Testing the Porter hypothesis: the effects of environmental investments on efficiency in Swedish industry

The main objective of this paper is to test the Porter hypothesis by assessing static and dynamic effects of environmental policy on productivity. According to the hypothesis, stringent environmental regulations have dynamic effects on firm performance, and these effects eventually generate profits that offset the adaptation costs. We extend previous analyses by using unique data on environmental protection investments in the Swedish manufacturing industry as a proxy for environmental stringency. These data enable us to separate environmental protection investments into pollution prevention and pollution control. This distinction is crucial since the hypothesis claims that it is investments in prevention that have positive dynamic effects on firm performance. To test the hypothesis, a stochastic production frontier model is estimated where firm inefficiency is a function of investments in environmental protection. In general, we find no support for the Porter hypothesis within the time frame of our study, indicating that environmental regulations lead to efficiency losses. This result is even stronger in the harshly regulated pulp and paper industry.     

Some reflection on research ‘Schools’ and geographies

Reflecting on real and perceived differences between European and North American research cultures, I challenge views that ‘European’ research is under appreciated or discriminated against, and caution against isolationist European positions. Instead, I argue that although no distinctive and coherent European tradition or culture really exists, there may be elements of the prevalent research culture that can be turned into an advantage for Europe-based and/or European-trained researchers in helping to influence and improve one, global research conversation. Of course, a range of sub-communities and sub-conversations will and should exist, but there is no reason for these to be based on geography.     

Do poverty and poor health and nutrition increase the risk of armed conflict onset?

We analyze the effects of improving the economic, food security and health status on the risk of armed cotntectflict onset, focusing on the factors related to the millennium development goals. We employ the discrete-time hazard model that allows us to examine the time-varying effects of socioeconomic factors controlling for the reverse effect of conflict. Our results show that income poverty and poor health and nutritional status are more significantly associated with armed conflict onset than GDP per capita, annual GDP growth, and the ratio of primary commodity exports over GDP. In particular, poor health and nutritional status seems to play a key role in inducing armed conflicts in poor countries. These results indicate that, when a majority of the poor and the malnourished resides in rural areas and depends on agriculture directly or indirectly, investments in public goods for agriculture and rural areas can be effective tools to achieve the multiple goals of reduced poverty, food security and armed conflict, including riots in early 2008 triggered by high food prices. Food policy can be an effective element of efforts to maintain stability.     

Asset specificity and behavioral uncertainty as moderators of the sales growth — Employment growth relationship in emerging ventures

Sales growth and employment growth are the two most widely used growth indicators for new ventures; yet, sales growth and employment growth are not interchangeable measures of new venture growth. Rather, they are related, but somewhat independent constructs that respond differently to a variety of criteria. Most of the literature treats this as a methodological technicality. However, sales growth with or without accompanying employment growth has very different implications for managers and policy makers. A better understanding of what drives these different growth metrics has the potential to lead to better decision making. To improve that understanding we apply transaction cost economics reasoning to predict when sales growth will be or will not be accompanied by employment growth. Our results indicate that our predictions are borne out consistently in resource-constrained contexts but not in resource-munificent contexts.     

Agglomeration, Relative Wage Costs and Foreign Direct Investment—Evidence from Swedish MNCs 1974–1998

This paper examines the relationship between agglomeration economies and relative wage costs in influencing location of multinational corporations. An inflow of firms to certain regions and industries is likely to increase demand for labor. If mobility of labor is low increased costs can be expected to deter additional inflows of firms, albeit agglomeration economies may compensate for higher wages. Despite its important policy implications this relationship has to our knowledge not been exposed to empirical testing. The empirical analysis finds that foreign direct investment has become increasingly sensitive to differences in wage cost across industrialized countries, but also that agglomeration economies related to knowledge externalities positively influences higher costs. The relative strength of these two forces impacts the spatial distribution of production.

The cause of Danish unemployment: Demand or supply shocks?

We study the Danish unemployment experience 1905–92 using a common trends model with cointegration constraints. To justify the identifying assumptions about the cointegration vectors and the common trends we present a simple macroeconomic model of the labor market. The model determines the long run behavior of labor productivity, employment, unemployment, real product and real consumer wages. The empirical results give support for three cointegration relations and two common trends. Based on the economic model the trends are interpreted as representing labor productivity (technology) and labor supply. With unemployment being nonstationary, the common trends analysis indicates that labor supply shocks is the primary source for explaining the behavior of unemployment. First Version Received: August 1999/Final Version Received: June 2000     

Anchor Points, Reference Points, and Counteroffers in Negotiations

Based on the theoretical assumptions that counteroffers are generated through an anchoring-and-adjustment process and that offers are perceived as gains or losses relative to a reference point, predictions were made of how, in a price negotiation, the size of counteroffers vary with proposed selling prices and reservation prices. The predictions were confirmed in two experiments. In Experiment 1, 64 undergraduate students of business administration playing the role of buyers of condominiums were presented proposed selling prices and asked to give a counteroffer which a hypothetical seller would accept or reject. A reference point was induced by telling subjects their reservation price. Before giving a counteroffer subjects were asked to indicate whether it was higher or lower than an arbitrary anchor point. In four different groups of subjects, high vs. low reference point was crossed with high vs. low anchor point. The results showed as expected that the counteroffers were higher for a high than for a low anchor point, and higher for a high reference point when the anchor point was perceived as a gain than for a low reference point when the anchor point was perceived as a loss. In Experiment 2 in which another 48 undergraduate students of business administration participated, the anchor points were the proposed selling prices and the reference point (reservation price) was manipulated by providing estimates of the market price. The results were as predicted, thus suggesting that the proposed selling prices operated as anchor points and that the estimated market prices affected the reservation prices (reference points) so that the selling prices and estimated market prices jointly affected the counteroffers.     

Dynamic portfolio optimization across hidden market regimes

Regime-based asset allocation has been shown to add value over rebalancing to static weights and, in particular, reduce potential drawdowns by reacting to changes in market conditions. The predominant approach in previous studies has been to specify in advance a static decision rule for changing the allocation based on the state of financial markets or the economy. In this article, model predictive control (MPC) is used to dynamically optimize a portfolio based on forecasts of the mean and variance of financial returns from a hidden Markov model with time-varying parameters. There are computational advantages to using MPC when estimates of future returns are updated every time a new observation becomes available, since the optimal control actions are reconsidered anyway. MPC outperforms a static decision rule for changing the allocation and realizes both a higher return and a significantly lower risk than a buy-and-hold investment in various major stock market indices. This is after accounting for transaction costs, with a one-day delay in the implementation of allocation changes, and with zero-interest cash as the only alternative to the stock indices. Imposing a trading penalty that reduces the number of trades is found to increase the robustness of the approach.