MODELING THE EVOLUTION OF EXPECTATIONS AND UNCERTAINTY IN GENERAL EQUILIBRIUM

We develop methods to solve general equilibrium models in which forward‐looking agents are subject to waves of pessimism, optimism, and uncertainty that turn out to critically affect macroeconomic outcomes. Agents in the model are fully rational and conduct Bayesian learning, and they know that they do not know. Therefore, agents take into account that their beliefs will evolve according to what they will observe. This framework accommodates both gradual and abrupt changes in beliefs and allows for an analytical characterization of uncertainty. We use a prototypical Real Business Cycle model to illustrate the methods.     

Assessing students’ equality of opportunity in OECD countries: the role of national- and school-level policies

This article analyses the relationship between equality of opportunity and the characteristics of the educational system, jointly considering country- and school-level policies. Because school social environment represents a fundamental channel in shaping educational opportunities, we consider all policies, recorded in PISA 2012 dataset, that affect the sorting of students to schools. We show that including sorting policies enriches the explanation of the socio-economic gradient, that is, the association between students’ performances and parental background, with respect to previous studies including only country-level features. The negative impact of early tracking on equality of opportunity is overvalued without including other sorting policies, while grouping students’ within-school by ability increases the socio-economic gradient and a greater students’ heterogeneity in the school reduces the gradient.     

An investigation of wholly‐owned foreign subsidiary control through transaction cost economics theory

This paper investigates the management control systems used by multinational corporation headquarters to control wholly‐owned foreign subsidiaries. Our theory development is based on transaction cost economics. First, we conduct a series of exploratory interviews, providing an insight into the context, and second, we provide empirical evidence based on cross‐sectional survey data. Our results indicate that activity traits (uncertainty, asset specificity and post hoc information impactedness) have significant implications on control choices, in particular the control archetype combinations chosen by headquarters, although not all results are consistent with theory predictions. Our findings are supported by extensive alternative testing.     

Goodwill write-off and financial market behaviour: An analysis of possible relationships

The aim of this contribution is to verify whether there exists a reaction of financial markets to the new accounting method for goodwill introduced by SFAS 142 and IAS 36. Our research hypothesis is that financial markets should have no significant reaction to the goodwill write-off following the impairment test, since the latter's outcome represents an economic estimate without financial significance. The hypothesis was checked by the analysis of the companies added to the Standard & Poor's Europe 350 index over a three-year period, taking note of goodwill write-off announcements and relating them with the stock market prices and their volatility. The results demonstrate a correlation between the goodwill write-off and the behaviour of financial markets, while the same connection cannot be evinced for prices volatility. Also, what comes out from our analysis is that markets need a relatively long period, over one semester, before absorbing in full the effects resulting from the write-off announcement.     

Non‐Reciprocal Trade Preferences and the Role of Compliance Costs in the Agricultural Sector: Exports to the EU

We investigate whether non‐reciprocal preferential regimes granted by the European Union have an impact on agricultural export flows from beneficiary countries while accounting for the costs of compliance that may prevent exporters from taking full advantage of potential benefits. Compliance costs are heterogeneous and difficult to measure. We proxy their influence and specify a model that allows for a different preferential margin impact according to the proxy costs. Adopting the gravity framework and using a sample of 554 lines of agricultural products for 131 developing countries in 2002, we find that the costs of compliance play a role in making the schemes work: the lower the costs, the greater the impact of the preferential margins. Moreover, the estimated margin effect differs between different regimes.     

Technical efficiency and use of information and communication technology in Spanish firms

The literature concerned with the relationship between performance and information and communications technology (ICT) is usually focused on the ICT investments. This paper shows that it is the level of use of ICT within organisations, with preference as regards the expenses of ICT, which is responsible for the effect on performance. A general sample of 2255 Spanish companies has been used. Firms’ performance is measured as technical efficiency, which is determined by a data envelopment analysis (DEA), in which special attention is paid to the problem of the outliers. Finally, the analysis of the level of use of ICT is focused on a key area of the organisations, the supply chain, which affects the technical efficiency of the firms analysed. Results show that there is evidence of a positive effect of the use of ICT on technical efficiency. This effect is especially notable at intensive use levels in activities related to operations/manufacturing, purchasing or sales.     

Going up and down: rethinking the empirics of growth in the developing and newly industrialized world

Growth dynamics are remarkably heterogeneous, in particular when one focuses on developing countries. Economic miracles and failures are embedded within extended phases of either growth or decline. In this paper, we analyze the growth patterns of developing and newly industrialized countries on the basis of structural breaks and growth regimes experienced. Emphasizing the presence of broken trends, we focus on the difference between expansionary and recessionary regimes of medium length, and we show that models of takeoffs and exponential growth are inadequate to characterize the majority of observed growth dynamics. Then, we move to a systematic classification of different patterns and we isolate an additional stylized fact characterizing the process of growth and development. In particular, our results show that expansionary regimes are associated with convergence and positive correlation between growth and (short run) volatility. By contrast, in recessionary regimes, poorer countries face deeper failures and a negative correlation between growth and volatility is found, indicating that output fluctuates less around the trend during strong rather than mild recessions. Catching-up phenomena are infrequent but more likely to occur across categories of growth patterns rather than within. Finally, we discover that regimes of growth and recession show similar average length (about 16 years). Although recessions are, on average, remarkably pronounced (14% loss of GDP per capita), the magnitude of growth is much larger during expansions. In sum, our results underline that stable positive growth is hardly achieved in developing countries, which rather alternate long phases of expansions with equally long phases of recession. Moreover, cross-sectional empirical regularities are found to differ between regimes of positive and negative growth.