Exceptional performance of multinational suppliers: theory and evidence

Review of World Economics - This paper focuses on an unexamined area of trade—the behaviour of heterogeneous intermediate suppliers facing final producers of different ability and pursuing...     

Institutions for private sector development and pro‐poor growth: Evidence from Vietnam

Using the Vietnam Household Living Standards Survey 2008, we explore the differences in pro‐poor growth performance in provinces in Vietnam according to the quality of the provinces’ institutions that support private sector activity. We exploit the localized and varying effect of French colonial legacy across Vietnamese provinces to address the endogeneity of institutions. We find strong and robust evidence of a positive effect of good‐quality institutions that support private sector activity on pro‐poor growth and that enhanced working hours and hourly wage and extended income from non‐farm self‐employment play critical roles in this outcome.     

Does bank competition promote financial inclusion? A cross-country evidence

The idea of financial inclusion has recently been discussed as one of the key strategies to enhance economic development (World Bank 2014). We move this discussion forward by examining if bank competition is a crucial component enforcing financial inclusion, which is arguably a finance supply-side driven process. In this study, we compute the financial inclusion index built on Sarma (2008) approach to better reflect banks’ willingness and capability to provide financial services. Applying System Generalized Method of Moments to the panel of 93 countries, we find that bank competition promotes financial inclusion.     

Estimating the gravity model when zero trade flows are frequent and economically determined

ABSTRACT

Since the 1950s, we have known that the presence of zero-valued dependent variables can seriously bias econometric estimates whether the zeros are included or excluded. Yet the widely-used gravity model is frequently estimated on samples that include large fractions of zeros. An influential paper by Santos Silva and Tenreyro – based on simulations that include no economically-determined zeros – concludes that the bias problems resulting from zeros and those resulting from heteroscedasticity and nonlinearity can be solved using the Poisson Pseudo-Maximum-Likelihood (PPML) model including the zero values. This paper begins by adapting the Santos Silva and Tenreyro experimental design to include economically-determined zeros to see whether this conclusion continues to hold. With this design, it finds that alternative estimators have lower bias than PPML. Changing to a Monte Carlo design that replicates the much-higher real-world frequency of predicted values near zero restores the finding of lower bias with the PPML estimator. The results highlight the need for very careful design of Monte Carlo experiments when evaluating alternative estimators of the gravity model.     

Shipping cost and development of the landlocked developing countries: Panel evidence from the common correlated effects approach

We estimate the impact of shipping cost on development for landlocked developing countries (LLDCs). Since container trade is important to them, we construct a country-specific measure of shipping cost, called HarpexCost, which combines the global cost of container shipping with information on how exposed to container shipping each LLDC is. We employ the common correlated effects (CCE) estimator of Pesaran (Econometrica, 2006; 55: 967) to first estimate the impact of HarpexCost on the LLDCs’ development, and then recover the actual impact of shipping cost from these estimates. Overall, we observe that shipping cost has large negative effects on the LLDCs. Building upon these results, we provide new estimates on the cost of landlockedness and how trade benefits their development.     

Does Greater Amount of Information Always Bolster Attitudinal Resistance?

Previous research suggests that attitudinal resistance to information that challenges a prior evaluation increases with the amount of information underlying the prior evaluation. We revisit this proposition in a context in which a set of important claims about a target brand are presented either alone—a lower amount of isolated information—or along with other favorable, but less important claims—a higher amount of embedded information. Results from two experiments show that when the challenge occurs immediately after the initial evaluation, a greater amount of embedded initial information does produce greater attitudinal resistance. However, when the challenge occurs after a delay, a lesser amount of isolated information produces greater attitudinal resistance. The findings qualify previous assumptions about the role of prior information in attitudinal resistance, and support a constructive view of judgment revision and attitudinal resistance.     

Analyzing the Memory Impact of Advertising Fragments

Marketers are making increasing use of very brief messages that mention just a brand name or a brand name with a short headline, as in event sponsorship and program endorsements. There has been debate over the effectiveness of these advertising fragments. This paper introduces an approach for controlled testing of the effects of advertising fragments. Using a reaction-time based procedure, we show that a key effect of advertising fragments is to revive established brand associations, even though these associations are not explicitly communicated. This reactivation occurs not only when these names receive focal attention, but also when they receive nonfocal attention.     

Robust Markowitz mean‐variance portfolio selection under ambiguous covariance matrix

This paper studies a robust continuous‐time Markowitz portfolio selection problem where the model uncertainty affects the covariance matrix of multiple risky assets. This problem is formulated into a min–max mean‐variance problem over a set of nondominated probability measures that is solved by a McKean–Vlasov dynamic programming approach, which allows us to characterize the solution in terms of a Bellman–Isaacs equation in the Wasserstein space of probability measures. We provide explicit solutions for the optimal robust portfolio strategies and illustrate our results in the case of uncertain volatilities and ambiguous correlation between two risky assets. We then derive the robust efficient frontier in closed form, and obtain a lower bound for the Sharpe ratio of any robust efficient portfolio strategy. Finally, we compare the performance of Sharpe ratios for a robust investor and for an investor with a misspecified model.     

Optimal consumption policies in illiquid markets

We investigate optimal consumption policies in the liquidity risk model introduced by Pham and Tankov (Math. Finance 18:613–627, 2008). Our main result is to derive smoothness C ¹ results for the value functions of the portfolio/consumption choice problem. As an important consequence, we can prove the existence of the optimal control (portfolio/consumption strategy) which we characterize both in feedback form in terms of the derivatives of the value functions and as the solution of a second-order ODE. Finally, numerical illustrations of the behavior of optimal consumption strategies between two trading dates are given.     

The impact of microcredit on self‐employment profits in Vietnam

This study examines the impact of microcredit on household self‐employment profits in Vietnam. For two indicators of credit participation – a dichotomous participation dummy and the accumulated amount of microcredit received per household – the analysis reveals a positive effect on household profits. The analysis also reveals that an instrumental variable method within a fixed‐effects framework can control for the possible endogeneity of credit and thereby identify the true effect of credit.