When is multidimensional screening a convex program?

A principal wishes to transact business with a multidimensional distribution of agents whose preferences are known only in the aggregate. Assuming a twist (= generalized Spence-Mirrlees single-crossing) hypothesis, quasi-linear utilities, and that agents can choose only pure strategies, we identify a structural condition on the value b(x,y) of product type y to agent type x — and on the principal?s costs c(y) — which is necessary and sufficient for reducing the profit maximization problem faced by the principal to a convex program. This is a key step toward making the principal?s problem theoretically and computationally tractable; in particular, it allows us to derive uniqueness and stability of the principal?s optimal strategy — and similarly of the strategy maximizing the expected welfare of the agents when the principal?s profitability is constrained. We call this condition non-negative cross-curvature: it is also (i) necessary and sufficient to guarantee convexity of the set of b-convex functions, (ii) invariant under reparametrization of agent and/or product types by diffeomorphisms, and (iii) a strengthening of Ma, Trudinger and Wang?s necessary and sufficient condition (A3w) for continuity of the correspondence between an exogenously prescribed distribution of agents and of products. We derive the persistence of economic effects such as the desirability for a monopoly to establish prices so high they effectively exclude a positive fraction of its potential customers, in nearly the full range of non-negatively cross-curved models.     

When is a Nation? Comparing Lithuania and Georgia

The article uses a constructivist reformulation of the question 'when is a nation?' as a parameter of comparison for the analysis of nationalist discourses on history in post-socialist Lithuania and Georgia. It shows that Lithuanian nationalists, by means of a critical reassessment of national history, described the nation as something that still had to be created, whereas Georgian nationalists referred to the unchallenged image of a glorious past and so treated the nation as something to be simply picked up from history. It is also argued that these diverging historiographical narratives correspond to different conceptualisations of the notion of the nation. While Lithuanians nationalists conceptualised the nation in the tradition of the French Revolution as a category that aims at the reconfiguration of state-society relations, Georgian nationalists identified it with traditional modes of organising social relations.     

Why is mobile capital taxed?

The government for a jurisdiction has both capital and labor taxes at its disposal. It taxes mobile capital to finance the public good despite the desire to attract capital and despite the tax on immobile labor if capital incomes are distributed more unequally than labor incomes among the residents of the jurisdiction. The result extends to progressive taxes and to pure redistribution.     

When is reputation bad?

In traditional reputation models, the ability to build a reputation is good for the long-run player. In [Ely, J., Valimaki, J., 2003. Bad reputation. NAJ Econ. 4, 2; http://www.najecon.org/v4.htm. Quart. J. Econ. 118 (2003) 785–814], Ely and Valimaki give an example in which reputation is unambiguously bad. This paper characterizes a class of games in which that insight holds. The key to bad reputation is that participation is optional for the short-run players, and that every action of the long-run player that makes the short-run players want to participate has a chance of being interpreted as a signal that the long-run player is “bad.” We allow a broad set of commitment types, allowing many types, including the “Stackelberg type” used to prove positive results on reputation. Although reputation need not be bad if the probability of the Stackelberg type is too high, the relative probability of the Stackelberg type can be high when all commitment types are unlikely.     

When is a Nation not a Nation? The Case of Anglo-British Nationhood

This article examines the articulation of Anglo-British national identity in the tabloid Press, paying particular attention to how the emotions of shame, sorrow, defiance and nostalgia underlie much tabloid discourse of nationhood. These are depicted either as emotions aroused in the writer (and, by extension, the reader) by aspects of the Anglo-British nation; or as emotions which the nation itself (and, again, the reader) is experiencing. The exaggeration and intensity of this discourse suggests that the tabloids are adopting a special role in defending not only the virtues of the Anglo-British nation but also the very notion of nationhood, at a time when this is being undermined by various social, political and economic forces. The study thus provides insight into the dynamic and contested character of contemporary Anglo-Britishness, and illustrates that the nation is a process rather than an entity that either exists or does not exist.     

When is there state independence?

