi public et les performances du marche du travail dans les pays en developpement Yves Abessolo (CEREG, Universite de Yaounde II) Cet article analyse les interactions entre l’emploi public et les performances du marche du travail dans les pays en developpement. Si dans les pays developpes il est montre que l’emploi public evince l’emploi prive et accroit le chomage, notre contribution theorique suggere que l’emploi public a une influence importante sur les performances du marche du travail des pays etudies a travers trois canaux. D’abord, a travers des externalites positives, l’emploi public accroit la productivite du secteur prive. Ensuite, compte tenu du degre de substitution entre les productions des secteurs public et prive d’une part, et du niveau des rentes d’autre part, l’emploi public n’evince pas l’emploi prive. Enfin, aucun element theorique ne justifie l’idee selon laquelle l’emploi public accroit le chomage, nos resultats suggerent meme que l’emploi public diminue durablement le chomage. This paper explores the consequences of public employment on labour market performances in developing countries. If in developed countries evidence shows that public employment may not only crowd out private employment, but also increase overall unemployment, our theoretical considerations suggest that public employment significantly affects labour market performances through three channels. First, positive externalities of public employment increase private sector productivity. Secondly, with the level of substitutability of public and private outputs, and the size of the rents, there is no crowding out effects of public jobs on the private sector. In the latter case, our theoretical analysis suggests that public employment may reduce unemployment in developing countries. (Full text in french) JEL: J21 J23 J24 J33 Date: 2004-11 URL: http://d.repec.org/n?u=RePEc:mon:ceddtr:110&r=all 186. A Pedant's Approach to Exponential Smoothing Ralph D Snyder An approach to exponential smoothing that relies on a linear single source of error state space model is outlined. A maximum likelihood method for the estimation of associated smoothing parameters is developed. Commonly used restrictions on the smoothing parameters are rationalised. Issues surrounding model identification and selection are also considered. It is argued that the proposed revised version of exponential smoothing provides a better framework for forecasting than either the Box- Jenkins or the traditional multi-disturbance state space approaches. Keywords: Time Series Analysis, Prediction, Exponential Smoothing, ARIMA Models, Kalman Filter, State Space Models JEL: C22 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:msh:ebswps:2005-5&r=all 187. Exponential Smoothing Model Selection for Forecasting Baki Billah Maxwell L King Ralph D Snyder Anne B Koehler Applications of exponential smoothing to forecast time series usually rely on three basic methods: simple exponential smoothing, trend corrected exponential smoothing and a seasonal variation thereof. A common approach to select the method appropriate to a particular time series is based on prediction validation on a withheld part of the sample using criteria such as the mean absolute percentage error. A second approach is to rely on the most appropriate general case of the three methods. For annual series this is trend corrected exponential smoothing: for sub- annual series it is the seasonal adaptation of trend corrected exponential smoothing. The rationale for this approach is that a general method automatically collapses to its nested counterparts when the pertinent conditions pertain in the data. A third approach may be based on an information criterion when maximum likelihood methods are used in conjunction with exponential smoothing to estimate the smoothing parameters. In this paper, such approaches for selecting the appropriate forecasting method are compared in a simulation study. They are also compared on real time series from the M3 forecasting competition. The results indicate that the information criterion approach appears to provide the best basis for an automated approach to method selection, provided that it is based on Akaike's information criterion. Keywords: Model Selection; Exponential Smoothing; Information Criteria; Prediction; Forecast Validation JEL: C22 Date: 2005-03 URL: http://d.repec.org/n?u=RePEc:msh:ebswps:2005-6&r=all 188. Time Series Forecasting: The Case for the Single Source of Error State Space J Keith Ord Ralph D Snyder Anne B Koehler Rob J Hyndman Mark Leeds The state space approach to modelling univariate time series is now widely used both in theory and in applications. However, the very richness of the framework means that quite different model formulations are possible, even when they purport to describe the same phenomena. In this paper, we examine the single source of error [SSOE] scheme, which has perfectly correlated error components. We then proceed to compare SSOE to the more common version of the state space models, for which all the error terms are independent; we refer to this as the multiple source of error [MSOE] scheme. As expected, there are many similarities between the MSOE and SSOE schemes, but also some important differences. Both have ARIMA models as their reduced forms, although the mapping is more transparent for SSOE. Further, SSOE does not require a canonical form to complete its specification. An appealing feature of SSOE is that the estimates of the state variables converge in probability to their true values, thereby leading to a formal inferential structure for the ad-hoc exponential smoothing methods for forecasting. The parameter space for SSOE models may be specified to match that of the corresponding ARIMA scheme, or it may be restricted to meaningful sub-spaces, as for MSOE but with somewhat different outcomes. The SSOE formulation enables straightforward extensions to certain classes of non-linear models, including a linear trend with multiplicative seasonals version that underlies the Holt-Winters forecasting method. Conditionally heteroscedastic models may be developed in a similar manner. Finally we note that smoothing and decomposition, two crucial practical issues, may be performed within the SSOE framework. Keywords: ARIMA, Dynamic Linear Models, Equivalence, Exponential Smoothing, Forecasting, GARCH, Holt's Method, Holt- Winters Method, Kalman Filter, Prediction Intervals. JEL: C22 C53 C51 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:msh:ebswps:2005-7&r=all 189. INFLATION DYNAMICS AND NOMINAL ADJUSTMENT IN THE BALTIC STATES Jaan Masso Karsten Staehr The paper seeks to explain the inflationary dynamics in the Baltic countries since the mid-1990s. While single-equation estimations generally yield poor results, panel data estimations provide statistically and economically satisfactory findings. Our main result is that the observed gradual disinflation can to a large extent be explained by adjustment to international prices. Stringent fixed exchange rate systems have exerted downward pressure on inflation both directly and via expectations of future inflation. Measures of excess capacity in the labour market have no effect on inflation, while industrial output gaps have some explanatory power. Real oil price shocks have an immediate but short-lived impact on inflation. Keywords: Inflation, exchange rates, Phillips curve JEL: E31 E42 P24 Date: 2005 URL: http://d.repec.org/n?u=RePEc:mtk:febawb:35&r=all 190. Monte Carlo Tests with Nuisance Parameters: A General Approach to Finite-Sample Inference and Nonstandard Asymptotics DUFOUR, Jean-Marie The technique of Monte Carlo (MC) tests [Dwass (1957), Barnard ( 1963)] provides an attractive method of building exact tests from statistics whose finite sample distribution is intractable but can be simulated (provided it does not involve nuisance parameters). We extend this method in two ways: first, by allowing for MC tests based on exchangeable possibly discrete test statistics; second, by generalizing the method to statistics whose null distributions involve nuisance parameters (maximized MC tests, MMC). Simplified asymptotically justified versions of the MMC method are also proposed and it is shown that they provide a simple way of improving standard asymptotics and dealing with nonstandard asymptotics (e.g., unit root asymptotics) Parametric bootstrap tests may be interpreted as a simplified version of the MMC method (without the general validity properties of the latter). Keywords: Monte Carlo test ; maximized monte Carlo test ; finite same test ; exact test ; nuisance rameter ; bounds ; bootstra; rametric bootstra; simulated annealing ; asymotics ; nonstandard asymotic distribution. JEL: C12 C15 C2 C52 C22 Date: 2005 URL: http://d.repec.org/n?u=RePEc:mtl:montde:2005-03&r=all 191. Exact Multivariate Tests of Asset Pricing Models with Stable Asymmetric Distributions BEAULIEU, Marie-Claude DUFOUR, Jean-Marie KHALAF, Lynda In this paper, we propose exact inference procedures for asset pricing models that can be formulated in the framework of a multivariate linear regression (CAPM), allowing for stable error distributions. The normality assumption on the distribution of stock returns is usually rejected in empirical studies, due to excess kurtosis and asymmetry. To model such data, we propose a comprehensive statistical approach which allows for alternative - possibly asymmetric - heavy tailed distributions without the use of large-sample approximations. The methods suggested are based on Monte Carlo test techniques. Goodness-of-fit tests are formally incorporated to ensure that the error distributions considered are empirically sustainable, from which exact confidence sets for the unknown tail area and asymmetry parameters of the stable error distribution are derived. Tests for the efficiency of the market portfolio (zero intercepts) which explicitly allow for the presence of (unknown) nuisance parameter in the stable error distribution are derived. The methods proposed are applied to monthly returns on 12 portfolios of the New York Stock Exchange over the period 1926-1995 (5 year subperiods). We find that stable possibly skewed distributions provide statistically significant improvement in goodness-of-fit and lead to fewer rejections of the efficiency hypothesis. Keywords: catal asset icing model ; mean-variance efficiency ; non-normality ; multivariate linear regression ; stable distribution ; skewness ; kurtosis ; asymmetry ; uniform linear hythesis ; exact test ; Monte Carlo test nuisance rameter ; scification test ; diagnostics. JEL: C3 C12 C33 C15 G1 G12 G14 Date: 2005 URL: http://d.repec.org/n?u=RePEc:mtl:montde:2005-04&r=all 192. Distribution-Free Bounds for Serial Correlation Coefficients in Heteroskedastic Symmetric Time Series DUFOUR, Jean-Marie FARHAT, Abdekjelik HALLIN, Marc We consider the problem of testing whether the observations X1, . ., Xn of a time series are independent with unspecified ( possibly nonidentical) distributions symmetric about a common known median. Various bounds on the distributions of serial correlation coefficients are proposed: exponential bounds, Eaton- type bounds, Chebyshev bounds and Berry-Esseen-Zolotarev bounds. The bounds are exact in finite samples, distribution-free and easy to compute. The performance of the bounds is evaluated and compared with traditional serial dependence tests in a simulation experiment. The procedures proposed are applied to U.S. data on interest rates (commercial paper rate). Keywords: autocorrelation ; serial dendence ; nonrametric test ; distribution-free test ; heterogeneity ; heteroskedasticity ; symmetric distribution ; robustness ; exact test ; bound ; exnential bound ; large deviations ; Chebyshev inequality ; Berry-Esseen interest rates. JEL: C14 C22 C12 C32 E4 Date: 2005 URL: http://d.repec.org/n?u=RePEc:mtl:montde:2005-05&r=all 193. Intertemporal Social Evaluation BLACKORBY, Charles BOSSERT, Walter DONALDSON, David Intertemporal social-evaluation rules provide us with social criteria that can be used to assess the relative desirability of utility distributions across generations. The trade-offs between the well-being of different generations implicit in each such rule reflect the underlying ethical position on issues of intergenerational equity or justice. We employ an axiomatic approach in order to identify ethically attractive socialevaluation procedures. In particular, we explore the possibilities of using welfare information and non-welfare information in a model of intertemporal social evaluation. We focus on the individuals’ birth dates and lengths of life as the relevant non-welfare information. As usual, welfare information is given by lifetime utilities. It is assumed that this information is available for each alternative to be ranked. Various weakenings of the Pareto principle are employed in order to allow birth dates or lengths of life (or both) to matter in social evaluation. In addition, we impose standard properties such as continuity and anonymity and we examine the consequences of an intertemporal independence property. For each of the Pareto conditions employed, we characterize all social-evaluation rules satisfying it and our other axioms. The resulting rules are birth- date dependent or lifetime-dependent versions of generalized utilitarianism. Furthermore, we discuss the ethical and axiomatic foundations of geometric discounting in the context of our model. Keywords: Intergenerational Equity and Justice, Intertemral Social Choice, Welfarist and Non-Welfarist Social Evaluation. JEL: D63 Date: 2005 URL: http://d.repec.org/n?u=RePEc:mtl:montde:2005-06&r=all 194. Tests multiples simules et tests de normalite bases sur plusieurs moments dans les modeles de regression DUFOUR, Jean-Marie FARHAT, Abdekjelik KHALAF, Lynda Cet article illustre l’applicabilite des methodes de reechantillonnage dans le cadre des tests multiples ( simultanes), pour divers problemes econometriques. Les hypotheses simultanees sont une consequence habituelle de la theorie economique, de sorte que le controle de la probabilite de rejet de combinaisons de tests est un probleme que l’on rencontre frequemment dans divers contextes econometriques et statistiques. A ce sujet, on sait que le fait d’ignorer le caractere conjoint des hypotheses multiples peut faire en sorte que le niveau de la procedure globale depasse considerablement le niveau desire. Alors que la plupart des methodes d’inference multiple sont conservatrices en presence de statistiques non-independantes, les tests que nous proposons visent a controler exactement le niveau de signification. Pour ce faire, nous considerons des criteres de test combines proposes initialement pour des statistiques independantes. En appliquant la methode des tests de Monte Carlo, nous montrons comment ces methodes de combinaison de tests peuvent s’appliquer a de tels cas, sans recours a des approximations asymptotiques. Apres avoir passe en revue les resultats anterieurs sur ce sujet, nous montrons comment une telle methodologie peut etre utilisee pour construire des tests de normalite bases sur plusieurs moments pour les erreurs de modeles de regression lineaires. Pour ce probleme, nous proposons une generalisation valide a distance finie du test asymptotique propose par Kiefer et Salmon (1983) ainsi que des tests combines suivant les methodes de Tippett et de Pearson- Fisher. Nous observons empiriquement que les procedures de test corrigees par la methode des tests de Monte Carlo ne souffrent pas du probleme de biais (ou sous-rejet) souvent rapporte dans cette litterature – notamment contre les lois platikurtiques – et permettent des gains sensibles de puissance par rapport aux methodes combinees usuelles. Keywords: regression lineaire ; test de normalite ; ajustement ; asymetrie ; aatissement ; moments d’ordre surieur ; Monte Carlo ; test induit ; combinaison de tests ; inference simultanee ; Tiett ; Fisher ; Pearson ; SURE ; test d’heteroscedasticite. JEL: C1 C12 C15 C2 C52 C21 C22 Date: 2005 URL: http://d.repec.org/n?u=RePEc:mtl:montde:2005-07&r=all 195. Consistent House Allocation EHLERS, Lars KLAUS, Bettina In practice we often face the problem of assigning indivisible objects (e.g., schools, housing, jobs, offices) to agents (e.g., students, homeless, workers, professors) when monetary compensations are not possible. We show that a rule that satisfies consistency, strategy-proofness, and efficiency must be an efficient generalized priority rule; i.e. it must adapt to an acyclic priority structure, except -maybe- for up to three agents in each object's priority ordering. Keywords: indivisible objects, iority structure, consistency, strategy-oofness. JEL: D63 D70 Date: 2005 URL: http://d.repec.org/n?u=RePEc:mtl:montde:2005-08&r=all 196. Asymptotic Distribution of a Simple Linear Estimator for VARMA Models in Echelon Form DUFOUR, Jean-Marie TAREK, Jouini In this paper, we study the asymptotic distribution of a simple two-stage (Hannan-Rissanen-type) linear estimator for stationary invertible vector autoregressive moving average (VARMA) models in the echelon form representation. General conditions for consistency and asymptotic normality are given. A consistent estimator of the asymptotic covariance matrix of the estimator is also provided, so that tests and confidence intervals can easily be constructed. Keywords: Time series ; VARMA ; stationary ; invertible ; echelon form ; estimation ; asymotic normality ; bootstra; Hannan-Rissanen JEL: C3 C32 C53 Date: 2005 URL: http://d.repec.org/n?u=RePEc:mtl:montde:2005-09&r=all 197. Dynamic Measures of Individual Deprivation BOSSERT, Walter D'AMBROSIO, Conchita We introduce and axiomatize a one-parameter class of individual deprivation measures. Motivated by a suggestion of Runciman, we modify Yitzhaki’s index by multiplying it by a function that is interpreted as measuring the part of deprivation generated by an agent’s observation that others in its reference group move on to a higher level of income than itself. The parameter reflects the relative weight given to these dynamic considerations, and the standard Yitzhaki index is obtained as a special case. In addition, we characterize more general classes of measures that pay attention to this important dynamic aspect of deprivation. Keywords: Deivation, Equity, Individual Well-Being. JEL: D63 Date: 2005 URL: http://d.repec.org/n?u=RePEc:mtl:montde:2005-10&r=all 198. How has Financial Modernization Affected Corporate Customers? Kenneth A. Carow Edward J. Kane Rajesh P. Narayanan Previous studies of the announcement effects of relaxing administrative and legislative restraints show that signal events leading up to the enactment of the Financial Services Modernization Act (FSMA) increased the prices of financial- institution stocks. An unsettled question is whether the gains observed for these stocks arise from projected increases in efficiency or from reductions in customer bargaining power. This paper documents that some of the value increase came at the expense of potential and actual customers. The stock prices of credit-constrained customers declined during FSMA event windows and experienced significant increases in beta in the wake of its enactment. These findings reinforce evidence in the literature on bank mergers that large-bank consolidation is unfavorably affecting the availability of credit for capital-constrained firms. JEL: G21 G24 G28 L51 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11256&r=all 199. Prices, Production and Inventories over the Automotive Model Year Adam Copeland Wendy Dunn George Hall This paper studies the within-model-year pricing and production of new automobiles. Using new monthly data on U.S. transaction prices, we document that for the typical new vehicle, prices fall over the model year at a 9.2 percent annual rate. Concurrently, both sales and inventories are hump shaped. To explain these time series, we formulate a market equilibrium model for new automobiles in which inventory and pricing decisions are made simultaneously. On the demand side, we use micro-level data to estimate time-varying aggregate demand curves for each vehicle. On the supply side, we solve a dynamic programming model of an automaker that, while able to produce only one vintage of a product at a time, may accumulate inventories and consequently sell multiple vintages of the same product simultaneously. The profit maximizing pricing and production strategies under a build- to-stock inventory policy imply declining prices and hump-shaped sales and inventories of the magnitudes observed in the data. Further, roughly half of the price decline is driven by inventory control considerations, as opposed to decreasing demand. JEL: D21 D42 E22 L11 L62 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11257&r=all 200. On the Measurement of Segregation Federico Echenique Roland G. Fryer, Jr. This paper develops a measure of segregation based on two premises: (1) a measure of segregation should disaggregate to the level of individuals, and (2) an individual is more segregated the more segregated are the agents with whom she interacts. Developing three desirable axioms that any segregation measure should satisfy, we prove that one and only one segregation index satisfies our three axioms, and the two aims mentioned above; which we coin the Spectral Segregation Index. We apply the index to two well-studied social phenomena: residential and school segregation. We calculate the extent of residential segregation across major US cities using data from the 2000 US Census. The correlation between the Spectral index and the commonly-used dissimilarity index is .42. Using detailed data on friendship networks, available in the National Longitudinal Study of Adolescent Health, we calculate the prevalence of within-school racial segregation. The results suggests that the percent of minority students within a school, commonly used as a substitute for a measure of in-school segregation, is a poor proxy for social interactions. JEL: Z13 C0 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11258&r=all 201. Structural Equations, Treatment Effects and Econometric Policy Evaluation James J. Heckman Edward Vytlacil This paper uses the marginal treatment effect (MTE) to unify the nonparametric literature on treatment effects with the econometric literature on structural estimation using a nonparametric analog of a policy invariant parameter; to generate a variety of treatment effects from a common semiparametric functional form; to organize the literature on alternative estimators; and to explore what policy questions commonly used estimators in the treatment effect literature answer. A fundamental asymmetry intrinsic to the method of instrumental variables is noted. Recent advances in IV estimation allow for heterogeneity in responses but not in choices, and the method breaks down when both choice and response equations are heterogeneous in a general way. JEL: C1 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11259&r=all 202. School-to-Career and Post-Secondary Education: Evidence from the Philadelphia Educational Longitudinal Study Frank F. Furstenberg, Jr. David Neumark We study a set of programs implemented in Philadelphia high schools that focus on boosting post-secondary enrollment. These programs are less career oriented than traditional school-to-work programs, but are consistent with the broadening of the goals of school-to-work to emphasize post-secondary education. The Philadelphia Longitudinal Educational Study (PELS) data set that we examine contains an unusually large amount of information on individuals prior to placement in STC programs. We use the detailed information in the PELS to study the process of selection into these programs and to examine their impact on a set of mainly schooling-related outcomes during and after high school, although we also consider their impact on non-academic outcomes. The data point to positive effects of these programs on high school graduation and on both academic and non-academic awards in high school, and similar negative effects on dropping out of high school. The results also suggest positive effects on aspirations for higher education and on college attendance. In addition, there is some evidence that these programs are more effective in increasing college attendance and aspirations among at-risk youths. JEL: I28 J24 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:11260&r=all 203. Monetary policy and asset prices: the investment channel Fernando Alexandre (Universidade do Minho - NIPE and Birkbeck College) Pedro Bacao (Universidade de Coimbra) The role of monetary policy during periods of asset price volatility has been the subject of discussion among economists and policymakers at least since the 1920s and the Great Depression that followed. In this paper we survey the recent and rapidly growing literature on this topic, with an emphasis on the investment channel. We present a detailed discussion of the hypotheses that have been used to justify, or criticise, a response to asset prices. These hypotheses concern imperfections in financial markets, bubbles in asset prices, and the information on which firm managers and central banks base their decisions. Keywords: Investment; Asset Prices; Inflation Targeting; Fundamentals. Date: 2005 URL: http://d.repec.org/n?u=RePEc:nip:nipewp:3/2005&r=all 204. Assessing the Impact of Indonesian Social Safety Net Programs on Household Welfare and Poverty Dynamics Sudarno Sumarto (SMERU Research Institute) Asep Suryahadi (SMERU Research Institute) Wenefrida Widyanti (SMERU Research Institute) In early 1998 the Government of Indonesia established several social safety net (SSN) programs to help the poor and the newly poor cope with the impact of the impending economic crisis, covering food security, employment creation, education, health, and community empowerment. This article evaluates the impact of these programs on household welfare and poverty, utilizing a panel data set of over 10 thousand households which were visited four times in a 14 month period. The impact of participation in the social safety net programs on household consumption is found to be generally positive. However, only the subsidized rice program appears to have significantly reduced the risk of poverty among participating households. Keywords: safety net programs, poverty dynamics, Indonesia, program evaluation Date: 2004-08 URL: http://d.repec.org/n?u=RePEc:eab:develo:108&r=all 205. Poverty Targeting in Indonesia: Programs, Problems and Lessons Learned Ari A. Perdana (Centre for Strategic and International Studies) John Maxwell (Australian National University) This paper presents a discussion on some poverty alleviation programs that are specifically targeted to the poor. The programs covered in this paper are: Inpres Desa Tertinggal (IDT), Padat Karya (Employment), Food Security, Education and Health component of the postcrisis Social Safety Net package. Brief assessments of the programs show that the targeting of poverty alleviation programs in Indonesia has been a difficult and frustrating process for central government planners attempting to allocate scarce budgetary resources as efficiently and effectively as possible. Although poor families did benefit to a certain degree, all the programs that we have considered have suffered from two common problems: under-coverage and leakage. The paper concludes that the effectiveness of various poverty-targeted program in Indonesia are determined by, among other things, the type of targeting, administrative capacity, program design and publicity, and the quality of monitoring. Keywords: Indonesia, poverty, poverty targeting, poverty alleviation, Social Safety Net, Inpres Desa Tertinggal Date: 2004-03 URL: http://d.repec.org/n?u=RePEc:eab:develo:68&r=all 206. Sustaining East Asia's Economic Dynamism: How Aid Worked Hadi Soesastro (Department of Economics, Centre for Strategic and International Studies) This paper examines the role of foreign aid or development assistance in helping sustain East Asia’s economic dynamism. The first section discusses the changing landscape of development assistance and examines the place of East Asia in it. The second section focuses on the recent evolution of Japan’s development assistance policy. Japan is singled out as it has been the most important donor for countries in East Asia and is likely to remain so for many years to come. The third section looks at Japan’s ODA (official development assistance) from the perspective of selected East Asian countries and highlights the issues, lessons and the recommendations that have emerged in the region on how aid could work to help meet the challenges faced by the region. Keywords: foreign aid, development assistance, East Asia, Japan, official development assistance (ODA) Date: 2004-05 URL: http://d.repec.org/n?u=RePEc:eab:develo:76&r=all 207. Protecting Education for the Poor in Times of Crisis: An Evaluation of a Scholarship Program in Indonesia Robert Sparrow (Vrije University Amsterdam, Tinbergen Institute) This paper analyses the impact of an Indonesian scholarship program, which was implemented to preserve access to education for the poor during the Southeast Asian economic crisis. Allocation followed a decentralized design that involved both geographic and individual tarteging. The identification strategy exploits this decentralised structure, relying on instrumental variables constructed from regional miss-targeting at the initial phase of allocation. The results show that allocation of scholarships was pro-poor, but with substantial leakage to the non-poor. The program has been successful in increasing enrolment, especially for primary school aged children from poor rural households. Morevoer, the scholarships seem to have assisted households in smoothing consumption during the crisis, relieving pressure on households' investments in education and utilization of child labour. Keywords: social safety net, program evaluation, education, child labour, child labor, Asian economic crisis Date: 2004-06 URL: http://d.repec.org/n?u=RePEc:eab:develo:96&r=all 208. Asset Pricing Model with Robust Control: Recourse in Pessimism to Equity Premium Eric F.Y. Lam (City University of Hong Kong) Gregory C. Chow (Department of Economics, Princeton University) Calibrating the robust asset pricing model with power utility suggest the degree of robustness of 19th century US consumer- investor to be 0.00387. When constant relative risk aversion ( CRRA) is 2 and subjective discount factor equals 0.99, the mean burden-compensation for reallocating a dollar from stock to bond is estimated to be 0.05090 annually. When this mean is above 0. 04801, the mean-variance of intertemporal marginal rate of substitution meets the Hansen-Jagannathan (1991) type volatility bound. For CRRA of 4, 74.25% of the empirical equity premium is due to pessimism and the rest is due to excess return’s positive correlation with consumption. Keywords: Asset pricing, equity premium, investor pessimism, robust control JEL: G10 G12 E44 Date: 2003-09 URL: http://d.repec.org/n?u=RePEc:eab:financ:204&r=all 209. Theory of Continuously-sampled Asian Option Pricing Jin E. Zhang (Department of Economics and Finance, City University of Hong Kong) This paper presents a theory of continuously-sampled Asian option pricing. For the geometric Asian options, we give the pricing formulas for both backward-starting and forward-starting cases. For the arithmetic Asian options, we show that the governing Partial Differential Equation (PDE) can not be transformed into a heat equation with constant coefficients, therefore does not have a closed-form solution of Black-Scholes type, i.e., in terms of cumulative normal distribution function. We then solve the PDE with perturbation approach , and obtain an analytical solution in a series form. Numerical results show that comparing with the exact numerical results of Zhang (2000) the series converges very fast and gives a good approximate value that is more accurate than any other approximate methods in the literature at least for the options tested in this paper. Graphical result shows that the solution converges globally very fast especially near the origin, in which area most of the traded Asian options fall. Keywords: Asian options, geometric mean, arithmetic mean, continuous sampling, partial differential equation, perturbation method JEL: G13 URL: http://d.repec.org/n?u=RePEc:eab:financ:228&r=all 210. E-Finance Development in Korea Choong Yong Ahn (Korea Institute of International Economic Policy) Doo Yong Yang (Korea Institute of International Economic Policy) E-finance in Korea has evolved since the late 1980s, when developments in information and telecommunication technology started to be applied to the financial industry. Since the 1990s, e-finance has led a paradigm shift in the financial industry as financial transactions in computer-based tools began increasing. There are several factors that contributed to e-finance development. Korea possess the basic requisite conditions to foster thriving e-finance, including an advanced IT infrastructure, several government e-commerce initiatives and financial restructuring resulting from the financial crisis. In fact, all of these factors have eliminated possible impediments to the development of e-finance in developing countries. This paper shows that the decision for the introduction of internet banking depends on the profit level for the bank rather than the asset size and/or operation costs. Intuitively, large banks are early takers in providing Internet banking de to a huge amount of initial investment costs to establish an Internet banking network. At the same time, cost inefficient banks are inclined to consider the introduction of Internet banking earlier to reduce inefficiency caused by replacing cost-inefficient infrastructure. However, Korea shows an interesting case such that the asset size and operation costs were irrelevant to the establishment of Internet banking networks. On the other hand, profitability was relevant to the introduction of Internet banking. This may imply that relatively profitable banks at the onset of the crisis were able to jump into e-finance earlier than non-profitable banks. Furthermore, this paper shows that the adoption of internet banking has a positive effect of bank profit. Keywords: e-fianance development in Korea, Internet Banking, financial industry JEL: G21 L86 C33 Date: 2004-04 URL: http://d.repec.org/n?u=RePEc:eab:financ:92&r=all 211. Governance and Poverty Reduction: Evidence from Newly Decentralized Indonesia. Sudarno Sumarto (SMERU Research Institute) Asep Suryahadi (SMERU Research Institute) Alex Arifianto (SMERU Research Institute) This study is the first attempt to systematically examine the impact of bad governance practices in Indonesia on poverty reduction. Indonesia is a country that has endured bad governance for a long period, but has also sustained significant poverty reduction. Prior to the onset of the economic crisis in mid 1997, the problem of bad governance in Indonesia was apparent but mostly ignored because it was compensated for by high economic growth. The advent of the economic crisis, however, has highlighted the seriousness of the problem. This study focuses on the impact of bad governance on the poor, the people who are most vulnerable to the impact of bad governance. By assembling scattered anecdotal evidence on how past and current practices of bad governance in Indonesia have hurt the poor, this study shows that the adverse impact of bad governance on the poor is real, systematically affects many people, and undermines the efforts to reduce poverty in the country. more systematic evidence on how bad governance affects povery reduction indicates that regions that practice better governance indeed experience faster poverty reduction and vice versa. Keywords: poverty reduction, governance, Indonesia, bad governance Date: 2004-03 URL: http://d.repec.org/n?u=RePEc:eab:govern:109&r=all 212. Regional Cooperation towards Multilateral Arrangements on Agriculture, Labour, and Environment in the Context of Globalisation: The Case of Indonesia Linda Christanty (CFG Jakarta) Raymond Atje (Department of Economics, Centre for Strategic and International Studies) This paper has, as its title suggests, discusses policy and regulatory development in the forestry sector for a period of more than 30 years. During this period the forestry sector has experienced a lot of changes. It has contributed significantly to the country’s economic development, especially during the later years prior to the crisis. At the onset of the crisis forestry- related activities, including plantations, were among the main producers of exported goods. This development was partly a result of various policies and regulations introduced during the period under consideration. Some of those policies had only short time horizons,and very often did not adhere to sound economic and environmental considerations. There has been an intense pressure on the government to improve the management of the forestry sector. It is doubtful however that there will soon be a major reform in the sector. Some of the old players are on their way out, but other interest groups that are vying to replace them. The nature of the game in the forestry sector has not changed that much over the years, i.e., it is still the one that nurtures rent seeking and predatory behavior. Keywords: Indonesia, forestry policy, regulations, New Order Date: 2004-02 URL: http://d.repec.org/n?u=RePEc:eab:govern:56&r=all 213. Decentralization and the Forestry Sector: Opportunities and Challenges Linda Christanty (CFG Jakarta) Raymond Atje (Department of Economics, Centre for Strategic and International Studies) Kurnya Roesad (Department of Economics, Centre for Strategic and International Studies) This paper looks into Indonesia’s recent experience with the decentralization process and assesses opportunities and challenges for the forestry sector. Despite its brief existence since only 2001 and the limited data available, decentralization in the forestry sector has shown some significant trends. The paper finds that co-ordination between different levels of government is still lacking, lacking a clear division of tasks between central, provincial and district governments. Indonesia’s move to a more market – based forestry governance system is currently impeded by the lack of a sound and secure property and tenure rights system, exacerbated by legal uncertainties, and weak monitoring and enforcement capacities on the local level. Overall, when compared to other forest-rich countries, decentralization has not sufficiently empowered regional and local governments in the forestry sector, as the central government retains most of the power to manage the country’s forests. Keywords: Indonesia, decentralisation, forestry sector Date: 2004-02 URL: http://d.repec.org/n?u=RePEc:eab:govern:57&r=all 214. Third World States in the Midst of the Cold War: A Study of ASEAN’s Decision to Establish the Zone of Peace, Freedom and Neutrality (ZOPFAN) Proposal, 1971-1972 Shafiah Fifi Muhibat (Department of International Relations, Centre for Strategic and International Studies) The purpose of this paper is to analyse the decision making in ASEAN in its policy to declare Southeast Asia as a zone of peace, freedom and neutrality in 1971. Two significant and interrelated factors served as the basis for the ASEAN member states in their decision to establish the ZOPFAN proposal: first, the international and regional security condition during that period; and second, the differing national interests of each ASEAN state members which resulted in a compromise. The new power pattern in the region forced the ASEAN state members to come up with a scenario that could best protect regional security. Each state realised that its security might be in danger if the regional security situation did not improve. At this point, the ASEAN states decided to collaborate to guard themselves against the worst possible consequences. The fact that ASEAN decided to come up with such an optimistic policy is particularly interesting to observe, because it gives an insight of how the Third World states placed and saw themselves within the Cold War theatre. Keywords: Association of Southeast Asian Nations (ASEAN); Zone of Peace, Freedom and Neutrality (ZOPFAN), regional security, cold war Date: 2004-01 URL: http://d.repec.org/n?u=RePEc:eab:govern:67&r=all 215. ASEAN: Regional Economic Cooperation and Its Institutionalization Hadi Soesastro (Department of Economics, Centre for Strategic and International Studies) This paper discusses the need to beyond the old ‘ASEAN way’ and suggests the importance of further institutional deepening of economic cooperation in ASEAN, especially in the aftermath of the recent financial crisis. Hence, it suggests the need to develop of a ‘Common Market minus’, in which ASEAN brings in areas or sectors that are excluded from liberalization under the umbrella of the integration project and let them be managed through a common policy approach by newly created “regional units.” Yet, such a development needs to be carefully crafted, based on clear principles. Keywords: ASEAN, regional economic cooperation, institution building, ASEAN Vision 2020 Date: 2003-08 URL: http://d.repec.org/n?u=RePEc:eab:govern:71&r=all 216. Challenges to APEC Trade Policy: The Doha Development Agenda and RTAs/FTAs Hadi Soesastro (Department of Economics, Centre for Strategic and International Studies) Recent development in global trade saw countries moving in multiple fronts in liberalising trade, utilising multilateral, regional and bilateral trade agreements to promote trade. This paper examines the issues surrounding this latest trend, noting the opportunities as well as dangers to global free trade associated with such an approach. In particular, it investigates implications of the growing numbers of regional trade agreements ( RTAs) and free trade agreements (FTAs) within the APEC region, particularly in light of the Doha development agenda. Keywords: Asia-Pacific Economic Cooperation (APEC), World Trade Organization (WTO), Doha round, regional trade agreements (RTA), free trade agreements (FTA) Date: 2003-05 URL: http://d.repec.org/n?u=RePEc:eab:govern:73&r=all 217. Assessing Democratisation in Southeast Asia: Towards Regional Grassroots Empowerment Christine Susanna Tjhin (Department of Politics and Social Change, Centre for Strategic and International Studies) Aries A. Arugay (Institute for Strategic and Development Studies, Philippines) Herman Joseph S. Kraft (Institute for Strategic and Development Studies, Philippines) This working paper illustrates the processes behind one of the ASEAN People’s Assembly (APA) initiatives, which is the democratisation assessment program for Southeast Asia. This working paper provides a preliminary conceptual framework and methodology for assessing democratisation in the region. This initiative should be recognised as a “work-in progress”, as the debates on democratisation and empowerment should ultimately involve the participation of more citizens in the region. As such, this initiative will be flexible to the inputs and insights of relevant stakeholders in the region that will definitely be facilitated by future endeavours. Keywords: Association of Southeast Asian Nations (ASEAN), democratisation, empowerment Date: 2004-03 URL: http://d.repec.org/n?u=RePEc:eab:govern:77&r=all 218. Social Security Reform in Indonesia: An Analysis of the National Social Security Bill (RUU Jamsosnas) Alex Arifianto (SMERU Research Institute) The Indonesian social security program is currently undergoing a fundamental overhaul designed to make the existing system work better for the beneficiaries and to extend social security coverage to more workers, both in the formal and informal sector. The existing scheme has not been successful in its aims to provide adequate social security benefits to beneficiaries because of its low coverage, limited benefits, and low investment returns, combined with poor governance. The government has proposed a plan to convert the current social security scheme, which is based on a provident fund system, into a compulsory social insurance system. The plan is analyzed in this paper in order to examine the possible impact of the proposed scheme on the Indonesian labor market, investment flows, the government budget, and the economy in general. From this analysis, we can conclude that there are several serious flaws in the government proposal as outlined in the proposed legislation, such as: the proposed scheme could worsen Indonesia’s labor market and investment climate, worsen the government’s budget deficits, and does not provide room for the private sector to provide social security benefits to Indonesians. Many have concluded that publicly-provided social security schemes are no longer a viable model for workers today. Instead private social security schemes would suit the health and retirement needs of today’s workers better than public social security schemes. Given the many problems facing the Indonesian public pension and healthcare system today, Indonesia should seriously consider adopting private social security programs to replace the current publicly provided scheme. Keywords: social security, public pension, national health insurance, Indonesia Date: 2004-09 URL: http://d.repec.org/n?u=RePEc:eab:govern:79&r=all 219. Indonesia's Transition to Decentralized Governance: An Evolution at the Local Level Widjajanti I. Suharyo (SMERU Research Institute) Indonesia’s decentralization reform is now in its third year of implementation. The ‘big bang’ start marked the transfer of resources –assets, personnel and finances- to the regions to compensate for the added authorities and functions. While the speed and size of the changes to formal structure have been phenomenal, the adjustment of non-formal institutional settings is likely to take a long time. Many conceptual and practical problems remain and the path to reform is continuously driven by an evolutionary change in the practices as well as in the perception and expectation of decentralization. Drawing from SMERU field research, this paper highlights the dynamics of the implementation of decentralization reform at the local level and some related issues and concerns. Although this reform is still in the preliminary stages, the findings of these studies show how the reform process has influenced the evolution of governance at the local level. In addition to the general findings, special attention is devoted to the problems of budget allocation, community participation and intergovernmental coordination faced by two resource-poor regions –West Lombok and Bandar Lampung ( City)– in relation to the provision of public services. Although the progress at the local level might have been overshadowed by many problems, any progress certainly needs to be acknowledged to allow local governance to strengthen. Keywords: Decentralization, decentralisation, Indonesia, local governance, reform Date: 2003-06 URL: http://d.repec.org/n?u=RePEc:eab:govern:99&r=all 220. The Macroeconomic Consequences of Terrorism S. Brock Blomberg (Claremont McKenna College) Gregory D. Hess (Claremont McKenna College) Athanasios Orphanides (Division of Monetary Affairs) We perform an empirical investigation of the macroeconomic consequences of international terrorism and interactions with alternative forms of collective violence. Our analysis is based on a rich unbalanced panal data set with annual observations on 177 countries from 1968 to 2000, which brings together information from the Penn World Table dataset, the ITERATE dataset for terroist events, and dataset of external and internal conflict. We explore these data with cross-sectional and panal groth regression analysis and a structural VAR model. We find that, on average, the incidence of terrorism may have an economically significant negative effect on growth, albeit one that is considerably smaller and less persistant that that associated with either external wars or internal conflict. As well, terrorism is associated with a redirection or economic activity away from investment spending and towards government spending. However, our investigation also suggests important differences both regardng the incidence and the economic consequences of terrorism among different sets of countries. In OECD economies, in particular, terrorist incidents are considerably more frequent than in other nations, but the negative influence of these incidents on growth is smaller. Keywords: Growth, Conflict, Terrorism, International terrorism, collective violence, macroeconomic consequences JEL: E6 H1 H5 D74 O11 Date: 2004-01 URL: http://d.repec.org/n?u=RePEc:eab:macroe:100&r=all 221. Exchange Rate Volatilities and Time-varying Risk Premium in East Asia Chae-Shick Chung (Korea Institute for International Economic Policy) Doo Yong Yang (Korea Institute for International Economic Policy) This paper is to analyze characteristics of the foreign exchange market in four major East Asian countries (Korea, Thailand, Singapore and Japan) before and after the financial crisis to get implicatoins of it. Our focus is given on the relationship between exchange rate volatilities and risk premium on the selected countries. The crisis-hit countries in the region including Korean and Thailand show structural break during the Asian crisis in representing higher standard deviations on nominal exchange rates since 1997. However, it is argued that they returned to the previous rigid exchange movements due to a fear of floating. Nevertheless, it is believed that the exchange rate arrangements in crisis-hit countries differ from the previous psedo-dollar pegged system. Keywords: Exchange rate volatility, risk premium foreign exchange, market in East Asia, financial crisis, foreign exchange rate, Korea, Thailand, Singapore, Japan JEL: F31 G12 Date: 2004-10 URL: http://d.repec.org/n?u=RePEc:eab:macroe:122&r=all 222. A Risk-Based Rationale for Two-Way Capital Flows: Why do Capital Flights and Inward Foreign Direct Investments Co- exist? Arnab K. Basu (Department of Economics, College of William and Mary) Nancy H. Chau (Department of Applied Economics and Management, Cornell University) This paper develops a positive theory of two-way capital flows – the simultaneous outward flight of capital assets, and the inflow of foreign direct investment that acquires ownership of local productions units. The basic model exploits insights from entrepreneurial decision making under uncertainty in a general equilibrium setting, and traces out the relationship between (i) entrepreneurial incentives to exploit higher expected profits from risky production activities at the firm level and (ii) the resulting competitive rewards to capital in general equilibrium. The model shows that contrary to expectation, relative liquid assets tend to flow from capital-poor to capital-rich economies, while foreign direct investment aimed at acquiring ownership of production units follows the reversed pattern. We also examine the optimal investment policies for both host and origin countries, and show the rationale behind the inherent conflict of interests between developing and developed economies in the context of capital market liberalization. Keywords: Capital flows, liquid capital asset, general equilibrium model Date: 2003-05 URL: http://d.repec.org/n?u=RePEc:eab:macroe:160&r=all 223. The Impact of Fiscal Policy on Income Distribution and Poverty: A Computable General Equilibrium Approach for Indonesia Yose Rizal Damuri (Department of Economics, Centre for Strategic and International Studies) Ari A. Perdana (Department of Economics, Centre for Strategic and International Studies) The paper seeks to quantitatively measure the impact of fiscal policy on income distribution and poverty in Indonesia using WAYANG, the CGE model for Indonesian economy. We find that scenarios for fiscal expansion significantly influence income distribution and poverty. Fiscal expansion mainly benefits urban households and non-labour rural households – basically, the wealthiest segments of the society. We have are several explanations. First, factors of production owned by these segments allowed them to reap the most benefits from fiscal expansions. Second, these households are least affected by price increases due to their consumption structure. Finally, we find that, in real terms, the Indonesia’s taxation system burdens poorer households more than richer ones. Keywords: Indonesia, income distribution, poverty, economic modelling, fiscal policy Date: 2003-05 URL: http://d.repec.org/n?u=RePEc:eab:macroe:58&r=all 224. Economic Crisis and Trade Liberalization: A CGE Analysis On The Forestry Sector Tubagus Feridhanusetyawan (Department of Economics, Centre for Strategic and International Studies) Yose Rizal Damuri (Department of Economics, Centre for Strategic and International Studies) This paper uses simulations based on a GTAP model to reproduce the economic crisis in Southeast Asia, and in particular in Indonesia. The model is a static-real sector model, so the focus of the simulation is on the declining investment and the declining prices of non-traded goods during the crisis. The simulation is conducted by creating an exogenous shock on risk premium in Indonesia, Thailand and Malaysia, which leads to smaller allocation of regional investment in these countries, lower stock of capital goods, and lower production. The second shock, which is the declining price of land and natural resource, opens the possibility of resource allocation between sectors in the economy. The results of the crisis simulation show that the declining overall GDP during the crisis is accompanied by declining productions of capital and labor-intensive commodities, and expansion of natural resource and land based sectors. Based on the simulation, the economic crisis is expected to lower production of forestry and forestry related manufacturing sectors, mainly because these sectors are more capital or labor intensive, rather than land or natural resource intensive. Consistent with the modeling exercise, the output of these sectors also declined in reality during the worst time of the crisis in 1997-99. The simulation results also show that the negative impact of the crisis on welfare, measured as the changes in equivalent variation, is serious. The second simulation in this study measures the impact of trade liberalization on the economy after the crisis. The results show that the potential benefit from trade liberalization is large, and larger than the welfare lost during the crisis. In other words, pursuing more progressive trade liberalization would speed up the economic recovery after the crisis by creating more opportunity to get the most benefit from the global economy. Keywords: Southeast Asia, Indonesia, Asian crisis, forestry sector, computable general equilibrium (CGE) Date: 2004-02 URL: http://d.repec.org/n?u=RePEc:eab:macroe:62&r=all 225. Indonesia in Crisis: A Macroeconomic Perspective Tubagus Feridhanusetyawan (Department of Economics, Centre for Strategic and International Studies) Mari Pangestu (Department of Economics, Centre for Strategic and International Studies) This paper presents an illustrative analysis of the crisis from a macroeconomic perspective, by focusing on the various economic adjustments both in the real and monetary sectors. It argues that the complex nature of the political and economic reform process has resulted in sub – optimal growth rates. The paper discusses, first, the evolution of the crisis. Then it provides an account of the developments in the real sector and growth in general. The authors then present monetary adjustments, including inflation, exchange rate, and other issues related to the banking and financial sectors. The fourth section discusses the balance of payment trends, by focusing more on the adjustments of exports and imports. This is followed by a discussion on debt issues and fiscal sustainability, while the last part concludes with the prospect of achieving macroeconomic stability. Keywords: Indonesia, crisis, macroeconomic adjustment Date: 2004-02 URL: http://d.repec.org/n?u=RePEc:eab:macroe:63&r=all 226. Dynamics of Open Economy Business Cycle Models: The Case of Korea Hyungdo Ahn (Korea Institute for International Economic Policy) Sunghyun H. Kim (Department of Economics, Tufts University) A small open economy such as Korea is vunerable to outside shocks, in particular, would inetrest rate shocks, exchange rate shocks (or the terms of trade shocks), and foreign productivity shocks. Many researchers have empirically analyzed the effects of these shocks on macroeconomic variables using various time series estimation methods including the VAR. However, there has been an increasing demand for an analysis based on a simulation method using dynamic stochastic general equilibirum (DSGE) models, because the empirical estimation can only provide ad-hoc economic interpretations of the results. We construct a fully expanded DSGE model for a small open economy and calibrate the model to match the model characteristics to those observed in the Korean data. We explicitly model the non-traded sector of the economy. We focus on the dynamic effects of external shocks. Keywords: Busniess cycle models, external shocks, Korea Date: 2003-06 URL: http://d.repec.org/n?u=RePEc:eab:macroe:88&r=all 227. Complementarity of Horizontal and Vertical Multinational Activities Sungil Bae (Korea Institute for International Economic Policy) Tae Hwan Yoo (Korea Institute for International Economic Policy) This paper explores the multimational activities of the Japanese automobile industry by focusing on the vertical production structure of a firm. The main objective is to analyze the effects of horizontal multinational activities on vertical multinational activities. First, we construct a theoretical model to predict whether an increase in horizontal multinational activity leads to an increase in already exisiting vertical multinational activity. This result mainly comes from the increased flow of intermediate products. Second, by applying annual data for the Japanese automobile industry from 1982 to 1997, we estimate equations based on a theoretical model. The estimated resuls provide a complementary relationship between horizontal and vertical multinational activities, thereby supporting the results of the theoretical model. Keywords: Foreign direct investment, Horizontal multinational activity, Vertical multinational activity, Intra- industry trade, Mulitnational activities, vertical production structure, Japanese automobile industry JEL: F21 F23 Date: 2004-05 URL: http://d.repec.org/n?u=RePEc:eab:macroe:98&r=all 228. Locating Multinational Companies in China: Korean and Japanese Companies Sung Jin Kang (Korea Institute for International Economic Policy) Hong Sik Lee (Korea Institute for International Economic Policy) By using aggregate and firm level data of Korean and Japanese foreign affiliates in China ,we investigate the recent FDI trends and the determinants of location choice. The comparison of the FDI trends of Japanese and Korean companies show that Korean companies are concentrated into China, especially in three regions of northeast of China. The conditional logit estimation results differ between Korean and Japanese companies. Even though agglomeration variable is shown to be positive and significant for two countries, regional income is shown to be positive for Japan but negative for Korea. For Korean companies, the college graduate, the railway variables and trade share are shown to be positive and significant but other variables such as the number of economic zones and the share of production by government-owned companies to total regional production are shown to be negative. In addition, the distance form Korea and the ethnicity factor might play more significant roles in FDI decisions as well. Thus, we can interpret that the main determinants such as agglomeration, vertical, horizontal FDI and infrastructural variables play significant roles in explaining recent FDI location. However, explanatory power of those variables above for location decision of Japanese companies is not significant. Keywords: multinational companies, China, Korean companies, Japanese companies, FDI JEL: F11 F12 Date: 2004-01 URL: http://d.repec.org/n?u=RePEc:eab:microe:138&r=all 229. Who should own Indonesia’s forests? Exploring the links between economic incentives, property rights and sustainable forest management Raymond Atje (Department of Economics, Centre for Strategic and International Studies) Kurnya Roesad (Department of Economics, Centre for Strategic and International Studies) The existing economic incentive regime was one main factor behind high deforestation rates in Indonesia. Government intervention to push for the expansion wood processing industries resulted in unsustainable resource use patterns. Uncertain tenurial arrangements and property rights, unenforceable contractual obligations and weak monitoring and enforcement by the government exacerbated the situation. Indonesia’s existing forest management system does not provide efficient structures of control rights to any of the sector’s many stakeholders. The lack of well-defined property rights has prevented various stakeholders from trading their control rights so as to improve the efficiency of the management. Future economic research on forestry issues in Indonesia could therefore highlight the importance of secure property and ownership rights in any strategies to implement sustainable forestry management. Keywords: Indonesia, forestry management, property rights, incentive design Date: 2004-02 URL: http://d.repec.org/n?u=RePEc:eab:microe:54&r=all 230. Agricultural-Forestry Linkages: Development Of Timber And Tree Crop Plantations Towards Sustainable Natural Forests Erwidodo (Center for Agro Socioeconomic Research) Satria Astana (Center for Socioeconomic Research on Foresty, Ministry of Forestry, Indonesia) There are at least two problems left unsolved that calls for our attention, namely: (i) millions of hectare of logged over areas and most of them are degraded and others are underutilized and left unproductive, and (ii) high supply-demand gap of logs, due to a huge excess demand for logs and pulpwood. Industrial timber and estate crop plantations are considered to be the alternative way out towards reaching sustainable natural forest management. Evidence suggests that many logging companies are in fact more interested on clear-cutting timber than truly establishing the plantation. The main reason has been the need to get cheap timber for fulfilling an excess demand for pulpwood by pulp and paper industries. Many logging companies who also own estate crop plantations apply for a license to establish (timber or estate crop) plantation in the conversion area, clear the forest for logs and pulpwood, and eventually abandon the cleared land The paper presents a historical perspective of agricultural development in Indonesia, focusing on food and cash crop developments particularly in the outer islands of Indonesia. The authors explore agricultural-forestry linkage is highlighted in section present a discussion on further development of industrial timber and estate crop plantation as logical ways towards sustainable forest management in the future. Keywords: Indonesia, forestry, agriculture, timber, estate crop, sustainable forestry Date: 2004-02 URL: http://d.repec.org/n?u=RePEc:eab:microe:59&r=all 231. Economic Adjustment and the Forestry Sector: Does Removing the Log Export Ban Matter Much? Arya B. Gaduh (Department of Economics, Centre for Strategic and International Studies) Kurnya Roesad (Department of Economics, Centre for Strategic and International Studies) For most of the 1980s and 1990s, Indonesia’s forest industry was characterized by protectionist policies. The combination of a log-export ban and the enforcement of artificially low prices of logs by APKINDO had fostered the inefficient domestic wood-panel producers, while potentially killed off more efficient wood-panel producers abroad. The removal of APKINDO and the log export ban, as major parts of the IMF – led economic reform agenda since 1998 was expected to improve allocative efficiency in the wood – processing sector. However, the removal of these policies likely increased pressure on Indonesia’s forests. An artificially low price of logs reduces their supply, and henceforth, relieves pressures off forests. Taking away the ban gradually moves the prices back to the international level, hence increasing the rate of wood extraction. As such, absent other forms of intervention, we face a trade-off between economic efficiency and environmental sustainability of the log export ban policy. This paper is an attempt to describe, and quantify when possible, this trade-off empirically. It asks whether the log export ban has encouraged less efficient use of domestic logs and whether it has helped to reduce the rate of round wood extraction. The empirical study suggests that the former did occur during the LEB and APKINDO regime of 1985-1997, while the latter cannot be shown empirically. Keywords: Indonesia, log ban, crisis, adjustment, forestry sector. Date: 2004-02 URL: http://d.repec.org/n?u=RePEc:eab:microe:66&r=all 232. Corporate Restructuring in Korea; Empirical Evaluation of Corporate Restructuring Programs Choong Young Anh (asKorea Institute for International Economic Policy) Doo Yong Yang (Korea Institute for International Economic Policy) This paper has two purposes: First, we briefly review the corporate sector in Korea to gain an understanding of how corporate sector reforms have evoloved and developed; Second we evaluate the rehabiliatation measures for corporate restructuring from firm-level data. Based on these analyses, the papar attempts to draw lessons from the Korean experience for other Asian countries facing similar corporate sector problems. Keywords: Corporate restructuring, Korea Date: 2003-12 URL: http://d.repec.org/n?u=RePEc:eab:microe:86&r=all 233. The Determinants of Truck Accidents in the United States Peter D. Loeb William A. Clarke This paper examines the determinants of truck accidents in the United States using a time series data set covering the period 1970-2001. Econometric models are developed and subjected to a set of specification error tests so as to increase the probability of selecting models which are statistically reliable. Along with conventional factors affecting motor vehicle accidents, the effect of the Motor Carrier Act of 1980, which deregulated the trucking industry, is examined for its effect on truck accidents. In addition, the model accounts for the effect railroad freight mileage has on truck accidents. Empirical results show that alcohol consumption, the unemployment rate, and railroad freight activity had a significant effect on truck accidents. However, deregulation of the trucking industry did not have a statistically significant adverse effect on these accidents. Keywords: Truck Accidents, Motor Carrier Act of 1980, Staggers Act, Alcohol Consumption, Deregulation. JEL: L92 I18 L51 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:run:wpaper:2005-002&r=all 234. How to Compare Taylor and Calvo Contracts: a comment on Michael Kiley Huw Dixon Engin Kara In a recent paper, Michael Kiley argued that the Calvo model of price adjustment is both quantitatively and qualitatively different from the Taylor model. What we show is that Kiley ( along with most other people) are choosing the wrong parameterization to compare the two models. In effect they are comparing the average age of Calvo contracts with the completed length of Taylor contracts. When we compare the average age of Taylor contracts with the average of Calvo, the differences become much smaller and easier to understand. We also show that autocorrelation of output can be larger in a Taylor economy than in the age-equivalent Calvo economy. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:san:cdmawp:0504&r=all 235. Why are Securitization Issues Tranched? Maciej Firla-Cuchra Tim Jenkinson Securitisations usually involve creating multiple tranches of a single issue with different characteristics, placed on the market as separate securities. Various theoretical explanations have been advanced to explain such tranching. This paper provides the first systematic testing of such theories using a proprietary database of over 5000 separate tranches in European securitisations raising a total of $1 trillion. We find support for asymmetric information and market segmentation explanations for tranching and present evidence on how such different rationales influence the structuring process in practice. We also investigate the impact of tranching on the price of securities issued. For those issues where our model predicts a higher optimal number of tranches, we find that additional uniquely- rated tranches are associated with higher prices for the issue as a whole. JEL: G21 G22 G28 Date: 2005 URL: http://d.repec.org/n?u=RePEc:sbs:wpsefe:2005fe04&r=all 236. Universality of Measurements on Quantum Markets Ireneusz Pakula Edward W. Piotrowski Jan Sladkowski We reason about possible future development of quantum game theory and its impact on information processing and the emerging information society. Two of the authors have recently proposed a quantum description of financial market in terms of quantum game theory. These "new games" cannot by themselves create extraordinary profits or multiplication of goods, but they may cause the dynamism of transaction which would result in more effective markets and capital flow into hands of the most efficient traders. We focus upon the problem of universality of measurement in quantum market games. Quantum-like approach to market description proves to be an important theoretical tool for investigation of computability problems in economics or game theory even if never implemented in real markets. URL: http://d.repec.org/n?u=RePEc:sla:eakjkl:23&r=all 237. "Governance, African Debt, and Sustainable Development: Policies for Partnership with Africa" Haider A. Khan (GSIS, University of Denver) The purpose of this paper is to review the structure and impact of the structural adjustment policies in Sub-Saharan Africa and find a set of future policy prescriptions. The failure of SAPs for the most part can be traced to the dogmatic pursuit of inappropriate policies derived from an inadequate theoretical framework by the IFIs. However, failure of governance in Africa have also been significant factors. An alternative set of SAPs and a new partnership between donors, trade partners and the Sub- Saharan African economies are proposed as part of a coherent development strategy based on Sen's concept of capabilities enhancement. Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:tky:fseres:2005cf334&r=all 238. Additional Proofs for Mechanism Design with Communication Costs. Severinov, Sergei Deneckere, Raymond Date: 2005-04-03 URL: http://d.repec.org/n?u=RePEc:ubc:pmicro:severinov-05-04-03-09-37-06&r=all 239. Children of international migrants in Indonesia, Thailand, and the Philippines: a review of evidence and policies John Bryant This paper considers three groups of children affected by international migration: (i) children left behind by international labour migrants from the Philippines, Indonesia, and Thailand; (ii) children of Thai nationals in Japan; and (iii) children brought along by irregular migrants in Malaysia and Thailand. Based on the limited data available from published sources, the paper constructs preliminary estimates of numbers of children involved. It then synthesizes available evidence on problems and opportunities faced by the children, and on policies towards them. [...more] Keywords: Child Poverty; Migration; Social Policies; Keywords: Cambodia; Indonesia; Malaysia; Myanmar; Philippines; Thailand; JEL: F22 Date: 2005 URL: http://d.repec.org/n?u=RePEc:ucf:inwopa:inwopa05/31&r=all 240. Values and Politics in the US: An Equilibrium Analysis of the 2004 Election Woojin Lee (University of Massachusetts Amherst) John Roemer (Yale University) The CNN exit polls after the 2004 election rated ‘moral values’ the most important issue; next came ‘jobs and the economy.’ Eighty percent of the voters who rated moral values the most important issue voted for Bush while eighty percent of the voters who rated jobs and the economy the most important voted for Kerry. We study the extent to which the distribution of voter opinion on moral values influences the positions that parties take on the economic issue, which we take to be the size of the public sector, through political competition. There are at least two distinct ways this influence might occur. First, because the Republican Party is identified with a traditionalist stance on moral values, some voters who desire a large public sector may nevertheless vote Republican because traditionalist morality is important for them. This we call the policy bundle effect. Second, it may be the case that those who subscribe to a traditionalist morality take economic conservatism to be part of that view, in the sense that they view the state as, for instance, usurping the role of the individual and/or family. We call this effect the moral Puritanism effect. Thus economic conservatism in the US may be politically strengthened by moral traditionalism because the Republican Party links the two issues (policy bundle) or because moral traditionalists in the US are anti-statist (in the Puritan sense). Our analysis will enable us to predict how equilibrium policies proposed by Democratic and Republican Parties would change if all voters had the same view on the moral- values issue, and we will decompose these changes into the aforementioned two effects. JEL Categories: D3, D7, H2 Keywords: moral values, redistribution, moral Puritanism effect, policy bundle effect, party unanimity Nash equilibrium Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:ums:papers:2005-08&r=all 241. New-Keynesian Macroeconomics and the Term Structure Seonghoon Cho (Korea Development Institute) Antonio Moreno (School of Economics and Business Administration, University of Navarra) Geert Bekaert (Columbia Business School, Columbia University) This article complements the structural New-Keynesian macro framework with a no-arbitrage affine term structure model. Whereas our methodology is general, we focus on an extended macro- model with an unobservable time varying inflation target and the natural rate of output which are filtered from macro and term structure data. We obtain large and significant estimates of the Phillips curve and real interest rate response parameters. Our model also delivers strong contemporaneous responses of the entire term structure to various macroeconomic shocks. The inflation target dominates the variation in the “level factor” whereas the monetary policy shocks dominate the variation in the “slope and curvature factors”. JEL: E31 E32 E43 E52 G12 Date: 2005-04 URL: http://d.repec.org/n?u=RePEc:una:unccee:wp0405&r=all 242. The Impact of Heterogeneous Trading Rules on the Limit Order Book and Order Flows Carl Chiarella (School of Finance and Economics, University of Technology, Sydney) Giulia Iori In this paper we develop a model of an order-driven market where traders set bids and asks and post market or limit orders according to exogenously fixed rules. The model seeks to capture a number of features suggested by recent empirical analysis of limit order data, such as; fat-tailed distribution of limit order placement from current bid/ask; fat-tailed distribution of order execution-time; fat-tailed distribution of orders stored in the order book; long memory in the signs (buy or sell) of trades. The model developed here extends the earlier one of Chiarella and Iori (2002) in several important aspects, in particular agents have heterogenous time horizons and can submit orders of sizes larger than one, determined either by utility maximisation or by a random selection procedure. We analyze the impact of chartist and fundamentalist strategies on the determination of both the placement level and the placement size, on the shape of the book, the distribution of orders at different prices, and the distribution of their execution time. We compare the results of model simulations with real market data. Date: 2005-02-01 URL: http://d.repec.org/n?u=RePEc:uts:rpaper:152&r=all 243. On the Distributional Characterization of Log-returns of a World Stock Index Kevin Fergusson (School of Finance and Economics, University of Technology, Sydney) Eckhard Platen (School of Finance and Economics, University of Technology, Sydney) In this paper we identify distributions which suitably fit log- returns of the world stock index (WSI) when these are expressed in units of different currencies. By searching for a best fit in the class of symmetric generalized hyperbolic distributions the maximum likelihood estimates appear to cluster in the neighborhood of those of the Student t distribution. This is confirmed on a high significance level under the likelihood ratio test. Keywords: world stock index; benchmarked log-return; Student t distribution; symmetric generalized hyperbolic distribution JEL: G10 G13 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:uts:rpaper:153&r=all 244. Benchmarking and Fair Pricing Applied to Two Market Models Hardy Hulley (School of Finance and Economics, University of Technology, Sydney) Shane Miller (School of Finance and Economics, University of Technology, Sydney) Eckhard Platen (School of Finance and Economics, University of Technology, Sydney) This paper considers a market containing both continuous and discrete noise. Modest assumptions ensure the existence of a growth optimal portfolio. Non-negative self-financing trading strategies, when benchmarked by this portfolio, are local martingales under the real-world measure. This justifies the fair pricing approach, which expresses derivative prices in terms of real-world conditional expectations of benchmarked payoffs. Two models for benchmarked primary security accounts are presented, and fair pricing formulas for some common contingent claims are derived. Keywords: growth optimal portfolio; benchmark approach; fair pricing; Merton model; minimal market model JEL: G10 G13 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:uts:rpaper:155&r=all 245. The Value of Statistical Life and the Economics of Landmine Clearance in Developing Countries John Gibson (University of Canterbury) Sandra Barns Michael Cameron Steven Lim Frank Scrimgeour John Tressler This paper presents estimates of the Value of Statistical Life ( VSL) in rural Thailand using the contingent-valuation (CV) method. These estimates are applied to an economic analysis of landmine clearance. The estimated VSL of US$250,000 suggests that the value of lives saved from landmine clearance is at least an order of magnitude greater than the values used in existing studies. Keywords: Asia; Thailand; benefit-cost analysis; contingent valuation; landmines; value of statistical life JEL: J17 O22 Date: 2005-04-01 URL: http://d.repec.org/n?u=RePEc:wai:econwp:05/04&r=all 246. Market Equilibrium in Exchange Economies with Some Families of Concave Utility Functions Bruno Codenotti (Toyota Technological Institute at Chicago) Kasturi Varadarajan (University of Iowa) We present explicit convex programs which characterize the equilibrium for certain additively separable utility functions and CES functions. These include some CES utility functions that do not satisfy weak gross substitutability. Keywords: Exchange economy, computation of equilibria, convex feasibility problem JEL: C8 Date: 2005-03-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpco:0503001&r=all 247. Multi-agent modeling and simulation of a sequential monetary production economy Marco Raberto (DIBE-CINEF, University of Genoa) Andrea Teglio (DIBE-CINEF, University of Genoa) Silvano Cincotti (DIBE- CINEF, University of Genoa) This paper presents a heterogeneous agent model of a sequential monetary production economy. A deterministic dynamic flow model is employed. The model is characterized by three classes of agents: a single homogeneous representative consumer, heterogeneous firms and a banking sector. There are three asset classes (or debts): a single homogeneous physical good, money and debt securities. The homogeneous commodity is produced by firms and, if saved, increases their capital stock. Firms issue debts to finance growth. Firms are homogeneous as regarding production technology but are heterogeneous relative to expected in°ation. Consumers provide labor force and make the decision of consumption and saving of their income. They own all the equities of firms and banks. The banking sector collects consumer savings and provides credit supply to firms. The main result of the model is that real economic variables are strongly affected by the level of credit supply in relation to the level of savings. Keywords: Heterogeneous agents, financial markets and the macroeconomy, computer simulation JEL: D92 E17 E44 Date: 2005-03-12 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpco:0503002&r=all 248. Merging discrete measurements Antonio Quesada (Universitat Rovira i Virgili, Spain) A merging function synthesizes a vector of numbers (representing measurements, scores or quantitative opinions) into a single number (representing a consensus or collective measurement, score or quantitative opinion). Assuming that all the involved numbers are drawn from a discrete set, it is shown that projection functions are the only merging functions satisfying three properties satisfied by the arithmetic mean (defined for real numbers). Another projection result is obtained under alternative assumptions when merging functions are assumed to transform matrices of numbers from a discrete set to a vector of numbers from the discrete set. Keywords: Aggregation of measurements; merging functions; interdependent measurements; social choice. JEL: C80 D71 Date: 2005-04-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpco:0504001&r=all 249. Are Exchange Rates Really Random Walks? Some Evidence Robust to Parameter Instability Barbara Rossi (Duke University) Many authors have documented that it is challenging to explain exchange rate fluctuations with macroeconomic fundamentals: a random walk forecasts future exchange rates better than existing macroeconomic models. This paper applies newly developed tests for nested model that are robust to the presence of parameter instability. The empirical evidence shows that for some countries we can reject the hypothesis that exchange rates are random walks. This raises the possibility that economic models were previously rejected not because the fundamentals are completely unrelated to exchange rate fluctuations, but because the relationship is unstable over time and, thus, difficult to capture by Granger Causality tests or by forecast comparisons. We also analyze forecasts that exploit the time variation in the parameters and find that, in some cases, they can improve over the random walk. Keywords: forecasting, exchange rates, parameter instability, random walks JEL: C52 C53 F3 Date: 2005-03-19 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpda:0503001&r=all 250. SOCIALIST PRIVATIZATION: RESPONSE Edgar L. Feige (University of Wisconsin-Madison) In earlier papers on “Socialist privatization” Feige proposed a sequential set of stabilization, privatization and liberalization policies designed to provide the necessary, albeit not sufficient conditions, for a transition from a planned to a market economy. An important component of the proposed policy package was an equalitarian distribution of a portion of “state” wealth to private citizens by means of a voucher program whose aim was to establish a social safety net of private wealth composed of “citizen shares” to cushion the disruptions and lessen the hardships of the transition process. This paper estimates the value of the proposed “citizen shares” and finds that they would have provided a significant social safety net as well as a powerful incentive for Soviet citizens to support the reform program. The problem with the proposed voucher program was not that it provided too little incentive. The problem was that the government failed to provide the relevant information to the public and that government information was not likely to be viewed as credible by its citizens. Reference: Comparative Economic Studies. Vol. XXXII No. 3, Fall, 1990 Keywords: Transition, privatization, property rights, social safty net, Russia, voucher scheme. JEL: P2 P3 H82 H54 D63 Date: 2005-01-22 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0501010&r=all 251. Fundamentalist attitudes and the export of democracy Luca Correani (University of Tuscia, Department of economics Viterbo, Italy) Is democracy exportable? A present-day political doctrine seems to recommend exporting democracy to those countries where diffused religious and social values do not allow the spontaneous growth of democratic institutions. In this paper we present a model that allows us to study the dynamics induced by the exogenous imposition of democracy, when the society is dominated by antidemocratic preferences. We analyze the dynamics of the distribution of democratic values in a population where agents have heterogeneous preferences about democracy, distinguishing between fundamentalist-antidemocratic agents and democratic agents (implicit references to Moslem societies are pervasive in this paper). Cultural traits and norms are acquired through a process of intergenerational cultural transmission and socialization. The driving force in the equilibrium selection process is the education effort exerted by parents; this depends on the distribution of democratic values in the population and on expectations about future policies affecting formal and informal institutions. The main result is that when fundamentalism is sufficiently diffused in all institutional dimensions of social life, the imposition of formal democratic rules do not significantly affect social preferences. This occurs because the existing democratic types perceive their children’s “conversion” to fundamentalism as less costly than the utility cost perceived by fundamentalist types when their children adopt democratic preferences: so fundamentalists’ education effort dominates the dynamic of preferences. As soon as the exogenous imposition is removed the system will again converge to fundamentalist and antidemocratic institutions. We argue that shortsighted behaviour like this by democratic agents might be strongly correlated to the level of economic development. On the other hand the model shows how a cruel fundamentalist dictatorship can not wholly destroy democratic preferences in the population; the sole result is a fictitious homologation of manifested attitudes, with no preferences dynamics and the previous real attitudes immediately emerging as soon as dictatorship falls. JEL classification: E13; P16 Keywords: Democracy, Cultural change, Formation of Preferences JEL: E13 P16 Date: 2005-01-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0501011&r=all 252. Application of Method of Systems Potential in Economics Grigorii Pushnoi It is proposed to consider the business cycle as hysteresis loop with fluctuating limiting points. Concept is based on the Method of System Potential, (Proceedings of International System Dynamics Conference 2003, No.56) which describes dynamics of spontaniously arising Complex Systems as the process of realization of some its inner propertiy of such Systems, so- called the 'Potential of a System'. Quasi-periodical dynamics of the 'index of efficiency' of such systems outcome from 'evolution equations' of the Method. Dynamics of Economic System is analized on the basis of this general system approach. Quasi-periodical cycle consists of two phases of gradual growth and two jumps – upward and down ward. Every such jump means mathematical catastrophe. The surface of this catastrophe is analyzed. It is proposed consider cyclical evolution of a System as a process of its qualitative refreshment. This method as applied to Economic System allows explaining some properties of the typical business cycle established by W. C. Mitchell (NBER) with respect to duration of different phases of the cycle. The Method as applied for quantitative analysis of U.S. Economic dynamics in 1922-1949 gives advance understanding of Great Depression of 1930’s. Keywords: economical potential, Great Depression, catastrophe, business cycle, complex system dynamics JEL: N Date: 2005-02-05 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502001&r=all 253. Capital Augmenting and Labor Augmenting Approach in Measuring Contribution of Human Capital and Education to Economic Growth Milenko Popovic (INSTITUTE OF ECONOMIC SCIENCES, Belgrade, Serbia & Montenegro) In this paper an effort has been made to unveil some hidden and implicit assumptions that has been used in different models dealing with analysis and measurement of contribution of human capital to economic growth. In order to do it we started from the general production function with heterogeneous labor input and general production function with heterogeneous human and physical capital. By introducing different assumptions regarding the partial elasticity of substitution between different factors of production we derived different models for human capital contribution. Apart from making hidden assumptions of existing models explicit we also derived several others models that can be used for the same purposes. Keywords: Economic Growth, Growth Accounting, Human Capital, Capital of Education, Partial Elasticity of Sustitution JEL: O P Date: 2005-02-05 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502002&r=all 254. Application of Method of System Potential for the Analysis of Economic System Dynamics. Grigorii Pushnoi (International Bogdanov Institute) The exact mathematical formulation of new System Method based on ideas of “system potential” and “conditions of its realization” is given. Cyclical dynamics of “efficiency of work” of a complex adaptive system follows from this Method. These cycles have the properties like to the properties of typical business cycles. It is proposed to identify these evolution cycles of complex adaptive systems as applied to economic system with business cycles. Keywords: business cycle, catastrophe jump, economic potential, complex adaptive system JEL: E Date: 2005-02-05 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502003&r=all 255. Diversity Indices of Technical Capability of 14 African Countries Voxi Heinrich Amavilah (REEPS & Glendale College) I outline four, and calculate two, broad indices of the diversity of technical capability of 14 African countries based on nine common descriptors of technical capability. I find technical capability to be heterogenous, and conclude that performance policies that ignore technical diversity of capability are potentially misleading, ineffective, and perhaps even damaging. Keywords: diversity indices, technical capability, diversity technical capability JEL: O55 O49 C63 P52 Date: 2005-02-05 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502004&r=all 256. Livelihoods and Farm Efficiency in Rural Georgia Kelvin_Balcombe (Imperial College) Dirk_Bezemer (University of Groningen) Junior_Davis (University of Greenwich) Iain_Fraser (Imperial College) This paper contributes to the literature on the role of on rural livelihood strategies in rural growth and poverty reduction. It distinguishes between livelihood diversity strategies that contribute to sustainable growth in household incomes, and those that mainly have a 'coping' function. It suggests that typically, the contribution of livelihood diversity to growing household income is through relaxing dependence on credit for access to capital. In this scenario, livelihood diversity would lead to higher technical efficiency in agriculture via investment and thereby to higher household incomes. Survey data from Georgia are introduced and used to test these hypotheses using a Bayesian stochastic frontier approach. The findings are relevant to defining more clearly the scope and aims of policies to stimulate the rural non-farm economy in developing and transition countries. Keywords: Livelihoods analysis; survey data; incomes; efficiency; Bayesian stochastic frontier approach JEL: Q Date: 2005-02-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502005&r=all 257. The Economic Logic of “Open Science” and the Balance between Private Property Rights and the Public Domain in Scientific Data and Paul A. David (Stanford University &The University of Oxford) The progress of scientific and technological knowledge is a cumulative process, one that depends in the long?run on the rapid and widespread disclosure of new findings, so that they may be rapidly discarded if unreliable, or confirmed and brought into fruitful conjunction with other bodies of reliable knowledge. “Open science” institutions provide an alternative to the intellectual property approach to dealing with difficult problems in the allocation of resources for the production and distribution of information. As a mode of generating reliable knowledge, “open science” depends upon a specific non-market reward system to solve a number of resource allocation problems that have their origins in the particular characteristics of information as an economic good. There are features of the collegiate reputational reward system -- conventionally associated with open science practice in the academy and public research institutes – that create conflicts been the ostensible norms of ‘cooperation’ and the incentives for non-cooperative, rivalrous behavior on the part of individuals and research units who race to establish “priority.” These sources of inefficiency notwithstanding, open science is properly regarded as uniquely well suited to the goal of maximising the rate of growth of the stock of reliable knowledge. High access charges imposed by holders of monopoly rights in intellectual property have overall consequences for the conduct of science that are particularly damaging to programs of exploratory research which are recognized to be vital for the long-term progress of knowledge-driven economies. Like non-cooperative behaviors among researchers in regard to the sharing of access to raw data-steams and information, and systematic under-provision the documentation and annotation required to create reliably accurate and up-to- date public database resources, lack of restraint in privatizing the public domain in data and information can significantly degrade the effectiveness of the entire research system. Considered at the macro-level, open science and commercially oriented R&D based upon proprietary information constitute complementary sub- systems. The public policy problem, consequently, is to keep the two sub-systems in proper balance by public funding of “open science” research, and by checking excessive incursions of claims to private property rights over material that would otherwise remain in the public domain of scientific data and information. JEL: O P Date: 2005-02-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502006&r=all 258. Koyaanisqatsi in Cyberspace Paul A. David (Stanford University & The University of Oxford) Koyaanisqatsi is a Hopi Indian word that translates into English as 'life out of balance,' 'crazy life,' 'life in turmoil,' 'life disintegrating,' all meanings consistent with indicating 'a way of life which calls for another way of living.” While not wishing to suggest either that the international regime of intellectual property rights protection scientific and technical data and information is “crazy” or that it is “in turmoil”, this paper argues that the persisting drift of institutional change towards towards a stronger, more extensive and globally harmonized system of intellectual property protections during the past two decades has dangerously altered the balance between private rights and the public domain in data and information. In this regard we have embarked upon “a way of life which calls for another way of living.” High access charges imposed by holders of monopoly rights in intellectual property have overall consequences for the conduct of science that are particularly damaging to programs of exploratory research which are recognized to be critical for the sustained growth of knowledge-driven economies. Lack of restraint in privatizing the public domain in data and information has effects similar to those of non- cooperative behaviors among researchers in regard to the sharing of access to raw data-steams and information, or the systematic under- provision the documentation and annotation required to create reliably accurate and up-to- date public database resources. Both can significantly degrade the effectiveness of the research system as a whole. The urgency of working towards a restoration of proper balance between private property rights and the public domain in data and information arises from considerations beyond the need to protect the public knowledge commons upon which the vitality of open science depends. Policy-makers who seek to configure the institutional infrastructure to better accommodate emerging commercial opportunities of the information-intensive “new economy” – in the developed and developing countries alike –therefore have a common interest in reducing the impediments to the future commercial exploitation of peer-to-peer networking technologies which are likely to be posed by ever-more stringent enforcement of intellectual property rights. JEL: O P Date: 2005-02-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502007&r=all 259. Economic Fundamentals Of the Knowledge Society Paul A. David (Stanford University) Dominique Foray (Stanford University) This article provides an introduction to fundamental issues in the development of new knowledge-based economies. After placing their emergence in historical perspective and proposing a theoretical framework that distinguishes knowledge from information, the authors characterize the specific nature of such economies. They go on to deal with some of the major issues concerning the new skills and abilities required for integration into the knowledge-based economy; the new geography that is taking shape (where physical distance ceases to be such an influential constraint); the conditions governing access to both information and knowledge, not least for developing countries; the uneven development of scientific, technological (including organizational) knowledge across different sectors of activity; problems concerning intellectual property rights and the privatization of knowledge; and the issues of trust, memory and the fragmentation of knowledge. This monograph is concerned with the nature of the process of macroeconomic growth that has characterized the U. S. experience, and manifested itself in the changing pace and sources of the continuing rise real output per capita over the course of the past two hundred years. A key observation that emerges from the long-term quantitative economic record is that the proximate sources of increases in real GDP per head in the century between 1889 and 1999 were quite different from those which obtained during the first hundred years of American national experience. Baldly put, the economy's ascent to a position of twentieth century global industrial leadership entailed a transition from growth based upon the interdependent development and extensive exploitation of its natural resources and the substitution of tangible capital for labor, towards a the maintenance of an productivity leadership through rising rates of intangible investment in the formation and exploitation of technological and organizational knowledge. JEL: O P Date: 2005-02-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502008&r=all 260. Will Building ‘Good Fences’ Really Make ‘Good Neighbors’ in Science? Paul A. David (All Souls College, Oxford & Stanford University) Problematic issues are raised by the expressed intention of the European Commission to promote greater awareness on the part of scientists in the “European Research Area” about intellectual property rights and their uses in the context of “Internet intensive research collaborations.” Promoting greater awareness and encouraging more systematic usage of IRP protections are logically distinct, but as policies for implementation – especially within the EC’s Fifth Framework Programme – the former can too readily shade into the latter. Building “good fences” does not make for “good (more productive) neighbors” in science. Balance needs to be maintained between the “open science” mode of research, and private proprietary R&D, because at the macro-system level the functions that each is well-suited to serve are complementary. Recent policy initiatives, particularly by the EC in relation to the legal protection of property rights in database, pose a serious threat to the utility of collaboratively consttructed digital information infrastructures that provide “information spaces” for voyages of scientific discovery. The case for alternative policy approaches is argued in this paper, and several specific proposals are set out for further discussion. JEL: O P Date: 2005-02-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502009&r=all 261. A TRAGEDY OF THE PUBLIC KNOWLEDGE ‘COMMONS’? Global Science, Intellectual Property and the Digital Technology Boomerang Paul A. David (All Souls College, Oxford & Stanford University) Radical legal innovations in intellectual property protection have been introduced by the little noticed European Database Directive of March 1996. This initiative, part of the larger institutional transformations initiated in response to the economic ramifications of rapid progress in digital information technologies, poses numerous contentious issues in law and economics. These are likely to create ambiguities for business and non-profit activities in this area for years to come, and the terms on which those issues are resolved will materially affect the costs and organizational feasibility of scientific projects that are of global reach and significance. This is the case especially in fields such as geology, oceanography and climatology, which depend heavily upon the collection, management and analysis of large volumes of observational data that cannot be regenerated. More generally the conduct of open, collaborative science – along with many of the benefits that flow from it for the developed and the developing economies alike – may be seriously jeopardized by the consequences of the new database protections. This raises the spectre of a new and different “tragedy of the commons,” one created by continuing the unbalanced pressure to extract greater economic rents by means of controlling access to information. “Over-fencing,” which is to say, the erection of artificial cost barriers to the production of reliable public knowledge by means of reliable public knowledge, threatens the future of “the public knowledge commons” that historically has proved critically important for rapid advance in science and technology. The paper sets out the economic case for the effectiveness of open, collaborative research, and the forces behind the recent, countervailing rush to strengthen and expand the scope of intellectual property rights protection. Focusing upon innovations in copyright law and the sui generis protection of hitherto unprotected content, it documents the genesis and analyzes the economic implications of the EC’s Database Directive, and related legislative proposals ( H.R. 3125, H.R. 354 and H.R. 1858) in the US. The discussion concludes by advancing a number of modest remedial proposals that are intended to promoted greater efforts to arrive at satisfactory policy solutions for this aspect of “the digital dilemma.” Keywords: intellectual property rights, copyright, sui generis protection of expressive material, economics of information-goods, open science, “fair use,” scientific databases. JEL: O P Date: 2005-02-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502010&r=all 262. Is Public R&D a Complement or Substitute for Private R&D? A Review of the Econometric Evidence Paul A. David (All Souls College, Oxford University & Stanford University) Bronwyn H. Hall (Nuffield College, Oxford University, & University of California at Berkeley) Andrew A. Toole (Stanford Institute for Economic Policy Research, Stanford University) Is public R&D spending complementary and thus “additional” to private R&D spending, or does it substitute for and tend to “crowd out” private R&D? Conflicting answers are given to this question. We survey the body of available econometric evidence accumulated over the past 35 years. A framework for analysis of the problem is developed to help organize and summarize the findings of econometric studies based on time series and cross-section data from various levels of aggregation ( laboratory, firm, industry, country). The findings overall are ambivalent and the existing literature as a whole is subject to the criticism that the nature of the “experiment(s)” that the investigators envisage is not adequately specified. We conclude by offering suggestions for improving future empirical research on this issue JEL: O P Date: 2005-02-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502011&r=all 263. The Digital Technology Boomerang: New Intellectual Property Rights Threaten Global “Open Science” Paul A. David (All Souls College, Oxford & Stanford University) There is a serious threat that ill-considered government support for expanding legal means of controlling access to information for the purpose of extracting private economic rents is resulting in the 'over- fencing of the public knowledge commons' in science and engineering. Such a new 'tragedy of the commons' would bring adverse long-run consequences for future welfare gains through technological progress, and re-distributional effects further disadvantaging the present economically less advanced countries of the world. Radical legal innovations in intellectual property protection that seriously jeopardize the effective conduct of open, collaborative science have been introduced by the little noticed European Database Directive of March 1996. This initiative forms an emblematic and substantively significant aspect of the broader set of transformations in intellectual property rights institutions that have been initiated in response to the economic ramifications of rapid progress in digital information technologies. The EC Directive poses numerous contentious issues in law and economics that will create ambiguities for business and non-profit activities in this area for years to come. The terms on which those issues are resolved will materially affect the costs and organizational feasibility of scientific projects that are of global reach and importance, especially those that depend heavily upon the collection, management and analysis of large volumes of observational data that cannot be regenerated. This paper sets out the economic case for the effectiveness of open, collaborative research, and the forces behind the recent, countervailing rush to strengthen and expand the scope of intellectual property rights protection. Focusing upon innovations in copyright law and the sui generis protection of hitherto unprotected content, it documents the genesis and analyzes the economic implications of the EC's Database Directive, and related legislative proposals (H.R. 3125, H.R. 354 and H.R. 1858) in the US. Several modest remedial proposals are advanced to mitigate the adverse impact of 'the digital technology boomerang' upon open science. Keywords: intellectual property rights, copyright, sui generis protection of expressive material, economics of information-goods, open science, 'fair use,' scientific databases JEL: O P Date: 2005-02-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502012&r=all 264. FROM MARKET MAGIC TO CALYPSO SCIENCE POLICY A Review of Terence Kealey's The Economic Laws of Scientific Research Paul A. David (All Souls College, Oxford & Stanford University) The current reconsideration of public research funding policies in the U.S., and U.K. and other industrialized economies makes it important that policy makers and the public understand the valid economic grounds for government support of science. This review article of a book that which argues for the ending of all government support of non-military R&D, provides an occasion to take stock of what is known about the subject. The review concludes that the extreme laissez-faire science policy arguments adroitly advanced by Terrance Kealey's book are analytically without foundation, and are based upon distortions and misinterpretations of the evidence of economic history, as well as on the misuse of econometric methods. The problem is that Mr. Kealey is an engaging writer and there still is in some policy circles an audience for his message, hence to undo the damage will call for concerted and persistent efforts on the part of economists specializing in the economics of science and technology. JEL: O P Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502013&r=all 265. Dispersion y Estabilidad de las Diferencias Salariales interestatales en Mexico, 1984-2000 Willy W. Cortez (Departmento de Metodos Cuantitativos, CUCEA, Universidad de Guadalajara) Economic liberalization has induced a new dynamics on wage setting and employment on Mexican labor market. These changes have been caused by two related events: productive restructuring and increasing labor market flexibility. To the extent that productive restructuring has implied significant regional changes, we assess if these regional changes have been accompanied by significant changes in cross state wage differences by educational levels. We find evidence that there is a small trend for the wage differences to decline among college graduates. However, the evidence among lower educational levels is less conclusive. Resumen La liberalizacion economica ha inducido una nueva dinamica de determinacion de los salarios y el empleo en el mercado laboral Mexicano. Estos cambios han sido causados por dos eventos relacionados: la reestructuracion productiva y a la creciente flexibilizacion del mercado laboral. En la medida que la reestructuracion productiva ha implicado cambios regionales significativos, se evalua si estos cambios regionales han venido acompanados de cambios significativos en las diferencias salariales interestatales por nivel educativo. Se encuentra evidencia de una ligera tendencia hacia la reduccion de las diferencias salariales entre los trabajadores con educacion universitaria. Para los niveles educativos inferiores la evidencia es menos concluyente. Keywords: Diferencias Salariales Interestatales, Nivel Educativo, Ecuacion de Mincer, Mexico JEL: I20 J31 J51 O15 Date: 2005-02-14 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502014&r=all 266. Jamaica’s Private Sector: A Strategy For Sustainable Hypercompetition Development Peter W Jones (Economic Development Institute,Jamaica) In order for Jamaica to transition from a developed to developing country there needs to be developed in Jamaica a strong knowledge based economy. The literature speaks to four preconditions that lead to knowledge becoming an effective engine of growth. These are: · An economic and institutional regime to provide incentives for the efficient use of existing and new knowledge and the flourishing of entrepreneurship. · An educated and skilled population to create, share, and use knowledge well. · A dynamic information infrastructure to facilitate the effective communication, dissemination, and processing of information. · An efficient innovation system of firms, research centers, universities, consultants, and other organizations to tap into the growing stock of global knowledge, assimilates and adapt it to local needs, and create new technology. Through Government policy and actions this infrastructure will be facilitated. The Jamaican Private Sector however will have to be the engine of growth, to enable the transition in creating sustainable economic development and the final transition for Jamaica to developed country status. This document is divided in to three (3) sections as follows: · Section I: The Global Village Scenario; · Section II: Jamaica’s Private Sector Preparation For Hypercompetition Thinking; · Section III: The Jamaica Hypercompetition Strategy The