Economics research in Spain during the 1990s: a literature review

This paper reviews the results of the literature on the ranking of centers of excellence in economics. There are two objectives: (1) to examine the evolution during the 1990s of certain features of economics research—such as the gap that exists between the US and the rest of the world, the dominant position of the UK within Europe, and the low productivity of economic scholars everywhere—and (2) to document the significant progress that Spanish research institutions have experienced during this period. Results by several broad fields of specialization are summarized here for the first time. This work was carried out under project SEJ2004-01959 financed by the Spanish Ministry of Education and Science. I would like to thank Eduardo Ley, José Luis Ferreira, and Diego Moreno for their comments, as well as Bruno Cassiman for his editorial work.     

On the Robustness of Least-Squares Monte Carlo (LSM) for Pricing American Derivatives

This paper analyses the robustness of Least-Squares Monte Carlo, a technique proposed by Longstaff and Schwartz (2001) for pricing American options. This method is based on least-squares regressions in which the explanatory variables are certain polynomial functions. We analyze the impact of different basis functions on option prices. Numerical results for American put options show that this approach is quite robust to the choice of basis functions. For more complex derivatives, this choice can slightly affect option prices. This revised version was published online in June 2006 with corrections to the Cover Date.     

Individual pay for performance in Spain: Cognitive sociology and the subsidiary insider perspective

This article examines how individual pay for performance is interpreted, predominantly by nonmanagerial employees, within the European context, at three subsidiaries of one U.S. multinational corporation in Spain. The study reveals how two levels of the cognitive socialization process color the lens through which employees view pay for performance and reveals how subsidiary founding, politics of resistance, and host‐country effects impact the implementation of the practice. Contrary to past studies in the literature, the study discovered a large number of nonmanagerial employees with a positive interpretation of pay for performance due to the influence of pre‐existing organizational cultural experiences. © 2010 Wiley Periodicals, Inc.     

Can complaint-handling efforts promote customer engagement?

This study aims to fill an important research gap in customer management, namely, the extent to which customer engagement arises as a consequence of an effective complaint-handling strategy. In tackling this question, we offer new insights into service research that may help researchers and managers better understand customer non-transactional behaviors to complaint-handling actions. To test the conceptual framework, we employ self-reported information from a sample of customers who have experienced a service failure in the financial services industry. Findings show that complaint handling will increase not only customer satisfaction with the complaint-handling process but also customer engagement. Satisfaction also plays a mediating effect. Therefore, in the event of a service failure, a proper management of the problem will lead to more engaged customers.     

Adverse selection under ignorance

Summary. We examine an adverse selection relationship in which the principal may ignore the ex ante distribution of the agent's types. The principal's behavior is described by a disutility function that covers the standard minimax regret and minimax loss criteria. We show that the incentive compatible and individually rational mechanism, which minimizes the maximal (or the minimal) principal's disutility over a set of priors, requires the efficient agents to realize the corresponding first-best actions and may demand actions lower than the first-best ones from less efficient agents. We also analyze the qualitative differences between the case in which the principal considers regrets and the case in which he considers losses. Received: 19 October 1998; revised version: 9 November 1999     

Technological differences and convergence in the OECD

Abstract. In this paper we test the homogeneity of the technological parameters among OECD countries, which is the maintained hypothesis in most of the empirical growth literature. We first identify differences in the constant term of the convergence equation estimated for the OECD 1960/1990 sample using a fixed- effects estimator. Then we provide a formal test of the homogeneity of technological parameters across groups of countries. We identify at least two different groups within the OECD, with significantly different technologies. Convergence within each group is fast, supporting the notion of club convergence. Nevertheless, the implausible parameter values obtained for the leading technology club casts some doubts on the validity of the Solow model to account for the long run behaviour of this group of countries.     

Who is ruling Europe? Empirical evidence on the German Dominance Hypothesis

The aim of this paper is to analyze the hypothesis of German dominance in the European Monetary System (EMS). For this purpose, we use monthly interest rates for nine European countries from January 1979 to the second half of 1997. In particular, we test the stability of the implied long-run relationships to assess whether there has been a significant change in the EMS performance. The econometric methodology is based on Johansen's maximum likelihood procedure and several tests for parameter instability. The most important finding is that, although Germany has a significant influence on the monetary policy of the other European countries, it is not possible to accept the existence of dominance. First version received: May 1999/Final version received: November 2000     

Measuring the functional efficiency of agricultural futures markets

This article presents a method for measuring the functional efficiency of agricultural futures markets in terms of social welfare using a standard futures market structural model. Employing the concept of social surplus, it can be shown that, when futures prices are used to estimate future spot prices, the errors in prediction produce to some degree resource misallocation, which in turn results in welfare losses. Therefore, the social welfare associated with the presence of futures markets can be measured using a Social Loss index. The indicator was calculated for the period 1975–2015 and for several subperiods, which allow us to analyse functional efficiency before and after the 2007–2008 spikes in the prices of agricultural commodities. Futures contracts for 12 products are evaluated. The products are grouped in three different categories: ‘soft products’, ‘livestock’ and ‘grains and oilseeds’. The results indicate that livestock contracts tended to be more efficient than the rest of the contracts during the whole period, but in 2008–2015 their efficiency decreased vis‐á‐vis the rest of the products. Nevertheless, 2008–2015 proved to be the most efficient subperiod, confirming the remarkable development of agricultural futures markets over time.     

Correlation as probability: applications of Sheppard’s formula to financial assets

In this paper, a result for bivariate normal distributions from statistics is transformed into a financial asset context in order to build a tool which can translate a correlation matrix into an equivalent probability matrix and vice versa. This way, the correlation coefficient parameter is more understandable in terms of joint probability of two stocks’ returns, and much more useful in terms of the information it provides. We validate, empirically, our result for a sample covering the three market capitalization categories in the S&P 500 index over a ten-year period. Finally, the accuracy of this new tool is measured theoretically and some applications from the practitioners’ point of view are offered. Such applications include, for instance, the calculation of the number of trading days in a year in which two stocks have same sign returns and how to split the average return of weighted stocks into four orthants.     

Explaining micro-enterprise survival in rural Vietnam: a multilevel analysis

To date, most of the empirical work conducted on enterprise survival has focused on enterprises in developed countries, while studies on enterprise survival in rural areas of emerging markets remain scarce. This paper attempts to address this gap in the research by using mixed-effects parametric survival models to analyze the effects of factors, at different explanatory levels, on the survival probability of micro-enterprises in rural Vietnam. The results show that enterprise-specific factors dominate with regard to explaining the survival probability of such micro-enterprises. However, the empirical results also indicate that the linkages of micro-enterprises with their broader economic environment, as well as some location-specific factors, such as access to markets and financial services, contribute significantly towards explaining the survival probability of micro-enterprises in rural Vietnam.