THREE HYPOTHESES ON THE BRAZILIAN SERVICE SECTOR

Three hypotheses on services, the Gershuny effect, the externalisation of producers services and the macroeconomic equation for the services share in employment, are tested with Brazilian data. The first two show trends similar to those in the developed economies, but, in the last one, findings are affected by consideration of the underground economy. The results suggest a dual character for Brazilian services: an informal, labour intensive group of sectors, present in the large metropolitan areas, coexists with a formal, less labour intensive one, where producers' services are probably predominant. These groups will respond differently to a greater trade liberalisation.     

IMP studies: A bridge between tradition and innovation

“Combining the Social and Technological Aspects of Innovation: Relationships and Networks” was the title of the 28th IMP Conference held in Rome, at Università Cattolica del Sacro Cuore in 2012.     

Negative network effects and asymmetric pure price equilibria

Portuguese Economic Journal - We show that in finite settings with identical firms and consumers, asymmetric pure price equilibria with positive profits exist. We consider a price competition...     

Equity-premium prediction: Attention is all you need

Predictions of stock returns are greatly improved relative to low-dimensional forecasting regressions when the forecasts are based on the estimated factor of large data sets, also known as the diffusion index (DI) model. However, when applied to text data, DI models do not perform well. This paper shows that by simply using text data in a DI model does not improve equity-premium forecasts over the naive historical-average model, but substantial gains are obtained when one selects the most predictive words before computing the factors and allows the dictionary to be updated over time.     

Investment–cash flow sensitivity and investor protection

We examine the role of country-level legal investor protection (i.e., shareholder and creditor protection) on firm investment–cash flow sensitivity (ICFS). Using underexplored research data on investor protection across 21 countries and working with a conservative empirical design, we extend prior literature on the relation between investor protection and ICFS and provide new evidence on how these country-level attributes interact to explain a firm's ICFS. We find that either the strong legal protection of minority shareholders or the strong legal protection of creditors reduces the sensitivity of investment to internal cash flow. However, in countries with strong levels of both minority shareholder and creditor protection, ICFS increases. Our results remain robust after controlling for several alternative explanations. The results support the argument that overregulation arises when policymakers increase investor protection at levels that lead firms to avoid external sources of finance, hampering firm investment. Our findings suggest that countries face a regulatory trade-off such that increasing investor protection (either shareholder or creditors protection) enhances financial markets efficiency, but excessive regulation can indeed lead to financial markets inefficiencies.