Does Increased Extraction of Natural Gas Reduce Carbon Emissions?

Without an international climate agreement, extraction of more natural gas could reduce emissions of CO₂ as more clean natural gas may drive out dirty coal and oil. Using a computable equilibrium model for the Western European electricity and natural gas markets, we examine whether increased extraction of natural gas in Norway reduces global emissions of CO₂. We find that both in the short run and in the long run total emissions are reduced if the additional quantity of natural gas is used in gas power production in Norway. If instead the additional quantity is exported directly, total emissions increase both in the short run and in the long run. However, if modest CO₂-taxes are imposed, increased extraction of natural gas will reduce CO₂ emissions also when the additional natural gas is exported directed.earlier version of this paper was presented at the 25th Annual IAEE International Conference in Aberdeen June 2002.     

The political economy of redistribution under democracy

We ask what redistributions of income and assets are feasible in a democracy, given the initial assets and their distribution. The question is motivated by the possibility that if redistribution is insufficient for the poor or excessive for the rich, they may turn against democracy. In turn, if no redistribution simultaneously satisfies the poor and the wealthy, democracy cannot be sustained. Hence, the corollary question concerns the conditions under which democracy is sustainable. We find that democracies survive in wealthy societies. Conditional on the initial income distribution and the capacity of the poor and the wealthy to overthrow democracy, each country has a threshold of capital stock above which democracy survives. This threshold is lower when the distribution of initial endowments is more equal and when the revolutionary prowess of these groups is lower. Yet in poor unequal countries there exist no redistribution scheme which would be accepted both by the poor and the wealthy. Hence, democracy cannot survive. As endowments increase, redistribution schemes that satisfy both the poor and the wealthy emerge. Moreover, as capital stock grows the wealthy tolerate more and the poor less redistribution, so that the set of feasible redistributions becomes larger. Since the median voter prefers one such scheme to the dictatorship of either group, democracy survives.We would like to thank, Daron Acemoglu, Marco Basetto, Alberto Bisin, V.V. Chari, Pat Kehoe, Onur Ozgur for very useful comments.     

Exploring purchasing integration in product development

With increasing outsourcing and the growing importance of product innovation as a means for creating competitive advantage, the integration of purchasing and product development processes has become a key issue for many firms. Although, consequently, the integration of purchasing and suppliers in product development has attracted growing attention from practitioners and researchers, most research on the topic remains limited to the context of single development projects. The integration with long-term issues such as technological alignment between supplier and manufacturer is often neglected. This limited conception and the lack of a coherent definition of what purchasing integration in product involvement is form a major impediment to the advancement of knowledge in this field. Therefore, this article develops a framework encompassing various activities across different management levels, which embody the alignment and integration of purchasing and product development processes.     

The moments of the Gompertz distribution and maximum likelihood estimation of its parameters

The Gompertz distribution is widely used to describe the distribution of adult deaths. Previous works concentrated on formulating approximate relationships to characterise it. However, using the generalised integro-exponential function, exact formulas can be derived for its moment-generating function and central moments. Based on the exact central moments, higher accuracy approximations can be defined for them. In demographic or actuarial applications, maximum likelihood estimation is often used to determine the parameters of the Gompertz distribution. By solving the maximum likelihood estimates analytically, the dimension of the optimisation problem can be reduced to one both in the case of discrete and continuous data. Monte Carlo experiments show that by ML estimation, higher accuracy estimates can be acquired than by the method of moments.     

On a general periodic preventive maintenance policy incorporating warranty contracts and system ageing losses

In this paper, a general periodic preventive maintenance (PM) policy for a repairable revenue-generating system is developed and studied. We define ‘ageing losses’ as the difference in revenues generated by an ideal system (no ageing) and a real system that ages over the same period of consideration. It is assumed that preventive maintenance slows the system deterioration process and therefore reduces ageing losses. The proposed model is general in the sense that (1) both the warranty contracts and system ageing losses are incorporated in the maintenance cost modeling and (2) the implementation of PM actions does not have to be strictly periodic. A cost model is developed for the buyer under two decision variables—the calendar time of the first PM and the degree of each PM. Numerical examples are then presented to show the effectiveness of the proposed model. Sensitivity analyses are further conducted to investigate the impact of model parameters on optimal solutions.     

