Reliable Estimates of Sovereign Rating

International Advances in Economic Research -     

Heterogeneity in Production Structures and Efficiency: An Analysis of the Czech Food Processing Industry

The present study analyses firm heterogeneity and sector‐specific technology. The theoretical model stands on the assumption of maximizing the return on capital and overcomes problems involved in simple profit maximization. The results show that a random parameter model with sector dummies and heteroscedasticity is the most appropriate model specification for distinguishing firm‐level and sector‐level efficiency and heterogeneity. The heterogeneity among firms as well as among sectors was found to be an important characteristic in Czech food processing. This holds for production technology as well as for technical efficiency. Moreover, the decomposition of total variance shows that intrasectoral differences in technologies are much more pronounced than the intersectoral differences. The differences in intrasector heterogeneity also suggest that the food processing industry will be subject to accelerated structural change in the coming years. Moreover, we found that on average the companies highly exploit their production possibilities. However, some companies cannot keep pace with competitors. Because leapfrogging does not appear to be present in selected industries (except for Milling), structural change is expected to occur in such a way that the most successful companies will strengthen their position.     

Priority-driven behaviors under the Boston mechanism

We study school choice markets where the non-strategy-proof Boston mechanism is used to assign students to schools. Inspired by previous field and experimental evidence, we analyze a type of behavior called priority-driven: students have a common ranking over the schools and then give a bonus in their submitted preferences to those schools for which they have high priority. We first prove that under this behavior, there is a unique stable and efficient matching, which is the outcome of the Boston mechanism. Second, we show that the three most prominent mechanisms on school choice (Boston, deferred acceptance, and top trading cycles) coincide when students’ submitted preferences are priority-driven. Finally, we run some computational simulations to show that the assumption of priority-driven preferences can be relaxed by introducing an idiosyncratic preference component, and our qualitative results carry over to a more general model of preferences.     

Corporate Default Prediction Model Averaging: A Normative Linear Pooling Approach

Focusing on credit risk modelling, this paper introduces a novel approach for ensemble modelling based on a normative linear pooling. Models are first classified as dominant and competitive, and the pooling is run using the competitive models only. Numerical experiments based on parametric (logit, Bayesian model averaging) and nonparametric (classification tree, random forest, bagging, boosting) model comparison shows that the proposed ensemble performs better than alternative approaches, in particular when different modelling cultures are mixed together (logit and classification tree). Copyright © 2016 John Wiley & Sons, Ltd.     

Differences in exchange rate pass-through in the euro area

This paper focuses on the pass-through of exchange rate changes into the prices of imports made by euro area countries originating outside the area. Using data on import unit values for 13 different product categories for each country, we estimate industry-specific rates of pass-through across and within countries for all euro members. In the short-run, pass-through rates differ across industries and countries and are less than one. In the long-run neither full pass-through nor equality of pass-through rates across industries and countries can be rejected. Differences exist across euro area countries in the degree that a common exchange rate movement gets transmitted into consumer prices and costs of production indices. Most of these differences in transmission rates are due to the distinct degree of openness of each country to non-euro area imports rather than to the heterogeneity in the structure of imports.     

Price versus quantity in a duopoly of vertical differentiation with loss-averse consumers

In a model à la Mussa and Rosen (1978) in which consumers are loss-averse, I check the robustness of the result obtained by Tanaka (2001). As he did, I find that the quantity contract is a dominant strategy for both firms. Thus, Cournot is the outcome in equilibrium. Finally, I find that loss aversion in general intensifies competition.     

Strategic Environmental Standards, Wage Incomes and the Location of Polluting Firms

The purpose of this paper is tostudy how the choice of environmental standardsby governments is affected by the existence ofwage incomes when firms locations areendogenous. In developed countries labor isunionized, which allows positive wage incomesto arise. Thus, each government has incentivesto persuade firms to locate in its countrysince social welfare depends on suchincomes. But, as pollution damages theenvironment, each government will only try toattract polluting firms to thecountry, to obtain the wage incomes, whenthe valuation of environmental damage showsthat it is low.     

University patents,R&D competition,and social welfare

Although university patenting has increased dramatically over the past three decades, debates persist regarding the broad economic implications of the phenomenon. This article examines the social welfare implications of university patenting in a model of R&D competition in which firms develop innovations on the basis of the disclosure of a university invention. When such disclosure does not preempt the patenting of downstream innovations, university patenting enhances social welfare only if a regime of open access to university inventions is characterized by excessive aggregate R&D from the viewpoint of social welfare. When the university invention disclosure preempts patenting on firms’ innovations, the nature of the open access equilibrium in the R&D market depends on the threat of imitation ex post. Only when the threat of imitation is sufficiently strong firms will not invest in downstream R&D in the open access regime. In this case, university patenting promotes R&D investment and increases social welfare.