The time-varying integration of euro area government bond markets

We derive a model in which a standard international capital asset pricing model (ICAPM) for government bonds is nested within an ICAPM with impediments to invest in the local government bond markets. Excess returns or risk premiums are then driven by a country-specific or idiosyncratic stochastic factor on top of the common factor which has a time-varying idiosyncratic impact on the premiums. With this model we investigate the financial integration of government bond markets over time through two channels. First, we allow for gradual convergence from the full ICAPM with impediments to the standard model through the vanishing of the idiosyncratic factors. Second, we allow for gradual equalization of the country-specific impacts of the common factor. State space methods are used to estimate the model with weekly government bond risk premiums for Belgium, France, Italy, Germany, and the Netherlands over the period 1995–2009. Our results suggest, first, that the idiosyncratic factors were almost eliminated by 2006 in all countries but Italy but then reappeared due to the financial crisis that started in 2007. Second, the country-specific exposures to the common international risk factor have converged across countries, with no setback during the crisis.     

CEO Succession Mechanisms,Organizational Context,and Performance: A Socio‐Emotional Wealth Perspective on Family‐Controlled Firms

This article extends the literature on CEO succession and financial performance by addressing corporate owners' mixed motives and desires to protect their interest in being in business. We draw on a Socio‐Emotional Wealth (SEW) perspective to investigate how the choice of one of three succession mechanisms – relay succession, ‘horse races’ among internal CEO candidates, and hiring from outside – may effectively balance trade‐offs between corporate owners' non‐financial SEW motives and the firm's financial performance. We find that implementing one of these succession mechanisms reduces the negative impact that typically characterizes CEO transitions in family firms. We also show that family presence on the board of directors offsets the benefits of having selected these balancing succession mechanisms, in either placing too much emphasis on SEW, or creating negative dynamics that make the chosen succession mechanisms less effective.     

Economic growth and poverty traps in sub-Saharan Africa: The role of education and TFP shocks

This paper investigates the “education-total factor productivity trade-off” in explaining income per worker differences between sub-Saharan (unlucky) and G7 (lucky) economies. First, we examine the dynamics of average years of schooling (i.e. education), capital per worker, income per worker, and total factor productivity (TFP) across sub-Saharan and G7 countries. We confirm that physical capital and education levels partially explain income per worker differences between lucky and unlucky economies. Second, we undertake a novel examination of the impact of technology shocks on income per worker, with the goal of understanding the role of technology variation in causing cross-country income per worker differences, and as a potential contributor to overall slow growth in the sub-Saharan region. In a vector autoregressive (VAR) framework, we show that the impact of “ad hoc” TFP shocks on income per worker is larger in unlucky economies than in lucky ones. We observe that average TFP volatility in the “unlucky world” is eight times higher than in the “G7 world”. We argue that the order of magnitude of the impact heavily depends on the level of the TFP volatility. Last, we suggest that the documented differences in the amount of physical capital and in the productivity of human capital between these two regions add conceptual support for the existence of poverty traps for sub-Saharan Africa.     

Kernel-weighted GMM estimators for linear time series models

This paper analyzes the higher-order asymptotic properties of generalized method of moments (GMM) estimators for linear time series models using many lags as instruments. A data-dependent moment selection method based on minimizing the approximate mean squared error is developed. In addition, a new version of the GMM estimator based on kernel-weighted moment conditions is proposed. It is shown that kernel-weighted GMM estimators can reduce the asymptotic bias compared to standard GMM estimators. Kernel weighting also helps to simplify the problem of selecting the optimal number of instruments. A feasible procedure similar to optimal bandwidth selection is proposed for the kernel-weighted GMM estimator.     

An EC-framework for scientific research and technological innovation

Science and technology have come under the fire of critics over the last ten years or so, but the present situation of mankind will call for more, and not less, human ingenuity. A particular problem for Europe to master is the need to improve the channels for translating scientific achievements into competitive engineering and technology. It is a problem which can best be solved within a coherent policy framework, designed and implemented at Community level.     

DISCRETE CHOICE MODELS WITH MULTIPLE UNOBSERVED CHOICE CHARACTERISTICS*

Since the pioneering work by Daniel McFadden, utility‐maximization‐based multinomial response models have become important tools of empirical researchers. Various generalizations of these models have been developed to allow for unobserved heterogeneity in taste parameters and choice characteristics. Here we investigate how rich a specification of the unobserved components is needed to rationalize arbitrary choice patterns in settings with many individual decision makers, multiple markets, and large choice sets. We find that if one restricts the utility function to be monotone in the unobserved choice characteristics, then up to two unobserved choice characteristics may be needed to rationalize the choices.     

Labor turnover before plant closure: “Leaving the sinking ship” vs. “Captain throwing ballast overboard”

Involuntary job loss in administrative data is commonly identified by exploiting the exogenous nature of mass layoffs or plant closures. However, prior knowledge can lead to selection in the labor turnover of distressed firms. This paper proposes a simple method to determine if and when selective turnover sets in. Based on a rich administrative data set for Austria, we show that separations up to two quarters before plant closure should be included in the treatment group. Moreover, we find that early leavers are associated with significantly lower costs of job loss due to plant closure.     

Optimal simple rules and the lower bound on the nominal interest rate in the Christiano–Eichenbaum–Evans model of the US business cycle

Schmitt-Grohé and Uribe (NBER wp 10724, 2004b) analyzes the optimal, simple and implementable monetary policy rules in a medium-scale macromodel, as the one proposed by Christiano et al. (J Polit Econ 113:1–45, 2005). In doing so, they use a sensible, but somewhat arbitrary constraint to account for the lower bound condition on the nominal interest rate. In this work, we check the robustness of their main results to such a criteria. We find that the optimal policies are actually absolutely robust to the easing of this criterion for all the different cases considered.