INPUT–OUTPUT ANALYSIS FOR BUSINESS PLANNING: A CASE STUDY OF THE UNIVERSITY OF SYDNEY

We present a multi-region input–output (MRIO) model of the University of Sydney embedded in the Australian economy, which forms the centrepiece of a new data-driven framework for strategic forecasting and planning of the University's financial operations. This framework incorporates both Leontief's well-known demand-pull, as well as Ghosh's supply-push exercise. It is therefore able to estimate the immediate financial implications for the University, and the economy-wide flow-on effects, for example as a result of changes in demand for courses by students, or as a result of supply-side changes such as wage increases. We report on recent scenario studies on the financial performance of the teaching and research functions of the University, and the lessons learned for management practice.     

UNCERTAINTY ANALYSIS FOR MULTI-REGION INPUT–OUTPUT MODELS – A CASE STUDY OF THE UK'S CARBON FOOTPRINT

This paper reviews and demonstrates methods available for estimating standard deviations for carbon multipliers in a multi-regional input–output (MRIO) framework. We attempt to capture all possible variations of underlying data and calculation procedures in a global MRIO model constructed with particular focus on the UK. We consider these variations to be random, and determine the stochastic variation of the whole MRIO system using Monte Carlo techniques. 5000 simulation runs were carried out to determine the standard deviations of multipliers. From these, the standard deviations of components of the UK's carbon footprint were estimated using error propagation. We estimate an 89% probability that the UK's carbon footprint has increased between 1994 and 2004.     

WHAT DO WE KNOW ABOUT THE IMPACT OF INTELLECTUAL PROPERTY RIGHTS ON THE FOREIGN DIRECT INVESTMENT LOCATION (COUNTRY) CHOICE? A REVIEW AND RESEARCH AGENDA

Despite a longstanding debate, at both a theoretical and empirical level, research on the relationship between foreign direct investment (FDI) and intellectual property rights (IPRs) remains scant and ambiguous. As a result, the link between IPR strength and multinational enterprises’ (MNEs) propensity to invest is unproven and seemingly dependent on a number of factors. We critically review the theory and evidence of the influence of IPRs on FDI and MNEs’ investment location (country) decisions both to ‘take stock’ of existing knowledge of this relationship and, by identifying gaps in, and shortcomings of prior work, develop a fruitful research agenda. We find that existing empirical work on the IPR–FDI nexus, though skewed in favour of a positive relationship between IPR protection and FDI, is fragmented, inconclusive and unable to square the conflicting theoretical predictions on how the strength of IPRs can affect MNEs’ FDI location decisions. Several issues and challenges are highlighted to explain the difficulties of the collective body of past empirical work to provide a definite answer to the question of the impact of IPRs on FDI, from which valuable recommendations are proposed to guide future applied research.     

A TIP OF THE ICEBERG? THE PROBABILITY OF CATCHING CARTELS

Reliable estimates of crime detection probabilities could help in designing better sanctions and improve our understanding of the efficiency of law enforcement. For cartels, we only have limited knowledge on the rate at which these illegal practices are discovered. In comparison to previous works, this paper offers a more parsimonious and simple‐to‐use method to estimate time‐dependent cartel discovery rates, while allowing for heterogeneity across firms. It draws on capture–recapture methods that are frequently used in ecology to make inferences on various wildlife population characteristics. An application of this method provides evidence that less than a fifth of cartelising firms are discovered. Copyright © 2013 John Wiley & Sons, Ltd.     

HOW DO YOU CAPTURE LIQUIDITY? A REVIEW OF THE LITERATURE ON LOW-FREQUENCY STOCK LIQUIDITY

Researchers have various ways to measure liquidity but most of them come with both merits and demerits. This study provides a literature review of low-frequency liquidity measures with a primary focus on liquidity measurement as well as its implication on asset pricing. Based on the dimension it captures, a range of existing low-frequency measures are divided into four categories of liquidity proxies including transaction cost, volume, price impact, and multidimension-based measures. We review some well-established liquidity proxies, a new bid–ask spread estimator and price impact ratios proposed recently. Finally, we discuss how good low-frequency liquidity measures are at capturing standard liquidity benchmarks, which are constructed from high-frequency intraday data.     

HOW DO CONSUMERS MAKE CHOICES? A SURVEY OF EVIDENCE

Abstract In this paper, we review the evidence about the purchase behaviour of consumers. We concentrate on the characteristics of the choice process, choice of the external information source and nature of the information obtained from these sources. The impact of important systematic differences among consumers and products on choice behaviour is also discussed.     

