Multinational firms, international trade and international telecommunications

The study analyses the determinants of international telephone, telex, telegram and leased lines communication between the United States and 46 countries. It focusses on the role of multinational firms, international trading firms and new information technologies within the framework of the theory of transaction costs.Results of the econometric estimates suggest that: (a) technological conditions of telecommunication infrastructure, i.e., international diffusion lags of new information technologies, play an important role in the explanation of international telephone and telex telecommunication flows but not in the demand for telegraph and leased lines, (b) multinational firms use international telecommunication to reduce the coordination costs and are strong customers of leased lines and telephones, but less so of telex and telegrams, (c) international trading firms exhibit less clear preferences in the use of the different media to reduce transaction costs.     

Inside innovation persistence: New evidence from Italian micro-data

This paper contributes the analysis of the persistence of innovation activities, as measured by different innovation indicators and explores its past and path dependent characteristics. The study provides new insights on the role of R&D investments in innovation persistence and analyses differentiated patterns of persistence across product and process innovation, by accounting for complementarity effects between the two types of innovative behaviour. The empirical analysis is based on a sample of 451 Italian manufacturing companies observed during the years 1998–2006. Results highlight the relevance of innovation persistence. The highest level of persistence is found for R&D-based innovation activities, witnessing the actual presence of significant entry and exit barriers. Moreover, we obtain more robust evidence of persistence for product innovation than for process innovation when complementarity effects between the two types of innovation are accounted for.     

Trade liberalisation and inequalities in Nepal: A CGE analysis

In this paper we examine the effects of trade liberalisation on inequality in the small developing country of Nepal. We use a Computable General Equilibrium approach applied to a newly developed social accounting matrix, simulating three liberalisation scenarios: (i) import liberalisation; (ii) export liberalisation; and (iii) import and export liberalisations implemented together under different exchange rate regimes. Outcomes reveal that industry reallocation following liberalisation does not respond to classical trade theory expectations about factor intensity and abundance. On the distributive side, liberalisation seems to increase the high-skilled/low-skilled gap and favour rich households relatively more. However, since under fixed exchange rate also the two poorest household groups increase their income levels, liberalisation may also expected to be beneficial for poverty alleviation.     

The Organization of Production

The organization of production depends on both technical and governance factors. The integration of recent advances in cost theory into production theory makes it easier to appreciate the joint effects of transaction and coordination costs interacting with wages and capital costs in the decision-making of firms. The corporate function, integrating the production function and the governance function, facilitates the joint analysis of the full array of factors including the effects of interrelatedness and complementarities of new technologies and of pecuniary economies of scale. The corporate function and pecuniary economies of scale also provide new elements in the understanding of the ever present variety of firms in industrial structures and the role of historic time in the theory of the firm.     

Consumption optimization for recursive utility in a jump-diffusion model

In this paper, we consider a market model with prices and consumption following a jump-diffusion dynamics. In this setting, we first characterize the optimal consumption plan for an investor with recursive stochastic differential utility on the basis of his/her own beliefs, then we solve the inverse problem to find what beliefs make a given consumption plan optimal. The problem is viewed in general for a class of homogeneous recursive utility, and later we choose a logarithmic model for the utility aggregator as an explicitly computable example. When beliefs, represented via Girsanov’s theorem, get incorporated into the model, the change of measure gives rise, up to a transformation, to a backward stochastic differential equation whose generator exhibits a quadratic behavior in the Brownian component and a locally Lipschitz one in the jump component, which is solvable on the basis of some recent results.     

Complexity and technological change: knowledge interactions and firm level total factor productivity

The analysis of social interactions as drivers of economic dynamics represents a growing field within the economics of complexity. Social interactions are a specific form of interdependence whereby the changes in the behavior of other agents affect utility functions for households and production functions for producers. In this paper, we apply the general concept of social interactions to the area of the economics of innovation and we articulate the view that knowledge interactions play a central role in the generation of new technological knowledge so that innovation becomes the emergent property of a system, rather than the product of individual actions. In particular, we articulate and test the hypothesis that different layers of knowledge interactions play a crucial role in determining the rate of technological change that each firm is able to introduce. The paper presents an empirical analysis of firm level total factor productivity (TFP) for a sample of 7,020 Italian manufacturing companies observed during the years 1996–2005. This will enable us to identify the distinctive role of regional, inter-industrial and localized intra-industrial knowledge interactions as distinctive and significant determinants, together with internal research and innovation efforts, of changes in firm level TFP.     

Mitigation of Moral Hazard and Adverse Selection in Venture Capital Financing: The Influence of the Country's Institutional Setting

A venture capitalist (VC) needs to trade off benefits and costs when attempting to mitigate agency problems in their investor‐investee relationship. We argue that signals of ventures complement the VC's capacity to screen and conduct a due diligence during the preinvestment phase, but its attractiveness may diminish in institutional settings supporting greater transparency. Similarly, whereas a VC may opt for contractual covenants to curb potential opportunism by ventures in the postinvestment phase, this may only be effective in settings supportive of shareholder rights enforcement. Using an international sample of VC contracts, our study finds broad support for these conjectures. It delineates theoretical and practical implications for how investors can best deploy their capital in different institutional settings while nurturing their relationships with entrepreneurs.     

INCOME INEQUALITY WITHIN EUROPEAN REGIONS: DETERMINANTS AND EFFECTS ON GROWTH

Economic inequality across Europe has been largely investigated by analyzing the determinants and dynamics of the disparities between countries and regions. Similarly, many studies have focused on inequality within European countries. So far, less attention has been devoted to economic inequality within European regions, mainly due to data shortages. The aim of this paper is to shed some light on this level of analysis. After the introductory section, the first part of the paper presents the conceptual bases of the study, examining relevant theoretical and empirical arguments about (i) the determinants of economic inequality, (ii) the relationship between economic inequality and growth, and (iii) the desirability and specificity of regional analysis. The second part of the paper, using various econometric approaches, provides evidence of the centrality of labor market qualitative and quantitative aspects and of some country-level institutional settings for regional inequality levels. As regards the effects of inequality on growth, the results suggest a positive relationship.     

The efficiency of social public expenditure in European countries: a two-stage analysis

Do European countries differ in the efficiency of their welfare policies? And which factors can account for such variability? To address these questions, we perform a two-stage efficiency analysis. First, based on a composite output indicator for social protection expenditure, we measure efficiency by means of the Free Disposable Hull and Data Envelopment Analysis techniques. Second, we perform an econometric analysis to identify the factors that can be associated to cross-country differences. We find that countries scoring higher efficiency have higher education and GDP levels, a smaller population size, a lower degree of selectivity of their welfare systems and a lower corruption level.