Modelling a sustainable requalification problem by analytic hierarchy process

Quality & Quantity - Decision problems are often characterized by a great number of alternative actions and by the complexity of relationships between factors involved in the process. This...     

University specialization and new firm creation across industries

This article examines how the scientific specialization of universities impacts new firm creation across industries at the local level. In accordance with the Pavitt-Miozzo-Soete taxonomy, we consider eight industry categories, which reflect the characteristics of firms’ innovation patterns and, ultimately, the knowledge inputs that firms require. Using data on new firm creation in Italian provinces (i.e., at the NUTS3 level), we estimate negative binomial regression models separately for each industry category to relate new firm creation to the scientific specialization in basic sciences, applied sciences and engineering, and social sciences and humanities of neighboring universities. We find that universities specialized in applied sciences and engineering have a broad positive effect on new firm creation in a given province, this effect being especially strong in service industries. Conversely, the positive effect of university specialization in basic sciences is confined to new firm creation in science-based manufacturing industries, even if this effect is of large magnitude. Universities specialized in social sciences and humanities have no effect on new firm creation at the local level whatever industry category is considered.     

Does the Macroeconomy Predict UK Asset Returns in a Nonlinear Fashion? Comprehensive Out‐of‐Sample Evidence

We perform a comprehensive examination of the recursive, comparative predictive performance of linear and nonlinear models for UK stock and bond returns. We estimate Markov switching, threshold autoregressive (TAR) and smooth transition autoregressive (STR) regime switching models and a range of linear specifications including models with GARCH type specifications. Results demonstrate UK asset returns require nonlinear dynamics to be modelled with strong evidence in favour of Markov switching frameworks. Our results appear robust to the choice of sample period, changes in loss functions and to the methodology employed to test for equal predictive accuracy. The key findings extend to a similar sample of US data.     

Migration as an antidote to rent-seeking?

We develop a new mechanism through which skilled migration may influence economic performance in the sending country. If agents can choose between acting as rent-seekers and engaging in productive activities, and only productive skills are exportable, a positive probability of migration (to a more secure economy) reduces the relative expected returns from rent-seeking, thus decreasing the proportion of skilled workers who opt for “parasitic” activities. Such an improvement in the allocation of talent may prevail over the loss of skilled workers due to outmigration. However, we show that this result is not robust to the introduction of endogenous protection. If productive workers share their resources between accumulation of productive capital and investment in security, prospective migration may induce a weaker protection against rent-seeking, which in turn might depress average income in the source economy.     

THE ROLE OF HOUSE PRICES IN THE MONETARY TRANSMISSION MECHANISM ACROSS EUROPEAN COUNTRIES

This paper provides a discussion of the ‘housing market’ channels of the monetary transmission mechanism and offers some evidence of institutional differences in the European housing and mortgage markets. Using a number of Vector Autoregressive models, estimated individually for nine European countries over the pre‐EMU period, we find that house prices are significantly affected by interest rate shocks. The relative role of these interest‐rate‐induced fluctuations in house prices for private consumption is then investigated. We show that house prices may enhance the effects of interest rate shocks on consumer spending in those economies where housing and mortgage markets are relatively more developed and competitive.     

Electricity Prices as Signals for the Evaluation of Reforms: An Empirical Analysis of Four European Countries

This paper looks at price trends as signals for the evaluation of utility reforms. A specific example is considered: electricity prices in four countries, namely France, Germany, Italy and UK. These countries offer a natural experiment in different patterns of public/private ownership and liberalisation of electricity industry. Electricity prices are mainly influenced by the mix of energy inputs, their costs, and by consumption per capita. Under different institutional settings, prices for business users are often more cost‐reflective than prices for residential users. Beyond these common features, the evidence does not support the view that there is clear dominance of one industry pattern in terms of welfare change for the representative consumer. This conclusion tends to question the widely held idea that one specific ‘orthodox’ reform should be preferred: privatisation with liberalisation and vertical disintegration. Utility reforms should be flexible and country‐specific.     

Are the dynamic linkages between the macroeconomy and asset prices time-varying?

We estimate a number of multivariate regime switching VAR models on a long monthly US data set for eight variables that include excess stock and bond returns, the real T-bill yield, predictors used in the finance literature (default spread and the dividend yield), and three macroeconomic variables (inflation, industrial production growth, and a measure of real money growth). Heteroskedasticity may be accounted for by making the covariance matrix a function of the regime. We find evidence of four regimes and of time-varying covariances. We show that the best in-sample fit is provided by a four state model in which the VAR(1) component fails to be regime-dependent. We interpret this as evidence that the dynamic linkages between financial markets and the macroeconomy have been stable over time. The four-state model can be helpful in forecasting applications and provides one-step ahead predicted Sharpe ratios.     

FAILING FIRM DEFENCE WITH ENTRY DETERRENCE

Under the principle of the failing firm defence a merger that would be blocked due to its harmful effect on competition could be nevertheless allowed when (i) the acquired firm is actually failing, (ii) there is no less anticompetitive alternative offer of purchase, (iii) absent the merger, the assets to be acquired would exit the market. We focus on potential anticompetitive effects of a myopic application of the requirement (iii) by studying consequences of a horizontal merger on entry in a Cournot oligopoly with a failing firm. Entry is deterred if the merger is cleared and, when the industry is highly concentrated, consumer welfare is higher under a prohibition because long‐run gains due to augmented competition exceed short‐run losses due to shortage of output.