The effect of sample size on European Union’s renewable energy investment drivers

Macroeconomic modelling results based on relatively varying sample sizes may lead to incoherent results. Such effects have not been adequately understood in the renewable energy literature regarding the European Union (EU). This study focuses on the comparison of results obtained for renewable energy investment drivers (for solar and wind energy investments) on different samples of EU countries, including all EU-27, former EU-15 and 11 high renewable investment EU countries. The study used a random effect panel data modelling approach over the period 1995–2011 for studying the impact of the levelized cost, regulation perception, carbon emissions and climatic condition on wind and solar investments over the three samples. The results demonstrate the importance of trustable regulation schemes to ensure that regulation will not have a significant negative effect on investment, showing also the need to further extend the model to include support schemes as fundamental drivers for investment.     

On the uncertainty and risks of macroeconomic forecasts: combining judgements with sample and model information

Institutions which publish macroeconomic forecasts usually do not rely on a single econometric model to generate their forecasts. The combination of judgements with information from different models complicates the problem of characterizing the predictive density. This article proposes a parametric approach to construct the joint and marginal densities of macroeconomic forecasting errors, combining judgements with sample and model information. We assume that the relevant variables are linear combinations of latent independent two-piece normal variables. The baseline point forecasts are interpreted as the mode of the joint distribution, which has the convenient feature of being invariant to judgments on the balance of risks.     

Super‐replication in fully incomplete markets

In this work, we introduce the notion of fully incomplete markets. We prove that for these markets, the super‐replication price coincides with the model‐free super‐replication price. Namely, the knowledge of the model does not reduce the super‐replication price. We provide two families of fully incomplete models: stochastic volatility models and rough volatility models. Moreover, we give several computational examples. Our approach is purely probabilistic.     

Bundling agricultural technologies to adapt to climate change

Farmers can respond to climate change by modifying their technologies or management practices, or both. In this paper, we examine the choice of crop, irrigation, and cover as a bundled decision by a farmer. Using discrete choice analysis and a cross section of farms from Israel, we test whether these decisions are sensitive to climate and find that they are. In the case of Israel, the farmers completely substitute capital for climate. Simulating increase in temperature suggests that warming would lead Israeli farmers to shift mainly to orchards under cover and irrigation. But it is likely that bundling adaptations will provide flexibility and sustainability for future farmers in many locations under climate change conditions.     

Choosing the two finalists

This paper studies a decision maker who for each choice set selects a subset of (at most) two alternatives. We axiomatize three types of procedures: (i) The top two: the decision maker has in mind an ordering and chooses the two maximal alternatives. (ii) The two extremes: the decision maker has in mind an ordering and chooses the maximal and the minimal alternatives. (iii) The top and the top: the decision maker has in mind two orderings and he chooses the maximal element from each.     

How to Count Patents and Value Intellectual Property: The Uses of Patent Renewal and Application Data

Patent counts are very imperfect measures of innovative output. This paper discusses how additional data—the number of years a patent is renewed and the number of countries in which protection for the same invention is sought—can be used to improve on counts in studies that require a measure of the extent of innovation. Simple weighting schemes are proposed, which may remove half of the noise in patent counts as a measure of innovative output. We describe models of the patent application and renewal processes whose parameter estimates can be used to assess the value of the proprietary rights created by the patent laws. We illustrate their use with estimates of how the value of patent protection would vary under alternative legal rules and renewal fees and with estimates of the international flows of returns from the patent system. Recent progress in the development of databases has increased the potential for this type of analysis.     

Determinants of corporate debt maturity in South America: Do institutional quality and financial development matter?

We test whether a country's level of financial development or institutional quality (or both) has a first‐order effect on corporate debt maturity decisions on a sample of 359 non-financial firms from five South American countries over a 12‐year period. We find that there is a substantial dynamic component in the determination of a firm's debt maturity, and firms face moderate adjustment frictions toward their optimal maturities. More importantly, the level of financial development does not influence debt maturity, whereas the institutional quality of a country has a significant positive effect on the level of long-term debt in a firm's financial structure. Our results support the hypothesis that the quality of national institutions is an important determinant of corporate financing in general and of debt maturity in particular.     

Risk processes analyzed as fluid queues

This paper presents the Laplace transform of the time until ruin for a fairly general risk model. The model includes both the classical and most Sparre-Andersen risk models with phase-distributed claim amounts as special cases. It also allows for correlated arrival processes, and claim sizes that depend upon environmental factors such as periods of contagion. The paper exploits the relationship between the surplus process and fluid queues, where a number of recent developments have provided the basis for our analysis.     

Risk adjusted discount rates and the present value of risky costs

In capital budgeting the correct risk adjusted discount rate for future cash flows is independent of whether the flow is a cost or a revenue. Contrary to a widely disseminated view in some popular textbooks and elsewhere, costs are not especially safe (nor risky), and accordingly costs should not be discounted at especially low risk adjusted discount rates. This paper analyzes capital budgeting within a portfolio model in which revenues and costs appear as “long’ and “short’ portfolio positions, respectively, and proves that costs are neither more nor less intrinsically risky than revenues.     

The Impact of the Entry of Biosimilars: Evidence from Europe

Biologics represent a substantial and growing share of the U.S. drug market. Traditional “small molecule” generics quickly erode the price and share of the branded product upon entry, however only a few biosimilars have been approved in the US since 2015, thereby largely preserving biologics from competition. We analyze European markets, which have had biosimilar competition since 2006. Using our own survey, we analyze how market features and public policies predict biosimilar entry, price, and penetration, finding significant heterogeneity across countries and products. Effective buyer institutions are associated with increased biosimilar penetration. Our estimates can inform ongoing policy discussions.