Internationalisation,Innovation and Productivity: How Do Firms Differ in Italy?

This paper addresses the issue of intra‐industry heterogeneity and internationalisation. We show that, after controlling for sector, location, firm age and size, Italian manufacturing companies exhibit different economic and innovative performance according to their involvement in foreign activities. In particular, exporters show intermediate innovative performance between non‐internationalised firms and those carrying out foreign production. Multinationals with a lower commitment to foreign markets, i.e. with non‐manufacturing activities abroad only, exhibit a higher productivity than exporters but they do not appear to innovate more than the latter. Heterogeneity in productivity is robust to controlling for innovation inputs and outputs, suggesting that the difference in economic performance cannot be entirely attributed to different innovative activities, and that the involvement in international operations can be a distinct channel of knowledge accumulation.     

Is Government Expenditure Volatility Harmful for Growth? A Cross‐Country Analysis*

The aim of the paper is to analyse the relationship between government expenditure volatility and long‐run growth. Using cross‐country panel data from 1970 to 2000, the paper finds that countries with higher government expenditure business‐cycle volatility have lower growth, even after controlling for other country‐specific growth correlates such as investment, government expenditure, human capital, population growth and output volatility. This relation is robust to different measures of business cycles. Moreover, considering different subsamples, the paper finds that while government volatility significantly affects long‐run growth for developing countries, it has a small effect for OECD countries.     

Market Structures with Multi-product Firms: Welfare Analysis and Policy Implications

In the real world firms operate in more than one market and consequently can exploit scope economies and/or demand complementarities. Introducing multi-product firms in the picture makes the standard assumption that more competition is always beneficial for social welfare less clear-cut. In this paper we show that a concentrated structure can be socially preferable in the presence of scope economies, whereas a fragmented structure has to be preferred when products are close substitutes. We also identify either analytically or numerically the socially optimal market structure when aggregate output (and then consumer surplus) or total welfare are used as ranking criteria. The analysis is useful for discussing which market structure should be favored by policy makers aimed at introducing competition in sectors which were previously monopolized by state-owned firms. To that respect, our findings point out that not only the level (number of firms) but also the form (type of firms) of competition matters.     

Age and firm growth: evidence from three European countries

This article provides new insights into the dependence of firm growth on age along the entire distribution of growth rates, and conditional on survival. Using data from the European firms in a global economy survey, and adopting a quantile regression approach, we uncover evidence for a sample of French, Italian and Spanish manufacturing firms with more than ten employees in the period from 2001 to 2008. We find that: (1) young firms grow faster than old firms, especially in the highest growth quantiles; (2) young firms face the same probability of declining as their older counterparts; (3) results are robust to the inclusion of other firms’ characteristics such as labor productivity, capital intensity and the financial structure; (4) high growth is associated with younger chief executive officers and other attributes that capture the attitude of the firm toward growth and change. The effect of age on firm growth is rather similar across countries.     

Services trade and credit frictions: Evidence with matched bank–firm data

The effects of credit supply shocks on the exports of services are not clear a priori. On the one hand, services need lower initial investment in physical capital than manufacturing. On the other hand, competitiveness for exporting services requires investments in intangible capital and in product customisation that may be subject to credit frictions. Using Italian matched bank–firm data and focusing on the sovereign debt crisis, we find an elasticity of services exports to credit supply, between 0.3 and 0.4. The effects of credit shocks are especially relevant for firms exporting complex services to countries with weaker institutions and for services that are not the main product of the firms. Overall, our results suggest that credit supply plays a relevant role for exporting services during crises.     

