Does market competitiveness significantly affect public intervention in agricultural insurance: the case in Italy

Analyses of agricultural insurance failures often assume the existence of competitive supply, tracing the reasons for high insurance cost and limited farmer participation to informational problems, and suggesting the need for premium subsidization in order to increase participation. However, in countries such as Spain and Italy, where agricultural insurance is most highly subsidized, it could be that supply is not fully competitive. In this article, we explore the incidence of public subsidies to agricultural insurance premia when supply is noncompetitive. Through the use of a simple empirical model of an insurance market, it is shown that, while in the case of a competitive supply, subsidies to insurance would benefit farmers, a monopolistic supply would capture most of the subsidy, thus eliminating the potential incentive towards wider participation by farmers. The model is applied to a panel of Italian farms for different levels of risk aversion to demonstrate the limited effect that a subsidy to a hypothetical all risk yield insurance would have on farmer participation in the case of monopolistic supply.     

Optimization of Thermal Energy Storage Systems in Distributed Generation Systems

The distributed generation as well as the combined production of electrical energy and heat for domestic use in order to increase the energy efficiency becomes more important and both technically and financially feasible. However, feasibility and efficiency can be significantly increased by decoupling the production of heat or power or the referring demand in order to operate the production units in the most efficient way. Thermal storage systems connected to combined heat and power units offer the opportunity of such a decoupling of production and demand for heat in domestic or industrial use. In this article, based on an analysis of different thermal storage technologies, a model is introduced for optimal operation of thermal storage connected to combined heat and power units in terms of the generation costs or contribution margin as extension of an energy generation planning and trading optimization method. Moreover, the application, coordinated operation and participation in spot markets of such plant-storage-combinations are evaluated.     

The labour market effects of offshoring of small and medium-sized firms: micro-level evidence for Germany

Small and medium-sized enterprises (SMEs) are the economic powerhouse of many OECD countries (perhaps most prominently so in Germany). Yet, the labour market dynamics caused by the internationalization of their production activities are largely unexplored. We use survey-based micro-level data for Germany to explore the employment effects of offshoring of SMEs, relying on propensity score matching and difference-in-difference analysis. We find evidence for a downsizing effect in the immediate aftermath of offshoring whereas, initially, job creation is not spurred. In the medium run, we find evidence for a slowing down of employment dynamics of offshoring firms (that tend to belong to the better performing SMEs in Germany) relative to non-offshoring firms. Even though our results do not point to a net employment loss in the medium run, our evidence suggests that offshoring may lead to less jobs being created. This conclusion cannot be confirmed for large companies.     

Complexity as a constraint on firm expansion within and across industries

With this paper, we want to shed light on factors influencing a firm's rate of expansion. We argue that expansion is a complex task and complexity associated with expansion projects in one period can negatively impact rate of expansion in the following period. Moreover, we argue that firm portfolio complexity also slows down further expansion. Using longitudinal data on the expansion path of 91 German companies, we show that added product scope of expansion and degree of internationalization characterizing expansion in one period as well as level of product and international diversity have a significant impact on slowing down rate of expansion in the subsequent period. Copyright © 2008 John Wiley & Sons, Ltd.     

Strategies for online communities

This study examines the participation of firms in online communities as a means to enhance demand for their products. We begin with theoretical arguments and then develop a simulation model to illustrate how demand evolves as a function of interpersonal communication and a firm's chosen strategy. In this model, the firm's strategy involves allocating advocates who promote its product in online communities. Our model results point to some key parameters informing firms' strategies when social learning processes shape demand. Copyright © 2008 John Wiley & Sons, Ltd.     

Volatility of Price Indices for Heterogeneous Goods with Applications to the Fine Art Market

Price indices for heterogeneous goods such as real estate or fine art constitute crucial information for institutional or private investors considering alternative investment decisions in times of financial markets turmoil. Classical mean‐variance analysis of alternative investments has been hampered by the lack of a systematic treatment of volatility in these markets. In this paper we propose a hedonic regression framework which explicitly defines an underlying stochastic process for the price index, allowing to treat the volatility parameter as the object of interest. The model can be estimated using maximum likelihood in combination with the Kalman filter. We derive theoretical properties of the volatility estimator and show that it outperforms the standard estimator. We show that extensions to allow for time‐varying volatility are straightforward using a local‐likelihood approach. In an application to a large data set of international blue chip artists, we show that volatility of the art market, although generally lower than that of financial markets, has risen after the financial crisis of 2008–09, but sharply decreased during the recent debt crisis. Copyright © 2013 John Wiley & Sons, Ltd.     

Kurzfristige Kehrtwende bei der Beschaffung neu zu errichtender Anlagen für die Netzreserve in Deutschland

Shortly before the decision of the Electricity Market Law on June 22, 2016 took place, the Federal Ministry for Economic Affairs and Energy (BMWi) changed its mind with respect to the procurement of new power plants for the German grid reserve. Other than originally planned, this is no longer organized via a competitive bidding process. Instead, the responsibility for the procurement will be transferred to the transmission system operators, which therefore face the challenge of implementing an appropriate procurement mechanism. This paper presents an economic explanation for this short-term change. Our analysis reveals that the proposed transfer of the concept for the procurement of spare capacity to the procurement of the grid reserve was not appropriate. The bidders would have been exposed to significant risks, in particular due to high cost and calculation uncertainties, which are also critical with respect to the achievement of the objectives of the grid reserve. Therefore, we consider the decision of refusing the original procurement concept as the right step, although we consider a competitive procedure advantageous. However, such a procedure has to take the special requirements of the grid reserve into account. Yet this problem remains even after the transfer of responsibility from the BMWi to the transmission system operators.     

A modified maximum likelihood test

If the supremum in the definition of the maximum likelihood test is replaced by the essential supremum, conditions for asymptotic optimality can be relaxed.This research was supported in part by NSF research grant number GP 31123X.     

Buyout Transactions in the German‐speaking Region: Determinants of Abnormal Performance and Unlevered Returns

This is one of the first comprehensive studies of drivers of private equity performance in the German‐speaking region known as the DACH, made up of Germany, Austria, and Switzerland. It contributes three things to private equity research: First, it explains how operational value drivers affect operational performance (operational alpha) and unlevered rates of return. Second, it whether the same relationships hold across different kinds of private equity business models (those with either organic or inorganic growth strategies; or whether PE investments are small‐cap or mid‐to‐large‐cap). Third, it distinguished between the periods before and after the global financial crisis of 2008. The authors found that (1) annualised benchmark‐adjusted EBITDA margin growth (i.e. improvement in EBITDA margin) is the most significant determinant in abnormal operational performance and unlevered returns, regardless of the business model; (2) private equity firms executing a buy‐and‐build strategy generate lower unlevered returns than those executing an organic growth strategy when the benchmark company is clearly outperformed, most likely because of limited PE managerial resources; (3) mid‐to‐large‐cap private equity firms generate higher unlevered returns and operational alphas than small‐cap private equity firms when the benchmark company is clearly outperformed, because, we believe, larger companies have a higher fixed cost leverage than smaller ones; and we have found that (4) buyout transactions exited during or after the financial crisis yield higher operational alphas but lower unlevered returns compared to buyout transactions exited before the crisis, when the portfolio company underperforms its benchmark company.