Purchasing power parity in Brazil: a test for fractional cointegration

The purpose of this paper is to test the validity of the purchasing power parity (PPP) doctrine in Brazil. Historical data for the period 1855–1996 are considered. The period 1855–1990 is also analysed in order to compare the results with those obtained by Zini and Cati (1993) using the conventional cointegration analysis. This article uses fractional cointegration analysis, a flexible methodology which allows for more subtle forms of mean reversion. The tests performed are those of Geweke and Porter-Hudak (1983), and of Hurvich and Ray (1995). The critical values for both tests are generated by simulation because they are non-standard. The empirical results do not support the absolute PPP hypothesis but the relative PPP holds in the long run.     

Patterns and determinants of international fragmentation of production: Evidence from outward processing trade between the EU and Central Eastern European countries

Patterns and Determinants of International Fragmentation of Production: Evidence from Outward Processing Trade between the EU and Central Eastern European Countries. — In this paper we investigate a specific form of international fragmentation of production, that is, the form giving rise to international trade for reasons of processing. Data on textile and apparel trade between EU countries and Central European countries show that the magnitude of trade for reasons of processing greatly overshadows that of final trade. The industry appears to be affected by a process of international fragmentation whose understanding requires a new definition of the concept of comparative advantage. Our analysis suggests that this fragmentation is activated by labor cost differentials as well as by reasons of geographic and cultural proximity.     

The Influence of Firm's Size and International Experience on the Ownership Structure of Italian FDI in Manufacturing

The literature on foreign direct investment (FDI) has analysed the entry mode choice by multinational enterprises (MNEs) from several theoretical viewpoints. Nevertheless, previous studies have mainly focused on the behaviour of large and established MNEs while little attention has been given to small- and medium-sized firms.The paper aims at providing further empirical evidence on the role of firm size and international experience in influencing the ownership structure of FDI. The main hypothesis is that smaller firms, characterised by financial and managerial constraints, as well as firms lacking experience in managing foreign operations, suffer from a condition of adverse asymmetry in information costs, compared to their competitors. Therefore, they are forced to act prudently, minimising risk and thus preferring a less control arrangement of foreign subsidiaries.A binomial logistic model is developed with reference to manufacturing foreign direct investments undertaken by Italian firms in the period 1986–1993.     

Non‐Fundamentalness in Structural Econometric Models: A Review

Current economic theory typically assumes that all the macroeconomic variables belonging to a given economy are driven by a small number of structural shocks. As recently argued, apart from negligible cases, the structural shocks can be recovered if the information set contains current and past values of a large, potentially infinite, set of macroeconomic variables. However, the usual practice of estimating small size causal Vector AutoRegressions can be extremely misleading as in many cases such models could fully recover the structural shocks only if future values of the few variables considered were observable. In other words, the structural shocks may be non‐fundamental with respect to the small dimensional vector used in current macroeconomic practice. By reviewing a recent strand of econometric literature, we show that, as a solution, econometricians should enlarge the space of observations, and thus consider models able to handle very large panels of related time series. Among several alternatives, we review dynamic factor models together with their economic interpretation, and we show how non‐fundamentalness is non‐generic in this framework. Finally, using a factor model, we provide new empirical evidence on the effect of technology shocks on labour productivity and hours worked.     

Interlocking directorates in Italy: persistent links in network dynamics

In this work we study the time evolution of interlocking directorates in Italy from 1998 to 2011 by means of dynamical networks. Our purpose is to assess if in Italy there is a connected and stable structure, due to the presence of directors with multiple mandates, like it happens in the German case. We find a very cohesive network structure, due to the presence of a few directors with multiple assignments and, unlike the German case, this structure is stable, but not connected. Moreover we propose an alternative approach to investigate the dynamics, based on temporal networks, in order to quantify the variation of links in a certain time period. We construct a unique cumulative network, where nodes are companies and the existence of an edge is related with the persistence in time of an interlock between two companies. This persistence is due on the one hand to the ownership of a few family firms, and on the other hand to cross-shareholdings between companies. To complete the analysis we also investigate whether the link stability results from the appointments of the same director or from the stepping in/out of different directors.     

Innovation management in service firms: a research agenda

This article suggests an agenda for further research on innovation management in service firms. It investigates differences and similarities between issues identified by previous academic research and issues brought up by practitioners within the area of innovation management in service firms. The results show that there are some major differences; for instance, researchers stress a need for formalized processes for development work, while practitioners focus on facilitating innovation in everyday operations. The main conclusion is that in order to bridge the gap between research and practice we would encourage further research on innovation in service firms to (1) conduct micro studies of innovation work, (2) view innovation in the context of everyday operations and (3) focus on co-workers’ innovative potential.     

The impact of outward FDI on the home country's labour demand and skill composition

The present paper adds to the literature investigating the effects of outward FDI on the home country employment and skill composition. Considering the “industrial region” as the unit of the analysis, we capture both direct and indirect effects of foreign production on the parent company and its environment. The empirical evidence refers to the internationalisation of production by Italian firms throughout the period 1996–2002, and it shows that foreign activities have a negative impact upon the demand for low skilled workers in the parent company's “industrial region”, but also on the demand for high skilled workers when FDI are addressed to high income countries.