Endogenous location leadership

We analyze a game of timing where Sellers, which have marginal production cost asymmetries, can delay entry and a commitment to a location in a Hotelling type setting. When cost differences are large enough the game becomes a war of attrition that yields Stackelberg behavior where the high cost firm will delay choosing a location until the low cost firm commits to its position. We find interaction effects between timing and the degree of product differentiation and compute timing/location and mixed strategy equilibria through a range of marginal cost differences. The firms maximally differentiate with moderate cost differences; with somewhat greater cost differences there is intermediate differentiation, and; with large cost differences there is a blockading monopoly. The low cost firm always commits to entry immediately whereas the high cost firm either enters immediately, shortly after the low cost leader, or never, depending on the cost differences. Finally, we find that in equilibrium the duopoly is sustained for a larger range of cost differentials and that differentiation is greater than the social optimum.     

Comparing IV with structural models: What simple IV can and cannot identify

This paper compares the economic questions addressed by instrumental variables estimators with those addressed by structural approaches. We discuss Marschak’s Maxim: estimators should be selected on the basis of their ability to answer well-posed economic problems with minimal assumptions. A key identifying assumption that allows structural methods to be more informative than IV can be tested with data and does not have to be imposed.     

On financial deepening and long-run growth

I develop a stylized model of endogenous growth in which the level of financial depth influences an economy’s long-run growth. Financial depth is defined within the model as the ease with which investors can issue equity in the market on new units of capital. I assume that agents differ in the cost of undertaking investment projects and that there is a fixed distribution of such costs across the population. I theoretically identify channels through which financial depth influences growth, both positively and negatively. When considering a specific distribution of costs, I show that the net effect of financial depth on growth is non-monotonic. It depends on the shape of the distribution, as well as the level or stage of financial depth. The results of this paper help to rationalize some findings in the recent empirical literature on the non-monotonic effect of financial depth on long-run growth. The model is even capable of obtaining a negative effect of excessive financial depth on growth, a result that is also found in the empirical literature.     

Complementarity between heterogeneous human capital and R&;D: can job-training avoid low development traps?

This paper uses a non-overlapping generations model of endogenous growth to emphasize the effect of human capital’s heterogeneity on economic growth. In addition to education, we present two different typologies of training. The first, technology-general, is independent of R&D; the second, technology-specific, is connected to the success of innovative activities and it is only provided to workers engaged in research. By extending Redding (Econ J 106:452–470, 1996), we demonstrate that human capital composition is important in determining the probability of innovation and the economy’s growth rate. Moreover, the paper shows that technology-general training avoids low development traps when R&D is absent.     

Patterns of international capital raisings

This paper documents several new patterns associated with firms issuing stocks and bonds in foreign markets that motivate the need for and help guide the direction of future research. Three major patterns stand out. (1) A large and growing fraction of capital raisings, especially debt issuances, occurs in international markets, but a very small number of firms accounts for the bulk of international capital raisings, highlighting the cross-firm heterogeneity in financial globalization. (2) Changes in firm performance following equity and debt issuances in international markets are qualitatively similar to those following domestic issuances, suggesting that capital raisings abroad are not intrinsically different from those in domestic markets. (3) Firms continue to issue securities both abroad and at home after accessing international markets, suggesting that international and domestic markets are complements, not substitutes. Existing theories do not fully account for these patterns.     

Spillovers and absorptive capacity in the decision to innovate of Spanish firms: the role of human capital

This paper investigates whether the existence of knowledge spillovers and the capacity of firms to assimilate them, which we relate with R&D intensity and some human resource management practices, are associated with the decision to innovate of Spanish firms. In order to do this, we employ data from the ‘Central de Balances’ database, which covers both manufacturing and services firms during the period 2003–2007, and use an estimator proposed by Wooldridge [2005. Simple solutions to the initial conditions problem in dynamic nonlinear panel data models with unobserved heterogeneity. Journal of Applied Econometrics 20, no. 1: 39–54] for dynamic random effects discrete choice models. The empirical exercise provides evidence on the positive link between spillovers and the innovative behaviour of companies, not just for the knowledge generated in the same industry, but also for that generated in the same region or by the public sector. Moreover, this link is stronger for those firms with a higher capacity to absorb those spillovers. This ability not only works through firms’ R&D capabilities, but also through factors such as the quality of the labour force, the share of temporary employment and the amount of resources spent in training. In addition to these factors, we find that innovation performance exhibits a high degree of inertia. Further, some other observed firm characteristics, such as size, sales growth, export behaviour, sector capital intensity or financial structure variables, are also found to be relevant determinants of the likelihood of innovation.     

