Equilibrium portfolios in the neoclassical growth model

This paper studies equilibrium portfolios in the standard neoclassical growth model under uncertainty with heterogeneous agents and dynamically complete markets. Preferences are purposely restricted to be quasi-homothetic. The main source of heterogeneity across agents is due to different endowments of shares of the representative firm at date 0. Fixing portfolios is the optimal equilibrium strategy in stationary endowment economies with dynamically complete markets. However, when the environment displays changing degrees of heterogeneity across agents, the trading strategy of fixed portfolios cannot be optimal in equilibrium. Very importantly, our framework can generate changing heterogeneity if and only if either minimum consumption requirements are not zero or labor income is not zero and the value of human and non-human wealth are linearly independent.     

The dynamics of efficient asset trading with heterogeneous beliefs

This paper analyzes the dynamic properties of portfolios that sustain dynamically complete markets equilibrium when agents have heterogeneous priors. We argue that the conventional wisdom that belief heterogeneity generates continuous trade and significant fluctuations in individual portfolios may be correct but it needs some qualifications. We consider an infinite horizon stochastic endowment economy populated by many Bayesian agents with heterogeneous priors over the stochastic process of the states of nature. Our approach hinges on studying the portfolios that decentralize Pareto optimal allocations. Since these allocations are typically history dependent, we propose a methodology to provide a complete recursive characterization when agents believe that the process of states of nature is i.i.d. but disagree about the probability of the states. We show that even though heterogeneous priors within that class can indeed generate genuine changes in the portfolios of any dynamically complete markets equilibrium, these changes vanish with probability one if the true process consists of i.i.d. draws from a common distribution and the support of some agent's prior belief contains the true distribution. Finally, we provide examples in which asset trading does not vanish because either (i) no agent learns the true conditional probability of the states or (ii) some agent does not know the true process generating the data is i.i.d.     

Environmental practices and the value added of horticultural firms

This paper explores the relationship between environmental management and productivity in the fruit and vegetable sector. Our empirical analysis focuses on the effect of environmental practices on the value added in horticultural firms of Andalusia. These practices are included in the incentive programmes established by the Common Agricultural Policy on a voluntary basis. Taking the investment in environmental activities as knowledge capital, we propose a specific analysis that evaluates the effect of the factors of the production function on the value added. Our results show a positive overall impact of environmental investment on the product's market value. We conclude that there is a direct link between environmental management and productivity in the sector under study. Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment.     

Biotechnology Development in Spain: A Change of Paradigm?

This article presents a quantitative and qualitative analysis of the Spanish biotechnology sector, including its scientific, business, policy and social aspects. The study differentiates two sub-sectors, considered to be the most representative: Biopharma and Agro-food. The results show that biotechnology development in Spain has entered a new phase. Traditionally, research and development in Spain followed an unstructured path built around regional spaces and driven by factors and influences external to Spain. However, the emergence of a fast-growing sector of spin-off companies from the public research system, specifically in the Biopharma sector, points to a change of model of development of the industry, on the national as well as the regional level. The data also show the key role which public policy plays in creating a suitable framework for innovation and point to the need of analyzing the influence of social and cultural factors on the development of the biotechnology sector.     

Exploring the big jump in the Spanish unemployment rate: Evidence on an ‘added-worker’ effect

Spain is destroying more jobs than any other European country. In the third quarter of 2009, the unemployment rate stood at 17.9%, the second-highest rate in the 27-nation EU and the highest rate in the euro area (EA-16). The exponential growth of the Spanish unemployment rate is the by-product of falling employment rates. However, there is a second explanation which is often overlooked by unemployment forecasters: changes in labour force participation rates. On the one hand, in times of recession participation rates tend to increase in order to safeguard sustainable household incomes. This phenomenon is known as the ‘added-worker’ effect. On the other hand, there is also an opposite effect in that individuals leave the labour force in recessions because chances to find employment are low. This is the ‘discouraged-worker’ effect. Applying a threshold cointegration model to Spanish quarterly data over the period 1976-2008, we find that the added-worker effect dominates the discouraged-worker effect, but only when unemployment is below 11.7%. Above this threshold, the two effects cancel each other out so that the participation rate is not influenced by further deteriorations of economic conditions. Since Spain recently passed the 11.7% unemployment threshold, our model predicts that there will be no further increases in the participation rate in the near future.     

Indeterminacy in price–value correlation measures

During the last 20 years, an important body of literature on the so-called ‘Ricardo’s 93% theory of value’ – the classical hypothesis which asserts that direct prices are very good predictors of both production prices and market prices – has shown that the hypothesized strong correlation in fact holds in the context of cross-sectional data. However, these empirical results are extremely dubious due to severe problems that cause indeterminacy and arbitrariness in the measures of correlation usually employed.      

Treasury auctions in Spain: a linear approach

Abstract. The majority of Treasuries use discriminatory auctions to sell government debt. A few Treasuries use uniform auctions. The Spanish Treasury is the only one that uses a hybrid format of discriminatory and uniform auctions. All Treasury auctions are multiple-unit multiple-bid auctions, usually assumed to be common and unknown value auctions. Taking in account these features, we analyze the Spanish auction format, taking a linear approximation to bidders' multiple bids, and characterize a parameter set in which the Spanish format gives higher expected seller's revenue than discriminatory and uniform auctions. Policy implications are obtained by calibrating theoretical results with data. We thank S. Nu?ez, and seminar participants at GREQAM, CEFI, the 1999 CEF meeting in Boston and the 57th European Meeting of the Econcometric Society for suggestions. We are especially grateful to two anonymous referees for detailed comments that greatly improved the paper. Any error is our responsability. The authors express their thanks for financial support to Ministerio de Ciencia y Teconologia from Proyecto SEC2000-0723, n_o 9114.     

Reinterpreting social pacts: Theory and evidence

We investigate the empirical determinants of social pacts over the 1970–2004 period. We adopt a political economy approach, showing that governments are more likely to sign a pact when the cost of a conflict with trade unions is relatively larger. Such a cost depends on macroeconomic variables and on measures of social conflict and union strength. These findings are remarkably stable across sub-periods, in apparent contrast with previous contributions that emphasised differences between first- and second-generation pacts. Our interpretation is that pacts were different across periods because the policy issues changed, but the incentives to seek union consensus did not.     

Variance Estimation of Imputed Estimators of Change for Repeated Rotating Surveys

A common problem in survey sampling is to compare two cross‐sectional estimates for the same study variable taken from two different waves or occasions. These cross‐sectional estimates often include imputed values to compensate for item non‐response. The estimation of the sampling variance of the estimator of change is useful to judge whether the observed change is statistically significant. Estimating the variance of a change is not straightforward because of the rotation in repeated surveys and imputation. We propose using a multivariate linear regression approach and show how it can be used to accommodate the effect of rotation and imputation. The regression approach gives a design‐consistent estimation of the variance of change when the sampling fraction is small. We illustrate the proposed approach using random hot‐deck imputation, although the proposed estimator can be implemented with other imputation techniques.