Testing the Correlated Random Coefficient Model

The recent literature on instrumental variables (IV) features models in which agents sort into treatment status on the basis of gains from treatment as well as on baseline-pretreatment levels. Components of the gains known to the agents and acted on by them may not be known by the observing economist. Such models are called correlated random coe cient models. Sorting on unobserved components of gains complicates the interpretation of what IV estimates. This paper examines testable implications of the hypothesis that agents do not sort into treatment based on gains. In it, we develop new tests to gauge the empirical relevance of the correlated random coe cient model to examine whether the additional complications associated with it are required. We examine the power of the proposed tests. We derive a new representation of the variance of the instrumental variable estimator for the correlated random coefficient model. We apply the methods in this paper to the prototypical empirical problem of estimating the return to schooling and nd evidence of sorting into schooling based on unobserved components of gains.     

Forward-Looking Disclosures,Financial Verifiability and Analysts' Forecasts: A Study of Cross-Listed European Firms

Forward-looking disclosures are a crucial source of information when valuing a company. We study the effect of forward-looking disclosures on analysts' forecast properties, in particular accuracy and dispersion. Our sample includes all the non-financial firms from Italy, Germany, France and Switzerland that in year 2002 were cross-listed on local stock exchanges and on the New York Stock Exchange. We conduct a content analysis on the Annual Report and the 20F form of these companies for the years 2002, 2003 and 2004. We differentiate between forward-looking information on the basis of the disclosure of expected effects on future financial performance and the disclosure of a measure of this impact. We define forward-looking information disclosed with the characteristics of being quantified and directed (and financial) as financially verifiable as it facilitates the comparison with its subsequent realisation in relation to expected future financial performance. Our analysis finds support for the theoretical prediction that verifiable disclosures are more effective than unverifiable disclosures at improving accuracy and reducing dispersion of analysts' forecasts. Our sample also allows us to explore the effects of the difference between the degrees of verifiability between forward-looking disclosures of the 20F form versus those of the domestic annual report. Our analysis provides empirical support for the hypotheses that these differences are significant and have a significant effect on forecast properties.     

Valuing externalities from energy infrastructures through stated preferences: a geographically stratified sampling approach

The externalities produced by high-voltage transmission lines are multidimensional, may strongly depend on the local context, and are thus difficult to capture through standard environmental valuation exercises. We experiment a GIS approach to design a geographically stratified contingent valuation sample of the population resident in infrastructure corridors in a whole region. We estimate, by means of a binary choice logit model, the perceived marginal damage from impacts of power lines on human health, the landscape and the environment. Specific treatment is given to qualitatively different forms of impact, namely real estate depreciation versus diffused perception of damage, arising at different distances from the lines. The set of GIS-based variables (proximity to power lines, presence of other infrastructure, endowment of natural and built heritage and other local context variables) prove to be significant predictors in the utility function of resident households. Finally, we compute simulated values that combine information on individual’s willingness to pay, population density and the dimension of the considered corridor around the infrastructure, so as to generalize the outcomes of case-specific studies for use in policy choices such as infrastructure localization, undergrounding and negotiation of compensations.     

Network design in games with spillovers

How should an organization be designed in order to provide its members with minimal incentives to defect? And how does the optimal design depend on the type of strategic interaction between defectors and remaining organizational members? This paper addresses such issues in a game theoretic model of cooperation, in which an organization is formally represented by a connected network, and where gains from cooperation are given by a partition function. We show that critical structural features of the organization depend in a clear-cut way on the sign of spillovers. In particular, positive spillovers favor the adoption of dispersed and centralized forms, while negative spillovers favor cohesive and horizontal ones. Moreover, if the organizational form determines all the communication possibilities of members, a highly centralized organization—the star—emerges under positive spillovers, whereas two horizontal architectures—the circle and the complete—emerge under negative spillovers.     

Monetary integration strategies and perspectives of new EU countries

The poor record of economic convergence between the euro area and those countries that joined the European Union (EU) in May 2004 raises serious doubts about the possibility for the latter countries to adopt the European single currency in the not too distant future. In fact, many new EU countries would have to make considerable efforts in order to fulfil all EMU criteria by the end of the present decade. These efforts could lead to output and growth losses in these countries, which would run counter to their catching‐up process with respect to the rest of the EU. To avoid a number of shortcomings elicited by the obligation to respect the convergence criteria in the short term, and also to avoid the financial instability risks implied by participation in the ERM II, this paper suggests an alternative plan for integrating the new EU countries monetarily. The plan consists in creating a European settlement agent in charge of the final payment of the new EU countries’ international transactions. These transactions would be settled using an international monetary standard whose creation would eliminate instability on the foreign exchange market by its being the yardstick that the current international monetary system lacks.     

Uncertainty in Integrated Regional Models

This paper examines the nature of uncertainty in integrated econometric+input–output (ECIO) regional models. We focus on three sources of uncertainty: (a) econometric model parameter uncertainty; (b) econometric disturbance term uncertainty; and (c) input–output coefficient uncertainty. Through a series of Monte Carlo simulations we analyse the relative importance of each component as well as the question of how their interaction may propagate through the integrated model to affect the distributions of the endogenous variables. Our results suggest that there is no simple answer to the question of which source of uncertainty is most important in an integrated model. Instead, that answer is conditioned upon the focus of the analysis and whether the industry specific or macro level variables are of central concerns.     

Fractionalization

We provide new measures of ethnic, linguistic, and religious fractionalization for about 190 countries. These measures are more comprehensive than those previously used in the economics literature and we compare our new variables with those previously used. We also revisit the question of the effects of ethnic, linguistic, and religious heterogeneity on the quality of institutions and growth. We partly confirm and partly modify previous results. The patterns of cross-correlations between potential explanatory variables and their different degree of endogeneity makes it hard to make unqualified statements about competing explanations for economic growth and the quality of government. Our new data, which features the underlying group structure of ethnicities, religions and languages, also allows the computation of alternative measures of heterogeneity, and we turn to measures of polarization as an alternative to the commonly used index of fractionalization.     

From stand-up to start-up: exploring entrepreneurship competences and STEM women’s intention

International Entrepreneurship and Management Journal - This study seeks to explore the relationship between entrepreneurship competencies and intention (EI) of a sample of potential STEM...     

Estimating non-linear serial and cross-interdependence between financial assets

This paper proposes an approach based on copula families to determine shape and magnitude of non-linear serial and cross-interdependence between returns and volatilities of financial assets. It is evident the predominance of the student’s t copula in returns relationships. Association in tails is generally larger than the absolute. There is a fast decrease in association along time, but even after 5 days, there is still dependence between returns. For volatilities, Joe copula predominates in estimated bivariate relationships fit. Clayton copula rotated 180° (survival), Gumbel, BB6 and BB8 copulas also fit some relationships. The magnitude of lagged associations is larger for risks than returns. Persistence in the dependences is very high, and decreases very little after the first lag. The tail dependence has larger values than the absolute in most relationships. We present a practical application of the proposed approach, based on optimal investment allocation and risk prediction.