Development and implementation of customer solutions: A study of process dynamics and market shaping

A broad, dynamic network perspective on solution processes remains scarce. This article presents the process of developing and implementing customer solutions and its effects on the wider business environment by investigating customers and suppliers in the global mining industry (Australia, Chile, and Sweden), analyzing the deployment of a new customer solution, and assessing the changes to the competitive environment and focal firms' relationships with other customers and suppliers. It shows that the forces that drive customer and supplier interests and motivation to co-develop customer solutions may change over time, thus redefining the aim and scope of solutions and creating failure risks. Customers present problems; suppliers respond, on the basis of not only the feasibility of the customer-specific solution but also of their evaluation of future solutions in a broader market; then suppliers aim to standardize successful solutions across markets. Customers want close supplier relationships and unique solutions but also like standardized and repeatable solutions, so they can share development costs with competitors and expose the supplier to competition to avoid lock-in effects. From a network perspective, a novel solution can have a market-shaping effect and evoke reactions from other actors who want to enhance their market position. However, these changes are not necessarily deliberate, and the dynamics that market introductions of solutions trigger may be difficult to predict.     

Portfolio choice with indivisible and illiquid housing assets: the case of Spain

This paper studies the investment decisions of Spanish households using a unique data-set, the Spanish Survey of Household Finance (EFF). We propose a theoretical model in which households, given a fixed investment in housing, allocate their net wealth across bank time deposits, stocks and mortgage. Besides considering housing as an indivisible and illiquid asset that restricts the portfolio choice decision, we take into account the financial constraints that households face when they apply for external funding. For every representative household in the EFF, we solve this theoretical problem and obtain the theoretically optimal portfolio that is then compared with households’ actual choices. We find that households significantly under-invest in stocks and deposits while the optimal and actual mortgage investments agree. Considering the three types of financial assets at once, we find that the households headed by highly financially sophisticated, older, retired, richer, and unconstrained persons are the ones investing more efficiently.     

Imposing monotonicity on outputs in parametric distance function estimations

The technology set involved in the estimation of a multi-output production frontier theoretically implies monotonicity on outputs. This is because an efficient firm cannot reduce the vector of outputs holding the vector of inputs fixed while it still belongs to the frontier. In empirical studies dealing with the estimation of parametric distance functions, this hypothesis is often violated by observations with far from average characteristics. To overcome this limitation, we propose a new approach for allowing the easy imposition of monotonicity on outputs in this context. This methodology is tested in the educational sector using Spanish student level data from the Programme for International Student Assessment (PISA) database. The results indicate that a nonnegligible 8.33% of the production units break the monotonicity assumption. Furthermore, although there is no statistically significant difference in efficiency distribution by school ownership, our methodology helps to detect a slight worse mathematical performance for students attending public schools.     

Deconstructing Herding: Evidence from Pension Fund Investment Behavior

In this paper, we examine herding across asset classes and industry levels. We also study what incentives managers at various layers of the financial industry face when investing. To do so, we use unique and detailed monthly portfolios between 1996 and 2005 from pension funds in Chile, a pioneer in pension-fund reform. The results show that pension funds herd more in assets that have more risk and for which pension funds have less market information. Furthermore, the results show that herding is more prevalent for funds that narrowly compete with each other, namely, when comparing funds of the same type across pension fund administrators (PFAs). There is much less herding across PFAs as a whole and in individual pension funds within PFAs. These herding patterns are consistent with incentives for managers to be close to industry benchmarks, and might be also driven by market forces and partly by regulation.