Maximal surplus from the pivotal mechanism: a closed form solution

The paper derives a closed form solution for the maximal surplus generated by the pivotal mechanism in the case of a binary public good. The formula may be used to compare the pivotal mechanism to other mechanisms. An illustration is provided to demonstrate how such a comparison may be made. Received: 30 April 1997 / Accepted: 16 June 1998     

Asymptotic distribution of the cointegrating vector estimator in error correction models with conditional heteroskedasticity

This paper explores the asymptotic distribution of the cointegrating vector estimator in error correction models with conditionally heteroskedastic errors. Asymptotic properties of the maximum likelihood estimator (MLE) of the cointegrating vector, which estimates the cointegrating vector and the multivariate GARCH process jointly, are provided. The MLE of the cointegrating vector follows mixture normal, and its asymptotic distribution depends on the conditional heteroskedasticity and the kurtosis of standardized innovations. The reduced rank regression (RRR) estimator and the regression-based cointegrating vector estimators do not consider conditional heteroskedasticity, and thus the efficiency gain of the MLE emerges as the magnitude of conditional heteroskedasticity increases. The simulation results indicate that the relative power of the t-statistics based on the MLE improves significantly as the GARCH effect increases.     

Tests for zero inflation in a bivariate zero‐inflated Poisson model

The score test statistics for testing zero inflation and covariance parameter are proposed in the bivariate zero‐inflated Poisson (BZIP) regression model. The Monte Carlo studies show that the score test and likelihood ratio test for testing zero inflation underestimate the nominal significance level, while the score test for covariance parameter keeps the significance level close to the nominal one. To overcome this nominal level underestimation, we propose a bootstrap method of the score test for the testing problem of zero inflation. An empirical example with covariates is provided to illustrate the results. In addition, score test for zero inflation is also proposed in the BZIP model, which allows a flexible dependence structure using copula.     

Shopping values of clothing retailers perceived by consumers of different social classes

With the advent of diverse forms of retailing, competition among retailers is becoming more intense. Due to this phenomenon, retailers now require marketing strategies that can differentiate themselves from other retailers. However, there is a lack of research on what kind of shopping values consumers perceive from the retailers they visit. This paper analyzes dimensions of shopping values consumers perceive and variations in perceived shopping values according to the types of clothing retailers, be it a department store, discount store, or internet shopping mall. More specifically, the paper analyzes the moderating effect of consumers’ different social class in perceiving the shopping values of each retailer. The results show that shopping value consists of five major constructs: experiential, diversional, reliable, efficient, and self-expressive shopping values. We also found that consumers perceive more experiential, diversional, and reliable shopping values in department stores and internet shopping malls than in discount stores, and self-expressive shopping value is highly perceived in department stores. However, consumers’ social class can moderate the perception of shopping values for department stores and internet shopping malls, but not for discount stores. Discount store shopping is likely to provide consistent shopping values to consumers of all classes. Based on these findings, managerial implications are then presented.     

Determinants of Anti‐Trafficking Policies: Evidence from a New Index

We develop an index measuring the three main dimensions – prosecution, protection, and prevention – of the anti‐trafficking policies of the governments of up to 180 countries over the 2000?2010 period. Overall, developed countries perform better than the rest of the world; compliance with prosecution policy is highest, while governmental efforts to protect victims of human trafficking remain weakest. We employ the new indices to investigate which factors determine anti‐trafficking policies. We find that compliance with anti‐trafficking policies significantly decreases with corruption and is higher in countries that also respect the rights of women. We also find some tentative evidence for spatial dependence in anti‐trafficking policies.     

A computationally fast estimator for random coefficients logit demand models using aggregate data

This article proposes a computationally fast estimator for random coefficients logit demand models using aggregate data that Berry, Levinsohn, and Pakes ( 1995 ; hereinafter, BLP) suggest. Our method, which we call approximate BLP (ABLP), is based on a linear approximation of market share functions. The computational advantages of ABLP include (i) the linear approximation enables us to adopt an analytic inversion of the market share equations instead of a numerical inversion that BLP propose, (ii) ABLP solves the market share equations only at the optimum, and (iii) it minimizes over a typically small dimensional parameter space. We show that the ABLP estimator is equivalent to the BLP estimator in large data sets. Our Monte Carlo experiments illustrate that ABLP is faster than other approaches, especially for large data sets.     

Earnings Management Surrounding CEO Turnover: Evidence from Korea

This article examines the empirical relation between chief executive officer (CEO) turnover and earnings management in Korea using a sample of 403 CEO turnovers and 806 non‐turnover control firms during the period 2001–2010. We classify CEO turnovers into four types depending on whether the departure of the outgoing CEO is peaceful or forced and whether the incoming CEO is promoted from within or recruited from outside the firm. We measure earnings management by both discretionary accruals and real activities management. We also control for the endogeneity of CEO turnover and a potential selection bias using 2SLS and Heckman's two‐stage approach. After controlling for corporate financial performance and governance structure, we find upward earnings management by the departing CEO only when the departure is forced and the new CEO is an insider. In this case, the new CEO also engages in downward earnings management using both discretionary accruals and real activities management. We also find some evidence that the new CEO recruited from outside the firm manages discretionary accruals upward following the peaceful departure of his predecessor. In all other types of CEO turnover, we do not find evidence of significant earnings management by either CEO.     

Testing for two-regime threshold cointegration in vector error-correction models

This paper examines a two-regime vector error-correction model with a single cointegrating vector and a threshold effect in the error-correction term. We propose a relatively simple algorithm to obtain maximum likelihood estimation of the complete threshold cointegration model for the bivariate case. We propose a SupLM test for the presence of a threshold. We derive the null asymptotic distribution, show how to simulate asymptotic critical values, and present a bootstrap approximation. We investigate the performance of the test using Monte Carlo simulation, and find that the test works quite well. Applying our methods to the term structure model of interest rates, we find strong evidence for a threshold effect.