Industrial Policy and Technology Diffusion: Evidence from Paper Making Machinery in Indonesia

In this paper, we analyze the diffusion and adoption of paper making machinery in the Indonesian pulp and paper industry, from 1923 till 2000. We develop a machine level index of technological sophistication (mach), which measures the technological distance of each paper machine to the world technological frontier. The data reveal a pattern of rapid technological catch up. But catch up was not an industrywide phenomenon. Some modern firms installed state-of-the-art machinery, while others installed older vintages. The paper argues that industrial policy has played an important role in the speed and nature of diffusion of paper making machinery.     

The political economy of redistribution under democracy

We ask what redistributions of income and assets are feasible in a democracy, given the initial assets and their distribution. The question is motivated by the possibility that if redistribution is insufficient for the poor or excessive for the rich, they may turn against democracy. In turn, if no redistribution simultaneously satisfies the poor and the wealthy, democracy cannot be sustained. Hence, the corollary question concerns the conditions under which democracy is sustainable. We find that democracies survive in wealthy societies. Conditional on the initial income distribution and the capacity of the poor and the wealthy to overthrow democracy, each country has a threshold of capital stock above which democracy survives. This threshold is lower when the distribution of initial endowments is more equal and when the revolutionary prowess of these groups is lower. Yet in poor unequal countries there exist no redistribution scheme which would be accepted both by the poor and the wealthy. Hence, democracy cannot survive. As endowments increase, redistribution schemes that satisfy both the poor and the wealthy emerge. Moreover, as capital stock grows the wealthy tolerate more and the poor less redistribution, so that the set of feasible redistributions becomes larger. Since the median voter prefers one such scheme to the dictatorship of either group, democracy survives.We would like to thank, Daron Acemoglu, Marco Basetto, Alberto Bisin, V.V. Chari, Pat Kehoe, Onur Ozgur for very useful comments.     

An analysis of air mass effects on rail ridership in three US cities

This paper examines whether daily weather affects ridership in urban transportation systems. When examining human–weather relationships, it is often advantageous to examine air masses, which take into account the entire parcel of air over a region. Spatial synoptic classification characterizes air masses based upon numerous meteorological variables at a given location. Thus, rather than examining temperature or precipitation individually, here we compare daily ridership to synoptic air mass classifications for three urban rail systems: Chicago Transit Authority (CTA), Bay Area Rapid Transit (BART), and the Hudson–Bergen light-rail line in northern New Jersey. Air masses are found to have a significant impact on daily rail ridership, with usage typically increasing on dry, comfortable days and decreasing on moist, cool ones, particularly on weekends. Although the comfort of a particular air mass changes throughout the year, seasonality is not a significant factor with respect to the air mass–ridership relationship. The results of this study can benefit rail system managers who must predict daily ridership or in the development of cost-benefit analyses for station improvements.     

Bankruptcy reform in the Middle East and North Africa: Analyzing the new bankruptcy Laws in the UAE,Saudi Arabia,Morocco, Egypt,and Bahrain

For years, countries in the Middle East and North Africa (MENA) region have been trying to increase entrepreneurship rates and attract foreign investment, however, their bankruptcy statutes remained antiquated and punitive in nature. Potential start‐ups and foreign investors have been deterred from these markets due to a lack of alternative solutions to liquidation and a fear of punishment for business failure. At least seven countries in the region have now taken steps to modernize their bankruptcy laws to provide restructuring mechanisms and other measures designed to incentivize risk‐taking rather than to deter it. With this year's crash in oil prices, an unprecedented global pandemic and an imminent recession, an effective bankruptcy system has become even more critical to avoid catastrophic results for the employment rates and economic value of the companies in the region. However, despite these recent reforms, significant improvements are still needed to maximize the value and benefits of bankruptcy procedures in the face of these growing economic threats.     

Input–Output Structural Decomposition Analysis: A Critical Appraisal

Over the past decade, input–output structural decomposition analysis (SDA) has developed into a major analytical tool. We review the development of SDA and its relationship to other methodologies. We present the fundamental principles of alternative approaches to deriving SDA estimating equations and explore the various decompositions of changes in IO tables. We also identify several complications and unresolved issues. Most importantly, we find that a rigorous grounding in economic theory is lacking for SDA, but we are able to offer some suggestions as to how it might be established.     

Bitcoin price and its marginal cost of production: support for a fundamental value

This study back-tests a marginal cost of production model proposed to value the digital currency Bitcoin. Results from both conventional regression and vector autoregression (VAR) models show that the marginal cost of production plays an important role in explaining Bitcoin prices, challenging recent allegations that Bitcoins are essentially worthless. Even with markets pricing Bitcoin in the thousands of dollars each, the valuation model seems robust. The data show that a price bubble that began in the Fall of 2017 resolved itself in early 2018, converging with the marginal cost model. This suggests that while bubbles may appear in the Bitcoin market, prices will tend to this bound and not collapse to zero.     

Enhancing television advertising: same-language subtitles can improve brand recall,verbal memory,and behavioral intent

This research explores how same-language subtitles—on-screen text that matches the spoken language—can enhance advertising effectiveness for television commercials on normal viewing audiences outside of foreign-language or deaf-viewer contexts. A preliminary eye-tracker study shows that same-language subtitles capture disproportionate visual attention, and a first study highlights that same-language commercial subtitles can increase brand recall and memory of other verbal ad information. Three further studies using 12 additional ads reinforce the positive effects of subtitles and show how same-language subtitle effectiveness varies with changes in visual and verbal ad complexity. In addition to showing how subtitles can increase behavioral intent, results also highlight how varying subtitle content affects memory gains and illustrate how subtitles can lead to negative effects in the uncommon situation that brand information is missing from the audio. As the efficacy of television advertising becomes increasingly debated, same-language subtitling is a simple way to boost advertising effectiveness.     

China's New Role in the International Financial Architecture

The rise of China is challenging the international financial architecture in a number of ways. This paper highlights three that are of critical importance: the challenge of absorbing massive Chinese savings; the incorporation of China into a cohesive global financial safety net; and the organisation of China's participation in funding the demand for international investment projects. The global financial architecture needs to be reformed. But what role should China play? The paper defines the options open to China and the opportunities and barriers it will face. We argue that China can work with the established economic powers in reforming the existing architecture. At the same time, China seeks cooperation in building new institutions and organisations that fill gaps in the existing arrangements. But no matter how international financial diplomacy plays out in the near term, deep financial and economic reform at home will alone deliver China a central role in the international financial architecture. Domestic reform could also attend to some of the challenges that currently plague China's impact on the system. The success or failure of these domestic reforms will be at the crux of the strength or fragility of the international financial architecture in the years ahead.