Dwelling Age Heteroskedasticity in Repeat Sales House Price Equations

Several authors have attributed the heteroskedasticity observed in repeat sales house price equations to the length of time between sales. Recently, Goodman and Thibodeau (1995) developed a theoretical model that relates heteroskedasticity in hedonic house price equations to dwelling age. Using data for nearly 2,000 repeat sales in Dallas, Texas, this research examines whether repeat sales heteroskedasticity is related to dwelling age, to the length of time between sales, or to both. An iterative generalized least squares procedure that explicitly models the residual variance is used to obtain robust parameter estimates and to increase the efficiency of the usual repeat sales price indices.     

Equity Carve-Outs and Managerial Discretion

This study proposes a managerial discretion hypothesis of equity carve-outs in which managers value control over assets and are reluctant to carve out subsidiaries. Thus, managers undertake carve-outs only when the firm is capital constrained. Consistent with this hypothesis, firms that carve out subsidiaries exhibit poor operating performance and high leverage prior to carve-outs. Also consistent with this hypothesis, in carve-outs wherein funds raised are used to pay down debt, the average excess stock return of + 6.63 percent is significantly greater than the average excess stock return of −0.01 percent for carve-outs wherein funds are retained for investment purposes.     

Paragons of virtue? Competitor entry and the strategies of incumbents in the U.S. local telecommunications industry

We investigate whether the presence of new competitors has influenced the behaviour of U.S. incumbent local exchange carriers (ILECs) with respect to pricing, advertising and the extent of diversification that they engage in. This issue is explored empirically, using data for the major local exchange carriers for the years 1994 to 1998. The period straddles periods of both absence and presence of competition in the industry, since the Telecommunications Act of 1996 has opened hitherto closed markets to competitive local exchange carriers (CLECs). While a recent Federal Communications Commission (FCC) report on local competition documents vigorous entry during the past years, the market share of the entrants is insubstantial. Our results indicate that the threat provided by market entrants has notably influenced the strategic behaviour of ILECs. The findings show that the incumbent U.S. local operators, particularly the larger ILECs, aggressively protect their profit streams from traditional business. The evidence demonstrates that the ILECs have responded to the Telecommunications Act 1996, and to the threat of market entry it has created, through entry deterrence. This strategic behaviour has been successful in providing ILECs with protection of their monopolistic markets so far.     

Aggregate Fluctuations with National and International Returns to Scale*

Cyclical movements in aggregate output, factor inputs, and productivity are all positively correlated across countries. This article proposes a model in which positive cross‐country correlations of these variables result from increasing returns to the world‐wide variety of intermediate goods even if technology shocks are purely country‐specific. The model also accounts for the observed positive relationship between bilateral trade volume and international comovements. Positive comovements can also arise with constant returns to variety, but only if technology shocks are themselves strongly correlated. The combination of constant returns and common shocks, however, tends to generate procyclical fluctuations of the trade balance.     

Does skill obsolescence increase the risk of employment loss?

In this article, we analyse whether technological change induces skill obsolescence and early labour market exit, and to what extent training participation and on the job learning reduce these risks. Using panel data on older workers, we find that workers report skill obsolescence more often when learning is a structural characteristic of the job. This perceived skill obsolescence is not related to a higher probability of losing employment. Instead, workers who experience skill obsolescence appear to learn more on the job and participate more often in training, which decreases the risk of losing employment. These results are consistent with the dynamic model of skill obsolescence and employment loss we develop in this article. Moreover, we find that when workers with long job tenures decrease their training participation, this is an early indicator of future job loss.     

Determinants of US direct foreign investment in the Caribbean

This study evaluates two groups of variables (economic and structural/locational) associated with US short- and long-run direct foreign investment (DFI) in the Caribbean over the 1983–1994 period. Separate generalized least square models for the Caribbean and Latin America were estimated to determine whether differences existed between the two regions as to the variables associated with the levels of DFI. This helped provide insights as to the strategies that should be maintained or introduced to give the Caribbean a competitive edge in attracting the limited amounts of US DFI likely to be available for investment in the Western hemisphere.     

Forecasting profitability and earnings: a study of the UK market (1982–2000)

An approach recently developed by Fama and French (2000 Fama, EF and French, KR. 2000. Forecasting profitability and earnings. The Journal of Business, 73: 161–75.  ) is applied to the study of whether UK company profitability is mean-reverting. A sample of roughly 987 firms per year for a period from 1982–2000 is used, drawn from Datastream. In a simple partial adjustment model convergence towards the mean at a rate of about 25% per year is found. The results are very similar in direction to those of Fama and French (2000 Fama, EF and French, KR. 2000. Forecasting profitability and earnings. The Journal of Business, 73: 161–75.  ) but the results do not display significant non-linearities. The change in profitability appears to be more strongly influenced by dividends in the UK.     

Dept and input misallocation of agricultural supply and marketing cooperatives

Kim and Maksimovic provide an empirical model to examine the effect of dept on a firm. Their model is adopted to examine agricultural supply and marketing cooperatives. Using a short-run variable cost function, we find firm efficiency decreases as dept increases. A US$1 increase in indebtedness increases total short-run variable costs by US$0.0167 or roughly 1.67% Dept tends to shift input usage away from labour inputs. A test developed by Conrad and Unger is applied to determine whether the agricultural supply and marketing cooperatives are at a long-run equilibrium capacity. It is found that most of the cooperatives were overinvested in capacity. However,dept does not explain this overinvestment. Finally,the effect of dept on total productivity over the study period is examined. It is found that dept has had a small positive impact on total factor productivity growth. Scale economics and non-optimal capacity had large impacts on total factor productivity. Although dept is associated with short-run misallocation of resources, we find little evidence that dept is associated with long -run suboptimal capacity.