Communication technologies and spatial organization of multi-unit firms in metropolitan areas

Departing from traditional location theory (which treats a firm as a single-unit entity), in this paper we consider that each firm consists of multiple units that exchange information or services. Specifically, we develop a general equilibrium model of the city,in which each firm consists of a front-unit (e.g. business office) and back-unit (e.g. plant or back-office). Each front-unit interacts with all other front-units for the purpose of business communications, while each back-unit exchanges information or management services only with the front-unit of the same firm. Each firm must choose the location of its front-unit and back-unit optimally. The equilibrium spatial configuration of the city is determined as an outcome of interactions among all firms and households through competitive land and labor markets. We show that, depending on parameters, a variety of interesting patterns of metropolitan spatial organization emerges.     

Modelling spatial allocation-location solutions for general practitioner medical services in cities: The equity-revenue maximizing conflict case

A General Practitioner Location-Allocation model is presented which can be used to analyze the availability and distribution of general practitioner medical services. This modelling approach can also be used to locate new practitioner services while insuring minimum levels of income for all general practitioners, decreasing any mal-distribution of practitioner services and increasing the number of people that are provided accessible services.     

Uncertainty across volatility regimes

We propose a nonrecursive identification scheme for uncertainty shocks that exploits breaks in the volatility of macroeconomic variables and is novel in the literature on uncertainty. This approach allows us to simultaneously address two major questions in the empirical literature: Is uncertainty a cause or effect of decline in economic activity? Does the relationship between uncertainty and economic activity change across macroeconomic regimes? Results based on a small‐scale vector autoregression with US monthly data suggest that (i) uncertainty is an exogenous source of decline of economic activity, and (ii) the effects of uncertainty shocks amplify in periods of economic and financial turmoil.     

Sanctions as revelation regimes

Sanctioning in the face of uncertainty has been investigated from the perspective of signaling models, in which an informed target sends a signal and the sanctioner decides to sanction or not. As the more powerful power, however, the sanctioner could take the lead rather than react to the action of the target. Borrowing from contract theory, I present a new approach to the sanctioning of a target of unknown type in which the sanctioner explicitly structures the target’s options before the target moves. The theory shows that in a situation in which a sanctioning state is ignorant of the target’s willingness to comply, it may be able to elicit the revelation of that information through a careful mix of incentives. I derive the comparative statics and provide historical illustrations. I thank Eric Fisher, Massimo Morelli, Chad Rector, Kuba Zielinski, and Byungwon Woo for valuable suggestions on prior versions.     

Exchange rate regimes in the transition economies

D. Mario Nuti illustrates the extraordinary progress made by central and eastern European economies in their trade and exchange regimes. Surprisingly, instant convertibility of exchange rates was established. In spite of diverse exchange rate regimes they have all experienced initial severe undervaluation - the cost of speed and of unrestricted trade - followed by rapid real revaluation and incipient protectionism. Since 1994 an embarras de richesse has appeared: high capital inflows which are either inflationary or costly to sterilise. Lower interest rates are recommended.     

Modelling money demand in Germany

In this paper an empirically stable money demand model for M3 in Germany is presented. The sample period 1975–94 includes German unification. It is shown that this development has not substantially destabilized money demand. Parameter stability is extensively tested and not rejected. Applying encompassing tests, this model encompasses two recent models but is not encompassed by them. Exogeneity of the explanatory variables is discussed and tested along the definitions given in Engle, Hendry and Richard (1983). There is evidence that inflation and long-term interest rates are super-exogenous with respect to the parameters of the demand for M3 model. This result and the empirical long-run money demand function presented in this paper may affect the applicability of the so called ‘P-Star concept’ for German M3. © 1998 John Wiley & Sons, Ltd.     

Multiple regimes and cross-country growth behaviour

This paper provides some new evidence on the behaviour of cross-country growth rates. We reject the linear model commonly used to study cross-country growth behaviour in favour of a multiple regime alternative in which different economies obey different linear models when grouped according to initial conditions. Further, the marginal product of capital is shown to vary with the level of economic development. These results are consistent with growth models which exhibit multiple steady states. Our results call into question inferences that have been made in favour of the convergence hypothesis and further suggest that the explanatory power of the Solow growth model may be enhanced with a theory of aggregate production function differences.     

Modelling China's Economy in Transition

The rapid decentralization in China in the last decade has dramatically reduced the role of central planning. However, the lack of a capital market has promoted rent seeking and resulted in an investment system trapped by the existing structure. The lack of a labor market has led to wage drift. The lack of reform in the social welfare system has caused distorted consumption demands. Moreover, the enterprise-by-enterprise negotiation under the Two-tier Pricing System and the Contract Management Responsibility System makes it dificult to use indirect policy instruments effectively. This paper presents a model incorporating these specific features in order to mimic the actual operation of the economy. Forecasts and policy simulations are made for the period from 1987 to 1995. The results have produced, for the first time, some empirical evidence for a number of hypotheses put forward by Chinese economists in the last five years.     

