You Don't Have to be German to be a "Hidden Champion"

The "hidden champions" among Germany's medium-sized companies are becoming a by-word for students of management. But do hidden champions exist outside Germany? What management processes distinguish them from other companies? And are there lessons from their success for other companies? This article, extracted from the author's forthcoming book, summarises his answers to these questions.     

Explaining International Variations in Self-Employment: Evidence from a Panel of OECD Countries

Organisation for Economic Cooperation and Development (OECD) data from 1972 to 1996 reveals substantial differences in the levels and trends of self-employment rates across countries. This article uses recently developed panel integration and cointegration techniques to explore the determinants of aggregate self-employment rates. We find that within the panel, self-employment rates are positively and significantly related to personal income tax rates and negatively and significantly related to the unemployment benefit replacement rate. This accords a central role to government tax and transfer policies, in contrast to nonrobust influences from macroeconomic variables, which have been widely used in previous studies.     

ENDOGENOUS POPULATION GROWTH IN AN OVERLAPPING GENERATIONS MODEL WITH INTERNATIONAL LENDING AND BORROWING*

In this paper population growth is the outcome of a utility maximizing process undertaken by each working generation. This is distinct from the usual treatment of population growth as an exogenous variable. Steady state growth paths are analysed, and the model is extended to allow for international lending and borrowing. The results obtained broadly correspond to the case of a given rate of increase of population, but under certain assumptions it is found that a capital importing country will have a faster rate of growth as a result of being able to borrow on international capital markets.     

The Role of Incentives in the Public Sector: Issues and Evidence

Using incentive pay to improve public-sector efficiency is animportant component of the UK government's public-service modernizationagenda. In this paper, we review the important issues in performancepay in the public sector, and summarize the evidence on itseffects. We consider how optimal incentives for public-sectorworkers may differ from those in the private sector and, ifthey do, what types of incentives are more appropriate for thepublic sector. We investigate the reasons for the infrequentuse of explicit incentives in the public sector. We summarizeevidence of particular relevance to the public sector, on issuessuch as the impact on output of incentive pay schemes, gamingand dysfunctional behaviour, multiple principals, intrinsicmotivation, and teamwork. Finally, we comment on the designof new policies being introduced in the UK public sector inthe light of the theoretical arguments and the evidence.     

Is hospital competition wasteful?

Recent attention has been given to the hypothesis that local hospital competition takes the form of costly duplication of specialized services--the "medical arms race." This contrasts with the hypothesis that the supply of specialized services is determined solely by "the extent of the market." We develop a model predicting the provision of specialized services in local markets. Our analysis of California hospitals provides minimal support for the medical arms race hypothesis while suggesting substantial scale economies for many services. Our results emphasize the importance of properly specifying the extent of the market. Failure to do so leads one to overestimate the importance of competition.     

Delta Boosting Machine with Application to General Insurance

In this article, we introduce Delta Boosting (DB) as a new member of the boosting family. Similar to the popular Gradient Boosting (GB), this new member is presented as a forward stagewise additive model that attempts to reduce the loss at each iteration by sequentially fitting a simple base learner to complement the running predictions. Instead of relying on the negative gradient, as is the case for GB, DB adopts a new measure called delta as the basis. Delta is defined as the loss minimizer at an observation level. We also show that DB is the optimal boosting member for a wide range of loss functions. The optimality is a consequence of DB solving for the split and adjustment simultaneously to maximize loss reduction at each iteration. In addition, we introduce an asymptotic version of DB that works well for all twice-differentiable strictly convex loss functions. This asymptotic behavior does not depend on the number of observations, but rather on a high number of iterations that can be augmented through common regularization techniques. We show that the basis in the asymptotic extension differs from the basis in GB only by a multiple of the second derivative of the log-likelihood. The multiple is considered to be a correction factor, one that corrects the bias toward the observations with high second derivatives in GB. When negative log-likelihood is used as the loss function, this correction can be interpreted as a credibility adjustment for the process variance. Simulation studies and real data application we conducted suggest that DB is a significant improvement over GB. The performance of the asymptotic version is less dramatic, but the improvement is still compelling. Like GB, DB provides a high transparency to users, and we can review the marginal influence of variables through relative importance charts and the partial dependence plots. We can also assess the overall model performance through evaluating the losses, lifts, and double lifts on the holdout sample.     

Capital taxation,investment, growth,and welfare

This paper formulates a model of economic growth to study the effects of broad capital taxation (of profits, dividends, and capital gains) on macroeconomic outcomes in small open economies. A framework of exogenous growth permits modeling countries in transition to a country-specific steady state and to discern steady-state and transitory effects of shocks on economic outcomes. The chosen framework is amenable to structural estimation and, in view of the parsimony of the model, fits data on 79 countries over the period 1996–2011 well. The counterfactual analysis based on the estimated model suggests that capital-tax reductions induce positive effects on output and the capital stock (per unit of effective labor) that are economically significant and are accommodated within time windows of 5 years without much further economic response after that. The responses of economic aggregates are found to be relatively strongest to changes in corporate-profit-tax rates and weaker for dividend and capital-gains taxes.