Optimal probabilistic forecasts: When do they work?

Proper scoring rules are used to assess the out-of-sample accuracy of probabilistic forecasts, with different scoring rules rewarding distinct aspects of forecast performance. Herein, we re-investigate the practice of using proper scoring rules to produce probabilistic forecasts that are ‘optimal’ according to a given score and assess when their out-of-sample accuracy is superior to alternative forecasts, according to that score. Particular attention is paid to relative predictive performance under misspecification of the predictive model. Using numerical illustrations, we document several novel findings within this paradigm that highlight the important interplay between the true data generating process, the assumed predictive model and the scoring rule. Notably, we show that only when a predictive model is sufficiently compatible with the true process to allow a particular score criterion to reward what it is designed to reward, will this approach to forecasting reap benefits. Subject to this compatibility, however, the superiority of the optimal forecast will be greater, the greater is the degree of misspecification. We explore these issues under a range of different scenarios and using both artificially simulated and empirical data.     

When is it efficient to treat juvenile offenders more leniently than adult offenders?

This paper provides a rationale for two characteristics of juvenile justice systems. First, juvenile justice systems tend to be more lenient in terms of both incarceration rates and time incarcerated. Second, higher expenditures are made to incarcerate a juvenile offender than an adult prisoner. It does this by examining the effect juvenile incarceration has on human capital acquisition and in turn, later incentives to commit crime as adults. In the process, it also offers an explanation of the empirical finding that individuals arrested as juveniles are more likely to be arrested as adults.     

When is a move a migration?

"This paper extends the traditional theory of urban location to derive a consistent model of inter- and intra-regional mobility. It demonstrates that the two are behaviorally distinct. Workplace and residence relocations tend to be 'substitutes' in intra-regional mobility but are 'complements' in inter-regional mobility. Previous empirical papers have neglected the theoretical foundations of intra-regional mobility. In consequence, they have made four types of analytical compromises: defined 'migration' as any change in residence location, used job changes as proxies for workplace mobility, neglected commuting distances, and used estimation techniques that do not reveal the underlying behavior."     

When is there a Kuznets curve? Some evidence from the ex-socialist countries

This paper investigates when there is a Kuznets curve, that is, under which conditions income inequality eventually declines with economic growth. The analysis was performed on a sample of 26 ex-socialist countries from the former Eastern Bloc, during the post-socialist years. These countries had very similar characteristics when socialism collapsed, but very different experiences with transition afterwards, which makes them a suitable group for analysing the relationship between GDP and inequality. We focus on four factors that may shape this relationship – labour market institutions, the market power of companies, social benefits and taxes. Our findings suggest that the Kuznets curve is present only when control of companies’ market power is effective and taxes are high.     

Possibilistic mean–variance portfolios versus probabilistic ones: the winner is...

Decisions in Economics and Finance - In this paper, we compare the mean–variance portfolio modeling based on the possibilistic representation of the future stock returns to the one based on...     

Transparency and inflation: What is the effect on the Brazilian economy?

This paper presents empirical evidence concerning the effect of central bank transparency on inflation considering the Brazilian case after the adoption of inflation targeting. Two indices for measuring transparency, based on forward-looking and backwardlooking views, are developed. Furthermore, empirical evidence is divided into three steps: (i) analysis of simple correlation through scatterplot diagrams; (ii) use of VAR models; and (iii) estimation of different specifications of the Phillips curve using OLS and GMM based on the structural model used by the Central Bank of Brazil (CBB). The findings allow one to conjecture that inflation expectations are well coordinated by the CBB. In short, the transparency of information by the CBB is a very important tool for guiding public expectations and thus contributes to maintain inflation under control.     

When is Effort Contagious in New Venture Management Teams? Understanding the Contingencies of Social Motivation Theory

Consistent with social motivation theory, prior research on managerial motivation suggests that effort is contagious across management team members. In this study, we draw on belongingness theory to develop a model on important boundary conditions to social motivation theory in the management team context. The model predicts that new venture managers react to their teammates’ higher effort levels by investing higher effort levels themselves primarily when they are confronted with a threat – namely, low venture performance and high environmental hostility – but that effort is less contagious when managers face little threat. We test our model with a sample of 103 new venture managers nested in 51 management teams in a longitudinal setting capturing managerial effort over 26 weeks. While we do not find a direct relationship between teammates’ effort and a new venture manager’s subsequent effort, we find support for the crucial role of threat in triggering the contagion of managerial effort. We discuss the contributions of our study for research on management teams, performance feedback, and entrepreneurial effort in new ventures.     

