Uncertain Productivity Growth and the Choice between FDI and Export

While determinants of FDI patterns have received widespread attention, the timing of their surge remains largely unexplained. According to the proximity–concentration trade‐off argument, a surge in FDI in times of decaying international transportation costs seemingly represents a paradox. Besides transportation costs, other factors have contextually changed: in particular, the uncertainty that firms bear has increased. Enriching the classical choice problem of a multinational firm with insights from the literature on investment under uncertainty, we illustrate how different types of uncertainty determine the timing and optimal entry mode (i.e. FDI or export) of a multinational enterprise into a new market.     

Cost-effectiveness of metformin plus vildagliptin compared with metformin plus sulphonylurea for the treatment of patients with type 2 diabetes mellitus: a Portuguese healthcare system perspective

Objective:

To evaluate the cost-effectiveness of vildagliptin plus metformin vs generic sulphonylurea plus metformin in patients with type 2 diabetes mellitus, not controlled with metformin, from a Portuguese healthcare system perspective.

Methods:

A cost-effectiveness model was constructed using risk equations from the UK Prospective Diabetes Study Outcomes Model with a 10,000-patient cohort and a lifetime horizon. The model predicted microvascular and macrovascular complications and mortality in yearly cycles. Patients entered the model as metformin monotherapy failures and switched to alternative treatments (metformin plus basal-bolus insulin and subsequently metformin plus intensive insulin) when glycated hemoglobin A1c >7.5% was reached. Baseline patient characteristics and clinical variables were derived from a Portuguese epidemiological study. Cost estimates were based on direct medical costs only. One-way and probabilistic sensitivity analyses were conducted to test the robustness of the model.

Results:

There were fewer non-fatal diabetes-related adverse events (AEs) in patients treated with metformin plus vildagliptin compared with patients treated with metformin plus sulphonylurea (6752 vs 6815). Addition of vildagliptin compared with sulphonylurea led to increased drug acquisition costs but reduced costs of AEs, managing morbidities, and monitoring patients. Treatment with metformin plus vildagliptin yielded a mean per-patient gain of 0.1279 quality-adjusted life years (QALYs) and a mean per-patient increase in total cost of €1161, giving an incremental cost-effectiveness ratio (ICER) of €9072 per QALY. Univariate analyses showed that ICER values were robust and ranged from €4195 to €16,052 per QALY when different parameters were varied.

Limitations:

The model excluded several diabetes-related morbidities, such as peripheral neuropathy and ulceration, and did not model second events. Patients were presumed to enter the model with no diabetes-related complications.

Conclusion:

Treatment with metformin plus vildagliptin compared with metformin plus sulphonylurea is expected to result in a lower incidence of diabetes-related AEs and to be a cost-effective treatment strategy.     

Groundwater balance and conservation under different water pricing and agricultural policy scenarios: A case study of the Hamadan-Bahar plain

Government subsidies for agricultural activities in recent decades have encouraged farmers of Hamadan-Bahar plain to extend the number of wells and irrigated farms, with no consideration of groundwater resource conservation. As a result, the level of the groundwater table has decreased continuously in this area, threatening the life of groundwater aquifer. The objective of the study is to analyze the impacts of irrigation water pricing and agricultural policy scenarios on aquifer conservation by considering the dynamic relations between aquifer groundwater balance and the agriculture sector. For this purpose a combination of simulation and optimization techniques is considered in a dynamic framework. Firstly, dynamic treatments of groundwater and the main factors affecting the balance of studied aquifer are simulated. Then, optimization behaviour of agriculture sector related to farmers' decision-making processes is defined on the time horizon. Thereafter all of the equations are used simultaneously by a non-linear dynamic programming method, which maximize present value of gross margins of agriculture sector subject to groundwater constrains and other input limitations. The analysis of the results indicates that water pricing by itself can considerably reduce the agricultural demand for aquifer groundwater in the Hamadan-Bahar plain.     

Fiscal shocks and real exchange rate dynamics: Some evidence for Latin America

This paper analyses the effects of fiscal shocks in selected Latin American countries using a two-country model for output, labour input, government spending and relative prices. Dynamic simulation techniques are then applied, in particular to shed light on the possible effects of fiscal imbalances on the real exchange rate. Using quarterly data over the period 1980-2006, we find that in a majority of cases fiscal shocks are the main driving force of real exchange rate fluctuations.     

