The impact of patents and standards on macroeconomic growth: a panel approach covering four countries and 12 sectors

Based on the assumption that codified technological know-how contributes to economic growth, this paper presents the estimation of a Cobb–Douglas production function, pooling data from four European countries and 12 sectors. The empirical results confirm that both the stock of patents and the stock of technical standards contribute significantly to economic growth in the 1990s. Whereas the results of the country models are rather similar, we observe significant differences between the sector models, which indicate that standards are more important for growth in less R&D-intensive industries and patents in R&D-intensive industries.

Managing portfolio risk in strategic technology management: evidence from a panel data-set of the world's largest R&D performers

In this article, we analyze the impact of firms’ technology bases on their financial performance. By taking a strategic perspective of technology, we argue that it is not sufficient to analyze only the size or novelty/quality of the technology base as technology bases can best be understood as portfolios of individual technologies. In such a framework, risk consideration should be taken into account. More specifically, we argue that increasing technological breadth can serve as a hedge against the inherent uncertainties of developing and commercializing technology, in particular when the technology base is very large or novel. We also propose that technology has higher impacts on financial performance for firms with broader technology portfolios. A similar argument proposes that technological breadth can offset the increased risks of addressing foreign markets. We test our hypotheses using an international panel data-set of large R&D-performing firms. Our results suggest that broad technology portfolios can indeed serve as a hedge against technological and commercialization risks.     

An Equilibrium Model of Catastrophe Insurance Futures and Spreads

This article presents a valuation model of futures contracts and derivatives on such contracts, when the underlying delivery value is an insurance index, which follows a stochastic process containing jumps of random claim sizes at random time points of accident occurrence. Applications are made on insurance futures and spreads, a relatively new class of instruments for risk management launched by the Chicago Board of Trade in 1993, anticipated to start in Europe and perhaps also in other parts of the world in the future. The article treats the problem of pricing catastrophe risk, which is priced in the model and not treated as unsystematic risk. Several closed pricing formulas are derived, both for futures contracts and for futures derivatives, such as caps, call options, and spreads. The framework is that of partial equilibrium theory under uncertainty.     

How suboptimal are linear sharing rules?

The objective of this paper is to analyze criteria for portfolio choice when two investors are forced to invest in a common portfolio and share the proceeds by a linear sharing rule. A similar situation with many investors is typical for defined contribution pension schemes. The restriction implies two sources of suboptimal investment decisions as seen from each of the two investors individually. One is the suboptimal choice of portfolio, the other is the forced linear sharing rule. We measure the combined consequence for each investor by their respective loss in wealth equivalent. We show that significant losses can arise when investors are diverse in their risk attitude. We also show that an investor with a low degree of risk aversion, like the logarithmic or the square root investor, often applied in portfolio choice models, can either inflict or be subject to severe losses when being forced to participate in such a common investment pool.     

Estimating the output gap in real time: A factor model approach

By using a dynamic factor model, we can substantially improve the reliability of real-time output gap estimates for the U.S. economy. First, we use a factor model to extract a series for the common component in GDP from a large panel of monthly real-time macroeconomic variables. This series is immune to revisions to the extent that revisions are due to unbiased measurement errors or idiosyncratic news. Second, our model is able to handle the unbalanced arrival of the data. This yields favorable nowcasting properties and thus starting conditions for the filtering of data into a trend and deviations from a trend. Combined with the method of augmenting data with forecasts prior to filtering, this greatly reduces the end-of-sample imprecision in the gap estimate. The increased precision has economic importance for real-time policy decisions and improves real-time inflation forecasts.     

An economic analysis of standards competition: The example of the ISO ODF and OOXML standards

The objective of this paper is to analyze economic efficiency considerations of standards competition, in order to thereby enrich the discussion about the transfer of the ECMA-376-1 (Office Open XML - OOXML) standard into the ISO/IEC 29500:2008 standard parallel to the already existing ISO/IEC 26300:2006 (Open Document Format for Office Applications - ODF) standard. Based on the available economic literature we identify parameters that need to be considered in the decision for or against a competition between competing standards. The characteristics in the specific case of competition between the ODF and the OOOXML standard clearly justify the decision for two documents standards.     

Emissions Trading with Updated Allocation: Effects on Entry/Exit and Distribution

Allocation of emissions allowances may have significant distributional and efficiency effects. It is well known that cost-efficiency may be achieved if allowances are auctioned or distributed in a lump sum manner, e.g., based on emissions levels before the start of the system (‘grandfathering’). Böhringer and Lange (Eur Econ Rev 49:2041–2055, 2005) show that a cost-effective outcome can also be achieved if the base year for allocation is continually updated (‘updating’), given that banking and borrowing are prohibited. In this paper we examine whether updating alters the entry and exit conditions for firms compared to grandfathering, and how it affects profits for new and existing firms. We find that the two schemes function surprisingly similar: First, the incentives to entry and exit are identical. Second, the total value of free quotas to existing firms, based on emissions before the system starts, is also identical without any auctioning. With updating initial claims for free allowances have a shorter lifetime compared to grandfathering, but quota prices are higher as firms anticipate the effect of current emissions on future claims to free allowances. The two effects exactly cancel each other out. If there is some combination of auction and free allocation, the total value of free quotas will always be highest under grandfathering if the auction rate is the same. Entry and exit incentives are still equal.     

Progressive Taxes and the Labour Market: Is the Trade–off Between Equality and Efficiency Inevitable?

Does an income tax harm economic efficiency more the more progressive it is? Public economics provides a strong case for a definite ‘yes’. But at least three forces may pull in the other direction. First, low–wage workers may on average have more elastic labour supply schedules than high–wage workers, in which case progressive taxes contribute to a more efficient allocation of the total tax burden. Second, in non–competitive labour markets, progressive taxes may encourage wage moderation, and hence reduce the equilibrium level of unemployment. And third, if wage setters have egalitarian objectives, progressive taxes may reduce the need for redistribution in pre–tax wages, and hence increase the demand for low–skilled workers. This paper surveys the theoretical, as well as the empirical literature about labour supply, taxes and wage setting. We conclude that in a second best world, the trade–off between equality and efficiency is not always inevitable.