Threshold cointegration and spatial price transmission when expectations matter

We examine the performance of the threshold cointegration approach, specifically Band‐TVECM, to price transmission analysis in an explicit context where trade decisions are made based on expectation of final prices, because trade takes time. We find that, following a standard inference strategy, a large portion of three‐regime cases are not identified as such. Results show that transfer costs are systematically underestimated, particularly in three‐regime models. The speed of price transmission is also biased in three‐regime models. Furthermore, inferences about occurrence of trade are poor, with estimated models suggesting far lower market integration than is true in the data‐generating process.     

Television viewing and hostile personality trait increase the risk of injuries

Individuals with high levels of hostility may be more susceptible to the influence of television on violence and risk taking behaviors. This study aimed to examine whether hostile personality trait modifies the association between TV viewing and injuries. It is a prospective study of 4,196 black and white adults aged 23 to 35 in 1990/1. Cross-lagged panel models were analyzed at three 5-year time periods to test whether TV viewing predicted injuries. Covariates were gender, race, and education. Individuals who watched more TV (0 hours, 1–3 hours, 4–6 hours, and ≥7 hours) were more likely to have a hospitalization for an injury in the following 5 years across each of the three follow-up periods [OR = 1.5 (95%CI = 1.2, 1.9), 1.5 (1.1, 1.9), and 1.9 (1.3, 2.6)]. The cross-lagged effects of TV viewing to injury were significant in the high hostility group [OR = 1.4 (95%CI = 1.1, 1.8), 1.3 (1.0, 1.8), and 2.0 (1.3, 2.9)] but not in the low hostility group [OR = 1.3 (95%CI = 0.6, 2.2), 1.1 (0.6, 2.1), and 1.4 (0.7, 2.8)]. Additionally, a statistically significant difference between the two models (P < 0.001) suggested that hostility moderated the relationship between TV watching and injury. These findings suggest that individuals who watch more TV and have a hostile personality trait may be at a greater risk for injury.     

The Effect of Venture Capital Financing on the Sensitivity to Cash Flow of Firm's Investments

This work studies the effect of venture capital (VC) financing on firms' investments in a longitudinal sample of 379 Italian unlisted new‐technology‐based firms (NTBFs) observed over the 10‐year period from 1994 to 2003. We distinguish the effects of VC financing according to the type of investor: independent VC (IVC) funds and corporate VC (CVC) investors. Previous studies argue that NTBFs are the firms most likely to be financially constrained. The technology‐intensive nature of their activity and their lack of a track record increase adverse selection and moral hazard problems. Moreover, most of their assets are firm‐specific or intangible and hence cannot be pledged as collateral. In accordance with this view, we show that the investment rate of NTBFs is strongly positively correlated with their current cash flows. We also find that after receiving VC financing, NTBFs increase their investment rate independently of the type of VC investor. However, the investments of CVC‐backed firms remain sensitive to shocks in cash flows, whereas IVC‐backed firms exhibit a low and statistically not significant investment–cash flow sensitivity that we interpret as a signal of the removal of financial constraints.     

Agroindustrialization of the global agrifood economy: bridging development economics and agribusiness research

This paper examines the agroindustrialization process from two supposedly disparate views: development economics and agribusiness research. The evolution of conceptual and methodological approaches emanating from these fields is explored and general observations are made concerning farm economic interdependence, institutional and organizational change, differing scopes of interest, the causes of agroindustrialization, orientation, and the choice of microanalytic tools, terminology, and unit of analysis. Despite an impressive list of hurdles, disincentives, and disconnects, complementarities between the two fields are identified. The paper concludes by exploring the potential of bridging development economics and agribusiness research to inform the future agroindustrialization research agenda.     