document services as a guide to the process for the Jamaican Private Sector. Hence, the title Jamaica’s Private Sector: A Strategy For Sustainable Hypercompetition Development. It is important that this document be read sequentially, failure to do so could result in challenges that are not desirable, especially from a business point of view. Keywords: Jamaica Private sector,Jamaica,Jamaica,Jamaica,Private sector,Private Sector Organization Of Jamaica JEL: O P Date: 2005-02-20 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502015&r=all 267. Working-age Adult Mortality and Primary Sschool Attendance in Rural Kenya Takashi Yamano (Foundation for Advanced Studies on International Development) Thomas S. Jayne (Michigan State University) The rapid increase in adult mortality due to the AIDS epidemic in sub- Saharan Africa raises great concern about its impact on child welfare. This article estimates the impact of AIDS-related adult mortality on primary school attendance in rural Kenya using a panel of 1,266 households surveyed in 1997, 2000, and 2002. We find a strong correlation between working-age adult mortality and lagged HIV- prevalence rates at nearby sentinel survey sites. School attendance, especially for children in relatively poor households, is negatively correlated with lagged provincial HIV- prevalence rates. Children, especially girls in relatively poor households, are less likely to be in school directly prior to the death of an adult member than children in unafflicted households. By contrast, boys in relatively poor households are less likely to be in school after an adult death. The evidence indicates that rising adult mortality in rural Kenya is adversely affecting primary school attendance especially among the poor. However, these results measure only short-term impacts. Over the longer run, whether school attendance in afflicted household rebounds or deteriorates further is unknown. Keywords: HIV/AIDS, Education, Kenya JEL: O12 O15 J10 Q12 Date: 2005-02-21 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502017&r=all 268. Land Inequality and the Emergence of Human Capital Promoting Institutions Oded Galor (Brown University & Hebrew University) Omer Moav (Hebrew University) Dietrich Vollrath (Brown University) This research suggests that favorable geographical conditions, that were inherently associated with inequality in the distribution of land ownership, adversely affected the implementation of human capital promoting institutions (e.g., public schooling and child labor regulations), and thus the pace and the nature of the transition from an agricultural to an industrial economy, contributing to the emergence of the Great Divergence in income per capita across countries. The basic premise of this research, regarding the negative effect of land inequality on public expenditure on education is established empirically based on cross-state data from the beginning of the 20th century in the United States. Keywords: Land Inequality, Institutions, Geography, Human capital accumulation, Growth JEL: O10 O40 Date: 2005-02-22 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502018&r=all 269. Nature and Trends of Cropping Pattern in Orissa: A District Level Analysis Manoranjan Pattanayak (Jawaharlal Nehru University) The objective of this paper is to study the nature and trends of cropping pattern in Orissa, a coastal state of India. For this purpose we have taken into account all thirteen districts of the state and 18 crops of the districts which cover more than 95percent of the gross cropped area of the district. The period of the study is from 1985 to 2000. We have calculated the area, yield and production of the crops and showed its trend in the aforesaid period. Keywords: Orissa agriculture, cropping pattern, Orissa economy JEL: N55 Q10 Date: 2005-02-26 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502019&r=all 270. Have Price Policies Damaged LDC Agricultural Productivity? Lilyan E. Fulginiti (University of Nebraska) Richard K. Perrin (University of Nebraska) This paper examines agricultural policies in 18 developing countries over the period 1961-1985. We measure productivity with both a nonparametric Malmquist index and a production function, confirming previous findings of declining agricultural productivity, but with sufficident inconsistencies as to raise concern about the adequacy of the methods. We nontehless find considerable support for the hypothesis that unfavorable price policies have damaged agricultural performance in these countries. Keywords: Agricultural productivity, developing countries, price policies JEL: O4 Q1 Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502020&r=all 271. Institutions and Agricultural Productivity in Sub-Saharan Africa Lilyan E. Fulginiti (University of Nebraska) Richard K. Perrin (University of Nebraska) Bingxin Yu (University of Nebraska) Agricultural productivity in 41 Sub-Saharan Africa (SSA) countries from 1960 to 1999 is examined by estimating a semi- nonparametric Fourier production frontier. Over the four decades the estimated rate of productivity change was 0.83% per year, although the average rate from 1985-99 was a strong 1.90% per year. Former UK colonies exhibited significantly higher productivity gains than others, while Liberia and countries that had been colonies of Portugal or Belgium exhibited net reductions in productivity. We measure a significant reduction in productivity during political conflicts and wars, and a significant increase in productivity among those countries with higher levels of political rights and civil liberties. Keywords: Sub-Saharan Africa, agricultural productivity, institutions, stochastic frontier, Fourier functional form. JEL: Q Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502021&r=all 272. Accounting for Agricultural Decline with Economic Growth in Taiwan Ling Sun (Providence University) Lilyan E. Fulginiti (University of Nebraska) E. Wesley Peterson (University of Nebraska) In this paper we propose an empirical model to decompose the evolution of the agricultural GDP share of Taiwan into three components: price changes, factor endowment changes and technological change. The full sample period is 1967 to 1997. The data were first tested to assess whether the time series are nonstationary and cointegrated. After confirming their nonstationarity and cointegrated relation- ship, we then employ an error correction model (ECM) in the empirical estimation to capture the dynamic as well as long-run equilibrium relationship among those economic variables. The results suggest that relative prices have a positive influence on the share of agriculture in GDP in both the long-run and the short-run. An increase in capital per unit of labor, on the other hand, is associated with a smaller agricultural share. This result is consistent with the Rybczynski Theorem. Technical change has been biased in favor of this sector. The strong negative impact of the change in factor endowments seems to dominate any possible positive effect of relative prices and technical change. This result makes a strong case for a Heckscher-Ohlin type model as a basis of understanding the development of the Taiwanese economy. Keywords: Taiwan, productivity growth, GDP function, error correction, JEL: O4 Q1 Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502022&r=all 273. Investing in Hope: AIDS, Life Expectancy, and Human Capital Accumulation Rui Huang (University of California-Berkeley) Lilyan E. Fulginiti (University of Nebraska) E. Wesley Peterson (University of Nebraska) A three period overlapping generations model is developed to investigate the impact of shorter life expectancy due to disease, on human capital investment decisions and income growth. This research is particularly relevant to Sub-Saharan Africa given the dramatic reduction in life expectancy due to HIV/AIDS and the potential lasting effects on growth. Our results indicate that as life expectancy shortens so does schooling inducing a lower growth rate of income. These relationships are even more pronounced for the African continent than for the rest of the world. Keywords: HIV/AIDS, Africa, life expectancy, growth, overlapping generations. JEL: O13 O47 O55 Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502023&r=all 274. Productivity Growth in China: Evidence from Chinese Provinces Xiang Ao (University of Nebraska) Lilyan E. Fulginiti (University of Nebraska) Young (1995) estimated Total Factor Productivity (TFP) growth for Hong Kong, Taiwan, Singapore and South Korea. He reported moderate growth rates for these four regions. This means that rapid growth of GDP in these four economies is due mainly to fast increase of inputs. Young (2000) also estimated the TFP growth rate of China to be 1.4% per year during the period of 1978 to 1998. Similar to his claim for the four 'Asian Tigers', he concluded that 'the productivity performance of the non- agricultural economy (of China) during the reform period is respectable, but not outstanding.' China's real GDP grew at about 9% every year during that period. Is this extraordinary growth rate only due to factor accumulation? Or is it to a large degree due to improved efficiency and innovations? To answer this question, this study uses a panel dataset of real GDP, capital stock, and labor force for 30 provinces for 1978 to 1998 to estimate the TFP for the Chinese economy. Two approaches are used to estimate the aggregate production technology: a fixed-effects model and a stochastic frontier model. Our results are consistent across models indicating a TFP growth rate of 4.9% and 3.3% respectively. Both estimates are higher than Young's 1.9%. Our estimates also indicate that national average of TFP's contribution to GDP growth amount to 41.3% and 38.7%, respectively. Other results of interest indicate that capital has contributed more than labor to GDP growth and that technological change has been labor using. Keywords: Productivity growth, China, provinces, stochastic frontier, TFP, technical change, efficiency change JEL: O47 O53 Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502024&r=all 275. LDC Agriculture: Non-parametric Malmquist productivity indexes Lilyan E. Fulginiti (University of Nebraska) Richard K. Perrin (University of Nebraska) This paper examines changes in agricultural productivity in18 developing countries over the period 1961-1985. We use the nonparametric, output- based Mamquist index to examine whether the results from such approach confirm results from other methods that have indicated declining agricultural productivity in less developed countries. Keywords: Journal of Development Economics, vol. 53 (1997), 373- 390 JEL: O4 Q1 Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0502025&r=all 276. Crecimiento potencial y productividad en la Argentina: 1980- 1997 Osvaldo Meloni (Universidad Nacional de Tucuman, Argentina) El presente trabajo estima el producto potencial para la Argentina en el periodo 1980-97. El enfoque utilizado es el aplicado por Roldos (1997) para el caso de Chile, que obtiene las participaciones de los factores de produccion mediante la estimacion de una funcion de produccion agregada con insumos ajustados por calidad y supone pleno uso de factores productivos. La serie de producto potencial obtenida presenta dos subperiodos bien diferenciados: en el lapso 1980-89 la tasa de cambio promedio anual fue nula, mientras que para el subperiodo 1990-97 fue del 5,4%. Sin embargo, en este ultimo subperiodo el nivel del potencial fue superior al registrado, lo que indicaria que no hubo episodios de “recalentamiento” durante esos anos. El trabajo se completa con la estimacion de las fuentes de crecimiento economico de Argentina. Se encuentra que, mientras en el lapso 1980-89 la productividad total de factores decrecio a una tasa del 0,4% si se computan los insumos ajustado por calidad y del 1,8% si no se practica tal ajuste; en el subperiodo 1990-97 la productividad total de factores crecio al 2% anual si los insumos se ajustan por calidad y al 4% sin ajuste. Estos guarismos nos revelan que el crecimiento que experimento nuestro pais durante la decada del 90, fue del tipo intensivo, en contraposicion al crecimiento extensivo detectado por otros autores en la ex –Union Sovietica y algunos paises del sudeste asiatico. Keywords: Crecimiento Potencial - Productividad Total de los Factores JEL: O4 Date: 2005-03-01 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0503001&r=all 277. Definition of a methodology to analyze and measure interactions inside Regional Innovation Systems. Jon Mikel Zabala Iturriagagoitia (Institute of Innovation & Knowledge Management. INGENIO CSIC-UPV) The aim of the present thesis proposal is to define a methodology to measure the interactions among the agents involved in a System of Innovation, due to the fact that the literature agrees in a lack of measures in this respect. The conceptualization of Regional Innovation Systems (Cooke and Morgan, 1993) can be understood like an extension and adaptation arisen from the concept of National Innovation Systems defined in the works of Freeman (1987), Nelson (ed., 1993) and Lundvall (ed., 1992) and in the subsequent development of Edquist (ed., 1997). It consist of analyzing the existence of actors (institutions, clusters, universities, industries…) and regional competences, and the interactions into Innovation Networks among them, providing regional authorities with a tool to define policies to increase competitiveness. A first stream work in which relations and flows among the main agents of an Innovation System are shown, is the one made up by the works of Scherer, (1982), Pavitt (1984) Archibugi (1988), Galli and Teubal (1997), DeBresson (ed., 1996) Another is due to Andersen (1992, 1996) on Innovation Systems, using “graph theory” and simulation models (Andersen and Lundvall, 1997). Recently, some different research projects can be found in which relations established among the agents in Innovation Systems are studied (European Planning Studies, Vol. 8, Not. 4, 2000). Besides, diverse simulation models created to measure the characteristics of Innovation Systems in different environments (Simulating Self-Organizing innovation networks” - SEIN-) are also detailed. There is a growing need to elaborate indicators that allow to predict changes in the regional innovation capacity beyond those employed in the linear model. We have also noticed the need to measure other processes such as those related to institutional relations and the creation of networks, in order to evaluate innovation policies (Zenker, 2001; Landabaso, Oughton, Morgan, 2001; Saviotti, 1997; Archibugi, Howells and Michie, eds., 1999). This is supported by the fact that several policies fostering innovation have been defined, such as RIS, RTP, RITTS, etc… In this context, and due to the importance of co-operation practices within Regional Innovation Systems, the present research project tries to contribute with a model as well as an Indicator Scoreboard which helps quantify the interrelations that occur among the agents in an Innovation System. Keywords: Regional Innovation Systems, Innovation Networks, Measures, Interactions. JEL: O P Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0503002&r=all 278. Endogenous Globalization and Income Divergence Yoshiaki Sugimoto (Department of Economics, European University Institute) This paper develops a growth theory that accounts for the evolution of trade policy, underlying internal class conflicts, and global income divergence over the last few centuries. By analyzing political responses to the distributional effects of international trade, this paper finds a prominent interaction between trade policy and the pattern of economic development, and suggests that the nature of the interaction depends on a country's resource abundance and distribution. As shown by the example of Western Europe, land-scarce countries will reach a developed stage through a non-monotonic evolution of trade policy. In contrast, land- abundant countries, especially those with concentrated landownership, tend to fail to take off because of landlords' opposition to industrialization. Keywords: Trade Policy, Growth, Class Conflict JEL: F10 F13 F43 O11 O40 Date: 2005-03-12 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0503003&r=all 279. America Latina: Hambre y Alimentos en Abundancia Paul Lewin Keywords: Rural Development; Food Security; Hunger; Latin America JEL: O P Date: 2005-03-14 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0503004&r=all 280. From Decentralisation of Planning to People's Planning: Experiences of the Indian States of West Bengal and Kerala Charvak (Centre for Development Studies, Kerala Research Project for Local Level Development) >From Decentralisation of Planning to Peoples Planning - Experiences of the Indian States of Kerala and West Bengal by Charvak, 2000: The Discussion Paper attempts a comparison of the process of decentralisation of planning in the two States that have made significant progress in this area. The study shows that social mobilisation, process of democratisation, mass conscientisation, demand from below, and collective action have been responsible for their success. It also makes a critical review of the evolution of local bodies in these States followed by an analysis of the process, and the new innovative experiments of decentralisation. A detailed account of the Kalliasseri experiment (from Resource Mapping to Peoples Plan Campaign) as well as the KSSP experiment (from Science Popularisation to Local Level Planning) is also given. The study concludes with the observation that instrumentalities such as the total literacy campaign, peoples mobilisation, popular science movements, and mass conscientisation are the necessary conditions for replicating of the Kerala and the West Bengal experience in other States. (http://www.krpcds.org/fellowsh.htm)(http://www.krpcds. org/charvak.pdf. Other related works of Charvak: Background Paper to UNDP, India, 1998, Country Strategy Paper for IDF-1998 and to the UN award winning HDR-2004 of West Bengal). Keywords: Decentralisation, Decentralization, Planning, Top-down, Bottom up, Left politics, Local governance, democracy, local planning, JEL: O P Date: 2005-03-15 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0503005&r=all 281. Western Institution Building:The War, Hayek’s Cosmos and the WTO M. Ulric Killion (Shanghai International Studies University) Despite the shortcomings of Hayek’s spontaneous order, there is a positive side, perhaps even a positive feedback. Hayek left us with a “what if” question and returns us to that initial opening of Pandora’s Box, or perhaps the initial onset of neo- realism, neo-liberalism, developmentalism, globalism, transnationalism and other concepts, precepts and adjectives justifying institution building by bargaining and military force. In terms of new world order, institution building by necessity requires fundamental changes in governmental structures in non- Western cultures and nation-states such as China, Afghanistan and Iraq. Such changes are being prompted by means of political, economic and military powers of the U.S. and other developed nation-states, and international intergovernmental organizations dominated by developed nation-states such as the World Trade Organization. However arguably well intended there remains the question of what will eventually result from the introduction of Western institutions into non-Western cultures and developing countries. This article explores F. A. Hayek’s discourse concerning taxis and cosmos (Kosmos), in terms of institution building. This article addresses why China presents an instance of institution building by bargaining, while countries such as Iraq and Afghanistan offer instances of institution building by military force, then directs emphasis toward institutional and constitutional reform, and an evolution of Western law in non- Western cultures and developing nation- states such as China, Afghanistan, and Iraq. Although Hayek may have had contrary intentions, his discourse on taxis and cosmos (Kosmos), and spontaneous order, nonetheless, challenges a modern Western world to rethink its priorities and policies, and perhaps even foundational ideologies, especially in the realm of rebuilding non-Western cultures and developing countries. Keywords: Western, Institution building, F. A. Hayek, War, WTO, Cosmos, constitutions, laws, international, politics, economics, military, force, neo-realism, neo-liberalism, developmentalism, globalism, transnationalism JEL: F1 F2 P Q Z Date: 2005-03-20 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0503006&r=all 282. INEQUALITY AND DETERMINANTS OF EARNINGS IN MALAYSIA, 1984-97 Branko Milanovic (World Bank; Carnegie Endowment for International Peace) Using the large nationally-representative Malaysian Household Income Surveys from 1984, 1989 and 1997, the paper studies earnings inequality and determinants of earnings. During the period 1984-97, Malaysia’s real per capita GDP increased by about 70 percent, participation rates for both men and women went up among all age groups and the average number of years of schooling increased by 1.2 years. Inequality of earnings, measured by the Gini coefficient, remained stable, but other measures of inequality (like decile ratios) show a significant relative wage improvement among the bottom deciles, and relative wage decrease on the top. The inter-state earning differences shrunk between 1984 and 1989 (a period of slow growth which includes the 1985-86 recession) and increased in the latter period. The rate of return to an additional year of schooling remained high (at 10 percent) despite the huge increase in the supply of the highly educated. The stable overall rate though masks an increased rate of return on women’s education, and a decreased rate for men. Women wage “discrimination” nevertheless amounts to 16-20 percent, and the bias has recently increased. The pro-Chinese earning ethnic bias is estimated at 31 percent. JEL: J21 J31 J7 O12 Date: 2005-03-23 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0503007&r=all 283. Measurement Error in Access to Markets Javier Escobal (GRADE) Sonia Laszlo (McGill University) Studies in the microeconometric literature increasingly utilize distance to or time to reach markets or social services as determinants of economic issues. These studies typically use self- reported measures from survey data, often characterized by non- classical measurement error. This paper is the first validation study of access to markets data. New and unique data from Peru allow comparison of self-reported variables with scientifically calculated variables. We investigate the determinants of the deviation between imputed and self-reported data and show that it is non-classical and dependent on observable socio-economic variables. Our results suggest that studies using self-reported measures of access may be estimating biased effects. JEL: O P Date: 2005-03-29 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0503008&r=all 284. Unified Growth Theory Oded Galor (Brown University) This chapter examines the process of development from an epoch of Malthusian stagnation to a state of sustained economic growth. The analysis focuses on recently advanced unified growth theories that capture the intricate evolution of income per capita, technology, and population over the entire course of human history. The inconsistency of non-unified growth models with the main characteristics of the process of development across most of human history induced growth theorists to advance an alternative theory that captures in a single unified framework the epoch of Malthusian stagnation, the modern era of sustained economic growth, and the recent transition between these distinct regimes. Unified growth theory reveals the underlying micro foundations that are consistent with the growth process over the entire history of the human species, enhancing the confidence in the viability of the theory, its predictions and its policy implications for the growth process of less developed economies. Keywords: Growth, Technological Progress, Demographic Transition, Income Distribution, Human Capital, Evolution, Natural Selection, Malthusian Stagnation, Class Structure. JEL: O11 O14 O33 O40 J11 J13 Date: 2005-04-01 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0504001&r=all 285. Employment Effects of Different Innovation Activities: Microeconometric Evidence Bettina Peters (ZEW Centre for European Economic Research) Using a recently developed model which allows to separate a few well- established employment effects of product and process innovations, this paper reports new results on the relationship between innovation and employment growth in Germany. The model is tailor-made for analysing firm-level employment effects of innovations using specific information provided by CIS data. It establishes a theoretical link between employment growth and innovation output. The econometric analysis confirms that product innovations have a positive impact on employment. In contrast to previous studies, this effect is independent of the novelty degree. Moreover, different employment effects between manufacturing and service firms regarding process innovations were found. Finally, from a cross country perspective the results for Germany are similar to those found for Spain and the UK. Keywords: Innovation, employment, applied econometrics, manufacturing, services JEL: O33 J23 C21 O32 L60 Date: 2005-04-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0504002&r=all 286. Measuring Social Capital in Italy. An Exploratory Analysis Fabio Sabatini (University of Rome La Sapienza) The aim of this paper is to trace a map of Italian local social capital endowments. It focuses on the “structural” dimension of the concept, as identified with social networks. The analysis is based on a dataset collected by the author including about two hundred indicators of five main social capital dimensions: strong family ties, weak informal ties, voluntary organizations, civic awareness, and political participation. 51 key variables are selected for performing principal component analyses both on each of the five groups and on the entire dataset, in order to build latent indicators for every single social capital’s dimension and for the concept as a whole. Finally, a multiple factor analysis is run on the entire dataset, in search of a single synthetic measure of social capital. A clear distinction emerges between bonding social capital, shaped by strong family ties, and bridging and linking social capital, shaped by weak ties among friends, neighboors and members in voluntary organizations. Areas characterized by high levels of bonding social capital can suffer from a lack of bridging and linking ties. The study provides a valuable synthetic indicator capturing the particular configuration of social capital which the literature generally associates with positive economic outcomes. Keywords: Social capital, Social networks, Economic development, Principal component analysis, Multiple factor analysis JEL: A12 O10 O18 R11 Date: 2005-04-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0504003&r=all 287. Finance, Technology and Inequality in Economic Development Ryo Horii (Osaka University) Ryoji Ohdoi (Osaka University) Kazuhiro Yamamoto (Osaka University) This paper develops an overlapping generations model with technology choice and imperfect credit market, in order to investigate a possible source of underdevelopment. Consistent with empirical observations in the literature, the model shows that better financial institutions that provide stronger enforceability of contracts facilitate the development of financial markets, which in turn enables firms to switch to more capital intensive technologies, thereby promoting economic development. In the presence of credit rationing, however, this technological switch widens inequality. Therefore, risk-averse agents would not be willing to improve the financial institutions to the level at which the technological switch occurs, resulting in a development trap. A remedy is to facilitate small firms' adoption of existing technology, rather than the new one. Keywords: Enforceability of Contracts, Technological Switch, Income Distribution, Credit Rationing, Development Trap. JEL: O14 O16 Date: 2005-04-12 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0504004&r=all 288. Availability of Higher Education and Long-Term Economic Growth Akiomi Kitagawa (Tohoku University) Ryo Horii (Osaka University) Koichi Futagami (Osaka University) This paper examines the economic growth effects of limited availability of higher education in a simple endogenous growth model with overlapping generations. With limited availability, the scarcity of human capital keeps its price high and distributes a larger share of the aggregate output to young households. Under certain conditions, it leads to greater aggregate savings in each period, thereby enabling the economy to grow faster than without any limitation. In such cases, an excessive expansion in the availability causes a temporary boom followed by a serious deficiency in investible funds, resulting in a substantial slowdown in economic growth. Keywords: Endogenous Growth; Human Capital; Slowdown; Intergenerational Income Distribution JEL: O41 Date: 2005-04-12 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0504005&r=all 289. Labor Conflict and Foreign Investments: An Analysis of FDI in India Nidhiya Menon (Brandeis University) Paroma Sanyal (Brandeis University) This paper analyzes patterns of foreign direct investment in India. We investigate how labor conflict, credit constraints, and indicators of a state’s economic health influence location decisions of foreign firms. We account for the possible endogeneity of labor conflict variables in modeling the location decisions of foreign firms. This is accomplished by using a state- specific fixed effects framework that captures the presence of unobservables, which may influence investment decisions and labor unrest simultaneously. Results indicate that labor unrest is endogenous across the states of India, and has a strong negative impact on foreign investment. Keywords: Foreign Direct Investment, Labor Disputes, Developing Countries, India. JEL: L2 L5 O2 Date: 2005-04-13 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0504006&r=all 290. Wants and Past Knowledge: Growth Cycles with Emerging Industries Ryo Horii (Osaka University) This paper develops a demand-pull theory of growth cycles based on variety-expansion models of endogenous growth. In the process of economic growth, cycles are generated by the interaction between consumers' desire to satisfy an indefinite range of wants and firms' incentive to utilize knowledge from past production experiences. Accumulated knowledge induces firms to agglomerate with each other in the technology space, but when the demand for unsatisfied wants reaches a threshold, firms start to adopt new technologies, causing sporadic emergence of new industries. Although emerging industries temporarily decelerates economic growth, they are indispensable parts of sustained long-term growth. Keywords: demand-pull growth, growth cycles, wants, knowledge, emergence of industries. JEL: O31 O33 O41 Date: 2005-04-13 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0504007&r=all 291. Industrialization and Infant Mortality Maya Federman (Pitzer College) David I. Levine (Haas School of Business, UC Berkeley) On average, infant mortality rates are lower in more industrialized nations, yet health and mortality worsened during early industrialization in some nations. This study examines the effects of growing manufacturing employment on infant mortality across 274 Indonesian districts from 1985 to 1995, a time of rapid industrialization. Compared with cross-national studies we have a larger sample size of regions, more consistent data definitions, and better checks for causality and specification. We can also explore the causal mechanisms underlying our correlations. Overall the results suggest manufacturing employment raised living standards, housing quality, and reduced cooking with wood and coal, which helped reduce infant mortality. At the same time, pollution from factories appears quite harmful to infants. The overall effect was slightly higher infant mortality in regions that experienced greater industrialization. Keywords: Industrialization, infant mortality, Indonesia, pollution, indoor air pollution JEL: O11 O14 O18 O19 I12 Date: 2005-04-14 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0504008&r=all 292. General Purpose Technologies and Productivity Surges: Historical Reflections on the Future of the ICT Revolution Paul A. David (All Souls College & Stanford University) Gavin Wright (All Souls College & Stanford University) Presented to the International Symposium on ECONOMIC CHALLENGES OF THE 21ST CENTURY IN HISTORICAL PERSPECTIVE, Oxford, England, 2nd-4th July, 1999 Celebrating the Scholarly Career of Charles H. Feinstein, FBA. Re- examination of early twentieth century American productivity growth experience sheds light on the general phenomenon of recurring prolonged swings in total factor productivity (TFP) growth rate experienced in the advanced industrial economies. After a “productivity slowdown” lasting more than a quarter of a century (during which TFP for in the manufacturing sector grew at less than 1 percent per annum, industrial TFP surged to average 6 percent per annum during 1919- 29. This contributed substantially to the absolute and relative rise of the US domestic economy’s TFP residual, and in many respects it may be seen as the opening of the high-growth era that persisted into the 1970s. The productivity surge marked the culminating phase in the diffusion of “the dynamo” as a general purpose technology (GPT); that saw a shift in the underlying technological regime brought about by the implementation of critical engineering and organizational advances originating in some two decades earlier. Closer analysis reveals the significant concurrence of the factory electrification movement in this period with important structural changes that were taking place in US labor markets; in addition, there were significant complementarities between managerial and organizational innovations and the new dynamo-based factory technology, on the one hand, and, and the reinforcement of both kinds of innovation by the macroeconomic conditions of the 1920s. This more complicated, historical view of the dynamics of GPT diffusion is supported by comparisons of the US experience of factory electrification with the developments taking place in Japanese industry during the 1920’s, and in the UK manufacturing sector during the 1930’s. Concluding sections of the paper reflect on the analogies and contrasts between the historical case of a socio-economic regime transition involving the electric dynamo and the modern experience of the information and communications technology (ICT) revolution. Our formulation the GPT concept in explicitly historical terms contributes to explaining the paradoxical phenomenon of the late twentieth century productivity slowdown in the US. It also points to some contemporary portents of a future phase of more rapid ICT-based growth in total factor productivity. JEL: N Date: 2005-02-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0502002&r=all 293. Path dependence, its critics and the quest for ‘historical economics’ Paul A.David (All Souls College, Oxford & Stanford University) The concept of path dependence refers to a property of contingent, non- reversible dynamical processes, including a wide array of biological and social processes that can properly be described as 'evolutionary.' To dispell existing confusions in the literature, and clarify the meaning and significance of path dependence for economists, the paper formulates definitions that relate the phenomenon to the property of non-ergodicity in stochastic processes; it examines the nature of the relationship between between path dependence and 'market failure,' and discusses the meaning of 'lock-in.' Unlike tests for the presence of non-ergodicity, assessments of the economic significance of path dependence are shown to involve difficult issues of counterfactual specification, and the welfare evaluation of alternative dynamic paths rather than terminal states. The policy implications of the existence of path dependence are shown to be more subtle and, as a rule, quite different from those which have been presumed by critics of the concept. A concluding section applies the notion of 'lock-in' reflexively to the evolution of economic analysis, suggesting that resistence to historical economics is a manifestation of 'sunk cost hysteresis' in the sphere of human cognitive development. Keywords: path dependence, non-ergodicity, irreversibility, lock- in, counterfactual analysis JEL: N Date: 2005-02-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0502003&r=all 294. At last, a remedy for chronic QWERTY-skepticism! Paul A. David (All Souls College, Oxford) JEL: N Date: 2005-02-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0502004&r=all 295. If only I could sack you! Management turnover and performance in large German Banks between 1874 and 1913 Christian Bayer (Universitat Dortmund) Carsten Burhop (Universitat Munster) We analyze the relation of firm performance and managerial turnover in 19th century German banking by probit estimation. This period covers a major reform of corporate governance. Before the reform performance and turnover are unrelated, wheras after the reform more succesfull managers leave firms more seldom. However, only short run performance matters. Keywords: Management turnover, Performance, Banking, late 19th century Germany JEL: G30 J33 N23 Date: 2005-02-14 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0502006&r=all 296. Banking on Change: Information systems and technologies in UK High Street Banking, 1919-1979 Bernardo BATIZ-LAZO (London South Bank University) Peter WARDLEY (University of the West of England) This paper explores the automation of the supply of financial services on the British High Street. Its aim is to provide an historical perspective to highlight the longevity of organisational change in the financial sector and to emphasise its remarkable continuity: UK clearing banks and building societies had very specific problems and adopted particular responses. It also indicates the close correspondence of organisational change with assessments by senior bank staff of both technological opportunities and the reception to change of bank customers. Office mechanisation (from the introduction of office equipment and “mechanical banking” in the inter-war years to its culmination with computer technology in the late 1950s and beyond) was introduced alongside the development of new capabilities. Technological change eventually offered others the potential to compete in bank markets. However, time and again, and despite a broadening of the range of financial institutions which provided competing services, technical change associated with long-standing experience resulted in a strengthened competitive position for already established participants. Keywords: banks, building societies, technological change, management accounting JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503001&r=all 297. The Australian Institute of Management Business report awards and their influence on corporate reporting in Australia Ray ANDERSON (Victoria University) In 1950, the Australian Institute of Management introduced an Annual Report Award, which was designed to improve the form and presentation of annual reports. The purpose of this paper is to investigate the impact the award scheme had on annual report design and presentation and the financial practices of Australian companies. Keywords: Annual Reports; design; presentations; accounting practices JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503002&r=all 298. La frontiere comptable du groupe : evolution du concept de perimetre de consolidation de 1965 a 1985 Didier BENSADON (Universite de Nantes) This survey aims to analyse the evolutions of the consolidation perimeter concept through reports and studies issued by public and private organizations implied in the financial report issue. A supplementary lighting is brought on the practice of the groups thanks to the analysis of Saint-Gobain consolidated accounts between 1965 and 1985. Resume Cette recherche se propose d’analyser les evolutions de la notion de perimetre de consolidation au travers de rapports et etudes emanant d’organismes publics et prives impliques dans l’information financiere. Un eclairage supplementaire est apporte sur la pratique des groupes grace a l’analyse des comptes consolides de Saint-Gobain entre 1965 et 1985. Keywords: Accounting history, consolidated accounts, consolidation perimeter, Saint-Gobain. JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503003&r=all 299. Les faux bilans de la Banque de France dans les annees 1920 Bertrand BLANCHETON (Universite Montesquieu Bordeaux IV) Pendant plus d’un an, entre 1924 et 1925, la Banque de France presente au public de faux bilans hebdomadaires. La Banque minimise le chiffre de la circulation monetaire afin de preserver la confiance des operateurs notamment sur le marche des changes. Cette contribution leve le voile sur les techniques de manipulations utilisees et analyse les consequences de la revelation en avril 1925 de ce « scandale » sur la credibilite de la Banque de France. JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503004&r=all 300. Les mutations du traitement des donnees comptables dans les banques francaises dans les annees 1930-1960 Hubert BONIN (Universite Montesquieu Bordeaux IV) L’histoire des banques en tant que « firmes » reste encore lacunaire pour les decennies anterieures aux travaux des specialistes d’economie industrielle au sein des departements de gestion ou de sciences economiques, qui portent sur le dernier tiers du XXe siecle. Pourtant une « prehistoire » du management est pertinente pour evaluer comment les banquiers ont evolue d’un type de societe plutot informelle ou les methodes de traitement administratif et comptable avaient en fait plus ou moins leguees par les techniques constituees pendant les XVe- XVIIIe siecles a un type de societe structuree en une veritable « organisation ». La notion de « rationalisation » devient alors un mot d’ordre et determine un processus d’evolution vers un nouveau type d’economie tertiaire, beaucoup plus « formalisee » – en opposition a une economie « informelle » ou simplement encore « inorganisee » – parce que les banques se sont soudain inquietees de ne plus pouvoir connaitre la realite de l’etendue chiffree des risques qu’elles brassaient. Les exigences de controle des risques – l’une des specificites du portefeuille de savoir-faire des banques – ont evidemment pese en faveur d’une rapide acclimatation de methodes « industrielles » pour mettre en place une reelle « organisation tertiaire ». C’est pourquoi l’introduction des machines comptables n’est qu’une piece du vaste ensemble de reformes de rationalisation qui se cristallise dans les annees 1920-1950 : standardisation, normalisation, suppression des doublons-papiers et des duplications ou chevauchements de services, durcissement des procedures de controle et mecanisation (de l’ecriture, avec les machines a ecrire ; ou des comptes) sont autant d’outils de cette mutation structurelle qui introduit les « technologies de l’information » dans le secteur bancaire. JEL: N Date: 2005-03-24 Date: 2005-03-25 Date: 2005-03-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503005&r=all 301. Illuminating the darkness: the impact of the First World War on cost calculation practices in British firms Trevor BOYNS (Cardiff University) Through a detailed examination, using business archives, of the impact of the First World War on cost calculation practices in British firms, this paper examines, and finds wanting, the claim of Loft (1986, 1990) that cost accounting came into the light in Britain during the First World War. Keywords: costing, Britain, First World War JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503006&r=all 302. L’expert-comptable judiciaire : un pair de la cour ? Emmanuel CHARRIER (Universite Paris IX Dauphine) Le dispositif juridique francais, fidele au modele de la decision publique, place l’expert dans une situation subalterne par rapport au Juge qui le choisit, lui fixe sa mission, lui impartit des delais et finalement le remunere, et a qui il doit apporter un eclairage strictement limite a sa technique afin que la decision de justice soit prise en toute autorite par le Juge. Pourtant, l’expertise comptable judiciaire occupe une position particuliere sur la scene judiciaire : la duree de ces missions donne a l’expert un acces privilegie aux justiciables ; la frequence des discussions financieres dans les proces les fait paraitre accessibles, en depit de la complexite des questions expertisees ; enfin, la comptabilite trouve ses racines dans l’economie, qui dispute au droit la legitimite a evaluer les dommages a reparer. C’est pourquoi l’etude se propose d’examiner, au travers des publications de compagnies d’experts, dans quelle mesure les experts comptables judiciaires se cantonnent au service technique du Juge ou, au contraire, se revendiquent comme pairs bien avises au service de la Justice. Keywords: Droit, justice, expert judiciaire, expert comptable, comptabilite, technique, legitimite, autorite, compagnies d’experts, discours publics JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503007&r=all 303. L'entreprise au-dela de ses obligations legales : publicite financiere et communication chez Saint-Gobain ( 1867-2005) Rahma CHEKKAR (Universite Orleans) Our study aims at understanding the introduction and the development of financial 'communication' in French companies. The case of Saint-Gobain (1867-2005) is used to explain why and how Saint-Gobain have taken the initiative in going more to meet investors, by having voluntary disclosed more than legal financial information. Keywords: Financial communication – France - Saint-Gobain – Voluntary disclosure – Law JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503008&r=all 304. Les annees sombres de l'Ordre national des experts- comptables : quelques textes oublies Jean-Guy DEGOS (Universite Montesquieu – Bordeaux IV) It is difficult, even in 2005, to write the peaceful history of the French Institute of Chartered Accountants. Almost everywhere, it is written that it was founded in 1945. It would be more accurate to say that it was re-constituted in 1945. It was actually created in 1942 and its origins are still regarded with shame by some people. It is the dissension between the professionals, during the years 1925-1939 which gave birth to it in the Second World War. There would have been occasions to found it earlier (in 1867, or 1917, or even 1921). This paper does not aim to start again a painful polemic. It wants only to show how the Institute was organized and how it functioned during 3 years, 3 short but fundamental years, which left indelible traces that some sought at all costs to erase. Keywords: Corporatism, Education, Chartered Accountant, Formation, Professional Institute, Accounting Profession. JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503009&r=all 305. Mythe et realite des relations entre les experts- comptables et les avocats : La guerre du chiffre et du droit a eu lieu Maxime DELHOMME (Societe d'avocats Delhomme Bregou et associes) Les avocats plaidaient et les comptables comptaient, les seconds, plus pres des marchands dont les premiers se tenaient a distance. La revolution industrielle du 19eme n’ayant ete possible que par l’instauration d’instruments juridiques nouveaux sont apparus entre le notariat, ange gardien du patrimoine, et l’avocat plaidant, sur les consequences des atteintes a ce patrimoine, des juristes qui, eux, organisaient les nouvelles conditions de la creation et de la gestion de ce patrimoine, notamment sous forme sociale. L’essor consecutif d’une fiscalite complexe a fourni par la suite tant a ces juristes qu’aux comptables un role de plus en plus important qu’ils se partageaient. L’Etat, pour assurer sa quietude quant a l’etablissement de l’assiette fiscale, formalisera alors une profession comptable liberale connue aujourd’hui sous le titre d’expert-comptable. JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503010&r=all 306. Comptabilite et traite negriere. Le Guide du commerce de Gaignat de l'Aulnais (1718-1791) Cheryll S. Mc WATTERS (University of Alberta) Yannick LEMARCHAND (Universite de Nantes) Malgre un titre tres general qui explique certainement le peu de place qui lui a ete fait jusque-la dans l'histoire de la comptabilite, le Guide du commerce de Gaignat de l'Aulnais ( 1771) est vraisemblablement l'un des tout premiers manuels specialises de comptabilite, mais d'une specialisation qui lui confere une place tres particuliere. Au-dela de quelques paragraphes consacres aux matieres commerciales traditionnelles — marchandises a echanger en divers pays, pratique du change, effets de commerce, poids et mesures, etc. — et d'une presentation relativement classique de la tenue des livres en partie simple et parties doubles, l'ouvrage est essentiellement consacre au commerce maritime et, plus particulierement, a l'un de ses aspects les plus dramatiques : la traite negriere. L’essor consecutif d’une fiscalite complexe a fourni par la suite tant a ces juristes qu’aux comptables un role de plus en plus important qu’ils se partageaient. L’Etat, pour assurer sa quietude quant a l’etablissement de l’assiette fiscale, formalisera alors une profession comptable liberale connue aujourd’hui sous le titre d’expert-comptable. JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503011&r=all 307. De l’atelier a l’utopie. Consultants et projets de societe dans la tourmente (1930 – 1944) Yves LEVANT (ESC Lille) Marc NIKITIN (Universite Orleans) In the first half of the 20th century France, consultants offered their services to big firms, sometimes successfully. In a somewhat cloudy economic context, some of them, like Bedaux or Perrin, elaborated more ambitious social projects, in order to cope with the economic disorders. All those projects failed. L’Etat, pour assurer sa quietude quant a l’etablissement de l’assiette fiscale, formalisera alors une profession comptable liberale connue aujourd’hui sous le titre d’expert- comptable. Keywords: Consultants – Business History – France – 20th century- Bedaux – Perrin JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503012&r=all 308. Comptabilite privee et formation du droit romain classique Marc MALHERBE (Universite Montesquieu Bordeaux IV) Comptabilite et droit n’ont pas toujours ete deux sciences independantes. Sous l’Antiquite romaine, la comptabilite privee a largement contribue a la formation du droit romain, particulierement entre le second siecle avant Jesus-Christ et le IIIe siecle de notre ere. Pendant cette periode de cinq siecles, la comptabilite privee a tout d’abord constitue un moyen de preuve tres utile en cas de litige, avant de devenir une veritable source du droit des contrats. Ce n’est qu’au Bas-Empire que son influence s’affaiblira, lorsque le droit deviendra completement autonome. Keywords: Comptabilite privee. Droit romain. Codex accepti et expensi. Expensilatio. JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503013&r=all 309. Le principe de fixite du capital social : une etude juridique et comptable du concept (1807-1947) Nicolas PRAQUIN (Universite Marne la vallee) En consacrant le principe de responsabilite limitee aux apports pour les actionnaires de societes anonymes, le legislateur introduisait dans le code de commerce de 1807 une regle novatrice qui aura des repercussions majeures sur la facon de concevoir la comptabilite dans son rapport avec les creanciers ; elle se traduit par le principe de fixite du capital a partir de 1818. Initialement rudimentaire, le concept devient complexe a mesure que se transforment l’environnement socio-economique et les pratiques comptables. La discussion entre comptables et juristes s’avere feconde : la regle juridique s’inscrit progressivement comme principe comptable avant d’etre abandonnee lors de la mise en ?uvre des plans comptables francais. Keywords: Fixite du capital – Capital social – Creanciers – Code de commerce – Principes comptables – Situation nette. JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503014&r=all 310. Les comptes du canal de Suez : analyse d'un investissement pharaonique (1859-1869) Christian PRAT dit HAURET (Universite Montesquieu Bordeaux IV) The research topic is analysing financial statements of Suez Channel Company from the construction beginning to the end (1859- 1869) Keywords: Financial Statements - Investment -Suez Channel - Ferdinand de Lesseps JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503015&r=all 311. The merchant banker, the broker and the Company chairman: a new issue case study Jeannette RUTTERFORD (Open University) This paper explores the roles of a merchant banker, Everard Hambro, and the chairmen of two companies, Thames Iron and Trollope, Colls & Co., in the restructuring of their companies at the beginning of the twentieth century. Their correspondence provides evidence that the choice of corporate capital structure had little to do with company needs or risk characteristics. Instead, Hambro, in concert with stockbrokers, concentrated on legal issues and on ensuring that the securities issued conformed in amount, type and price to market norms, including the avoidance of stock watering. The company chairmen concentrated on ensuring that they retained control and that the new issues were deemed a success. Keywords: Corporate finance, stock watering, underwriting, new issues JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503016&r=all 312. The merchant banker, the broker and the Company chairman: a new issue case study Jeannette RUTTERFORD (Open University) This paper explores the roles of a merchant banker, Everard Hambro, and the chairmen of two companies, Thames Iron and Trollope, Colls & Co., in the restructuring of their companies at the beginning of the twentieth century. Their correspondence provides evidence that the choice of corporate capital structure had little to do with company needs or risk characteristics. Instead, Hambro, in concert with stockbrokers, concentrated on legal issues and on ensuring that the securities issued conformed in amount, type and price to market norms, including the avoidance of stock watering. The company chairmen concentrated on ensuring that they retained control and that the new issues were deemed a success. Keywords: Corporate finance, stock watering, underwriting, new issues JEL: N Date: 2005-03-24 Date: 2005-03-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503017&r=all 313. Emergence d’une profession comptable liberale : le cas du Maroc Sami El OMARI (Universite des sciences sociales Toulouse 1) Michele SABOLY (Universite des sciences sociales Toulouse 1) The purpose of this article is to study the birth and the evolution of accountancy profession and bodies in Morocco. The results show that accountants attempt to monopolize the market for accounting and audit services. National and historical specificities are highlighted. Keywords: professional bodies, history, Morocco JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503018&r=all 314. La pratique du droit par la profession d’expert-comptable itineraires croises de l’avocat et de l’expert- comptable Christian SIMON (Universite Paris 12 Creteil Val -de- Marne) Le jeudi 25 septembre 2003, lors de l’ouverture du Congres des experts- comptables au Palais des expositions de la Porte Maillot a Paris, le Premier Ministre, Jean-Pierre RAFFARIN, aurait-il par son annonce mis a nouveau le feu aux poudres ? La hache de guerre est-elle de nouveau deterree entre avocats et experts-comptables ? En cause, un arbitrage rendu par Matignon en faveur de l’intervention des experts-comptables dans le domaine de la creation d’entreprise, incluant ainsi le conseil juridique. Le perimetre d’intervention de l’expert en