Asymptotic properties of the efficient estimators for cointegrating regression models with serially dependent errors

In this paper, we analytically investigate three efficient estimators for cointegrating regression models: Phillips and Hansen’s [Phillips, P.C.B., Hansen, B.E., 1990. Statistical inference in instrumental variables regression with I(1) processes. Review of Economic Studies 57, 99–125] fully modified OLS estimator, Park’s [Park, J.Y., 1992. Canonical cointegrating regressions. Econometrica 60, 119–143] canonical cointegrating regression estimator, and Saikkonen’s [Saikkonen, P., 1991. Asymptotically efficient estimation of cointegration regressions. Econometric Theory 7, 1–21] dynamic OLS estimator. We consider the case where the regression errors are moderately serially correlated and the AR coefficient in the regression errors approaches 1 at a rate slower than 1/T$1/T$, where T$T$ represents the sample size. We derive the limiting distributions of the efficient estimators under this system and find that they depend on the approaching rate of the AR coefficient. If the rate is slow enough, efficiency is established for the three estimators; however, if the approaching rate is relatively faster, the estimators will have the same limiting distribution as the OLS estimator. For the intermediate case, the second-order bias of the OLS estimator is partially eliminated by the efficient methods. This result explains why, in finite samples, the effect of the efficient methods diminishes as the serial correlation in the regression errors becomes stronger. We also propose to modify the existing efficient estimators in order to eliminate the second-order bias, which possibly remains in the efficient estimators. Using Monte Carlo simulations, we demonstrate that our modification is effective when the regression errors are moderately serially correlated and the simultaneous correlation is relatively strong.     

Reallocation and productivity growth in Japan: revisiting the lost decade of the 1990s

Hayashi and Prescott (Rev Econ Dyn 5(1):206–235, 2002) argue that the ‘lost decade’ of the 1990s in Japan is explained by the slowdown in exogenous TFP growth rates. At the same time, other research suggests that Japanese banks’ support for inefficient firms prolonged recessions by reducing productivity through misallocation of resources. Using the data on large manufacturing firms between 1969 and 1996, the paper attempts to disentangle the factors behind the slowdown in productivity growth during the 1990s. The main results show that there was a significant drop in within-firm productivity, the component that is not affected by reallocation of input and output shares across firms over time, during the 1990s. Although we find that misallocation among large continuing firms represents a substantial drag to overall TFP growth for these firms throughout the sample period, the negative impact of misallocation was least visible during the 1990s. The significant reduction in within-firm productivity growth suggests that, as the Japanese economy has matured, a policy which fosters technological innovations via greater competition, R&D, and fast technological adoption may have become increasingly important in promoting economic growth.

On the emergence of non‐profit orchestras

In the market for live classical music, a symphony orchestra typically has fixed costs that are high relative to demand, so that the demand curve lies entirely below the average cost curve (Baumol & Bowen, 1966)—a situation in which a for‐profit enterprise cannot survive. The present study aims to explain how a non‐profit orchestra can survive in such an adverse market environment by relying on private donations, even in the absence of altruism. We argue that a financially distressed orchestra may employ a strategy to impose a non‐profit distribution constraint on itself—thus becoming a non‐profit, tax‐deductible organization—and use its member musicians' worker surplus to produce donor privileges, which enables the orchestra to induce donations from an individually rational audience by taking advantage of a tax deduction scheme. With this strategy, the orchestra can successfully extract consumer surplus from the audience to offset its loss.     

On the effect of mean-nonstationarity in dynamic panel data models

In this paper, we investigate the effect of mean-nonstationarity on the first-difference generalized method of moments (FD-GMM) estimator in dynamic panel data models. We find that when data is mean-nonstationary and the variance of individual effects is significantly larger than that of disturbances, the FD-GMM estimator performs quite well. We demonstrate that this is because the correlation between the lagged dependent variable and instruments gets larger owing to the unremoved individual effects, i.e., instruments become strong. This implies that, under mean-nonstationarity, the FD-GMM estimator does not always suffer from the weak instruments problem even when data is persistent.     

HETEROGENEOUS COMPUTATION OF RAINBOW OPTION PRICES USING FOURIER COSINE SERIES EXPANSION UNDER A MIXED CPU–GPU COMPUTATION FRAMEWORK

This paper focuses on comparing different heterogeneous computational designs for the calculation of rainbow options prices using the Fourier‐cosine series expansion (COS) method. We also propose a simple enough way to automatically decide the ratio of load balancing at runtime. A general‐purpose computing on graphic processing unit implementation of the two‐dimensional composite Simpson rule free of conditional statements with some degree of loop unrolling is also introduced. We will also show how to reduce the integration domain of coefficients appearing in the option pricing and by doing so achieve a substantial speed‐up and improve accuracy when compared with a straightforward implementation. Copyright © 2014 John Wiley & Sons, Ltd.     

International Consumption Patterns among High‐income Countries: Evidence from the OECD Data*

This paper examines the effect of economic integration on the product‐level consumption patterns across the OECD in the past decade. Estimation results find evidence of strong convergence in cross‐country consumption patterns with substantial heterogeneity across products and countries. The results are robust to either the benchmark choice, data selection, or the choice of model specification. In addition to documenting convergence, the paper relates the volume of international trade to cross‐country consumption patterns.     

SUNK COSTS OF CAPITAL AND THE FORM OF ENTERPRISE: INVESTOR‐OWNED FIRMS AND WORKER‐OWNED FIRMS*

ABSTRACT ** : This paper examines implications of sunk costs of capital for efficient forms of enterprise. It is assumed that firm owners and outside traders are asymmetrically informed of venture risks, and that there are sunk costs associated with investment in physical and human capital. We then make an efficiency comparison between investor‐owned and worker‐owned firms. We find that the firm is efficient when it is owned by the input supplier (the investor or worker) who incurs large sunk costs. This is because such an input supplier can credibly signal to the other input supplier that he in fact has a safe project. An empirical study based on the Japanese manufacturing industry seems to support the theoretical result.     

Foreign ownership,human capital,and the structure of wages in Japan

We examine the differences in the structure of wages between domestic and foreign-owned establishments in Japan. We use high-quality datasets from the Japanese government and construct a large employer–employee matched database consisting of 1 million workers in 1998. Our results confirm that foreign-owned establishments in Japan pay higher wages. We estimate that one percentage increase in foreign-ownership share of equity raises wages by 0.3%. We surmise that this foreign-ownership wage premium can be explained, at least in part, by compensating wage differentials. Workers in foreign-owned establishments are not protected by lifetime employment. They receive higher compensation for being exposed to higher risk and forfeiting their employment security. We also find that in foreign-owned establishments, wages are determined more by general skills, and less by firm-specific skills. These effects become more pronounced among establishments with a higher share of foreign ownership. The gender wage gap is considerably smaller among foreign establishments. Given the lack of long-term prospects for women in the Japanese labor market, foreign-owned establishments may be one source of ‘brain drain’ for highly skilled women there.