Lotto nothing? The budgetary impact of state lotteries

Lottery revenues are often touted as an independent revenue source for states. Using 32 years of state financial data, the fallacy of such thinking is demonstrated. Being the first to control for the self-selection of being a lottery state, it is found that overall tax revenues decline with increased lottery sales. Moreover, it is discovered that this decline is driven by a decrease in revenues from general sales and excise taxes, which is only partially offset by increases in income tax receipts. Such findings are attributed to a combination of behavioural and political responses following the lottery's implementation.     

Eine reformierte Finanzverfassung muss für künftige Aufgaben gewappnet sein

Negotiations between the federal level and the Länder to reform the German fiscal equalisation system have begun. Major laws concerning the support of the East German Länder and the system of fiscal equalisation in general have to be replaced by 2020. However, instead of debating the design of the future fiscal equalisation with an emphasis on attaining the constitutionally anchored goal of guaranteeing equivalent living standards throughout the country, the publicly discussed proposals focus too narrowly on incremental changes. They fail to take account of future and current social and economic challenges such as demographic change and regional disparities.     

A PRIMAL–DUAL ALGORITHM FOR BSDES

We generalize the primal–dual methodology, which is popular in the pricing of early‐exercise options, to a backward dynamic programming equation associated with time discretization schemes of (reflected) backward stochastic differential equations (BSDEs). Taking as an input some approximate solution of the backward dynamic program, which was precomputed, e.g., by least‐squares Monte Carlo, this methodology enables us to construct a confidence interval for the unknown true solution of the time‐discretized (reflected) BSDE at time 0. We numerically demonstrate the practical applicability of our method in two 5‐dimensional nonlinear pricing problems where tight price bounds were previously unavailable.     

Path dependent border effects: the case of Poland’s reunification (1918-1939)

The paper explores the persistence of former borders in an integrating economic area, the reborn Polish nation state after World War I. It uses a gravity model of trade for the years 1926-1934 in order to assess the impact of former partition borders that Poland inherited from its period of partition between Germany, Russia, and the Habsburg monarchy (1795-1918). The findings point to a persistent but decreasing impact of former borders over time, interrupted during the Great Depression. Compared to recent findings on border effects between Canada and the US or home bias effects across member states of the contemporary European Union or even between US states the Polish domestic market was quite well integrated.     

the 'making' of an entrepreneur: testing a model of entrepreneurial intent among engineering students at MIT

In the present study a covariance structure model is tested to identify the causes of entrepreneurial intent among engineering students. Specifically, we explore whether steady personal dispositions or whether perceptions of contextual founding conditions have an impact on the intention to found one's own business. The survey of 512 students at the MIT School of Engineering broadly confirms the model. Personality traits have a strong impact on the attitude towards self–employment. The entrepreneurial attitude is strongly linked with the intention to start a new venture. The students' personality therefore shows an indirect effect on intentions. Furthermore, the entrepreneurial intent is directly affected by perceived barriers and support factors in the entrepreneurship–related context. The findings have important implications for policy makers inside and outside universities.     

Patents for genetic inventions: a tool to promote technological advance or a limitation for upstream inventions?

Today's conventional wisdom among economists and lawyers is heavily weighted toward the proposition that strong and broad patent rights are conducive to economic progress. Concerns have been raised as to the extent to which strong patent rights could build up barriers to follow-up research and thus hinder technological advance. This poses a number of difficulties particularly in the area of genetics with respect to the scope of protection and the definition of what is patentable. This article considers the problems of ‘anti-commons’, limitations for upstream inventions, patent thickets and royalty stacking with licenses for genetic inventions. A survey of 53 biotechnology companies in Switzerland builds the empirical basis of the investigation. The survey results confirm that the concepts of ‘anti-commons’, ‘patent thickets’ and ‘royalty stacking’ are indeed relevant. However, they are not highly relevant for the Swiss biotechnology industry from an economic point of view. A broad research exemption combined with a protection limited to concrete disclosure functions of DNA patents and compulsory licensing arrangements are considered as feasible remedies for overcoming certain difficulties with gene patents.     

Assessing the Risk of Liquidity Suppliers on the Basis of Excess Demand Intensities

In this article we introduce the concept of excess volume durations,which are defined as the time until a given amount of buy orsell excess volume is traded on the market. Excess volume durationsindicate the one-sided intensity of liquidity demand and characterizethe risk of a market maker with respect to asymmetric informationand inventory problems. By modeling excess volume durationsbased on Box–Cox-type autoregressive conditional duration(ACD) models, it is shown that market microstructure variablesare predictors for the expected liquidity demand intensity.Moreover, the length of excess volume durations is found tobe positively correlated with the magnitude of the correspondingprice impact and thus the market depth.     

Assessing the impact of communication costs on international trade

Communication costs are frequently cited as an important determinant of trade costs. We test this relationship by incorporating alternative measures of communication costs in a model of bilateral trade. We find that international variations in communication costs indeed have a significant influence on trade patterns. Furthermore, estimates using disaggregated data reveal that communication costs are more important for trade in differentiated products than for trade in homogenous products.     

Privatization from the Acquirer's Perspective: a Mergers and Acquisitions Based Framework

Privatization, especially in developing countries, presents international firms with opportunities for market entry and growth, but acquirers have to consider the distinct characteristics of a state owned enterprise (SOE) and the influence of the government as seller and policy maker. This study introduces a model, based on mergers and acquisitions literature and microeconomic theory, that explains the critical relationships among characteristics of the SOE, the government, and the acquirer. Public administration research suggests that the critical characteristics of SOEs are their sources of funding and their mode of social control of the organization, and recent work in privatizing countries emphasizes the influence of the government. The theoretical framework for the model suggested here is derived from research within the field of strategic management on mergers and acquisitions. The paper develops propositions regarding the organizational fit between private firms and those heretofore owned by governments and discusses research and managerial implications.     

Endowments vs. market potential: What explains the relocation of industry after the Polish reunification in 1918?

How did the location of industry across interwar Poland react to the Polish reunification? After more than 120 years of political and economic separation, Poland was reunified at the end of 1918. In consequence, the removal of internal tariff barriers and improved infrastructure strengthened the domestic market, while foreign market relations were cut off. Similarly, the geographical distribution of factor endowments was changed, for example, through internal migration. How did these forces interact to determine the location of industry? We survey the dynamics of industrial location between 1902 and 1925-1937 and estimate a specification that nests market potential and comparative advantage to quantify their respective impact during the interwar years. The results point to a role for both, comparative advantage and access to markets. We show that both statistically and economically the most important factors were the endowment with skilled labour and inter-industry-linkages.