chiffres s’en trouve elargi, alors qu’il etait defini de facon assez stricte dans l’ordonnance de 1945. La jurisprudence d’ailleurs par un arret du 4 fevrier 2003 avait deja ouvert la breche. Rivaux ou complementaires ? C’est ce que s’efforcera de demontrer cette etude. Keywords: Actes juridiques, avocat, expert-comptable, Ordre. JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503019&r=all 315. Taxer les benefices de guerre, ou confisquer les profits illicites, deux legitimites distinctes Beatrice TOUCHELAY (Universite Paris 12 Creteil Val -de- Marne) L’imposition des benefices exceptionnels lies a la Grande guerre est introduite par la loi du 1er Juillet 1916. Nee de la guerre, cette loi est d’abord l’objet d’un consensus relatif. Elle marque le debut de la modernisation du systeme fiscal francais. Le contexte de la guerre mais aussi les difficultes d’application tenant a la complexite de la loi et au manque d’empressement des assujettis limitent son rendement. L’experience inedite de ce premier impot sur les benefices industriels et commerciaux francais est pourtant riche d’enseignements. Elle oblige a definir les limites du droit des entreprises sur leur benefice, a discuter des limites du secret des affaires et a s’interroger sur la legitimite et sur les modalites de l’intervention de l’Etat dans la repartition des revenus. L’experience ouverte en 1916 sert de repere aux grandes reformes fiscales de l’apres guerre. Elle sert aussi a definir la fiscalite exceptionnelle introduite pour repondre aux necessites du rearmement. La filiation se prolonge apres la Liberation. L’une des premieres mesures d’autorite du Gouvernement provisoire de la Republique francaise est d’adopter une ordonnance prescrivant la confiscation des profits illicites. Il s’agit desormais de punir et non plus d’eliminer les enrichissements lies a la guerre. Il s’agit egalement d’asseoir une Autorite politique, et non plus de repondre aux aspirations des parlementaires. Il faut confisquer et taxer les profits illicites alors que le legislateur de juillet 1916 introduisait une contribution exceptionnelle sur les benefices extraordinaires. Le choix du terme profit – qui a une mauvaise image en France – et celui du qualificatif illicite stigmatisent une faute. Il y a donc deux reactions fiscales distinctes aux sorties des guerres mondiales. Ces experiences montrent que les fondements juridiques de la fiscalite peuvent etre davantage lies aux circonstances que le resultat d’une construction rigoureuse. Keywords: Entreprises - Fiscalite – Impots - Guerres mondiales - Histoire economique et financiere de la France - Patronat JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503020&r=all 316. L'actionnaire minoritaire, le commissaire, l'avocat et le juge : histoire d'une fusion litigieuse Stephane TREBUCQ (Universite Montesquieu-Bordeaux IV) The case of a French merger can be used to better understand the nature of conflicts of interest and cognitive conflicts between accountants, shareholders, lawyers and judges. This is especially the case when exchange ratios are unfairly established. When caught in a situation of asymmetrical information, minority shareholders try to obtain more information about the auditors' report through a trial. The financial knowledge possessed by the judge then becomes a necessary condition if shareholders are to be protected. Keywords: Auditor, minority shareholder, merger, trial, exchange ratio, fairness JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503021&r=all 317. Gens du chiffre et gens du pretoire : Domaines reserves, domaines convoites Jean-Guy DEGOS (Universite Montesquieu-Bordeaux IV) Loic GESLIN (Conseil regional de l'OEC d'Aquitaine) The ordinance of September 19, 1945, which had been preceded by laws 467 and 468 of April 3, 1942, has always been the law of the Institute of Chartered Accountants. This chart, designed in painful times, has been of great use since its promulgation, because it contains some articles particularly relevant and structuring. But sometimes it contains more contestable paragraphs. Among those, article number 14 generates ambiguity on the respective missions of the Chartered Accountants and the Certified Accountants and especially article number 22 treats of the additional missions of the chartered accountant and often caused competitions between lawyers and accountants. This document points out some stages of this fight and gives an extreme example of these contests which will have to necessarily disappear, for the common use of the firms and the both professional Institutes. Keywords: Corporatism, Diplomas, Teaching, Chartered accountant ( CPA), Professional Institute, Education, Accounting profession. JEL: N Date: 2005-03-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0503022&r=all 318. An Inquiry Into the Causes and Nature of Walras' Theory of Tatonnement stephane verani (The University of Western Australia) In this short note, a broad analysis of the tatonnement in Leon Walras theory of General Equilibrium is conducted. The possible origin of the tatonnement in Walras's theory and the basic mechanics of this process are discussed. Using modern and conflicting interpretations of the Edgeworth-Walras debate it is shown that the tatonnement process is not part of a dynamic model. Keywords: Leon Walras, tatonnement process, Edgeworth-Walras debate JEL: N Date: 2005-04-05 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0504001&r=all 319. Grocer 1.0, an Econometric Toolbox for Scilab: an Econometrician Point of View Dubois (Minstere de l'Economie, des Finances et de l'Industrie - Paris- France) Grocer is an econometric toolbox for Scilab, a free opensource matrix- oriented toolbox similar to Matlab and Gauss. It contains more than 50 econometric different methods, with many variants and extensions. Most standard econometric tools are available. Grocer contains also two original econometric tools: a function allowing the 'automatic' estimation of the 'true model' starting from a more general and bigger one, a method that provides the most thorough expression of the so- called LSE econometric methodology; a function calculating the contributions of exogenous variables to an endogenous one. Keywords: econometric software, estimation, general to specific, contributions JEL: C1 C2 C3 C4 C5 C8 Date: 2005-01-21 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0501014&r=all 320. Overlaying Time Scales in Financial Volatility Data Eric Hillebrand (Louisiana State University, Department of Economics) Apart from the well-known, high persistence of daily financial volatility data, there is also a short correlation structure that reverts to the mean in less than a month. We find this short correlation time scale in six different daily financial time series and use it to improve the short-term forecasts from GARCH models. We study different generalizations of GARCH that allow for several time scales. On our holding sample, none of the considered models can fully exploit the information contained in the short scale. Wavelet analysis shows a correlation between fluctuations on long and on short scales. Models accounting for this correlation as well as long memory models for absolute returns appear to be promising. Keywords: GARCH, volatility persistence, spurious high persistence, long memory, fractional integration, change-points, wavelets, time scales JEL: C1 C2 C3 C4 C5 C8 Date: 2005-01-31 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0501015&r=all 321. PROTECTION OF PRIVACY THROUGH MICROAGGREGATION Edgar L. Feige (University of Wisconsin-Madison) Harold W. Watts (University of Wisconsin-Madison) A proposal for maintaining privacy protection in large data bases by the use of partially aggregated data instead of the original individual data. Proper micro aggregation techniques can serve to protect the confidential nature of the individual data with minimumal information loss. Reference:Data base4s, Computers and the Social Sciences, R. Bisco (ed.),Wiley, 1970, pp. 261-272 Keywords: Privacy,data protection, micro-aggregation, JEL: C43 C82 C88 Date: 2005-02-03 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502001&r=all 322. The Long-Run Forecasting of Energy Prices Using the Model of Shifting Trend Stanislav Radchenko (UNC at Charlotte) This paper constructs long-term forecasts of energy prices using a reduced form model of shifting trend developed by Pindyck (1999) A Gibbs sampling algorithm is developed to estimate models with a shifting trend line which are used to construct 10-period-ahead and 15-period ahead forecasts. An advantage of forecasts from this model is that they are not very influenced by the presence of large, long-lived increases and decreases in energy prices. The forecasts form shifting trends model are combined with forecasts from the random walk model and the autoregressive model to substantially decrease the mean forecast squared error compared to each individual model. Keywords: energy forecasting, oil price, coal price, natural gas price, shifting trends model, long term forecasting JEL: C53 Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502002&r=all 323. Market price of risk implied by Asian-style electricity options Rafal Weron (Hugo Steinhaus Center) In this paper we propose a jump diffusion type model which recovers the main characteristics of electricity spot price dynamics, including seasonality, mean reversion, and spiky behavior. Calibration of the market price of risk allows for pricing of Asian-type options written on the spot electricity price traded at Nord Pool. The usefulness of the approach is confirmed by out-of-sample tests. Keywords: Power market, Electricity price modeling, Asian option, Market price of risk, Derivatives pricing JEL: C51 G13 L94 Q40 Date: 2005-02-07 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502003&r=all 324. Modeling and forecasting electricity loads: A comparison Rafal Weron (Hugo Steinhaus Center) Adam Misiorek (Institute of Power Systems Automation) In this paper we study two statistical approaches to load forecasting. Both of them model electricity load as a sum of two components – a deterministic (representing seasonalities) and a stochastic (representing noise). They differ in the choice of the seasonality reduction method. Model A utilizes differencing, while Model B uses a recently developed seasonal volatility technique. In both models the stochastic component is described by an ARMA time series. Models are tested on a time series of system-wide loads from the California power market and compared with the official forecast of the California System Operator ( CAISO). Keywords: Electricity, load forecasting, ARMA model, seasonal component JEL: C22 C53 L94 Q40 Date: 2005-02-07 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502004&r=all 325. Modeling electricity prices with regime switching models Michael Bierbrauer (University of Karlsruhe) Stefan Trueck (University of Karlsruhe) Rafal Weron (Hugo Steinhaus Center) We address the issue of modeling spot electricity prices with regime switching models. After reviewing the stylized facts about power markets we propose and fit various models to spot prices from the Nordic power exchange. Afterwards we assess their performance by comparing simulated and market prices. Keywords: Power market, Electricity price modeling, Regime switching model JEL: C51 L94 Q40 Date: 2005-02-07 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502005&r=all 326. On detecting and modeling periodic correlation in financial data Ewa Broszkiewicz-Suwaj (Wroclaw University of Technology) Andrzej Makagon (Hampton University) Rafal Weron (Hugo Steinhaus Center) Agnieszka Wylomanska (Wroclaw University of Technology) For many economic problems standard statistical analysis, based on the notion of stationarity, is not adequate. These include modeling seasonal decisions of consumers, forecasting business cycles and - as we show in the present article - modeling wholesale power market prices. We apply standard methods and a novel spectral domain technique to conclude that electricity price returns exhibit periodic correlation with daily and weekly periods. As such they should be modeled with periodically correlated processes. We propose to apply periodic autoregression PAR) models which are closely related to the standard instruments in econometric analysis - vector autoregression (VAR) models. Keywords: periodic correlation, sample coherence, electricity price, periodic autoregression, vector autoregression JEL: C22 C32 L94 Q40 Date: 2005-02-07 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502006&r=all 327. Assessing Forecast Performance in a VEC Model: An Empirical Examination Bragoudakis Zacharias (Bank of Greece) This paper is an exercise in applied macroeconomic forecasting. We examine the forecasting power of a vector error-correction model (VECM) that is anchored by a long-run equilibrium relationship between Greek national income and productive public expenditure as suggested by the economic theory. We compare the estimated forecasting values of the endogenous variables to the real-historical values using a stochastic simulation analysis. The simulation results provide new evidence supporting the ability of the model to forecast not only one-period ahead but also many periods into the future. Keywords: Cointegration, Forecasting, Simulation Analysis, Vector error- correction models JEL Classifications: C15, C32, C53, E0, E6 Working Paper Series Keywords: Cointegration, Forecasting, Simulation Analysis, Vector error- correction models JEL: C1 C2 C3 C4 C5 C8 Date: 2005-02-09 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502007&r=all 328. Nonparametric Slope Estimators for Fixed-Effect Panel Data Kusum Mundra (San Diego State University) In panel data the interest is often in slope estimation while taking account of the unobserved cross sectional heterogeneity. This paper proposes two nonparametric slope estimation where the unobserved effect is treated as fixed across cross section. The first estimator uses first-differencing transformation and the second estimator uses the mean deviation transformation. The asymptotic properties of the two estimators are established and the finite sample Monte Carlo properties of the two estimators are investigated allowing for systematic dependence between the cross-sectional effect and the independent variable. Simulation results suggest that the new nonparametric estimators perform better than the parametric counterparts. We also investigate the finite sample properties of the parametric within and first differencing estimators. A very common practice in estimating earning function is to assume earnings to be quadratic in age and tenure, but that might be misspecified. In this paper we estimate nonparametric slope of age and tenure on earnings using NLSY data and compare it to the parametric (quadratic) effect. Keywords: Nonparametric, Fixed-effect, Kernel, Monte carlo JEL: C1 C14 C23 C15 Date: 2005-02-09 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502008&r=all 329. Grinkevych's Model of forecasting Dmitry (Grinkevych) PROBLEM SOLVING OF FORECASTING ON SHORT PERIODS IN THE CASE OF TRANSITIONAL STRUCTURE-CHANGING CHARACTER OF DEVELOPMENT OF ECONOMICS IN THE PRESENCE OF CONSIDERABLE SEASONAL AND STOCHASTIC COMPONENTS IN TIME SERIES. MODEL OF NONLINEAR-ADDITIVE SEASONAL DEVELOPMENT WITH MULTIPLICATIVE STOCHASTIC CORRECTION BY THE DECLARATIVE LIMITED AUTOREGRESSIVE ROW OF RELATIVE REMAINDER. Keywords: forecasting JEL: C1 C2 C3 C4 C5 C8 Date: 2005-02-15 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502009&r=all 330. Multivariate STAR Unemployment Rate Forecasts Costas Milas (City University) Phil Rothman (East Carolina University) In this paper we use smooth transition vector error-correction models (STVECMs) in a simulated out-of-sample forecasting experiment for the unemployment rates of the four non-Euro G-7 countries, the U.S., U.K., Canada, and Japan. For the U.S., pooled forecasts constructed by taking the median value across the point forecasts generated by the STVECMs perform better than the linear VECM benchmark more so during business cycle expansions. Pooling across the linear and nonlinear forecasts tends to lead to statistically signi?cant forecast improvement for business cycle expansions for Canada, while the opposite is the case for the U.K. JEL: C1 C2 C3 C4 C5 C8 Date: 2005-02-18 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502010&r=all 331. Extraction of Common Signal from Series with Different Frequency Edoardo Otranto (DEIR-Universita di Sassari) The extraction of a common signal from a group of time series is generally obtained using variables recorded with the same frequency or transformed to have the same frequency (monthly, quarterly, etc.). The statistical literature has not paid a great deal of attention to this topic. In this paper we extend an approach based on the use of dummy variables to the well known trend plus cycle model, in a multivariate context, using both quarterly and monthly data. This procedure is applied to the Italian economy, using the variables suggested by an Italian Institution (ISAE) to provide a national dating. Keywords: Business cycle; State-space; Time Series; Trend; Turning Points JEL: C1 C2 C3 C4 C5 C8 Date: 2005-02-18 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502011&r=all 332. Measuring Customer Value and Market Dynamics for New Products of a Firm:An Analytical Construct for Gaining Competitive Advantage Rajagopal (Monterrey Institute of Technology & Higher Education, ITESM, Mexico City Campus, Mexico DF) The role of customer value has been largely recognized over time by the firms as an instrument towards stimulating market share and profit optimization. The customer values for a new product of firm in competitive markets are shaped more by habits, reinforcement effects, and situational influences than strongly- held attitudes. A strong and sustainable customer value associated with a new product launched by a firm may also lead to build the customer loyalty in the long run. An analysis of the new product-market structuring based on customer value may be developed well within the microeconomic framework of a firm. The measure of customer value as the efficiency of new product may be viewed from the customer’s perspective towards a ratio of outputs (e.g., perceived use value, resale value, reliability, safety, comfort) that customers obtain from a product relative to inputs (price, running costs) that customers have to deliver in exchange. However, the aggregate returns on the customer value towards the new product from the perspective of a firm may be observed manifesting in enhancing the market share, market coverage and augmenting profit in a given market. There has not been many contributions emerged in the past addressing the measurement of the customer value as an intangible asset of the firms, though substantial literature is available discussing the customer relations and loyalty building perspectives. This paper attempts to critically examine the available literature on the subject, discuss a model that provides a framework for analyzing the variables associated with customer value and to identify potential research areas. A basic premise of the paper is that the focus should be on maximizing total customer value and customer satisfaction which are inter-dependent in the decision making process towards buying new products. The framework of the construct is on a proposed model which integrates all aspects so as to maximize the potential of the organization and all its subsystems to create and sustain satisfied customers. The discussion in the paper on the customer value gaps in the process of marketing new products explores the possible situations that may lead to lower the customer value. Keywords: New product management, customer value measurement, market coverage, aggregate returns, market penetration, model construct and estimation, profitability JEL: B41 C13 C44 C51 D11 M21 M31 Date: 2005-02-19 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502012&r=all 333. Were Cobb and Douglas Prejudiced? A Critical Re-analysis of their 1928 Production Model Identification Cornelis A. Los (Kent State University) In 1928 Cobb and Douglas (C&D) presented a system analysis which established the first empirically identified production model, which forms the foundation for Solow's growth theory and research into productivity growth factors, such as 'technological progress ' and 'human capital development '. C&D claimed that their production model ('function') showed neutral economies of scale, i.e., constant returns to scale, with a labor production elasticity of 3/4 and a capital production elasticity of 1/4. A simple CLS analysis shows that C&D's data were incorrectly identified by an (n,q)=(3,1) linear model. C&Ds claim that their neutral 'constant returns of scale ' was the inevitable scientific conclusion of their analysis was also incorrect, since that conclusion is strictly determined by their subjectively chosen projection direction. In fact, the data shows that with their model and identification technology constant, increasing and diminishing returns to scale are all three compatible with the uncertain data. Their (n,q) = (3,1) model was never identified with an acceptable level of scientific accuracy, with a maximum coefficient value variation of 212%). In contrast, a simple two-equation (n,q) = (3,2) system model can be accurately identified from C&Ds data set, with an acceptable level of accuracy, with a maximum coefficient value variation of 7.4%). Keywords: System identification, growth theory, production elasticities, projections, Complete Least Squares, noisy data JEL: C1 C2 C3 C4 C5 C8 Date: 2005-02-19 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502013&r=all 334. Metodologia estadistica para estudios de Disponibilidad a Pagar (DAP) aplicada a un proyecto de Abastecimiento de Agua adela parra romero (cinara - universidad del valle) viviana vargas franco (universidad nacional de colombia) carlos castellar palma (universidad del valle) Los estudios de DAP han sido implementados en el sector de Agua potable y saneamiento (AAS), como una herramienta que ayuda a determinar con mayor acierto la viabilidad financiera ex-ante de proyectos de abastecimiento de agua y saneamiento basico, y en un sentido mas amplio promover un mejor nivel de recuperacion de costos y la sostenibilidad de los sistemas a construir. En este sentido a nivel internacional y nacional se ha creado un especial interes en la forma en que estos estudios son aplicados y especificamente en la metodologia estadistica utilizada para la planeacion y ejecucion de los estudios. La DAP es obtenida, a traves de la aplicacion de una encuesta a los usuarios potenciales del proyecto, donde la DAP se indaga utilizando alguno de los formatos de pregunta disponibles para este fin. Algunos de estos formatos son el formato referendum, multiple, subasta y abierto, sin embrago aun no hay un acuerdo sobre cual es el formato optimo, en que condiciones se debe aplicar y cual es el modelo estadistico apropiado para estimar de manera confiable la DAP. Este articulo presenta una metodologia estadistica basada en la revision de los formatos de pregunta y los modelos estadisticos apropiados para estimar la DAP. Se presenta ademas, un caso de estudio donde se estima la Disponibilidad a Pagar por el mejoramiento del servicio de agua para el municipio de Jamundi ,Valle; utilizando el formato referendum.. Keywords: contingent valuation, willingness to pay, project benefits, environmental valuation, statistics JEL: C1 C2 C3 C4 C5 C8 Date: 2005-02-21 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502014&r=all 335. A link between measures of Gross National Product, and measures of corruption Mukti Diah Riani (Gadjha Mada University) Stuart Wattam (MDR Associates) This paper establishes a link between a countries economic performance as measured by Gross National Product (GNP) and a compound measure of Transparency, Corruption Perceptions Index ( CPI), and (TI 2002). CPI is a measurement that should provide an indication as to a countries reputation in the eyes of investors and traders for openess and information disclosure in government and non governmental organisations, in relation to corruption, bribery and extra non-justifiable payments. Corruption involes the behaviour of public officials either elected or appointed, by which they unlawfully enrich themselves or those close to them. This is probably the case of the disparate performance of developing countries, where some are experiencing economic growth while others are falling behind. (Helman 2000). There has been comment in the press about the relationship between corrupt practices, and a countries economic performance. (Anon 2001), ( Lobe 2001) and (Perlez 2002). This evidence is presented as a countries ability to attract trade and investment, which should be possible to measure by examining it's economic performance. This paper does not attempt to analyse the accuracy of this evidence, it instead shows an empirical link between measures of GNP and CPI, which along with the anecdotal evidence support the view that a countries economic performance is indeed tied to it's reputation for corruption and transparency. Keywords: Corruption, Economic Performance, GNI JEL: C1 C2 C3 C4 C5 C8 Date: 2005-02-23 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502015&r=all 336. Structural Changes in NICs: Some Evidences on Attractor Points Hossein Abbasi-Nejad (University of Tehran) Shapour Mohammadi (University of Tehran) In this paper we develop a regression and a kernel density based model for finding fixed points and attractors of dynamical systems to explore attractors of structural change for NICs. The results show that countries consume longer time in some structures than the others. This can be interpreted as existence of attractors that pull countries to themselves in the first stage of the development. In the other words one attractor (low level attractor) prevent countries to reach industrial structure. Awareness of this can be helpful in policymaking for transition from one structure to another. This analysis shades light on the problem that 'why some countries can not get ride of traditional structure?' or bad structure phenomena. Keywords: Attractors, Structural changes, Fixed Points, Multidimensional Kernel Density, Regression Analysis. JEL: C14 C62 O50 O29 Date: 2005-02-23 Date: 2005-03-02 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502016&r=all 337. A Genetic Algorithm for the Structural Estimation of Games with Multiple Equilibria Victor Aguirregabiria (Boston University) Pedro Mira (CEMFI) This paper proposes an algorithm to obtain maximum likelihood estimates of structural parameters in discrete games with multiple equilibria. The method combines a genetic algorithm (GA) with a pseudo maximum likelihood (PML) procedure. The GA searches efficiently over the huge space of possible combinations of equilibria in the data. The PML procedure avoids the repeated computation of equilibria for each trial value of the parameters of interest. To test the ability of this method to get maximum likelihood estimates, we present a Monte Carlo experiment in the context of a game of price competition and collusion. Keywords: Empirical games; Maximum likelihood estimation; Multiple equilibria; Genetic algorithms. JEL: C13 C35 Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0502017&r=all 338. Structural Changes in NICs: Some Evidences on Attractor Points Hossein Abbasi-Nejad (University of Tehran) Shapour Mohammadi (University of Tehran) In this paper we develop a regression and a kernel density based model for finding fixed points and attractors of dynamical systems to explore attractors of structural change for NICs. The results show that countries consume longer time in some structures than the others. This can be interpreted as existence of attractors that pull countries to themselves in the first stage of the development. In the other words one attractor (low level attractor) prevent countries to reach industrial structure. Awareness of this can be helpful in policymaking for transition from one structure to another. This analysis shades light on the problem that 'why some countries can not get ride of traditional structure?' or bad structure phenomena. Keywords: Attractors, Structural changes, Fixed Points, Multidimensional Kernel Density, Regression Analysis. JEL: C14 C62 O50 O29 Date: 2005-03-02 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503001&r=all 339. Nonlinearity, Nonstationarity and Spurious Forecasts Vadim Marmer (Yale University) Various implications of nonlinearity, nonstationarity and misspecification are considered from a forecasting perspective. My model allows for small departures from the martingale difference sequence hypothesis by including an additive nonlinear component, formulated as a general, integrable transformation of the predictor, which is assumed to be I(1). Such a generating mechanism provides for predictability only in the extremely short run. In the stock market example, this formulation corresponds to a situation where some relevant information may escape the attention of market participants only for very short periods of time. I assume that the true generating mechanism involving the nonlinear dependency is unknown to the econometrician and he is therefore forced to use some approximating functions. I show that the usual regression techniques lead to spurious forecasts. Improvements of the forecast accuracy are possible with properly chosen integrable approximating functions. This paper derives the limiting distribution of the forecast MSE. In the case of square integrable approximants, it depends on the $L_{2}$-distance between the nonlinear component and the approximating function. Optimal forecasts are available for a given class of approximants. Finally, I present a Monte Carlo simulation study and an empirical example in support of the theoretical findings. Keywords: forecasting, integrated time series, misspecified models, nonlinear transformations, stock returns, dividend-price ratio. JEL: C22 C53 G14 Date: 2005-03-05 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503002&r=all 340. Boating Against the Current: Cases, Concepts, Models and Development Power feng dai (Zhengzhou Information Engineering University) Generalizing from many of actual problems, this paper puts forward the game: boating against the current, discusses the related assumptions and analyzes the related characters of it. Further more, the author gives the dispersed and continuous models for boating against the current Based on the Partial Distribution[14]-[17]. It is worth to say that the game of boating against the current is a representative example of Development Power problems [18]-[21]. So we should see that the theories of Development Power is proved to have a wide realistic background, and studying Development Power is important for human to interpret and to analyze the macro-laws and macro-characters of economy and society developing. Keywords: boating against the current, Development Power (DP), Partial Distribution, society and economy, analytic model JEL: C1 C2 C3 C4 C5 C8 Date: 2005-03-08 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503003&r=all 341. Long-term memories of developed and emerging markets: Using the scaling analysis to characterize their stage of development T. Di Matteo (Universita degli Studi di Salerno) T. Aste (Australian National University) Michel M. Dacorogna (Converium) The scaling properties encompass in a simple analysis many of the volatility characteristics of financial markets. That is why we use them to probe the different degree of markets development. We empirically study the scaling properties of daily Foreign Exchange rates, Stock Market indices and fixed income instruments by using the generalized Hurst approach. We show that the scaling exponents are associated with characteristics of the specific markets and can be used to differentiate markets in their stage of development. The robustness of the results is tested by both Monte-Carlo studies and a computation of the scaling in the frequency-domain. Keywords: Scaling exponents; Time series analysis; Multi-fractals JEL: C00 C1 G00 G1 Date: 2005-03-08 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503004&r=all 342. A Residential Energy Demand System for Spain Xavier Labandeira (rede & Universidade de Vigo) Jose M. Labeaga (FEDEA & UNED) Miguel Rodriguez (rede & Universidade de Vigo) Sharp price fluctuations and increasing environmental and distributional concerns, among other issues, have led to a renewed academic interest in energy demand. In this paper we estimate, for the first time in Spain, an energy demand system with household microdata. In doing so, we tackle several econometric and data problems that are generally recognized to bias parameter estimates. This is obviously relevant, as obtaining correct price and income responses is essential if they may be used for assessing the economic consequences of hypothetical or real changes. With this objective, we combine data sources for a long time period and choose a demand system with flexible income and price responses. We also estimate the model in different sub-samples to capture varying responses to energy price changes by households living in rural, intermediate and urban areas. This constitutes a first attempt in the literature and it proved to be a very successful choice. Keywords: households, energy, demand, spain, location JEL: D12 Q41 R22 Date: 2005-03-08 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503005&r=all 343. Business cycle and sector cycles Matteo M. Pelagatti (University of Milan-Bicocca) A methodology based on the multivariate generalized Butterwoth filter for extracting the business cycles of the whole economy and of its productive sectors is developed. The method is then illustrated through an application to the Italian gross value added time series of the main economic sectors. Keywords: Business cycle, Butterworth filter, Unobserved components, Kalman Filter JEL: C13 C32 E32 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503006&r=all 344. Dynamic Conditional Correlation with Elliptical Distributions Matteo M. Pelagatti (University of Milan-Bicocca) Stefania Rondena (University of Milan-Bicocca) The Dynamic Conditional Correlation model of Engle has made the estimation of multivariate GARCH models feasible for reasonably big vectors of securities’ returns. In the present paper we show how Engle’s twosteps estimate of the model can be easily extended to elliptical conditional distributions and apply different leptokurtic DCC models to some stocks listed at the Milan Stock Exchange. A free software written by the authors to carry out all the required computations is presented as well. Keywords: Multivariate GARCH, Dynamic conditional correlation, Generalized method of moments JEL: C1 C2 C3 C4 C5 C8 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503007&r=all 345. Time Series Modeling with Duration Dependent Markov- Switching Vector Autoregressions: MCMC Inference, Software and Applications Matteo M. Pelagatti (University of Milan-Bicocca) Duration dependent Markov-switching VAR (DDMS-VAR) models are time series models with data generating process consisting in a mixture of two VAR processes, which switches according to a two- state Markov chain with transition probabilities depending on how long the process has been in a state. In the present paper I propose a MCMC-based methodology to carry out inference on the model's parameters and introduce DDMSVAR for Ox, a software written by the author for the analysis of time series by means of DDMS-VAR models. An application of the methodology to the U.S. business cycle concludes the article. Keywords: Markov-switching, Business cycle, Gibbs sampling, Duration dependence, Vector autoregression JEL: C1 C2 C3 C4 C5 C8 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503008&r=all 346. Econometric Analysis of O.U.T.A. – Organisation of Urban Transportations of Athens Giovanis Elephtherios (Graduate from the University of Thessaly in city of Volos) In this project we will analyse specific economic factors of O.U. T.A. (Organism of Urban and Transportations of Athens. O.U.T.A. is a legal person of private law and was established in according to the law 2175/1993, as a successor of O.U.T. . (Organism of Urban and Transportations). O.U.T. was established in according to the law 588/1977 as a full public enterprise, applicable under the principles of private economy and operational for the public benefit under the supervisor and the control of the Ministry of transportations and communications. O.U.T.A. as a maternal enterprise supervise four other companies, which they belong to O. U.T.A. There are U.T.B. (Union of thermal bushes), which concerns the control of thermal bushes, E.R.A.P. (Electric Railroad of Athens-Peraia ) which took over the control of the Electric railroad of Athens and also the control of the green bushes, D.E. B.A.P. (Driven by Electricity bushes of Athens-Peraia) the driven bushes by electricity with antennas and finally the A.M.C.F. ( Attica Metro company function) which company is not anything else than the company that have taken over the control of the Metro function. In the first chapter we will analyse three models of adaptive expectations. The first model concerns the revenues, the second concerns investments and third concerns the costs. In the second chapter we will examine, with the help of dynamic Nerlove model, the adjustment of the real revenues at the desirable level. Also the same analysis will be done with the lending and the subsidy. We will examine the O.U.T.A. at the total of the same O. U.T.A. and the total of the other four enterprises, but we will examine also each of the four other companies. In chapter third we present simultaneous equations of revenues and investments. Finally , in fourth chapter is being reference to the Koyck model and the Almon technique. Specifically, we will present two models, which the first concerns, revenues and investments and the second model concerns revenues and the price of tickets. Keywords: basic econometrics JEL: C1 C2 C3 C4 C5 C8 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503010&r=all 347. THE INFLATION IN EUROPEAN UNION Giovanis Elephtherios (Graduate from the University of Thessaly in city of Volos) The significance of stability of P.C.I. (Price consumer index) is reported in the situation of economy in which the price consumer index does not present tendencies of important change so much to inflation,- as down,- deflation. This is also the aim of E.E. (European Union), to maintain in a constant level the price consumer index. In this article we will present a model of forecast of inflation of E.E. in the 15 states, with result the possibility that is given to us to be able forecast with a great precision the inflation of separately states which it helps us to forecast also the inflation of E.E. of the 15 and to take in a short time the essential measures of economic policy, those who from them are feasible and to deter undesirable situations. Keywords: basic econometrics JEL: C1 C2 C3 C4 C5 C8 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503012&r=all 348. CUSTOMER SATISFACTION MEASUREMENT MODELS: GENERALISED MAXIMUM ENTROPY APPROACH Amjad D. Al-Nasser This paper presents the methodology of the Generalised Maximum Entropy (GME) approach for estimating linear models that contain latent variables such as customer satisfaction measurement models. The GME approach is a distribution free method and it provides better alternatives to the conventional method; Namely, Partial Least Squares (PLS), which used in the context of costumer satisfaction measurement. A simplified model that is used for the Swedish customer satis faction index (CSI) have been used to generate simulated data in order to study the performance of the GME and PLS. The results showed that the GME outperforms PLS in terms of mean square errors (MSE). A simulated data also used to compute the CSI using the GME approach. Keywords: Generalised Maximum Entropy, Partial Least Squares, Costumer Satisfaction Models. JEL: C1 C2 C3 C4 C5 C8 Date: 2005-03-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503013&r=all 349. Powerful and Serial Correlation Robust Tests of the Economic Convergence Hypothesis Ozgen Sayginsoy (University at Albany--SUNY) In this paper, a likelihood ratio approach is taken to derive a test of the economic convergence hypothesis in the context of the linear deterministic trend model. The test is designed to directly address the nonstandard nature of the hypothesis, and is a systematic improvement over existing methods for testing convergence in the same context. The test is first derived under the assumption of Gaussian errors with known serial correlation. However, the normality assumption is then relaxed, and the results are naturally extended to the case of covariance stationary errors with unknown serial correlation. The test statistic is a continuous function of individual t-statistics on the intercept and slope parameters of the linear deterministic trend model, and therefore, standard heteroskedasticity and autocorrelation consistent estimators of the long-run variance can be directly implemented. Building upon the likelihood ratio framework, concrete and specific tests are recommended to be used in practice. The recommended tests do not require the knowledge of the form of serial correlation in the data, and they are robust to highly persistent serial correlation, including the case of a unit root in the errors. The recommended tests utilize the nonparametric kernel variance estimators, which are analyzed using the fixed bandwidth (fixed-b) asymptotic framework recently proposed by Kiefer and Vogelsang (2003). The fixed-b framework makes possible the choice of kernel and bandwidth that deliver tests with maximal asymptotic power within a specific class of tests. It is shown that when the Daniell kernel variance estimator is implemented with specific bandwidth choices, the recommended tests have asymptotic power close that of the known variance case, as well as good finite sample size and power properties. Finally, the newly developed tests are used to investigate economic convergence among eight regions of the United States (as defined by the Bureau of Economic Analysis) in the post-World-War-II period. Empirical evidence is found for convergence in three of the eight regions. Keywords: Likelihood Ratio, Joint Inequality, HAC Estimator, Fixed-b Asymptotics, Power Envelope, Unit Root, Linear Trend, BEA Regions. JEL: C1 C2 C3 C4 C5 C8 Date: 2005-03-11 Date: 2005-03-11 Date: 2005-03-11 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503014&r=all 350. Conditional Distribution of the Limit Order Book Given the History of the Best Quote Process Martin Smid (UTIA AV CR) Recently, models of limit order markets, particularly those of the continuous double auction, are subject to an intense research. Due to their complexity, the models are regarded to be analytically intractable. In the present paper, nonetheless, a closed form result is derived: the conditional distribution of the limit order book given the history of the best quote process. Keywords: limit order markets, continuous double auction, limit order book, conditional distribution, immigration-death process JEL: C51 G10 Date: 2005-03-13 Date: 2005-03-22 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503015&r=all 351. Causation Delays and Causal Neutralization up to Three Steps Ahead: The Money-Output Relationship Revisited Jonathan B. Hill (Florida International University) In this paper, we develop a parametric test procedure for multiple horizon "Granger" causality and apply the procedure to the well established problem of determining causal patterns in aggregate monthly U.S. money and output. As opposed to most papers in the parametric causality literature, we are interested in whether money ever "causes" (can ever be used to forecast) output, when causation occurs, and how (through which causal chains). For brevity, we consider only causal patterns up to horizon h = 3. Our tests are based on new recursive parametric characterizations of causality chains which help to distinguish between mere noncausation (the total absence of indirect causal routes) and causal neutralization, in which several causal routes exists that cancel each other out such that noncausation occurs. In many cases the recursive characterizations imply greatly simplified linear compound hypotheses for multi-step ahead causation, and permit Wald tests with the usual asymptotic ??- distribution. A simulation study demonstrates that a sequential test method does not generate the type of size distortions typically reported in the literature, and null rejection frequencies depend entirely on how we define the "null hypothesis" of non-causality (at which horizon, if any). Using monthly data employed in Stock and Watson (1989), and others, we demonstrate that while Friedman and Kuttner's (1993) result that detrended money growth fails to cause output one month ahead continues into the third quarter of 2003, a significant causal lag may exist through a variety of short-term interest rates: money appears to cause output after at least one month passes, although in some cases using recent data conflicting evidence suggests money may never cause output and be truly irrelevant in matters of real decisions. Keywords: multiple horizon causation; multivariate time series; sequential tests. JEL: C1 C2 C3 C4 C5 C8 Date: 2005-03-15 Date: 2005-03-23 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503016&r=all 352. An intuitive guide to wavelets for economists Patrick Crowley (Texas A&M University - Corpus Christi) Wavelet analysis, although used extensively in disciplines such as signal processing, engineering, medical sciences, physics and astronomy, has not yet fully entered the economics discipline. In this discussion paper, wavelet analysis is introduced in an intuitive manner, and the existing economics and finance literature that utilises wavelets is explored. Extensive examples of exploratory wavelet analysis are given, many using Canadian, US and Finnish industrial production data. Finally, potential future applications for wavelet analysis in economics are also discussed and explored. Keywords: statistical methodology, multiresolution analysis, wavelets, business cycles, economic growth JEL: C19 C87 E32 Date: 2005-03-17 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503017&r=all 353. What causes the forecasting failure of Markov-Switching models? A Monte Carlo study Marie Bessec (EURIsCO - University Paris Dauphine) Othman Bouabdallah (EUREQua - University Paris Pantheon Sorbonne) This paper explores the forecasting abilities of Markov- Switching models. Although MS models generally display a superior in-sample fit relative to linear models, the gain in prediction remains small. We confirm this result using simulated data for a wide range of specifications by applying several tests of forecast accuracy and encompassing robust to nested models. In order to explain this poor performance, we use a forecasting error decomposition. We identify four components and derive their analytical expressions in different MS specifications. The relative contribution of each source is assessed through Monte Carlo simulations. We find that the main source of error is due to the misclassification of future regimes. Keywords: Forecasting, Regime Shifts, Markov-Switching. JEL: C22 C32 C53 Date: 2005-03-22 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503018&r=all 354. Financing Constraints and Firm Inventory Investment: A Reexamination John Tsoukalas This paper shows that small firms inventory investment is substantially more sensitive (relative to large firms) to cash flow than previously recognized. Consequently, the strength of financing constraints on inventory investment may have been understated. Keywords: Inventories, Dynamic Panel Models JEL: C1 C2 C3 C4 C5 C8 Date: 2005-03-22 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503019&r=all 355. ACCUMULATED PREDICTION ERRORS, INFORMATION CRITERIA AND OPTIMAL FORECASTING FOR AUTOREGRESSIVE TIME SERIES Ching-Kang Ing (Institute of Statistical Science, Academia Sinica) The predictive capability of a modification of Rissanen's accumulated prediction error (APE) criterion, APE$_{\delta_{n}}$, is investigated in infinite-order autoregressive (AR($\infty$)) models. Instead of accumulating squares of sequential prediction errors from the beginning, APE$_{\delta_{n}}$ is obtained by summing these squared errors from stage $n\delta_{n}$, where $n$ is the sample size and $0 < \delta_{n} < 1$ may depend on $n$. Under certain regularity conditions, an asymptotic expression is derived for the mean-squared prediction error (MSPE) of an AR predictor with order determined by APE$_{\delta_{n}}$. This expression shows that the prediction performances of APE$_{\delta_{n}}$ can vary dramatically depending on the choice of $\delta_{n}$. Another interesting finding is that when $\delta_{n}$ approaches 1 at a certain rate, APE$_{\delta_{n}}$ can achieve asymptotic efficiency in most practical situations. An asymptotic equivalence between APE$_{\delta_{n}}$ and an information criterion with a suitable penalty term is also established from the MSPE point of view. It offers a new perspective for comparing the information- and prediction-based model selection criteria in AR($\infty$) models. Finally, we provide the first asymptotic efficiency result for the case when the underlying AR($\infty$) model is allowed to degenerate to a finite autoregression. Keywords: Accumulated prediction errors, Asymptotic equivalence, Asymptotic efficiency, Information criterion, Order selection, Optimal forecasting JEL: C1 C2 C3 C4 C5 C8 Date: 2005-03-23 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503020&r=all 356. Models of Firm Dynamics and the Hazard Rate of Exits: Reconciling Theory and Evidence using Hazard Regression Models Arnab Bhattacharjee (Department of Economics, University of St Andrews) This paper considers empirical work relating to models of firm dynamics. We show that a hazard regression model for firm exits, with a modification to accommodate age-varying covariate effects, provides an empirical framework accommodating many of the features of interest in studies on firm dynamics. Modelling implications of some of the popular theoretical models are considered and a set of empirical procedures for verifying testable implications of the theoretical models are proposed. The proposed hazard regression models can accommodate negative effects of initial size that go to zero with age (active learning model), negative initial size effects that fall with age but stay permanently negative (passive learning model), conditional and unconditional hazard rates that decrease with age at higher ages, and adverse effects of macroeconomic shocks that decrease with age of the firm. The methods are illustrated using data on quoted UK firms. Consistent with the active learning model, the effect of initial size is significantly negative for a young firm and falls to zero with age. The hazard function conditional on size, other firm- and industry-level characteristics, and macroeconomic conditions decreases with age only at higher ages, but shows the weaker property of Increasing Mean Residual Life over its entire life-duration. Instability in exchange rates affects survival of very young firms strongly, and the effect decreases to insignificant levels for older firms. Keywords: Firm exit, Learning, Firm Dynamics, Non-proportional hazards, Hazard regression models JEL: C14 C34 C41 C52 D83 L16 Date: 2005-03-29 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0503021&r=all 357. FORECASTING SPOT ELECTRICITY PRICES WITH TIME SERIES MODELS Rafal Weron (Hugo Steinhaus Center) Adam Misiorek (Institute of Power Systems Automation) In this paper we study simple time series models and assess their forecasting performance. In particular we calibrate ARMA and ARMAX (where the exogenous variable is the system load) processes. Models are tested on a time series of California power market system prices and loads from the period proceeding and including the market crash. Keywords: Electricity, price forecasting, ARMA model, seasonal component JEL: C22 C53 L94 Q40 Date: 2005-04-06 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0504001&r=all 358. Testing Cointegration Rank in Large Systems Chen Pu (Universitat Bielefeld > Fakultat fur Wirtschaftswissenschaften) Hsiao Chihying (Universitat Bielefeld > Fakultat fur Wirtschaftswissenschaften) In this paper we investigate the possibility of the application of subsampling procedure for testing cointegration relations in large multivariate systems. The subsampling technique is applied to overcome the difficulty of nonstandard distribution and nuisance parameters in testing for cointegration rank without an explicitly formulated structural model. The contribution in this paper is twofold: theoretically this paper shows that the subsampling testing procedure is consistent and asymptotically most powerful; practically this paper demonstrates that the subsampling procedure can be applied to determine the cointegration rank in large scale models, where the standard procedures hits already its limit. Especially for the cases of few stochastic trends in a system, the subsampling procedure shows robust and reliable results. Keywords: Cointegration, Large System, Nonparametric Tests, Subsampling, PPP JEL: C19 C40 C50 Date: 2005-04-08 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0504002&r=all 359. Where Did the Trade Liberalization Drive Latin American Economy: A Cross Section Analysis Rajagopal (Monterrey Institute of Technology & Higher Education, ITESM, Mexico City Campus, Mexico DF) The institutional reforms towards trade liberalizations in Latin America during the 1980s and the 1990s have introduced a good measure of import competition, but trade policies alone are not sufficient to create a competitive environment in an economy. The countries in Latin America have not had much experience with competition policies in the past. Combined with restrictive trade policies, the absence of competition policies has often led to monopolized domestic markets. The balance of payments crisis shocks have also contributed significantly to differences in growth performance and associated with a large decline of growth rates and develops into another crisis in the future. The trade competitiveness among the countries of Latin American region have revealed higher export sensitivity to world commodity prices, domestic absorption and economic activity combined with a high income elasticity of imports. This paper attempts to analyze the extent of trade competitiveness and its impact on the economic welfare measures in the Latin American countries. The analysis concentrates on the total factor productivity and exports in the countries of the region in reference to the economic growth pattern emerged during 1950-2003. The Cobb-Douglas function has been used to measure the total factor productivity and Nash equilibrium has been calculated to measure the economic welfare gains among the trading blocs in the Latin American region. The results of the study determine that international liquidity, financial soundness, real exchange rate depreciation and monetary policy play a critical role in reducing output losses and increasing the economic welfare gains. Keywords: Trade liberalization, institutional reforms, total factor productivity, regional growth, trading blocs, foreign direct investment, economic welfare, Latin America JEL: C13 C71 F43 O47 Date: 2005-04-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpem:0504003&r=all 360. When Punishment Fails: Research on Sanctions, Intentions and Non- Cooperation Daniel Houser (ICES, Department of Economics, George Mason University) Erte Xiao (ICES, Department of Economics, George Mason University) Kevin McCabe (ICES, Department of Economics, George Mason University) Vernon Smith (ICES, Department of Economics, George Mason University) People can