When do thick venture capital markets foster innovation? An evolutionary analysis

In this paper, we examine the trade off between different effects of the availability of venture capital on the speed of technological progress in an industry. We consider an evolutionary industry simulation model based on Nelson and Winter (1982), in which R&D efforts of an incumbent firm generate technological know-how embodied in key R&D employees, who might use this know-how to found a spinoff of the incumbent. Venture capital is needed to finance a spinoff, so that the expected profits from founding a spinoff depend on how easily venture capital can be acquired. Accordingly, thick venture capital markets might have two opposing effects. First, incentives of firms to invest in R&D might be reduced and, second, if spinoff formation results in technological spillovers between the parent firm and the spinoffs, the generation of spinoff firms might positively influence the future efficiency of the incumbent’s innovation efforts. We study the manner in which this tradeoff influences the effect of venture capital on innovation expenditures, speed of technological change and evolution of industry concentration in several scenarios with different industry characteristics.     

The international risk sharing puzzle is at business cycle and lower frequency

Abstract We decompose the correlation between relative consumption and the real exchange rate in its dynamic components at different frequencies. Using multivariate spectral analysis techniques, we show that, at odds with a high degree of risk sharing, in most OECD countries the dynamic correlation tends to be quite negative, and significantly so, at frequencies lower than two years – the appropriate frequencies for assessing the performance of international business cycle models. Theoretically, we show that the dynamic correlation over different frequencies predicted by standard open economy models is the sum of two terms: a term constant across frequencies, which can be negative when uninsurable risk is large; a term variable across frequencies, which in bond economies is necessarily positive, reflecting the insurance intertemporal trade provides against forecastable contingencies. Numerical analysis suggests that leading mechanisms proposed by the literature to account for the puzzle are consistent with the evidence across the spectrum.     

Suffer the little children: Measuring the effects of parenthood on well-being worldwide

This paper investigates the relationship between parenthood and well-being in a large sample of individuals from 94 countries worldwide. We find that having children is negatively related to well-being. Conditioning on economic and socio-demographic characteristics can only partially help to explain this finding. We show that the negative effect of parenthood on well-being is explained by a large adverse impact on financial satisfaction, that dominates the positive impact on non-financial satisfaction. The results are robust to the use of alternative empirical specifications and to the inclusion of the reported ideal number of children as a proxy variable to account for the endogeneity of parenthood decisions.     

The codetermined firm in a Cournot duopoly: A stability analysis

This paper aims to study the stability issue in a Cournot duopoly with codetermined firms. We show that when both firms codetermine employment together with decentralised employees' representatives, a rise in wages acts as an economic (de)stabiliser when the wage is fairly (high) low, while under profit maximisation a rise in wages always acts as a stabilising device because the parametric stability region monotonically increases with the wage in such a case. Moreover, a rise in the union's bargaining power has a de-stabilising effect, except when the wage is low and the firm power is already high. Therefore, under codetermination a change either in the wage or firm power in the Nash bargaining plays an ambiguous role on stability. We also show with numerical simulations that complex dynamics can also occur.     

Semi-analytical prices for lookback and barrier options under the Heston model

Decisions in Economics and Finance - Under the Heston stochastic volatility model, we derive semi-analytical formulas for the prices of path-dependent options with payoffs linked to the maximum or...     

PERFORMANCE MEASUREMENT IN SOLIDARITY ECONOMY ORGANIZATIONS: THE CASE OF FAIR TRADE SHOPS IN ITALY

ABSTRACT: The aim of this paper is to introduce a multidimensional assessment model for organizations that have multiple goals and are not driven exclusively by profit. Therefore, it is an assessment method particularly suitable for social enterprises. In order to measure the efficiency of production units in each dimension, the Data Envelopment Analysis non‐parametric method is applied. Our case study is concerned with Fair Trade shops and members of the consortium Altromercato for which we collected variables that could be associated with input and output for the economic, socio‐cultural and organizational dimensions. The results of the analysis confirm the presence of economies of scale in the economic dimension but not in the socio‐cultural dimension. Moreover, our organizational analysis confirmed a low general professionalization. Our results also confirm, on the one hand, the more pronounced capacity of cooperatives to sell Fair Trade products compared to associations, which, on the other hand, have the tendency to achieve proportionately better results in the socio‐cultural dimension.     

Do minimum quality standards bite in polluting industries?

We investigate the introduction of a minimum quality standard in a vertically differentiated duopoly where production is polluting. We examine the alternative frameworks with quality-dependent fixed or variable costs, under both price and quantity competition. Under Bertrand behaviour, the introduction of a binding MQS regulation reduces product differentiation, which causes an increase in the output and pollution. Hence its adoption must rely on the increase in consumer surplus generated by the increase in output and average quality. Conversely, in the Cournot setting, a binding MQS decreases output and pollution, and its adoption is driven by the fact that the balance between these effects and the associated increase in average quality yields a welfare improvement.     

Economic growth and stability with public pay-as-you-go pensions and private intra-family old-age insurance

This paper compares the steady-state and dynamic outcomes of two historical alternatives as a means of old-age insurance, namely, voluntary intra-family transfers from young to old members versus pay-as-you-go public pensions, in a general equilibrium overlapping generations model with children as a desirable good. We show that the shift from a private system of old-age support to public pensions increases the gross domestic product (GDP) per worker. Moreover, although in both cases the steady-state stock of capital, under myopic expectations, may be (globally) unstable depending on the size of the inter-generational transfer, we show that the existence of public pensions rather than private intra-family gifts considerably reduces the possibility of cyclical instability.     

Earnouts: The real value of disagreement in mergers and acquisitions

Earnout agreements link part of the payment for an acquired company to its future performance. Despite their option-like features, they cannot be valued using vanilla option-pricing methods. Two peculiar sources of risk affect these contracts: Bidder default before the earnout expiration (default risk) and potential litigation associated with earnouts (litigation risk). We developed an option-pricing model that encompasses these sources of risk, showing that counterparty and litigation risk can have a remarkable impact on earnout values. Our model's relevance is further enhanced by recent accounting standards that require contingent payments to be valued at fair value.     

Antony Lewis: The basics of bitcoins and blockchains

Financial Markets and Portfolio Management -