Planning to cheat: EU fiscal policy in real time

Using real-time data from Europe's Stability and Convergence Programs, we explore how fiscal plans and their implementation in the EU are determined. We find that (1) implemented budgetary adjustment falls systematically short of planned adjustment and this shortfall increases with the projection horizon, (2) variability in the eventual fiscal outcomes is dominated by the implementation errors, (3) there is a limited role for 'traditional' political variables, (4) stock-flow adjustments are more important when plans are more ambitious, and (5), most importantly, both the ambition in fiscal plans and their implementation benefit from stronger national fiscal institutions. We emphasize also the importance of credible plans for the eventual fiscal outcomes .
--- Roel Beetsma, Massimo Giuliodori and Peter Wierts     

Supporting high-tech start-ups: Lessons from Italian technology policy

Public intervention is often advocated in high-tech sectors in order to solve market imperfections that limit the activity of new technology-based firms (NTBFs). Whilst some European countries have adopted national government support policies which explicitly target this type of firm; in Italy, as in other EU countries, there are no public support measures specifically designed for NTBFs. So, a question arises: to what extent are the NTBFs of these countries able to get funds from public administration? The paper focuses on the Italian case, and after a review of the available national public subsidies, through empirical and econometric analyses, it investigates whether horizontal general-purpose direct support mechanisms at national level permit an efficient allocation of public funds. The results highlight the need for more specific and customised policy measures towards NTBFs.     

Motivations behind users’ participation in the standard-setting process: Focus on financial analysts

The aim of this study is to investigate what motivates financial analysts to participate in the accounting standard-setting process. We focus on financial analysts because they are an important group of the financial statements users. The paper employs the meso-level approach used by Durocher et al. (2007) that integrates the macro domain’s focus on the standard setters with the micro domain’s focus on individuals and thus it links the characteristics of due process for standard setting with users’ attitudes. We develop a survey for the Chartered Financial Analysts Institute (CFA), which is one of the largest associations of investment professionals in the world, and collected data through computer-assisted Web interviews. We use a structural equation model with PLS to test our hypotheses. Our main findings confirm that a combination of micro and macro domains explains the frequency of financial analysts’ participation in the standard setting process. This investigation, thus, deepens our understanding of motivations behind analysts’ involvement in the accounting standard-setting process and delivers both theoretical contributions and practical insights.     

An assessment of the waste effects of corruption on infrastructure provision

In this paper, we investigate the association between the efficiency of infrastructure provision and the level of corruption, in the province in which the infrastructure takes place, employing a large dataset on Italian public works contracts. We, first, estimate efficiency in public contracts’ execution using a smoothed DEA bootstrap procedure that ensures consistency of our estimates. Then, we evaluate the effects of corruption using a semi-parametric technique that produces a robust inference for an unknown serial correlation between efficiency scores. In order to test the robustness of our results, the parametric stochastic frontier approach has also been employed. The results from both nonparametric and parametric techniques show that greater corruption, in the area where the infrastructure provision is localised, is associated with lower efficiency in public contracts execution.     

Computationally simple lattice methods for option and bond pricing

We propose new lattice-based algorithms for option and bond pricing, which rely on computationally simple trees, i.e., trees with the number of nodes that grows at most linearly in the number of time intervals. Contrary to commonly used methods, the target diffusion is approximated directly, without having to transform the original process into a constant volatility process. The discrete approximating process converges to the target continuous process, and the proposed algorithms are shown to be efficient and accurate for pricing purposes.     

Sink or Swim: Empowering Leadership and Overload in Teams' Ability to Deal with the Unexpected

The notion of improvisation has recently emerged in managerial studies as a viable solution to flexibly dealing with unexpected occurrences in work environments. However, past research on team improvisation has overlooked the contingencies that allow teams to effectively improvise. Drawing upon demand‐control theory, we investigate how empowering leadership and overload affect the improvisation‐performance relationship in the context of 48 work teams. Our results suggest that empowering leadership positively moderates the relationship between improvisation and performance, while overload attenuates the same relationship. Moreover, we found a joint effect of overload and empowering leadership influencing the improvisation‐performance link, such that improvisation is most positively related to performance when empowering leadership is high and overload is low. Conversely, we found that empowering leadership is particularly detrimental to the improvisation‐performance relationship when team members perceive high degrees of overload. Our findings make important contributions to the extant team literature as well as to the emerging literature on team improvisation. We outline several significant insights for HR managers and team leaders who are responsible for supporting teams that face unexpected events in the work environment. © 2013 Wiley Periodicals, Inc.     

Efficiency gains and myopic antitrust authority in a dynamic merger game

This paper models a sequential merger formation game with endogenous efficiency gains in which every merger has to be submitted for approval to the Antitrust Authority (AA). Two different types of AA are studied: first, a myopic AA, which judges a given merger without considering that subsequent mergers may occur; and, second, a forward looking AA, which anticipates the ultimate market structure a given merger will lead to. By contrasting the decisions of these two types of AA, merger policy implications can be drawn. In particular, the efficiency offence argument does not find any justification under a forward looking AA.     

R&D subsidies and the performance of high-tech start-ups

This paper addresses the question of the efficacy of R&D policy measures in support of high-tech start-ups. We show that subsidies awarded on a competitive basis lead to a positive effect, while those assigned through an automatic procedure do not.