Trade and welfare effects of a potential free trade agreement between Japan and the United States

Review of World Economics - This paper addresses the trade and welfare implications of a bilateral trade agreement between the U.S. and Japan. In 2019, the two countries signed a “stage...     

Laffer strikes again: Dynamic scoring of capital taxes

We set up a neoclassical growth model extended by a corporate sector, an investment and finance decision of firms, and a set of taxes on capital income. We provide analytical dynamic scoring of taxes on corporate income, dividends, capital gains, other private capital income, and depreciation allowances and identify the intricate ways through which capital taxation affects tax revenue in general equilibrium. We then calibrate the model for the US and explore quantitatively the revenue effects from capital taxation. We take adjustment dynamics after a tax change explicitly into account and compare with steady-state effects. We find, among other results, a self-financing degree of corporate tax cuts of about 70–90% and a very flat Laffer curve for all capital taxes as well as for tax depreciation allowances. Results are strongest for the tax on capital gains. The model predicts for the US that total tax revenue increases by about 0.3–1.2% after abolishment of the tax.     

FMPM Best Paper Award 2019

Financial Markets and Portfolio Management -     

Innovation speed under uncertainty and competition

Innovation speed is widely considered to be a key factor for a firm's ability to maintain competitive advantage. Primarily, empirical evidence has found contradictory interdependencies regarding the role of innovation speed. The prevailing proposition of “the faster the better” has been challenged by results of empirical studies heavily depending on the methodological setup used. In contrast, we propose a model of the complete innovation process to study innovation speed under uncertainty and competition. We find that higher market uncertainty speeds up innovation and encourages firms to innovate incrementally. Strong competition tends to reduce innovation speed and encourages rather radical innovation.     

Testing Fairness Principles for Public Environmental Infrastructure Decisions

Group Decision and Negotiation - Public infrastructure decisions affect many stakeholders with various benefits and costs. For public decisions, it is crucial that decision-making processes and...     

Budget impact analysis of secukinumab versus adalimumab in the treatment of ankylosing spondylitis

Background: Biologic treatments have enhanced the treatment outcomes of patients with active ankylosing spondylitis (AS). Until recently, TNF-alpha-inhibitors have been the only biologics approved for the treatment of active AS. The objective of this study was to assess the potential financial impact of the first non-TNF-alpha biologic secukinumab (fully human IL-17A-inhibitor) vs adalimumab (TNF-alpha-inhibitor) in the treatment of AS in Finland.

Materials and methods: In this model-based budget impact analysis, patients were treated either with secukinumab (150?mg) or adalimumab (40?mg). The number of patients and market share of different biologics were based on national reimbursement registry data. Adalimumab was the most commonly used biologic treatment for AS, and in the base case analysis all adalimumab patients are assumed to switch to secukinumab. Response rates were based on a matching-adjusted indirect comparison between secukinumab and adalimumab. Patients not achieving response were switched to another biologic treatment.

Results: Treating AS patients with secukinumab instead of adalimumab leads to potential savings of 18.2 million euros within a 5-year time period. The total costs within the follow-up time were 59.5 million euros and 77.7 million euros with and without secukinumab, respectively. According to sensitivity analyses, a higher adoption rate of secukinumab corresponds to higher potential savings.

Conclusions: Secukinumab is a cost-saving treatment option compared with adalimumab in the treatment of AS in Finland. More patients could be treated with a biologic by allocating resources more efficiently.     

Stakeholder Engagement: Keeping Business Legitimate in Austria’s Natural Mineral Water Bottling Industry

Stakeholder maneuvers such as Internet media attacks or consumer boycotts can have devastating effects on companies. By contrary, vital relationships between companies and their stakeholders can be highly beneficial. A review of the existing stakeholder-management literature suggests to engage stakeholders in business activities in a positive manner. However, the types of successful engagement activities differ across industries. The purposes of this article are to develop an explanatory framework based on the literature findings, to introduce stakeholder-engagement literature to a segment of the water sourcing industry, and to unfold industry’s stakeholder-engagement measures. Based on a content analysis of 11 cases, we investigate if and how companies in the natural mineral water bottling industry in Austria inform, communicate, and therefore engage with stakeholders. It became evident that fewer than three of eleven companies published information on sustainability or corporate social responsibility reports, open house days, workshops, or international community activities. Most companies maintained a website for their bottled natural mineral water or communicated quality consciousness. We conclude that most companies in the Austrian mineral water industry could increase their stakeholder-engagement activities to positively respond to challenging business environments.     

Joint estimation of technology choice and technical efficiency: an application to organic and conventional dairy farming

This paper proposes an econometric framework for joint estimation of technology and technology choice/adoption decision. The procedure takes into account the endogeneity of technology choice, which is likely to depend on inefficiency. Similarly, output from each technology depends on inefficiency. The effect of the dual role of inefficiency is estimated using a single-step maximum likelihood method. The proposed model is applied to a sample of conventional and organic dairy farms in Finland. The main findings are: the conventional technology is more productive, ceteris paribus; organic farms are, on average, less efficient technically than conventional farms; both efficiency and subsidy are found to be driving forces behind adoption of organic technology.     

Marketing sustainable tourism: the role of value orientation,well-being and credibility

Abstract

Marketing for sustainable tourism primarily attracts customers with a biospheric–altruistic value orientation. To reach a broader consumer group and also persuade people with a self-enhancement orientation to book sustainable hotels, the effectiveness of three different communication styles (emotionality levels, amount of sustainability information and inclusion of a label) is investigated, considering the consumer’s value orientation. An experiment with 337 participants was conducted to analyze the effects of communication on consumer perceptions of well-being and credibility. Multigroup structural equation modeling was used to compare the impacts of communication style on participant’s attitude toward booking a sustainable hotel, mediated by well-being and credibility. The results highlight significantly different communication effects among the two contrasting target groups. Consumers who are highly interested in sustainability (biospheric–altruistic value orientation) are persuaded by messages that include details about the hotel’s sustainability performance, in order to increase the social–environmental well-being, whereas for customers who are less interested in sustainability (self-enhancement value orientation), a self-referential emotionally communication is essential, as it increases the emotional well-being. Inconsistent findings regarding the role of communication in raising the perception of credibility were obtained.     

The warnings puzzle: an upstream explanation

Enforcement agencies issuing warnings are an empirical regularity in the enforcement of laws and regulations, but a challenge to the standard economic theory of public enforcement. A number of recent contributions explain the popularity of warnings as a response to information asymmetries between regulator and regulatee. We offer a distinct, but complementary explanation: Warnings can serve as a signaling device in the interaction between the enforcement agency and its budget-setting authority. By using costly warnings for minor offenses that would otherwise not be pursued, the agency can generate observable activity to escape budget cuts in subsequent periods. We show in a stylized model that warnings may indeed occur in an equilibrium of a game in which warnings are entirely unproductive in the agency-regulatee interaction, and thereby derive a testable hypothesis on regulatory agency behavior.