Access pricing and investment: a real options approach

This paper examines a three-period model of an investment decision in a network industry characterized by demand uncertainty, economies of scale and sunk costs. In the absence of regulation we identify the market conditions under which a monopolist decides to invest early as well as the overall welfare generated by this decision. In a regulated environment, we consider a vertically integrated network provider that is required to provide access to downstream competitors and compare two distinct access pricing methodologies: the Efficient Component Pricing Rule (ECPR) and the Option to Delay Pricing Rule (ODPR). We identify the welfare-maximizing access prices using the unregulated market output as a benchmark and show that optimal access regulation depends on market conditions (that is, the nature of demand) with two possible outcomes: (i) access prices that provide a positive payoff to the incumbent, that is, provide a positive compensation to account for the option to delay; and (ii) access prices that yield a zero payoff to the incumbent. Moreover, unlike the earlier literature that argues in favor of an ECPR-type methodology to account for the interaction between irreversibility and demand uncertainty, we find that, except under very specific conditions, an access price that accounts for the option to delay value is welfare-superior to the ECPR.      

Is Exporting a Source of Productivity Spillovers?

This paper investigates whether exporting generates positive productivity spillover effects on other plants in the same industry and on plants in vertically related industries. Using data for Chilean manufacturing plants from 1990 to 1999, we find strong evidence that domestic as well as foreign-owned exporting plants improve productivity of local suppliers. We also find some evidence of horizontal spillovers from exporting but these are mainly generated by plants with foreign ownership. These results suggest that positive productivity spillovers are not only generated by the presence of foreign-owned exporting plants but also by exporting activity of domestic firms. The results are robust to controls for agglomeration of economic activity, the importance of non-exporting foreign-owned plants, and plant unobserved heterogeneity. JEL no.  F10, F23, O3, O54     

Designing minimum-cost recycling collection networks with required throughput

The problem of designing minimum-cost recycling networks with required throughput is a subset of the broader class of facility location problems in which the recycler wishes to determine the optimal number and location of receiving centers as well as the correct financial incentive to be offered in order to stimulate collection of used or unrecoverable products to a degree required for regulatory reasons or otherwise. This paper presents a conceptual framework, an analytical model, and a three-stage algorithmic solution for this problem. An illustrative case study in the recycling of unrecoverable tires in southern states of Brazil is presented.     

Growth Due To Globalization*

This article presents a growth model including geographical space and transportation costs in which the geographical area where firms sell their product is endogenous. Growth is generated by the expansion of trade and there is a positive relationship between degree of openness and income level. The model explains why economies become increasingly more open and why the degree of openness is not robustly correlated with growth. In contrast to other growth models, investment in transport infrastructure plays an important role and the size of the country does not affect growth.     

Employment and Exchange Rates: The Role of Openness and Technology

Real exchange rate movements are important drivers of the reallocation of resources between sectors of the economy. Economic theory suggests that the impact of exchange rates should vary with the degree of exposure to international competition and with the technology level. We show that both the degree of openness and the technology level mediate the impact of exchange rate movements on labour market developments. According to our estimations, whereas employment in high-technology sectors seems to be relatively immune to changes in real exchange rates, these appear to have sizable and significant effects on highly open low-technology sectors. The analysis of job flows suggests that the impact of exchange rates on these sectors occurs through employment destruction.     

Learning from accidents: Updates of the European regulation on the investigation and prevention of accidents and incidents in civil aviation

Civil aviation has a longstanding tradition of investigating accidents and reporting incidents, which contributes to making aviation one of the safest forms of transport.To make flying safer, independent investigation into accidents is essential as it the surest way of identifying the causes of an accident and answering the fundamental questions “What really happened?” and “What can be done to prevent similar incidents in the future?”.The obligation to investigate accidents is enshrined in the Chicago Convention of 1944. Recognizing the importance of accident investigation, the European Union adopted Council Directive 94/56/EC establishing the fundamental principles governing the investigation of civil aviation accidents and incidents and later on Directive 2003/42/EC on occurrence reporting. They both significantly contributed to harmonization of accident prevention.But with air traffic steadily increasing, accidents do happen despite the best efforts of regulators and industry. The organization of the air transport sector is much more complex now than it was a decade ago. Today there is significant divergence in the investigating capacity of the EU Member States compared to 1994. Furthermore nowadays investigating air accidents take new kinds of expertise and more resources than a decade ago. At the same time there is a new legal and institutional environment in Europe derived from the adoption of European aviation safety rules. Also the organizational set-up has changed substantially with the establishment of the European Aviation Safety Agency (EASA), which is now responsible for certifying aircraft in the EU. The EU rules on investigating air accidents need to be updated to reflect the current realities of Europe's aviation market and the complexity of the global aviation industry.Accordingly, over the last few years the European Commission has been working on a Regulation on the investigation and prevention of accidents and incidents in civil aviation, with the intention of updating and replacing the existing Directive. With this new regulation the Commission aims to promote more efficient and independent inquiries into the causes of air accidents and also expects to strengthen the rights of the victims of air accidents.Today the end is in sight, once that the Commission and European Parliament have reached an agreement about the content and text of this new regulation. Reasons behind this new regulation are presented in this paper together with a detailed explanation of its main contents, an assessment of their impact and their expected benefits.     

When in peril, retrench: Testing the portfolio channel of contagion

The impact of past gains and losses on international investors' risk aversion is an important factor in the propagation of financial shocks across countries. We first present a stylized model illustrating how changes in investors' risk aversion affect portfolio decisions and stock prices. We then examine empirically the behavior of international mutual funds. When funds' returns are below average, they reduce their exposure to countries in which they were overweight and vice versa. An index of “financial interdependence” that reflects the extent to which countries share overexposed funds helps explain the pattern of stock market comovement across countries and the pattern of contagion during crises.     

If You Blog,Will They Follow? Using Online Media to Set the Agenda for Consumer Concerns on “Greenwashed” Environmental Claims

Agenda-setting theory is used to investigate if consumers' online opinions on “greenwashed” advertisements (misleading green advertisements) are influenced by the agenda set by online newspaper articles and environmental nongovernmental organization (NGO) blogs. Leximancer is initially used to obtain attributes and identify themes from four different online stakeholder discussions on greenwashing. Content analysis and cross-lagged correlations are further used to verify if blogs and news articles set the substantive attribute salience in the consumer discussions over a 12-month period (January–December 2009). We found two significant themes in the various stakeholder discussions on greenwashing: marketing communication credibility and impact on natural environment. Results also indicate a bidirectional agenda-setting relationship between consumers and other stakeholders from the same country.