Modelling Policy Issues in a World of Imperfect Competition

General equilibrium theory constitutes a sound basis for the discussion of policy issues if firms do not have market power. However, if firms influence prices strategically, the concept of profits loses its meaning due to the price normalization problem. Hence, it is unclear how to model the behavior of oligopolistic firms. In order to provide a conceptual foundation for the analysis of policy issues in the case of imperfect competition, we discuss ways to formulate the objective of a strategic firm. In particular, we investigate the concept of real wealth maximization that is based on profits as well as on shareholders' aggregate demand.     

Disentangling the impact of infrastructure on trade using a new index of infrastructure

Making use of considerably improved measures of infrastructure, the study assesses the impact of infrastructure on bilateral trade for a panel of 150 developed and emerging economies during the period 1992–2011. The authors make use of a gravity approach to disentangle the impact of infrastructure on trade and trade costs. Improving infrastructure endowments and quality decreases trade costs and increases international trade flows. Countries with improved infrastructure reduce not only bilateral trade costs but also multilateral trade costs. The decomposition of effects indicates that better infrastructure encourages higher export flows relative to domestic trade flows. Main results of the study prove to be robust, also when considering distinct trade categories (consumption goods, intermediates, and capital goods) for a smaller sample.     

A New Global Index of Infrastructure: Construction,Rankings and Applications

We construct comprehensive and comparable indices on the most relevant components of economic infrastructure. An unobserved components model is employed to cover the largest possible number of developing and developed countries over the period 1990–2010. We map major findings from the new indices of infrastructure and provide country rankings, which we also compare with subjective assessments of infrastructure in the World Economic Forum's Global Competitiveness Report. Finally, we exemplify possible applications related to trade and foreign aid. By overcoming several data limitations, our new global index can help assess the links between infrastructure and economic development more systematically.     

An‘s Bett gefesselt

Wann sind freiheitsentziehende Ma?nahmen erlaubt? – Die Gefahr, dass Pflegebedürftige stürzen und sich verletzen oder Demenzkranke orientierungslos die Wohnung verlassen, ist im Pflegealltag allgegenw?rtig. Solche Ereignisse gilt es zu verhindern – aber: Bauchgurte oder Bettgitter dürfen nicht ohne weiteres eingesetzt werden.     

Passion Isn't Always a Good Thing: Examining Entrepreneurs' Network Centrality and Financial Performance with a Dualistic Model of Passion

We propose a conceptual model that links entrepreneurs' passion, network centrality, and financial performance, and test this model with small business managers in formal business networking groups. Drawing on the dualistic model of passion, we explore the relationships that harmonious and obsessive passion have with financial performance, mediated by network centrality. Results indicate that harmoniously passionate entrepreneurs had higher out‐degree centrality in their networking group (i.e., they were more inclined to seek out members to discuss work issues), which increased the income they received from peer referrals and, ultimately, business income. Obsessively passionate entrepreneurs had lower in‐degree centrality (i.e., they were less likely to be approached by peers), and in turn received less income from referrals and less business income. These findings highlight that entrepreneurial passion does not always result in positive financial outcomes – the type of passion makes a difference. Implications for research and practice are discussed.     

Effects of Unilateral Climate Policy on Terms of Trade,Capital Accumulation,and Welfare in a World Economy

We present a two-good, two-country overlapping generations model where emissions arise from production and each country has a domestic emission permit system. When one country unilaterally reduces her cap on emissions, her output available for domestic and foreign consumption diminishes more than in the other country. With unchanged consumption expenditure shares for both goods the domestic terms of trade improve, while capital stocks decline in the reducing and less strongly in the non-reducing country. Improving terms of trade in the reducing country and falling capital stocks lead in total to welfare losses in both countries. However, if the country which unilaterally reduces her emission permits is a net creditor to the world economy and the Golden Rule applies, her own welfare loss remains below that of the non-reducing country.     

Empirical Evidence on the Success of R&;D Cooperation—Happy Together?

In this paper we analyse the effect of past R&D cooperation on current firms’ innovation performance. Success measures are: sales of innovative products, distinguishing between products new to the firm and new to the market, and cost reductions due to innovative processes. Particular attention is paid to the impact of different cooperation partners. The analysis rests on firm-level data of the annual German innovation survey. We find that R&D cooperation with competitors leads to greater cost reductions that are attributable to innovative processes. R&D cooperation with research institutes has a positive influence on a firm’s economic success with market novelties.