What is the relationship between philanthropy,materiality and public space?

This article explores the dynamic between public space and material representations of philanthropy. It adapts the conception of public space in terms of layers: physical, code and content (Lessig, 2001; Németh, 2012). The article discusses physical forms of philanthropy and the codified norms, processes and relationships in material representations of philanthropy (code). To this end, part one examines how gifts of buildings and the memorialisation of philanthropy embody the philanthropic dominance of public space. Part two explores how the (re)appropriation of public space(s) encapsulates what happens in, and in relation to physical manifestations of philanthropy (content). Specifically; (i) the uses of spaces (ii) deliberation in public spaces; (iii) the decolonisation of philanthropic processes and practices; and (iv) the complementarity of public space and the public sphere. The article offers a novel heuristic for philanthropy and public space that can also inform conversations between development professionals and donors, and public debate.     

When does the manufacturing reshoring strategy create value?

Reshoring has gained a lot of attention recently by academics and practitioners alike, and is promising to become even more relevant in the aftermath of the COVID-19 pandemic. Building on earlier research on the effects of reshoring announcements on the short-term market value of the firm, this work employs an event-study methodology and aims to understand under which circumstances the market perceives reshoring as potentially more (or less) value-creating. The analysis of a sample of 64 reshoring instances from 2005 to 2019, announced by 54 firms from eight developed economies, suggests that investors are more confident in the firm's future cash-flow potential when: a) it invests in productive activities at home, instead of overseas, i.e. ‘kept-from-offshoring’ (as opposed to actual relocations of activities, i.e. ‘back-reshoring’); b) the reshoring instance is communicated as a ‘plan’ (rather than a fixed ‘decision’); c) no state- or government-induced financial incentives are involved; d) the motivations are primarily ‘cost-efficiency seeking’ (rather than ‘customer perceived value seeking’).     

When do institutions suddenly collapse? Zones of knowledge and the likelihood of political cascades

Quality & Quantity - In this paper institutions are treated as stabilized sets of expectations, an approach that encourages investigation of how cultural formations, political regimes, global...     

Recognizing the benefits of diversity: When and how does diversity increase group performance?

Diversity does not only bring positive consequences. It has often been recognized that heterogeneity in teams can reduce intra-group cohesiveness, and that it can lead to conflicts and misunderstandings which, in turn, can lower employee satisfaction, citizenship behaviors and increase turnover. On the other hand, there is also evidence for performance-increasing effects of diversity because it can improve creativity and innovation through the team members' greater variety of perspectives. Little is known, however, about the conditions and the psychological mechanisms required for increasing group performance under diverse settings. Answers to research questions such as how and when diversity influences performance at work are still limited. The purpose of the paper is to provide theoretical answers to these questions by proposing a model of managing diversity which draws on social psychology theories. The model brings a new perspective by identifying the process of learning from one another's identity within a group. This process underlies two different levels of mechanisms (individual and group level). The model proposes that when these social psychological mechanisms are activated, diversity will lead to an increase in group performance. The model also suggests that collective identity is salient and when psychological safety climate are the psychological conditions that activate these mechanisms.     

When is rational behavior consistent with rules of thumb? a link between evolutionary terminology and neoclassical methodology

In this article, a dynamic industry with optimizing interacting firms is formulated as a Markov game. It is shown that a suitable specification of the state space and the interaction structure leads to constant optimal decisions or routine behavior of all firms. This result depends on two crucial assumptions, the homogeneity of the state space and the linearity of the payoff functions. These assumptions may be interpreted as one possibility to understand bounded rationality. Myopic expectations according to the entry–exit process lead to a similar result in the extended entry–exit model. Hence, neoclassical methods are merged with evolutionary terminology.     

When much is not better? Top management compensation,board structure,and performance in Spanish firms

Previous empirical results reveal several contradictions when relating top management compensation, board structure and levels of performance. While fewer directors and more external directors are associated with better supervision, there is no agreement on the effect on top management compensation level. This lack of consensus is even more noticeable when analyzing the effect performance. This paper offers a theoretical framework and a panel data methodology based empirical study to account for how earlier analyses have differed. Given the large board dimension in the Spanish market, information processing perspectives are confirmed which positively link board size with higher top management compensation. Similarly, a higher proportion of external directors reduces top management compensation levels since it improves supervision and reduces insiders' power. Finally, a quadratic relation is obtained between performance and top management compensation. This relation explains a positive effect, supported by agency theory on performance at low levels of management compensation, and a negative effect which is consequence of higher managers' discretion at high levels.     

