The impact of collinearity on regression analysis: the asymmetric effect of negative and positive correlations

The purpose of this paper is to ascertain how collinearity in general, and the sign of correlations in specific, affect parameter inference, variable omission bias, and their diagnostic indices in regression. It is found that collinearity can reduce parameter variance estimates and that positive and negative correlation structures have an asymmetric effect on variable omission bias. It is also shown that the effects of collinearity are moderated by the relationship between the dependent variable and the regressors, a consideration not incorporated into most commonly used collinearity diagnostics. The formulae derived enable researchers to assess the sensitivity of regression results to the underlying correlation structure in the data.     

Stated Preferences, Real Behaviour and Anchoring: Some Empirical Evidence

We compare different contingent valuation question formats with each other and with observed behaviour for a non-monetary estimation task, the expected number of kilometers travelled by automobile. Open-ended questions, open-ended follow-up questions, dichotomous choice (DC) questions, and double-bound DC questions are included. The single and double-bound DC questions result in an estimated mean about twice as high as the actual value and the open-ended mean. The DC question overestimation seems to be due to an anchoring effect leading to yea-saying behaviour. Our results about the difference between DC questions and open-ended questions is consistent with the pattern observed in contingent valuations studies of the willingness to pay. Our results indicates that DC questions seem to be associated with a general overestimation problem that is present even for simple non-monetary estimation tasks.     

Technological Threat and Opportunity Assessment

One of the major challenges in the management of innovation is a practical and useful implementation of technology forecasting. This article proposes the concept of aniticpating the technological future, and that a structured approach to this concept could be an invaluable aid to technical decision-making. The notion of technological threat and opportunity assessment is presented as a useful framework for anticipating technological change. This notion is based on a dual approach.Firstly, a rapidly changing global technological landscape necessitates keeping track of technological developments. However, since we are dealing with innovation (rather than mere invention), the market implications are as important as the technological ones and have to be accounted for as such. Secondly, any organisation could be considered to be technology-based to some or other degree, implying that technologies have the ability to affect the bottom line of the organisation in some way. It is thus required to assess the business impact of such technologies, typically through a technology or innovation audit.Having assessed specific technological threats and opportunities facing the organisation, an innovation strategy needs to be developed in response to the identified threats and opportunities. Various possible offensive and/or defensive responses should be considered, culminating in the selection and implementation of an optimal strategy.     

How Does the Minimum Wage Affect Firm Investments in Fixed and Human Capital? Evidence from China

This paper empirically analyzes the impact of Chinese minimum wage regulations on the firm decision to invest in physical and human capital. We exploit the geographical and inter‐temporal variations of county‐level minimum wages in a panel data set of all state‐owned and all above‐scale non‐state‐owned Chinese firms covering the introduction of the new Chinese minimum wage regulations in 2004. In our basic regressions including all Chinese firms, we find significant negative effects of the minimum wage on human capital investment rates and no overall effects on fixed capital investment rates. When grouping firms by their ownership structure, we find that these results hold for most firms. Foreign‐owned firms are an exception to some extent, because the likelihood that they invest in human capital has not decreased in response to the policy.     

The impact of award uncertainty on settlement negotiations

Legal disputes are often negotiated under the backdrop of an adjudicated award. While settlements are common, they are not universal. In this paper, we empirically explore how uncertainty in adjudicated awards impacts settlement negotiations. To do so, we develop an experimental design to test how increases in variance and positive skewness of the award distribution impact negotiations and settlement rates. We find increases in variance decrease settlement rates, while increases in skewness generally increases settlement rates. We also gather individual measures of risk aversion and prudence, and incorporate these measures into the analysis to test for heterogeneous treatment effects. Overall, our results suggest that highly variable adjudicated awards can contribute to the excess use of inefficient litigation, while more positively skewed awards can reduce the use of inefficient litigation.     

Corporate Governance and the Environment: What Type of Governance Creates Greener Companies?

We build on a stakeholder–agency theoretical perspective to explore the impact of particular corporate governance mechanisms on firm environmental performance. Our empirical evidence shows that several important corporate governance mechanisms such as the board of directors, managerial incentives, the market for corporate control, and the legal and regulatory system determine firms' environmental performance levels. These results suggest that these different governance mechanisms resolve, to some extent, the existing divergence of interests between stakeholders and managers with respect to environmental activities.     

Job Polarization and Task‐Biased Technological Change: Evidence from Sweden, 1975–2005

In this paper, we show that between 1975 and 2005, Sweden exhibited a pattern of job polarization with expansions of the highest‐ and lowest‐paid jobs compared to middle‐wage jobs. The most popular explanation for such a pattern is the hypothesis of task‐biased technological change, where technological progress reduces the demand for routine middle‐wage jobs but increases the demand for non‐routine jobs located at the tails of the job–wage distribution. However, our estimates do not support this explanation for the 1970s and 1980s. Stronger evidence for task‐biased technological change, albeit not conclusive, is found for the 1990s and 2000s. In particular, there is both a statistically and economically significant growth of non‐routine jobs and a decline of routine jobs. However, results for wages are mixed; while task‐biased technological change cannot explain changes in between‐occupation wage differentials, it does have considerable explanatory power for changes in within‐occupation wage differentials.     

The Effects of Average Norm Model Regulation: The Case of Electricity Distribution in Sweden

Following the reform of energy sectors, some countries have used engineering norm models in incentive regulation of network utilities. In 2003, Sweden adopted this approach to regulation of electricity distribution networks. This paper examines whether the norm models represent the real networks and create incentives for performance improvement. We analyse data from 138 network concession holders between 2000 and 2007. The results show that norm models are not adequate representations of real networks. Also, utilities that perform better than their norm models tend to behave opportunistically. Finally, we find that private utilities respond more strongly to incentives.     

GOVERNMENT SIZE AND GROWTH: A REJOINDER

In our 2011 survey of the literature in the Journal of Economic Surveys on the effect of government size on economic growth in wealthy countries we find a relatively consistent pattern: An increase in government size by 10 percentage points is associated with a 0.5–1 percentage point lower annual growth rate. This conclusion is questioned by Colombier. In this rejoinder we present a rebuttal of Colombier's argument based on a detailed scrutiny of his own statistical evidence and regression results. Furthermore, we note that several new papers that have appeared since our original paper was published give support to our main conclusion.