The attraction paradigm in dyadic exchange

Although the marketing literature alludes to the influence of interpersonal attraction in dyadic exchange, the composition of attraction, as well as its relationship to other elements in the exchange process, has not been given adequate attention. Since substantial empirical evidence supports the impact of attraction on a variety of human responses, this article examines how attraction impacts on marketing dyads and presents a model of interpersonal attraction as a framework for empirical testing. The implications of the model are discussed, and suggestions for further research are given.     

Impact of country-of-origin cues on consumer judgments in multi-cue situations: a covariance analysis

The effect of country-of-origin labelling on consumers’ assessments of product quality, risk to purchase, perceived value and likelihood of purchasing was tested experimentally in a multi-product, multi-cue setting. Country-of-origin information was found to be more important in affecting product quality assessments than were price and brand information. Price was important in value assessment while brand was significant in a few product specific cases. Age, education, sex, and perceptions of ability to judge products were variously related to consumers’ ratings of quality, risk, value and likelihood of purchase especially when the product was more complex and difficult to judge. However, much of the variation in consumer judgments was not accounted for by the variables employed in this study, suggesting that future research should include more detailed studies of information processing whereby intrinsic and extrinsic product cues and a wide range of consumer characteristics are taken into consideration.     

ENDOGENOUS EXPORT SUBSIDIES AND WELFARE UNDER DOMESTIC COST HETEROGENEITY

We present a model of international market share rivalry where the domestic export subsidy is determined by lobbying. Greater domestic cost heterogeneity leads to a higher subsidy level and a larger domestic market share. However, the relationship between cost heterogeneity and welfare is ambiguous. Starting from a near-symmetric situation, an increase in heterogeneity reduces domestic welfare if the number of domestic firms exceeds some critical value. When starting farther from symmetry, the welfare effect is reversed. Our findings are in contrast with the results from the existing literature where lobbying is ignored.     

Forecasting Social Security Actuarial Assumptions

Abstract

This paper presents a forecasting model of economic assumptions that are inputs to projections of the Social Security system. Social Security projections are made to help policy-makers understand the financial stability of the system. Because system income and expenditures are subject to changes in law, they are controllable and not readily amenable to forecasting techniques. Hence, we focus directly on the four major economic assumptions to the system: inflation rate, investment returns, wage rate, and unemployment rate. Population models, the other major input to Social Security projections, require special demographic techniques and are not addressed here.

Our approach to developing a forecasting model emphasizes exploring characteristics of the data. That is, we use graphical techniques and diagnostic statistics to display patterns that are evident in the data. These patterns include (1) serial correlation, (2) conditional heteroscedasticity, (3) contemporaneous correlations, and (4) cross-correlations among the four economic series. To represent patterns in the four series, we use multivariate autoregressive, moving average (ARMA) models with generalized autoregressive, conditionally heteroscedastic (GARCH) errors.

The outputs of the fitted models are the forecasts. Because the forecasts can be used for nonlinear functions such as discounting present values of future obligations, we present a computer-intensive method for computing forecast distributions. The computer-intensive approach also allows us to compare alternative models via out-of-sample validation and to compute exact multivariate forecast intervals, in lieu of approximate simultaneous univariate forecast intervals. We show how to use the forecasts of economic assumptions to forecast a simplified version of a fund used to protect the Social Security system from adverse deviations. We recommend the use of the multivariate model because it establishes important lead and lag relationships among the series, accounts for information in the contemporaneous correlations, and provides useful forecasts of a fund that is analogous to the one used by the Social Security system.     

Environmental regulations and industrial competitiveness: evidence from China

Economic activities are closely related to real-world environmental issues. Currently, more attention is paid to the association between environmental regulations and industrial competitiveness (IC) because of pressures on economic development and environmental protection. In this study, we identify and explain the association between environmental regulations and IC in China. As the largest developing country in the world, China has the unavoidable responsibility of protecting the environment and promoting global economic development. We analyse the mechanisms behind environmental regulations and industrial competiveness at the provincial level and conclude that the impact of environmental regulations upon IC is not a simple linear one, but a U-shaped relationship. It is argued that the crucial intervention to activate the U-shaped relationship, or Porter’s Hypothesis, is innovation, which can be triggered by stringent regulations and well-designed policies.     

Beware of ‘Good’ Outliers and Overoptimistic Conclusions*

The main goal of this paper is to warn practitioners of the danger of neglecting outliers in regression analysis, in particular, good leverage points (i.e. points lying close to the regression hyperplane but outlying in the x‐dimension). While the types of outliers which do influence regression estimates (vertical outliers and bad leverage points) have been extensively investigated, good leverage points have been largely ignored, probably because they do not affect the estimated regression parameters. However, their effect on inference is far from negligible. We propose a step‐by‐step procedure to identify and treat all types of outliers. The paper of Persson and Tabellini [American Economic Review (2004) Vol. 94, pp. 25–46] linking the degree of proportionality of an electoral system to the size of government is discussed to illustrate how the choice of a measure and the existence of atypical observations may substantially influence results.     

Cross‐border Lobbying in Preferential Trading Agreements: Implications for External Tariffs and Welfare

This paper examines the effect of cross‐border lobbying on domestic lobbying and on external tariffs in both Customs Union (CU) and Free Trade Area (FTA). We do so by developing a two‐stage game which endogenizes the tariff formation function in a political economic model of the directly unproductive rent‐seeking activities type. We find that cross‐border lobbying un‐ambiguously increases both domestic lobbying and the equilibrium common external tariffs in a CU. The same result also holds for FTA provided tariffs for the member governments are strategic complements. We also develop a specific oligopolistic model of FTA and show that tariffs are indeed strategic complements in such a model.     

Sub-debt Yield Spreads as Bank Risk Measures

Several recent studies have recommended greater reliance on subordinated debt as a tool to discipline bank risk taking. Some of these proposals recommend using sub-debt yield spreads as triggers for supervisory discipline under prompt corrective action (PCA). Currently such action is prompted by capital adequacy measures. This paper provides the first empirical analysis of the relative accuracy of various capital ratios and sub-debt spreads in predicting bank condition: measured as subsequent CAMEL or BOPEC ratings. The results suggest that some of the capital ratios, including the summary measure used to trigger PCA, have almost no predictive power. Sub-debt yield spreads performed slightly better than the best capital measure, the Tier-1 leverage ratio, albeit the difference is not significant. The performance of sub-debt yields satisfies an important pre-requisite for using sub-debt as a PCA trigger. However, the prediction errors are relatively high and further work to refine the measures would be desirable.