The Internal Rate of Return Approach and the AIRR Paradigm: A Refutation and a Corroboration

This article shows that the internal rate of return (IRR) approach is unreliable and that the recently introduced average internal rate of return (AIRR) model constitutes the basis for an alternative theoretical paradigm of rate of return. To this end, we divide the paper into two parts: a pars destruens and a pars construens. In the “destructive” part, we present a compendium of 18 flaws associated with the IRR approach. In the “constructive” part, we construct the alternative approach from four (independent) economic intuitions and put the paradigm to the test by showing that it does not suffer from any of the flaws previously investigated. We also show how the IRR, as a rate of return, is absorbed into the new approach.     

Ethnic group size,linguistic isolation,and immigrant entrepreneurship in the USA

Using a sample of immigrant men in US census data from the early and late 1900s and available in the Integrated Public Use Microdata Series (IPUMS), this study explores: (1) whether immigrant entrepreneurship is positively affected by ethnic group size and linguistic isolation; (2) how sensitive these relationships are to English-language proficiency; and (3) if these relationships have remained stable over time. The empirical results indicate that the size of the local ethnic population does not enhance immigrant self-employment for either English-proficient or limited-English-proficient (LEP) men in the USA. In addition, while linguistic isolation in the local labour pool seems to promote entrepreneurship among English-fluent immigrants in certain cases, it appears to hinder business formation among the LEP. Finally, comparing the results across time-periods is consistent with the premise that rising xenophobia pushes a disproportionate share of the LEP into self-employment.     

Macroeconomic Context,Relationships with Stockholders and Strategic Factors in the Determination of Brazilian Corporations' Performance

ABSTRACT

With the purpose to identify the intensity of the existent relationships in the explanatory topology of corporations' financial performances, comprised by the three dimensions of macroeconomic context, resource management strategies and relationships with stockholders, Brazilian corporations which were active from the year of 1996 to 2000 were analyzed. Based on the understanding of the relationships among the three dimensions previously mentioned, a structural model was adopted and as the methodology for the measurement and analysis of the relationships among constructs, the parameters estimation method used was the Partial Least Squares. As a result, the resource allocation strategies were identified as the critical factor in the performance of the analyzed corporations.

RESUMEN. Las empresas brasileñas de capital abierto fueron estudiadas a lo largo del período 1996 a 2000, con el objeto de identificar la intensidad de las relaciones existentes en la topología explicativa del desempeño financiero de dichas organizaciones, constituida por las dimensiones, el contexto macroeconómico, las estrategias de gestión de sus recursos y su relación con sus stockholders. Cubriendo especialmente la comprensión de las relaciones entre las dimensiones presentadas, adoptamos un modelo estructural y, como metodología de mensuración y análisis de las relaciones entre los constructos, la estimación de parámetros en base al método Partial Least Squares. Como resultado, logramos identificar que las estrategias de asignación de recursos son un factor determinante del desempeño de las organizaciones estudiadas.

RESUMO. Com o objetivo de identificar as intensidades das relações existentes na topologia explicativa constituída pelas dimensões ambiente competitivo, estratégias competitivas, relações com stakeholders e o desempenho das organizações, foram estudadas empresas brasileiras de capital aberto, ativas no período entre 1996 e 2000. Com foco no entendimento das relações entre as dimensões apresentadas, foi adotado um modelo estrutural e como metodologia de mensuração e análise das relações entre os constructos, a estimação de parâmetros pelo método Partial Least Squares. Como resultado, as estratégias competitivas foram identificadas a como fator determinante do desempenho das organizações estudadas.     

Broad Cross‐License Negotiations

In many industries, broad cross‐license agreements are considered a useful method to obtain freedom to operate and to avoid patent litigation. In this paper, I study firm incentives to sign a broad cross‐license as well as the duration of broad cross‐license negotiations. I develop a model of bargaining with learning, which predicts that two firms will enter a broad cross‐license agreement only if their capital intensities are large enough. The model also predicts faster negotiations when firms have high capital intensities and when the frequency of future disputes is low. I confirm these predictions empirically using a novel data set on cross‐licensing and litigation in the US semiconductor industry.     

Labor supply, child care, and welfare in Spanish households

This paper presents a household model in which both spouses work and care for their children, thereby obtaining a measure of household welfare. Applying this model to the Spanish case allows for drawing some basic conclusions. That is, the highest efficiency in caring for children is obtained when time is offered by the mother. Moreover, the time dedicated to child care by the father is considered as leisure time in a higher proportion than time dedicated by the mother. Also, a direct and strong relationship is detected between monetary income and welfare. Household welfare is greater when the children are older, and welfare increases when the father dedicates less time to work outside the home.The authors would like to thank the anonymous referees for their helpful comments and suggestions on an earlier version of this paper. The authors are also indebted to the Ministerio Español de Trabajo y Asuntos Sociales for its financial support.     

A RULE FOR AGGREGATING INDIVIDUAL WELFARE MEASURES

It is common, but often incorrect, practice in most applied works, especially in the field of applied general equilibrium models, to evaluate the overall impact of alternative policy changes by means of the sum of equivalent variations of (different classes of) individual consumers. This note proposes to use these same equivalent variations in a different way, namely, to aggregate them by the Borda rule.     

Search, Bargaining, Money, and Prices Under Private Information

This paper presents a model of money and search where bargaining determines prices and the quality of goods is private information. It studies how a lemons problem affects the purchasing power of money. There are multiple, Pareto-ranked equilibria. The superior equilibrium, where no lemons are produced, exists even if information about quality is relatively scarce. In other equilibria, there is price dispersion, and uninformed buyers pay higher prices than informed buyers for all goods. Taxing money balances (a proxy for inflation) makes buyers less selective, thus reducing the average quality of supply and the premium paid for known quality.     

Strategic pricing and entry deterrence under price-cap regulation

This paper shows that dynamic price-cap regulation allows the regulated firm to deter entry. Under dynamic price-cap regulation, the allowed prices in each period are an increasing function of the prices set in the previous period. By setting a low price before entry, the regulated firm can commit itself to charge a low price in the event of entry. If this price is sufficiently low with respect to the potential entrant's fixed cost, entry does not occur. Whether the regulated firm prefers to deter or accommodate entry depends on the level of the entry cost for the prospective entrant, on the tightness of the price-cap and on the degree of market power of the competing firms in case of entry.