become less cooperative when threatened with sanctions, and researchers have pointed to both 'intentions' and incentives as sources of this effect. This paper reports data from a novel experimental design aimed at determining the relative importance of intentions and incentives in producing non- cooperative behavior in a personal exchange environment. Subjects play one-shot investment games in pairs. Investors send an amount to trustees and request a return on this investment and, in some treatments, are given the option to threaten sanctions to enforce this return request. The decisions of trustees who face credible threats intentionally imposed (or not) by their investors are compared to the decisions of trustees who face threats randomly imposed (or not) by nature. When not threatened, trustees typically decide to return a positive amount that is less than the investor requested. When threatened with sanctions this decision becomes least common. In particular, under severe sanction threats most trustees return the desired amount, while under weak threats the most common decision is to return nothing. Critically, these results do not depend on whether the trustee is threatened intentionally by their investor or randomly by nature: trustees who are threatened with weak sanctions are significantly more likely to provide a zero return to their investors, even when they know that their investors had no role in imposing the threat. Our findings lend support to the view that credible threats of sanctions generate a “cognitive shift” that crowds- out norm-based motivations and increases the likelihood of income- maximizing behavior. Keywords: punishment, intentions, cooperation, trust, reciprocity, experimental and behavioral economics JEL: C9 Date: 2005-02-07 Date: 2005-02-18 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0502001&r=all 361. Herd Behavior in a Laboratory Financial Market Marco Cipriani (George Washington University) Antonio Guarino (UCL) We study herd behavior in a laboratory ?nancial market where a sequence of subjects trades an asset whose value is unknown. In two treatments the price is updated according to a deterministic rule based on the order ?ow, and in another it is updated by experimental participants. Theory predicts that agents should never herd. Our experimental results are in line with this prediction. Nevertheless, we observe a phenomenon that cannot be accounted for by the theory. In some cases, subjects decide not to use their private information and choose not to trade. In other cases, they ignore their private information to trade against the market (contrarian behavior). (JEL C92, D8, G14) JEL: C92 D8 G14 Date: 2005-02-17 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0502002&r=all 362. The Individual Behavior in a Public Goods game Walid HICHRI (GREQAM & University of Aix-Marseille III) Generally, with a standard linear public goods game, one observes at the aggregate level that contributions lay between the Nash equilibrium and the social optimum and decrease over time with an end-effect.Our purpose is to see whether these general aggregate results remain available at the group and at the individual levels. To do so, we formed six groups of four persons and made them play a public goods game. At the aggregate level, we find that our results correspond almost to the standard experimental findings in literature.Using the classification of Isaac et al. (1984), we find that at the group level, only two groups adopt the standard behavior and only two groups present a behavior similar to what we obtain at the aggregate level. At the individual level, we compare contributions over time of each subject to the group and the aggregate results and classify them into types. Only in one of the 6 groups individuals adopt an homogeneous behavior. In the five other groups, individuals have different behaviors. Keywords: Public Goods; Free-Riding; Aggregate level; Individual Behavior; Experiments. JEL: H4 Date: 2005-02-21 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0502003&r=all 363. The cost of fair divisions: An experimental investigation of Ultimatum Games with groups Marco Faillo (Department of Economics, University of Trento & Sant'Anna School of Advanced Studies, Pisa, Italy) I investigated the effect of the presence of a group of non- active subjects upon the behavior of active players in a Ultimatum bargaining game. In the experiment a subject with the role of P has to offer a share r of a sum S to a subject with the role of AR who belongs to a group and decides on behalf of his group’s members (players R). If AR rejects the P’s offer, both active and non-active players get zero, if AR accepts the offer then P gets S ? r while r is equally divided between AR and the members of his group. Every subject assumes all the three roles (P, AR and R) and the group size is manipulated keeping constant the share S/N (with N=number of subjects, either active or non active, involved in the game). Data suggest that active players tend to behave as they were playing a standard two-person Ultimatum game. A clear insensitivity to changes in group size by subjects playing as P, emerging in the main experiment, is compatible with the hyphotesis that at the basis of their behavior there is a willingness to gain a payoff which satisfies an ex-ante fixed aspiration level, that for most of them corresponds to about half of S. The interpretation of the decisions taken by subjects under the AR role is more complicated as, although most of them show a behavior which is compatible with the one observed in the standard Ultimatum Game, a non- negligible share of players fix very low acceptance thresholds that could be explainained in terms of a shift from the willingness to punish unfair behaviors to the responsibility for others’ wellbeing. Keywords: Ultimatum Bargaining, Fairness, Social Norms JEL: C7 C9 D0 Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0502004&r=all 364. When punishment fails: Research on sanctions, intentions and non- cooperation Daniel Houser (George Mason University) Erte Xiao (George Mason University) Kevin McCabe (George Mason University) Vernon Smith (George Mason University) People can become less cooperative when threatened with sanctions, and researchers have pointed to both 'intentions' and incentives as sources of this effect. This paper reports data from a novel experimental design aimed at determining the relative importance of intentions and incentives in producing non- cooperative behavior in a personal exchange environment. Subjects play one-shot investment games in pairs. Investors send an amount to trustees and request a return on this investment and, in some treatments, are given the option to threaten sanctions to enforce this return request. The decisions of trustees who face credible threats intentionally imposed (or not) by their investors are compared to the decisions of trustees who face threats randomly imposed (or not) by nature. When not threatened, trustees typically decide to return a positive amount that is less than the investor requested. When threatened with sanctions this decision becomes least common. In particular, under severe sanction threats most trustees return the desired amount, while under weak threats the most common decision is to return nothing. Critically, these results do not depend on whether the trustee is threatened intentionally by their investor or randomly by nature: trustees who are threatened with weak sanctions are significantly more likely to provide a zero return to their investors, even when they know that their investors had no role in imposing the threat. Our findings lend support to the view that credible threats of sanctions generate a “cognitive shift” that crowds- out norm-based motivations and increases the likelihood of income- maximizing behavior. Keywords: experiment, intentions, sanctions, trust, cooperation JEL: C91 D64 Date: 2005-03-02 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0503001&r=all 365. Is playing alone in the darkness sufficient to prevent informational cascades? Annamaria Fiore (DSE, Universita di Bari) Andrea Morone (DSE, Universita di Bari) Models of herd behaviour and informational cascades were theoretically developed in 1992 respectively by Banerjee (A simple model of herd behavior) and Bikhchandani, Hirshleifer and Welch (A Theory of Fads, Fashion, Custom and Cultural Change as Informational Cascades). Both articles pointed out the existence of an information externality that causes a welfare loss, and both proposed the idea that destroying an amount of information may turn out in a social improvement. Although this is an old idea and in the last years many features of herd behaviour and informational cascades were studied, this particular aspect was never developed or extensively analysed. In this article we will try to investigate this hypothesis both theoretically and experimentally. Keywords: Informational Cascades; Individual Decision Making; Experiments; Information Externality JEL: C92 Date: 2005-03-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0503002&r=all 366. HYPOTHETICAL (NON)BIAS IN CHOICE EXPERIMENTS: EVIDENCE FROM FRESHWATER PRAWNS Darren Hudson (Mississippi State University) Karina Gallardo (Oklahoma State University) Terry Hanson (Mississippi State University) A mail survey choice experiment and in-store controlled experiment were conducted concurrently in the same location to test for hypothetical bias in choice experiments using a new product—freshwater prawns. Findings suggest that hypothetical bias in the mail survey was not present for the new product, but some hypothetical bias was detected for substitute products, depending on the choice of econometric estimation method. However, the general conclusion is the choice experiments are an effective means of assessing potential market demand for new products with little evidence for hypothetical bias. Keywords: hypothetical bias, choice experiments, in-store experiments, functional form choice JEL: C9 Date: 2005-03-09 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0503003&r=all 367. A Market Analysis of the Fruit, Vegetable and Flower market in Hotorget,Stockholm,Sweden based on the Institutional Analyses Perspective Supreena Narayanan (Stockholm School of Economics) The follow market analysis is a research based on the fruit, vegetable and flower(organic produce) division of the Hotorget market,Stockholm,Sweden. The institutional analysis perspective has been employed based on which the relation of Hotorget market to Saluhallsforvaltningen, Migrationsverket and Partihallarna have been researched in detail. Major conclusion observed as a result of this analysis include: • Hotorget market primarily solves the problem of meeting the basic organic product necessities of people in an around Stockholm and abides by the laws and property rights as stated by Saluhallsforvaltningen. • Flower, fruits and vegetable markets as in this case have played an important role as conditioning institutions in moulding human action as far as market purchases are concerned. The buyer aspect of the market analysis plays an integral role in understanding the kinship and cultural institutions aspect behind the market analysis as per the institutional perspective. • Sellers are meant to confirm to norms slated by saluhallsforvaltningen pertaining to price, quality, technology maintenance, procurement policy and infrastructure as well as Riksbank (issuer of medium of exchange),Migrationsverket( Immigration Rules),Partihallarna(wholesaler) and Krav(Quality Standards). • The evolutionary psychology that onewould associate with the Hotorget market includes possible forthcoming changes in the mindset and attitudes of traders which encompasses the range, quality and quantity of products sold. Possibly catering to a larger section of the customer base in Stockholm, innovation in products sold and method of selling to name a few. JEL: C9 Date: 2005-03-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0503004&r=all 368. Why Lying Pays: Truth Bias in the Communication with Conflicting Interests Toshiji Kawagoe (Future University - Hakodate) Hirokazu Takizawa (Research Institute of Economy, Trade & Industry) We conduct experiments of a cheap-talk game with incomplete information in which one sender type has an incentive to misrepresent her type. Although that Sender type mostly lies in the experiments, the Receiver tends to believe the Sender's messages. This confirms ``truth bias'' reported in communication theory in a one-shot, anonymous environment without nonverbal cues. These results cannot be explained by existing refinement theories, while a bounded rationality model explains them under certain conditions. We claim that the theory for the evolution of language should address why truthful communication survives in the environment in which lying succeeds. Keywords: Cheap talk, Communication, Private information, Experiment, Equilibrium refinement, Bounded rationality, Truth bias JEL: C72 C92 D82 Date: 2005-03-22 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0503005&r=all 369. Within-Team Competition in the Minimum Effort Coordination Game Enrique Fatas (University Valencia) Tibor Neugebauer (University Hannover) Javier Perote (Juan Carlos University Madrid) We report the results of an experiment on a continuous version of the minimum effort coordination game. The introduction of within-team competition significantly increases effort levels relative to a baseline with no competition and increases coordination relative to a secure treatment where the payoff- dominant equilibrium strategy weakly dominates all other actions. Nonetheless, within-team competition does not prevent subjects to polarize both in the efficient and the inefficient equilibria. Keywords: Coordination Games, Team Incentives, Minimum Effort Game JEL: C91 Date: 2005-03-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0503006&r=all 370. BIDDING STRATEGIES OF SEQUENTIAL FIRST PRICE AUCTIONS PROGRAMMED BY EXPERIENCED BIDDERS Tibor Neugebauer (University Hannover) This paper considers bidding automata programmed by experienced subjects in sequential first price sealed bid auction experiments. These automata play against each other in computer tournaments. The risk neutral subgame perfect Nash equilibrium strategy of the independent private value model serves as a benchmark. The equilibrium strategy does not describe any of the heterogeneous automata programs submitted by subjects and does not always perform better than average in the tournament. Keywords: Experimental Economics, First-Price Sealed-Bid Auctions, Sequential Auctions, Independent Private Value Model, Finite Automata JEL: C92 C12 C13 C72 D44 Date: 2005-03-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0503007&r=all 371. THEORY AND MISBEHAVIOR OF FIRST-PRICE AUCTIONS: THE IMPORTANCE OF INFORMATION FEEDBACK IN EXPERIMENTAL MARKETS Tibor Neugebauer (University Hannover) Javier Perote (Juan Carlos University Madrid) This article reports the results of a market experiment designed to test the predictions of the constant relative risk aversion model and to study the importance of information feedback in repeated first-price sealed-bid auctions. The data reveal that introduction of price information feedback implies a significant change of individual behavior. Without price information feedback, the data support the risk neutral Nash equilibrium prediction; with price information feedback, on the other hand, subjects overbid the risk neutral Nash equilibrium significantly. The constant relative risk aversion model is rejected since it predicts overbidding for both feedback conditions. Keywords: Experimental Economics, First-price Sealed-bid Auctions, Independent Private Value Model, Bidding Theory, Risk Aversion JEL: C92 C12 C13 C72 D44 Date: 2005-03-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0503008&r=all 372. Selfish-biased conditional cooperation: On the decline of contributions in repeated public goods experiments Tibor Neugebauer (University Hannover) Javier Perote (Juan Carlos University Madrid) Ulrich Schmidt (University Hannover) Malte Loos (University Kiel) The recent literature suggests that people have social preferences with a self-serving bias. Our data analysis reveals that the stylized fact of declining cooperation in repeated public goods experiments results from this bias and adaptation. Keywords: experimental economics, information feedback, public goods, voluntary contributions, conditional cooperation JEL: C72 C92 H41 Date: 2005-03-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0503009&r=all 373. Altruism and Political Participation James Fowler (UC Davis) I rework the traditional calculus of participation model by adding a term for benefits to others. Altruism is shown to affect participation in two ways. First, although the probability that a single act of participation affects the outcome of a political activity in large populations is quite small, the number of people who enjoy the benefit is large. As a result, altruists have a significant incentive to participate. Second, if politics involves transfers from one group to another, then unconditional altruists gain nothing from participating. However, discriminating altruists who care more about some groups than others will have a significant incentive to participate in activities that make members of their preferred groups better off. I use dictator games to measure altruism towards an unidentified anonymous recipient and two recipients identified only as a registered Democrat or a registered Republican. These allocations also permit a distinction between discriminating altruists and unconditional altruists. The results show that partisanship has several important effects on dictator game allocations, and both altruism and discriminating altruism significantly increase political participation. JEL: C9 Date: 2005-04-01 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0504001&r=all 374. Behaviour in a Two-Stage Two Public Goods Experiment Massimo Finocchiaro Castro (Department of Economics, Royal Holloway College, University of London & DEMQ, University of Catania) In a two-stage two-public good experiment, we study the effect that subjects’ possibility of contributing to a public good in the first stage of the game has on the voluntary contributions to the second public good. Our results show that subjects do not follow either the Nash strategy or the Pareto efficient strategy and that they perceive the two public goods as substitutes. Keywords: public goods, experiments, voluntary provision JEL: A13 H41 C92 Date: 2005-04-05 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0504002&r=all 375. Emotion expression in human punishment behavior Erte Xiao (George Mason University) Daniel Houser (George Mason University) Evolutionary theory reveals that punishment is effective in promoting cooperation and maintaining social norms. Although it is accepted that emotions are connected to punishment decisions, there remains substantial debate over why humans use costly punishment. Here we show experimentally that constraints on emotion expression can increase the use of costly punishment. We report data from Ultimatum Games11, where a proposer offers a division of a sum of money and a responder decides whether to accept the split, or reject and leave both players with nothing. Compared to the treatment where expressing emotions directly to proposers is prohibited, rejection of unfair offers is significantly less frequent when responders can convey their feelings to the proposer concurrently with their decisions. These data support the view that costly punishment might itself be used to express negative emotions, and suggest that future studies will benefit by recognizing that human demand for emotion expression can have significant behavioral consequences in social environments including families, courts, companies and markets. Keywords: ultimatum game, emotion expression, sanctions, cooperation JEL: C9 Date: 2005-04-08 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpex:0504003&r=all 376. Pricing in Electricity Markets: a Mean Reverting Jump Diffusion Model with Seasonality Alvaro Cartea (Birkbeck College, University of London) Marcelo_Gustavo Figueroa (Birkbeck College, University of London) In this paper we present a mean-reverting jump diffusion model for the electricity spot price. We obtain a closed-form solution for forward contracts and calibrate it to market data from England and Wales. Finally, based on the calibrated forward curve we present months, quarters, and seasons-ahead forward surfaces. Keywords: Energy derivatives, mean reversion, jump diffusion, electricity spot and forward. JEL: G Date: 2005-01-21 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0501011&r=all 377. Assessment of Financial Stability Reports-Sveriges Riksbank Supreena Narayanan (Stockholm School of Economics) Rashmi Dalvi (Stockholm School of Economics) This paper analyses the financial stability report of Sveriges Riksbank, and is organized as follows: • The first section deals with understanding the mechanism of financial stability, transparency in relation to financial stability and bank failure. • The second section deals with a case study on issues related to the assessment of financial stability of the Bank of England. • In the third section is included a research summary of the financial stability reports of Sveriges Riksbank. • The fourth and final section includes a conclusion of the research efforts pertaining to financial stability assessment and the Sveriges Riksbank stability reports. JEL: G Date: 2005-01-30 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0501012&r=all 378. Discount Rates in Emerging Capital Markets Samuel Mongrut Montalvan (Universidad del Pacifico) Didac Ramirez Sarrio (Universitat de Barcelona) The estimation of the discount rate for an investment project in conditions of risk relies upon two crucial assumptions: market completeness and well-diversified investors. Although, these two assumptions are tenable in developed capital markets, they are not suitable in emerging markets. In emerging markets there are not enough twin securities to obtain a unique stochastic discount factor and therefore one project’s market value, and investors usually face short selling and borrowing restrictions. Furthermore, these markets are plagued with non-diversified entrepreneurs that invest all their capital to undertake entrepreneurial adventures. In this research one derives expressions for the project discount rate using the fundamental pricing equation under incomplete capital markets in two extreme situations: when investors hold a well-diversified portfolio and when they are not diversified at all. Although, both situations may apply in developed and emerging capital markets, they apply especially to emerging markets. In fact, well-diversified investors, such as foreign mutual funds, increasingly invest in emerging markets, while the bulk of firms involves either small or medium enterprises owned by a single or a group of non- diversified entrepreneurs. One concludes that although the CAPM cannot hold under incomplete markets it is still a good approximation for well-diversified investors in emerging markets, while it is necessary to use a hurdle rate based on the project total risk for the case of non-diversified entrepreneurs. Keywords: Project valuation, incomplete markets, asset pricing JEL: H43 D52 G12 Date: 2005-01-30 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0501013&r=all 379. Practical guide to real options in discrete time II Svetlana Boyarchenko (The University of Texas at Austin.) Sergei Levendorskii (The University of Texas at Austin) This paper is an extended version of the paper 'Practical Guide to Real Options in Discrete Time' (http://econwpa.wustl.edu: 80/eps/fin/papers/0405/0405016.pdf), where a general, computationally simple approach to real options in discrete time was suggested. We explicitly formulate conditions of the general theorems for basic types of real options, and explain our method in detail for the case of transition density given by exponential functions on each half-axis. To demonstrate that the discrete time approach can be more analytically tractable than the continuous time one, we consider timing of investment with lags, and a model of gradual capital expansion. We obtain simple formulas for the expected values of capital stock in every time period; in continuous time models, a much more sophisticated technique is needed. Keywords: Real options, embedded options, expected present value operators JEL: D81 C61 G31 Date: 2005-01-31 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0501014&r=all 380. Mean Reversion Expectations and the 1987 Stock Market Crash: An Empirical Investigation Eric Hillebrand (Louisiana State University, Department of Economics) After the stock market crash of 1987, Fischer Black proposed a model in which he explained the crash by inconsistencies in the formation of expectations of mean reversion in stock returns. Following this explanation, a model that allows for mean reversion in stock returns is estimated on daily stock index data around the crash of 1987. The results strongly support Blackaˆ™s hypothesis. Simulations show that on Friday Oct 16, 1987, a crash of 20 percent or more had a probability of more than seven percent. Keywords: stock-market crash, mean reversion, stock return predictability, change-points JEL: G10 C22 Date: 2005-01-31 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0501015&r=all 381. FINANCIAL ACCOUNTING MEASUREMENT: INSTRUMENTATION AND CALIBRATION stanley c. w. salvary (Canisius College) In its Conceptual Framework (CF), the Financial Accounting Standards Board (FASB) has not identified the observable phenomena and was not able to identify a single measurement property in financial accounting. While identifying aspects of the observable phenomena in financial accounting, the FASB has indicated that there are five measurement attributes which are used in financial accounting and the result is a mixed-attributes model. Lacking a critical underlying theory, the FASB’s Conceptual Framework is feeble at best in providing guidance for accounting measurement. Devoid of the critical theory, the FASB focuses on prediction rather than explanation and, thereby, has adopted an ‘information perspective’ as opposed to a ‘measurement perspective’ for financial accounting standards. This condition has induced a very serious concern for legislative action on the part of the US Congress. In this paper, investments constitute the observable phenomena in financial accounting and recoverable cost, which is grounded in measurement and not prediction, is the measurement property. This measurement property, which is linked to investments and explicated by the capital budgeting model, provides the logical explanation of the apparent diverse rules in financial accounting and establishes a single attribute model. Keywords: Conceptual framework; transaction costs; organizational activity; measurement attribute; present value; realizable value; lower of cost and market value; organizational efficiency; bank-centric financial system; JEL: G Date: 2005-02-02 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502001&r=all 382. Multi-attribute Analysis of Confidence, Convenience and Price Functions of Customers of Financial Services Firms: a GLS Systems Model Ananth Rao (College of Business Administration, Dubai University College) The purpose of the study is to examine significant attributes of customers for explaining the level of confidence, convenience and affordability of services offered by financial service firms ( FSFs). A GLS systems model is applied to cross sectional survey data in Dubai. Earnings stability, reliability and liquidity were found to be significant attributes to explain the satisfaction and confidence of customers across FSFs. Results indicate that: core, tangible and relational attributes besides ambience and ATM network were significant attributes that positively influenced the customers’ satisfaction and convenience of FSFs. Home loans, credit cards, savings accounts, term deposits and insurance services were significant products that were affordable and valued by customers. The systems model was validated using holdout sample. The customers’ confidence and convenience functions had a reliability of 92 to 94 percent while the value function had a reliability of 74 percent. The study findings have implications on FSFs’ customer relationship management, customer insight and production/transaction processing competencies. Keywords: Confidence, Convenience, Affordability, Financial service firms, CRM, Customer insight and production/transaction processing competencies, GLS Systems Model JEL: C31 G21 M31 N25 R22 Date: 2005-02-07 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502002&r=all 383. Corporate Governance Mechanisms and Firm Financing in India Jayesh Kumar (Xavier Institute of Management) This study investigates the firm financing patterns in India and the role of corporate governance mechanisms. We use firm-level time series data of nearly 2000 listed companies from 1994 through 2000, to analyze the firm’s corporate financing behavior in connection with its corporate governance arrangements, specially its shareholding pattern. Our results show that the capital structure of the firm is non-linearly linked to its corporate governance mechanisms (ownership structure). We find that firms with weaker corporate governance mechanisms (dispersed shareholding pattern, in particular measured by the entrenchment effects of group affiliation) tend to have a higher level of debt. Firms with higher foreign ownership or with low institutional ownership tend to have lower debt level. We do not find any significant relationship between ownership of directors and corporate with the firm financing in India. Overall, the findings presented in the paper provide evidence of definite role of corporate governance mechanisms in firm’s financing decisions in India. Keywords: Corporate Governance, Ownership Structure, Firm Financing, Capital Structure, Debt vs. Equity, and India JEL: G15 G32 G34 Date: 2005-02-07 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502003&r=all 384. Risk Managing Bermudan Swaptions in the Libor BGM Model Raoul Pietersz (Erasmus University Rotterdam) Antoon Pelsser (Erasmus University Rotterdam) This article presents a novel approach for calculating swap vega per bucket in the Libor BGM model. We show that for some forms of the volatility an approach based on re-calibration may lead to a large uncertainty in estimated swap vega, as the instantaneous volatility structure may be distorted by re-calibration. This does not happen in the case of constant swap rate volatility. We then derive an alternative approach, not based on re-calibration, by comparison with the swap market model. The strength of the method is that it accurately estimates vegas for any volatility function and at a low number of simulation paths. The key to the method is that the perturbation in the Libor volatility is distributed in a clear, stable and well understood fashion, whereas in the re-calibration method the change in volatility is hidden and potentially unstable. Keywords: central interest rate model, Libor BGM model, swaption vega, risk management, swap market model, Bermudan swaption JEL: G13 Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502004&r=all 385. Fast drift approximated pricing in the BGM model Raoul Pietersz (Erasmus University Rotterdam) Antoon Pelsser (Erasmus University Rotterdam) Marcel van Regenmortel (ABN AMRO Bank) This paper shows that the forward rates process discretized by a single time step together with a separability assumption on the volatility function allows for representation by a low- dimensional Markov process. This in turn leads to e±cient pricing by for example finite differences. We then develop a discretization based on the Brownian bridge especially designed to have high accuracy for single time stepping. The scheme is proven to converge weakly with order 1. We compare the single time step method for pricing on a grid with multi step Monte Carlo simulation for a Bermudan swaption, reporting a computational speed increase of a factor 10, yet pricing sufficiently accurate. Keywords: BGM model, predictor-corrector, Brownian bridge, Markov processes, separability, Feynman-Kac, Bermudan swaption JEL: G13 Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502005&r=all 386. Rank Reduction of Correlation Matrices by Majorization Raoul Pietersz (Erasmus University Rotterdam) Patrick J. F. Groenen (Erasmus University Rotterdam) A novel algorithm is developed for the problem of finding a low- rank correlation matrix nearest to a given correlation matrix. The algorithm is based on majorization and, therefore, it is globally convergent. The algorithm is computationally efficient, is straightforward to implement, and can handle arbitrary weights on the entries of the correlation matrix. A simulation study suggests that majorization compares favourably with competing approaches in terms of the quality of the solution within a fixed computational time. The problem of rank reduction of correlation matrices occurs when pricing a derivative dependent on a large number of assets, where the asset prices are modelled as correlated log-normal processes. Mainly, such an application concerns interest rates. Keywords: rank, correlation matrix, majorization, lognormal price processes JEL: G13 Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502006&r=all 387. Efficient Rank Reduction of Correlation Matrices Igor Grubisic (Utrecht University) Raoul Pietersz (Erasmus University Rotterdam) Geometric optimisation algorithms are developed that efficiently find the nearest low-rank correlation matrix. We show, in numerical tests, that our methods compare favourably to the existing methods in the literature. The connection with the Lagrange multiplier method is established, along with an identification of whether a local minimum is a global minimum. An additional benefit of the geometric approach is that any weighted norm can be applied. The problem of finding the nearest low-rank correlation matrix occurs as part of the calibration of multi- factor interest rate market models to correlation. Keywords: geometric optimisation, correlation matrix, rank, LIBOR market model JEL: G13 Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502007&r=all 388. A Comparison of Single Factor Markov-functional and Multi Factor Market Models Raoul Pietersz (Erasmus University Rotterdam) Antoon Pelsser (Erasmus University Rotterdam) We compare single factor Markov-functional and multi factor market models for hedging performance of Bermudan swaptions. We show that hedging performance of both models is comparable, thereby supporting the claim that Bermudan swaptions can be adequately risk-managed with single factor models. Moreover, we show that the impact of smile can be much larger than the impact of correlation. We propose a new method for calculating risk sensitivities of callable products in market models, which is a modification of the least-squares Monte Carlo method. The hedge results show that this new method enables proper functioning of market models as risk-management tools. Keywords: Markov-functional model, market model, Bermudan swaption, terminal correlation, hedging, Greeks for callable products, smile JEL: G13 Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502008&r=all 389. Generic Market Models Raoul Pietersz (Erasmus University Rotterdam) Marcel van Regenmortel (ABN AMRO Bank) Currently, there are two market models for valuation and risk management of interest rate derivatives, the LIBOR and swap market models. In this paper, we introduce arbitrage-free constant maturity swap (CMS) market models and generic market models featuring forward rates that span periods other than the classical LIBOR and swap periods. We develop generic expressions for the drift terms occurring in the stochastic differential equation driving the forward rates under a single pricing measure. The generic market model is particularly apt for pricing of Bermudan CMS swaptions, fixed-maturity Bermudan swaptions, and callable hybrid coupon swaps. Keywords: market model, generic market models, generic drift terms, hybrid products, BGM model JEL: G13 Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502009&r=all 390. Business cycle effects on Portfolio Credit Risk: scenario generation through Dynamic Factor analysis rea cipollini (queen mary university of london) giuseppe missaglia (iccrea) In this paper, we focus on measuring the risk associated to a bank loan portfolio. In particular, we depart from the standard one factor model representation of portfolio credit risk. In particular, we consider an hetrogeneous portfolio, and we account for stochastic dependent recoveries. We also examine the influence of either one systemic shock (interpreted as the state of the business cycle) or two systemic shocks (interpreted as demand and supply innovations) on portfolio credit risk. The identification and estimation of the common shocks is obtained by fitting a Dynamic Factor model to a large number of macro credit drivers. The scenarios are obtained by employing Montecarlo stochastic simulation. Keywords: Risk management default correlation Dynamic Factor JEL: C32 E17 G20 Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502010&r=all 391. THE ACCOUNTING VARIABLE AND STOCK PRICE DETERMINATION stanley c. w. salvary (Canisius College) Several tests have been conducted to determine which valuation model best fits stock price data. Given very little success, those studies suggest the need for a clear understanding of the market process of stock price determination. This paper advances the concepts of product costing and product pricing, which pertain to financial accounting valuation and the stock market price determination, respectively. This research effort presents a workable hypothesis of stock price determination. Keywords: stock valuation models; fundamental value; committed finance; financial product costing; financial product pricing; 'investment base'; risk/return preferences; sequential expectations adjustment model; heterogeneous expectations; economic space. JEL: G Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502011&r=all 392. Privileged Interfirm/Bank Relationships in Central Europe: Trigger or Trap for Corporate Governance? Gerhard Fink (Vienna University of Business & Economics) Peter R. Haiss (Bank Austria) Lucjan T. Orlowski (Sacred Heart University) Dominick Salvatore (Fordham University) The paper focuses on the question whether banks and capital markets in Central Europe are capable of exerting a positive influence on enterprise performance at the present stage of the economic transformation. These markets are characterised by privileged, collaborative interfirm/interbank relationships demonstrated through various channels. Among them is the competition for private deposits between commercial and national banks that are simultaneously supervisors of commercial banks, as is the case in Poland. Other channels include: heavily indebted large banks that are owners of industrial companies (as is the case in Slovakia with the steel mill VSZ owning the third largest bank IRB), investment funds that are facilitating industrial restructuring, and foreign banks holding only minority stakes in large domestic financial institutions. JEL: G20 P30 Date: 2005-02-12 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502012&r=all 393. Measurement of Financial Risk Persistence Cornelis A. Los (Kent State University) This paper discusses various ways of measuring the persistence or Long Memory (LM) of financial market risk in both its time and frequency domains. For the measurement of the risk, irregularity or 'randomness' of these series, we can compute a set of critical Lipschitz - Holder exponents, in particular, the Hurst Exponent and the Levy Stability Alpha, and relate them to the Mandelbrot- Hoskings' fractional difference operators, as occur in the Fractional Brownian Motion model (which is our benchmark). The main contribution of this paper is to provide a compaison table of the various critical exponents available in various scientific disciplines to measure the LM persistence of time seies. It also discusses why Markov- and (G)ARCH models cannot capture this LM, long term dependence or risk persistence, because these models have finite lag lengths, while the empirically observed long memory risk phenomenon is an infinite lag length phenomenon. Currently, there are three techniques of nonstationary time series analysis to measure time - varying financial risk: Range/Scale analysis, windowed Fourier analysis, and wavelet MRA. This paper relates these powerful analytic techniques to classical Box-Jenkins-type time series analysis and to Pearson's spectral frequency analysis, which both rely on the uncorroboated assumption of stationarity and ergodicity. Keywords: Persistence, long memory, dependence, time series, frequency, critical exponents, fractional Brownian motion, (G)ARCH, risk measurement JEL: C15 C23 C53 G10 Date: 2005-02-13 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502013&r=all 394. Portfolio Selection with Monotone Mean-Variance Preferences Massimo Marinacci (Universita di Torino) Fabio Maccheroni (Universita Commerciale L. Bocconi) Aldo Rustichini (University of Minnesota) Marco Taboga (Banca d'Italia) We propose a portfolio selection model based on a class of preferences that coincide with mean-variance preferences on their domain of monotonicity, but differ where mean-variance preferences fail to be monotone. Keywords: Portfolio selection. Mean-variance. Risk measures. Convex risk measures. Ambiguity. Robustness. Asymmetric returns. JEL: G Date: 2005-02-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502014&r=all 395. ON FINANCIAL ACCOUNTING MEASUREMENT: A RECONSIDERATION OF SFAC 5 BY THE FASB IS NEEDED Stanley C. W. Salvary This paper attempts to reinforce by means of social theory the procedure and property (attribute) of financial accounting measurement advanced by Salvary [1985,1989,1992]. The procedure entails estimating the amount of cash flows derivable from existing investment projects; and the measurement property ( attribute) is identified as recoverable cost. The 'cash-in and cash-out' principle establishes financial capital maintenance as the appropriate capital maintenance concept to be followed in the measurement of periodic income. An analogy between a bank savings account and an equity security is used to identify the measurement property (attribute) and validate the additivity of financial accounting numbers. Problems with the monetarist model were used to demonstrate the appropriateness (stability) of the measurement scale (monetary unit). The logical analysis developed in this paper makes a compelling case for a reconsideration of Statement of Financial Accounting Concept No. 5 by the FASB. Keywords: capital maintenance; 'cash-in and cash-out' principle; organizing of economic activities; cost efficient means of transacting; uncertain purchasing power; price mechanism; intertemporal transfer of risks; Replacement of non-monetary assets; a venture approach; intersavers' transfer of risks; storage of financial capital;savings account; effectiveness and efficiency in cash management; Hicksian consumption model. JEL: G Date: 2005-02-19 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502015&r=all 396. FINANCIAL ACCOUNTING INFORMATION AND THE RELEVANCE/IRRELEVANCE ISSUE Stanley C. W. Salvary Some current research conclude that the numbers in financial statement are not relevant for three basic reasons. The numbers: ( 1) are not isomorphic1 with capital market values, (2) do not have a future orientation, and (3) are un-interpretable since they are based upon five different measurement attributes. The lack of isomorphism argument is invalid since actual current performance is not identical with the capital market expectations of future performance. The lack of a future orientation argument is invalid since financial statements capture what has happened and not what is expected to happen. Since a single measurement attribute is required to produce meaningful measures, the un- interpretability argument holds. A unique measurement attribute is identified in this paper to address this problem Keywords: capital market values; Basle Capital Accord; value of marketable securities; technical insolvency effect; the high-technology and dot-com firms; security returns; short-term earnings management; 'new economy'; Total Value Creation; liquidity of insurance industry; causative choice; speculative choice; goodwill impairment; financial analysis; JEL: G Date: 2005-02-21 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502016&r=all 397. Corporate governance in Greece: developments and policy implications Loukas Spanos (National & Kapodistrian University of Athens, Dept. of Economics) The upgrading of the Greek capital market and the effort to join other mature capital markets has posed corporate governance reform as a first priority. In addition, the 2004 Olympic Games put the Greek market in the international spotlight and will likely invite interest from foreign investors. More than ever, an efficient corporate governance framework is condition sine qua non for the competitive transformation of the capital market and the business world. At the same time the European Union (EU) faces both the pressure and challenge for harmonization of the laws and regulations and convergence of corporate governance systems, especially after the entrance of the new member states. The paper has two objectives: (i) to present the main aspects of corporate governance in Greece, contributing to the relevant growing body of literature, and (ii) to place the current corporate governance developments and trends in Greece within the international debate, especially in the light of the recent debate to improve and convergence corporate governance in EU. Firstly, I review the corporate governance debate and its implication at the EU level. Secondly, I describe the corporate governance framework in Greece in the light of the recent key reforms. Finally, I summarize the overall findings and proceed with some critical points and recommendations for the potential future direction of the corporate governance agenda in Greece. Keywords: Corporate governance, rating, disclosure, ownership, Greece JEL: G Date: 2005-02-22 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502017&r=all 398. International Stock-Bond Correlations in a Simple Affine Asset Pricing Model Stefano d'Addona (Columbia Business School) Axel H. Kind (University of St. Gallen - Swiss Institute of Banking & Finance) In this paper we use an affine asset pricing model to jointly value stocks and bonds. This enables us to derive endogenous correlations and to explain how economic fundamentals influence the correlation between stock and bond returns. The presented model is implemented for G7 post- war economies and its in-sample and out-of-sample performance is assessed by comparing the correlations generated by the model with conventional statistical measures. The affine framework developed in this paper is found to generate stock-bond correlations that are in line with empirically observed figures Keywords: Affine Pricing Models, Stock-Bond Correlations, G-7 Countries JEL: F30 G12 G15 Date: 2005-02-23 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502018&r=all 399. TRACING THE DEVELOPMENT OF A CONCEPTUAL FRAMEWORK OF ACCOUNTING A WESTERN EUROPEAN AND NORTH AMERICAN LINKAGE: A PARTIAL EXAMINATION stanley c. w. salvary Given the call for the development of an accounting conceptual framework, this paper rejects the need for such an undertaking. Using a historical methodology this paper traces the existence of an accounting conceptual framework that painstakingly has been established over the centuries. The paper maintains that the existing need is to fine tune the exisiting framework. Keywords: A Classical Model of Accounting; measure ment and communication processes; stock-jobbing of companies' shares; 'Bubble Act'; environmental stimulus; feudal system; venture accounting; 'economic capital maintenance'; creditors' protection; Joint Stock Companies; conservatism; corporate capitalism; corporate social responsibility. JEL: G Date: 2005-02-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502019&r=all 400. Efficiency of Banks in Regions at Different Stage of European Integration Process Daniel Stavarek (Silesian University - School of Business Administration) This paper estimates commercial banks’ efficiency in three relatively homogenous groups of countries with different level of economic development and different involvement in the process of European integration. The first group consists of Portugal and Greece, the second group is represented by the Czech Republic, Hungary, Poland and Slovakia and the third group includes Bulgaria and Romania. The paper aims to reveal whether the differences among regions and countries in the stage of European integration and economic situation are visible also in banking efficiency. Thus we test the hypothesis that the higher degree of European economic integration and economic development goes hand in hand with higher baking efficiency. Employing Data Envelopment Analysis on unconsolidated data we evaluate efficiency of banks in a core of their business - financial intermediation - in 2002- 2003. Results suggest that differences in banking efficiency exist among analyzed regions and the hierarchy corresponds with the hierarchy of regions and countries in terms of economic development and degree of integration. Thus, low level of financial intermediation efficiency in Central and Eastern European countries may undermine their effort to boost the economic growth and catch-up the forerunning countries. The importance of the efficiency gap is underscored by the fact that only some of the catching-up countries recorded higher growth of efficiency than the forerunners. Keywords: efficiency, banks, Data Envelopment Analysis, integration JEL: C14 G21 Date: 2005-02-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502020&r=all 401. Multifractal Modeling of the US Treasury Term Structure and Fed Funds Rate Sutthisit Jamdee (Kent State University) Cornelis A. Los (Kent State University) This paper identifies the Multifractal Models of Asset Return ( MMARs) from the eight nodal term structure series of US Treasury rates as well as the Fed Funds rate and, after proper synthesis, simulates those MMARs. We show that there is an inverse persistence term structure in the sense that the short term interest rates show the highest persistence, while the long term rates are closer to the GBM's neutral persistence. The simulations of the identified MMAR are compared with the original empirical time series, but also with the simulated results from the corresponding Brownian Motion and GARCH processes. We find that the eight different maturity US Treasury and the Fed Funds rates are multifractal processes. Moreover, using wavelet scalograms, we demonstrate that the MMAR outperforms both the GBM and GARCH(1,1) in time-frequency comparisons, in particular in terms of scaling distribution preservation. Identified distributions of all simulated processes are compared with the empirical distributions in snapshot and over time-scale ( frequency) analyses. The simulated MMAR can replicate all attributes of the empirical distributions, while the simulated GBM and GARCH(1,1) processes cannot preserve the thick-tails, high peaks and proper skewness. Nevertheless, the results are somewhat inconclusive when the MMAR is applied on the Fed Funds rate, which has globally a mildly anti-persistent and possibly chaotic diffusion process completely different from the other nodal term structure rates. Keywords: MMAR, multifractal spectrum, long memory, scaling, term stucture, persistence, Brownian motion, GARCH, time-frequency analysis JEL: C19 C23 C52 C53 E44 G11 Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0502021&r=all 402. What’s Common to Relationship Banking and Relationship Investing? Reflections within the Contractual Theory of the Firm Doris Neuberger (University of Rostock) The financial systems in continental Europe are moving from bank intermediation to intermediation by non-bank institutional investors. The present paper examines to what extent this implies a substitution of relationship finance by arm’s length finance or just of one form of relationship finance by another. Within the contractual theory of the firm, we seek common features of relationship banking and relationship investing. Extending the governance structure approach, we show that both are hybrid governance forms, whose comparative advantages depend on two kinds of asset specificity. They are complements rather than substitutes to finance and control firms with different redeployability and information opaqueness of assets. Keywords: relationship banking, relationship investing, banks, institutional investors, corporate governance, contractual theories of the firm JEL: G20 G30 L14 L22 Date: 2005-03-02 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503001&r=all 403. MERGERS AND ACQUISITIONS IN THE PORTUGUESE BANKING INDUSTRY: IS IT THERE A PROCESS OF VALUE CREATION? Jacinto Vidigal da Silva (University of Evora) Miguel Diz (University of Evora) This paper examines the valuation effects of mergers & acquisitions in the Portuguese banking industry from 1995 to 2003 over a 41-day (-20, +20) event window. Evidence shows some targets gains, but no gains for the bidders. The combined entity ( target+bidder) shows no significant gains contradicting some other European studies but confirming the great majority of American research. Keywords: Mergers and acquisitions (M&A), bidder, target, event window, shareholder value, abnormal returns JEL: G Date: 2005-03-02 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503002&r=all 404. 