Identification, weak instruments, and statistical inference in econometrics

Abstract.  We discuss statistical inference problems associated with identification and testability in econometrics. We consider inference in non-parametric models and weakly identified structural models (weak instruments). We point out that many ill‐defined statistical problems, such as non‐testable hypotheses, occur in these areas and are typically associated with asymptotic approximations. In non‐parametric models, such problems include testing moments and inference under heteroscedasticity or serial dependence of unknown form. For weakly identified structural models, difficulties are typically associated with improper pivots, and we review recent developments aimed at proposing more reliable procedures, including alternative proposed statistics, bounds, projection, split‐sampling, conditioning, Monte Carlo tests. JEL classification: C1, C12, C14, C15, C3, C5     

An evaluation of the effects of Colour Me Beautiful on women's shopping habits

The research presents a case study about the way that women make decisions about colour and dress prior to, and after a visit to an image consultancy, Colour Me Beautiful. It specifically asks to what extent women feel they have benefited from such a consultation in relation to the fashion system and the experience of shopping. The first section argues that the interviewees, prior to a consultation, had adopted a narrow and restricted mode of decision‐making in relation to clothes and colour due to a variety of social and personal reasons. The second section explores the processes by which the majority of interviewees began to gain confidence and a renewed interest in selecting clothes after a colour consultation. Such a ‘technology of the self’ enabled the respondents to ‘play’ with the fashion system, in a way that they had not felt able to do before. In particular the mechanisms of expertise and meaning were central to this process of change.     

Human Capital and Systems of Innovation in African Development

Abstract: In this paper we propose that historically generated institutions and persistent pattern of human capital formation condition the emergent systems of innovation in Africa. These factors determine the development path of the region. We advance the notion of dynamic and non‐dynamic systems of innovation, the latter describing the African condition. We combine the strands of literature on institutions and their persistence in shaping development with evolutionary theory and systems of innovation. Evidence is presented on the colonial origins of skewed schooling enrolment, at variance with the industrialization objective of modern economies. Employing simple statistical tests, the persistence of initial human capital (school enrolment) reflects in the significant correlation among the three levels of schooling enrolments, and correlation of enrolment in 1970 with per capita income in 2000, a periodicity of some three decades. This outcome is consistent with the literature on countries at early stages of development. Path‐dependency is partially proved even though we did not attempt to investigate all variables making up the system of innovation. This is a first tentative attempt to explore long‐run development in Africa within the systems of innovation framework.     

Asymmetric rivalry between strategic groups: response,speed of response and ex ante vs. ex post competitive interaction in the spanish bank deposit market

The objective of this study is to examine asymmetric rivalry between strategic groups in a given industry. Two research hypotheses argue for the existence of asymmetric rivalry in the sense that strategic groups of small companies have a greater degree of response but a slower speed of response to the actions of strategic groups of large companies, than vice versa. To test this, we use an ex post approach that examines the news releases published on the strategic actions and reactions of firms. A third hypothesis compares ex ante competitive expectations with ex post asymmetric rivalry between strategic groups. To test this, we compare ex post news on actions/reactions with an ex ante approach that estimates conjectural variations. The empirical application carried out on bank deposits in the Spanish market defines strategic groups in terms of size due to the historical and institutional conditions of the industry (deregulatory change). The results obtained show that rivalry patterns between strategic groups in terms of company size can be predicted as asymmetric in the sense that smaller bank strategic groups have a greater degree of response (Stackelberg ‘leader–follower’ competitive interaction), and a slower speed of response to the actions of larger bank strategic groups than is found the other way around. Moreover, ex ante expectations of aggressiveness on the part of larger strategic groups characterize greater ex post reactions from the smaller‐size strategic groups. Therefore, the size distribution of strategic groups is valuable to research on complex industries with deregulation changes. Copyright © 2005 John Wiley & Sons, Ltd.     

