Pursuing a biotechnology system of innovation in Lithuania: a conceptual framework for effective policy intervention

The focus of this paper is on Lithuania, whose government released an ambitious innovation strategy to become an innovative services hub for Northern Europe by 2015, and an innovation hub by 2020. Biotechnology has been identified as a strategic sector, and whether Lithuania will be able to achieve its ambition of a fully functioning biotechnology sectoral system of innovation will be explored. With the Lithuanian government declaring that they will intervene to achieve their innovation goals, this paper argues that sound policy intervention is possible and can be done in a way that avoids the limitations of past systemic approaches. The policy approach presented is based on a modified extended industry life cycle, and the movement of system structures through three phases – background, pre-emergence and emergence – and explains how each phase lays the groundwork for transition to the next phase.     

The future of pensions in Europe

Unfunded state pension schemes are projected to become financially unsustainable. This is usually attributed to demographic trends. Yet trends in unemployment and in female labour force participation are quantitatively as important. Improvements in either or both might be sufficient to rescue existing state schemes, especially if combined with an end to the practice of allowing, even after retirement, the value of a pension to rise with national earnings rather than prices.
Attempts at piecemeal reform are important because nothing in economic theory suggests a switch to the alternative, fully funded pensions is desirable. Not only would such a transition be costly, and therefore politically difficult; it also neglects the fact that it makes sense to diversify the retirement portfolio, holding claims both on labour productivity and on capital assets. One can even view pensions as part of a more sophisticated system of intergenerational transfers through which workers finance their earlier education and subsequent retirement.     

Inter-basin water transfers under uncertainty: Storage capacity and optimal guaranteed deliveries

This paper deals with water transfers between jurisdictions not claiming riparian rights to the same water source, and taking place through straightforward sales. Taking into account the uncertain nature of water surpluses, we investigate, within a partial equilibrium framework, the implications of a third party's provision of storing facilities upon the potential supplier's decision whether, and to what extent, it is worthwhile to guarantee a constant amount of water exports. The analysis suggests that there exists a minimum storage capacity below which the potential supplier will never find it profitable to divert a constant amount of water outside his boundaries; the greater the uncertainty about future surpluses and/or internal costs due to even occasional water shortages resulting from the water export commitment, the higher the required minimum storage capacity will be. Above this minimum, an increase in the capacity would be better for the surplus agent, but in a situation in which water surplus is expected to decrease over time, increases in storage capacity would make him willing to guarantee a smaller amount of water deliveries.This work has been carried out under the auspices of the European Science Foundation's research program Sharing fresh water resources in the Mediterranean region: An economic perspective. Previous versions have been presented at ESF workshops held at the Universities of Haifa, Padova and Crete. Financial support from MURST (funds 40% — 1992) is gratefully acknowledged. We wish to thank Nunzio Cappuccio, Haluk Akdogan, Karl Mäler, Mordechai Shechter, Naomi Zeitouni, and two anonimous referees for helpful comments. The usual disclaimer applies.     

Assessing students’ equality of opportunity in OECD countries: the role of national- and school-level policies

This article analyses the relationship between equality of opportunity and the characteristics of the educational system, jointly considering country- and school-level policies. Because school social environment represents a fundamental channel in shaping educational opportunities, we consider all policies, recorded in PISA 2012 dataset, that affect the sorting of students to schools. We show that including sorting policies enriches the explanation of the socio-economic gradient, that is, the association between students’ performances and parental background, with respect to previous studies including only country-level features. The negative impact of early tracking on equality of opportunity is overvalued without including other sorting policies, while grouping students’ within-school by ability increases the socio-economic gradient and a greater students’ heterogeneity in the school reduces the gradient.     

Unit nonresponse errors in income surveys: a case study

A survey on the economic and social conditions of households in the city of Modena was carried out in 2002 and in 2006 (two waves) by the CAPP (Centre for Analyses of Public Policies). In the first wave of 2002, each designated sampling unit (i.e., the family) had three units as reserves. If the first refused to be interviewed, the interviewer contacted the three reserves, one after the other, until obtaining either one respondent or four non-participant units. At the end of the survey four categories of units were distinguished: interviewees, refusals, noncontacts, and unused reserves. All units were matched with their corresponding record in the databases of the Ministry of Finance of 2002 and the Census of 2001. The resulting data set permitted the analysis of unit or total nonresponses. The distribution of fiscal income showed different shapes for the four categories, implying a selective participation of the families. The interviewees yielded a positive bias of about 600?, holding constant other factors. The selection of the significant factors affecting nonresponse was performed via backward elimination in a logit model and with the lasso method. Participation increased as fiscal income and age increased and by education level (secondary school and university degree), while it decreased among entrepreneurs, independent workers, managers, and medium-to-low skilled workers.     

Deferred taxation under default risk

In this article, we have used a continuous EBIT-based model to study deferred tax liabilities under default risk. Quite surprisingly, default risk has been disregarded in research on deferred taxation. In order to underline its importance, we first calculated the probability of default, over a given time period, together with the contingent value of tax deferral. We then applied our theoretical model to a sample of 27,749 OECD companies. We showed that, when accounting for both firms with a negative EBIT and firms with a probability of default higher than 50% (over a 10-year period), a relevant percentage of firms were close enough to default. Hence, the expected present value of deferred taxes is much lower than that obtained in a deterministic context. From the Government’s point of view, deferred tax liabilities are a risk-free loan. Since only a portion are subsequently repaid, the Government should account for future losses due to companies’ default. So far, these estimates have been missing, although techniques do exist and are quite practical.     

Dynamic Tax Evasion with Habit Formation in Consumption*

We model the optimal intertemporal decision of an agent who chooses tax evasion and consumption, over an infinite lifetime horizon, where consumption is driven by habits. We find the following: (i) tax evaders reduce consumption in the early stages of habit accumulation and increase it over time; (ii) habit formation has a dampening effect on tax evasion; (iii) neglecting tax evasion can lead to habit overestimation; (iv) the effect of the tax rate on tax evasion is ambiguous; (v) heavy fines are more efficient than frequent controls in reducing tax evasion.     

Who votes for public environmental goods in California?: Evidence from a spatial analysis of voting for environmental ballot measures

Voting referenda provide direct evidence of the demand for public goods. A number of previous studies have used referenda to analyze the support for public environmental goods. These studies have used aggregate data from large jurisdictional units (usually counties) and summary income measures such as the mean or median, and have usually found that higher income areas offer greater support for environmental propositions. We examine environmental referenda voting in California using census block group data, spatial dependence controls, and detailed income distribution data. We find that household income has a negative marginal effect on environmental referenda voting for most of the income range when using census block data. In addition, controls for spatial dependence significantly reduce the magnitude of most coefficients. This suggests that OLS estimates of referenda determinants are biased. We also show that county level data may be subject to severe aggregation bias and might not be appropriate for referenda studies.