Network neutrality and the nature of competition between network operators

The neutral architecture of the Internet is being challenged by various parties, such as network operators providing the connections to end-users, who are interested in gaining control of the information exchanged over the Internet. What are the effects on competition and welfare of such practices? Currently, there exists very little economic theory on network neutrality. This paper provides a preliminary analysis of the type of economic modeling that can address network neutrality, as well as of the type of results that can be expected.     

Intertemporal substitution and the liquidity effect in a sticky price model

The liquidity effect, defined as a decrease in nominal interest rates in response to a monetary expansion, is a major stylized fact of the business cycle. This paper first confirms that, with separable preferences, a low degree of intertemporal substitution in consumption is a necessary condition for the existence of the liquidity effect. In contrast to this result, in a model with non-separable preferences and capital accumulation it takes an implausibly high elasticity of intertemporal substitution to produce a liquidity effect. The robustness of these results to alternative degrees of nominal rigidities, capital adjustment costs and stochastic monetary processes is also analysed. We conclude that price stickiness, by itself, does not guarantee the existence of a liquidity effect.     

IntraLATA long-distance demand: carrier choice, usage demand and price elasticities

Competition in the long-distance market in the US continues to intensify; the 1996 Telecommunications Act has led to increased competition in long-distance telephony especially as the Regional Bell Operating Companies have begun to gain entry to long-haul, long-distance markets. In order to better understand the implications of having increased service offerings, models of how customers choose between carriers (and the impact of this choice on subsequent usage) will be useful. We develop the first publicly available models that simultaneously estimate choice and usage for intraLATA long-distance in the US. Utilizing a generalized Tobit model, the price responsiveness of usage and carrier choice are estimated. The results are generally consistent with expectations both in terms of theory and of practical experience in the industry.     

Technology Transfer and Learning

Despite the fact that international technology transfer has been widely studied its management still encounters many difficulties. To fully understand the issues that are relevant to the process of transferring production technology, it is necessary to determine the important factors that influence this process. Learning curves are often used as a means of determining the time required to become familiar with a transferred technology. The cases discussed in this paper have all employed learning curves, which were established at the outset of the transfer process and which turned out to be incorrect. As a consequence the envisaged efficiencies were not obtained. This phenomenon is partly due to the fact that when technology is transferred to a relatively inexperienced 'destination company', the curve is established based on the circumstances of the 'source company'. The case study findings lead to the conclusion that to establish a realistic curve a more comprehensive method is required than simply basing anticipated performance on that achieved at the source company.     

A Cross‐national Comparison of R&D Expenditure Decisions: Tax Incentives and Financial Constraints*

We provide evidence on the impact of tax incentives and financial constraints on corporate R&D expenditure decisions. We contribute to extant research by comparing R&D expenditures in the United States and Canada, thereby exploiting the differences in the two countries' R&D tax credit mechanisms and generally accepted accounting principles. The two tax incentive mechanism designs are consistent with differing views of the degree of financial constraints faced by firms in these economies. Our sample also allows us to explore the effects of capitalizing R&D on Canadian firms. Employing a matched design, we document relations between tax credit incentives and R&D spending consistent with both Canadian and U.S. public companies responding as though they are not financially constrained. We estimate that the Canadian credit system induces, on average, $1.30 of additional R&D spending per dollar of taxes forgone while the U.S. system induces, on average, $2.96 of additional spending. We also find that firms that capitalize R&D costs in Canada spend, on average, 18 percent more on R&D. Collectively, this evidence is important to the ongoing debates in both countries concerning the appropriate design of incentives for R&D and is consistent with the assumptions found in the U.S. tax credit system, but not those found in the Canadian system.     

Liquidity, Labels and Medium-Term Notes

We suggest that the medium-term note market provides an excellent laboratory for exploring the relationships between yield, liquidity, and the label affixed to a financial instrument. Crabbe and Turner (1995) examined the liquidity issue and uncovered the counter-intuitive result that issue size is unrelated to liquidity. Their study failed to examine a potential channel for a liquidity effect, however, in the form of multiple issues from a single, typically large, MTN registration filing. We find evidence that file size is significantly related to yield in a number of instances. Several other proxies for liquidity, such as frequency of issue, are also sometimes significantly related to yields. Contrary to Crabbe and Turner (1995) , we find that labeling a security an MTN can have an impact on its yield. The label "note" also appears to matter for yield in some instances.     

Long- and short-term interest rates in 19 countries: Tests of cointegration and parameter instability

This paper examines the long-run relationship between short-term and long-term interest rates (both nominal and real) in 19 countries, and explores the possibility that the relationship is statistically stable using Lc, MeanF, and SupF statistics suggested by Hansen [1992]. Empirical results obtained from various cointegration techniques (Johansen, Phillips and Hansen, Stock and Watson, and Park) and quarterly data (1973–1998) show considerable support for the expectations hypothesis in all countries (except the United Kingdom). In a majority of cases, it is also found that a stable relationship exists between the short-term and long-term interest rates.