Mathematical Needs and Economic Interpretations

This paper discusses why the disconnection between formal structuresand theoretical content in economic model building can leadto undesirable consequences. By contrast, linking formal andverbal contents by means of coherent and relevant interpretationsis worth the effort: it is a relatively simple way of helpingto improve mathematical economic theorization. By way of illustration,the interpretation that Arrow and Debreu put on the inclusionof free goods in their proof of existence of general equilibriumis also discussed.     

Employee attitudes,customer satisfaction,and sales performance: assessing the linkages in US grocery stores

Using store‐level panel data for a major supermarket company, we investigate the linkages between employee attitudes, customer satisfaction, and sales performance, while controlling for observed and unobserved differences across stores. We find that employee attitudes positively affect customer satisfaction with service but do not affect customer satisfaction with quality or value. Additionally, we find that customer satisfaction with service positively affects sales performance. Our results suggest that employee attitudes affect sales performance through their impact on customer service. Copyright © 2008 John Wiley & Sons, Ltd.     

Public capital formation and labor productivity growth in Mexico

This paper addresses the important question whether public investment spending on economic infrastructure enhances economic growth and labor productivity in Mexico. Following the lead of the endogenous growth literature, it presents a modified production function which explicitly includes the positive or negative externality effects generated by additions to the public capital stock. Using cointegration analysis, the paper proceeds to estimate a dynamic labor productivity function for the 1955–94 period that incorporates the impact of the growth rate in the stocks of both private and public capital (as opposed to the flows) and the economically active population (EAP) (rather than the rate of population growth). The results suggest that (lagged) increases in public investment spending on economic infrastructure—as opposed to overall public investment spending—have a positive and highly significant effect on the rate of labor productivity growth. In addition, the estimates suggest that increases in government consumption expenditures may have a negative effect on the rate of labor productivity growth, thus suggesting that the composition of government spending may also play an important role in determining the rate of labor productivity growth. Finally, the findings call into question the politically expedient policy in many Latin American countries of disproportionately reducing public capital expenditures on economic and social infrastructure to meet targeted reductions in the fiscal deficit as a proportion of GDP.     

Does sovereign debt ratings news spill over to international stock markets?

The evidence here indicates that sovereign debt rating and credit outlook changes of one country have an asymmetric and economically significant effect on the stock market returns of other countries over 1989–2003. There is a negative reaction of 51 basis points (two-day return spread vis-á-vis the US) to a credit ratings downgrade of one notch in a common information spillover around the world. Upgrades, however, have no significant impact on return spreads of countries abroad. Closeness (e.g., geographic proximity) and emerging market status amplify the effect of a spillover. Downgrade spillover effects at the industry level are more pronounced in traded goods and small industries.     

Time-to-build, monetary shocks, and aggregate fluctuations

The idea that the investment process takes time to produce finished capital goods was an integral part of Kydland and Prescott's early work on real business cycles, but this feature has been dropped in much recent work, mainly because it seemed to have little effect on macroeconomic dynamics. With a generalization of the “time-to-build” feature that incorporates multiple types of capital, however, a New Keynesian model can produce “u-shaped” responses in output, investment, and inflation to a monetary policy shock. Such responses are not found in many studies that assume no time-to-build friction. In addition, different specifications of the time-to-build structure result in substantially different response patterns for these aggregate variables.     

Fear of foresight: Knowledge and ignorance in organizational foresight

We discuss the changes occurring in the field of organizational foresight. The analysis results from viewing foresight from two different perspectives: as centered on the future or on the present; as macroscopic analysis or microscopic practice. The combination of these factors results in four different modes of organizational foresight: strategic planning, visioning, scenario thinking and planned emergence. These different perspectives are examined. We contribute to the literature by presenting foresight as a complex process, amenable to different understandings. Foresight is often portrayed as a technical and analytic process. We discuss it as a human process permeated by a dialectic between the need to know and the fear of knowing.     

Poverty and crime in 19th century Germany

We estimate the impact of poverty on crime in 19th century Bavaria, Germany. Rainfall is used as an instrumental variable for grain (rye) prices to address econometric identification problems in the existing literature. The rye price was a major determinant of living standards during this period. The rye price has a positive effect on property crime: a one standard deviation increased property crime by 8%. OLS estimates are twice as large as instrumental variable estimates, highlighting the value of our empirical approach. Higher rye prices lead to significantly less violent crime, though, and we argue that higher beer prices, caused by the higher rye prices, are a likely explanation.     

Research and development in pharmaceuticals: Mexico

The article analyses the activities of the pharmaceutical industry in Mexico. From information available, there appear to be close links between the imports of foreign technology, the restrictive uses of industrial property and the weakness of local R and D. The spending on local R and D by US-owned drug companies was negligible compared to their expenditure on technology imports and advertising. It is suggested that the prerequisite for a strong indigenous pharmaceutical industry is the development of local technological capability. The article concludes by putting forward policy-oriented proposals aimed at creating local R and D capability.     

The endogeneity of the natural rate of growth

The aim of this paper is to estimate the sensitivity of thenatural rate of growth to the actual rate of growth for 15 OECDcountries over the period 1961–95, on the hypothesis thatthe natural rate of growth is not exogenously given. To do this,we estimate the natural rate of growth and, then, how it changeswhen the actual growth rate is different from the natural rate.As a side test of the endogeneity hypothesis, we also test forthe direction of causality between national output and factorinputs for the same set of countries. Our results support theidea that the natural rate of growth is not independent of theactual rate of growth and bring to the fore the importance offocusing on demand as well as supply for an understanding oflong-run growthrate differences between countries.