Bias of OLS Estimators due to Exclusion of Relevant Variables and Inclusion of Irrelevant Variables

In this paper, I discuss three issues related to bias of OLS estimators in a general multivariate setting. First, I discuss the bias that arises from omitting relevant variables. I offer a geometric interpretation of such bias and derive sufficient conditions in terms of sign restrictions that allows us to determine the direction of bias. Second, I show that inclusion of some omitted variables will not necessarily reduce the magnitude of bias as long as some others remain omitted. Third, I show that inclusion of irrelevant variables in a model with omitted variables can also have an impact on the bias of OLS estimators. I use a running example of a simple wage regression to illustrate my arguments.     

Trends and Future Directions in Online Marketing Research

Over the last decade, the increased adoption of the Internet in public life as well as in developing businesses has led to a phenomenal rise in academic research on online marketing. This article is set to extensively review scholarly articles appearing from 2000 to 2014 on the topic from 10 top-tier academic journals to understand the research trends in the domain. A literature review has reported eight major subjective categories with an analysis of online marketing effectiveness framework. This review found three most significant subject categories: (1) online marketing issues; (2) Internet usage, perception, and attitude; and (3) online shopping and e-commerce. Additionally, some new online marketing research topics such as word-of-mouth, user-generated content, and social network are also highlighted. Finally, a selection of research topics that got the maximum attention of researchers is presented along with discussion of the future research directions in the online marketing space.     

Impact of Payment Technology on Seasonality of Currency in Circulation: Evidence from the USA and India

Journal of Quantitative Economics - This paper examines the impact of payment technology on seasonality in currency in circulation. We specify that total transaction in a period follows a Gompertz...     

Estimating welfare changes from efficient pricing in public bus transit in India

Three different and feasible pricing strategies for public bus transport in India are developed in a partial equilibrium framework with the objective of improving economic efficiency and ensuring revenue adequacy, namely average cost pricing, marginal cost pricing, and two-part tariffs. These are assessed not only in terms of gains in economic efficiency, but also in changes in travel demand and consumer surplus. The estimated partial equilibrium price is higher in all three pricing regimes when compared to the current price. As a result, consumer surplus falls in all three cases. The price increase is much larger with average cost pricing compared to marginal cost pricing or two-part tariffs, and hence a larger fall in demand and consumer surplus occurs due to average cost pricing. While there is a gain in economic efficiency from marginal cost pricing and two-part tariffs, this improvement comes at the expense of reduced public bus transit demand and consumer surplus, given the price inelastic public bus transit demand estimated for India. Given the mobility needs and the developmental concerns of a growing economy such as India, the challenge for policy makers is to balance the gains in economic efficiency in the public bus transit sector against other social, political, and developmental goals.     

On the first passage time processes of brownian motion with positive drift

Abstract

The first passage time processes of Brownian Motion with positive drift are of considerable importance, particularly in life-testing or life-time situation as a natural consequence. It has been used in sequential analysis, e.g. finding the best test for testing the hypothesis of no drift versus the alternative of positive drift in a Brownian Motion. Various properties of the first passage time process of Brownian Motion with positive drift are reviewed and several new properties are investigated. In short, γ-variation properties, characterization, and behaviour at infinity are discussed.     