WHY DO WE LIE? A PRACTICAL GUIDE TO THE DISHONESTY LITERATURE

Over the last decade, a massive body of research has been devoted to uncovering human dishonesty. In the present paper, we review more than a hundred papers from this literature and provide a comprehensive overview by first listing the existing theoretical frameworks, and then covering the common empirical approaches, synthesizing the demographic and personal characteristics of those who cheat, identifying the behavioural mechanisms found that affect dishonesty and finally we finish by discussing how the empirical evidence fit theory. Overall, the review concludes that many people behave dishonestly, but also that it is a highly malleable behavior sensitive to elements such as decision contexts, behaviour of others, state of mind and depletion. The review can be used as an overview of the dishonesty literature or as a guide or work of reference for selected topics of interest.     

A NUCLEAR FUTURE? UK GOVERNMENT POLICY AND THE ROLE OF THE MARKET

Nuclear power should be a feasible non‐carbon option in a liberalised market for electricity generation. However, if it is to be so, there needs to be a stable carbon price and a tax system which does not treat nuclear generation in a similar way to carbon‐based electricity generation. Further major reform of the electricity generating market will also be necessary.     

DO CRISES INDUCE REFORM? A CRITICAL REVIEW OF CONCEPTION,METHODOLOGY AND EMPIRICAL EVIDENCE OF THE ‘CRISIS HYPOTHESIS’

The notion that economic crises induce the adoption of reform ranks among the most widely accepted concepts in the political economics literature. However, the underlying mechanism of the so‐called ‘crisis hypothesis’ has yet to be fully understood. This paper provides a comprehensive survey of the relevant empirical evidence to date, and scrutinizes the operationalization of the hypothesis’ key concepts: crisis, reform and the political mediation of reform during crises. We argue that the social perception of both crises and the subsequent cost of reform requires consideration of how these concepts are operationalized. As a product of the broader economic and institutional environment, social perceptions largely determine the manner in which the political mediation of reform during crises works. Present‐day methodological approaches fail to adequately reflect social perceptions and consequently compromise the determination of what constitutes both crisis and the cost of reform in the context of the crisis hypothesis. Most notably, the identification of crises by fixed thresholds constructed around macroeconomic variables impedes the interpretation of the hypothesis’ underlying mechanism. A fuller treatment of social perception within the operationalization of the hypothesis’ key concepts can enhance our understanding of how economic crises influence political dynamics in bringing about reform.     

WHY IS THERE A LACK OF EVIDENCE ON KNOWLEDGE SPILLOVERS FROM FOREIGN DIRECT INVESTMENT?

Empirical analyses of knowledge spillovers from foreign direct investment (FDI) offer mixed results; they find positive, neutral and negative FDI spillover effects. This lack of evidence mainly comes from the results of firm‐level panel data analysis. This is important since this approach seems to be the most appropriate for estimating FDI spillovers. The paper takes a look at recent substantive and methodological developments in FDI spillover analysis, which have brought some more optimistic results with regard to FDI spillovers, and can help in further development in this field. The main substantive development relates to the introduction of a broad variety of sources of firm heterogeneity (foreign affiliates as well as local firms) in the analysis. Others include differentiation between vertical (inter‐industry) and horizontal (intra‐industry) spillovers, and host country absorptive capacity for knowledge spillovers. Methodological developments relate to distinguishing between technological/knowledge and productivity spillovers, improvement of modelling and estimation methods, and an increased amount and quality of data.     

DO WATER-RICH REGIONS HAVE A COMPARATIVE ADVANTAGE IN FOOD PRODUCTION? IMPROVING THE REPRESENTATION OF WATER FOR AGRICULTURE IN ECONOMIC MODELS

With growing demand for fresh water and uncertain supplies, there is an increasing concern about future water scarcity. Since most freshwater withdrawals are for agriculture, reliance on water embodied in imported food (trade in ‘virtual water’) is a possible strategy to provide food to water-stressed regions while conserving their scarce supply for other purposes. To evaluate this proposition, we extend a model of interregional trade by (1) defining endowments of water that cannot be exceeded, (2) allowing simultaneous operation of rainfed and irrigated agriculture, and (3) distinguishing sub-regional endowments within a larger economic region. An application to the Mexican economy compares region-specific water abundance with economic comparative advantage under alternative scenarios. We conclude that the water-rich regions of Mexico are relatively high-cost producers of food and that they do not pick up the slack even when the lowest-cost Mexican regions are constrained by binding water constraints.     

DOES STUDENT WORK REALLY AFFECT EDUCATIONAL OUTCOMES? A REVIEW OF THE LITERATURE

We review the theories put forward, methodological approaches used and empirical conclusions found in the multidisciplinary literature on the relationship between student employment and educational outcomes. A systematic comparison of the empirical work yields new insights that go beyond the overall reported negative effect of more intensive working schemes and that are of high academic and policy relevance. One such insight uncovered by our review is that student employment seems to have a more adverse effect on educational decisions (continuing studies and enrolment in tertiary education) than on educational performance (test and exam scores).     

