Wild Bootstrap Inference for Wildly Different Cluster Sizes

The cluster robust variance estimator (CRVE) relies on the number of clusters being sufficiently large. Monte Carlo evidence suggests that the ‘rule of 42’ is not true for unbalanced clusters. Rejection frequencies are higher for datasets with 50 clusters proportional to US state populations than with 50 balanced clusters. Using critical values based on the wild cluster bootstrap performs much better. However, this procedure fails when a small number of clusters is treated. We explain why CRVE t statistics and the wild bootstrap fail in this case, study the ‘effective number’ of clusters and simulate placebo laws with dummy variable regressors. Copyright © 2016 John Wiley & Sons, Ltd.     

Global sourcing and quality recalls: An empirical study of outsourcing-supplier concentration-product recalls linkages

This study investigates how supply chain sourcing strategies are associated with product quality recalls. In particular, the research examines how make-or-buy decisions (i.e., outsourcing), the use of foreign suppliers (i.e., offshore outsourcing), the relocation of production to offshore markets (i.e., offshoring), and decisions to consolidate supply bases (i.e., the use of few vs. myriad suppliers) are related to product recalls. Product recalls are serious quality failures in supply chains with significant, negative impacts on firm performance. Product recalls are frequently connected to the globalization of supply chains. Globalization has, at times, promoted inconsistency in quality control and standards, leading to quality problems and failures. Data across multiple industries, with widely reported recalls, have been collected and analyzed using regression techniques. Our findings indicate that offshore outsourcing has a greater impact on recalls than offshoring without outsourcing; outsourcing domestically has the least influence. Outsourcing to a smaller supplier base may lead to fewer recalls at low levels of outsourcing. However, it may exacerbate the impact of outsourcing on recalls at high levels of outsourcing.     

The urban–rural divide

A vast literature has related perceptions of income inequality to individuals' income: the higher the level of income, the less inequality is perceived. Here, examining the perceptions of income and social inequality, we argue that rural or urban residence affects both inequality perceptions and the impact of income on these perceptions. We test the theory using survey data from 12 Central and Eastern European countries and we find that income negatively affects inequality perceptions but only in urban areas. These findings confirm the importance of accounting for urbanity to understand what drives individuals' perceptions of inequality.     

Towards a circular economy: insights based on the development of the global ENGAGE-materials model and evidence for the iron and steel industry

A number of recent economic modelling studies have attempted to analyse resource efficiency and the circular economy. However, modelling analysis in this area is relatively underdeveloped. In particular, many CGE models are unable to provide significant insight given their aggregated sectoral coverage. Here we describe the development of the Environmental Global Applied General Equilibrium (ENGAGE-materials) model created to consider the economic and sectoral effects of potential policies on a circular economy and resource efficiency, which affect materials and resources at the stages of extraction, production and recycling. Our policy scope is global with a special emphasis on China and Europe, as both regions have dedicated policies in place and indicate their willingness to take the lead. The case of steel is relevant as it is a key material for all economies across the world and offers a range of interesting features for circularity and sustainability. ENGAGE-materials models iron ore mining, primary production of iron and steel, secondary production of iron and steel, and steel scrap recycling at the global level. We utilise this technology rich framework to provide preliminary results on scenarios comprising economic insights into a saturation effect and straightforward policy such as doubling the availability of secondary steel.     

Take the money or run? Investors' ethical reputation and entrepreneurs' willingness to partner

Drawing on the multi-principal–agent perspective, this research models the influence of venture capitalists' reputation for ethical behavior on entrepreneurs' willingness to partner decisions. We test our model using a two-study design. Study one, a conjoint experiment, revealed that explicit knowledge of past unethical behavior negatively affects entrepreneurs' willingness to partner. Interaction effects revealed that factors previously shown to influence the entrepreneurs' evaluations—investor value-add and investment track record—become largely contingent upon and often subjugated by investors' ethical reputation. Study two, a traditional between-subjects scenario experiment, revealed that when entrepreneurs develop their own perceptions about the ethicality of an investor's prior behaviors, the ethical dimension remains highly influential. Further, we find that as the consequences of rejecting funding become more severe (e.g., possible bankruptcy), entrepreneurs become increasingly willing to partner with unethical investors. We also find that high fear of failure entrepreneurs are less willing to partner with unethical investors than their low fear of failure counterparts.     

An information-based model of target stock price runup in the market for corporate control

The stock price runup of target firms in the market for corporate control has been anecdotally attributed to inside trading. Moreover, the empirical merger and acquisitions literature documents a time-varying level and duration of the stock price runup of target firms. Using a market microstructure approach, we model stock price runup as a stochastic process that shifts between a random walk without drift and a predictable process dependent on a parsimonious set of state variables. Consistent with the market microstructure literature, predictability in prices can be exploited only by the informed trader. The model is capable of explaining the complex stylized facts observed in stock price runup. It is also consistent with the merger wave literature, as we find that capital liquidity, economic growth, and market valuations drive the complex dynamics of stock price runup.