Economic Integration and Public Provision of Education

This paper develops a model of fiscal competition in public provision of a private good: education. In this framework, the welfare enhancing effects of public education provision are shown to be reduced by increased student mobility when, like in the EU, countries are unable to set differentiated fees to foreign students. Indeed, the threat of attraction of foreigners who free-ride on the national education system may induce suboptimal levels of public education provision when (price) discrimination is forbidden. Alternatively, countries may try to escape regulation and avoid equal treatment of foreign students. The paper provides some empirical evidence of the existence of a fiscal externality in education at the EU level.     

Next generation network: How to stimulate investment while maintaining a competitive market

High-speed communication networks are the basic infrastructure for a whole range of next generation communication services. They can induce a wave of innovations and eventually lead to growth and new employment. However, large investments will be needed to generate Next Generation Networks (NGN) and the risks for the investor will be substantial. On the other hand, investors can create monopolistic bottlenecks which prevent competitors from gaining access to essential infrastructure. As a consequence, uncompetitive markets will emerge. The following article proposes a regulatory system which creates incentives for investment while safeguarding competition.     

Intergovernmental grants in Russia

Two hypotheses about the determinants of Russian intergovernmental grants are tested. According to the first hypothesis, federal transfers to regions correlate with recent voting behaviour of regional electorates. The second hypothesis states that transfers are higher in regions with politically powerful governors. I find a strong confirmation for the first hypothesis and no evidence for the second hypothesis for the years 1995–99. This result is robust across specifications. However, in the years 2000–2004 electoral variables show no effect on transfers. The only significant political variable is Putin’s visits to regions.     

Interpolation and backdating with a large information set

Existing methods for data interpolation or backdating are either univariate or based on a very limited number of series, due to data and computing constraints that were binding until the recent past. Nowadays large datasets are readily available, and models with hundreds of parameters are easily estimated. We model these large datasets with a factor model, and develop an interpolation method that exploits the estimated factors as an efficient summary of all available information. The method is compared with existing standard approaches from a theoretical point of view, by means of Monte Carlo simulations, and also when applied to actual macroeconomic series. The results indicate that our method is rather robust to model misspecification, although traditional multivariate methods also work well while univariate approaches are systematically outperformed. When interpolated series are subsequently used in econometric analyses, biases can emerge, but they are smaller with multivariate approaches, including factor-based ones.     

Competition in Lending: Theory and Experiments*

A variation of the Rothschild-Stiglitz’ equilibrium is examined in the context of competitive lending under adverse selection. The predictions of the model are tested in an experimental market setting. If equilibrium exists, the loan contracts offered and taken should separate projects by quality. When equilibrium exists, the experiments confirm the theory. The entrepreneurs with high-risk projects take bigger loans and pay higher credit spreads than those with low-risk projects. When equilibrium does not exist, which happens exactly when the candidate equilibrium does not provide a Pareto-optimal allocation, in half of the sessions loan trading stabilizes around the candidate equilibrium pair. In the other half, however, markets never settle down. This finding has important implications. When lenders can offer menus of contracts, as is usually the case in reality, the outcome may not be the zero-profit separating contracts of the standard model. Worse, fitting the standard model to field data may lead to serious biases in estimated parameters while falsely accepting the model’s main restriction (separation). *The financial support of the Division of Humanities and Social Sciences at Caltech is gratefully acknowledged. I would like to thank Charles Plott, Thomas Palfrey, Bill Zame, Mike Lemmon, as well as the seminar participants at Caltech, UCSD, Duke, Berkeley, Stanford, University of Utah, Columbia, Georgia State University, Tulane, University of Houston, and Arizona State University for helpful comments, and the staff of EEPS, SSEL, and CASSEL for their help in running the experiments. I am especially grateful to my advisor and mentor Peter Bossaerts for his guidance and encouragement. All errors are my own.     

Evaluating contemporary social exclusion in Europe: a hierarchical latent class approach

In recent years, the concept of social exclusion has received a renewed attention in scientific research, as well as in politics. In this contribution we propose a hierarchical Latent Class (LC) model for the analysis of differences and similarities about experiences and perceptions of social exclusion among European regions. Social exclusion is a situation that affects individuals, and derives from a multidimensional deprivation in several domains of life. In particular, we identify and define an economic, a social and an institutional dimension. The LCs, which structure the individuals with respect to a set of observed indicators, represent different typologies of social exclusion at individual level according to the three identified dimensions. The regional differences in the latent variable distribution are modeled following a nonparametric approach for the random effects. This multilevel extension leads to the identification of a typology of regions, allowing different social exclusion structures to stand out for different European areas. The hierarchical latent class approach proves to be profitable in investigating the relevance of different risk factors of social exclusion and their relationships, and in verifying whether, and to what extent, the same risks and disadvantages determine the same perception of marginalization and exclusion in different political, economic, social and cultural contexts. The analysis is carried out using the 56.1-2001 Eurobarometer Survey, which focused on poverty and social exclusion situations, from both a subjective and an objective point of view.     

The effect of neglecting the slope parameters’ heterogeneity on dynamic models of corporate capital structure

We present a parsimonious representation of debt-ratio dynamics that is able to nest the Trade-Off, Pecking-Order and Market-Timing theoretical models, at the same time avoiding the poolability of the slope parameters. The inference on the heterogeneous speed of adjustment of the firm towards the target debt ratio is based on a comparison of the unit root results from both individual company and (this is a relative novelty in the case of micro-data) panel data. Results show that company behavior is largely heterogeneous with regard to the theory underlying the historical data. Our proposed methodology may be usefully employed in order to identify sub-samples of companies behaving in an homogeneous manner, and can be extended to study the empirical capital structure models with more appropriate quantitative instruments. This would avoid the arbitrary a priori selection of sub-samples and the imposition of untested poolability assumptions as commonly occurs in the empirical literature.     

Family Vacation Decision Making: The Role of Woman

Most people spend their vacations with their family and decide where, how, and when with their spouses. The woman's role within the couple has become more and more influential in certain purchase decisions. This influence is strongly related to their lifestyles and values. For the tourism sector and its marketing strategy, it would be very useful to know the role that women play in vacation decisions. So, this article aims to analyze the influence of women's lifestyles and values on family vacation decisions. The information is based on 300 questionnaires addressed to married or cohabiting women. The results show differences in vacation decisions depending on the profile of the women (professional vs. traditional) and their preferences in activities.     

Testing efficiency of the ruble-sterling foreign-exchange market under the gold standard

This paper tests an efficient market hypothesis for the Russian ruble–UK sterling exchange rates in the gold standard period 1897–1913. Using Bayesian Markov Chain Monte Carlo methods it is shown how to test a weak-form market efficiency in a doubly truncated regression model with ARMA-GARCH error. The suggested model accounts for time series characteristics of the data and bounds of exchange rates caused by the gold points and government intervention. We find that the weak-form efficiency hypothesis can not be rejected for the gold standard ruble exchange rates in both St.Petersburg and London markets.