On the nonexistence of recursive equilibrium in stochastic OLG economies

We study a class of stochastic Overlapping generations (OLG) economies that have one-memory equilibria, that is equilibria that are determined by the current and past realizations of the states of uncertainty. This class is negligible, but important. In particular, it contains all the known examples of nonexistence of recursive equilibrium. We show that, within this restricted domain, the existence of recursive equilibrium is actually typical, and such examples are therefore nonrobust. We thank Felix Kubler, Herakles Polemarchakis and Steve Spear for many useful discussions. This paper was started while the first author was visiting Columbia Business School.     

Macroeconomic adjustment programmes in the euro area: an overall assessment

Since the start of EMU (Economic and Monetary Union), the euro area, and more broadly the global economy, experienced an unprecedented credit boom. The expansion of credit was particularly strong in Greece, Ireland, Portugal and Cyprus and all of them subsequently needed official financial support. In each of the four programmes, financial assistance has been provided and promised against the commitment of each country to fulfil certain economic policy conditions contained in the macroeconomic adjustment programme. In general, a macroeconomic adjustment is a process driven by policies but also by changes in private spending behaviour (consumption, imports, investment) and improvement in competitiveness that countries are required to undertake after a large shock. In the case of the four countries, the shock emerged as a consequence of an excessive accumulation of imbalances in different parts of the economy: in the public sector in Greece, in the housing and banking sectors in Ireland, external imbalances in Portugal and in the banking sector in Cyprus. The paper looks at the feasibility of the fiscal adjustment comparing the macroeconomic conditions in the four countries and emphasising the role of the fiscal multipliers in the process. It also assesses the fall in the output in a comparative framework, stressing the role played by the different components of demand either in amplifying the effect of the fiscal consolidation or in offsetting it. In addition, it considers formulation of the programmes as well as their implementation with most attention devoted to reforms aiming at improving competitiveness, growth and employment in the framework of a cross-country approach.     

Does VC fund diversification pay off? An empirical investigation of the effects of VC portfolio diversification on fund performance

The paper tests different theories of how diversification by Venture Capital (VC) firms affects fund performance. The Financial Intermediation and the Resource-based Theory suggest that lower financial risk associated with diversification implies a lower return. However, the assumptions of these theories are questionable in the context of venture capital. We test their validity using data on VC portfolio diversification by industry and country using an original dataset of 649 VC funds originating in the United Kingdom over the period 1981–2000. Results show that higher diversification by industry does indeed lower VC fund success rates. Diversification by geographical region, on the contrary, increases returns.     

Intra-regional trade and business cycles in Southeast Asia

Conclusion In this note we considered the relationship between trade integration and the cross-country correlation of business cycle activity in southeast Asia. We found a positive and significant relationship between the degree of bilateral trade intensity and the cross-country bilateral correlation of business activity over the period 1986–1996, a period when trade integration was proceeding rapidly. Thus, the Frankel and Rose (1997) finding that more trade integration between industrialized countries tends to result in more highly synchronized business cycles, appears to be robust to a sample of countries which have diverse income levels and economic structures and are likely to have less bilateral intraindustry trade.     

The effects of universities' proximity to industrial districts on university–industry collaboration

There is increasing awareness that university–industry collaboration provides an important knowledge transfer channel and, thus, is a powerful driver of innovation. Universities are increasingly being asked to play incisive roles in the process of regional economic development. This paper assesses the extent to which university–industry collaboration, expressed in terms of private funding for university consulting research activities, is affected by the geographic proximity of an academic institution to an Industrial District (ID). Although the economic literature insists on the positive effects of proximity for these collaborations, empirical work on Italian ID so far shows no particular effects. This paper provides new insights into the effects of academic proximity to ID on university–industry collaboration, by presenting robust evidence that proximity to districts promotes the establishment of collaboration agreements. This sheds new light on the need for targeted policies to support local productive systems. The empirical evidence is based on an analysis of qualitative information and an econometric analysis of financial data for the whole population of Italian university departments engaged in research in the Engineering and Physical Sciences.     

Measuring Restrictiveness of Bilateral Trade Policies: A Comparison between Developed and Developing Countries

This paper compares the degree of openness to trade of three developed countries markets—the European Union, Japan, the United States—with that of three middle-income countries, namely Brazil, India, and China. A theoretically consistent protection measure—the Mercantilistic Trade Restrictiveness Index (MTRI)—is employed to average tariffs at different levels of aggregation. The computation relies on a comparative static applied general equilibrium model (Global Trade Analysis Project—GTAP) featuring imperfect competition as well as on the bilateral applied tariffs included in the most recent version of the GTAP database. Results provide a different picture from what could have been expected given the widely publicized diffusion of preferential schemes supposedly favoring developing countries exports. JEL no.  F17, C68, Q17     

Bennet Woodcroft and the value of English patents, 1617–1841

We examine the potentialities of a new indicator measuring the value of English patents in the period 1617–1841. The indicator is based on the relative visibility of each individual patent in the contemporary technical and legal literature as summarized in Bennet Woodcroft's Reference Index of Patents of Invention. We conclude that the indicator provides a reasonable proxy for the value of patents and that it can be usefully employed to shed light on the timing and scope of innovation during the Industrial Revolution. In particular, our indicator offers a suitable reconciliation between the patent records evidence and the Crafts–Harley view of the Industrial Revolution.