Political regimes and bank interest margins

The political determinants of banks' profitability are yet to be fully explored in the political economy of finance literature. This article brings politics to the theoretical discussion and the empirical analysis of bank interest margins, arguing that differences in political regimes are crucial in accounting for variations in banking profits across countries. The paper argues that we should expect lower margins from financial intermediation in autocracies than in democracies because of an inherent credibility problem and a lack of oversight in the former. Limited by state-owned banks or regulations favoring cronies, the room for financial elites to develop independent political power to threaten the government should be lower in autocracies than in democracies. I test this hypothesis with nonparametric (matching) and parametric analyses, where the former is used to estimate the latter to lower model dependence. The results consistently show that banks' interest margins in autocracies are lower by some amount between -0.4 and -1.3. This association is also confirmed indirectly when we analyze the impact of banking competition. The existence of big banks in democracies is positively related to banks' profits from intermediation, while the opposite is true for autocracies.     

Linear household technologies

This paper discusses, estimates and formally compares the best known procedures for incorporating demographic variables into complete demand systems. In particular, a class of general procedures belonging to Gorman's family of ‘general linear household technologies’ is introduced. Estimation and comparison of different procedures make use of Italian household budget data for the years 1973–1992, incorporating a single demographic variable (family size) into a Generalized Quadratic Almost Ideal Demand System. In our empirical example, however, even the most general household technologies are unable to fully capture the behavioural heterogeneity shown by the data. Copyright © 2000 John Wiley & Sons, Ltd.     

Modelling Inflation Volatility

This paper discusses estimation of US inflation volatility using time‐varying parameter models, in particular whether it should be modelled as a stationary or random walk stochastic process. Specifying inflation volatility as an unbounded process, as implied by the random walk, conflicts with priors beliefs, yet a stationary process cannot capture the low‐frequency behaviour commonly observed in estimates of volatility. We therefore propose an alternative model with a change‐point process in the volatility that allows for switches between stationary models to capture changes in the level and dynamics over the past 40 years. To accommodate the stationarity restriction, we develop a new representation that is equivalent to our model but is computationally more efficient. All models produce effectively identical estimates of volatility, but the change‐point model provides more information on the level and persistence of volatility and the probabilities of changes. For example, we find a few well‐defined switches in the volatility process and, interestingly, these switches line up well with economic slowdowns or changes of the Federal Reserve Chair. Moreover, a decomposition of inflation shocks into permanent and transitory components shows that a spike in volatility in the late 2000s was entirely on the transitory side and characterized by a rise above its long‐run mean level during a period of higher persistence. Copyright © 2015 John Wiley & Sons, Ltd.     

Modelling Intra-Group Relationships

Within a group of companies, a model is given for management of the relationships between the parent company and its subsidiaries. This is particularly relevant for groups originating from mergers and takeovers, because firms acquired often differ substantially in organizational structure from each other and from the parent company. The model provides a means of harmonizing the organizational structures of parent company and subsidiaries, so as to provide a complete coverage of necessary activities without duplication, and a means of identifying which activities should, in economic terms, be centralized by the parent company, and which should be delegated to the subsidiary. Finally, there is an empirical application of the model to one of the principal Italian banking groups.     

Political regimes: a coalition formation approach

What leads to the stability of a particular regime and what causes its demise? With the aid of formal modeling, the paper illustrates the necessary and sufficient conditions for different political regimes to exist. The game involves two factions representing the differing interests of the civil society and the armed forces of a nation. We illustrate the emergence of political regimes that includes both unconstrained and constrained democracies, both military and civilian autocracies and an alliance formed by a segment of the civil society and the military.     

Employment protection regimes and dismissal of members in worker cooperatives

In connection with the "Great Reset" literature in management and organizational theory, this article discusses human resource sustainability, employment stability, and layoffs in worker cooperatives, a unique organizational form in which employees are members holding residual control rights. Theoretical and empirical contributions show that worker control stabilizes employment better than investor ownership, opening the door to stronger employment protection. The paper leverages key theoretical insights from evolutionary economics and systems theory to discuss the benefits and critical elements associated with limiting member layoffs in worker cooperatives. While strong employment protection can lead to short-term inefficiencies and underperformance due to labour hoarding, imperfections in governance and control mechanisms, it can foster better accumulation and retention of firm-specific human capital and dynamic capabilities, thereby supporting long-term performance.     

De facto and official exchange rate regimes in transition economies

This paper provides an empirical investigation on the discrepancies between official and de facto exchange rate regimes in transition economies. We use a probit model to describe the determination of regime discrepancies. We find that “errors” in the selection of official regimes as well as the macroeconomic developments calling for conflicting adjustments in exchange rate regimes are important determinants of regime discrepancies.     

Incorporating correlation regimes in an integrated stressed risk modeling process

The practice of using stress tests to complement Value at Risk (VaR) estimates suffers from some limitations such as the lack of coherence between a statistical risk measure and a subjective one. On the other hand there is a wide consensus that using the same correlation matrix to design various stress tests is not likely to provide an accurate representation of relationship amongst risk factors in periods of market stress. In this paper we introduce a solution to these problems by explicitly considering different correlation regimes and incorporating the result of the stress test to the traditional market risk measurement models.