What is the globalisation of inflation?

This paper studies the globalisation of CPI inflation by analysing core, energy and food components, testing for structural breaks in the relationships between domestic inflation and a corresponding country-specific foreign inflation series at the monthly frequency for OECD countries. The iterative methodology employed separates coefficient and variance breaks, while also taking account of outliers. We find that the overall pattern of globalisation in aggregate inflation is largely driven by convergence of the mean levels of the core component from the early 1990s, compatible with the introduction of inflation targeting in many countries of our sample. There is less evidence of increased synchronisation of shortrun movements in core than aggregate inflation, but an increased role for shortrun foreign energy inflation often contributes to the globalisation effect.     

How warm is the corporate response to climate change? Evidence from Pakistan and the UK

In response to growing consensus among scientists and governments to act fast to avoid dangerous impacts of climate change, many industries have started to prepare for a carbon‐constrained world. However, this response is far from being uniform. Often action is predicated on economic, technological, organizational and institutional drivers and barriers, which vary between countries and across industrial sectors. In order to understand the effectiveness of industry response, it is therefore important to analyse corporate response across different sectors in different countries. Focusing on the nine most energy‐intensive and greenhouse gas (GHG) emitting industrial sectors, this paper compares corporate responses to climate change in Pakistan and the UK. By analysing the divergence of strategies adopted by industries across different sectors in two countries, the paper examines the key factors influencing corporate adoption and implementation of GHG reduction and energy‐efficiency strategies in Pakistan and the UK. Copyright © 2007 John Wiley & Sons, Ltd and ERP Environment.     

When do corporate social responsibility initiatives impact on customer-facing employees? Evidence from India and the Netherlands

The vast majority of the extant literature on corporate social responsibility (CSR) has focused on the macro (firm) level of analysis by examining the linkage between CSR and firm-level outcomes. As such, very few studies have focused on the micro (individual) level of analysis. Against this backdrop, the present study focuses on the individual level of analysis thereby contributing to the emerging psychology of CSR literature, which considers employees' perceptions of their employing organizations' social actions as more important than organizations' objective CSR performance (Rupp, Shao, Thornton and Skarlicki (2013), ‘Applicants’ and Employees’ Reactions to Corporate Social Responsibility: The Moderating Effects of First-Party Justice Perceptions and Moral Identity,’ Personnel Psychology, 66, 895–933). Moreover, the study is one of the first examining the role of context in employee attitudes toward CSR. In particular, it builds on the psychology of CSR (e.g. Rupp et al. 2013) literature to propose a research framework that delineates the moderating effects of satisfaction with payment, satisfaction with the job itself and individualism in the relationship between corporate social performance (CSP) perceptions and customer-facing employees' behavioral outcomes. Data are collected from customer-facing employees in two major organizations in the Netherlands and India. Results suggest a complex interplay between CSP perceptions and the two facets of job satisfaction, and that national context is likely to moderate the contingent effects of CSP perceptions on customer-facing employees' behavioral outcomes.     

Greening the Supply Chain: When Is Customer Pressure Effective?

Suppliers face increasing pressure from their customers to improve their environmental performance. When firms downstream in the supply chain seek to achieve such improvements themselves, they frequently request that their suppliers adopt greener practices. This paper investigates the rationale for suppliers to comply with or resist the mandate of their customers to adopt the international environmental management standard ISO 14001 in the North American automotive industry. We argue that the effectiveness of such a mandate will vary according to the characteristics of the relationship between suppliers and customers. We contrast and test hypotheses based on both transaction cost and information theories to suggest that suppliers, whether in a dependent or distant relationship with their customers, have incentives to comply with the requests of their customers but through different mechanisms. Our study analyzed the characteristics of 3,152 automotive suppliers located in the United States, Canada, and Mexico over the 2000–2003 period. Findings indicate that suppliers with highly specialized assets, as well as younger suppliers, suppliers headquartered in Japan, and those reporting to the Toxic Release Inventory, are more likely to respond to their customers' pressures to adopt the certified management standard ISO 14001.