Reliable Estimates of Sovereign Rating

International Advances in Economic Research -     

Sectoral Selection and Informality: a Nicaraguan Case Study

Using microdata from the 1998 and 1993 Nicaraguan Living Standards Measurement Survey, this paper analyzes the relative size and attractiveness of formal and informal sector employment. Switching regression models of the formal/informal sector employment choice indicate that education across years and gender are the primary determinants of formal sector participation. Furthermore, the formal sector is characterized by positive selection. The results for the informal sector are less definitive, but are also suggestive of positive selection. These findings imply that the informal and formal sectors in Nicaragua contribute positively to the overall economy by attracting those individuals best suited for (in)formal sector employment.     

Utopian thought and the politics of sustainable development

This article argues that utopian thought is a necessary condition for the politics of sustainable development. Since utopian thought has so far been constrained by some typically Western features from the era of modernity, this requires a shift that transcends the following three fundamental aspects: the notions of fixed truth, fixed territoriality and fixed final goals for politics. The article argues that the concept of global sustainable development can entail three new elements of utopian thought: the disintegration of fixed territoriality, a never-ending story, and prismatic blueprints. Using these elements, utopian thought can provide transformative power, so that politics and policymaking can meet contemporary global challenges to development and the environment.     

Risk and performance estimation in hedge funds revisited: Evidence from errors in variables

This paper revisits the performance of hedge funds in the presence of errors in variables. To reduce the bias induced by measurement error, we introduce an estimator based on cross sample moments of orders three and four. This Higher Moment Estimation (HME) technique has significant consequences on the measure of factor loadings and the estimation of abnormal performance. Large changes in alphas can be attributed to measurement errors at the level of explanatory variables, while we emphasize some shifts in the economic contents of the equity risk premiums by switching from OLS to HME.     

Interest rates,expectations and the credibility of the Bank of Spain

The purpose of the paper is to pinpoint the date of the change of monetary policy regime which occurred in Spain during the year 1984, when it moved away from controlling monetary aggregates towards interest rate targeting. The most likely date for the change is estimated and, surprisingly, there is evidence that agents learned about the new intermediate target quite rapidly.A week after the change, the term structure of interest rates showed how market agents attributed much more informational content to interest rate changes than they had previously. Two types of transitions are tried: a one-step and a gradual logistic swithing function.     

Heterogeneity in Production Structures and Efficiency: An Analysis of the Czech Food Processing Industry

The present study analyses firm heterogeneity and sector‐specific technology. The theoretical model stands on the assumption of maximizing the return on capital and overcomes problems involved in simple profit maximization. The results show that a random parameter model with sector dummies and heteroscedasticity is the most appropriate model specification for distinguishing firm‐level and sector‐level efficiency and heterogeneity. The heterogeneity among firms as well as among sectors was found to be an important characteristic in Czech food processing. This holds for production technology as well as for technical efficiency. Moreover, the decomposition of total variance shows that intrasectoral differences in technologies are much more pronounced than the intersectoral differences. The differences in intrasector heterogeneity also suggest that the food processing industry will be subject to accelerated structural change in the coming years. Moreover, we found that on average the companies highly exploit their production possibilities. However, some companies cannot keep pace with competitors. Because leapfrogging does not appear to be present in selected industries (except for Milling), structural change is expected to occur in such a way that the most successful companies will strengthen their position.     

Priority-driven behaviors under the Boston mechanism

We study school choice markets where the non-strategy-proof Boston mechanism is used to assign students to schools. Inspired by previous field and experimental evidence, we analyze a type of behavior called priority-driven: students have a common ranking over the schools and then give a bonus in their submitted preferences to those schools for which they have high priority. We first prove that under this behavior, there is a unique stable and efficient matching, which is the outcome of the Boston mechanism. Second, we show that the three most prominent mechanisms on school choice (Boston, deferred acceptance, and top trading cycles) coincide when students’ submitted preferences are priority-driven. Finally, we run some computational simulations to show that the assumption of priority-driven preferences can be relaxed by introducing an idiosyncratic preference component, and our qualitative results carry over to a more general model of preferences.     

Price versus quantity in a duopoly of vertical differentiation with loss-averse consumers

In a model à la Mussa and Rosen (1978) in which consumers are loss-averse, I check the robustness of the result obtained by Tanaka (2001). As he did, I find that the quantity contract is a dominant strategy for both firms. Thus, Cournot is the outcome in equilibrium. Finally, I find that loss aversion in general intensifies competition.