Formation and adaptation of reference prices in grain marketing: an experimental study

This study aimed to explore how producers’ reference prices are formed and adapt over time, and how they affect marketing decisions. Results indicate that producers focus on three major variables to form their reference prices: the current market price, the highest price to date, and their expectation about price behavior. Further, they update their reference prices during the marketing season mainly in response to changes in current market prices, their own expectations about price behavior, and the general price trend. Finally, our findings suggest that producers’ marketing decisions are based on the spread between current market price and reference price, the general market trend and price expectation.     

Homothetic preferences on star-shaped sets

This paper describes properties of homothetic preferences on a subset X of a vector space which is star-shaped with respect to 0 (e.g., a cone). We prove that a preference relation on X is homothetic, greedy and calibrated if and only if there exists a positively homogeneous function that represents it. This function is unique up to a strictly increasing and positively homogeneous transformation. As a corollary, we find that, if X is contained in a topological vector space, then œ is homothetic and continuous if and only if there exists a positively homogeneous and continuous function that represents it.     

Crop Insurance Valuation under Alternative Yield Distributions

Considerable disagreement exists about the most appropriate characterization of farm-level yield distributions. Yet, the economic importance of alternative yield distribution specifications on crop insurance valuation has not been well documented. The results of this study demonstrate that large differences in expected payouts from popular crop insurance products can arise solely from the parameterization chosen to represent yield distributions. The results suggest that the frequently unexamined yield distribution specification may lead to economically significant errors in crop insurance policy rating and assessment of expected payouts from policies.     

Contemporaneous threshold autoregressive models: Estimation,testing and forecasting

This paper proposes a contemporaneous smooth transition threshold autoregressive model (C-STAR) as a modification of the smooth transition threshold autoregressive model surveyed in Teräsvirta [1998. Modelling economic relationships with smooth transition regressions. In: Ullah, A., Giles, D.E.A. (Eds.), Handbook of Applied Economic Statistics. Marcel Dekker, New York, pp. 507–552.], in which the regime weights depend on the ex ante probability that a latent regime-specific variable will exceed a threshold value. We argue that the contemporaneous model is well suited to rational expectations applications (and pricing exercises), in that it does not require the initial regimes to be predetermined. We investigate the properties of the model and evaluate its finite-sample maximum likelihood performance. We also propose a method to determine the number of regimes based on a modified Hansen [1992. The likelihood ratio test under nonstandard conditions: testing the Markov switching model of GNP. Journal of Applied Econometrics 7, S61–S82.] procedure. Furthermore, we construct multiple-step ahead forecasts and evaluate the forecasting performance of the model. Finally, an empirical application of the short term interest rate yield is presented and discussed.     

Expectations, learning and macroeconomic persistence

Monetary DGSE models under rational expectations typically require large degrees of features as habit formation in consumption and inflation indexation to match the inertia of macroeconomic variables.This paper presents an estimated model that departs from rational expectations and nests learning by economic agents, habits, and indexation. Bayesian methods facilitate the joint estimation of the learning gain coefficient together with the ‘deep’ parameters of the economy.The empirical results show that when learning replaces rational expectations, the estimated degrees of habits and indexation drop closer to zero, suggesting that persistence arises in the model economy mainly from expectations and learning.     

'Young In,Old Out' Revisited: New Patterns of Employment Replacement in the Italian Economy

This paper, based largely on data from the Italian social security (INPS) records, shows that recent employment trends in Italy have been marked by large job and worker turnover and a new and strong process of renewal and substitution of labour in industry. Entries of young workers have shown a remarkable increase, mainly through the application of work and training contracts ('contratti di formazione e lavoro') that provide firms with a means to cut labour costs. Meanwhile many workers in their 40s with considerable seniority, but still perfectly fit to go on working, found themselves squeezed out. The exit of this generation of mature workers was eased through subsidised early retirement, golden handshakes and a wide application of the 'cassa integrazione guadagni' (wage supplementation fund). This pattern of labour force replacement in industrial production, described as 'young in, old out', is at odds with the frequent ranking of Italy among the industrial countries hampered by rigid labour markets and questions theories of unemployment based on 'insider-outsider' hypotheses.