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.     

Case study research with moderate constructionism: Conceptualization and practical illustration

This paper develops a case study approach that builds on the foundations of moderate constructionism and abduction. We discuss the case study method and its role in industrial marketing, especially in business-to-business networks. Moderate constructionism is compared with realist, critical realist, and relativist approaches. We argue that moderate constructionism takes better into account the multiple constructed, community-bounded realities that all case studies inevitably deal with. The power of moderate constructionism to produce valid and generalizable new knowledge is critically assessed. We also address abduction in relation to induction and deduction and its role in the moderate constructionist research approach. Finally, we develop a process model, illustrated by a case study of a specific network in the pharmaceutical industry.     

Non-parametric production analysis in non-competitive environments

We extend the non-parametric methodology for empirical production analysis to deal with endogenous prices. As price endogeneity is often complemented by price uncertainty, we consider both the case of certain prices and the case of uncertain prices. The extensions are fully compatible with existing tools for eliciting and representing technology and price information, and preserves the tractable mathematical programming structure of the original methodology. An empirical application to the Dutch electricity distribution sector illustrates our extension.     

Phoenix rising: Legal reforms and changes in valuations in Finland during the economic crisis

Finland experienced an extremely severe economic depression in the early 1990s. As a part of the government's crisis management policies, significant new legislation was passed that increased supervisory powers of financial market regulators and reformed bankruptcy procedures significantly decreasing the protection of creditors. We show that the introduction of these new laws resulted in positive abnormal stock returns. The new laws also lead to increases in firms’ Tobin's q, especially for more levered firms. In contrast to previous studies, our results also suggest that public supervision of financial markets fosters rather than hampers financial market development.     

Games of coercion and power part II

This paper analyses the concept of coercion, understood as a special type of social power. Coercion uses threats to force the victim to obey the dominating agent, that is, to elicit an intentional response from the subordinate person. The typical decision environment is described and the effect of threats on utility distributions is analysed. Some causal aspects of threats are also discussed. The strategies of coercive threats are expressed in a game theoretical form. A paradox is revealed: the coercer can only seldom make his threat convincing to his intended victim. It is difficult to show that a rational agent (the coercer) would indeed realize his threat when he meets resistence. Different coercive state policies are then discussed in relation to this paradox and a solution is suggested. Finally, Steven Lukes' ideas concerning power are criticized.     

Neoclassical versus Frontier Production Models? Testing for the Skewness of Regression Residuals*

The empirical literature on production and cost functions is divided into two strands. The neoclassical approach concentrates on model parameters, while the frontier approach decomposes the disturbance term to a symmetric noise term and a positively skewed inefficiency term. We propose a theoretical justification for the skewness of the inefficiency term, arguing that this skewness is the key testable hypothesis of the frontier approach. We propose to test the regression residuals for skewness in order to distinguish the two competing approaches. Our test builds directly upon the asymmetry of regression residuals and does not require any prior distributional assumptions.     

Fund Liquidation, Self-selection, and Look-ahead Bias in the Hedge Fund Industry

A wide range of empirical biases hampers hedge fund databases.In this paper we focus upon survival-related biases and disentanglelook-ahead biases due to self-selection of funds and due tofund termination. Self-selection arises because funds voluntarilyreport their information to data vendors and may decide to stopdoing so. By extending existing methodology, we analyze persistencein hedge fund performance over the period 1994–2000, takinginto account the above biases. The results show that look-aheadbiases due to liquidation and self-selection enforce each otherand may lead to overestimating expected returns by as much as8% per year. Overall, the results are consistent with positivepersistence in hedge fund returns at horizons of two and fourquarters.     

Virtual operators in the mobile industry: a techno-economic analysis

For a company planning to become a mobile operator, two alternative ways to enter the market exist. In addition to the traditional way of acquiring a spectrum license and building a mobile network, market entrance is also possible by becoming a virtual operator and utilizing the existing networks of incumbent operators. Potentially, virtual operators will have an important role in shaping the mobile market structure and competition. In this paper, techno-economic modeling methods are used to analyze the position of virtual operators in the mobile communications industry. Four alternative virtual operator scenarios are constructed and analyzed using a linear, deterministic, and quantitative techno-economic model. The results highlight the importance of wholesale contracts with incumbent mobile network operators in determining the virtual operators’ business profitability. Unbalance in termination prices between fixed and mobile networks is shown to give incentives for virtual operators to invest in their own network infrastructure.     

What patents are used as collateral?—An empirical analysis of patent reassignment data

Only anecdotal evidence exists that ventures use patents as collateral to access debt financing. In this paper, we use a novel dataset on patent reassignments with a security interest to explore quantitatively what patents are used as collateral. We analyze characteristics of patents to disentangle whether it is the technology underlying a patent or the patent's exclusion right per se matters for collateralization. We do find empirical support only for technology-related characteristics, suggesting that lenders use patents to collateralize high-quality technology that can, in case of default, be redeployed to ventures in similar technology fields. On the other hand, patent-related characteristics like scope, which are, in general, related to patent value and are particularly important for non-practicing entities, do not matter.