Is the Engel curve approach viable in the estimation of alternative PPPs?

Conventional estimates of purchasing power parities (PPP) rely on cross-country price data. Using Engel curves, Almås (Am Econ Rev 102:1093–1117, 2012) was, however, able to show that PPPs contain substantial bias. Since constructing conventional estimates is expensive and time consuming, Almås’ idea of employing Engel curves is welcome. This article examines the viability of the Engel curve approach to PPP and its sensitivity to differences in relative prices and preferences by estimating Engel curves not only between countries but also for regions within a given country. My empirical evidence from the United States and Norway suggests that the differences can be problematic, but not sufficiently to discredit the new methodology. A pragmatic approach to PPP estimation between countries that are different is to compute a PPP band, rather than a point estimate. I present a practical example of this using expenditure data from 2001, which yields a band for NOK and US dollar.     

Market process(es) and (un)knowledge

By extending an underdeveloped idea of Lachmann, I show that the Austrian theory of the market process à la Kirzner is unable to explain the diversity of market processes because it neglects the imperfect inter-market mobility of factors of production. I show that by taking into account the imperfect mobility of capital equipment and the associated reshuffling costs, it is possible to formulate a set of empirically testable implications about the unfolding of the market process. Furthermore, I show that reshuffling costs shape the context in which the learning process takes place and that the epistemic assumption of structural opacity on which the Austrian theory of the market process relies is not incompatible with the epistemics assumption of structural transparency of neoclassical economics. These epistemic assumptions can be seen as the two poles of a “knowledge spectrum”, from potential omniscience to sheer ignorance.     

The ownership of ratings

We identify the optimal contract between a rating agency and a firm and the circumstances under which simple ownership contracts implement this optimal solution. We assume that the decision to obtain a rating is endogenous and the price of a rating is a strategic variable. Clients hiding their ratings can be an equilibrium only if they are ex ante uncertain of their quality and if the hiring decision is not observable. For some distribution functions, a competitive rating market is necessary for this result to obtain. In this context, competition between rating intermediaries will lead to less information in equilibrium.     

Family Firms’ Corporate Social Performance: A Calculated Quest for Socioemotional Wealth

This study investigates the engagement of family firms in corporate social responsibility. We first compare their corporate social performance (CSP) to non-family firms. Then, following recent evidence on the heterogeneity of family firms, we examine two factors that may influence CSP within family firms: the level of family control and the governance orientation of the country in which they operate. This research is based on a theoretical framework which considers both agency and socioemotional wealth (SEW) influences on family firms CSR engagements. Overall, we find that family firms exhibit lower CSP than non-family firms. But when focusing on family firms, our analyses show a curvilinear relationship between family control and CSP. At lower levels of control, family owners invest more in social initiatives to protect their SEW. Beyond a threshold level of control that we estimate at 36 % in our sample, economic considerations prevail over SEW and social performance starts decreasing. We also find that family firms operating in stakeholder-oriented countries are more attentive to social concerns than those operating in more shareholder-oriented countries.     

The Struggle for a Voice: Tensions between Associations and Citizens in Participatory Budgeting

The emergence of new participatory mechanisms, such as participatory budgeting, in towns and cities in recent years has given rise to a conflict between the old protagonists of local participation and the new citizens invited to participate. These mechanisms offer a logic of collective action different from what has been the usual fare in cities — one based on proposal rather than demand. As a result, urban social movements need to transform their own dynamics in order to make room for a new political subject (the citizenry and the non‐organized participant) and to act upon a stage where deliberative dynamics now apply. This article aims to analyse this conflict in three different cities that set up participatory budgeting at different times: Porto Alegre, Cordova and Paris. The associations in the three cities took up a position against the new participatory mechanisms and demanded a bigger role in the political arena. Through a piece of ethnographic research, we shall see that the responses of the agents involved (politicians, associations and citizens) in the three cities share some arguments, although the conflict was resolved differently in each of them. The article concludes with reflections on the consequences this conflict could have for contemporary political theory, especially with respect to the role of associations in the processes of democratization and the setting forth of a new way of doing politics by means of deliberative procedures.     

Intermediaries,Credibility and Incentives to Collude

A seller contracts and potentially colludes with a certification intermediary. We investigate the intermediary’s incentives to collude, her pricing strategy, and the extent to which buyers rely on the intermediary’s announcements. The probability of collusion is an endogenous variable, determined by the intermediary’s pricing strategy. The extent to which the market relies on the intermediary’s reports, the certification price and the intermediary’s profit decrease as the intermediary becomes less patient. By making certification mandatory, the intermediary loses her ability to screen out low‐quality sellers, which increases the probability of collusion.     

Monetary Union Enlargement,Fiscal Policy,and Strategic Wage Setting*

This contribution develops a framework for studying the effects of the enlargement of a monetary union on macroeconomic performances in the presence of strategic interactions between non‐atomistic labor unions, monetary, and fiscal authorities. We show that the integration of new identical member countries may have beneficial effects, depending on the fiscal policymaking structure. Qualifications to this result are provided under cross‐country asymmetries in the size of the economies, the structure of the labor markets, and the fiscal authorities' preferences.     

A small country's high-tech dilemma: the challenge facing new technology-based firms in Norway

Judging from their profit trends, new technology-based firms have not been very successful in Norway. After ten or more years of activity, fewer than half a dozen has accumulated profits over £1 million. Those that risked large initial investments in order to standardize an innovative new technology enjoyed the greatest amount of success. Most firms were able to develop a prototype, but many had great difficulties gearing up for production. Insufficient financing and know-how were the main problems. Firms have had more problems with production than with marketing, but very few seem prepared for the costs and challenges of an international marketing effort. Most lacked a clear marketing strategy or business plan. Financing was often a problem: there was little private investment, and equity capital was often scarce with a mean debt to equity ratio of less than 30%. Most firms received some sort of public funding, usually in support of product development, but so far it has had little impact on profit trends. A multi-national follow-up study with access to a larger data base would provide many more insights.     

Innovation in care services for the elderly

Ageing and innovation are usually considered to be contradictory phenomena. This article on innovation in care services for the elderly seeks to counter this established view. Taking as its starting point a definition of care services for the elderly that draws on the economics of services, the article advances a simple framework for analysing innovation in terms of ‘targets’. These targets, which make it possible to circumvent the usual economic categories (product and process innovation), are as follows: the various forms of assistance and residential provision for the elderly, the (tangible and intangible) technologies deployed, the services provided, the human environment (carers and relatives) and the institutional environment.