'The role of Financial Liberalization in Development: Weaknesses and Corrections' D. Saidane During the 80’s and 90’s, the increase in financial instability shook up the idyllic vision of the financial liberalization in developed nations. The difficulties borne by the banking sectors spread out in some Asian and Latin American countries as systemic crises. The deregulation of the financial sector has really affected their banks. We try to carry out an examination of the the financial liberalization process through a review of the literature. We analyze at first endemic weaknesses, then we study some institutional and conceptual solutions. We try to identify the micro-economic banking dimension as a driving force for the growth. The role of banking system is described in a development process usually facing the apology of the stock market. Keywords: financial development, banking, credit JEL: G Date: 2005-03-05 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503003&r=all 405. Eurodollar futures and options: convexity adjustment in HJM one- factor model Henrard Marc (BIS) In this note we give pricing formulas for different instruments linked to rate futures (euro-dollar futures). We provide the future price including the convexity adjustment and the exact dates. Based on that result we price options on futures, including the mid-curve options. Keywords: Interest rate futures, options on futures, HJM, one factor model. JEL: G13 Date: 2005-03-07 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503005&r=all 406. Inter-pattern speculation: beyond minority, majority and $- games Damien Challet (Oxford University) A new model of financial market is proposed, based on the sequential and inter-temporal nature of trader-trader interaction. In this pattern- based speculation model, the traders open and close their positions explicitely. Information ecology can be precisely characterised, and is strikingly similar to that of the Minority Game. Naive and sophisticated agents are shown to give rise to very different phenomenology. Keywords: Financial market, agent-based modelling, minority game, majority game, $-game, information, market efficiency JEL: G Date: 2005-03-09 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503006&r=all 407. Applied and Traditional Financial Approaches Within Multilevel Decision Systems Kirby Adam J.R. Faciane (Kirby Faciane / KAJR Faciane) One of the most important interfaces of a positive and normative theory of strategic behavior is the one with the discipline of finance. As a matter of fact, two of the mainstays of this discipline are capital investment theory and the capital- budgeting models that deal with long- term impacting decisions. The other main conceptual block is the group of financing decisions that have a decisive influence on the viability of a firm. The issue covered in this paper is the extent to which the traditional financial concepts and techniques are adequate to mirror and screen the strategic decisions. There is a multilevel decision system, and at the higher level-the strategic one-a financial approach different from the traditional one is applied: usual methods for project evaluation,, such as payback period or net present value, are eventually applied, as complementary instruments, after the higher-level resource allocation decision is taken. The economic and financial evaluation for such resource allocation emerges from an iterative process more complex than is usually assumed. The aims of this paper are to sketch the structure of the strategic decision process; to show the interaction between the higher-level decisions and the single investment choice; to investigate the nature of the strategic financial evaluation; and, finally, to formulate some ideas about a possible evolution of the discipline of finance that will allow the financial planner to interrelate with the other managers and the strategic planner in a creative and comprehensive way. The hope is to help managers test and back the industrial strategy from the financial point of view. The contribution of that activity to the success of a firm is often enormous and indispensable; the reality is full of companies with handsome products and business ideas that failed because they lacked adequate financial support in the penetration stage and in periods of fierce competition. Keywords: project management; strategic planning; decision systems; industrial strategy JEL: D1 G0 G00 G1 G3 G30 G38 G31 G32 Date: 2005-03-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503007&r=all 408. Information Theory and Market Behavior Jing Chen (University of Northern British Columbia) Some recent empirical works indicate that investor performance and market patterns are primarily information driven instead of a behavioral phenomenon. However, Grossman and Stiglitz information theory and its variations offer little guidance in identifying informed investors and in distinguishing between securities with scarce information and those with widely available information. We show that most empirical evidences about market behaviors documented in the literature can be explained by a new information theory generalized from Shannon’s entropy theory of information. Investor performance and market patterns are the results of information processing by investors of different sizes with different background knowledge. Keywords: information, entropy, market patterns, behavioral finance JEL: G Date: 2005-03-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503009&r=all 409. Measuring Loss Potential of Hedge Fund Strategies Marcos Mailoc Lopez de Prado (UBS) Achim Peijan (UBS) We measure the loss potential of Hedge Funds by combining three market risk measures: VaR, Draw-Down and Time Under-The-Water. Calculations are carried out considering three different frameworks regarding Hedge Fund returns: i) Normality and time- independence, ii) Non-normality and time- independence and iii) Non-normality and time-dependence. In the case of Hedge Funds, our results clearly state that market risk may be substantially underestimated by those models which assume Normality or, even considering Non-Normality, neglect to model time- dependence. Moreover, VaR is an incomplete measure of market risk whenever the Normality assumption does not hold. In this case, VaR results must be compared with Draw-Down and Time Under-The-Water measures in order to accurately assess about Hedge Funds loss potential. Keywords: Hedge Fund, Value-at-Risk, risk, performance, drawdown, under- the-water, normal returns, non-normal returns, time-dependence, ARMA, Monte Carlo, skewness, kurtosis, mixture of gaussian distributions, survival probability, styles, investment strategies JEL: G0 G1 G2 G15 G24 E44 Date: 2005-03-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503010&r=all 410. Corporate Governance Rating and Family Firms: The Greek Case Loukas Spanos (University of Athens Department of Economics) Lena Tsipouri (University of Athens Department of Economics) Manolis Xanthakis (University of Athens Department of Economics) Corporate governance (CG) studies have mostly focused on highly dispersed corporations. However, there is an important need for research exploring the governance structure of family-owned firms. The main characteristics that distinguish the family firm from the other types of corporations are the presence of one or more controlling family and the involvement of the owners in the management. Family firm is the most common form of business in Greece. Hence, the governance structures and the performance of the family firms affect the growth opportunities of the capital market. The aim of the paper is to explore the main aspects of CG of family-owned listed companies in Greece. For this purpose, we apply a specific CG rating methodology, using five core CG criteria to distinguish family from non-family firms: shareholders' rights and obligations; transparency, disclosure of information and auditing; board of directors; CEO and executive management and corporate social responsibility and corporate governance commitment. The overall research objective of the study is to develop a CG rating methodology on the current state of corporate governance in Greece. Each firm is rated among the 120 total number of companies (both family-owned and widely- held) The results disclose the potential strengths and weaknesses of the existing corporate governance framework of the family-owned firms and provide specific policy recommendations. Keywords: family firms, corporate governance rating, Greece JEL: G32 G39 Date: 2005-03-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503011&r=all 411. Bad Credit Equilibria with the Abnormally Utilized Commerical Sungsup Ra (Korea University, Asian Development Bank) The Paper shows why and how the excessive use of commercial paper by financial institutions and corporations contributed to the vulnerability of the Korean economy to external shocks. We review the unfolding process of the Korean currency crisis, focusing on the role of the commercial paper. We examine how the excessive utilization of commercial paper led to bad credit equilibria in both financial and corporate sectors. We investigate the underlying institutional and market factors leading to the abnormal utilization of commercial paper before the Korean currency crisis erupted in November 1997. The factors identified are: interest rate differentials between the commercial and merchant banking sectors; relatively lax regulation in the commercial paper market; corporations' preference of debt financing over equity financing due to the concerns of ownership, tax subsidies and sluggish equity market; and equity market; and lack of good credit rating agencies. Keywords: Korean currency crisis, commercial paper, merchant banks JEL: E22 E65 G30 Date: 2005-03-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503012&r=all 412. On the complete model with stochastic volatility by Hobson and Rogers Andrea Pascucci Marco Di Francesco We examine a recent model, proposed by Hobson and Rogers, which generalizes the classical one by Black and Scholes for pricing derivative securities such as options and futures. We treat the numerical solution of some degenerate partial differential equations governing this financial problem and propose some new numerical schemes which naturally apply in this degenerate setting. Then we aim to emphasize the mathematical tractability of the Hobson-Rogers model by presenting analytical and numerical results comparable with the known ones in the classical Black- Scholes environment. Keywords: Black-Scholes model, stochastic volatility, path- dependent option, hypoelliptic equation JEL: G Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503013&r=all 413. Long-Run Cash-Flow and Discount-Rate Risks in the Cross- Section of US Returns Michail Koubouros (Dept. of Economics, University of Peloponnese) Dimitrios Malliaropulos (Department of Banking & Financial Management, University of Piraeus, & National Bank of Greece) Ekaterini Panopoulou (Department of Economics, National University of Ireland, Maynooth) This paper decomposes the overall market (CAPM) risk into parts reflecting uncertainty related to the long-run dynamics of portfolio- specific and market cash-flows and discount-rates. We decompose market betas into four sub-betas (associated with assets' and market's cash- flows and discount-rates) and we employ a discrete time version of the I-CAPM to derive a four- beta model. The model performs well in pricing average returns on single- and double-sorted portfolios according to size, book-to- market, dividend-price ratios and past risk, by producing high estimates for the explained cross-sectional variation in average returns and economically and statistically acceptable estimates for the coefficient of relative risk aversion. JEL: G Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503014&r=all 414. Rational Financial Considerations in Allocating Capital Budgeting Projects Kirby Adam J.R. Faciane (Kirby Faciane / KAJR Faciane) Over the past thirty years, management has not used much of the capital budgeting theory because of its own good knowledge of basic economic theory, which says one allocates effort where it can do some good. Related to this lack of management attention has been the evolution of disciplines. Finance has moved much more toward applied economic theory, leaving the management science model builders to other things. The finance-cumeconomic theorists, in turn, have allegiances in many areas, but typically to 'pure' economics and not to management. Keywords: financial considerations; capital budgeting; allocation; rational behavior JEL: G G0 G00 Date: 2005-03-12 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503015&r=all 415. Liquidity Effects of Changes in a Pan-European Stock Index Ulrich Pape (ESCP-EAP European School of Management Berlin) Stephan Schmidt-Tank (ESCP-EAP European School of Management Berlin) Adding or deleting a security to or from an index can influence the share price considerably. A possible explanation that has been brought forward in the literature is the liquidity hypothesis according to which an increase in liquidity after an addition is responsible for the observed rise in value. In the following paper, we examine liquidity effects on securities that have been added to or deleted from the pan- European index STOXX 50 between 1998 and 2003, using bid-ask spreads as indicators for liquidity. While there is a medium term price effect, bid-ask spreads do not change significantly due to the index addition or deletion. Regression analysis shows that the explanatory power of bid- ask spreads for the observed price effect is negligible. As a consequence of our empirical findings, the liquidity hypothesis has to be rejected for the STOXX 50. This result, however, does not appear particularly surprising, as the STOXX 50 is composed of already highly liquid securities whose trading liquidity appears not to depend on membership in an international index. A possible explanation for the rejection of the liquidity hypothesis is that the applicability of the liquidity hypothesis hinges on the liquidity class of the stocks concerned before being added. Marginal increases of liquidity due to an index addition might decline with larger initial liquidity of the stocks added. Subsequent studies could focus on the particular shape of this 'liquidity curve' of stocks. Keywords: Pan-European stock index, index effect, STOXX, liquidity, price effect JEL: G14 G15 Date: 2005-03-15 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503016&r=all 416. Factors Influencing Brazilian Firms in their Decision to List on Foreign Stock Exchanges Otavio De Medeiros (Universidade de Brasilia, Brazil) Carmem Tiberio (Banco do Brasil) The paper’s purpose is to determine empirically factors that influence Brazilian firms in their decision to cross-border list their stock. The methodology adopted involves an economic analysis of Brazilian cross- listed firms, characterizing and differentiating them from non cross- listed firms, univariate and multivariate tests, using the logit model and a sample of 288 firms listed on Brazilian stock exchanges. The economic analysis shows that cross-listed firms invest substantially, and are profitable, dynamic, and highly valued on the domestic market. The results of the hypotheses tests indicate that size, stock market share, exposure on foreign markets, and best practices of corporate governance seem to be factors influencing Brazilian firms to cross list. Firms belonging to the Telecommunications industry sector seem to have a higher probability to cross-list. The relevance of the study is in improving the knowledge on the behavior of Brazilian firms in international capital markets. Keywords: Brazilian firms, cross-border list, cross-list, stock markets, logit model JEL: G Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503017&r=all 417. Translation of Financial Statements Dalthan Simas (Universidade do Estado do Rio de Janeiro, Brazil) Otavio De Medeiros (Universidade de Brasilia, Brazil) This paper has the purpose of surveying and critically analyzing the effects of accounting procedures which are closely related to groups of companies operating multinationally. These are the methods for translation of financial statements, e.g. the Temporal and the Closing- rate Methods, as far as those methods are embodied in accounting standards which have been either recommended or adopted by countries such as the UK and US. We conclude that with regard to changing prices, General Price Level Accounting is the best option. As for exchange rate fluctuations, the Closing Rate Method should be preferred over the Temporal Method, the order being owed to the greater relative importance of foreign operations which are carried out in an independent way, vis- a-vis those which are mere extensions of the parent company's. Costs may also have played a part towards the choice. However, the main conclusion that can be drawn is that convenience of use, for both the accounting profession and report users, seems to have been the determinant factor. Keywords: financial statements, translation, international accounting, exchange rate JEL: G Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503018&r=all 418. Order Flow and Exchange Rate Dynamics in Brazil Otavio De Medeiros (Universidade de Brasilia, Brazil) The paper presents results of empirical tests with hybrid nominal exchange rate models for the Brazilian foreign exchange market, using macroeconomic and market microstructure variables. The basic model was originally proposed and tested in the German ( DM/US$) and the Japanese (?/US$) foreign exchange markets by Evans and Lyons (2002). We applied the model to the Brazilian foreign exchange market (R$/US$) and obtained significant and correctly signaled coefficients, but the regressions showed low R2s, suggesting the omission of relevant variable(s). The inclusion of an additional variable representing a country-risk premium results significant and increases R2. Estimation by GARCH further improves previous results obtained by OLS. The upshot indicates that the route proposed by Evans and Lyons is a promising explanation for the R$/US$ exchange rate, but it seems the model specification needs further improvement. Keywords: exchange rate, market microstructure, country risk, order flow, Brazil JEL: G Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503019&r=all 419. An Econometric Model of a Firm’s Financial Statements Otavio De Medeiros (Universidade de Brasilia, Brazil) This paper reports the construction and testing of an econometric model designed to represent a firm’s financial statements. More specifically, the paper aims at showing how a firm’s financial statements can be empirically explained by means of a simultaneous equations structural model connecting macro and microeconomic (market) variables with accounting variables. We also present forecasts for the financial statements. The firm to which the model is applied is a monopoly in the Brazilian domestic market for petroleum products and the largest Brazilian firm in operation. The results obtained are consistent with the expectations associated to the structural model. Applications stemming from the study include financial analysis, forecasting and planning, as well as firm valuation. Keywords: econometric model, accounting, financial statements, Brazilian firm, simultaneous equations JEL: G Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503020&r=all 420. On the viscosity solutions of a stochastic differential utility problem Fabio Antonelli Andrea Pascucci We prove existence, uniqueness and gradient estimates of stochastic differential utility as a solution of the Cauchy problem for degenerate nonlinear partial differential equation. We also characterize the solution in the vanishing viscosity sense. Keywords: Viscosity solution, Burgers' equation, Stochastic differential utility JEL: G Date: 2005-03-18 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503021&r=all 421. Assessing Financial Evolution Kirby Adam J.R. Faciane (Kirby Faciane / KAJR Faciane) Over the past two decades, many economists believe that financial changes have greatly benefited society. Others argue that welfare gains have been a mixed blessing; a minority would probably go so far as to say that costs have outweighed their benefits. There is naturally no satisfactory resolution to this debate, considering the complexity of the issues as well as the judgmental nature of benefit and cost calculations. A look at the presumed positive effects and difficulties might be helpful in providing a perspective on the debate. Keywords: financial evolution, assessment JEL: G G0 G00 Date: 2005-03-18 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503022&r=all 422. Increasing Bank Efficiency Kirby Adam J.R. Faciane (Kirby Faciane / KAJR Faciane) This paper first reviews the main developments in deposit rate management in Italy in the last fifty years, pointing out the progressive elimination of rate and maturity discrimination between checking and savings accounts and the loss of competitiveness of bank deposits vis-a-vis the new assets available to households. While in other countries innovation has been led by financial intermediaries and deregulated banking systems, in Italy the process has caught the banks in a weak position, unable to react effectively to the new sources of competition for households’ savings stemming from the development of a deep and efficient market for Treasury bills and floating rate securities. In Italy, as in most industrial countries, the pace of financial innovation and of structural change in financial markets has been particularly rapid in the last few years and has considerably changed the traditional pattern of financial flows within the economy. A reaction of the banking system to these developments appears inevitable; however, an indiscriminate increase in the responsiveness of bank deposit rates to changes in money market rates, as a result of a reduction in the burden of the reserve requirement, could jeopardize the effectiveness of monetary control. On the other hand, this paper also shows that differentiating interest rates by the motive underlying the demand for deposits and by the costs incurred in deposit management can enhance the efficiency and competitiveness of banks without necessarily endangering the authorities’ stabilization objectives. In this perspective we consider the role that could be played by the new certificates of deposit introduced over twenty years ago which take advantage of a more favorable reserve treatment. If these CDs come to be held on a sufficient scale, they may help to speed up the adjustment of loan rates, thus reinforcing the impact on private spending of open market operations, without necessarily hampering monetary base and money supply control, in view of the higher interest rate elasticity and lower liquidity of this component of bank liabilities. Keywords: Bank Management; Efficiency JEL: G0 G0 G00 Date: 2005-03-20 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503023&r=all 423. Macro Investment Function Analysis Kirby Adam J.R. Faciane (Kirby Faciane / KAJR Faciane) This brief paper first discusses some of the crucial concepts involved in analyzing macro investment functions. The paper then gives a brief preview of the subject as it now stands, and finally suggests a convenient framework to study the various theories of investment. Keywords: investment; capital budgeting; capital expenditures; strategic planning JEL: G0 Date: 2005-03-23 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503024&r=all 424. An Empirical Analysis of Equity Default Swaps (II): Multivariate Insights Norbert_Jobst (Standard & Poor's) Arnaud_de_Servigny (Standard&Poor's) Equity default swaps (EDS) - contracts that trigger a payment when the underlying equity price falls below a predetermined level - have attracted much attention recently because of their similarities to credit default swaps (CDS) on the one hand, and American digital puts on the other. Particular interest has been received by Collateral- ized debt obligations (CDOs) referencing a portfolio of EDSs, which not only requires the univariate assessment of the risks inherent in EDSs, but also the analysis of dependencies between EDSs (and other asset classes). In this paper, we specifically address correlation or dependency aspects of EDSs, by applying techniques developed for estimating default correlation. Based on Standard & Poor’s CreditPro and Compustat North America) databases, extensive empirical research is presented. Amongst the main findings are that EDS correlations for standard strikes/barriers of 30% are significantly higher than default correlations, and increase in barrier level, but only for strikes above 50%. This indicates a barrier dependent correlation concept. Keywords: EDS Equity Default Swap Correlation JEL: G Date: 2005-03-28 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503025&r=all 425. Monetary Policy with Incomplete Markets Gourdel (CERMSEM) Triki (CERMSEM) We consider an extension of a general equilibrium model with incomplete markets that considers cash-in-advance constraints. The total amount of money is supplied by an authority, which produces at no cost and lends money to agents at short term nominal rates of interest, meeting the demand. Agents have initial nominal claims, which in the aggregate, are the counterpart of an initial public debt. The authority covers its expenditures, including initial debt, through public revenues which consists of taxes and seignorage, and distributes its eventual budget surpluses through transfers to individuals, while no further instruments are available to correct eventual budget deficits. We define a concept of equilibrium in this extended model, and prove that there exists a monetary equilibrium with no transfers. Moreover, we show that if the price level is high enough, a monetary equilibrium with positive transfers exists. Keywords: Cash-in-advance constraints, incomplete markets, nominal assets, monetary equilibrium, money, nominal interest rate, transfers, price levels JEL: C62 D52 E40 E50 G10 Date: 2005-03-29 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503026&r=all 426. EVOLUCION DE LAS ESTRATEGIAS DE INVERSION EN ACCIONES ( BORRADOR) Fernando Rubio (FERNCAPITAL S.A.) El presente documento de trabajo, muestra la evolucion historica reportada de las estrategias de inversion en acciones, principalmente en el mercado de USA, por lejos el mas importante del mundo. Tambien, se muestra investigacion en Espana. Se distinguen tres etapas: la inicial, correspondiente al establecimiento de la teoria del camino aleatorio; la correspondiente al desarrollo del CAPM y APT; y, la actual, correspondiente a las anomalias del CAPM, la cual incluye el estudio del behavioural finance. Nota: se indica mas informacion bibliografica que la reportada. Keywords: estrategias de inversion, CAPM, APT, behavioural finance, Espana, USA, acciones. JEL: G Date: 2005-03-29 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503027&r=all 427. EFICIENCIA DE MERCADO, ADMINISTRACION DE CARTERAS DE FONDOS Y BEHAVIOURAL FINANCE Fernando Rubio (FERNCAPITAL S.A.) El presente documento de trabajo, muestra un analisis y la evolucion historica reportada de la eficiencia de mercado, la administracion de carteras de fondos y sobre behavioural finance, principalmente en el mercado de USA, por lejos el mas importante del mundo. Tambien, se muestra investigacion en Espana. Primero, se discute brevemente la teoria al respecto, para luego concentrarse en la evidencia empirica reportada. Nota: se indica mas informacion bibliografica que la reportada. Keywords: estrategias de inversion, eficiencia de mercado, administracion de carteras, fondos, behavioural finance, Espana, USA, acciones. JEL: G Date: 2005-03-29 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503028&r=all 428. ESTRATEGIAS CUANTITATIVAS DE VALOR Y RETORNOS POR ACCION DE LARGO Fernando Rubio (FERNCAPITAL S.A.) Se intenta en esta investigacion generar estrategias de inversion cuantitativas basadas principalmente en el analisis fundamental desarrollado por Graham y Dodd (1934). Mientras existe cierto consenso que dichas estrategias pueden generar retornos satisfactorios, existe dificultad en explicar la razon de dichos retornos. Se postula aqui, que dichos retornos estan relacionados, al menos en parte, al flujo de resultados de las companias. En lo global, se utiliza una muestra con informacion de las mas importantes empresas que componen el mercado de Canada, Espana, Europa, USA y Gran Bretana. Se utiliza la metodologia estandar aplicada por Fama y French ( 1992) y Lakonishok, Shleifer y Vishny (1994). Dicha metodologia consiste en realizar, primero, una simulacion historica de las estrategias de inversion; para luego, realizar pruebas estadisticas basadas en analisis de regresion con minimos cuadrados ordinarios. Los resultados muestran que, en resumen, segun la evidencia empirica obtenida, al parecer mientras mayor sea el valor libro o el resultado por accion en relacion al precio y mientras menor sea dicho precio, existira un mayor potencial de retorno futuro de la accion. Se confirmaria en consecuencia la estrategia generica de inversion propuesta por Graham y Dodd (1934). Finalmente, cuando se introduce el riesgo y los efectos tamano y ratio BM, se concluye que la estrategia mas robusta es comprar acciones de menor precio y con la mayor diferencia entre dicho precio y el resultado contable por accion del ultimo ano. Sin embargo, no debe descartarse que los hallazgos sean producto de data mining. Nota: se indica mas informacion bibliografica que la reportada. Keywords: estrategias de inversion, eficiencia de mercado, administracion de carteras, Espana, USA, Canada, United Kingdom, Europa, acciones. JEL: G Date: 2005-03-30 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503029&r=all 429. Valuing Joint Ventures Using Real Options Ulrich Pape (ESCP-EAP European School of Management Berlin) Stephan Schmidt-Tank (ESCP-EAP European School of Management Berlin) As the valuation of strategic measures becomes increasingly important, relatively few articles have discussed the valuation methods pertained for joint ventures. This paper shows that real options contribute to a better valuation of joint venture projects through superior reflection of the value drivers compared to traditional valuation methodology. Particularly, the strategic value of a joint venture and the value of flexibility that stems from a less than full commitment can be determined using options valuation. Besides reviewing the basics of real options, the paper discusses the key levers of joint ventures and shows the power of real options in the valuation process. We apply four option types (option to defer, option to expand/acquisition option, option to innovate, and option to abandon) to an imaginary joint venture example and show how to use the Black/Scholes and binomial valuation techniques to value these options. Of the four option types, particularly the option to innovate is important, as it allows to reflect the strategic value of a joint venture generating future business opportunities. Despite its advantages, this valuation methodology also has some drawbacks that are discussed in the concluding section. Keywords: Joint ventures, real options, option valuation, Black/Scholes model, binomial option valuation JEL: G31 G34 Date: 2005-03-31 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0503030&r=all 430. L'impatto della New Economy sull'attivita bancaria italiana: un'analisi qualitativa Chiara Oldani (Luiss Guido Carli) La New Economy e un fenomeno che ha impresso una spinta verso l’utilizzo massiccio delle nuove tecnologie al livello mondiale nell’attivita economica; l’Italia sta ponendosi sul sentiero dell’innovazione, anche se negli ultimi tre anni gli investimenti hanno inevitabilmente rallentato, a causa dell’avversa congiuntura economica. L’innovazione tecnologica impatta sull’attivita bancaria sia dal lato dell’offerta di servizi alla clientela, sia dal lato della domanda da parte della clientela. Il sistema bancario italiano sta utilizzando l’innovazione per modificare la propria struttura e per cogliere nuove occasioni di profittabilita e di miglioramento della performance. La recente letteratura ha evidenziato come i grandi gruppi bancari, in grado di sostenere ingenti investimenti, possano offrire servizi innovativi alla clientela, ma questo puo avvenire attraverso la creazione della rete per la distribuzione del servizio, oppure con l’acquisizione/fusione con una banca online pre-esistente. JEL: L O Date: 2005-04-01 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504001&r=all 431. Economic Impact of 'Regulation on Corporate Governance': Evidence from India Asish K. Bhattacharyya (Indian Institute of Management Calcutta) Sadhalaxmi Vivek Rao (Indian Institute of Management Calcutta) India, with its 20 million shareholders, is one of the largest emerging markets in terms of the market capitalization. In order to protect the large investor base, the Securities and Exchange Board of India (SEBI) has enforced a regulation effective from April 2001, requiring mandatory disclosure of information and a change in the corporate governance mechanisms of the listed companies. This study empirically examines the economic impact of the Regulation on the stock market variables. The experimental group exhibits significant reduction in their beta consistent to the notion that increased information and better corporate governance mechanism reduces the risk of these companies. Keywords: Corporate Governance, Financial Disclosure Regulation, Voluntary Disclosure, Risk, Cost of Capital JEL: M41 G34 G38 Date: 2005-04-02 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504002&r=all 432. Economic Value Added --- A General Perspective Asish K. Bhattacharya (Indian Institute of Management Calcutta) B.V. Phani (Indian Institute of Management Calcutta) This paper explains the concept of Economic Value Added (EVA) that is gaining popularity in India. The paper examines whether EVA is a superior performance measure both for corporate reporting and for internal governance. It relied on empirical studies in U.S.A. and other advance economies. It concluded that though EVA does not provide additional information to investors, it can be adapted as a corporate philosophy for motivating and educating employees to differentiate between value creating and value destructing activities. This would lead to direct all efforts in creating shareholder value. The paper brings to attention the dangerous trend of reporting EVA casually that might mislead investors. Keywords: Economic Value Added, Corporate Performace JEL: G30 Date: 2005-04-02 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504003&r=all 433. PUBLIC ENTERPRISES---CORPORATE GOVERNANCE AND THE ROLE OF GOVERNMENT Asish K. Bhattacharyya (Indian Institute of Management Calcutta) Public sector occupies a prominent position in the Indian economy. The present government policy is to divest its holding in PSUs, without privatizing profit making PSUs. It has also decided to provide full autonomy to the board of directors of those enterprises. This provides an interesting setting to examine corporate governance issues. This paper examines corporate governance issues in the context of present disinvestment policy of the government. Keywords: Public Sector Enterprises, State-Owned Enterprises JEL: G30 Date: 2005-04-02 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504004&r=all 434. PRICING OF S&P 100 INDEX OPTIONS BASED ON GARCH VOLATILITY ESTIMATES Ayla Ogus (Izmir University of Economics) This paper is a contribution to the vast literature on the inefficiency in the index options markets. Previous research has found that trading based on implied volatility forecasts do not generate positive profits for the S&P 500 index options but GARCH volatility forecasts do. Trading based on implied volatility forecasts for the S&P 100 index options also fail to generate profits in excess of transaction costs. This paper shows that trading based on GARCH volatility forecast generates profits in excess of transaction costs for the S&P 100 index options hence there is systematic mispricing in the S&P index options markets. GARCH models fair well due to their flexibility to incorporate asymmetric and nonlinear volatility effects. Improved pricing models should work as well or better. Keywords: GARCH, S&P100, index options JEL: G12 Date: 2005-04-06 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504005&r=all 435. Adjustment of the WACC with Subsidized Debt in the Presence of Corporate Taxes: the N-Period Case Ignacio Velez-Pareja (Politecnico Garncolombiano) Joseph Tham (Duke University) Viviana Fernandez (Universidad de Chile) In the Weighted Average Cost of Capital (WACC) applied to the free cash flow (FCF), we assume that the cost of debt is the market, unsubsidized rate. With debt at the market rate and perfect capital markets, debt only creates value in the presence of taxes through the tax shield. In some cases, the firm may be able to obtain a loan at a rate that is below the market rate. With subsidized debt and taxes, there would be a benefit to debt financing, and the unleveraged and leveraged values of the cash flows would be unequal. The benefit of lower tax savings are offset by the benefit of the subsidy. These two benefits have to be introduced explicitly. In this paper we present the adjustments to the WACC with subsidized debt and taxes and the cost of leveraged equity for multiple periods. We demonstrate the analysis for both the WACC applied to the FCF and the WACC applied to the capital cash flow (CCF). We use the calculation of the Adjusted Present Value, APV, to consider both, the tax savings and the subsidy. We show how all the methods match. Keywords: Adjusted Present Value, APV, weighted average cost of capital, discounted cash flow, DCF equity value, cost of equity, WACC, subsidized debt with taxes, valuation of cash flows, project evaluation, project appraisal, firm valuation, cost of capital, cash flows, free cash flow, capital cash flow JEL: D61 G30 G31 G32 H43 Date: 2005-04-06 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504006&r=all 436. Arbitrage Bounds and the Time Series Properties of the Discount on UK Closed-End Mutual Funds Laurence Copeland (Cardiff Business School) In a dataset of weekly observations over the period since 1990, the discount on UK closed-end mutual funds is shown to be nonstationary, but reverting to a nonzero long run mean. Although the long run discount could be explained by factors like management expenses etc., its short run ‡uctuations are harder to reconcile with an arbitrage-free equilibrium. In time series terms, they appear to exhibit heavily nonlinear behaviour, perhaps best represented by an Exponential Smooth- Transition Autoregressive (ESTAR) model. Keywords: closed-end mutual funds, ESTAR, stationarity, JEL: G Date: 2005-04-07 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504007&r=all 437. Econometric Tests of Asset Price Bubbles: Taking Stock Refet Gurkaynak (Federal Reserve Board) Can asset price bubbles be detected? This survey of econometric tests of asset price bubbles shows that, despite recent advances, econometric detection of asset price bubbles cannot be achieved with a satisfactory degree of certainty. For each paper that finds evidence of bubbles, there is another one that fits the data equally well without allowing for a bubble. We are still unable to distinguish bubbles from time- varying or regime switching fundamentals, while many small sample econometrics problems of bubble tests remain unresolved. JEL: G Date: 2005-04-07 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504008&r=all 438. Realized Volatility and Asymmetries in the A.S.E. Returns Dimitrios D. Thomakos (Department of Economics, University of Peloponnese) Michail S. Koubouros (Department of Economics, University of Peloponnese) Using a newly developed dataset of daily value-weighted market returns we construct and analyze the monthly realized volatility of the Athens Stock Exchange (A.S.E.)from 1985 to 2003. Our analysis focuses on the distributional and time series properties of the realized volatility series and on assessing the connection between realized volatility and returns. In particular, we present strong existence on the volatility feedback effect and the leverage effect, the lagged returns and volatility asymmetry. Furthermore, we examine the cross-sectional distribution of unconditional loadings on the realized risk factor for characteristics single sorted common stock portfolios. We find that realized risk is a significantly priced factor in A.S.E., and its high explanatory power for the cross-section of portfolio returns is independent of any return variation related to the market (CAPM), size and book-to-market (Fama-French, 1993) factors. We discuss our findings in the context of the recent literature on realized volatility and feedback effects, as well as the literature on the pricing power of realized risk. Keywords: realized volatity, leverage effect, volatility feedback effect JEL: G Date: 2005-04-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504009&r=all 439. Proxy simulation schemes using likelihood ratio weighted Monte Carlo for generic robust Monte-Carlo sensitivities and high accuracy drift approximation (with applications to the LIBOR Market Model) Christian P. Fries (Universitat Heidelberg) Joerg Kampen (Universitat Heidelberg) We consider a generic framework for generating likelihood ratio weighted Monte Carlo simulation paths, where we use one simulation scheme K° (proxy scheme) to generate realizations and then reinterpret them as realizations of another scheme K* ( target scheme) by adjusting measure (via likelihood ratio) to match the distribution of K° such that E( f(K*) | F_t ) = E( f( K°) w | F_t ). This is done numerically in every time step, on every path. This makes the approach independent of the product ( the function f) and even of the model, it only depends on the numerical scheme. The approach is essentially a numerical version of the likelihood ratio method [Broadie & Glasserman, 1996] and Malliavin's Calculus [Fournie et al., 1999; Malliavin, 1997] reconsidered on the level of the discrete numerical simulation scheme. Since the numerical scheme represents a time discrete stochastic process sampled on a discrete probability space the essence of the method may be motivated without a deeper mathematical understanding of the time continuous theory (e.g. Malliavin's Calculus). The framework is completely generic and may be used for high accuracy drift approximations and the robust calculation of partial derivatives of expectations w.r.t. model parameters (i.e. sensitivities, aka. Greeks) by applying finite differences by reevaluating the expectation with a model with shifted parameters. We present numerical results using a Monte- Carlo simulation of the LIBOR Market Model for benchmarking. Keywords: Monte-Carlo, Likelihood Ratio, Malliavin Calculus, Sensitivities, Greeks JEL: C15 G13 Date: 2005-04-12 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504010&r=all 440. From Default Probabilities To Credit Spreads: Credit Risk Models Do Explain Market Prices Stefan Denzler (ETH) Michel M. Dacorogna (Converium Ltd) Ulrich A. Mueller (Converium Ltd) Alexander McNeil (Swiss Federal Institute of Technology) Credit risk models like Moody’s KMV are now well established in the market and give bond managers reliable estimates of default probabilities for individual firms. Until now it has been hard to relate those probabilities to the actual credit spreads observed on the market for corporate bonds. Inspired by the existence of scaling laws in financial markets by Dacorogna et al. (2001) and Di Matteo et al. (2005) deviating from the Gaussian behavior, we develop a model that quantitatively links those default probabilities to credit spreads (market prices). The main input quantities to this study are merely industry yield data of different times to maturity and expected default frequencies ( EDFs) of Moody’s KMV. The empirical results of this paper clearly indicate that the model can be used to calculate approximate credit spreads (market prices) from EDFs, independent of the time to maturity and the industry sector under consideration. Moreover, the model is effective in an out-of- sample setting, it produces consistent results on the European bond market where data are scarce and can be adequately used to approximate credit spreads on the corporate level. JEL: C15 C51 C52 C53 G12 G13 Date: 2005-04-14 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504011&r=all 441. LIQUIDITY RISK ESTIMATION USING FUZZY MEASURE THEORY Sebastian Alberto Rey (UNIVERSIDAD DE BUENOS AIRES) Javier Ignacio Garcia-Fronti (UNIVERSIDAD DE BUENOS AIRES) Maria Teresa Casparri (UNIVERSIDAD DE BUENOS AIRES) One of the most relevant issues in the risk analysis of the financial institutions? investments is to determine the capital allocation in order to maintain its solvency and liquidity in adverse situations. The portfolio risk analysis is necessary for assuring the right selection of that capital to be allocated. Each portfolio has a market risk. This risk is directly related to the losses that can be caused by adverse fluctuations of the portfolio asset prices. In this sense, it is necessary to construct a measure able to quantify the potential losses associated with that exposure. The classical Value-at-Risk measures the pure market risk; therefore, it does not bear some considerations. If a financial institution uses this classical framework to determine the quantity of capital to allocate in order to face its obligations with a certain level of confidence, then the institution does not take into account the partial or total portfolio liquidation consequences at the claim moment. To take into account these consequences is crucial because the number of assets to be sold in the market has an important influence in the price at which the transaction will be made. This influence is determined by the market liquidity at that moment. When these problems take place the financial institution could have liquidity problems to cancel its obligations. This paper develops and applies a Value-at-Risk model regarding prices fluctuations and potential market liquidity problems. Due to uncertainty of market liquidity in the future, the model includes Fuzzy Measure Theory . The first section of the paper presents some fundamental concepts of Fuzzy Measure Theory and Extreme Value Theory . The second section presents a “fuzzified” risk valuation model under the classical assumption of normal distribution for the investment returns; and, taking into consideration the Argentinean financial crisis, also presents the model under an Extreme Value Theory distribution. Both alternatives are applied to a portfolio of Repsol-YPF stocks so as to estimate the risk assumed by the holder. Keywords: Liquidity risk, Argentina, fuzzy measure JEL: G Date: 2005-04-14 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0504012&r=all 442. Markov Equilibrium in Models of Dynamic Endogenous Political Institutions Roger Lagunoff (Georgetown University) This paper examines existence of Markov equilibria in the class of dynamic political games (DPGs). DPGs are dynamic games in which political institutions are endogenously determined each period. The process of change is both recursive and instrumental: the rules for political aggregation at date t+1 are decided by the rules at date t, and the resulting institutional choices do not affect payoffs or technology directly. Equilibrium existence in dynamic political games requires a resolution to a “political fixed point problem” in which a current political rule (e.g., majority voting) admits a solution only if all feasible political rules in the future admit solutions in all states. If the class of political rules is dynamically consistent, then DPGs are shown to admit political fixed points. This result is used to prove two equilibrium existence theorems, one of which implies that equilibrium strategies, public and private, are smooth functions of the economic state. We discuss practical applications that require existence of smooth equilibria. Keywords: Recursive, dynamic political games, political fixed points, dynamically consistent rules. JEL: C73 D72 D74 Date: 2005-01-26 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0501003&r=all 443. Reinterpreting the meaning of breakdown Juan Vidal-Puga (Universidade de Vigo) A typical assumption of the standard alternating-offers model under risk is that the breakdown event means a complete and irrevocable halt in negotiations. We reinterpret the meaning of breakdown as the imposition to finish negotiations immediately. Specifically, after breakdown the last offer becomes definitive. A full characterization of the set of subgame perfect equilibrium payoffs is provided. We show that Rubinstein's allocation (1/(1+?) ?/(1+?)) is obtained under non- stationary strategies. Moreover, the payoffs in delayed equilibria are potentially better for the proposer than those in which agreement is immediately reached. Keywords: breakdown bargaining JEL: C72 C78 Date: 2005-01-31 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0501004&r=all 444. The Harsanyi paradox and the 'right to talk' in bargaining among coalitions Juan Vidal-Puga (Universidade de Vigo) We introduce a non-cooperative model of bargaining when players are divided into coalitions. The model is a modification of the mechanism in Vidal-Puga (Economic Theory, 2005) so that all the players have the same chances to make proposals. This means that players maintain their own 'right to talk' when joining a coalition. We apply this model to an intriguing example presented by Krasa, Tamimi and Yannelis (Journal of Mathematical Economics, 2003) and show that the Harsanyi paradox (forming a coalition may be disadvantageous) disappears. Keywords: cooperative games bargaining coalition structure Harsanyi paradox JEL: C71 C78 Date: 2005-01-31 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0501005&r=all 445. Buridan's Ass: Rationality or Naivete? Svetlana Boyarchenko (The University of Texas at Austin) We demonstrate that both severe procrastination and delay in performance of more important actions need not be attributed to self control problems and present-biased preferences, but, instead, may result from optimizing behavior of a risk-neutral individual facing a menu of options in an uncertain environment. The real options approach allows one to explain such procrastination by rationality, not naivete of agents, as it is done in the self-control literature. As a technical contribution, the paper suggests a robust method of solution of a two- point optimal stopping problem. Keywords: Real options, procrastination, choice between two projects JEL: D81 D91 C61 G31 Date: 2005-01-31 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0501006&r=all 446. More strategies, more Nash equilibria Sophie Bade (Department of Economics, Penn State University) Guillaume Haeringer (Department d'Economia i d'Historia Economica, Universitat Autonoma de Barcelona) Ludovic Renou (University of Adelaide, School of Economics) This short paper isolates a non-trivial class of games for which there exists a monotone relation between the size of pure strategy spaces and the number of pure Nash equilibria (Theorem). This class is that of two- player nice games, i.e., games with compact real intervals as strategy spaces and continuous and strictly quasi-concave payoff functions, assumptions met by many economic models. We then show that the sufficient conditions for Theorem to hold are tight. Keywords: Strategic-form games, strategy spaces, Nash equilibrium, two players JEL: C7 D8 Date: 2005-02-03 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0502001&r=all 447. Supermodular social games Ludovic Renou (University of Adelaide, School of Economics) A social game is a generalization of a strategic-form game, in which not only the payoff of each player depends upon the strategies chosen by their opponents, but also their set of admissible strategies. Debreu (1952) proves the existence of a Nash equilibrium in social games with continuous strategy spaces. Recently, Polowczuk and Radzik (2004) have proposed a discrete counterpart of Debreu's theorem for two-person social games satisfying some ``convexity properties'. In this note, we define the class of supermodular social games and give an existence theorem for this class of games. Keywords: Strategic-form games, social games, supermodularity, Nash equilibrium, existence. JEL: C7 D8 Date: 2005-02-03 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0502002&r=all 448. Debt contracts with ex-ante and ex-post asymmetric information: an example. G. Carlier (Universite Paris IX-Dauphine, CEREMADE, Place du Marechal De Lattre De Tassigny,) L. Renou (University of Adelaide, School of Economics) We consider a simple model of lending and borrowing combining two informational problems: adverse selection and costly state verification. Our analysis highlights the interaction between these two informational problems. We notably show that the higher the monitoring cost, the less discriminating the optimal menu of contracts is. Keywords: debt contracts, diversity of opinions, screening, costly monitoring, pooling. JEL: D8 G3 Date: 2005-02-03 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0502003&r=all 449. Gradual Nash Bargaining with Endogenous Agenda: A Path- Dependent Model Julian J. Arevalo (Universidad Externado de Colombia) This article proposes a method for considering the bargaining agenda as an endogenous phenomenon in gradual bargaining games, understood as being path-dependent processes. Some short, medium and long-term results for bargaining are presented, as well as a possible application for the model. Keywords: Game theory, Bargaining, Path-Dependent Processes JEL: C7 D8 Date: 2005-02-07 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0502004&r=all 450. A Game Theoretical Model of Land Contract Choice Americo Mendes (Portuguese Catholic University Porto - Faculty of Economics & Management) In most of the land tenancy literature the type of contract is exogenous. Also even though these contracts vary a lot among farms, between regions and over time, the theoretical literature has not always acknowledged this idiosyncrasy. Building on the strategic bargaining theory initiated by Rubinstein, this model not only makes the type of contract endogenous, but also provides the surplus sharing rules and the conditions giving rise to each type of contract, showing how the type and terms of the contract are tailored to fit the characteristics of the parties and their economic environment. Pairwise bargaining is embedded into a market context by putting “competitive pressure” on the players through the opportunity they have to break up bargaining and look for alternative partners. Because of this threat of opting out, the outcome of the bargaining process depends not only on the characteristics of the players, but also on events outside their match and the information they have about them. The model departs from price-taking assumptions. Type and terms of the contract result from negotiation and are shaped by the “relative bargaining powers” of the players whose relevant components are identified in a precise way in the model. Keywords: land tenancy, contract choice, game theory JEL: C7 D8 Date: 2005-03-13 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0503001&r=all 451. A Subjective Approach to Quantum Probability Ehud Lehrer (Tel Aviv University) Eran Shmaya (Tel Aviv University) A likelihood order is defined over linear subspaces of a finite dimensional Hilbert space. It is shown that such an order that satisfies some plausible axioms can be represented by a quantum probability in two cases: pure state and uniform measure. Keywords: subjective approach, quantum probabilty, betting JEL: C7 D8 Date: 2005-03-14 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0503002&r=all 452. Social Games: Matching and the Play of Finitely Repeated Games Matthew O. Jackson (Caltech) Alison Watts (Southern Illinois University) We examine a new class of games, which we call social games, where players not only choose strategies but also choose with whom they play. A group of players who are dissatisfied with the play of their current partners can join together and play a new equilibrium. This imposes new refinements on equilibrium play, where play depends on the relative populations of players in different roles, among other things. We also examine finite repetitions of games where players may choose to rematch in any period. Some equilibria of fixed-player repeated games cannot be sustained as equilibria in a repeated social game. Conversely, the set of repeated matching (or social) equilibria also includes some plays that are not part of any subgame perfect equilibrium of the corresponding fixed-player repeated games. We explore existence under different equilibrium definitions, as well as the relationship to renegotiation-proof equilibrium. It is possible for repeated matching equilibria to be completely distinct from renegotiation-proof equilibria, and even to be Pareto inefficient. Keywords: Social Games, Matching, Games, Repeated Games, Renegotiation JEL: A14 C71 C72 C78 J41 Date: 2005-03-14 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0503003&r=all 453. The Economics of Small Worlds Matthew O. Jackson (Caltech) Brian W. Rogers (Caltech) We examine a simple economic model of network formation where agents benefit from indirect relationships. We show that small- world features - -- short path lengths between nodes together with highly clustered link structures --- necessarily emerge for a wide set of parameters. Keywords: networks, small worlds JEL: A14 C72 Date: 2005-03-14 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0503004&r=all 454. Search in the Formation of Large Networks: How Random are Socially Generated Networks? Matthew O. Jackson (Caltech) Brian W. Rogers (Caltech) We present a model of network formation where entering nodes find other nodes to link to both completely at random and through search of the neighborhoods