An assessment of the Europe agreements’ effects on bilateral trade, GDP, and welfare

The so-called Europe Agreements had been enacted in the 1990s to initiate the integration of goods markets between the 15 EU incumbent economies as of 1995 and 10 potential entrants located in Central and Eastern Europe. This paper evaluates the trade, GDP, and welfare effects of these agreements by means of structural analysis of a bilateral trade flow model. The results support three conclusions. First, the agreements exerted significant positive effects on goods trade between the EU15 incumbents and the CEEC and, at the same time, they induced trade redirection from other countries. Second, EU15 GDP responded by an increase of much less than 1% while that in the 10 CEEC increased by several percent in response to the agreements. Third, the effects on welfare were moderate in the EU15 but amounted to more double-digit percentage changes in the involved CEEC.     

Engines of growth. Innovation and productivity in industry groups

The diversity of technological activities that contribute to growth in labour productivity is examined in this article for manufacturing and services industries in eight major EU countries. We test the relevance of two “engines of growth”, i.e., the strategies of technological competitiveness (based on innovation in products and markets) and cost competitiveness (relying on innovation in processes and machinery) and their impact on economic performance. We propose models for the determinants of changes in labour productivity and we carry out empirical tests for both the whole economy and for the four Revised Pavitt classes that group manufacturing and services industries with distinct patterns of innovation. Tests are carried out by pooling industries, countries and three time periods, using innovation survey data from CIS 2, 3 and 4, linked to economic variables. The results confirm the specificity of the two “engines of growth”; economic performances in European industries appear as the result of different innovation models, with strong specificities of the four Revised Pavitt classes.     

Institutional environment for entrepreneurship in rapidly emerging major economies: the case of Brazil,China, India,and Korea

The country institutional profile (CIP) construct has become the most widely used conceptualization of institutional environment for entrepreneurship. This construct is frequently employed to study institutional forces influencing entrepreneurial activity at the national level. However, relatively little is known about the cross-national equivalence of the construct. Moreover, the institutional environment for entrepreneurship in emerging economies remains largely under-explored. To address these issues, in the current study, we used the most frequently utilized CIP scale to collect data from 809 young adults in four rapidly emerging countries: Brazil, China, India, and South Korea. We examined the invariance of the CIP construct and unraveled differences in perceived institutional profiles among these rapidly emerging economies. Results support the CIP construct as largely invariant in the four REME countries and revealed important differences in specific aspects of institutional environments in these countries. Implications for future research and practice are discussed.     

Let's Get Real: A Factor Analytical Approach to Disaggregated Business Cycle Dynamics

This paper develops a method for analysing the dynamics of large cross-sections based on a factor analytic model. We use "law of large numbers" arguments to show that the number of common factors can be determined by a principal components method, the economy-wide shocks can be identified by means of simple structural VAR techniques and that the parameters of the unobserved factor model can be estimated consistently by applying OLS equation by equation. We distinguish between a technological and a non-technological shock. Identification is obtained by minimizing the negative realizations of the technology shock. Empirical results on 4-digit industrial output and productivity for the U.S. economy from 1958 to 1986 show that: (1) at least two economy-wide shocks, both having a long-run effect on sectoral output, are needed to explain the common dynamics; (2) although the technological shock accounts for at least 50 per cent of the aggregate dynamics of output, it cannot by itself explain dynamics at business cycle frequencies; (3) sector-specific shocks explain the main bulk of total variance but generate mainly high frequency dynamics; (4) both the technological and the non-technological component of output show a peak for positive sectoral comovements of output at business cycle frequencies; (5) technological shocks are strongly correlated with the growth rates of the investment in machinery and equipment sectors and their inputs.     

Coincident and Leading Indicators for the Euro Area

This paper proposes a new way to compute a coincident and a leading indicator of economic activity. Our methodology, based on Forni, Hallin, Lippi and Reichlin (2000), reconciles dynamic principal components analysis with dynamic factor analysis. It allows us to extract indicators from a large panel of economic variables (many variables for many countries). The procedure is used to estimate coincident and leading indicators for the EURO area. Unlike other methods used in the literature, the procedure takes into consideration the cross-country as well as the within-country correlation structure and exploit all information on dynamic cross-correlation.     

Cassetti's New Method for the Identification of Patterns in Input–Output Matrices: An Alternative Formulation

The least upper bound on the overall proportional error that results from the simplification of an input—output matrix is a useful measure of the information loss. In particular, it is proven that some of the available results on this bound can be used to reduce the computations required for an optimal introduction of zeros. Furthermore, it is shown that the matrix that solves the simplification problem for any given level of error is generally not unique, so that it is possible to impose a priori constraints on the pattern of zeros in the matrix.     

Persistence in law of one price deviations: Evidence from micro-data

Using an extensive micro-price panel, we find a positive cross-sectional relationship between LOP persistence and the distribution margin, which we measure using sectoral U.S. data, as suggested by the classical dichotomy. The median level of persistence (across goods) is low, and there is no evidence of a border effect: the half-life of a deviation is about 19 months across OECD cities and just 1 month lower across cities in the U.S. Aggregating our micro-data using a variety of weighting methods shows PPP persistence to be in the range of 1-2 years, over the 1990-2005 period. These results challenge three widely held views: (i) the classical dichotomy is irrelevant; (ii) high persistence is a robust feature of aggregate real exchange rates; and (iii) border crossings necessarily generate greater real exchange rate persistence.     

The Evaluation of Innovation Capabilities in Small Software Firms: A Methodological Approach

This paper presents a methodological approach for the evaluation of innovation capabilities in small software firms. The methodology is based on the assumption of a relationship between specific resources managed by small software firms and their innovation capabilities. Within the proposed methodological approach, a model for the quantitative analysis of innovation capabilities is presented. In order to show how the methodology can be applied to concrete situations, three case studies of small firms operating in the software sector and information services are presented and discussed.     

Concurrent learning: How firms develop multiple dynamic capabilities in parallel

Much is known about the importance of dynamic capabilities. Yet, surprisingly little is known about how multiple dynamic capabilities might be developed in parallel, since most existing work explores a particular dynamic capability in isolation. Using rich quantitative and qualitative data on Dow Chemical's acquisitions, joint ventures, and divestitures over the past 20 years, we seek to address this gap. Besides contributing by adding fresh insights about managing growth and the utility of distributed practice, and by shedding light on positive and negative experience transfer, our core contribution is an emergent theoretical framework that develops the concept of “concurrent learning. ” Copyright © 2014 John Wiley & Sons, Ltd.