Understanding the determinants of investment reactions to decoupling of the Common Agricultural Policy

The objective of this paper is to identify the determinants of the reactions of farm households to the decoupling of the Common Agricultural Policy (CAP) focusing, in particular, on changes in on-farm investment behaviour. The paper analyses a sample of 248 farm-households in 8 EU countries, using a non-parametric approach based on classification tree algorithms. The factors emerging as determinants of an increase in on-farm investment as a reaction to decoupling are: specialisation, existence of a successor, the farmer's age, labour management, SFP per hectare, location and expectations. When used, country variables, tend to substitute some of the factors listed above and become the main predictors, followed by labour endowment, specialisation and expectations. While the study confirms the relevance of the main determinants available from the literature, it also emphasises the articulation (non-linearities) of the effects of farm head age, labour management and SFP per hectare on the reactions to decoupling. This hints at the need for further research on the way such factors combine in determining farm-household reactions to a changing market and policy context, and support the usefulness of non-parametric statistics tools for such types of analysis.     

Does One Law Fit All? Cross-Country Evidence on Okun’s Law

Open Economies Review - This paper compares the performance of Okun’s Law in advanced and developing economies. On average, the Okun coefficient—which measures the short-run...     

Sub-sovereign bond buyback: a way forward for debt-laden regions in austerity

ABSTRACT

Previous academic literature has criticised bond buyback as a ‘”boondoggle” benefiting a country’s creditors’—meaning that buybacks are a wasteful use of public money. This paper challenges the narrow financial–economic perspective behind that statement by adopting a broader socio-political framework that includes the potential benefits of buyback for citizens, not just financial market costs. In particular, buyback does not necessarily require a budget surplus via higher local taxes and/or increased austerity measures.     

Uncertain Productivity Growth and the Choice between FDI and Export

While determinants of FDI patterns have received widespread attention, the timing of their surge remains largely unexplained. According to the proximity–concentration trade‐off argument, a surge in FDI in times of decaying international transportation costs seemingly represents a paradox. Besides transportation costs, other factors have contextually changed: in particular, the uncertainty that firms bear has increased. Enriching the classical choice problem of a multinational firm with insights from the literature on investment under uncertainty, we illustrate how different types of uncertainty determine the timing and optimal entry mode (i.e. FDI or export) of a multinational enterprise into a new market.     

Cost-effectiveness of metformin plus vildagliptin compared with metformin plus sulphonylurea for the treatment of patients with type 2 diabetes mellitus: a Portuguese healthcare system perspective

Objective:

To evaluate the cost-effectiveness of vildagliptin plus metformin vs generic sulphonylurea plus metformin in patients with type 2 diabetes mellitus, not controlled with metformin, from a Portuguese healthcare system perspective.

Methods:

A cost-effectiveness model was constructed using risk equations from the UK Prospective Diabetes Study Outcomes Model with a 10,000-patient cohort and a lifetime horizon. The model predicted microvascular and macrovascular complications and mortality in yearly cycles. Patients entered the model as metformin monotherapy failures and switched to alternative treatments (metformin plus basal-bolus insulin and subsequently metformin plus intensive insulin) when glycated hemoglobin A1c >7.5% was reached. Baseline patient characteristics and clinical variables were derived from a Portuguese epidemiological study. Cost estimates were based on direct medical costs only. One-way and probabilistic sensitivity analyses were conducted to test the robustness of the model.

Results:

There were fewer non-fatal diabetes-related adverse events (AEs) in patients treated with metformin plus vildagliptin compared with patients treated with metformin plus sulphonylurea (6752 vs 6815). Addition of vildagliptin compared with sulphonylurea led to increased drug acquisition costs but reduced costs of AEs, managing morbidities, and monitoring patients. Treatment with metformin plus vildagliptin yielded a mean per-patient gain of 0.1279 quality-adjusted life years (QALYs) and a mean per-patient increase in total cost of €1161, giving an incremental cost-effectiveness ratio (ICER) of €9072 per QALY. Univariate analyses showed that ICER values were robust and ranged from €4195 to €16,052 per QALY when different parameters were varied.

Limitations:

The model excluded several diabetes-related morbidities, such as peripheral neuropathy and ulceration, and did not model second events. Patients were presumed to enter the model with no diabetes-related complications.

Conclusion:

Treatment with metformin plus vildagliptin compared with metformin plus sulphonylurea is expected to result in a lower incidence of diabetes-related AEs and to be a cost-effective treatment strategy.