Reconciling Gray and Hotelling

A bstract .   Early exhaustible resource economics provides an important foundation for recent suggestions that firm-level economic modeling plays a larger role in the analysis of resource scarcity. The lack of empirical support for Hotelling's r -percent rule, introduced in 1931, and recent suggestions that industry behavior may not be reducible to firm behaviors are the primary motivating factors for examining the relative value of Gray's contribution to the field of exhaustible resource economics relative to Hotelling's contribution. Specifically, Gray's papers that appeared in the 1910s provide insight into the heterogeneity of deposits and their spatial dimensions, and offer the possibility that firms will be subject to fixed costs carried over between periods. In this paper, the arguments presented by Gray are formalized in a dynamic model, which allows the differences between Gray's and Hotelling's assumptions to be more fully explored. The results of the paper illustrate that by considering spatially identifiable heterogeneous deposits, fixed costs, and entry costs, in general Hotelling's r -percent rule is not a sufficient condition for firm-level decision making and that firms' extraction behavior cannot be linearly aggregated to describe industry behavior.     

A Bayesian Semiparametric Competing Risk Model with Unobserved Heterogeneity

This paper generalizes existing econometric models for censored competing risks by introducing a new flexible specification based on a piecewise linear baseline hazard, time‐varying regressors, and unobserved individual heterogeneity distributed as an infinite mixture of generalized inverse Gaussian (GIG) densities, nesting the gamma kernel as a special case. A common correlated latent time effect induces dependence among risks. Our model is based on underlying latent exit decisions in continuous time while only a time interval containing the exit time is observed, as is common in economic data. We do not make the simplifying assumption of discretizing exit decisions—our competing risk model setup allows for latent exit times of different risk types to be realized within the same time period. In this setting, we derive a tractable likelihood based on scaled GIG Laplace transforms and their higher‐order derivatives. We apply our approach to analyzing the determinants of unemployment duration with exits to jobs in the same industry or a different industry among unemployment insurance recipients on nationally representative individual‐level survey data from the US Department of Labor. Our approach allows us to conduct a counterfactual policy experiment by changing the replacement rate: we find that the impact of its change on the probability of exit from unemployment is inelastic. Copyright © 2014 John Wiley & Sons, Ltd.     

The Environmental Kuznets Curve,Cointegration and Nonlinearity

This paper clarifies some conceptual shortcomings of the empirical environmental Kuznets curve (EKC) literature that arise because of the hitherto inadequate application of unit root and cointegration techniques. The literature to date has ignored the fact, and a fortiori the consequences, that powers of integrated processes are themselves not integrated processes. The paper explains why standard methods should not be applied and discusses some recently proposed viable estimation and testing approaches for cointegrating polynomial regressions. The application to CO₂ and SO₂ emissions data shows that using appropriate methods leads to strongly reduced evidence for a cointegrating EKC compared to typical but conceptually not sound findings. Copyright © 2014 John Wiley & Sons, Ltd.     

Forecasting the volatility of asset returns: The informational gains from option prices

A new class of forecasting models is proposed that extends the realized GARCH class of models through the inclusion of option prices to forecast the variance of asset returns. The VIX is used to approximate option prices, resulting in a set of cross-equation restrictions on the model’s parameters. The full model is characterized by a nonlinear system of three equations containing asset returns, the realized variance, and the VIX, with estimation of the parameters based on maximum likelihood methods. The forecasting properties of the new class of forecasting models, as well as a number of special cases, are investigated and applied to forecasting the daily S&P500 index realized variance using intra-day and daily data from September 2001 to November 2017. The forecasting results provide strong support for including the realized variance and the VIX to improve variance forecasts, with linear conditional variance models performing well for short-term one-day-ahead forecasts, whereas log-linear conditional variance models tend to perform better for intermediate five-day-ahead forecasts.     

Region brand legitimacy: towards a participatory approach involving residents of a place

Places have started to adapt commercial branding tactics. But how do stakeholders perceive such practices? Drawing on survey data from French residents, we analyse the advertising legitimacy of a place brand and its influence on the effectiveness of marketing communications in the context of region branding. The results confirm that advertising legitimacy mediates the relationship between exposure to an advertisement and its efficiency. The place brand is more legitimate when advertisements target firms, residents or tourists than when they promote local products through co-branding. We highlight a new expression of democratic legitimacy: a process adapted to hybrid (public–private) organizations.     

Sustainable Entrepreneurship: A Convergent Process Model

Sustainable entrepreneurship pursues a triple bottom line approach of economic, social and ecological goals. The main aim of this paper is to add to our understanding of the process of sustainable entrepreneurship. Since the field of sustainable entrepreneurship is in a nascent stage, we conduct a qualitative study. We employ a multiple case study design to build theory. Based on four case studies we develop a model, which describes the process of sustainable entrepreneurship, including six phases: 1) recognizing a social or ecological problem; 2) recognizing a social or ecological opportunity; 3) developing a double bottom line solution; 4) developing a triple bottom line solution; 5) funding and forming of a sustainable enterprise; 6) creating or entering a sustainable market. By developing a convergent process model with two pathways, we make theoretical contributions to the emerging fields of sustainable entrepreneurship and social entrepreneurship. A key finding is that the triple bottom line of ecological, social and economic goals is integrated sequentially, not simultaneously. Copyright © 2015 John Wiley & Sons, Ltd and ERP Environment.