Enhancing television advertising: same-language subtitles can improve brand recall,verbal memory,and behavioral intent

This research explores how same-language subtitles—on-screen text that matches the spoken language—can enhance advertising effectiveness for television commercials on normal viewing audiences outside of foreign-language or deaf-viewer contexts. A preliminary eye-tracker study shows that same-language subtitles capture disproportionate visual attention, and a first study highlights that same-language commercial subtitles can increase brand recall and memory of other verbal ad information. Three further studies using 12 additional ads reinforce the positive effects of subtitles and show how same-language subtitle effectiveness varies with changes in visual and verbal ad complexity. In addition to showing how subtitles can increase behavioral intent, results also highlight how varying subtitle content affects memory gains and illustrate how subtitles can lead to negative effects in the uncommon situation that brand information is missing from the audio. As the efficacy of television advertising becomes increasingly debated, same-language subtitling is a simple way to boost advertising effectiveness.     

Assessing self-selection and endogeneity issues in the relation between activity-based costing and performance

Studies investigating the relation between ABC adoption and performance are inconclusive and plagued with econometric problems. This study extends prior research to investigate the association between ABC adoption and four manufacturing plant performance measures (cycle-time improvement, quality improvement, cost improvement, and profitability) and to assess selection bias and the endogenous nature of their relationship. I use the Heckman (1979) model to assess sample selection bias and the Wooldridge (2002) 2SLS-IV approach, to investigate endogeneity. After controlling for sample selection bias and endogeneity, the coefficient of ABC under the Heckman method and ABC_fit under the 2SLS-IV method becomes significantly higher compared to the coefficient of ABC under the OLS method. In addition, both the inverse Mills ratio, under the Heckman model, and Hausman F-test, under the Wooldridge 2SLS approach, are positive and significant, confirming the presence of both sample selection bias and endogeneity. Overall, I find that controlling for sample selection bias and endogeneity is essential in properly assessing the significance of ABC-performance association.     

The consequences of managerial indiscretions: Sex,lies, and firm value

Personal managerial indiscretions are separate from a firm's business activities but provide information about the manager's integrity. Consequently, they could affect counterparties’ trust in the firm and the firm's value and operations. We find that companies of accused executives experience significant wealth deterioration, reduced operating margins, and lost business partners. Indiscretions are also associated with an increased probability of unrelated shareholder-initiated lawsuits, Department of Justice and Securities and Exchange Commission investigations, and managed earnings. Further, chief executive officers and boards face labor market consequences, including forced turnover, pay cuts, and lower shareholder votes at re-election. Indiscretions occur more often at poorly governed firms where disciplinary turnover is less likely.     

Disaggregating operating and financial activities: implications for forecasts of profitability

Researchers, practitioners, and standard setters emphasize the importance of disaggregating financial statements into operating and financial activities. However, there is a lack of research demonstrating that this disaggregation improves forecasts of profitability. In this study, we consider whether and when the operating/financial disaggregation improves forecasts of profitability. Contrary to the use of an aggregate forecasting approach by most related prior research, we first show that the operating/financial disaggregation only provides forecast improvement over a benchmark model incorporating aggregate information when the components forecasting approach is used. We also compare the operating/financial disaggregation to the unusual/infrequent disaggregation required by US GAAP. We find that the operating/financial disaggregation yields less accurate forecasts than the unusual/infrequent disaggregation. However, when using the components forecasting approach, we find that the combination of both disaggregations improves forecasts of profitability. Finally, we document that the incremental usefulness of the operating/financial disaggregation relative to a benchmark model incorporating aggregate information is a function of growth and accounting conservatism. Overall, our study provides timely evidence concerning how analysts and investors might best use the operating/financial disaggregation for forecasting profitability.