Uncertainty and Investment Dynamics

This paper shows that with (partial) irreversibility higher uncertainty reduces the responsiveness of investment to demand shocks. Uncertainty increases real option values making firms more cautious when investing or disinvesting. This is confirmed both numerically for a model with a rich mix of adjustment costs, time-varying uncertainty, and aggregation over investment decisions and time and also empirically for a panel of manufacturing firms. These "cautionary effects" of uncertainty are large—going from the lower quartile to the upper quartile of the uncertainty distribution typically halves the first year investment response to demand shocks. This implies the responsiveness of firms to any given policy stimulus may be much weaker in periods of high uncertainty, such as after the 1973 oil crisis and September 11, 2001.     

El futuro del trabajo: Hacer frente a los retos mundiales del cambio demográfico y la automatización

Sobre la base de estimaciones y proyecciones de 2010-2020, se proyectan las necesidades mundiales de creación de empleo en 2020-2030 teniendo en cuenta las previsiones de crecimiento demográfico y participación laboral, los objetivos en cuanto a control del desempleo y las tendencias en cuanto a automatización, por edad, por género y por grupos de países según su nivel de renta. Serán necesarios 340 millones de nuevos puestos en el próximo decenio según estas estimaciones, debido en mayor medida a la evolución demográfica que a la automatización.     

Words, Deeds, and Lies: Strategic Behaviour in Games with Multiple Signals

We report the results of an experiment in which subjects play games against changing opponents. In one treatment, "senders" send "receivers" messages indicating intended actions in that round, and receivers observe senders' previous-round actions (when matched with another receiver). In another treatment, the receiver additionally observes the sender's previous-round message to the previous opponent, enabling him to determine whether the sender had lied. We find that allowing multiple signals leads to better outcomes when signals are aligned (all pointing to the same action), but worse outcomes when signals are crossed . Also, senders' signals tend to be truthful, though the degree of truthfulness depends on the game and treatment, and receivers' behaviour combines elements of pay-off maximization and reciprocity.     

How good was the profitability of British railways, 1870–1912?

This article provides new estimates of the return on capital employed (ROCE) for major British railway companies. It shows that ROCE was generally below the cost of capital after the mid‐1870s and fell until the turn of the century. Addressing cost inefficiency issues could have restored ROCE to an adequate level in the late 1890s but not in 1910. Declines in ROCE hit share prices and investors made little or no money in real terms after 1897. Optimal portfolio analysis shows that, while railway securities were attractive to investors before this date, they would have been justified in rushing to the exits thereafter.