Collective action clauses: How do they affect sovereign bond yields?

We study the effects of the adoption of collective action clauses (CACs) on government bond yields by exploiting secondary market data on sovereign bonds quoted in international markets from March 2007 to April 2011. CACs are assessed security by security. Using a panel data approach, we find a U-shaped effect of CACs on yields according to the credit rating of the issuer. While the impact is negligible for the highest ratings, a significant yield discount emerges for mid-range ratings, which is smaller for bad ratings and possibly insignificant for the worst ratings. This relationship appears fairly robust across a number of checks. This evidence may reflect the fact that CACs are valuable because they help with orderly restructuring unless the perceived probability of default is too small. Nevertheless, at low ratings, this effect can be weakened by an increasing risk of moral hazard.     

A first look at online reputation on Airbnb,where every stay is above average

Marketing Letters - Judging by the millions of reviews left by guests on the Airbnb platform, this trusted community marketplace for accommodations is fulfilling its mission of matching travelers...     

Distribution of wealth and incomplete markets: Theory and empirical evidence

This paper analyses the equilibrium distribution of wealth in an economy where firms’ productivities are subject to idiosyncratic shocks, returns on factors are determined in competitive markets, households have linear consumption functions and government imposes taxes on capital and labour incomes and equally redistributes the collected resources to households. The equilibrium distribution of wealth is explicitly calculated and its shape crucially depends on market incompleteness. With incomplete markets it follows a Paretian law in the top tail and the Pareto exponent depends on the saving rate, on the net return on capital, on the growth rate of population, and on portfolio diversification. The characteristics of the labour market crucially affects the bottom tail, but not the upper tail of the distribution of wealth in the case of completely decentralized labour market. The analysis also suggests a positive relationship between growth and wealth inequality. The theoretical predictions find a corroboration in the empirical evidence of United States in the period 1989-2004.     

Over the ROC methodology: Productivity,economic size and firms’ export thresholds

We identify the minimum combinations of productivity and “economic size” that Italian manufacturing firms need to achieve in order to access international markets. These “export thresholds” are estimated by applying, for the first time in economics, the ROC (receiver operating characteristics) methodology. In this way, we detect a model‐based (rather than a subjectively determined) cut‐off that allows to identify exporters and nonexporters and provides a measure of each firm’s distance from the export threshold. This methodology also paves the way to investigate other determinants of thresholds, thus helping to design more effective policy interventions to reduce barriers to trade.     

Optimal Portfolio Choice Under Decision‐Based Model Combinations

We propose a density combination approach featuring combination weights that depend on the past forecast performance of the individual models entering the combination through a utility‐based objective function. We apply this model combination scheme to forecast stock returns, both at the aggregate level and by industry, and investigate its forecasting performance relative to a host of existing combination methods, both within the class of linear and time‐varying coefficients, stochastic volatility models. Overall, we find that our combination scheme produces markedly more accurate predictions than the existing alternatives, both in terms of statistical and economic measures of out‐of‐sample predictability. Copyright © 2016 John Wiley & Sons, Ltd.     

Normal utilization as the adjusting variable in Neo‐Kaleckian growth models: A critique

As well‐known, the canonical Neo‐Kaleckian growth model fails to reconcile actual and normal rates of utilization in equilibrium. Some recent contributions revive an old proposal for solving this problem—making the normal rate of utilization an endogenous variable that converges to the actual utilization rate—justifying it with new, micro‐founded premises. We argue that these new justifications for the convergence of normal to actual utilization do not stand closer scrutiny. First, the proposed microeconomic model relies on various restrictive assumptions, some of which are mutually inconsistent. Second, the derivation of the macroeconomic adjustment mechanism from the microeconomic analysis involves a logical leap that can be justified only by a very arbitrary assumption with little economic justification. Finally, we discuss the way in which this mechanism has been incorporated into the Neo‐Kaleckian growth model by proposers of this approach. We show that, even if one puts aside, for the sake of argument, the first two points, the existence of autonomous components of demand is sufficient to invalidate the resulting macroeconomic model.     

An evolutionary theory of household consumption behavior

Evolutionary economics badly needs a behavioral theory of household consumption behavior, but to date only limited progress has been made on that front. Partly because Schumpeter’s own writings were focused there, and partly because this has been the focus of most of the more recent empirical work on technological change, modern evolutionary economists have focused on the “supply side”. However, because a significant portion of the innovation going on in capitalist countries has been in the form of new consumer goods and services, it should be obvious that dealing coherently with the Schumpeterian agenda requires a theory which treats in a realistic way how consumers respond to new goods and services. The purpose of this essay is to map out a broad alternative to the neoclassical theory of consumer behavior.     

Group heterogeneity and cooperation on the geographical indication regulation: The case of the “Prosciutto di Parma” Consortium

This paper explores the impact of individual group members’ heterogeneous characteristics, resources and strategies on their level of cooperation on defining the future regulation of Geographical Indications (GIs). By following a “grounded theory” approach, this study combines qualitative evidence from an in-depth study on the “Prosciutto di Parma” Protected Designation of Origin (PDO) Consortium with quantitative evidence based on data collected from 94 Consortium members and analysed through path modelling. Results confirm that (1) “Prosciutto di Parma” Consortium members have highly and increasingly heterogeneous characteristics, assets and strategies and that (2) higher heterogeneity negatively affects members’ agreement on the future level of restrictiveness of “Prosciutto di Parma” PDO as GI and therefore the effectiveness of the collective action. Overall, these findings give light to another internal barrier that may threaten producers’ opportunity of profiting from the use of established and highly recognized GIs. Managerial and policy implications for both “Prosciutto di Parma” Consortium members and other groups governing established and highly recognized GIs are drawn.     

How costly are debt crises?

The aim of this paper is to assess the short and medium-term impact of debt crises on GDP. Using an unbalanced panel of 154 countries from 1970 to 2008, the paper shows that debt crises produce significant and long-lasting output losses, reducing output by about 10 percent after 8 years. The results also suggest that debt crises tend to be more detrimental than banking and currency crises. The significance of the results is robust to different specifications, identification and endogeneity checks, and datasets.