of these randomly met nodes. We show that this model exhibits the full spectrum of features that have been found to characterize large socially generated networks. Moreover, we derive the distribution of degree (number of links) across nodes, and show that while the upper tail of the distribution is approximately ``scale- free,'' the lower tail may exhibit substantial curvature, just as in observed networks. We then fit the model to data from six networks. Besides offering a close fit of these diverse networks, the model allows us to impute the relative importance of search versus random attachment in link formation. We find that the fitted ratio of random meetings to search-based meetings varies dramatically across these applications. Finally, we show that as this random/search ratio varies, the resulting degree distributions can be completely ordered in the sense of second order stochastic dominance. This allows us to infer how the relative randomness in the formation process affects average utility in the network. Keywords: Networks, Network Formation, Power Laws, Scale-Free Networks, Small Worlds, Search JEL: A14 C71 C72 Date: 2005-03-14 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0503005&r=all 455. A game theoretic application of inverse limit Miklos Pinter (Corvinus University of Budapest) Keywords: Incomplete information, type space, hierarchies of beliefs JEL: C7 D8 Date: 2005-03-14 Date: 2005-03-14 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0503006&r=all 456. Cooperative investment games or population games Yaron Azrieli (Tel Aviv University) Ehud Lehrer (Tel Aviv University) The model of a cooperative fuzzy game is interpreted as both a population game and a cooperative investment game. Three types of core- like solutions induced by these interpretations are introduced and investigated. The interpretation of a game as a population game allows us to define sub-games. We show that, unlike the well-known Shapley- Shubik theorem on market games ( Shapley-Shubik) there might be a population game such that each of its sub-games has a non-empty core and, nevertheless, it is not a market game. It turns out that, in order to be a market game, a population game needs to be also homogeneous. We also discuss some special classes of population games such as convex games, exact games, homogeneousgames and additive games. Keywords: investment game, population game, fuzzy game, core- like solution, market game JEL: C7 D8 Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0503007&r=all 457. Brown's Original Fictitious Play Ulrich Berger (Vienna Univrsity of Economics) What modern game theorists describe as 'fictitious play' is not the learning process George W. Brown defined in his 1951 paper. His original version differs in a subtle detail, namely the order of belief updating. In this note we revive Brown's original fictitious play process and demonstrate that this seemingly innocent detail allows for an extremely simple and intuitive proof of convergence in an interesting and large class of games: nondegenerate ordinal potential games. Keywords: Fictitious Play, Learning Process, Ordinal Potential Games JEL: C72 Date: 2005-03-21 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0503008&r=all 458. On the Existence of Undominated Elements of Acyclic Relations Hannu Salonen (Department of Economics, University of Turku) Hannu Vartiainen (The Yrjo Jahnsson Foundation) We study the existence of undominated elements of acyclic and irreflexive relations. A sufficient condition for the existence is given in the general case without any topological assumptions. Sufficient conditions are also given when the relation in question is defined on a compact Hausdorff space. We study the existence of fixed points of acyclic correspondences, the existence of stable sets, and the possibility of representing the relation by a real valued function. Keywords: acyclic relations, undominated elements JEL: C7 D8 Date: 2005-03-23 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0503009&r=all 459. Dynamic Behavior in Minimum Effort Coordination Games - Some Theory of Group Size and Inter-Group Competition as Coordination Devices Thomas Riechmann (University of Magdeburg) This paper presents a model of individual behavior in minimum effort coordination games, focusing primarily on the effects of the number of players and the introduction of inter-group competition. It is shown that independent of the number of players and the number of competing groups, the most inefficient equilibrium is always the stochastically stable one. Yet, it turns out that the `security' of more efficient equilibria increases with a decrease of the number of players and with an increase of the number of competing groups. Keywords: Minimum Effort Coordination, Group Competition, Stochastic Stability, Dynamic Games JEL: C72 C92 Date: 2005-03-30 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0503010&r=all 460. A fair rule in minimum cost spanning tree problems Gustavo Bergantinos (Universidade de Vigo) Juan Vidal-Puga (Universidade de Vigo) We study minimum cost spanning tree problems and define a cost sharing rule that satisfies many more properties than other rules in the literature. Furthermore, we provide an axiomatic characterization based on monotonicity properties. Keywords: minimum cost spanning tree, cost sharing JEL: C7 D8 Date: 2005-04-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0504001&r=all 461. Collusion as an Informed Principal Problem Lucia Quesada (University of Wisconsin Madison) In this paper we address the question of collusion in mechanisms under asymmetric information. We develop a methodology to analyze collusion as an informed principal problem. First, if collusion occurs after the agents accept or reject the principal's offer; the dominant-strategy implementation of the optimal contract without collusion is collusion proof. Second, we look at a different timing, assuming that the agents' decision to accept or reject the principal's offer is taken after collusion, so agents can collude on their participation decisions. We also assume that the collusion offer includes a punishment strategy, to be used whenever the other agent rejects the side contract. We establish the conditions that have to be satisfied for a contract to be collusion proof and we show that the optimal contract without collusion is no longer collusion proof. The optimal collusion proof contract is asymmetric, both in transfers and in quantities. Keywords: Collusion, Informed Principal, Mechanism Design JEL: C72 D23 D82 L23 Date: 2005-04-06 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0504002&r=all 462. The Role of Contextual Clues in the Creation of Information Overload Chris Kimble (University of York UK) Paul Hildreth (University of York UK) David J Grimshaw (Cranfield University) There has been an explosion of new forms of communications media for interpersonal communication. There is anecdotal evidence of people suffering from 'information overload' as a result of these developments. This paper presents the results from, and analysis of, a case study of a perceived problem of information overload from e-mail in a large international organization: Watson Wyatt Partners. The research took two approaches to exploring the problem. The first was a survey of 1500 members of staff in the UK and Europe. This was aimed at collecting factual information. The second approach was to conduct follow up interviews with 19 people at two sites in the UK to explore some of the issues raised by the survey in greater depth. In the paper, we argue that for CMCs (Computer Mediated Communications) to be effective there is a need to establish a 'context' in which the message can be interpreted. In doing so, we will demonstrate that ignoring the degree of 'context' a media provides can adversely affect the users perceptions of that media. Keywords: Electronic mail, e-mail, CMC, communication technology, contextual clues, information overload JEL: D73 D82 D83 Date: 2005-04-08 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0504003&r=all 463. A new integral for capacities Ehud Lehrer (Tel Aviv University) A new integral for capacities, different from the Choquet integral, is introduced and characterized. The main feature of the new integral is concavity, which might be interpreted as uncertainty aversion. The integral is then extended to fuzzy capacities, which assign subjective expected values to random variables (e.g., portfolios) and may assign subjective probability only to a partial set of events. An equivalence between minimum over sets of additive capacities (not necessarily probability distributions) and the integral w.r.t. fuzzy capacities is demonstrated. The extension to fuzzy capacities enables one to calculate the integral also when there is information only about a few events and not about all of them. Keywords: new integral, capacity, choquet integral, fuzzy capacity, concavity JEL: C7 D80 D81 D84 G11 Date: 2005-04-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0504004&r=all 464. On the existence of Nash equilibrium in electoral competition Alejandro Saporiti (Queen Mary, University of London) This paper generalizes previous existence results on unidimensional electoral competition, by extending the traditional two-party electoral game to the case where parties have mixed motivations, in the sense that they are interested in winning the election, but also in the policy implemented after the contest. Although this game has discontinuous payoffs, it satisfies payoff security and reciprocally upper semi- continuity. However, conditional payoffs might violate quasi-concavity. Hence, our first result shows that the existence of a pure- strategy Nash equilibrium can be guaranteed only if parties' interests are symmetric. Instead, we prove that the mixed extension satisfies better reply security and, therefore, that a mixed-strategy equilibrium always exists. We also characterize the set of equilibria for a tractable version of the model. This shows that the interaction between the electoral uncertainty, the aggregate level of opportunism and its distribution among parties shape the equilibrium strategies. In particular, when the opportunism is large and asymmetrically distributed, the support of each mixed-strategy equilibrium is a closed interval located on one side of the median. Further, as the uncertainty increases, the probability distributions concentrate on the extremes of the support. And the mixed-strategy equilibrium vanishes above a critical level, over which each party plays a pure strategy in its own ideological side. Keywords: Electoral competition, mixed motivations, discontinuous games, Nash equilibrium. JEL: D70 D72 C72 Date: 2005-04-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0504005&r=all 465. Trust among Strangers Teck-Hua Ho (University of California, Berkeley) Keith Weigelt (University of Pennsylvania) The trust building process is basic to social science. We investigate it in a laboratory setting using a novel multi-stage trust game where social gains are achieved if players trust each other in each stage. And in each stage, players have an opportunity to appropriate these gains or be trustworthy by sharing them. Players are strangers because they do not know the identity of others and they will not play them again in the future. Thus there is no prospect of future interaction to induce trusting behavior. So, we study the trust building process where there is little scope for social relations and networks. Standard game theory, which assumes all players are opportunistic, untrustworthy, and should have zero trust for others is used to construct a null hypothesis. We test whether people are trusting or trustworthy and examine how inferring the intentions of those who trust affects trustworthiness. We also investigate the effect of stake on trust, and study the evolution of trust. Results show subjects exhibit some degree of trusting behavior though a majority of them are not trustworthy and claim the entire social gain. Players are more reluctant to trust in later stages than in earlier ones and are more trustworthy if they are certain of the trustee’s intention. Surprisingly, subjects are more trusting and trustworthy when the stake size increases. Finally, we find the sub- population who invests in initiating the trust building process modifies its trusting behavior based on the relative fitness of trust. Keywords: Experimental Economics, Behavioral Economics JEL: C79 C91 D64 Date: 2005-04-14 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0504006&r=all 466. Individual Preferences for Giving Raymond Fisman (Graduate School of Business, Columbia University) Shachar Kariv (Department of Economics, University of California, Berkeley) Daniel Markovits (Yale Law School, Yale University) This paper reports an experimental test of individual preferences for giving. We use graphical representations of modified Dictator Games that vary the price of giving. This generates a very rich data set well- suited to studying behavior at the level of the individual subject. We test the data for consistency with preference maximization, and we recover underlying preferences and forecast behavior using both nonparametric and parametric methods. Our results emphasize that classical demand theory can account surprisingly well for behaviors observed in the laboratory and that individual preferences for giving are highly heterogeneous, ranging from utilitarian to Rawlsian to perfectly selfish. Keywords: Experiment, Fairness, Dictator Game, and Revealed Preference JEL: C79 C91 D64 Date: 2005-04-14 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpga:0504007&r=all 467. The wage-wage-...-wage-profit relation in a multisector bargaining economy A. J. Julius (New School University) The equalization of profit rates across a multisector production economy subject to Nash bargaining over wages supports an industry wage structure like those that account for a large fraction of actual wage dispersion and a wage-wage-...-wage- profit surface on which the general profit rate can vary inversely or directly with the wage paid in a given industry. Institutional changes that compress or decompress the wage distribution depend for support on industrially specific cross- class coalitions of workers and capitalists. Technical changes that raise capitalists' profits in current prices can lower the equilibrium profit rate. Keywords: Wage-profit relation, prices of production, wage dispersion, bargaining, technical change JEL: D5 D33 J31 O31 Date: 2005-01-21 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpge:0501003&r=all 468. A Toolbox for the Numerical Study of Linear Dynamic Rational Expectations Models P. Marcelo Oviedo (Iowa State University) By simplifying the computational tasks and by providing step-by- step explanations of the procedures required to study a linear dynamic rational expectations (LDRE) model, this paper and the accompanying ``LDRE Toolbox' of Matalb functions guide a researcher with almost no experience in computational work to resolve and study his own model. After coding the model following specific guidelines, a single function call is all that is needed to log-linearize the model; simulate it under exogenous sequences of shocks; compute sample and population moment conditions; and obtain impulse-response functions. Three classical models in the Real-Business-Cycles literature are solved and studied throughout to give detailed examples of the steps involved in solving and studying LDRE models using the LDRE Toolbox. Namely, the economies in Brock and Mirman (Optimal Growth and Uncertainty: the Discounted Case, Journal of Economic Theory, 4(3): 479-513; 1972); King, Plosser, and Rebelo (Production, Growth and Business Cycles I: The Basic Neoclassical Model, Journal of Monetary Economics 21: 195-232; 1988); and Mendoza (Real Business Cycles in a Small Open Economy, American Economic Review 81(4): 797-818; 1991). Keywords: RBC models; Solution method; Toolbox of Matlab functions; Log- linear approximation techniques JEL: C63 C68 E32 F41 Date: 2005-01-26 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpge:0501004&r=all 469. Growth and Convergence in Southeast Asia Sugarcane Industries Erlangga Agustino Landiyanto (Faculty of Economics, Airlangga University) Wirya Wardaya (Faculty of Economics, Airlangga University) This paper analyses growth and convergence on sugarcane industry in southeast Asia countries. Important questions in this paper are whether the growth of sugar cane industry in Southeast Asia moves toward a convergence or divergence trend over time and to what extent the economic integration influences the development and policy of those countries. This paper is a cross-country study and employs GLS techniques. Some countries involved in the analysis are Indonesia, Malaysia, Thailand, Cambodia, Laos, Myanmar, The Philippines, and Vietnam. The finding suggests that based on ?O convergence approach, both basic variable and equation with dummy indicate that these variables could explain the convergence and speed of convergence within the industry. Furthermore, The regression results also strengthen the finding of ?m - convergence. Keywords: Convergence, Growth, Sugarcane. JEL: R C6 D5 D9 Date: 2005-01-31 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpge:0501005&r=all 470. Non-linear strategies in a linear quadratic differential game Colin Rowat (University of Birmingham) We study non-linear Markov perfect equilibria in a two agent linear quadratic differential game. In contrast to the literature owing to Tsutsui and Mino (1990), we do not associate endogenous subsets of the state space with candidate solutions. Instead, we address the problem of unbounded-below value functions over infinite horizons by use of the `catching up optimality' criterion. We present sufficiency conditions for existence based on results in Dockner, Jorgenson, Long and Sorger (2000). Applying these to our model yields the familiar linear solution as well as a condition under which a continuum of non-linear solutions exist. As this condition is relaxed when agents are more patient, and allows more efficient steady states, it resembles a Folk Theorem for differential games. The model presented here is one of atmospheric pollution; the results apply to differential games more generally. Keywords: differential game, non-linear strategies, catching up optimal, Folk Theorem JEL: C61 C73 H41 Q00 Date: 2005-02-01 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpge:0502001&r=all 471. The Relationship Between Poverty, Economic Growth, and Inequality Revisited Lonnie K. Stevans (Hofstra University) David N. Sessions (Hofstra University) It has been shown in prior research that higher growth reduces poverty. Authors have also found that the effect of economic growth on changes in poverty has either diminished or remained unchanged over time, e.g., the 1980s economic expansion in the U. S. had no affect on poverty. Using a formal error-correction model, we find that increases in economic growth are significantly related to reductions in the poverty rate for all families. However, growth was found to have a more pronounced effect on poverty during the expansionary periods of the 1960s, 1970s, 1980s, and 1990s. Other findings include identification of determinants of the dynamic behavior of poverty rates both in the short and long-term. JEL: C6 D5 D9 Date: 2005-02-08 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpge:0502002&r=all 472. Inverse stochastic dominance constraints and rank dependent expected utility theory Darinka Dentcheva (Stevens Institute of Technology) Andrzej Ruszczynski (Rutgers University) We consider optimization problems with second order stochastic dominance constraints formulated as a relation of Lorenz curves. We characterize the relation in terms of rank dependent utility functions, which generalize Yaari's utility functions. We develop optimality conditions and duality theory for problems with Lorenz dominance constraints. We prove that Lagrange multipliers associated with these constraints can be identified with rank dependent utility functions. The problem is numerically tractable in the case of discrete distributions with equally probable realizations. Keywords: Stochastic Dominance, Lorenz Curve, Yaari's Dual Utility, Rank Dependent Expected Utility, Optimality, Duality JEL: C6 D5 D9 Date: 2005-03-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpge:0503001&r=all 473. Discrete Dynamical Systems Oded Galor (Brown University) This manuscript analyzes the fundamental factors that govern the qualitative behavior of discrete dynamical systems. It introduces methods of analysis for stability analysis of discrete dynamical systems. The analysis focuses initially on the derivation of basic propositions about the factors that determine the local and global stability of discrete dynamical systems in the elementary context of a one dimensional, first-order, autonomous, systems. These propositions are subsequently generalized to account for stability analysis in a multi-dimensional, higher-order, non- autonomous, nonlinear, dynamical systems. Keywords: Discrete Dynamical Systems, Difference Equations, Global Stability, Local Stability, Non-Linear Dynamics, Stable Manifolds JEL: C6 D5 D9 Date: 2005-04-01 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpge:0504001&r=all 474. Structural Change and Its Impact on Productivity in Japan, Korea, and Singapore (1970-2000) K. Ali Akkemik (Nagoya University Graduate School of International Development) This paper examines the impact of structural change on productivity through a decomposition of aggregate manufacturing productivity growth in Korea, Singapore, and Japan over the period 1970-2000. First, the shift-share analysis is utilized to measure the impact of the allocation of labor among manufacturing industries on aggregate labor productivity. Next, the impact of the allocation of labor and capital on total factor productivity ( TFP) growth is analyzed. The findings show weak support for the positive impact on aggregate productivity of reallocation of factor inputs for Japan and Korea, and a positive impact for Singapore. Keywords: productivity shift-share analysis East Asia resource allocation JEL: C6 D5 D9 Date: 2005-04-03 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpge:0504002&r=all 475. Standard System and Bottlenecks to Growth in the Indian Economy: A Study Based on Input-Output Tables (93-94) Rahul Shastri (National Akademi of Development) The standard system is in balanced standard proportions, which permit growth without bottlenecks. This study estimates the standard system in the Indian Economy from the input-output tables prepared by the CSO, and use the standard proportions to identify sectors that are a bottleneck to 10% growth of the economic system. The study identifies 26 such sectors, of which 10 appear to be serious bottlenecks, with shortages of more than 1% of the total available resources in 1993-4. Crude oil with a shortage of 15.5%, coal with 13.6%, electricity with 3.8%, inorganic heavy chemicals with 3.3%, fertilisers with 2.6%, pesticides with 2.1% are some of the serious bottleneck sectors. Groundnuts, paper and animal services with about 2% shortfalls appear to be other serious cases of shortfalls at 10% growth rate. Keywords: Standard proportions, Standard proportions, bottleneck sectors JEL: C6 D5 D9 Date: 2005-04-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpge:0504003&r=all 476. Measuring Total Factor Productivity: Growth Accounting for Bulgaria Kaloyan Ganev (Agency for Economic Analysis & Forecasting) Total factor productivity measurement enables researchers to determine the contribution of supply-side production factors to economic growth. For Bulgaria, which is a transition economy, it is difficult to construct a production function with stable parameters, mostly because there are atypical developments of capital and labor during periods of economic growth, as well as due to the lack of sufficiently long and dependable data series. In this respect, growth accounting enables us to identify the basic sources and directions of influences. The calculations that have been carried out in this paper help in the identification of total factor productivity development as the main driving force of economic growth. The likely reasons for this strong influence have been also outlined. Keywords: Economic Growth, total factor productivity JEL: E22 O47 Date: 2005-04-13 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpge:0504004&r=all 477. Structured Analogies for Forecasting J.S. Armstrong (The Wharton School) When people forecast, they often use analogies but in an unstructured manner. We propose a structured judgmental procedure that involves asking experts to list as many analogies as they can, rate how similar the analogies are to the target situation, and match the outcomes of the analogies with possible outcomes of the target. An administrator would then derive a forecast from the experts<92> information. We compared structured analogies with unaided judgments for predicting the decisions made in eight conflict situations. These were difficult forecasting problems; the 32% accuracy of the unaided experts was only slightly better than chance. In contrast, 46% of structured analogies forecasts were accurate. Among experts who were independently able to think of two or more analogies and who had direct experience with their closest analogy, 60% of forecasts were accurate. Collaboration did not improve accuracy. Keywords: accuracy, analogies, collaboration, conflict, expert, forecasting, judgment. JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502001&r=all 478. How to Avoid Exploratory Research J.S. Armstrong (The Wharton School) Studies in marketing research often start with data rather than with a theory. This exploratory or inductive approach is at odds with the more preferred scientific method where the theory precedes the data in any single research study. (See, for example, the discussion by Francis, 1957) Because exploratory research is common, however, one might argue that it is of some value. A number of researchers have claimed that the exploratory approach leads to new and useful theories. But there is also the danger that the research will produce false leads or useless theories. An attempt is made in this paper to illustrate the dangers inherent in the exploratory approach. The question of whether the potential benefits are large enough to outweigh the dangers is left to the reader. JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502002&r=all 479. On the Interpretation of Factor Analysis J.S. Armstrong (The Wharton School) The importance of the researcher^Rs interpretation of factor analysis is illustrated by means of an example. The results from this example appear to be meaningful and easily interpreted. The example omits any measure of reliability or validity. If a measure of reliability had been included, it would have indicated the worthlessness of the results. A survey of 46 recent papers from 6 journals supported the claim that the example is typical, two-thirds of the papers provide no measure of reliability. In fact, some papers did not even provide sufficient information to allow for replication. To improve the current situation some measure of factor reliability should accompany applied studies that utilize factor analysis. Three operational approaches are suggested for obtaining measures of factor reliability: use of split samples, Monte Carlo simulation, and a priori models. Keywords: factor analysis JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502003&r=all 480. Derivation of Theory by Means of Factor Analysis or Tom Swift and His Electric Factor Analysis Machine J.S. Armstrong (The Wharton School) Problems in the use of factor analysis for deriving theory are illustrated by means of an example in which the underlying factors are known. The actual underlying model is simple and it provides a perfect explanation of the data. While the factor analysis 'explains' a large proportion of the total variance, it fails to identify the known factors in the model, The illustration is used to emphasize that factor analysis, by itself, may be misleading as far as the development of theory is concerned. The use of a comprehensive, and explicit a priori analysis is proposed so that there will be independent criteria for the evaluation of the factor analytic results. Keywords: factor analysis JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502004&r=all 481. The Graffiti Solution J.S. Armstrong (The Wharton School) Graffiti is regarded by many as a blight on our cities because it contributes to visual pollution. City governments spend vast sums in an effort to clean the ubiquitous graffiti from urban walls. I suggest that the ^Scleansing strategy^T is an expensive, ineffective way of dealing with the problem; well-known management techniques can solve the problem more efficiently. Keywords: graffiti problem, graffiti solution JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502005&r=all 482. Improving Learning at Universities: Who is Responsible? J.S. Armstrong (The Wharton School) Recently, I published a letter in the Wall Street Journal ( Armstrong 2004a) with the basic message that business school education has been losing effectiveness. Most important, students are not learning to do things, such as making an effective oral presentation, writing a persuasive management report, listening to others, conducting a meeting, or using statistical procedures to analyze data. This problem is not confined to business schools; it is plaguing the educational system on almost every level. My letter drew responses from alumni, faculty, recruiters, consultants, and students. Nearly all of them agreed with my assessment, claiming that the problem is rampant but ignored. As I will show below, however, evidence-based suggestions can resolve the problem. Keywords: learning, universities JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502006&r=all 483. Are Student Ratings of Instruction Useful? J.S. Armstrong (The Wharton School) Despite the lead article^Rs title ^SValidity Concerns and Usefulness of Student Ratings of Instruction^T (Greenwald 1997) in the American Psychologist^R^Rs special section on teacher ratings, the papers did not provide direct evidence on ^Susefulness.^T There is no evidence that the use of teacher ratings improves learning in the long run. The papers do not show that the effects would improve the allocation of effort between teaching and research, or that the quality of the educational experience will be better, or that students and faculty will be happier. Given the evidence to date, the case for student ratings is weak. I raise some questions about usefulness, with a particular emphasis on the ratings^R effects on learning. Keywords: learning, universities JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502007&r=all 484. The Devil<92>s Advocate Responds to an MBA Student<92>s Claim that Research Harms Learning J. S. Armstrong (The Wharton School) Snapshots from Hell describes a first-year student<92>s experience in the Stanford Master of Business Administration (MBA) program in 1989. Peter Robinson, formerly a speech writer for President Reagan, tells about his experiences in applying to business schools, living with other MBA students, taking courses, interacting with faculty, and interviewing for summer jobs. The experience was a hellish one for Robinson for a number of reasons. He found the transition from the White House to business school wrenching. He was, at first, quite lonely. And he was a poet ( weak mathematically) which made him feel vulnerable in the quantitative courses. But Robinson also lays a degree of the blame for the uglier aspects of his business school experience on Stanford Business School and, in particular, on the faculty. Much of the teaching was mediocre, Robinson says, and some of it was appalling. The reason? Robinson suggests that the faculty was paying too much attention to research. Keywords: learning, universities, MBA JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502008&r=all 485. Business School Prestige ^V Research versus Teaching J. S. Armstrong (The Wharton School) We examined the relationships between the research originating at business schools, students^R satisfaction with the schools, and the published ratings of the school^Rs prestige. Research was positively correlated to prestige (where prestige was based on the perceptions of academics, firms, and student candidates). The satisfaction of recent graduates was not related to a school^Rs prestige (based on the perceptions of academics and business firms). Research productivity of schools was not associated with lower satisfaction among their recent graduates. We conclude that schools should emphasize research instead of teaching if they desire high prestige. Keywords: learning, universities, business schools JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502009&r=all 486. Would Mandatory Attendance Be Effective for Economics Classes? J. S. Armstrong (The Wharton School) Romer (1993) suggests that universities should undertake experiments that would test the value of mandatory attendance for economics courses. He presents evidence showing that those who attended his classes received higher grades on his exams and concluded that ^San important part of the relationship [to the course grade] reflects a genuine effect of attendance.^T This conclusion is likely to be welcomed by some economics professors. In this note, I address two issues. First, what does prior research imply about a relationship between attendance and learning? Second, does Romer^Rs own evidence support his conclusion that mandatory attendance is beneficial? Keywords: learning, universities, business schools JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502010&r=all 487. The Case for Minimum Teaching Standards J. S. Armstrong (The Wharton School) We all share the desire to improve the learning environment at Wharton and to have students who will be satisfied with this environment. While most of the Wharton Teaching Committee's recommendations are consistent with these aims, I believe that recommendation #1, to 'Establish Minimum Standards for Acceptable Teaching,'' will be detrimental to learning. I therefore recommend that we reject proposal #1. This letter describes how I reached this conclusion, suggests alternatives, and recommends a process for resolving tie issues. Keywords: learning, universities, business schools JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502011&r=all 488. Learner Responsibility in Management Education, or Ventures into Forbidden Research (with Comments) J. S. Armstrong (The Wharton School) Formal education can be improved by transferring responsibility from the teacher to the learner. A simple approach to this is the time contract. Time contracts have been used successfully in nine quasi-experiments but, despite these successes, some educators see this as subversive research. Keywords: learning, universities, teachers JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502012&r=all 489. Teacher vs. Learner Responsibility in Management Education J. S. Armstrong (The Wharton School) A literature review suggested that behavioral changes occur more rapidly when the learner assumed responsibility. Natural learning, an approach to help learners assume responsibility, was compared with the traditional strategy in seven field experiments. It produced more than twice as many long-term behavioral changes. It was superior also for attitude change, but not for gains in knowledge. Keywords: learning, universities, teachers, management, education JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502013&r=all 490. Damped Seasonality Factors: Introduction J. S. Armstrong (The Wharton School) Previous research has shown that seasonal factors provide one of the most important ways to improve forecast accuracy. For example, in forecasts over an 18-month horizon for 68 monthly economic series from the M-Competition, Makridakis et al. (1984, Table 14) found that seasonal adjustments reduced the MAPE from 23.0 to 17. 7 percent, an error reduction of 23%. On the other hand, research has also shown that seasonal factors sometimes increase forecast errors (e.g., Nelson, 1972). So, when forecasting with a data series measured in intervals that represent part of a year, should one use seasonal factors or not? Statistical tests have been devised to answer this question, and they have been quite useful. However, some people might say that the question is not fair. Why does it have to be either/or? Shouldn^Rt the question be ^Sto what extent should seasonal factors be used for a given series?^T Keywords: seasonal factors, forecast, accuracy JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502014&r=all 491. Decomposition by Causal Forces: A Procedure for Forecasting Complex Time Series J. S. Armstrong (The Wharton School) Causal forces are a way of summarizing forecasters<92> expectations about what will happen to a time series in the future. Contrary to the common assumption for extrapolation, time series are not always subject to consistent forces that point in the same direction. Some are affected by conflicting causal forces; we refer to these as complex times series. It would seem that forecasting these times series would be easier if one could decompose the series to eliminate the effects of the conflicts. Given forecasts subject to high uncertainty, we hypothesized that a time series could be effectively decomposed under two conditions: 1) if domain knowledge can be used to structure the problem so that causal forces are consistent for two or more component series, and 2) when it is possible to obtain relatively accurate forecasts for each component. Forecast accuracy for the components can be assessed by testing how well they can be forecast on early hold-out data. When such data are not available, historical variability may be an adequate substitute. We tested decomposition by causal forces on 12 complex annual time series for automobile accidents, airline accidents, personal computer sales, airline revenues, and cigarette production. The length of these series ranged from 16 years for airline revenues to 56 years for highway safety data. We made forecasts for one to ten horizons, obtaining 800 forecasts through successive updating. For nine series in which the conditions were completely or partially met, the forecast error (MdAPE) was reduced by more than half. For three series in which the conditions were not met, decomposition by causal forces had little effect on accuracy. Keywords: airline accidents, extrapolation, Holt<92>s exponential smoothing, model formulation, personal computers, revenue forecasting, transportation safety. JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502015&r=all 492. Review of: Predicting Presidential Elections and Other Things J. S. Armstrong (The Wharton School) Ray Fair is one of my favorite econometricians. He has an excellent website, fairmodel.econ.yale.edu, where he freely shares his models. He writes clearly and his methods are reported in detail. He is concerned with the proper use of econometric methods. For example, he has long been opposed to the common practice of making ex post subjective adjustments to forecasts from econometric models. A review of empirical evidence supports his position (Armstrong and Collopy 1998). Keywords: presidential elections, forecasting JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502016&r=all 493. Forecasting for Environmental Decision Making J. S. Armstrong (The Wharton School) Those making environmental decisions must not only characterize the present, they must also forecast the future. They must do so for at least two reasons. First, if a no-action alternative is pursued, they must consider whether current trends will be favorable or unfavorable in the future. Second, if an intervention is pursued instead, they must evaluate both its probable success given future trends and its impacts on the human and natural environment. Forecasting, by which I mean explicit processes for determining what is likely to happen in the future, can help address each of these areas. Keywords: forecasting, environment JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502017&r=all 494. Forecasting for Marketing J. S. Armstrong (The Wharton School) R. Brodie (University of Auckland) Research on forecasting is extensive and includes many studies that have tested alternative methods in order to determine which ones are most effective. We review this evidence in order to provide guidelines for forecasting for marketing. The coverage includes intentions, Delphi, role playing, conjoint analysis, judgmental bootstrapping, analogies, extrapolation, rule-based forecasting, expert systems, and econometric methods. We discuss research about which methods are most appropriate to forecast market size, actions of decision makers, market share, sales, and financial outcomes. In general, there is a need for statistical methods that incorporate the manager's domain knowledge. This includes rule-based forecasting, expert systems, and econometric methods. We describe how to choose a forecasting method and provide guidelines for the effective use of forecasts including such procedures as scenarios. Keywords: forecasting, marketing JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502018&r=all 495. Commentary by J. Scott Armstrong on Fildes et al.: <93>Generalizing about univariate forecasting methods: further empirical evidence,<94> J. S. Armstrong (The Wharton School) Fildes, Hibon, Makridakis and Meade (1998), which will be referred to as FHMM, extends two important published papers. The idea of taking findings from each study and testing them against the data used in the other study is a good one. Such replications and extensions are important in the effort to develop useful generalizations and publication of this paper reflects the commitment of International Journal of Forecasting to replication research. In addition the study examines procedures for estimating smoothing parameters, and it evaluates the need for using multiple starting points when evaluating forecasting methods. On the negative side, FHMM does not fully describe the conditions under which one might expect a given extrapolation method to provide more accurate forecasts than competing methods. This limits the generalizability of its findings. In addition, I believe that the FHMM generalizations are even more limited than they might appear at first glance. Keywords: forecasting, univariate forecasting methods JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502019&r=all 496. How Serious are Methodological Issues in Surveys? A Reexamination of the Clarence Thomas Polls^T J. S. Armstrong (The Wharton School) F. Collopy (The Weatherhead School of Management) Opinion polling procedures allow for reasonable inferences about attitude changes. We examined this contention using surveys about the nomination of Clarence Thomas. In this situation, prior theory allowed us to predict the direction of changes, surveys had been conducted by a number of organizations, and substantial information was available about the methodology used in the surveys. As a result we concluded that the deteriorating opinions of Thomas were real. Keywords: surveys, methodology JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502020&r=all 497. Review of Ravi Batra, The Great Depression of 1990 (Simon and Schuster, New York, 1985) J. S. Armstrong (The Wharton School) The Great Depression of 1990 was on the New York Times best- seller list for non-fiction in the summer of 1987. It follows a standard formula for best sellers in forecasting: Forecast a great disaster, and include a formula for redemption. If the disaster occurs, you can say, <93>I told you so.<94> If it doesn't occur, you say, <93>It is good that they listened to my advice. I saved them.<94> How can you lose? When I first saw this book, it occurred to me that it was a hoax. Here is a man claiming to be a highly respected economist who makes a forecast and provides a date. The forecast is that the great depression will occur in 1990. A variety of paths to redemption are provided, the most important being that rich people should have to give up much of their riches, for it is the concentration of wealth that causes business cycles. This is a fact that Batra claims to have discovered. Batra suggests that society should tax this wealth. On the other hand, he also provides advice to rich people on how to preserve their wealth <96> put it in cash, then store it in a safe deposit box and at home. Businessmen should avoid long-term investments. Keywords: Ravi Batra JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502021&r=all 498. Communication of Research on Forecasting: The Journal J. S. Armstrong (The Wharton School) It seems trivial to point out that one of the major goals of the International Institute of Forecasters is to communicate research findings. In particular, the IIF tries to foster communication among researchers, between researchers and practitioners, across nationalities, and across disciplines. We have two major vehicles for this: the annual symposiums and the journal. This editorial examines the results that we have had to date with our journals. Keywords: research, forecasting, communication JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502022&r=all 499. Forecasting Methods for Marketing:* Review of Empirical Research J. S. Armstrong (The Wharton School) R. Brodie (University of Canterbury) S. McIntyre (Santa Clara University) This paper reviews the empirical research on forecasting in marketing. In addition, it presents results from some small scale surveys. We offer a framework for discussing forecasts in the area of marketing, and then review the literature in light of that framework. Particular emphasis is given to a pragmatic interpretation of the literature and findings. Suggestions are made on what research is needed. Keywords: forecasting, marketing, methods, review, research JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502023&r=all 500. Review of Steven J. Rosenstone, Forecasting Presidential Elections (published by Yale University Press, New Haven, CT, 1983)) J. S. Armstrong (The Wharton School) Rosenstone develops a causal model to forecast political voting. The model seems reasonable; for example, it includes information about party, key issues, the economy, war, incumbency, region, and trends over time. Standard econometric methods are then used to determine how much weight should be given to each factor. The conditions are then forecasted for each of the 50 states, and the weights are applied to give state-by-state forecasts. Aggregation across states provides forecasts of both the popular and electoral votes for presidential elections. Keywords: forecasting, presidential elections, review JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502024&r=all 501. Forecasting by Extrapolation: Conclusions from 25 Years of Research J. S. Armstrong (The Wharton School) Sophisticated extrapolation techniques have had a negligible payoff for accuracy in forecasting. As a result, major changes are proposed for the allocation of the funds for- future research on extrapolation. Meanwhile, simple methods and the combination of forecasts are recommended. Keywords: forecasting, methods, extrapolation JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502025&r=all 502. Commentary on the Makridakis Time Series Competition (M- Competition) J. S. Armstrong (The Wharton School) In 1982, the Journal of Forecasting published the results of a forecasting competition organized by Spyros Makridakis ( Makridakis et al., 1982). In this, the ex ante forecast errors of 21 methods were compared for forecasts of a variety of economic time series, generally using 1001 time series. Only extrapolative methods were used, as no data were available on causal variables. The accuracies of methods were compared using a variety of accuracy measures for different types of data and for varying forecast horizons. The original paper did not contain much interpretation or discussion. Partly this was by design, to be unbiased in the presentation. A more important factor, however, was the difficulty in gaining consensus on interpretation and presentation among the diverse group of authors, many of whom have a vested interest in certain methods. In the belief that this study was of major importance, we decided to obtain a more complete discussion of the results. We do not believe that <93>the data speak for themselves.