Noise Trading, Costly Arbitrage, and Asset Prices: Evidence from Closed-end Funds

If arbitrage is costly and noise traders are active, asset prices may deviate from fundamental values for long periods of time. We use a sample of 158 closed-end funds to show that noise-trader sentiment, as proxied by retail-investor flows, leads to fluctuations in the discount. Nevertheless, we reject the hypothesis that noise-trader risk is the cause of the long-run discount. Instead we find that funds which are more difficult to arbitrage have larger discounts, due to: (1) the censoring of the discount by the arbitrage bounds, and (2) the freedom of managers to increase charges when arbitrage is costly.     

Workplace heterogeneity and wage inequality in Denmark

Wage inequality is on the rise in most developed economies, and this phenomenon has fostered a growing body of research on its potential drivers. Using German data over the period 1985–2009, Card et al. (The Quarterly Journal of Economics 2013, 128(3), 967-1015) argue that rising workplace heterogeneity has contributed substantially to the rise in wage inequality. I revisit their findings in two ways. First, because the generalization of their findings remains an open question, I apply their methodological approach to Danish register data and test whether rising workplace heterogeneity explains a significant share of the rise in wage inequality in Denmark. I find that, contrary to Germany, workplace heterogeneity remained practically stable over time, and this pattern contributed slightly negatively to the rise in wage inequality. Second, I complement Card et al.'s (2013) methods with the variance decomposition exercise proposed by Song et al. (2019) to identify more precisely the sources of the rise in wage inequality in Denmark. Although the rise in wage inequality is partly a between-establishment phenomenon, I show that the strengthening of assortative matching patterns and the rising heterogeneity of workers within establishments are the main drivers of growing inequality.     

Guanxi and its influence on the judgments of Chinese auditors

Over a decade ago China launched a large-scale programme to develop science parks with on site business incubators. A major goal of this project was to redesign the economic architecture by creating institutions that would greatly improve the nation's innovation system. Science parks, following the western model, were considered appropriate institutions. This is because they could harness China's many public research institutes and universities and so help promote both existing indigenous firms and emerging new technology-based private firms. Since its inception, however, the programme has evolved to serve multiple purposes, of which innovation system reform is arguably only one, minor goal. This article investigates the evolution of China's two-pronged strategy to develop science parks and business incubators in pursuit of institutional reform of its innovation system.     

Quality and capacity choices in a vertical differentiation model with congestion

We consider a vertically differentiated market in which consumers’ utility is assumed to depend on the price, congestion level and the stand‐alone quality of the good or service. Two firms compete on this market, choosing capacities, stand‐alone qualities and prices. We characterize completely the subgame perfect equilibrium for the homogenous market case (where only one firm is active without congestion). We prove that both firms are active, choosing minimal differentiation along the capacity and quality dimensions. Therefore, the presence of congestion rules out market preemption as a possible outcome in equilibrium and weakens the incentive to differentiate.     

External heterogeneity and its impact on open innovation performance

While current research commonly finds there may be an optimum overall level of search depth commitment at the apex of an inverted U relationship, it says comparatively little about the optimal allocation of search depth between competing search channels. Neither does it explore in depth the qualitative differences in the breadth of different external search channels. Here we conceptually and empirically explore the idea of the intra-search channel allocation problem using the concept of heterogeneity in search depth and breadth. We explore how variations in the distribution of open innovation search depth and breadth influnence innovation performance and in doing so contribute to a more fine grained conceptual understanding of external innovation. We do so an emerging market context, namely China. Our contributions are therefore twofold, involving both conceptual and empirical elements.     

Socio-Technical Scenarios as a Tool to Improve Farm Advisory Services

This article examines the use of the socio-technical scenarios (STSc) method to explore the future needs of farmers in the adoption of more sustainable farming practices. It also examines the changes needed for advisory services to meet those identified needs. It presents the results from four STSc workshops organised as part of the H2020 AgriLink project. Workshop participants (farmers, advisors, policymakers, researchers), jointly explored future changes towards more sustainable agricultural systems paying special attention to the role of advisory services in these transitions. Despite the diversity of national contexts, common results emerged concerning both the shortcomings of the current advisory systems and directions for improvement. Participants agreed that advising on single aspects would not achieve the required systemic changes; these would require more integrated advisory systems at different levels (improved cooperation and knowledge flow), supported by more consistent policies. We indeed identified discrepancies between policy expectations and the broader innovation context. Policies should facilitate the role of advisors in supporting farmers to adopt sustainable innovations, but more often they also create barriers for such innovations. Participants’ concrete recommendations for more farmer-centered advisory services illustrate the usefulness of the STSc to explore potential solutions to key problems in contemporary farm advisory systems.     

Stepwise Investment in Circular Plastics Under the Presence of Policy Uncertainty

Environmental and Resource Economics - The use of recycled plastics is critical in the transition to a circular economy. However, for certain types of plastics, the recycling process is...