External Venturing and Discontinuous Strategic Renewal: An Options Perspective

This study examines the relationship between a firm's venturing activities and its undertaking of strategic renewal. The study was motivated by some important gaps in the corporate entrepreneurship literature on venturing and renewal. The extant literature has not focused on the different types and dimensions of firms' renewal activities. In particular, discontinuous renewal involving shifts in firms' core businesses is not well understood. Moreover, the conditions that drive firms to undertake strategic renewal have not been examined. For example, it is not known how venturing increases or reduces the benefits of undertaking renewal. This study focuses on a discontinuous form of renewal involving major changes in firms' core businesses and examines firms' external venturing activities that complement their internal development. We examine corporate venture capital (CVC) investments, which are direct minority equity investments made by established companies in privately held ventures. Discontinuous renewal is conceptualized as resulting from a set of related, and often sequential, managerial decisions. The first managerial decision is to initiate growth in a business that is relatively newer or smaller for the organization. The second decision is to move away, or even withdraw completely, from the current core business that enabled prior growth and prosperity for the firm and served as its primary revenue earner. Employing a real options perspective, we argue that CVC investments create growth options in new and existing businesses but do not result in firms' withdrawal from existing businesses. Therefore, we expect CVC activity to be negatively associated with the likelihood of a firm undertaking discontinuous renewal. We also propose that the benefits of withdrawing from existing businesses are even lower, and the costs even higher, for firms in dynamic industries and for firms that possess strong internal capabilities. The predictions of the study are tested using longitudinal data on 477 firms from the 1990 Fortune 500 list for the period 1990–2000. We find support for all our predicted hypotheses. These results help address important limitations in the corporate entrepreneurship literature. The study also contributes to the real options and organizational capabilities literatures.     

Rural–urban migration,urban unemployment and the structural transformation of a dual economy

This paper restructures the Harris–Todaro model in such a way that rural–urban migration in the presence of urban unemployment brings in the structural transformation desired for a developing dual economy by expanding the industrial sector before any policy is introduced to cure the domestic factor market distortion. Furthermore, migration may also help to eliminate unemployment as well as the wage gap in the economy. When international trade is introduced in this restructured dual economy, trade policies would have new implications; for example, unlike in the original Harris– Todaro structure, the import tariff may bring full employment and eliminate wage gaps between the sectors.     

The appropriateness of default investment options in defined contribution plans: Australian evidence

For participants in defined contribution (DC) plans who refrain from exercising investment choice, plan contributions are invested following the default investment option of their respective plans. Since default investment options of different plans vary widely in terms of their benchmark asset allocation, the most important determinant of investment performance, participants enrolled in these options face significantly different wealth outcomes at retirement. This paper simulates the terminal wealth outcomes under different static asset allocation strategies to evaluate their relative appeal as default investment choice in DC plans. We find that strategies with low or moderate allocation to stocks are consistently outperformed in terms of upside potential of exceeding the participant's wealth accumulation target at retirement as well as downside risk of falling below that target outcome by aggressive strategies whose allocation to stocks approach 100%. The risk of extremely adverse wealth outcomes for plan participants also does not appear to be very sensitive to asset allocation. Our evidence suggests the appropriateness of strategies heavily tilted towards stocks to be nominated as default investment options in DC plans unless plan providers emphasize predictability of wealth outcomes over adequacy of retirement wealth.     

MARX‐BIASED TECHNICAL CHANGE AND THE NEOCLASSICAL VIEW OF INCOME DISTRIBUTION

This paper empirically tests two competing views about capital–labour substitution at the aggregate level in capitalist economies: the classical model with Marx‐biased technical change versus the neoclassical model. Following Foley and Michl (1999 ), the classical viability condition of technical change is used to draw out two different hypotheses about the profit share in national income corresponding to the two competing models. A stochastic version of the viability condition is empirically tested with data from the Extended Penn World Tables 2.1 using a simple cross‐country estimation strategy. It is found that the data overwhelmingly rejects the neoclassical theory.     

Regulation,Minimum Wage and Informality: Introduction to Symposium

Are markets in developing and transition economies over‐regulated or under‐regulated? This is a perennial question in the development discourse, but one for which answers appear to come more from preset ideology than from context‐specific analysis and evidence. These issues become even more pressing when the debate turns to the links between regulation, deregulation and inequality. The recent experience of rising inequality in many countries has also brought to the fore predictable policy positions. A key aspect of labor regulation in developing countries, and one becoming more prominent in the era of rising inequality, is the minimum wage. The range of issues around regulation, minimum wage and informality was addressed by papers presented to a conference held in New Delhi on December 17–18, 2014. The conference was co‐sponsored by the World Bank, UK Department for International Development, Cornell University and Columbia University. The organizers of the conference were Kaushik Basu, Stefan Dercon, Ravi Kanbur and Jan Svejnar. A selection of papers from the conference which passed the usual review procedures of the Review of Development Economics, and a further selection of papers from those submitted to the journal, form this symposium.