Malmquist-type indices in the presence of negative data: An application to bank branches

In this paper we develop an index and an indicator of productivity change that can be used with negative data. For that purpose the range directional model (RDM), a particular case of the directional distance function, is used for computing efficiency in the presence of negative data. We use RDM efficiency measures to arrive at a Malmquist-type index, which can reflect productivity change, and we use RDM inefficiency measures to arrive at a Luenberger productivity indicator, and relate the two. The productivity index and indicator are developed relative to a fixed meta-technology and so they are referred to as a meta-Malmquist index and meta-Luenberger indicator. We also address the fact that VRS technologies are used for computing the productivity index and indicator (a requirement under negative data), which raises issues relating to the interpretability of the index. We illustrate how the meta-Malmquist index can be used, not only for comparing the performance of a unit in two time periods, but also for comparing the performance of two different units at the same or different time periods. The proposed approach is then applied to a sample of bank branches where negative data were involved. The paper shows how the approach yields information from a variety of perspectives on performance which management can use.     

Cross-listing and liquidity in emerging market stocks

In this study, we analyze liquidity costs for stocks and ADRs from the four main Latin American markets. The results indicate that international investors are exposed to different trading costs in Latin America, with market location and firm size as important determinants. In the local market, stocks that cross-list internationally do not always present a liquidity cost advantage relative to non-cross-listed stocks. When the ADR and the local stock markets are compared, large firms present lower trading costs in the home market. The opposite occurs for small firms.     

Why does bad news increase volatility and decrease leverage?

A recent literature shows how an increase in volatility reduces leverage. However, in order to explain pro-cyclical leverage it assumes that bad news increases volatility, that is, it assumes an inverse relationship between first and second moments of asset returns. This paper suggests a reason why bad news is more often than not associated with higher future volatility. We show that, in a model with endogenous leverage and heterogeneous beliefs, agents have the incentive to invest mostly in technologies that become more volatile in bad times. Agents choose these technologies because they can be leveraged more during normal times. Together with the existing literature this explains pro-cyclical leverage. The result also gives a rationale to the pattern of volatility smiles observed in stock options since 1987. Finally, the paper presents for the first time a dynamic model in which an asset is endogenously traded simultaneously at different margin requirements in equilibrium.     

Green auctions: A biodiversity study of mechanism design with externalities

This paper uses a mechanism design approach to study the biodiversity improvement in a territory, where the government is the principal and the landholders are the agents. In particular, I analyze an optimal mechanism that considers multidimensional bid which includes both the biodiversity improvement of the project and its cost. Additionally, this mechanism incorporates the externality (either positive or negative) that a biodiversity project causes in the surrounding agents who decided not to participate. Specifically, I assume that externalities enter in the cost function of the nonparticipating landholders. I show that, in the case of negative externalities, the government will implement a transfer function which is decreasing in the landholder's efficiency level. On the other hand, in the case of a positive externality, paradoxically the government may be interested in the nonparticipation of the most efficient landholders.     

MEASURING PROTECTION: MISSION IMPOSSIBLE?

Abstract.  There seems to be some confusion between 'openness' and 'protection' measures in the international trade literature. The aim of this paper is to bring together the state of the art in quantifying trade policy measures and, for this reason, we focus on the extent of the protection granted by policies rather than on the degree of openness of the economy. Given the considerable amount of literature that deals with these issues, we will limit our review as follows. On the one hand, we focus on trade policies implemented at the border and therefore do not consider all the other possible public interventions influencing trade flows. On the other hand, we only take into account indexes that explicitly adopt a metric expressed in a 'scalar aggregate' (tariff- and quota-equivalent measures, or an index in a closed interval). We distinguish between indexes that aggregate across products (same barrier for more products) and indexes that aggregate across instruments (more barriers for the same product). Finally, in order to classify the large number of indexes covered in our review, we propose a typology based on three categories: incidence, outcome and equivalence.     

The implementation of road user charging and the lessons learnt: the case of Valletta,Malta

Whilst the theory on road pricing is well developed there are only a few schemes operating worldwide with others which have failed to be implemented. One scheme which has received relatively little attention is the Controlled Vehicular Access System (CVA) recently implemented in Valletta, Malta. This paper draws on the experience of Valletta with a move from a fixed annual charge (V-licence) for access into the city to a time-based road user charge implemented in May 2007. The aims of this paper are to identify the reasons why a fixed charge was initially introduced; to review the literature related to implementation of road user charging schemes around the world; to compare the V-licence with the CVA and identify the issues relating to the change from one scheme to another. Through the direct involvement of one of the authors in the design and implementation of the road user charge in Valletta, this paper is based on archival data, direct observation and qualitative interviews. This paper concludes on what lessons can be learnt from the case of Valletta for other cities contemplating the introduction of a road user charge.     

Further evidence on business cycle asymmetries in G7 countries

This paper tests for business cycle symmetry in G7 countries during the post-World War II period using a number of tests, each reflecting alternative definitions of business cycle asymmetry. The tests are applied to monthly coincident economic indicators of business cycles. This found that business cycles in the US are characterized by both longitudinal (deepness) and transversal (steepness and sharpness) asymmetries: further, it is found that asymmetric transition probabilties and time irreversibility are due to nonlinearities. On the contrary, business cycles in Germany exhibits a symmetric behaviour. Between these extremes are the other countries, for which at least one of the tests here considered rejects the null of cyclical symmetry. Particularly, business cycle is characterized by deepness and sharpness in Canada, asymmetry in persistence in France and Japan, and asymmetric transition probabilities in France and United Kingdom.     

Training and economic density: Some evidence form Italian provinces

In this paper we use a search and matching model to investigate the economic relationship between training and local economic conditions. We identify two aspects of this relationship going in opposite directions: on the one hand, the complementarity between local knowledge spillovers and training generates a positive correlation between training and local density; on the other hand, higher wages and labor turnover in denser areas reduce training. Overall the relationship can be either positive or negative, depending on the relative strength of these two effects. Our empirical analysis, based on a sample of Italian firms, shows that training is lower in provinces with higher labor market density, measured as the number of employees per squared kilometer.     

Overview of Behavioural Economics Elements in the OECD Consumer Policy Toolkit

The note summarizes the history and contents of the OECD Consumer Policy Toolkit. It shows how the elements related to behavioural economics appear in the consumer policy of OECD countries as presented in the Toolkit. In particular, I look at the methods of detecting market malfunctioning and at the tools aimed at counteracting them.     

Cultural Competences: An Important Resource in the Industry–NGO Dialog

This article explores the concept of cultural competence and its relevance as an organizational resource in ethical disputes. Empirically, we aim to reveal the cultural competences that a global forest industry company, StoraEnso, and a global environmental nongovernmental organization (NGO), Greenpeace, utilized in forestry conflicts during 1985–2001. Our study is based on data which were collected from corporate and NGO communication outlets and which have gone through a detailed discourse-semiotic analysis. Our reinterpretation of the discourses identified three cultural competences: (1) the ability to understand changing consumer preferences and values, (2) the ability to utilize culturally determined positions of expertise, and (3) the ability to maintain trust and credibility in the community through open communicative practices. We argue that these competences are relevant in industry–NGO disputes for both parties. However, maintaining them all simultaneously is a difficult task, since various discourses which aim at upholding them can sometimes have contradictory effects.