The WTO and entry modes in China

For years, multinational enterprises (MNEs) vying for the Chinese market used joint ventures (JVs) as an entry mode. However, there has been a growing frustration with the JV mode. It is reported that MNEs are increasingly opting for wholly owned subsidiaries for better control. This article examines the recent development of the business environment in China. It concludes that there are now real entry options for MNEs, including exporting, JVs, wholly owned subsidiaries, and acquisitions. China's accession into the World Trade Organization (WTO) will accelerate the change process and make non‐JV options even more viable. A few decision rules for choosing an entry mode in China are discussed. © 2004 Wiley Periodicals, Inc.     

Combating deceptive advertisements and labelling on food products – an exploratory study on the perceptions of teachers

People are becoming more health conscious nowadays, but most of them are not able to adopt a lifestyle with adequate physical exercise and a healthier eating pattern. Many attempt to compensate by taking ‘health foods’. Despite the recent economic recession, the functional food market is expanding rapidly in Asian countries. Recent statistics indicate a huge increase in weight loss and functional food product advertising expenditure in Hong Kong and other Asian countries. In a large scale survey conducted by the Hong Kong Consumer Council on advertisements, it was found that 85% of the medicines, health food and therapies sampled contain questionable claims and misleading messages, which was the second most problematic category of the survey. In addition, young people do not understand much about modern food processing, in particular with regard to low energy and functional foods, and they know very little about modern food marketing strategies. The situation is potentially detrimental to consumer welfare, especially to the younger generation. This study was conducted to reflect critically on implications of the issue on the health and well‐being of young people in Hong Kong. Attempts are made to explore directions for designing relevant and effective education programmes to empower young people's abilities in understanding food advertising strategies and making informed decisions on food choice. This paper begins with a critical review of the current situation with regard to Hong Kong. Then, the results of an interview survey and a questionnaire survey on pre‐service and in‐service teachers’ perception towards misleading food advertising and labelling are reported. The situations at schools are defined and problems faced by teachers in providing relevant consumer education programmes to students are identified. Finally, some prospective foci for further investigation of this important issue, with a view to developing students’ critical skills in evaluating claims offered in food advertisements, will be considered.     

More powerful panel data unit root tests with an application to mean reversion in real exchange rates

Unit root tests, seeking mean or trend reversion, are frequently applied to panel data. We show that more powerful variants of commonly applied tests are readily available. Moreover, power gains persist when the modifications are applied to bootstrap procedures that may be employed when cross‐correlation of a rather general sort among individual panel members is suspected. Copyright © 2004 John Wiley & Sons, Ltd.     

The impact of the meal situation on the consumption of ready meals

The context in which a meal is eaten is known to affect intake and choice of food. The purpose of this study was to investigate in what typical situations ready meals are consumed and if consumer demands vary according to different situations. With a market survey four typical ready meal eating situations were identified, and the respondent's ready meal consumption was shown to be affected by situational factors. In the different eating situations there were dissimilar reasons for consumption. Two ready meal eating situations were investigated in greater detail in order to establish what triggered the ready meal consumption in these situations. One of these meal situations proved to be convenience driven and the other time driven. A situation‐oriented approach is suggested for further ready meal product development.     

Partial Privatization,Foreign Competition,and Optimum Tariff*

Using a simple international mixed oligopoly model with one public and one or more foreign firms, this paper examines the effect of partial privatization or foreign competition on optimum tariffs and finds that foreign competition lowers the optimal tariff rate but partial privatization raises it. This result implies that trade liberalization is welfare improving if a country opens up its economy by allowing foreign competition. However, the liberalization policy is not desirable when the country only partially or completely privatizes its publicly‐owned enterprises.     

OPENING RETURNS,NOISE, AND OVERREACTION

In this article a partial‐adjustment model, which shows how equity prices fail to adjust instantaneously to new information, is estimated using a Kalman filter. For the components of the Dow Jones Industrial 30 index I aim to identify whether overreaction or noise is the cause of serial correlation and high volatility associated with opening returns. I find that the tendency for overreaction in opening prices is much stronger than for closing prices; therefore, overreaction rather than noise may account for differences in the return behavior of opening and closing returns. JEL classification: G15