Whether a preference relation can be represented using state-independent utilities as opposed to state-dependent utilities may depend on which acts count as constant acts. This observation underlies an extension of Savage's expected utility theory to the state-dependent case that was proposed in this journal by Edi Karni. His result contains a condition requiring the existence of a set of acts which can play the role of constant acts and support a representation involving a state-independent utility function. This paper contains necessary and sufficient conditions on the preference relation for such a set of acts to exist. Results are obtained both for the Savage and the Anscombe and Aumann frameworks. Among the corollaries are representation theorems for state-dependent utilities. Relationships to Karni's work and extensions of the results are discussed.     

When do thick venture capital markets foster innovation? An evolutionary analysis

In this paper, we examine the trade off between different effects of the availability of venture capital on the speed of technological progress in an industry. We consider an evolutionary industry simulation model based on Nelson and Winter (1982), in which R&D efforts of an incumbent firm generate technological know-how embodied in key R&D employees, who might use this know-how to found a spinoff of the incumbent. Venture capital is needed to finance a spinoff, so that the expected profits from founding a spinoff depend on how easily venture capital can be acquired. Accordingly, thick venture capital markets might have two opposing effects. First, incentives of firms to invest in R&D might be reduced and, second, if spinoff formation results in technological spillovers between the parent firm and the spinoffs, the generation of spinoff firms might positively influence the future efficiency of the incumbent’s innovation efforts. We study the manner in which this tradeoff influences the effect of venture capital on innovation expenditures, speed of technological change and evolution of industry concentration in several scenarios with different industry characteristics.     

Expropriation risk and FDI in developing countries: Does return of capital dominate return on capital?

Previously reported effects of institutional quality and political risks on foreign direct investment (FDI) are mixed and, therefore, difficult to interpret. We present empirical evidence suggesting a relatively clear, statistically robust, and intuitive characterization. Institutional factors that affect the likelihood of an abrupt and total loss of foreigners’ capital (i.e., return of capital) dominate factors that affect rates of return conditional on a strictly positive terminal investment value (i.e., return on capital). The evidence is consistent with the hypothesis that expropriation risk is most important among the available measures of different dimensions of institutional quality. A one-standard-deviation reduction in expropriation risk is associated with a 72% increase in FDI, which is substantially larger than the effects of any other dimensions of institutional quality as simultaneously estimated in our empirical models of expected FDI inflows. We show that this evidence is consistent with the predictions of a standard theory of FDI under imperfect contract enforcement and multiple dimensions of political risk.     

When is a “wait and see” approach to invasive species justified?

Predictions of damages and damages that might be avoided from invasive species control policies are marred by uncertainty that has both economic and ecological roots. Public policies directed at invasive species typically lag their detection. One possible explanation is the coupling of uncertainty with political and economic commitments creates an incentive to delay a policy response in order to gain more information on how damaging the invasion will be – a “wait and see” approach. We investigate whether this rationale is justified by identifying invasion characteristics that require the wait and see approach often adopted by lawmakers and government agencies. The model shows that the source of uncertainty and degree of policy irreversibility matter and allows the classification of invasive species with a low rate of spread and low levels of uncertainty as those where policies can be optimally timed in the future.     

Human capital and income inequality in India: is there a non-linear and asymmetric relationship?

The article attempts to provide empirical evidence on the relationship between human capital and income inequality in India in a non-linear and asymmetric framework. To capture both long-run and short-run asymmetries, we have employed the non-linear autoregressive distributed lag approach using the relevant data from 1970 to 2016. Findings of the article suggest that education expansion acts as a major factor in reducing prevailing high income inequality, that is an increase in average years of schooling results in more equal distribution of income. In contrast, high economic growth, inflation and trade openness create unequal distribution of income. The asymmetric causality test results indicate that there is unidirectional causality running from female human capital, economic growth and inflation to income inequality. From a policy perspective, we suggest that education expansion should be used as a powerful tool to mitigate income inequality by emphasizing the quality of education. At the same time, policies geared towards social benefits, inclusive education, training for unskilled workers and price stability should be encouraged to attain fair income distribution in India.     

When is money neutral under flexible exchange rates?