DO WE REALLY NEED BOTH BEKK AND DCC? A TALE OF TWO MULTIVARIATE GARCH MODELS

Abstract The management and monitoring of very large portfolios of financial assets are routine for many individuals and organizations. The two most widely used models of conditional covariances and correlations in the class of multivariate GARCH models are BEKK and dynamic conditional correlation (DCC). It is well known that BEKK suffers from the archetypal ‘curse of dimensionality’, whereas DCC does not. It is argued in this paper that this is a misleading interpretation of the suitability of the two models for use in practice. The primary purpose of this paper is to analyse the similarities and dissimilarities between BEKK and DCC, both with and without targeting, on the basis of the structural derivation of the models, the availability of analytical forms for the sufficient conditions for existence of moments, sufficient conditions for consistency and asymptotic normality of the appropriate estimators and computational tractability for ultra large numbers of financial assets. Based on theoretical considerations, the paper sheds light on how to discriminate between BEKK and DCC in practical applications.     

WHAT DRIVES CAPITAL FLOWS TO EMERGING MARKETS? A SURVEY OF THE EMPIRICAL LITERATURE

This paper reviews the rapidly growing empirical literature on the drivers of capital flows to emerging markets. The empirical evidence is structured based on the recognition that the drivers of capital flows vary over time and across different types of capital flows. The drivers are classified using the traditional distinction between ‘push’ and ‘pull’ drivers, which continues to serve as a useful framework. Push factors like global risk aversion and external interest rates are found to matter most for portfolio debt and equity flows, but somewhat less for banking flows. Pull factors such as domestic output growth, asset returns and country risk matter for all three capital flows components, but most for banking flows.     

LONG DARK SHADOWS OR INNOVATIVE SPIRITS? THE EFFECTS OF (SMOOTHING) BUSINESS CYCLES ON ECONOMIC GROWTH: A SURVEY OF THE LITERATURE

Abstract It is argued that fiscal policy can play a part in preventing a possible downward spiral or be instrumental in achieving a higher long‐term path of growth. Never before has this argument been advanced as frequently as in the current economic crisis. However, the economic literature – an overview of which is given here – does not provide an unambiguous answer, either theoretically or empirically, to the question of the relationship between (the smoothing of) cyclical fluctuations and long‐term growth. In this context, two main contrasting explanatory paradigms can be identified: Schumpeter’s concept of creative destruction and the learning by doing hypothesis. Even if it were possible to identify the relationship more clearly on this basis, it is important not to lose sight of the problems associated with the real‐time assessment of the current economic situation, time lags and political economic incentives even in difficult times.     

WILL BUSINESS CYCLES IN THE EURO AREA CONVERGE? A CRITICAL SURVEY OF EMPIRICAL RESEARCH

Abstract.  This survey of business cycle synchronization in the European monetary union focuses on two issues: have business cycles become more similar, and which factors drive business cycle synchronization. We conclude that business cycles in the euro area have gone through periods of both convergence and divergence. Still, there is quite some evidence that during the 1990s business cycle synchronization in the euro area has increased. Higher trade intensity is found to lead to more synchronization, but the point estimates vary widely. The evidence for other factors affecting business cycle synchronization is very mixed.     

ARE IMPACTS OF EARLY INTERVENTIONS IN THE SCANDINAVIAN WELFARE STATE CONSISTENT WITH A HECKMAN CURVE? A META‐ANALYSIS

“Early intervention” has been a mantra in recent debates about human capital investment. Strong theoretical models motivate this focus by predicting that investment in children is most cost‐effective when they are young. The “Heckman curve” summarizes this idea visually (Heckman, 2006). However, hardly any reviews scrutinize this hypothesis empirically in modern welfare states such as those in Scandinavia that already invest heavily during early childhood. Any such review is ideally based on interventions conducted as randomized controlled trials (RCTs), set in the same welfare state, and comparable across ages through cost‐standardized effects. This meta‐analysis assembles cost‐standardized effect estimates from 10 RCTs, including a total of 18 intervention arms and 30,578 participants (aged 1.5–24 years), conducted by the same research center in the Scandinavian welfare state of Denmark. These interventions show significant effects relative to their costs, despite the large baseline investment level. Interventions targeted at younger children tend to produce larger effects, consistent with the Heckman curve. However, variation in the effect size within age groups is as large as it is across age groups. This indicates that both the quality and timing of investments matter and that “early interventions” are not necessarily superior to later interventions.