On the flexibility of flexible functional forms: An empirical approach

This paper analyzes empirically the ability of the Translog and Generalized Leontief functional forms to approximate Constant Elasticity of Substitution utility functions. Although these flexible forms provide a good local approximation they do not always provide a good approximation over a range of observations. Hence the finding in practice of observations for which the regularity conditions required by economic theory are not satisfied need not imply the absence of an underlying utility-maximizing process, but may simply reflect the inability of the flexible form to approximate the true utility function over the range of the data.     

Analysing the impact of the single European market and European integration upon local economies: A case study of Gloucestershire

Greater economic integration in the European Community (EC) will have far-reaching effects for businesses and individuals throughout the UK. Indeed, prior to the commencement of the Single European Market (SEM) — the only certain element of European economic integration — there was much evidence of organisations and industries restructuring, increased inward investment, and mergers and acquisitions. Such activities are likely to have far-reaching implications for local economies. Increasing numbers of local authorities are undertaking studies to assess the implications of the SEM measures for their own areas, and to suggest ways in which local government and other economic development actors might respond to the challenge of the opportunities and threats of the SEM. However, in assessing the impact of the SEM, it is important not to lose sight of the wider process of economic integration which has followed in its wake. This article details the methodology used in a study to assess the impact of the SEM upon the economy of one particular local area: Gloucestershire. The methodology employed would be capable of replication in other local areas. Some of the key findings from the Gloucestershire study are also outlined. Although there is only limited scope for public sector organisations at the local level in helping businesses to respond to the threats and opportunities of the SEM, suggestions for a general role for the County Council, the Training and Enterprise Council, and other organisations were identifiable, and specific recommendations for training policies, promotional activities, and planning policies were forthcoming.     

Factor pricing in commodity futures and the role of liquidity

This paper empirically investigates the pricing factors and their associated risk premiums of commodity futures. Existing pricing factors in equity and bond markets, including market premium and term structure, are tested in commodity futures markets. Hedging pressure in commodity futures markets and momentum effects is also considered. This study combines these factors to discuss their importance in explaining commodity future returns, while the literature has studied these factors separately. One of the important pricing factors in equity and bond markets is liquidity, but its role as a pricing factor in commodity futures markets has not yet been studied. To our knowledge, this research is the first to study liquidity as a pricing factor in commodity futures. The risk premiums of two momentum factors and speculators’ hedging pressure range from 2% to 3% per month and are greater than the risk premiums of roll yield (0.8%) and liquidity (0.5%). The result of a significant liquidity premium suggests that liquidity is priced in commodity futures.     

Chaebol,Investment Opportunity Set and Corporate Debt and Dividend Policies of Korean Companies

This paper examines explanations for the association between Korean Chaebol, which are giant conglomerates supported by various government initiatives, and corporate debt and dividend policies. Unlike in the US, the Korean corporate sector is dominated by the Chaebol which are characterized by concentrated family ownership, political affiliation and bank ownership. These institutional arrangements are likely to encourage more debt financing. In addition, the study also investigates whether firms with more growth options measured in terms of the investment opportunity set (IOS) have lower leverage and dividends. Results using observations from 411 Korean firms showed that for a fixed level of growth opportunities, Chaebol carry higher levels of debt. Results also show that growth options were negatively associated with leverage and dividends. No association, however, was found between Chaebol and dividends.     

The Effects of Comparative Advertising Mediated by Market Position of Sponsoring Brand

An experimental test of the relative effectiveness of comparative and non-comparative advertising was performed. Mock print ads for fast food chains were constructed and presented to respondents in a simulated magazine mode. The market position of the sponsoring brand was manipulated in both comparative and non-comparative formats. Multiple criterion variables were operationalized corresponding to all stages of the hierarchy-of-effects paradigm. On balance, for the nine hypotheses tested, results revealed that non-comparative advertising was demonstrably more effective than comparative advertising.     

What accounts for Chinese Business Cycle?

This paper investigates the sources of economic fluctuations in China since its reform that started in 1978. Using the framework of a standard neoclassical open economy model with time-varying frictions (wedge), we study the relative contribution of the efficiency, labor, investment and foreign debt wedges to the business cycles of China. The business accounting procedure suggests that productivity best explains the behavior of aggregate economic variables in China throughout the period of 1978–2006. The labor wedge plays a major role in explaining the movement of labor force. The foreign debt wedge and investment wedge primarily affect the composition of output, but their role in explaining the movement of output is modest. Our results suggest that the focus of government policies should be to combat the problems of inefficient factor utilization and labor market rigidity.