The paper studies the conditions for the neutrality of money under flexible exchange rates in an extended real-wage Mundell–Fleming model, with special emphasis on the specification of the behavior functions to correspond to their foundations in closed-economy macrotheory.It is shown that monetary expansion causes output first to decline, to eventually rise above its original level. However, if interest earnings on foreign securities dominate the trade balance in the expression for the exchange rate, monetary expansion leads to an appreciation of the exchange rate, while having an expansionary output effect. Money is neutral in the long run if either the wealth effect or foreign interest payments are abstracted from; if both are abstracted from, it is neutral also in the short run. Short and long-run neutrality results also if wealth consists only of foreign securities. The above responses hold both for net creditors and – with a minor qualification – debtors.     

When is the Nation? Constituent Elements and Processes

Two types of approach to the question 'When is the Nation?' are discussed: conditional and temporal. The relationship between the two approaches are analysed on three levels. First, through an analysis of various theories of nation and nationalism, it argues that determination of the emergence of the nation through enumeration of different 'constituent elements' fails to distinguish the nation from other social groups. Second an analysis of Croatian nationalist ideologies reveals numerous potentialities to define the same nation by emphasizing various, and sometimes contradictory, constituent elements. Finally, a survey conducted on a sample of Croatian population shows that there is no final set of constituent elements that could define the same nation in a specific historical moment. Therefore, the article concludes that the question 'When is the Nation?' could be answered mainly by identifying specific social processes.     

When sociable workers pay off: Can firms internalize social capital externalities?

We use an endogenous growth model to contrast the socially optimal allocation of human capital with the decentralized solution, in a context where workers make the choices that determine social capital accumulation. As social capital is expected to increase productivity but is not traded in markets, a positive social capital externality is identified. We discuss the possibility that, in response to this externality, firms subsidize social capital accumulation activities, incurring into additional costs that are recouped through productivity gains. This reaction by firms may be seen as a justification for some corporate social responsibility actions targeted at workers, although a full internalization of the externality does not look achievable in practice.     

What is a farecard worth?

In this paper wer use the duality approach to demand theory to evaluate the value to a consumer of a farecard which allows travel at zero marginal pecuniary cost. The analysis is extended to networks with two modes of travel (bus and underground).Illustrative figures are calculated for farecards on the London Transport network.     

When are ‘sharks’ beneficial? Corporate venture capital investment and startup innovation performance

The effect of corporate venture capital (CVC) investment on startup innovation performance has been examined in the extant literature. However, when this effect is enhanced is the important but relatively understudied question in strategy and entrepreneurship research. We build on the idea of regarding CVC investment relationships as learning alliances and introduce two situational factors as boundary conditions on the performance effect of CVC investment. In order to handle the endogeneity of CVC investment, we employ propensity score matching and differences-in-differences techniques. Based on the sample of startups in the human biotechnology industry in the United States, we find that CVC funding is beneficial for startup innovativeness when CVC investment is established after initial independent venture capital funding. Moreover, a startup’s patent stock before CVC funding also influences on that effect.     

When is Foreign Aid Effective in Fighting Terrorism? Threshold Evidence

Building on the previous literature, we assess when foreign aid is effective in fighting terrorism using quantile regressions on a panel of 78 developing countries for the period 1984–2008. Bilateral, multilateral and total aid indicators are used whereas terrorism includes: domestic, transnational, unclear and total terrorism dynamics. We consistently establish that foreign aid (bilateral, multilateral and total) is effective at fighting terrorism exclusively in countries where existing levels of transnational terrorism are highest. This finding is consistent with our theoretical underpinnings because donors have been documented to allocate more aid towards fighting transnational terrorist activities in recipient countries because they are more likely to target their interests. Moreover, the propensity of donor interest at stake is likely to increase with initial levels of transnational terrorism, such that the effect of foreign aid is most significant in recipient countries with the highest levels of transnational terrorism. Policy implications and future research directions are discussed.     

When is your experience valuable? Occupation-industry transitions and self-employment success

The literature on employee spinoffs has, for a long time, stressed the importance of industry-specific skills and experiences in explaining the success of new firms. We argue that employees also develop skills that are associated with their occupation within an industry, and that success as an entrepreneur, therefore, is also contingent on the relation between the entrepreneurs’ previous occupation and the industry in which they operate as self-employed. Using matched employer-employee data, we develop a measure, occupational spin-offs, that accounts for this relation. An occupational spin-off is defined as a start-up in the most common industry, given the previous occupation of the founder. We then show that entrepreneurs starting occupational spinoffs enjoy above average income from self-employment and have longer spells as business owners.