Does Gibrat's Law hold among young,small firms?

According to Gibrat's Law of Proportionate Effect, the growth rate of a given firm is independent of its size at the beginning of the examined period. Aimed at extending this line of investigation, the present paper uses quantile regression techniques to test whether Gibrat's Law holds for new entrants in a given industry: that is for new small firms in the early stage of their life cycle. The main finding is that for some selected industries in Italian manufacturing Gibrat's Law fails to hold in the years immediately following start-up, when smaller firms have to rush in order to achieve a size large enough to enhance their likelihood of survival. Conversely, in subsequent years the patterns of growth of new smaller firms do not differ significantly from those of larger entrants, and the Law therefore cannot be rejected.JEL Classification: L11, L60Previous versions of this paper were presented at the 27th Annual EARIE Conference (Lausanne, 7-10 September 2000) and at seminars held between 2000 and 2003 at the Economics Department of Harvard University, the Catholic University of Milan, the University of Ferrara, the University of Bologna, the Bank of Italy, and Athens University of Economics & Business. We would like to thank Carlo Bianchi, Giuseppe Colangelo, Giovanni Dosi, Steven Klepper (Editor), Stephen Martin, Ariel Pakes, Aman Ullah and, in particular, Helen Louri and two anonymous referees for their valuable comments on earlier drafts. Financial support from MIUR (Year 2000; protocol #MM13038538_001; project leader: E. Santarelli) is gratefully acknowledged.Correspondence to: E. Santarelly     

Economic consequences of intifada

In 2003 the World Bank (WB) and the International Monetary Fund (IMF) published estimates of macro-economic indicators for 2002 of the economy of Palestine. The WB used a micro-founded recursive dynamic computable general equilibrium (CGE) model, calibrated on the 1998 Social Accounting Matrix (SAM) of Palestine, to which shocks were applied, whereas the IMF based its estimates on a macro-founded income-expenditure model relying on more recent data. It turned out that there were substantial differences: the estimate by the WB of the real gross national income (at 1998 prices) was 25% less than the corresponding figure calculated by the IMF. This huge difference is not only relevant for a full understanding of the economic consequences of the intifada, but also for the size of the international community intervention. In this paper we propose our own evaluation with the help of a static CGE model, based on the 1998 SAM and the so-called intifada shock derived from data of the WB that we constructed for the analysis of some forms of emergency assistance in a previous article. It turns out that our estimates, based on an entirely different methodology, are remarkably close to those of the IMF.     

Planning in Turbulent Times: Exploring Planners' Agency in Jerusalem

This article explores the role of planning in the deeply divided and politically polarized context of Jerusalem. The overall argument developed throughout the article is that the relation between planning and politics is a non‐hierarchical set of interactions, negotiated within specific historical, geographical, legal and cultural contexts—in other words, orders don't come down from the politicians to be slavishly followed by planners. In this respect our findings, based on in‐depth interviews with Israeli planners, suggest that the case of Jerusalem represents a particularly dramatic illustration of the fact that the function of planning expertise can only be understood in relation to the surrounding socio‐political environment. Furthermore, contrary to conventional wisdom, planners in Jerusalem are not destined to either complicity or irrelevance in the face of political imperatives; planners' agency, however, does not simply reflect their mastery of specific professional knowledge and tools, but also their ability to act strategically in relation to the context in which they operate.     

Optimal strategy for a fund manager with option compensation

I consider the problem of portfolio optimization for a manager whose compensation is given by the sum of a constant and a variable term. The constant term is a fixed percentage of the managed funds that is payed to the manager independently of his performance. The variable term is a premium that is proportional to the profit earned by the manager over a benchmark at a certain evaluation date. I find the optimal strategy and the optimal portfolio value in the Black–Scholes setting when the benchmark is a linear combination of the risky asset and the money market account.     

THE EFFECT OF PARENTAL EMPLOYMENT ON CHILD SCHOOLING

This paper presents a model that provides conditions under which a causal interpretation can be given to the association between childhood parental employment and subsequent educational attainments of children. The key parameter comes from theconditional demand function for children's future earning capacity. Its identification rests on having data on siblings and assumptions about the timing of parents' knowledge of their children's endowments. In addition to sibling differences, the useof a fixed‐effects instrumental‐variables estimator identifies the parameter under weaker conditions. Empirical analysis informed by the model reveals a negative and significant effect on the child's educational attainment of the months of the mother's full‐time employment when the child was aged 0–5. The effect of the mother's part‐time employment is smaller and less well determined, but again negative. These results suggest that the substitution effect of the mother's employment dominates the income effects. Stronger adverse effects are found for children of less‐educated mothers. Copyright © 2012 John Wiley & Sons, Ltd.     

The Minimal Entropy Martingale Measure and the Valuation Problem in Incomplete Markets

Let χ be a family of stochastic processes on a given filtered probability space (Ω, F, (F_t)_t∈T, P) with T?R₊. Under the assumption that the set M_e of equivalent martingale measures for χ is not empty, we give sufficient conditions for the existence of a unique equivalent martingale measure that minimizes the relative entropy, with respect to P, in the class of martingale measures. We then provide the characterization of the density of the minimal entropy martingale measure, which suggests the equivalence between the maximization of expected exponential utility and the minimization of the relative entropy.     

Incomplete Information in Monetary Policy Games: Rules Rather Than a Conservative Central Banker

Time inconsistency in monetary policy can be addressed appointing a conservative central banker. But incomplete information about the central banker's preferences impairs the performance of delegation schemes. Firstly, the ensuing ex-ante variability of monetary response lowers welfare. Secondly, partial independence schemes may prove inadequate because reputation — not only legal arrangements — defines the actual degree of independence. The incumbent may exploit his reputation to impose too conservative policies whereas, if he lacks reputation, partial independence forces him to accommodate. As a result, simple rules may be preferred.
…I do not believe that we should always get the best man for the post; often I fear that we should not even get a tolerable man.
(W. Bagehot, The Government of the Bank of England, in 'Lombard Street')     

Publikumsvorstellungen im Rezeptionsprozess

This article addresses the question of how individual media users, who are part of a mass media audience, perceive their co-audience. We approached this question from an empirical social scientific communication research perspective by introducing a theoretical model of (situational) audience conceptions that might arise in the context of an anonymous, imperceptible mass audience. According to the model, both subjective media theories held by people and cues from the media content influence the users’ impression formation about their anonymous co-audience during media consumption. Audience conceptions would include assumptions on size, simultaneity, social structure and the experience of other consumers. We assume that, as soon as conceptions of the co-audience are formulated, they could influence cognitive and affective aspects of a person’s reception experience. The model states that the more the conception of the audience is salient in a viewer’s mind the stronger its influence on subsequent experiences will be. Possible effects on reception phenomena including social comparison processes and feelings of embarrassment are discussed exemplarily to illustrate fields the model could be fruitfully applied to. Finally, the concept of audience conception is illustrated in a model and brought into context with existing research.