Transformational Growth in the 1990s: Government,Finance and High-tech

Our aim is to understand how the process of transformational growth during the 1990s shaped the boom and bust of the New Economy. From the debate on new technologies and productivity growth, we move on to consider the questions raised by technological developments of the 1990s. Our focus is on the three-way relationship between the development of information and communications technologies, structural change and economic growth, as the key determinants of the cycle of expansion. This brings to the fore the effects of private investment driven by high-technology but we also need to consider the role played by finance and macro policy, and, in particular, the government budget.     

Sub-sovereign bond buyback: a way forward for debt-laden regions in austerity

ABSTRACT

Previous academic literature has criticised bond buyback as a ‘”boondoggle” benefiting a country’s creditors’—meaning that buybacks are a wasteful use of public money. This paper challenges the narrow financial–economic perspective behind that statement by adopting a broader socio-political framework that includes the potential benefits of buyback for citizens, not just financial market costs. In particular, buyback does not necessarily require a budget surplus via higher local taxes and/or increased austerity measures.     

Scope and scale economies in multi-utilities: evidence from gas,water and electricity combinations

Within the recent debate on liberalization of local public services, the paper investigates the cost properties of a sample of Italian public utilities providing in combination gas, water and electricity. The estimates from a Composite Cost Function econometric model (Pulley and Braunstein, 1992 Pulley, LB and Braunstein, YM. 1992. A composite cost function for multiproduct firms with an application to economies of scope in banking. Review of Economics and Statistics, 74: 221–30.  ) are compared with the ones coming from other traditional functional forms such as the Standard Translog, the Generalized Translog, and the Separable Quadratic. The results highlight the presence of global scope and scale economies only for multi-utilities with output levels lower than the ones characterizing the ‘median’ firm. This indicates that relatively small specialized firms would benefit from cost reductions by evolving into multi-utilities providing similar network services such as gas, water and electricity. However, for larger-scale utilities the hypothesis of null cost advantages is not rejected. Thus, it is possible that the recent diversification waves of leading companies are explained by factors other than cost synergies, so that the welfare gains that can be reasonably expected from such examples of horizontal integration, if any, are likely to be very low.     

Age and firm growth: evidence from three European countries

This article provides new insights into the dependence of firm growth on age along the entire distribution of growth rates, and conditional on survival. Using data from the European firms in a global economy survey, and adopting a quantile regression approach, we uncover evidence for a sample of French, Italian and Spanish manufacturing firms with more than ten employees in the period from 2001 to 2008. We find that: (1) young firms grow faster than old firms, especially in the highest growth quantiles; (2) young firms face the same probability of declining as their older counterparts; (3) results are robust to the inclusion of other firms’ characteristics such as labor productivity, capital intensity and the financial structure; (4) high growth is associated with younger chief executive officers and other attributes that capture the attitude of the firm toward growth and change. The effect of age on firm growth is rather similar across countries.     

Fiscal Convergence, Business Cycle Volatility, and Growth

This paper analyzes the effects of fiscal convergence on business cycle volatility and growth. Using a panel of 11 EMU and 21 OECD countries and 40 years of data, we find that countries with similar government budget positions tend to have smoother business cycles. That is, fiscal convergence (in the form of persistently similar ratios of government surplus/deficit to GDP) is systematically associated with smoother business cycles. We also find evidence that reduced business cycle volatility through higher fiscal convergence stimulates growth. Our empirical results are economically and statistically significant, and robust.     

The strength of science and technology drivers for SME innovation

This analysis feeds into the academic debate on the most proficient innovation mode across firms, placing special emphasis on the characteristic case of small and medium enterprises (SMEs). Of the three main approaches considered, the first stresses the importance of innovation based on science and technology (STI) drivers, such as research and development (R&D) and human capital, whereas the second approach emphasises innovation based on learning by doing, by using and by interacting (DUI); the third, more recent approach is conceived as a combination of the former two (STI?+?DUI). In this paper, the three models are tested on a sample of 409 SMEs that have been supported by a public programme for innovation promotion developed by the Basque Government in Spain. The result is quite different from what is expected, yet it is insightful and potentially useful for both academics and policy-makers. Contrarily to what one would expect, SME innovation output is in fact more sensitive to STI drivers than to DUI drivers.