New development: Managing the Covid-19 pandemic—from a hospital-centred model of care to a community co-production approach

ABSTRACT

Covid-19 is not only a crisis of intensive care but a social and humanitarian crisis. Until mass vaccination is undertaken, control of contagion will rely on responsible behaviour by citizens. Strategies for fighting Covid-19 in different regions of Italy have shown that an area-specific approach, not just hospital-focused, pays off. This article proposes a community co-production approach, in the light of discussions with politicians and key health decision-makers and actors.     

Trade credit versus bank credit: a simultaneous analysis in European SMEs

Small Business Economics - Trade credit and bank credit constitute two of the most important external sources of finance for small firms. The purpose of this paper, first and foremost, is to...     

Single and joint default in a structural model with purely discontinuous asset prices

Structural models of credit risk are known to present both vanishing spreads at very short maturities and a poor spread fit over longer maturities. The former shortcoming, which is due to the diffusive behaviour assumed for asset values, can be circumvented by considering discontinuous asset prices. In this paper the authors resort to a pure jump process of the Variance-Gamma type. First the authors calibrate the corresponding Merton type structural model to single-name data for the DJ CDX.NA.IG and CDX.NA.HY components. By so doing, they show that it also circumvents the diffusive structural models difficulties over longer horizons. Particularly, it corrects for the underprediction of low-risk spreads and the overprediction of high-risk ones. Then the authors extend the model to joint default, resorting to a recent formulation of the VG multivariate model and without superimposing a copula choice. They fit default correlation for a sample of CDX.NA names, using equity correlation. The main advantage of our joint model, with respect to the existing non-diffusive ones, is that it allows full calibration without the equicorrelation assumption, but still in a parsimonious way. As an example of the default assessments which the calibrated model can provide, the authors price an FtD swap.     

Tax Incentives and Household Investment in Complementary Pension Insurance: Some Recent Evidence From the Italian Experience

We show by a simple difference‐in‐difference methodology that, contrary to prior research, robustly raising the deductibility limit associated to pension fund holdings in Italy did not succeed in boosting households’ contributions to this form of savings. Some other empirical findings also suggest that this policy measure may have not even increased the average amount of first‐time contributors to such funds. In view of the specific features of the Italian market for complementary insurance (relatively young and less developed), these empirical results might be of interest to policymakers acting in countries with similar features (for instance, some of the more recent EU members).     

A test for the too-big-to-fail hypothesis for European banks during the financial crisis

Motivated by the theoretical prediction of the opportunistic behaviour of large banks that face expected public intervention, we test a full and a partial form of the too-big-to-fail (TBTF) hypothesis. The full form of the hypothesis implies the increase in the risk undertakings and profitability of banks that exceed a certain dimension; the partial form of the hypothesis implies only an augmented risk appetite of large banks compared to their smaller counterparts. The examined area is the European banking industry, whose behaviour is observed over the first wave of the present financial crisis (2007/09). The estimation of a quadratic fit that links change in a bank’s credit risk profile and profitability retention rates with a bank’s size suggests the existence of a partial form of the TBTF hypothesis. However, a more precise, local rolling windows estimation of the size sensitivities reveals that large banks – those whose liabilities exceed approximately 2% of the country of origin’s GDP (15% of our sample) – show an increase in credit risk profile and a superior capability of retaining higher ROA scores, vis-à-vis their smaller counterparts. With the caveats of our investigation, we interpret these results as evidence of a full form of the TBTF hypothesis.     

Influential listeners: An experiment on persuasion bias in social networks

This paper presents an experimental investigation of persuasion bias, a form of bounded rationality whereby agents communicating through a social network are unable to account for repetitions in the information they receive. We find that, after repeated communication within a social network, social influence depends not only on being listened to by many others, but also on listening to many others. We show that persuasion bias can be viewed as an extreme case of a generalized boundedly rational updating rule in which agents receive more or less attention depending on how many other agents they listen to. The results indicate that behavior in the experiment is consistent with an updating rule according to which agents' social influence is proportional to their indegree.     

Selecting structural innovations in DSGE models

Dynamic stochastic general equilibrium (DSGE) models are typically estimated assuming the existence of certain structural shocks that drive macroeconomic fluctuations. We analyze the consequences of estimating shocks that are “nonexistent” and propose a method to select the economic shocks driving macroeconomic uncertainty. Forcing these nonexisting shocks in estimation produces a downward bias in the estimated internal persistence of the model. We show how these distortions can be reduced by using priors for standard deviations whose support includes zero. The method allows us to accurately select shocks and estimate model parameters with high precision. We revisit the empirical evidence on an industry standard medium‐scale DSGE model and find that government and price markup shocks are innovations that do not generate statistically significant dynamics.     

The ‘wrong skewness’ problem: a re-specification of stochastic frontiers

In this paper, we study the ‘wrong skewness phenomenon’ in stochastic frontiers (SF), which consists in the observed difference between the expected and estimated sign of the asymmetry of the composite error, and causes the ‘wrong skewness problem’, for which the estimated inefficiency in the whole industry is zero. We propose a more general and flexible specification of the SF model, introducing dependences between the two error components and asymmetry (positive or negative) of the random error. This re-specification allows us to decompose the third moment of the composite error into three components, namely: (i) the asymmetry of the inefficiency term; (ii) the asymmetry of the random error; and (iii) the structure of dependence between the error components. This decomposition suggests that the wrong skewness anomaly is an ill-posed problem, because we cannot establish ex ante the expected sign of the asymmetry of the composite error. We report a relevant special case that allows us to estimate the three components of the asymmetry of the composite error and, consequently, to interpret the estimated sign. We present two empirical applications. In the first dataset, where the classic SF has the wrong skewness, an estimation of our model rejects the dependence hypothesis, but accepts the asymmetry of the random error, thus justifying the sign of the skewness of the composite error. More importantly, we estimate a non-zero inefficiency, thus solving the wrong skewness problem. In the second dataset, where the classic SF does not yield any anomaly, an estimation of our model provides evidence for the presence of dependence. In such situations, we show that there is a remarkable difference in the efficiency distribution between the classic SF and our class of models.     

The impact on the cost of equity capital in the effects of integrated reporting quality

Integrated reporting is a new reporting tool that includes financial and nonfinancial information, which represents a natural evolution of the corporate reporting movement. Although this practice has gained increasing attention in recent years, both from an academic and professional perspective, the quality of the reports still represents a critical aspect due to inadequate investigation. Only a few studies have focused on integrated reporting quality, and contributions on the effects of quality have been even rarer. This study aims to investigate on the impact of integrated reporting quality on the firm's cost of equity capital, owing to the paramount importance of this parameter for firms and investors. Our results highlight that integrated reporting quality has a significantly negative association with the cost of equity capital, suggesting that integrated reporting quality represents an innovative way to reduce the cost of equity. To our knowledge, this is the first study that examines the relationship between integrated reporting quality and a firm's cost of equity.     

EXISTENCE AND UNIQUENESS OF EQUILIBRIUM FOR A SPATIAL MODEL OF SOCIAL INTERACTIONS*

We extend Beckmann's spatial model of social interactions to the case of a two‐dimensional spatial economy with a large class of utility functions, accessing costs, and space‐dependent amenities. We show that spatial equilibria derive from a potential functional. By proving the existence of a minimizer of the functional, we obtain that of spatial equilibrium. Under mild conditions on the primitives of the economy, the functional is shown to satisfy displacement convexity. Moreover, the strict displacement convexity of the functional ensures the uniqueness of equilibrium. Also, the spatial symmetry of equilibrium is derived from that of the primitives of the economy.