Do European Primarily Internet Banks Show Scale and Experience Efficiencies?

Empirical evidence shows that Internet banks worldwide have underperformed newly chartered traditional banks mainly because of their higher overhead costs. European banks have not been an exception in this regard. This paper analyses, for the first time in Europe, whether this is a temporary phenomenon and whether Internet banks may generate scale economies in excess of those available to traditional banks. Also do they (and their customers) accumulate experience with this new business model, allowing them to perform as well or even better than their peers, the traditional banks? To this end, we have generally followed the same analytical framework and methodology used by DeYoung (2001, 2002, 2005) for Internet banks in the USA although the limitations in the availability of data, as well as the existence of different regulatory frameworks and market conditions, particularly in the retail segment, in the 15 European Union countries have required some modifications to the methodology. The empirical analysis confirms that, as is the case for US banks, European Internet banks show technologically based scale economies, while no conclusive evidence exists of technology based learning economies. As Internet banks get larger, the profitability gap with traditional banks shrinks. To the extent that Internet banks are profitable, European authorities may encourage a larger number of consumers to use this delivery channel, by tackling consumers security concerns. This would allow Internet banks to capture more of the potential scale efficiencies implied in our estimations.     

Investment Horizon Effects

Abstract:   Boudry and Gray (2003) have documented that the optimal buy‐and‐hold demand for Australian stocks is not necessarily increasing in the investment horizon when returns are predictable. Such finding is in contrast with Barberis (2000) who shows that positive monotonic horizon effects predominate for US stocks. Using a closed‐form approximation to the asset allocation problem, this paper relates the return dynamics to the investor's portfolio choice for different investment horizons. In the special case of a single risky asset, it is shown that return predictability under stationarity may induce both positive and negative horizon effects in the optimal allocation to the risky asset. The paper extends previous empirical results by solving for the optimal portfolio when two risky assets with predictable returns are available for investment.     

Designing Policy for Reducing the Off‐farm Effects of Soil Erosion Using Choice Experiments

Soil erosion produces both on‐site private costs and off‐site social costs, such as desertification, rural depopulation, siltation of waterways and reductions in biodiversity. To design efficient policies, land use planners and decision makers need information on the relative weights of changes in these consequences, since policy alternatives, such as different management restrictions, will have varying impacts on these consequences of erosion. The research presented here uses the choice experiment method to evaluate these relative weights, using a case study in the Alto Genil and Guadajoz watersheds in southern Spain. We find that reductions in desertification, protection of water quality, protection of biodiversity, the area covered by the scheme, and the number of rural jobs safeguarded are all significant determinants of preferences over alternative policy designs.     

Testing Choice Experiment for Benefit Transfer with Preference Heterogeneity

Benefit transfer is a cost-effective method for estimating the value of environmental goods that relies on information obtained in previous studies. The multiattribute approach of choice experiments should provide advantages in terms of benefit transfer, allowing differences in environmental improvements between sites as well as differences in socioeconomic and attitude characteristics between respondent populations. This article investigates the capability of choice experiment method to be used in environmental benefit transfer when a random parameters approach is used to allow for preference heterogeneity: we find that the inclusion of respondents' taste heterogeneity reduces the magnitude of the transfer error.     

The Removal of a Specialist Oversight Body for Local Public Audit: Insights from the Health Service in England

The abolition of the Audit Commission in England and Wales removes the ‘protector of the public purse’. The oversight body and its audit practice are largely replaced by the private sector regime and audit firms. We analyse the audit market for health service foundation trusts, an area of local public audit that operates without oversight from the Commission. We find evidence of premiums paid to some Big4 firms and that the presence of specialist public service auditors results in fee discounts. The firms limit their liability and assurance of audit quality is reduced under new audit regimes and governance structures.     

The occupational attainment of migrants and natives in Barcelona, 1930

Very few empirical studies have analysed the labour market performance of migrants in European countries in the nineteenth and early twentieth centuries. This article uses a rich new micro‐dataset to examine the occupational attainment of migrants, mostly internal migrants, in the city of Barcelona, a key destination from the late nineteenth century onwards, adding to the literature on internal migrations in Spain during the period of industrialization. The study shows that the occupational outcomes achieved by early migrants tended to match those of natives, the reference group. However, some groups of migrants who arrived at the end of the period covered by the study show poorer outcomes than natives. The relative underachievement of these groups is explained by changes in the type of migrants and in the characteristics of the labour market. Our estimates also suggest that Spanish migrants did not experience upward occupational mobility after settling in Barcelona.     

Probability matching and reinforcement learning

Probability matching occurs when an action is chosen with a frequency equivalent to the probability of that action being the best choice. This sub-optimal behavior has been reported repeatedly by psychologists and experimental economists. We provide an evolutionary foundation for this phenomenon by showing that learning by reinforcement can lead to probability matching and, if the learning occurs sufficiently slowly, probability matching does not only occur in choice frequencies but also in choice probabilities. Our results are completed by proving that there exists no quasi-linear reinforcement learning specification such that the behavior is optimal for all environments where counterfactuals are observed.     

Determinants of proactive innovative behaviour in new services: empirical investigation of service versus manufacturing firms

The research performs a complete analysis of the differences between services and products based on factors associated with the innovation process. The research analyses the factors/dimensions and their repercussions that determine firms' capacity to adapt to their environment and observes how the critical dimensions of the innovation process influence the gap generated by the difference in the firm's current level of innovation and the level developed by the competition. The results show that the client's participation in the process of innovation is greater in service firms that possess a larger innovation gap and are more proactive. The opposite is the case for formalization and decentralization, which occur in lower levels in this kind of firm. Further, decentralization and formalization are lower in service than in manufacturing firms.