R&D investments and corporate cash holdings

This paper presents evidence about how research and development (R&D) expenditures affect corporate cash holdings in European country groups that differ in their innovation capacity. In theory, one can expect intangible investments such as R&D to result in higher cash stocks than fixed investments, particularly because intangible capital is less suitable as collateral for obtaining external funds. The relationship can be expected to be particularly strong in innovative countries. These countries carry out a relatively high proportion of cutting-edge R&D, which tends to be particularly risky and may be associated with substantial gestation lags before becoming productive. These features tend to increase firms' precautionary cash holdings. To investigate this issue in a European context, we examine different groups of countries that are clustered based on differences in their innovative capacity. Our estimation results confirm a positive relation between changes in R&D investment and changes in cash holdings, whereas changes in fixed investment do not appear to be related to changes in cash positions. The impact of changes in R&D on cash tends to be higher for country groups characterized by a high level of innovative capacity than for countries with moderate levels of innovative capacity. However, the differences across country groups are less pronounced than expected.     

Impacts of Institutional Intervention on Price Transmissions: The Case of the Ethiopian Commodity Exchange

In the aftermath of the market liberalization reforms, interventions in developing countries shifted toward building institutions. One of such interventions is the introduction of commodity exchanges. The theoretical justification is that commoditization reduces the high transaction costs associated with the information and enforcement problems characterizing agricultural markets of these countries. However it is not known whether these potential gains are transmitted to the various markets along a value chain. By taking the Ethiopian Commodity Exchange (ECX) as a case, this paper examines the impacts of the introduction of the commodity exchange in transmitting price signals along the coffee value chain (world‐export‐auction‐producer prices). We found that both the speed and symmetry of transmission remains weak even after the launch of ECX. At each level, the market chain was found to favor buyers. This implies that not only the country's gains from export are sub‐optimal, the cumulative burden is on the millions of smallholder farmers who are located at the bottom of the chain. In a context where local agricultural markets remain traditional and export markets barely competitive, the introduction of the commodity exchange will have limited impacts in improving the performance of markets in transmitting price signals. Other policy measures to further liberalize both local and export markets are required.     

Block recursive equilibria for stochastic models of search on the job

We develop a general stochastic model of directed search on the job. Directed search allows us to focus on a Block Recursive Equilibrium (BRE) where agents' value functions, policy functions and market tightness do not depend on the distribution of workers over wages and unemployment. We formally prove existence of a BRE under various specifications of workers' preferences and contractual environments, including dynamic contracts and fixed-wage contracts. Solving a BRE is as easy as solving a representative agent model, in contrast to the analytical and computational difficulties in models of random search on the job.     

Stochastic differential equation modeling the prevalence of rare chronic diseases with an application to systemic lupus erythematosus

In this article we describe a system of stochastic differential equations to model the age‐specific prevalence of rare chronic diseases from incidence and mortality rates. As an application, the age profile of the prevalence of systemic lupus erythematosus in England and Wales in1995 is calculated. The results are in good agreement with the observed epidemiological measures.     

Does it Pay to Work for Free? Negative Selection and the Wage Returns to Volunteer Experience

This paper offers the first instrumental variables estimates of the wage returns to volunteer experience. The returns are substantial and differ considerably by gender. The results imply that the unequal valuation of volunteer experience by gender is more important in explaining the gender earnings gap than is the unequal valuation of part‐time paid work experience. The results also indicate negative selection into unpaid work. In a simple model of optimal volunteering, negative selection implies that a lower cost of volunteering would produce both an expanded and higher‐skilled pool of volunteers, and greater societal benefits from volunteer work.     

Random incentive systems in a dynamic choice experiment

Experiments frequently use a random incentive system (RIS), where only tasks that are randomly selected at the end of the experiment are for real. The most common type pays every subject one out of her multiple tasks (within-subjects randomization). Recently, another type has become popular, where a subset of subjects is randomly selected, and only these subjects receive one real payment (between-subjects randomization). In earlier tests with simple, static tasks, RISs performed well. The present study investigates RISs in a more complex, dynamic choice experiment. We find that between-subjects randomization reduces risk aversion. While within-subjects randomization delivers unbiased measurements of risk aversion, it does not eliminate carry-over effects from previous tasks. Both types generate an increase in subjects’ error rates. These results suggest that caution is warranted when applying RISs to more complex and dynamic tasks.     

Structure and Dynamics of Livestock Marketing in Rural Uganda: Constraints and Prospects for Research and Development

ABSTRACT

The projected global expansion in consumption of meat and other livestock products potentially offers sub-Saharan African small-holder farmers opportunities to escape from the poverty trap. A necessary condition for exploiting this potential is the establishment of marketing systems that provide farmers with reasonable incentives to participate in the market. In this study, the functioning of livestock markets in rural Uganda is analyzed based on a survey of 401 livestock keepers, complimented with focus group discussions with livestock traders and policy planners. The first part is dedicated to the empirical analysis of key organizational and institutional arrangements. Constraints along the marketing chain as well as potential institutional solutions are illuminated. The second part is dedicated to propositions of new areas where more work and new results are needed to improve the functioning of the livestock marketing chain. Empirical findings indicated the following institutional constraints: a poor market information system, lack of grades and standards, lack of trade finance, poor contract enforcement and dispute settlement, disorganized actors, high transaction risks, and poorly developed marketing infrastructure. The study recommends a structured approach to livestock marketing, market infrastructure development, and emphasis on arbitration systems as specific ways of improving the efficiency of livestock marketing in Uganda and other developing countries.