Business cycle measurement with some theory

A method to evaluate cyclical models not requiring knowledge of the DGP and the exact specification of the aggregate decision rules is proposed. We derive robust restrictions in a class of models; use some to identify structural shocks in the data and others to evaluate the class or contrast sub-models. The approach has good properties, even in small samples, and when the class of models is misspecified. The method is used to sort out the relevance of a certain friction (the presence of rule-of-thumb consumers) in a standard class of models.     

Insurance fraud detection: A statistically validated network approach

Fraud is a social phenomenon, and fraudsters often collaborate with other fraudsters, taking on different roles. The challenge for insurance companies is to implement claim assessment and improve fraud detection accuracy. We developed an investigative system based on bipartite networks, highlighting the relationships between subjects and accidents or vehicles and accidents. We formalize filtering rules through probability models and test specific methods to assess the existence of communities in extensive networks and propose new alert metrics for suspicious structures. We apply the methodology to a real database—the Italian Antifraud Integrated Archive—and compare the results to out-of-sample fraud scams under investigation by the judicial authorities.     

Free‐riding in multi‐party alliances: The role of perceived alliance effectiveness and peers' collaboration in a research consortium

Research summary : Multi‐party alliances rely on partners' willingness to commit and pool their efforts in joint endeavors. However, partners face the dilemma of how much to commit to the alliance. We shed light on this issue by analyzing the relationship between partners' free‐riding—defined as their effort‐withholding—and their perceptions of alliance effectiveness and peers' collaboration. Specifically, we posit a U‐shaped relationship between partners' subjective evaluations of alliance effectiveness and their free‐riding. We also hypothesize a negative relation between partners' perceptions of the collaboration of peer organizations and their free‐riding. Results from a mixed‐method study—combining regression analysis of primary data on a major inter‐organizational research consortium and evidence from two experimental designs—support our hypotheses, bearing implications for the multi‐party alliances literature. Managerial summary : Free‐riding is a major concern in multi‐party alliances such as large research consortia, since the performance of these governance forms hinges on the joint contribution of multiple partners that often operate according to different logics (e.g., universities, firms, and government agencies). We show that, in such alliances, partners' perceptions have relevant implications for their willingness to contribute to the consortium's shared goals. Specifically, we find that partners free‐ride more—that is, contribute less—when they perceive the effectiveness of the overall alliance to be either very low or very high. Partners also gauge their commitment to the alliance on the perception of the effort of their peers—that is, other organizations similar to them. These findings provide managers of multi‐party alliances with additional levers to motivate partners to contribute fairly to such joint endeavor. Copyright © 2015 John Wiley & Sons, Ltd.     

The collective voice of unions and workplace training in Italy: New insights from mixed methods

Using a three-phase approach that combines quantitative (pooled OLS, fixed effects and IV) with qualitative (semi-structured interviews) analyses, we find that in Italy, workplace unions are more likely to enhance training when they sign a firm-level agreement and when they can get access to external funds for financing. We also identify three channels: what we call a ‘maturation effect’, double-track communication and watch-dog function. We argue that these results are consistent with the idea that the impact of workplace unions on training depends on the empowerment of its collective voice within an institutional framework that does not fit either of the standard models provided by collective and liberal market economies.     

Coherent Distortion Risk Measures and Higher-Order Stochastic Dominances

Abstract

We show that the only coherent distortion risk measure that is consistent with respect to 3-convex order and hence with stochastic dominance of order 3 is the expected value, thus generalizing previous results of Hurlimann and solving a problem posed by Yamai and Yoshiba.     

Potential Tax Revenue from a Regulated Marijuana Market A Meaningful Revenue Source

A bstract . Dissatisfaction with current drug policy measures has led to a push for the regulation of drugs , especially marijuana . On the premise that such regulation is a real possibility, estimates of potential tax revenue from a regulation scheme and critical comments on other estimates of the size of the marijuana market are presented. For 1991, potential tax revenue is estimated to range from 2.55 to 9.09 billion dollars. The uncertainty surrounding the price elasticity of demand for marijuana, home cultivation of marijuana by individual users, and the extent to which purchases may still be made from the black market are discussed, as are their implications for potential tax revenue.     

A Methodological Note on Long-Period Positions

This brief paper seeks to overcome a number of methodologicaldisagreements among economists who use the long-period methodof analysis. In particular, it attempts to clarify the key distinctionsbetween convergence and stability, convergence and gravitationand chronological and theoretical persistence. The conclusionis that the theoretical soundness of the long-period methoddepends on the convergence of actual magnitudes towards theirlong-period counterparts, an empirical issue to which theoreticalconsiderations of stability are irrelevant.     

One‐Way Compatibility,Two‐Way Compatibility and Entry in Network Industries

We study the strategic choice of compatibility between two initially incompatible network goods in a two‐stage game played by an incumbent and an entrant firm. Compatibility may be achieved by means of a converter. We derive a number of results under different assumptions about the nature of the converter (one‐way vs two‐way), the existence of property rights and the possibility of side payments. With incompatibility, entry deterrence occurs for sufficiently strong network effects. In the case of a two‐way converter, which can only be supplied by the incumbent, incompatibility will result in equilibrium unless side payments are allowed and the network externalities are sufficiently low. When both firms can build a one‐way converter and there are no property rights on the necessary technical specifications, the unique equilibrium involves full compatibility. Finally, when each firm has property rights on its technical specifications, full incompatibility is observed at the equilibrium with no side payments; when these are allowed the entrant sells access to its network to the incumbent which refuses to do the same and asymmetric one‐way compatibility results in equilibrium.     

Patterns and determinants of international fragmentation of production: Evidence from outward processing trade between the EU and Central Eastern European countries

Patterns and Determinants of International Fragmentation of Production: Evidence from Outward Processing Trade between the EU and Central Eastern European Countries. — In this paper we investigate a specific form of international fragmentation of production, that is, the form giving rise to international trade for reasons of processing. Data on textile and apparel trade between EU countries and Central European countries show that the magnitude of trade for reasons of processing greatly overshadows that of final trade. The industry appears to be affected by a process of international fragmentation whose understanding requires a new definition of the concept of comparative advantage. Our analysis suggests that this fragmentation is activated by labor cost differentials as well as by reasons of geographic and cultural proximity.