Helping countries develop – the role of fiscal policy – Gupta, Sanjeev, Clements, Benedict & Inchauste, Gabriela

Books reviewed:
Gupta, Sanjeev, Clements, Benedict & Inchauste, Gabriela (Eds.) (2004). Helping countries develop – the role of fiscal policy. 527 pages. Published: Washington, DC: International Monetary Fund.     

Product Reliability,R&D,and Manufacturing Cost Shocks

Suppose a firm’s research and development (R&D) improves product reliability which in turn decreases the cost of product failure for both the firm and its customers. The primary research question of the paper is how a firm with market power optimally adjusts its R&D if it experiences a manufacturing cost shock. Our model suggests that a manufacturing cost shock prompts the firm to do less R&D in the cases where the replacement cost is low or the marginal manufacturing cost is high. Conversely, if the replacement cost is high and the marginal manufacturing cost is low, then the firm increases R&D, mitigating some of the increase in the manufacturing cost. The paper also compares the outcomes for reliability, profits, consumer surplus, and social surplus for the optimal R&D case as compared to the case of doing no R&D, paying particular attention to how exogenous changes in the marginal manufacturing cost affect this comparison.     

Accounting Quality,Liquidity Risk,and Post‐Earnings‐Announcement Drift

Recent microstructure research finds that liquidity risk, in particular its information component, plays an important role in explaining the post‐earnings‐announcement drift (PEAD). We decompose liquidity risk into an accounting‐associated component and a nonaccounting‐associated component and examine their relative importance in explaining PEAD. Our research is motivated by recent findings that liquidity risk is a systematic risk and earnings quality is negatively associated with liquidity risk. We find that the accounting‐associated component is more strongly related to PEAD returns than is its nonaccounting‐associated counterpart. Further analyses reveal that the relation between accounting‐associated liquidity risk and PEAD returns is weaker for firms with greater analyst following. We also find that in a significant market downturn, the relation between accounting‐associated liquidity risk and PEAD returns becomes more pronounced. Our study is the first to document a liquidity risk‐based role of accounting quality in explaining the PEAD phenomenon. It parses out the PEAD risk premia associated with accounting versus nonaccounting sources and, by so doing, sheds light on the role of accounting quality in shaping the liquidity risk‐PEAD returns relation.     

RAINFALL, THE MÉLINE TARIFF, AND WHEAT PRODUCTION IN MEDITERRANEAN FRANCE, 1885–1914

Wheat production stagnated in France during the late nineteenth and early twentieth century, while cultivated acreage and wheat output declined sharply around the Mediterranean from the 1870s. Wheat output never recovered in this region despite the introduction in 1885 of tariff measures, such as the 1892 Méline Tariff. This paper analyses the response of Mediterranean wheat growers to changes in local rainfall and to variations of the duty on imported grains. It uses regional level data for nine administrative divisions located on or near the Mediterranean and assesses the impact of rainfall on yields. It argues that an interplay of protectionist policies and environmental conditions explain the decline of wheat production.     

渝北扩城,打造“国际范”

重庆向北,全域处于重庆都市功能拓展区“重中之重”的渝北区,如何扩城“蜕变”,担当起未来重庆发展的“大梁”? 渝北区区委书记黄玉林接受采访时表示,“渝北将抢抓都市功能拓展区发展机遇,加快建设‘四区一门户’,力争到2016年,全区经济总量在2012年基础上翻一番,占重庆都市功能拓展区的比重达40％,主要经济指标继续保持全市领先,成为都市功能核心拓展区.”