A comparison of several approximations to the power function of the likelihood ratio test in covariance structure analysis*

In this paper we compare alternative asymptotic approximations to the power of the likelihood ratio test used in covariance structure analysis for testing the fit of a model. Alternative expressions for the noncentrality parameter (ncp) lead to different approximations to the power function. It appears that for alternative covariance matrices close to the null hypothesis, the alternative ncp's lead to similar values, while for alternative covariance matrices far from H_o the different expressions for the ncp can conflict substantively. Monte Carlo evidence shows that the ncp proposed in Satorra and Saris (1985) gives the most accurate power approximations.     

Network neutrality and the nature of competition between network operators

The neutral architecture of the Internet is being challenged by various parties, such as network operators providing the connections to end-users, who are interested in gaining control of the information exchanged over the Internet. What are the effects on competition and welfare of such practices? Currently, there exists very little economic theory on network neutrality. This paper provides a preliminary analysis of the type of economic modeling that can address network neutrality, as well as of the type of results that can be expected.     

The endless need for regulation in telecommunication: An explanation

Telecommunication services have existed as a legal monopoly nearly throughout its entire history. In 1998, telecom market liberalisation was achieved across the European Union (EU) through the introduction of competition among telephone services. Asymmetrical obligations were deemed necessary in order to compensate the market power of the former monopolist.As the evolution of asymmetrical regulation in Spain illustrates, obligations and the telecommunications operators subject to them increased with the regulatory framework established in 2002 in the EU. This new regulatory framework may continue to expand through the inclusion of functional separation as another possible asymmetrical obligation. In short, it seems that the regulatory pressure on the telecommunications industry is increasing, despite the lapse in time since the liberalisation of the industry.In this paper, a methodology developed by the Austrian School of Economics is applied in order to explain why the telecommunication market is subject to increasing regulation in Europe, rather than deregulation, after more than 10 years of liberalisation. In particular, Mises's theory of price control is used to explain the evolution of the regulation of local loop unbundling.     

Who's in charge of the central city? The conflict between efficiency and equity in the design of a metropolitan area

A circular metropolitan area consists of a central city surrounded by a suburb. Households sort over the two jurisdictions based on public service levels and their costs of commuting to the metropolitan center. Using numerical simulations, we show that (1) there typically exist two equilibria: one in which the poor form the voting majority in the central city and the other in which the rich form the majority in the central city; (2) there is an efficiency vs. equity trade-off as to which equilibrium is preferred; and (3) if the central city contains only poor households, equity favors expanding the central city to include rich households. The third result arises not because of a fiscal subsidy from rich to poor households induced by a property tax but rather because of a change in house price capitalization.     

Capital structure around the world: The roles of firm- and country-specific determinants

We analyze the importance of firm-specific and country-specific factors in the leverage choice of firms from 42 countries around the world. Our analysis yields two new results. First, we find that firm-specific determinants of leverage differ across countries, while prior studies implicitly assume equal impact of these determinants. Second, although we concur with the conventional direct impact of country-specific factors on the capital structure of firms, we show that there is an indirect impact because country-specific factors also influence the roles of firm-specific determinants of leverage.