REGULATION AND THE NATURAL PROGRESS OF OPULENCE

Adam Smith taught us how government regulation can counteract the market forces that produce economic growth. Here I explore a more complex interplay between regulation and economic growth. Regulation creates behavioural incentives that weaken or offset entirely the goal of the regulation. Growth produces many of the benefits ascribed to regulation while also hiding the costs and failures of regulation.     

Youth unemployment in Nigeria: nature,causes and solutions

Quality & Quantity - This study investigates the nature and causes of youth unemployment in Nigeria, with the aim of proffering evidence-based workable solutions as policy recommendation. Its...     

Robust and Powerful Tests for Nonlinear Deterministic Components

We develop a test for the presence of nonlinear deterministic components in a univariate time series, approximated using a Fourier series expansion, designed to be asymptotically robust to the order of integration of the process and to any weak dependence present. We show that our proposed test has uniformly greater local asymptotic power than the existing tests of Harvey, Leybourne and Xiao (2010) when the shocks are I(1), identical local asymptotic power when the shocks are I(0), and also improved finite sample properties. We also consider the issue of determining the number of Fourier frequencies used to specify any nonlinear deterministic components.     

Text matching to measure patent similarity

Research Summary : We propose using text matching to measure the technological similarity between patents. Technology experts from different fields validate the new similarity measure and its improvement on measures based on the United States Patent Classification System, and identify its limitations. As an application, we replicate prior findings on the localization of knowledge spillovers by constructing a case–control group of text‐matched patents. We also provide open access to the code and data to calculate the similarity between any two utility patents granted by the United States Patent and Trademark Office between 1976 and 2013, or between any two patent portfolios. Managerial Summary : We propose using text matching to measure the technological similarity between patents. The method can be used by various practitioners such as inventors, attorneys, patent examiners, and managers to search for closely related prior art, to assess the novelty of a patent, to identify R&D opportunities in less crowded areas, to detect in‐ or out‐licensing opportunities, to map companies in technology space, and to find acquisition targets. We use an expert panel to validate the improvement of the new similarity measure on measures based on the United States Patent Classification System, and provide open access to the code and data to calculate the similarity between any two utility patents granted by the USPTO between 1976 and 2013, or between any two patent portfolios.     

Undervaluation of directors in the board hierarchy: Impact on turnover of directors (and CEOs) in newly public firms

Research summary: We examine the consequences of the formalization of the board leadership structure at IPO for board‐level turnover. We introduce the concept of director undervaluation. It indicates the degree to which a director’s qualifications based on normatively accepted criteria for board leadership are not duly reflected in his/her appointments to the board chair and committee chair positions. We find that the higher the average undervaluation of directors on the board (“board undervaluation”), the greater the turnover levels of undervalued directors. This effect is stronger when board interaction frequency is higher. We contribute to the behavioral perspective on corporate governance by introducing justice‐based legitimacy as a key normative institution, and by providing a novel predictor of aggregate turnover of directors (as well as the firm’s CEO). Managerial summary: Why do outside directors exit the board? We offer a novel answer to this question in the context of newly public firms. We suggest that when directors are passed over for the board chair and committee chair positions despite having higher qualifications than their peers, they have been “undervalued,” and a negative board climate is likely to develop. We find that the higher the average undervaluation of directors on the board, the higher the turnover levels of these undervalued directors. More frequent board meetings exacerbate these turnover levels. Further, these turnover effects are not restricted to undervalued directors—even the CEO is more likely to exit. This study demonstrates the critical importance of developing a legitimate and fair board leadership structure.     

Endogenous Entry and Exit in Common Value Auctions

We develop and experimentally test a model of endogenous entry, exit, and bidding in common value auctions. The model and experimental design include an alternative profitable activity (a safe haven) that provides agentspecific opportunity costs of bidding in the auction. Each agent chooses whether to accept the safe haven income or forgo it in order to bid in the auction. Agents that enter the auction receive independently-drawn private signals that provide unbiased estimates of the common value. The auctioned item is allocated to the high bidder at a price that is equal to the high bid. Thus the market is a first-price sealed-bid common value auction with endogenous determination of market size.     

Marginal Rates and Elasticities of Substitution with Additive Models in DEA

Marginal rates and elasticities of substitution are derived from the optimal slack values obtained from modified versions of additive DEA models. Projection formulas are used to ensure that all points are on the efficient frontier as required for conformance with assumptions in micro-economics. The models used differ from standard versions in that slack values are allowed to be negative as well as positive in these additive models. This makes movement possible on efficiency frontiers, where improvement in some inputs or outputs requires worsening other inputs or outputs. A new definition is therefore introduced in which efficiency is attained only if the value of the worsenings is exactly offset by the value of the improvements. This includes, but is not restricted to, the case in which all slacks must be zero for full attainment of efficiency—as in standard versions of additive models.     

A reexamination of the consumption function using frequency domain regressions

This paper reexamines the permanent income hypothesis (PIH) in the frequency domain. In contrast to some time domain tests, our frequency domain approach provides an explicit and natural test ofboth the permanentand transitory implications of the PIH for jointly nonstationary consumption and income data. Using a simple theoretical model, we demonstrate that the PIH implies the marginal propensity to consume (MPC) out of zero frequency income is unity. The PIHalso implies that the theoretical MPC out of transitory (or high frequency) income is smaller than the long-run MPC. These theoretical restrictions are natural implications of Friedman's hypothesis that agents consume out of permanent or low frequency income and (dis)save out of transitory or high frequency income. We test this full set of restrictions directly using spectral regression techniques. Under our set of assumptions, the derived disposable income process is shown to have a unit root and to be cointegrated with consumption. We therefore employ a systems spectral regression procedure that accommodates stochastic trends in the consumption and income series as well as the joint dependence in these series. In view of the relatively recent development of these systems spectral estimators, we also conduct Monte Carlo simulations across both low and high frequencies to assess properties of the estimator relative to established single equation techniques. New empirical estimates of the consumption function and tests of the PIH based on systems spectral regression methods are reported for U.S. aggregate consumption and income data over the period 1948–1993. The empirical results provide some evidence for the theoretical implications of the PIH.     

The Zeitgeist of Futures?

This paper seeks the Zeitgeist of Futures from 1968 to the present. The primary effort is to discern the topics addressed by Futures over the years, how these have changed, what methods, time horizons, and moods are expressed. One goal is to shed light on questions such as whether FUTURES, or “futures studies” in general, anticipates the future or simply adds commentary on the present. If the former, by how much: if the latter, is the commentary useful? Another goal, assuming the answer is positive is to assess whether articles in FUTURES provide a “data base” for scenario building, modeling, or Delphi? Although the starting point addressed in this article is to explore trends in the use of vocabulary, and its correlations with “real world events” the goal is to comprehend connections and associations as revealed in FUTURES articles, as a step toward paradigm recognition and Zeitgeist.     

Beyond Neo-Malthusians and Cornucopians: comment on Chenoweth and Feitelson

In a recent paper in Futures, Chenoweth and Feitelson test of the validity of the projections of the Global 2000 Report to the President and The Resourceful Earth: A Response to Global 2000. This commentary critiques their approach, focusing on their comparison of the two studies' Year 2000 projections, and the pitfalls for near-term tests of long-term projections. Empirically, their paper does little to resolve the neo-Malthusian and Cornucopian debate. Nonetheless, given the past history of this acrimonious debate, their conclusions may undermine current efforts to balance global economic, social, and environmental concerns.