Does international openness affect the productivity of local firms?

This paper examines how international openness can change firm productivity in south‐eastern Europe (SEE), a crucial question for middle‐income countries. Using firm‐level data for six transition economies over the 1995–2002 period, we identify whether foreign ownership and propensity to trade with more advanced countries can bring about higher learning effects. We find that: (i) foreign ownership has helped restructure and enhance the productivity of local firms in four out of six countries; (ii) exporting to advanced markets has a larger impact on productivity growth in four countries, especially when the firm's absorptive capacity is taken into account; (iii) in contrast, exporting to the less competitive markets of the former Yugoslavia seems to negatively affect productivity growth in three countries; and (iv) learning effects from importing are similar to those from exporting. Our results suggest that trade liberalization is not uniformly beneficial. Regional composition of trade flows and absorptive capacity of local firms matter. Thus, trade liberalization within the SEE region may not provide a substitute for a general trade liberalization which includes access to the more competitive markets of countries belonging to the Organization for Economic Co‐operation and Development.     

The effect of information on the bidding and survival of entrants in procurement auctions

In government procurement auctions of construction contracts, entrants are typically less informed and bid more aggressively than incumbent firms. This bidding behavior makes them more susceptible to losses affecting their prospect of survival. In April of 2000, the Oklahoma Department of Transportation started releasing the internal cost estimates to complete highway construction projects. Using newly developed quantile regression approaches, this paper examines the impact of the policy change on aggressive entrants. First, we find that the information release eliminates the bidding differential between entrants and incumbents attributed to informational asymmetries. Second, we argue that the policy change affects the prospects of survival of entrants in the market. We find that those who used to exit the market relatively soon are now staying 37% longer, while at the median level bidding duration increased by roughly 68%. The policy has the potential to encourage entry in government procurement auctions and thus increase competition.     

Measuring the Market Power of the Portuguese Milk Industry

This paper is based on the previous work of Appelbaum (Journal of Econometrics, 1979, 9, pp. 283-94; 1982, 19, pp. 287-99). Iwata (Econometrics 1974, 42, pp. 947-66) and Rogers (PhD Dissertation, GeorgeWashington University, 1983).We estimate the degree of market power of an oligopolistic industry, using a linear system and the 2SLS estimation method. Our departure point is the work of Appelbaum (1982) where a 'market power index' is estimated for each of the sample's 25 years. As the market power index depends functionally on the conjectural elasticity, the goal is to obtain annual estimates for that elasticity. For this purpose, Appelbaum defines a non-linear simultaneous-equation system and obtains, with non-linear methods, the conjectural elasticity estimates for each year of the sample. Considering the conjectural elasticity's functional form that Appelbaum adopts, we use a different approach and obtain a linear system that is easier to estimate. Due to the particular features of the industry analysed, we also derive a much simpler form for the equations involved. The model's simplicity is appealing and its generalisation to other industries with homogeneous products may be implemented with ease.     

Intentions to Return of Clandestine Migrants: The Perverse Effect of Illegality on Skills

In this paper we show that highly skilled clandestine migrants are more likely to return home than migrants with low or no skills when illegality causes "skill waste", i.e. when illegality reduces the rate of return of individual capabilities (i.e. skills and human capital) in the country of destination. In a simple life-cycle framework, illegality is modeled as a tax on skills that reduces the opportunity cost of returning home particularly for the highly skilled. This proposition is tested on a sample of apprehended immigrants that unlawfully crossed the Italian borders in 2003. The estimation confirms that the intention to return to the home country is more likely for highly skilled illegal immigrants. The empirical results of this paper attenuate the common wisdom on the return decisions of legal migrants, according to which low-skill individuals are more likely to go back home (mainly because of negative self-selection).     

Testable implications of general equilibrium models: An integer programming approach

Focusing on the testable revealed preference restrictions on the equilibrium manifold, we show that the rationalizability problem is NP-complete. Subsequently, we present a mixed integer programming (MIP) approach to characterize the testable implications of general equilibrium models. Attractively, this MIP approach naturally applies to settings with any number of observations and any number of agents. This is in contrast with existing approaches in the literature. We also demonstrate the versatility of our MIP approach in terms of dealing with alternative types of assignable information. Finally, we illustrate our methodology on a data set drawn from the US economy. In this application, an important focus is on the discriminatory power of the rationalizability tests under study.     

Dynamics of Customer Response to Promotional and Relational Direct Mailings from an Apparel Retailer: The Moderating Role of Relationship Strength

Although direct mails have traditionally been used to sell a product or service, they can also be effective in enhancing retailer-customer relationships. This study examines how customers respond to ‘promotional’ (‘call to action’) and ‘relational’ (‘retailer-image enhancement’) direct mailings. The study develops a model that includes: (i) the dynamic effects of both types of direct mailings over time; and (ii) the moderating role of strength of the relationship that a customer enjoys with the retailer. Past purchase behavior is also considered. The model is then used in a study of customers of a Belgian apparel retailer. The results show that relational mailings positively affect customer response, irrespective of when they are sent. In contrast, the effects of promotional mailings are less clear-cut: although they work well in the short term, their effects can vary in the longer term. In addition, the study finds that a direct-mailing strategy should be planned in accordance with the strength of the relationship between the retailer and the target customers. The results of the study provide valuable insights for retailers in optimizing the effectiveness of their direct-mail initiatives.     

Estimating intergenerational schooling mobility on censored samples: consequences and remedies

In this paper we estimate the impact of parental schooling on child schooling, focus on the problem that children who are still in school constitute censored observations, and evaluate three solutions to it: replacement of observed with expected years of schooling, maximum likelihood approach, and elimination of all school‐aged children. Using intergenerational data from the Wisconsin Longitudinal Study we test how the three correction methods deal with censored observations. The one that treats parental expectations as if they were realizations seems to fix the censoring problem quite well. Copyright © 2009 John Wiley & Sons, Ltd.     

Introducing public–private partnerships for metropolitan subways in China: what is the evidence?

Rapidly growing motorisation has led to high levels of traffic congestion and emissions and has encouraged large Chinese metropolitan areas to invest in subway developments. The financial burden of these projects, however, far exceeds the availability of available public funds. As a consequence, the Chinese government has started to allow local governments with public–private partnerships (PPP) and private finance to supplement the funding deficit. Analysts often claim that countries have to fulfil certain institutional and other pre-conditions before they can make effective use of PPP. In this article, China’s record in meeting those requirements is examined and conclusions are drawn as to where the remaining weaknesses lie. Seven recent PPP projects for subways in five large metropolitan areas in China (Shanghai, Beijing, Shenzhen, Chongqing and Harbin) are investigated empirically. Conclusions are drawn concerning China’s current status regarding the use of PPP, the way it has been adapted to China’s financial, institutional and geographical context and the likely prospects for PPP in China in the future.     

Theories of the firm, competitive advantage and government policy

To improve the effectiveness of government policy, it is necessay to develop a good picture of what a firms in a knowledge-intensive economy is and does. In this paper, we have drawn on the recent surge of books and articles on the resource- and knowledge-based theories of the firm and their implications for competitive advantage. We would like to contribute to that discussion summarizing that debate and exploring the implications for government policy. In new theories of the firm, emphasis is placed on the crucial importance of knowledge, a production factor which is not easily imitated. Exampb of government policy which are based on these new inskhts are the recognition of the importance of demanding clients, the emphasis on the unique potential of the local business environment and the stimulation of transfer of knowledge between firms and networks instead of subsidizing project for knowledge development in isolated firms. A more realistic view of business behaviour will improve the effectiveness of policy, thereby generally improving the competitive position of firms.