An analysis of stability of the north–south growth model of trade: Saddle-path stability of the generalized grossman–helpman model with skilled and unskilled labours

Abstract

Following the Common Agency approach to political equilibrium, we examine how domestic interest groups can influence national policies toward FDI and how the choice of instrument by the government can affect lobbying activities. Domestic firms lobby for lower subsidies when a discriminatory subsidy on FDI is applied. However, when a subsidy is applied uniformly to both groups, they may lobby for higher subsidies. The nature of lobbying is also different for proportional and lump-sum profit subsidies when uniformly applied. The qualitative effect of the number of domestic firms or the degree of corruption on the equilibrium depends on the choice of instruments. Finally, with the help of numerical simulation, we examine whether there is any potential conflict between the government and the lobby groups on the choice of the instrument.     

How Do Small Businesses Finance Their Growth Opportunities?—The Case of Recovery from the Lost Decade in Japan

Previous studies argue that bank loans are cheaper than trade credit, so less‐constrained firms largely depend on bank loans and use trade credit less, especially in financially developed economies. However, the Japanese evidence does not support this view. First, small businesses with higher credit demand increase trade credit more during the period of the recovery from a severe recession. Second, creditworthy firms also increase trade credit to finance their growth opportunities. Third, firms in unstable industries increase trade credit more. This suggests that suppliers are able to offer credit, unlike banks, as they have a relative advantage in day‐by‐day monitoring. Copyright © 2012 John Wiley & Sons, Ltd.     

Insights from machine learning for evaluating production function estimators on manufacturing survey data

Journal of Productivity Analysis - National statistical organizations often rely on non-exhaustive surveys to estimate industry-level production functions in years in which a full census is not...     

Natural or unnatural selection? The end of lending relationships for small businesses

We investigate the situation where small business borrowers and banks end their lending relationships. If credit allocation is efficient, banks terminate their relationships with risky borrowers. Alternatively, small business borrowers are more likely to end their relationships when they have poor investment opportunities and do not require borrowed funds. However, if the soft budget constraints of banks or credit crunches are a significant problem, banks are likely to continue their relationships with risky firms or end their relationships with nonrisky firms, which is representative of an unnatural credit allocation. Using Japanese firm-level data, we show empirically that these relationships end naturally, with natural credit allocation supported even during the recent global financial crisis.     

Changing banking relationships and client‐firm performance: Evidence from Japan for the 1990s

The extant literature generally suggests that the performance of client firms deteriorates if their distressed main bank reduces the supply of credit. However, this insight is only consistent with the notion that main banks have an information advantage over other banks to the extent that a client firm has trouble getting access to credit if the firm changes its main bank. This paper shows that Japanese firms did change their main banking relationship when their main banks become distressed in a period with financial shocks. Surprisingly, these firms did not suffer from loss of access to credit and actually their performance significantly improved after their change of main banks.     

Impact of lowering the legal blood alcohol concentration limit to 0.03 on male, female and teenage drivers involved alcohol-related crashes in Japan

In June of 2002, a revision to part of the Road Traffic Act drastically increased the penalties for drinking and driving offences in Japan. Most notably, the legal blood alcohol concentration (BAC) limit for driving was lowered from 0.05 mg/ml to 0.03 mg/ml. The rationale for the new lower BAC limit was predicated on the assumption that drinking drivers will comply with the new, lower limit by reducing the amount of alcohol they consume prior to driving, thereby lowering their risk of crash involvement. This, in turn, would lead to fewer alcohol-related crashes. A key limitation of previous lower BAC evaluation research in determining the effectiveness of lower legal BAC limit policies is the assumption of population homogeneity in responding to the laws. The present analysis is unique in this perspective and focuses on the evaluation of the impact of BAC limit reduction on different segments of the population. The chief objective of this research is to quantify the extent to which lowering the legal limit of BAC has reduced male, female and teenager involvement in motor vehicle crashes in Japan since 2002. Most notably, the introduction of reduced BAC limit legislation resulted in a statistically significant decrease in the number of alcohol-impaired drivers on the road in Japan, indicating responsiveness to the legal change among adults and teenagers. In addition, this preliminary assessment appears to indicate that the implementation of 0.03 BAC laws and other associated activities are associated with statistically significant reductions in alcohol-involved motor vehicle crashes. In comparison, the rates of total crashes showed no statistically significant decline nor increase in the period following the introduction of the BAC law, indicating that the lower BAC limit only had an effect on alcohol-related crashes in Japan. The evidence suggests that the lower BAC legal limit and perceived risk of detection are the two most important factors resulting in a sustained change in drinking and driving behaviour in Japan. It is recommended that future research and resources in other countries be focused on these factors as determinants to reduced alcohol-related crashes.     

Rationalizable foresight dynamics

This paper proposes and studies the rationalizable foresight dynamics. A normal form game is repeatedly played in a random matching fashion by a continuum of agents who make decisions at stochastic points in time. A rationalizable foresight path is a feasible path of action distribution along which each agent takes an action that maximizes his expected discounted payoff against another path which is in turn a rationalizable foresight path. We consider a set-valued stability concept under this dynamics and compare it with the corresponding concept under the perfect foresight dynamics.     

Robust equilibria under non-common priors

This paper considers the robustness of equilibria to a small amount of incomplete information, where players are allowed to have heterogeneous priors. An equilibrium of a complete information game is robust to incomplete information under non-common priors if for every incomplete information game where each player's prior assigns high probability on the event that the players know at arbitrarily high order that the payoffs are given by the complete information game, there exists a Bayesian Nash equilibrium that generates behavior close to the equilibrium in consideration. It is shown that for generic games, an equilibrium is robust under non-common priors if and only if it is the unique rationalizable action profile. Set-valued concepts are also introduced, and for generic games, a smallest robust set is shown to exist and coincide with the set of a posteriori equilibria.     

Too Busy To Serve? An Examination of the Influence of Overboarded Directors

ABSTRACT Overboarded directors (i.e., those serving on too many boards) have come under recent attack. The accusation is that such directors are ‘stretched’ by several directorships and therefore cannot fulfil their governance responsibility. This study investigates the impact of overboarded directors upon key strategic decisions such as corporate acquisitions. Based on our examination of acquisition outcomes, we found that such directors are important sources of knowledge and enhance acquisition performance. Moreover, they represent an important complement to inside and non‐overboarded outside directors.     

Effects of Jumps and Small Noise in High-Frequency Financial Econometrics

Several new statistical procedures for high-frequency financial data analysis have been developed to estimate risk quantities and test the presence of jumps in the underlying continuous-time financial processes. Although the role of micro-market noise is important in high-frequency financial data, there are some basic questions on the effects of presence of noise and jump in the underlying stochastic processes. When there can be jumps and (micro-market) noise at the same time, it is not obvious whether the existing statistical methods are reliable for applications in actual data analysis. We investigate the misspecification effects of jumps and noise on some basic statistics and the testing procedures for jumps proposed by Ait-Sahalia and Jacod (Ann Stat 37–1:184–222 2009; 38–5:3093–3123 2010) as an illustration. We find that their first test (testing the presence of jumps as a null-hypothesis) is asymptotically robust in the small-noise asymptotic sense against possible misspecifications while their second test (testing no-jumps as a null-hypothesis) is quite sensitive to the presence of noise.