<94> Keywords: Makridakis, commentary, time series competition, m competition JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502026&r=all 503. How Expert Are the Experts? J. S. Armstrong (The Wharton School) If you want good forecasts for your industry, you should hire the best experts. Right? Well, maybe not. Certainly experts are in demand. Businessmen pay economists generously to tell them how the economy will change; brokerage firms give stock analysts large salaries to forecast company earnings; and politicians part with substantial fees for expert predictions, too. Keywords: experts, forecasting JEL: A Date: 2005-02-04 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502027&r=all 504. TOWARDS INSTITUTIONAL INFRASTRUCTURES FOR E-SCIENCE: The Scope of the Challenge Paul A David (University of Oxford & Stanford University) Michael Spence (University of Oxford & St Catherine’s College) The three-fold purpose of this Report to the Joint Information Systems Committee (JISC) of the Research Councils (UK) is to: • articulate the nature and significance of the non-technological issues that will bear on the practical effectiveness of the hardware and software infrastructures that are being created to enable collaborations in e- Science; • characterise succinctly the fundamental sources of the organisational and institutional challenges that need to be addressed in regard to defining terms, rights and responsibilities of the collaborating parties, and to illustrate these by reference to the limited experience gained to date in regard to intellectual property, liability, privacy, and security and competition policy issues affecting scientific research organisations; and • propose approaches for arriving at institutional mechanisms whose establishment would generate workable, specific arrangements facilitating collaboration in e- Science; and, that also might serve to meet similar needs in other spheres such as e- Learning, e-Government, e-Commerce, e- Healthcare. In carrying out these tasks, the report examines developments in enhanced computer-mediated telecommunication networks and digital information technologies, and recent advances in technologies of collaboration. It considers the economic and legal aspects of scientific collaboration, with attention to interactions between formal contracting and 'private ordering' arrangements that rest upon research community norms. It offers definitions of e-Science, virtual laboratories, collaboratories, and develops a taxonomy of collaborative e- Science activities which is implemented to classify British e- Science pilot projects and contrast these with US collaboratory projects funded during the 1990s. The approach to facilitating inter-organizational participation in collaborative projects rests upon the development of a modular structure of contractual clauses that permit flexibility and experience-based learning. JEL: A Date: 2005-02-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502028&r=all 505. Tom Swift and His Electric Regression Analysis Machine: 1973 Armstrong JS (The Wharton School) Tom Swift, who began his career with factor analysis (1967) , is pleased to announce that the “1973 Tom Swift Award for Data Abuse” has been won by LeRoy Stone and James Brosseau. They originally (Stone, et al., 1973) used 115 variables in a stepwise regression analysis to explain differences among 19 observations. They then claimed (Stone & Brosseau, 197 3) to have tested the predictive validity of this model. This was done by regressing the 14 variables from the model on data from 18 new subjects. This “cross-validation” yielded a final model with six variables and an R2 of 0.76. Keywords: Tom Swift, regression, statistics JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502030&r=all 506. Analyzing Quantitative Models Armstrong JS (The Wharton School) Shapiro George How can a potential user distinguish between a quantitative model that may be of some real value and one that is not? The model builder rarely provides much help, since most are advocates of their own work and tend to lose their objectivity toward the model. Therefore, an independent evaluation is necessary to judge the true usefulness of the model. Keywords: quantitative models, analysis JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502031&r=all 507. Brief vs. Comprehensive Descriptions in Measuring Intentions to Purchase JS Armstrong (The Wharton School) Terry Overton In forecasting demand for expensive consumer goods, direct questioning of potential consumers about their future purchasing plans has had considerable predictive success [1, 2, 4]. Any attempt to apply such 'intention to purchase' methods to forecast demand for proposed products or services must determine some way to convey product information to the potential consumer [3]. Indeed, all the prospective consumer knows about the product or service is what he may infer from the information given to him by the researcher. This paper presents a study of the effect upon intention to purchase of this seemingly crucial element—the extent and type of description of the new service. How extensive must the description of the new service be in order to measure intention to purchase? Keywords: forecasting, purchase intentions JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502032&r=all 508. Publication Bias Against Null Results Raymond Hubbard (College of Business & Public Administration, Duke University) JS Armstrong (The Wharton School) Studies suggest a bias against the publication of null (p > .05) results. Instead of significance, we advocate reporting effect sizes and confidence intervals, and using replication studies. If statistical tests are used, power tests should accompany them. Keywords: publication, bias, null results JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502034&r=all 509. The Profitability of Winning JS Armstrong (The Wharton School) Fred Collopy (Case Western Reserve University) Sports and war metaphors abound in business today. For example, one management book, Thunder in the Sky, by Thomas Cleary, opens with a Chinese saying that translates: “The marketplace is a battlefield. The Asian people view success in the business world as tantamount to victory in battle.” The book advises American executives to do the same. However, such metaphors are misleading. The objective in both sports and war is to beat the competitor. Business, on the other hand, aims to create wealth. Keywords: business, profits, winning, JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502035&r=all 510. Escalation Bias: Does It Extend to Marketing? JS Armstrong (The Wharton School) Nicole Coviello (University of Auckland) Barbara Safranek (S. G. Warburg & Co.) Escalation bias implies that managers favor reinvestments in projects that are doing poorly over those doing well. We tested this implication in a marketing context by conducting experiments on advertising and product-design decisions. Each situation was varied to reflect either a long-term or a short-term decision. Besides these four conditions, we conducted three replications. We found little evidence of escalation bias by 365 subjects in the seven experimental comparisons. Keywords: escalation bias, marketing JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502036&r=all 511. Principles Involving Marketing Policies: An Empirical Assessment JS Armstrong (The Wharton School) Randall L. Schultz (College of Business Administration, University of Iowa) We examined nine marketing textbooks, published since 1927, to see if they contained useful marketing principles. Four doctoral students found 566 normative statements about pricing, product, place, or promotion in these texts. None of these stateinents were supported by empirical evidence. Four raters agreed on only twenty of these 566 statements as providing meaningful principles. Twenty marketing professors rated whether the twenty meaningful principles were correct, supported by empirical evidence, useful, or surprising. None met all the criteria. Nine were judged to be nearly as correct when their wording was reversed. Keywords: Marketing Principles, Price, Product, Promotion, Place JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502037&r=all 512. Are Null Results Becoming an Endangered Species in Marketing? Raymond Hubbard (College of Business & Administration, Drake University,) JS Armstrong (The Wharton School) ditorial procedures in the social and biomedical sciences are said to promote studies that falsely reject the null hypothesis. This problem may also exist in major marketing journals. Of 692 papers using statistical significance tests sampled from the Journal of Marketing, Journal of Marketing Research, and Journal of Consumer Research between 1974 and 1989, only 7.8% failed to reject the null hypothesis. The percentage of null results declined by one-half from the 1970s to the 1980s. The JM and the JMR registered marked decreases. The small percentage of insignificant results could not be explained as being due to inadequate statistical power. Various scholars have claimed that editorial policies in the social and medical sciences are biased against studies reporting null results, and thus encourage the proliferation of Type 1 errors (erroneous rejection of the null hypothesis). Greenwald (1975, p. 15) maintains that Type I publication errors are underestimated to the extent that they are: “. . . frightening, even calling into question the scientific basis for much published literature.” Our paper examines the publication frequency of null results in marketing. First, we discuss how editorial policies might foster an atmosphere receptive to Type I error proliferation. Second, we review the evidence on the publication of null results in the social and biomedical sciences. Third, we report on an empirical investigation of the publication frequency of null results in the marketing literature. Fourth, we examine power levels for statistically insignificant findings in marketing to see if they are underpowered and thus less deserving of publication. Finally, we provide suggestions to facilitate the publication of null results. Keywords: File Drawer Problem, Null Results, Publication Bias, Statistical Power Analysis, Statistical Significance JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502038&r=all 513. Class of Mail Does Affect Response Rates to Mailed JS Armstrong (The Wharton School) In contrast to the conclusions. from traditional reviews, meta- analysis shows that certain types of postage have an important effect on return rates to mail surveys. In particular, US business reply postage should not be used in survey research. Keywords: response rates, mail, meta-analysis JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502039&r=all 514. Predicting The Outcome of Marketing Negotiations: Role- Playing versus Unaided Opinions JS Armstrong (The Wharton School) Philip D. Hutcherson (Beckman Instruments) Role -playing and unaided opinions were used to forecast the outcome of three negotiations. Consistent with prior re search, role-playing yielded more accurate predictions. In two studies on marketing negotiations, the predictions based on role-playing were correct for 53% of the predictions while unaided opinions were correct for only 7% (p < 0.001). Keywords: predicting, negotiations, marketing, role-playing, unaided opinion JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502040&r=all 515. Return Postage in Mail Surveys: A Meta Analysis JS Armstrong (The Wharton School) Edward J. Lusk (Social System Sciences, University of Pennsylvania) This paper describes a five-step procedure for meta-analysis. Especially important was the contacting of authors of prior papers. This was done primarily to improve the accuracy of the coding; it also helped to identify unpublished research and to supply missing information. Application of the five-step procedure to the issue of return postage in mail surveys yielded significantly more papers and produced more definitive conclusions than those derived from traditional reviews. This meta-analysis indicated that business reply postage is seldom costeffective because first class postage yields an additional 9% return. Business reply rates were lower than for other first class postage in each of the 20 comparisons. Keywords: surveys, meta-analysis, return postage JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502041&r=all 516. The Manager’s Dilemma: Role Conflict in Marketing JS Armstrong (The Wharton School) Norris Brisco, Melvin Copeland, Henry Erdman, Benjamin Hibbard, George Hotchkiss, Leverett Lyon, Stanley Resor, Clarence Saunders, Harry Tosdal, Roland Vaile: Who are these people? They are great men in the history of marketing, according to Wright and Dinsdale 1974). They are marketing heroes. But riot society’s heroes. Rather than hero, the marketing man is usually a villain in novels; he is the butt of jokes; and respondents to surveys think poorly of him. Keywords: conflict, marketing, manager JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502042&r=all 517. Estimating Nonresponse Bias in Mail Surveys JS Armstrong (The Wharton School) Terry Overton (Marketing Scientist Merck Sharp & Dohme) Valid predictions for the direction of nonresponse bias were obtained from subjective estimates and extrapolations in an analysis of mail survey data from published studies. For estimates of the magnitude of bias, the use of extrapolations led to substantial improvements over a strategy of not using extrapolations. Keywords: nonresponse bias, estimation JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502044&r=all 518. Monetary Incentives in Mail Surveys JS Armstrong (The Wharton School) Eighteen empirical studies from fourteen different researchers provide evidence that prepaid monetary incentives have a strong positive impact on the response rate in mail surveys. One of these studies is described here and an attempt is made to generalize from all eighteen about the relationship between size of incentives and reduction in nonresponse. These generalizations should be of value for the design of mail survey studies. Keywords: monetary incentives, surveys JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502045&r=all 519. Role Conflict: Society’s Dilemma with Excellence in Marketing Robert Nason (The Wharton School) JS Armstrong (The Wharton School) In recent years, the American market system has come under increasing criticism from those it serves. Many young people, radicals, members of minority groups and even middle-of-the- roaders are concerned about such things as poor product quality, poor variety, unsafe products. and misleading advertising. From almost any vantage point, flaws in the American economic system are visible. Keywords: role conflict, marketing, society, dilemma JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502046&r=all 520. Brand Trial After a Credibility Change David Montgomery (The Wharton School) JS Armstrong (The Wharton School) In most frequently purchased, branded product markets, the consumer has little to choose from in terms of significantly differentiated products. The staggering array of manufacturers’ claims and counter claims of brand superiority seems to leave consumers somewhat bewildered or cynical. What would happen if the credibility of the appeals made on behalf of one brand should suddenly be enhanced by a seemingly legitimate authority? More specifically, what would characterize consumers who would respond to such a change in credibility? Keywords: brand trial, credibility, JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502047&r=all 521. Reaping Benefits from Management Research: Lessons from the Forecasting Principles Project, with Reply to Commentators JS Armstrong (The Wharton School) Ruth Pagell (Emory University) It is often claimed that managers do not read serious research papers in journals. If true, this neglect would seem to pose a problem because journals are the dominant source of knowledge in management science. By examining results from the forecasting principles project, which was designed to summarize all useful knowledge in forecasting, we found that journals have provided 89 percent of the useful knowledge. However, journal papers relevant to practice are difficult to find because fewer than three percent of papers on forecasting contain useful findings. That turns out to be about one useful paper per month over the last half-century. Once found, the papers are difficult to interpret. Managers need low-cost, easily accessible sources that summarize advice (principles) from research; journals do not meet this need. To increase the rate of progress in developing and communicating principles, researchers, journal editors, textbook writers, software developers, web site designers, and practitioners should make some changes. Some examples: Researchers should directly study forecasting principles. Journal editors should actively solicit papers – invited submissions were about 20 times better than standard submissions at producing useful findings that were often cited, and does so at a lower cost. Web-site and software developers should provide practitioners with low-cost ways to use principles. Practitioners should apply the principles that are currently available. Keywords: journals, meta-analysis, peer review, principles, software, websites. JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502048&r=all 522. Incentives for Developing and Communicating Principles: A Reply JS Armstrong (The Wharton School) The commentators raised many interesting ideas in response to Armstrong and Pagell (2003), from which one general theme emerges: The commentators claim that management science lacks the incentives to encourage efforts to develop and communicate grounded principles. As a result, academics often conduct their research as an intellectual exercise with little concern as to whether their findings might eventually be of any practical use. The problem extends beyond management science. Smith (1991), an editor of the British Medical Journal, concluded from a review that only about 15 percent of medical interventions are supported by solid scientific evidence. He attributes this disconnect to an estimate that only about one percent of articles in medical journals are scientifically sound. Such results indicate problems with incentives in research. Keywords: incentives, communication, principles JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502049&r=all 523. Quality Control Versus Innovation in Research on Marketing JS Armstrong (The Wharton School) Brownlie and Saren (this issue) claim that “few innovative papers appear in the top marketing journals.” They attribute this problem to incentive structures. They ask what steps might be taken by the various stakeholders to encourage the development and transmission of useful innovative ideas. Presumably, this means findings that might contribute to better practices in marketing management. I address the first two issues (the problem and why it occurs) by using empirical search by myself and others. 1 then speculate about the third issue-procedures for improving the publication prospects for useful innovations. Keywords: quality control, innovation, research, marketing JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502050&r=all 524. Replications and Extensions in Marketing – Rarely Published But Quite Contrary* Raymond Hubbard (Drake University) JS Armstrong (The Wharton School) Replication is rare in marketing. Of 1,120 papers sampled from three major marketing journals, none were replications. Only 1.8% of the papers were extensions, and they consumed 1.1% of the journal space. On average, these extensions appeared seven years after the original study. The publication rate for such works has been decreasing since the 1970s. Published extensions typically produced results that conflicted with the original studies; of the 20 extensions published, 12 conflicted with the earlier results, and only 3 provided full confirmation. Published replications do not attract as many citations after publication as do the original studies, even when the results fail to support the original studies. Keywords: replications, extensions, marketing, research, publishing JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502051&r=all 525. Does the Need for Agreement Among Reviewers Inhibit the Publication of Controversial Findings? JS Armstrong (The Wharton School) Raymond Hubbard (Drake University) As Cicchetti indicates, agreement among reviewers is not high. This conclusion is empirically supported by Fiske and Fogg (1990), who reported that two independent reviews of the same papers typically had no critical point in common. Does this imply that journal editors should strive for a high level of reviewer consensus as a criterion for publication? Prior research suggests that such a requirement would inhibit the publication of papers with controversial findings. We summarize this research and report on a survey of editors. Keywords: publication, controversial findings, review JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502052&r=all 526. Readability and Prestige in Scientific Journals JS Armstrong (The Wharton School) Hartley, Trueman and Meadows [3] contribute useful evidence on whether scientists can gain prestige by writing in a manner that is difficult to read. This has been called the bafflegab theory by some. They concluded that the evidence was not strong. This comment examines some of the conclusions from Hartley, Trueman, and Meadows (HTM) and recommends directions for further research. Keywords: readability, prestige, scientific journal, publication JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502053&r=all 527. Publishing Standards for Research in Forecasting (Editorial) JS Armstrong (The Wharton School) Estella Bee Dagum Robert Fildes Spyros Makridakis When we first began publication of the Journal of Forecasting, we reviewed policies that were used by other journals and also examined the research on scientific publishing. Our findings were translated into a referee's rating form that was published in the journal [Armstrong (1982a)]. These guidelines were favorably received. Most referees used the Referee's Rating Sheet (Exhibit 1 provides an updated version) and some of them wrote to tell us that they found it helpful in communicating the aims and criteria of the journal. Keywords: publishing standards, research, forecasting JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502054&r=all 528. The Importance of Objectivity and Falsification in Management Science JS Armstrong (The Wharton School) In general, I thought that the Boal and Willis “Note on the Armstrong/Mitroff Debate” 1 provided an interesting and fair discussion. 2 The summary of the consequences of the subjective versus objective approaches (Table 1 in their paper) was helpful. It clearly outlined the dilemma faced by scientists: “Should I strive for personal gain or for scientific contributions?” It also described what is likely to happen to the theories generated from the subjective and objective approaches. For example, the authors claimed that the subjective approach will yield a fuller hearing for a theory. Keywords: objectivity, falsification, management science, publication JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502055&r=all 529. Cheating in Management Science (with Comments by M. K. Starr and M. J. Mahoney) JS Armstrong (The Wharton School) Honesty is vital to scientific work and, clearly, most scientists are honest. However, recent publicity about cases involving cheating, including cases of falsification of data and plagiarism, raises some questions: Is cheating a problem? Does it affect management science? Should anything be done? Keywords: cheating, honesty, management science, publication JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502056&r=all 530. Barriers to Scientific Contributions: The Author’s Formula JS Armstrong (The Wharton School) Recently I completed a review of the empirical research on scientific journals (Armstrong 1982). This review provided evidence for an “author’s formula,” a set of rules that authors can use to increase the likelihood and speed of acceptance of their manuscripts. Authors should: (1) not pick an important problem, (2) not challenge existing beliefs, (3) not obtain surprising results, (4) not use simple methods, (5) not provide full disclosure, and (6) not write clearly. Peters & Ceci P&C) are obviously ignorant of the author’s formula. In their extension of the Kosinski study (Ross 1979; 1980), they broke most of the rules. Why, then, is P&C’s paper being published? In my search for an explanation, I learned the following from Peters: (a) After a long delay, the paper was rejected by Science, with advice that it would be appropriate for the American Psychologist. (b) After a long delay, the paper was rejected by the American Psychologist. This history illustrates the predictive power of the author’s formula. Submission was meanwhile encouraged by the editor of the Behavioral and Brain Sciences – a journal specializing in peer interaction on controversial papers – and, after a final round of major revision, the paper was accepted for publication. In this commentary, I describe how P&C violated many rules in the author’s formula. It may be too late to salvage their careers, but the discussion should be instructive to other authors. Keywords: barriers, scientific contriution, publication JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502057&r=all 531. Is Review By Peers As Fair As It Appears? JS Armstrong (The Wharton School) Recent research shows that journal reviewing practices are neither objective nor fair. I propose a procedure to increase the likelihood of publishing important papers. This will be tested by Interfaces for a year. Keywords: publication, review, peers, fairness JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502058&r=all 532. Research on Scientific Journals: Implications for Editors and Authors JS Armstrong (The Wharton School) A review of editorial policies of leading journals and of research relevant to scientific journals revealed conflicts between 'science' and 'scientists.” Owing to these conflicts, papers are often weak on objectivity and replicability. Furthermore, papers often fall short on importance, competence, intelligibility, or efficiency. Suggestions were made for editorial policies such as: (1) structured guidelines for referees, (2) open peer review, (3) blind reviews, and (4) full disclosure of data and method. Of major importance, an author's “Note to Referees” (describing the hypotheses and design, but not the results) was suggested to improve the objectivity of the ratings of importance and competence. Also, recommendations are made to authors for improving contributions to science (such as the use of multiple hypotheses) and for promoting their careers ( such as using complex methods and obtuse writing). Keywords: scientific journals, authors, research, editors JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502059&r=all 533. Advocacy and Objectivity in Science JS Armstrong (The Wharton School) Three strategies for scientific research in management are examined: advocacy, induction, and multiple hypotheses. Advocacy of a single dominant hypothesis is efficient, but biased. Induction is not biased, but it is inefficient. The multiple hypotheses strategy seems to be both efficient and unbiased. Despite its apparent lack of objectivity, most management scientists use advocacy. For example, 2/3 of the papers published in a sampling of issues of Management Science (1955-1976) used advocacy. A review of the published empirical evidence indicates that advocacy reduces tire objectivity of the scientists. No evidence was found to suggest that this lack of objectivity could be overcome by a 'marketplace for ideas' (i.e., publication for peer review). It is recommended that tire method of multiple hypotheses be used. Keywords: advocacy, objectivity, science, publication JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502060&r=all 534. The Case of the Detrimental Drug: Implications for the Stakeholder Theory of Directorship JS Armstrong (The Wharton School) The Winter 1979 issues of Directors and Boards presented readers with a questionnaire based to a degree on a 1969 board incident at Upjohn Corporation [see Box 1 (on page 2) and Box 2 (on pages 3-4)]. In this questionnaire, a profitable drug named “Wondola” was being produced by the so-called International Drug Corporation (IDC). Readers were told that members of the American Medical Association's Council on Drugs had objected to the sale of most fixed -ratio (combination) drugs on the grounds that they grant no benefits superior to those of single- ingredient drugs, and are more likely to produce detrimental side effects, including death. Wondola, with an approximated fatality record of 14 to 22 deaths per year, was no exception. The Federal Drug Administration had asked IDC to withdraw the drug. Readers were asked how they would have voted at a board meeting called to resolve the withdrawal issue. Keywords: stakeholder theory, detrimental drug, JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502062&r=all 535. On the Effectiveness of Marketing Planning JS Armstrong (The Wharton School) Managers are often told that formal planning helps. It is useful to examine whether this is good advice. Thus, I applaud this effort to study marketing planning in New Zealand. Nevertheless, I find it difficult to accept the conclusions drawn by the authors of “Marketing Planning in New Zealand” (MPNZ). I am concerned with the definition of marketing planning, the criteria, and the design of the study. Keywords: marketing, planning, effectiveness JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502064&r=all 536. Strategic Planning And Forecasting Fundamentals JS Armstrong (The Wharton School) Individuals and organizations have operated for hundreds of years by planning and forecasting in an intuitive manner. It was not until the 1950s that formal approaches became popular. Since then, such approaches have been used by business, government, and nonprofit organizations. Advocates of formal approaches (for example, Steiner, 1979) claim that an organization can improve its effectiveness if it can forecast its environment, anticipate problems, and develop plans to respond to those problems. However, informal planning and forecasting are expensive activities; this raises questions about their superiority over informal planning and forecasting. Furthermore, critics of the formal approach claim that it introduces rigidity and hampers creativity. These critics include many observers with practical experience (for example, Wrapp, 1967). Keywords: planning, forecasting, strategic JEL: A Date: 2005-02-11 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502066&r=all 537. MOVEMENT OF WEALTH Gopinath VadirajaRao Bangalore (No affiliation) Economists say that Law of Equilibrium applies to systems of wealth as well. There is no clear idea as to how this Law operates. In systems of matter and energy equilibrium is reached by movement of matter/energy from higher level/concentration to lower concentration. Similar process operates in systems of wealth of different concentrations connected to each other. To express concentration two forms of wealth are required. When we say 4% sugar solution, 4 grams of sugar is dissolved in 100 grams of water. Here two forms of matter; solute and solvent are involved. Similarly in price(price is one expression of concentration of wealth) two forms namely money and goods are involved. Concentration of one form of wealth is always reciprocal of concentration of other form of wealth. In some cases only one form of wealth is mobile and other is static. I have termed such movement as Osmotic Movement of Wealth. When wealth moves from higher concentration to lower concentration, a) Increased savings; b)Increased returns; c) decreased cost OR all three above result. Keywords: Law of Equilibrium, Law of Conservation of Wealth, Osmotic Movement of Wealth JEL: A Date: 2005-02-15 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502067&r=all 538. LAW OF CONSERVATION OF WEALTH Gopinath VadirajaRao Bangalore (No affiliation) Law of Conservation is a universal Law and applies to mass, energy and wealth alike. When wealth is changed from one form to the other, the value of transferee form of wealth equals value of transferor form of wealth. This leads to inferance that wealth can neither be created nor be destroyed but can be changed from one form to the other. The principle of Double Entry Method of Bookkeeping rests on this Law. We cannot create a debit/credit without corresponding credit/debit and the assets and liabilities in a balance sheet should match. All classical economic theories and laws are based on this law. Law of Equilibrium and Law of Conservation are inseparable. One is the cause and the other is the effect. The words 'value in exchange' in the definition of wealth are to be deleted. Loss, depreciation and goodwill may/may not have value in exchange but they are expressed in units of wealth. They are added/subtracted to/from other forms of wealth. Keywords: law of Conservation and Law of Equilibrium JEL: A Date: 2005-02-18 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502068&r=all 539. The Academic Review Process: How Can We Make it More Efficient? Ofer H. Azar (Ben-Gurion University of the Negev) Recently many editors try to reduce the turnaround times of academic journals. Shorter turnaround times, however, will induce many additional submissions of low-quality papers, increasing significantly the workload of editors and referees, and the number of rejections prior to publication. I suggest several ideas how editors can shorten turnaround times and four ideas how they can still avoid frivolous submissions, thus improving the review process efficiency: higher submission fees; requiring authors to review papers in proportion to their submissions; using differential editorial delay – letting low-quality papers wait more; and banning papers from being submitted after a certain number of rejections. Keywords: Academic publishing, first response times, editorial process, review process, refereeing JEL: A1 A2 I2 J44 Z0 Date: 2005-02-20 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502069&r=all 540. Academic Evaluation and Ranking of Economic Journals Ianina Rossi (Departamento de Economia, Facultad de Ciencias Sociales, Universidad de la Republica) Alvaro Forteza (Departamento de Economia, Facultad de Ciencias Sociales, Universidad de la Republica) The purpose of this paper is to serve as an input in the revision of the evaluation guidelines of the Department of Economics FCS – UDELAR (dECON). With this aim, we report on what is taken into account in academic evaluation around the world, and which are the most frequently used methods of evaluation and the sources of information related to them. Finally, we present the evaluation guidelines used in economic departments in Brazil, Chile, Spain and the United States and compare them with those currently used in dECON. This paper has three files attached with detailed information on references and points granted to journals in several academic institutions(http: //www.decon.edu.uy/publica/publicac_.html). Keywords: academic evaluation, bibliographic references, bibliometric indicators, citation analysis, journal ranking, opinion surveys. JEL: A14 Date: 2005-02-21 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502070&r=all 541. Finding a path in the sustainability jungle. A framework for corporate action. Christian Seelos (IESE) Collective concerns about sustainable development and proposals about how to achieve sustainability have produced a confusing body of terminology that is more like a jungle of issues than a framework to enable focused action. Businesses, in particular, with their global reach, influence, capabilities and supposed deep pockets, are expected to contribute more towards sustainability; and yet the lack of clear definitions has left a vacuum of corporate guidance. Corporate Social Responsibility ( CSR) has become a synonym for corporate action towards sustainability, but companies continue to struggle to understand how to deal with this issue. This paper looks at some important drivers that link the overall discussion of sustainability with the business world. It presents a framework for corporate action that facilitates a practical approach grounded in existing market realities. By separating social responsiveness (social compliance) from social responsibility (CSR), it provides a two-phase approach that gives priority to credibly implementing social compliance without missing opportunities for leadership and excellence. The importance of social compliance in legitimizing, strengthening and building trust in market regulatory institutions is emphasized. It is argued that experimenting with unfocused CSR often is a zero-sum game for society, and that CSR without an explicit social compliance framework lacks credibility. >From the basis of a convincingly implemented social compliance framework, corporations may express their social responsibility as a voluntary measure and create social value more directly, without compromising their ability to create economic value. Because of the urgency and need for prioritization to achieve sustainable development it is proposed that corporations shift their CSR focus towards developing countries. Three models that have been identified as opportunities for corporations to contribute to this goal are discussed. Keywords: Sustainability; Sustainable Development; Corporate Social Responsibility; CSR; Bottom of the Pyramid; Social Entrepreneurship; Public-Private-Partnerships; JEL: A Date: 2005-02-24 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502071&r=all 542. Announcement of availability: "Definition & Reality in the General Theory of Political Economy" 2nd edition 2005 Thomas Colignatus (Thomas Cool Consultancy & Econometrics) This paper gives the announcement that the 2nd edition of DRGTPE is available at Dutch University Press. The basic idea of the book is that Keynes's General Theory is generalised even further by including endogenous government in the model, so that we arrive at a truly general Political Economy. By including 'stagnation in economic policy making' in our analysis we arrive at a better understanding of the Great Depression and the Great Stagflation. The general theory also explains why it would be advisable for a democratic society to create an Economic Supreme Court as a separate constitutional power, next to the Legislative, Executive and Judicial branches. This book primarily gives theory and stylized facts, and it is primarily directed at my fellow economists. The colleagues specifically will need to learn to understand the Definition and Reality methodology before they will appreciate that my analysis is scientifically warranted. Much work remains to be done in practical research. And much work remains to be done by the other professions. It may be hoped, none the less, that the parliaments of our democratic nations investigate the issue too, so that there is more hope for improvement in the living conditions of the many victims of the current imbalance of powers. JEL: A00 Date: 2005-02-25 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502072&r=all 543. Performance of Agriculture in the Changing Structure of the Orissa Economy: Issues Revisited Manoranjan Pattanayak (Jawaharlal Nehru University) Bibhu Prasad Nayak (Jawaharlal Nehru University) The economy of Orissa is characterized by the dominance of agricultural sector. Agriculture continues to be the mainstay of the state's economy with contribution about 28.13 percent to net state domestic product during 2001-2002. The agriculture alone provides direct and indirect employment to around 65 percent of the total workforce of the state as per 2001 provisional census. Nevertheless, the sector is continues to be characterized by low productivity.Although the contribution of agriculture to state income has significantly declined, the percentage of work force engaged in agriculture has remained somewhat unchanged. This implies that there has been an overcrowding in agriculture without any perceptible increase in production. Therefore, agricultural growth holds the key to the overall development of the state by way of creating employment, generating income, providing raw materials to the industrial sector and last but not the least ensuring self-reliance in food production and food security to the deprived sections. In this paper, we have studied the pattern of structural change in the last two decades. It is observed that, while the share of Primary sector has gone down drastically in gross state domestic product in 90's vis-a- vis 80's, the secondary or manufacturing sectors share is hovering around 17 percent throughout last fifty years. The only substantial change is occurred in service sector. In 1980, the share of service sector in GSDP was 30 percent. In 2000, it is reached at 45 percent. The issue at hand is that, while the share of primary sector has gone down in state income, it is not showing any trend of releasing labour force. In 1951, 72.86 percent of total workforce was engaged in primary sector, also in 1991, 72.9 percent is workforce is engaged there. Hence, whatsoever developmental effort has been undertaken by state, the fruit is unequally distributed as per capita income of service sector worker is much higher than primary sector. In this scenario, we have gone to explore the productivity in agriculture district wise. It is found that inter district variation in agricultural productivity is very high. Also, the input use in agriculture is skewed across the districts. In the plain and coastal land, the high productivity is explained by higher use of input. It is a vicious circle. Poverty reduces purchasing power i. e. in our case low application of input, and this again leads to poverty due to low agricultural productivity. This gives a strong message. That is Orissa which is a typical rural based agrarian economy, any developmental effort without due consideration for agricultural improvement will be proved nullified. It is also shown that over the years, the plan outlay on agriculture has gone down which reflects the priority of state government. Finally, we have tried to explain the role of several input in explaining agricultural productivity and concluded the paper with few suggestions. Keywords: Structural Change, Agricultural Productivity, Orissa Economy, Panel data JEL: N55 O13 Date: 2005-02-26 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502073&r=all 544. Economics as a zoo. Economists should select labels that advance understanding Thomas Colignatus (Thomas Cool Consultancy & Econometrics) The world has 6 billion people, and rising, and we like them all to know a little bit of economics. This means that there is a huge market for economic theory, economics textbooks and teachers. As groups of economists have the objective to get a little bit of the action, a key strategy seems to be to label oneself differently, say X, so that all customers can be told that if they want the real thing then they need X. What to think of labels like "realistic economics", "heterodox economics" and the "post-autistic economics network" ? If you don't join, are you non-realistic, orthodox and autistic ? Economics is in danger of turning into a zoo. As the animals have taken over the zoo too, there is nothing to control them but common sense. Common sense can be taxed needlessly. The preferred strategy is to provide quality, and then add proper labels that advance understanding. JEL: A00 Date: 2005-02-27 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502074&r=all 545. Models for ranking European institutions of higher learning with an application to data from Greece Georgios Bitros (Athens University of Economics & Business) Monitoring the success of colleges and universities can be useful to many interested parties and for many purposes. For example, it can assist administrations to identify the strengths and weaknesses of their institutions and take corrective actions. It can enlighten the decisions of funding authorities, as transparency and accountability in public life are becoming subjects of wide social concern. And of course it can provide prospective university students and their parents with the data they need to make informed educational decisions. In this paper we propose a flexible analytical framework for ranking institutions of higher learning and apply it to date from 19 Department of Economics, Business Administration, and European International and Economic Studies that operated in Greece in 1998. Our results suggest that the proposed model is robust with respect to several criteria. In particular, the rankings in each category remain unchanged for a wide range of the weights employed to sum the contributions of research, teaching and other activities of the faculties. The top departments retain their relative positions in their categories irrespective of whether the rating criterion is research or teaching, thus ascertaining the finding that good teaching goes hand in hand with good research. And last, but not least, it is found that market ratings of the various departments, as represented by the evaluations of graduates their employers, and other interested parties, are consistent with the rankings based on academic criteria. Keywords: University rankings, models of rankings, rankings of Greek economics and business departments JEL: A29 Date: 2005-02-28 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0502075&r=all 546. Models for ranking European institutions of higher learning with an application to data from Greece Georgios Bitros (Athens University of Economics & Business) Monitoring the success of colleges and universities can be useful to many interested parties and for many purposes. For example, it can assist administrations to identify the strengths and weaknesses of their institutions and take corrective actions. It can enlighten the decisions of funding authorities, as transparency and accountability in public life are becoming subjects of wide social concern. And of course it can provide prospective university students and their parents with the data they need to make informed educational decisions. In this paper we propose a flexible analytical framework for ranking institutions of higher learning and apply it to date from 19 Department of Economics, Business Administration, and European International and Economic Studies that operated in Greece in 1998. Our results suggest that the proposed model is robust with respect to several criteria. In particular, the rankings in each category remain unchanged for a wide range of the weights employed to sum the contributions of research, teaching and other activities of the faculties. The top departments retain their relative positions in their categories irrespective of whether the rating criterion is research or teaching, thus ascertaining the finding that good teaching goes hand in hand with good research. And last, but not least, it is found that market ratings of the various departments, as represented by the evaluations of graduates their employers, and other interested parties, are consistent with the rankings based on academic criteria Keywords: University rankings, models of ranking, ranking of Greek economics and business departments JEL: A29 Date: 2005-03-02 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0503001&r=all 547. Information and Communication Technology (ICT) in Indian Agriculture Deepak Kumar (ICFAI Business School) The Indian agricultural sector is leveraging the Information and Communication Technologies (ICT) to disseminate the right information at the right time. The cost factor in face-to-face information dissemination and the difficulties in reaching the target audiences have necessitated the introduction of ICT in agriculture. This article discusses the different models related to ICT in Indian agriculture like, Kisan call centers, The Gyandoot project, Bhoomi project, Village knowledge centers, and AGMARKNET. In the end, the article discusses the barriers and the outlook of ICT in Indian agriculture. Keywords: Information ,Agriculture JEL: A Date: 2005-03-03 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0503002&r=all 548. Central Banks and how they affect your retirement savings Joseph_ F_ Dunphy_ MBA_ MFP (Joseph_ F_ Dunphy_ MBA) Chris_Stone (Harvard University) VoiceAmericaRadio.com (Surfnetmedia.com) Poor_Richard's_Shoebox (poorrichardsshoebox.com) Radio show interview of expert in economics, on the role of central banks, and how various strategies result in inflation, deflation, recession and depression. Helps individual investors understand some of the current forces at work on the dollar and the euro, and retirement savings. Keywords: Central Banks, World Bank, International Monetary Fund, trade talks,NAFTA JEL: A E F3 F4 N Date: 2005-03-06 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0503004&r=all 549. Cooperation in the Classroom: Experimenting with Research Joint Ventures Michelle Sovinsky Goeree (Claremont McKenna College) Jeroen Hinloopen (University of Amsterdam) This paper describes a classroom exercise that illustrates the investment incentives facing firms when technological spillovers are present. The game involves two stages in which student “sellers” first make investment decisions then production decisions. The classroom game can be used to motivate discussions of research joint ventures, the free-rider problem, collusion, and antitrust policy regarding research and development. JEL: A Date: 2005-03-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0503005&r=all 550. A NEW APPROACH TO DEVELOPMENT- INTEGRATIVE IMPROVEMENT (II) ™: SUSTAINABLE DEVELOPMENT AS IF PEOPLE AND THEIR PHYSICAL, SOCIAL AND CULTURAL ENVIRONMENTS MATTERED Graham Douglas (Integrative Improvement Institute) The purpose of this article is to outline the core principles of Integrative Improvement (II) in comparison with current development approaches, describe key features of II and briefly comment on II in relation to the Sustainable Livelihoods (SL) approach of the United Kingdom Department for International Development (http://www.livelihoods.org/). The current development approaches considered are those selected in 6.1 of the SL Guidance Sheets, namely:- “• Country-level Development Strategies, for example: Poverty Reduction Strategy Papers, Comprehensive Development Frameworks and National Strategies for Sustainable Development; • Medium-Term Expenditure Frameworks; • Sector-Wide Approaches; • Governance and Rights-based Approaches.” Keywords: Economic development, Integrative Improvement, Integrative Thinking, Integrative Governance, Integrative Problem Solving, Integrative Capitalism, Integrative Democracy, Education-Teaching and learning, Training-Human Resources and management, Organisational development, Personal development, Applied Mind Science, Self-organising systems JEL: L M O P Date: 2005-03-12 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0503006&r=all 551. PUBLICATION PERFORMANCE OF ECONOMISTS AND ECONOMICS DEPARTMENTS IN TURKEY (1999-2003) murat cokgezen (marmara university, department of economics) This is the first study evaluating publication performances of economists and economics departments in Turkey. Findings show wide gaps between the Top-Five economics departments and economists affiliated to these universities and the others. Publication patterns of Turkish economists are the same with their counterparts living in the rest of the world. Keywords: performance, ranking, economists, economics departments, Turkey JEL: A Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0503007&r=all 552. Anti-corruption trainig programs in center and eastern Europe bryane michael (University of Oxford) Drawing upon the work of the NISPAcee Working Group on Preventing Corruption in Public Administration, this book reviews the current state of anti-corruption training and education in Central and Eastern Europe. Original data and analysis from anti- corruption trainers and policymakers from over 7 countries in the region -- Kosovo, Latvia, Lithuania, Poland, Russian Federation, Serbia, Ukraine, and others -- is assembled into the compilation. Each country analysis reviews anti- corruption legislation, existing training programmes, and provides detailed case studies from the country. Specific curricula are discussed as are options for countries wishing in adopting best practice from the region. A final chapter will discuss the lessons learned and address wider topics in the formation of anti-corruption training systems in Central and Eastern Europe. Keywords: anti corruption training, corruption prevention, public administration JEL: A Date: 2005-03-16 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0503008&r=all 553. REDEFINING WEALTH Gopinath VadirajaRao Bangalore (No affiliation) Wealth is defined as one that has 'Value in Exchange' and 'Value in use'. Accountants, in financial statements show items like goodwill, loss and depreciation that may/maynot have 'Value in exchange'. Who is right? Mathematics has an answer. Can we add 2a and 3a? Yes. Can we subtract 2a from 7a? Yes. Can one add or subtract 2a to/from 7b? No. Can we add 2meters and 3meters? Yes. Can we subtract 3grams from 5grams? Yes. Can we add or subtract 3 grams from 8seconds? No. Only wealth can be added or subtracted to/from wealth. This is in other words Law of Conservation of Wealth. As items like loss, depreciation and goodwill are added/subtracted to/from other forms of wealth these are forms of wealth. When one says that crop worth $4million is lost, he is expressing loass in units of money and money is a form of wealth. If loss is not a form of wealth, why is it expressed in units of wealth? What is the unit of non-wealth? Therefore, the words 'Value in Exchange' have no relevance. Keywords: Value in Exchange, Value in Use, Law of Conservation of Wealth and Law of Equilibrium JEL: B Date: 2005-03-17 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0503009&r=all 554. Models for ranking European Institutions of higher learning with an application to data from Greece Georgios Bitros (Athens University of Economics & Business) Monitoring the success of colleges and universities can be useful to many interested parties and for many purposes. For example, it can assist administrations to identify the strengths and weaknesses of their institutions and take corrective actions. It can enlighten the decisions of funding authorities, as transparency and accountability in public life are becoming subjects of wide social concern. And of course it can provide prospective university students and their parents with the data they need to make informed educational decisions. In this paper we propose a flexible analytical framework for ranking institutions of higher learning and apply it to date from 19 Department of Economics, Business Administration, and European International and Economic Studies that operated in Greece in 1998. Our results suggest that the proposed model is robust with respect to several criteria. In particular, the rankings in each category remain unchanged for a wide range of the weights employed to sum the contributions of research, teaching and other activities of the faculties. The top departments retain their relative positions in their categories irrespective of whether the rating criterion is research or teaching, thus ascertaining the finding that good teaching goes hand in hand with good research. And last, but not least, it is found that market ratings of the various departments, as represented by the evaluations of graduates their employers, and other interested parties, are consistent with the rankings based on academic criteria. Keywords: University rankings;models of rankings;rankings of Greek economics and business departments JEL: A29 Date: 2005-03-17 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0503010&r=all 555. Heterogeneous Students, Impartial Teaching and Optimal Allocation of Teaching Methods. Carmen Lamagna (American International University Bangladesh) Sheikh Selim (University of Southampton) This paper addresses the issue of identifying optimal mix of teaching methods for an instructor when students are of heterogeneous types. The exact student type cannot be identified ex ante which forces the instructor to act impartially and allocate teaching methods according to some pre-designed plan. In a simple model of instructor-student interaction, we show that if the instructor acts benevolent and impartially towards preparing the initial teaching method plan, there exists a unique optimal mix of teaching methods. We calibrate the impartial teaching model with data on the teaching of Business and Economics related undergraduate and postgraduate units, and find that the characterized optimal teaching method mix differs significantly across different units. Keywords: Active Teaching, Passive Teaching, Impartial Teaching JEL: A Date: 2005-03-17 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0503011&r=all 556. Enviornment purification smoking sticks Maheshjani (G.H.Jani.charitable trust,kampteelane, Rajnandgaon- 491441 C.G. India) In the present world due to grren house effects and carbons , the problem of air pollution is very much effective, if we take any step to stop this pollution ,it will effect badly to economics , USA has denied to stop green house effects , this is paer news , sothat purification of air is another way. Maheshjani Keywords: Enviornment purification herbal sticks JEL: A Date: 2005-03-23 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0503012&r=all 557. The Review Process in Economics: Is it Too Fast? Ofer H. Azar Rewards for publications in good economics journals are very high, while submission fees and other monetary costs associated with submitting an existing manuscript are low. Consequently, the editorial delay (especially the first response time – the time until the first editorial decision), by postponing monetary rewards to publication, constitutes the major submission cost ( from the author’s perspective). Reducing the delay will induce many additional submissions of low-quality papers to good journals, increasing significantly the workload of editors and referees. Moreover, the rejection rate will increase and cause papers to be rejected more times prior to publication, offsetting at least some of the shorter first response times. As a result, the efforts of many editors to reduce the editorial delay, while attracting more submissions to their journals, may have adverse effects from a social perspective, and the optimal delay might be longer than the current average of four months. Keywords: Review process, refereeing, publishing, academia, research, first response times, academic review process JEL: A19 Date: 2005-03-27 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0503013&r=all 558. "Approval Voting" lacks a sound moral base for the individual voter's choice of approval versus non-approval, especially when the Status Quo is neglected Thomas Colignatus (Thomas Cool Consultancy & Econometrics) "Approval Voting" is the voting mechanism reportedly used since 1987 by professional and scientific societies such as the Econometric Society, INFORMS, ASA, AMS, MAA, IEEE and the Social Choice and Welfare Society. The method lacks a sound moral base for the choice by individual members between approval and non- approval, especially when the Status Quo is neglected. Minority rights are better protected when every voter respects the uniform Status Quo, rather than allowing that every voter determines a private (secret) reference point. A better method than Approval Voting is the (Pareto-) Borda Fixed Point rule introduced in the literature in 2001. JEL: A00 Date: 2005-03-28 URL: http://d.repec.org/n?u=RePEc:wpa:wuwpgt:0503014&r=all 559. Demand for and Regulation of Cardiac Services Justin G. Trogdon (School of Economics, University of Adelaide) Efforts to regionalize cardiac services can increase access costs for patients. This study quantifies this trade off by estimating the effects of changes in the regulation of hospital services on treatments and outcomes. A demand model for surgery services is specified in which heart attack victims form expectations of the need for and productivity of surgery in their choice of hospital and treatment. The results indicate that mortality is relatively insensitive to moderate changes in policy: changes in travel costs and volume offset one another. Despite similar health outcomes, the competing policies have different implications for taxpayers. Keywords: heart attack, Medicare, dynamic discrete choice estimation JEL: I12 I18 C35 Date: 2005-02-03 URL: http://d.repec.org/n?u=RePEc:wpa:wuwphe:0502001&r=all 560. Reforming the Taxation of Human Capital: A Modest Proposal for Promoting Economic Growth Paul A. David (Stanford University & University of Oxford) A new scheme of personal income tax reform would eliminate the inefficiencies arising from differences in the tax treatment of investments in intangible human capital and other types of capital formation. It also would offset the exacerbation of those distortions caused by progressive taxation, without requiring abandonment of the latter principle. The proposed incremental reform of the personal income tax regime would permit full deductibility of private costs of education and training, but defer the exercise of the deduction credits. The novel instrument for achieving these objectives is an individually held, non- transferable asset: an untaxed, interest-bearing educational ( expense) deduction account -- christened the “UIBEDA,” and pronounced: “we- bedda.” Under plausibly realistic assumptions about the time profile of education-associated earnings differentials, and the progressiveness of tax rate schedules, it is feasible for the Treasury adopting such a scheme to satisfy an intertemporal balanced budget constraint, while in effect acting as a financial intermediary in the market for human capital investments. The UIBEDA scheme facilitates shifting from direct educational subsidies to the use of publicly subsidized student loans, and also can be readily extended to promote selective immigration of workers who have incurred indebtedness for human capital investments abroad. JEL: I Date: 2005-02-10 URL: http://d.repec.org/n?u=RePEc:wpa:wuwphe:0502002&r=all 561. How Optimal Educational and Fertility Decisions Are Getting Us Apart Jakub Growiec (Warsaw School of Economics) The influence of educational and fertility choices on the evolution of income distributions is studied within an overlapping-generations model. We find that in the long run, two distinct social classes emerge endogenously, characterized by different human capital levels and different household sizes. This finding relies only on parents' private versus public education choices and is further strengthened by the (bounded) trade-off between the quantity of offspring and its quality. Propensity to pay for children's extra education depends on parents' wealth, but also on average schooling efficiency. Increased schooling efficiency increases income inequality. It also pulls fertility up, but not in the poor households. If we introduce stochastic heredity, a calibrated model is able to replicate empirical income distributions endogenously with a fairly good fit. Keywords: private versus public education choice, fertility, human capital, income distribution dynamics, polarization JEL: D31 I21 J13 O15 Date: 2005-03-14 URL: http://d.repec.org/n?u=RePEc:wpa:wuwphe:0503001&r=all