The going public decision and the structure of equity markets

The industries in which listed firms are concentrated in less developed equity markets are not random, nor entirely explained by the underlying composition of production. Listed firms and market capitalization are disproportionately concentrated in industries with low beta (measured with their beta with the market portfolio in the U.S.). We document a strong positive relationship between the industry-weighted country beta and the degree of market development across countries. Recent IPO activity confirms the result since new listings have higher betas than the average firm already in the market.     

Essential equilibria of large generalized games

We characterize the essential stability of games with a continuum of players, where strategy profiles may affect objective functions and admissible strategies. Taking into account the perturbations defined by a continuous mapping from a complete metric space of parameters to the space of continuous games, we prove that essential stability is a generic property and every game has a stable subset of equilibria. These results are extended to discontinuous large generalized games assuming that only payoff functions are subject to perturbations. We apply our results in an electoral game with a continuum of Cournot-Nash equilibria, where the unique essential equilibrium is that only politically engaged players participate in the electoral process. In addition, employing our results for discontinuous games, we determine the stability properties of competitive prices in large economies.     

Latin American earnings inequality in the long run

This paper traces between-group earnings inequality for six Latin American countries over two centuries based on wage and income series compiled from a large array of primary and secondary sources. We find that inequality varied substantially by country and by period, questioning the notion that colonial legacies largely dominated the evolution of inequality. There is a broader inequality trajectory over the long run in the form of an “m” pattern with peaks around 1880 and the 1990s and a trough around 1920/1930s. Export-led growth does not necessarily imply a rise in inequality, while the import-substitution industrialisation efforts did not translate into a more egalitarian distribution of income. More notably, Latin America’s experience does not exhibit the great inequality levelling as seen in the North Atlantic economies from the 1930s to the 1970s.     

Likelihood evaluation of models with occasionally binding constraints

Applied researchers interested in estimating key parameters of dynamic stochastic general equilibrium models face an array of choices regarding numerical solution and estimation methods. We focus on the likelihood evaluation of models with occasionally binding constraints. We document how solution approximation errors and likelihood misspecification, related to the treatment of measurement errors, can interact and compound each other.     

Subterranean Commodification: Informal Housing and the Legalization of Basement Suites in Vancouver from 1928 to 2009

This article draws on Margaret Radin's theorization of ‘contested commodities' to explore the process whereby informal housing becomes formalized while also being shaped by legal regulation. In seeking to move once‐informal housing into the domain of official legality, cities can seldom rely on a simple legal framework of private‐law principles of property and contract. Instead, they face complex trade‐offs between providing basic needs and affordability and meeting public‐law norms around living standards, traditional neighbourhood feel and the environment. This article highlights these issues through an examination of the uneven process of legal formalization of basement apartments in Vancouver, Canada. We chose a lengthy period—from 1928 to 2009—to explore how basement apartments became a vital source of housing often at odds with city planning that has long favoured a low‐density residential built form. We suggest that Radin's theoretical account makes it possible to link legalization and official market construction with two questions: whether to permit commodification and how to permit commodification. Real‐world commodification processes—including legal sanction—reflect hybridization, pragmatic decision making and regulatory compromise. The resolution of questions concerning how to legalize commodification are also intertwined with processes of market expansion.     

Search and Wholesale Price Discrimination

Firms often choose not to post prices in wholesale markets, and buyers must incur costs to discover prices. Inspired by evidence of customized pricing (e.g., some customers pay up to 70% more than others) and search costs, I estimate a search model to study how personalized pricing impacts efficiency in a wholesale market. I find that price discrimination decreases total surplus by 11.6% and increases the sellers' profits by up to 52.1%. These effects are partially explained by price discrimination softening competition through a decrease in search incentives, illustrating how price discrimination may magnify the efficiency costs of search frictions.     

Be bad but (still) look good: Can controversial industries enhance corporate reputation through CSR initiatives?

Even though the link between perceived corporate social responsibility fit (PCSR‐fit) and corporate reputation has received much attention from scholars, this tradition has ignored that the underpinnings of this association vary depending on the particular characteristics of each industry under study. To delve into this matter, we investigate in the increasingly relevant context of controversial industries (CIs) how PCSR‐fit could enhance corporate reputation and which are the mediating mechanisms of this association. Our academic contribution is twofold. First, we find that controversial sectors indeed can increase corporate reputation through CSR activities. However, we find that to achieve this goal, the nature of PCSR‐fit should be different than what extant literature indicates, because companies in these settings should directly focus on avoiding or reducing their inherent controversial harm or impact. Second, we evidence that “CSR initiatives' legitimacy” and “situational skepticism” mediate the PCSR‐fit and corporate reputation relationship in CIs. Therefore, we further unravel the underpinnings of this association to advance what we know on the matter and aid practitioners in this particular context.     

Anchored putter ban: An examination of whether anchored putting impacts career success and putting performance

The Professional Golfers' Association (PGA) Tour ban on anchored putting (Rule 14‐1b) took effect on January 1, 2016. The ban remains controversial because the governance decision appears to have been made without adequate empirical evidence. Accordingly, to investigate the efficacy of the ban, the impact of using anchored putters on PGA golfers' career success and putting performance was examined. PGA golfers ranked in the top 125 were studied from 2009 to 2015. The analysis revealed an anchored putter offered no unfair advantage with regard to improving players' career success or putting performance when compared with standard putter usage by PGA golfers.     

Distinctive Features of Environmental Innovators: An Econometric Analysis

This paper analyzes the main determinants influencing environmental innovators (i.e. firms developing or adopting environmental innovations) in Spain with respect to non‐environmental innovators. Similarly to other contributions in the literature, our results show that Spanish environmental innovators respond to regulatory stimulus in the form of demand‐pull and technology‐push instruments. They have a high internal technological capability and combine internal and external information sources, mostly in cooperation with knowledge institutions. Environmental innovators are more concentrated in mature, traditionally highly polluting sectors, but new firms are not more environmentally innovative than incumbents. Most importantly, in contrast to other environmental innovation studies, mostly carried out in a German context, we have not found evidence of a market pull from either the domestic or international markets. Furthermore, cost savings are not found to be a distinctive driver for environmental innovators. These differential results are possibly related to the special features of Spain regarding its national innovation system and the degree of stringency of environmental regulation and environmental consciousness of its consumers. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.     

When is escalation of commitment unstoppable in group settings? An iterative economic modeling approach to unveil the dark side of group decision-making

Escalation of commitment (EOC) has been usually studied from a psychological lens, and only recently have scholars approached EOC from an economic perspective. We contribute to this by focusing on iterative decision-making in group settings with a game theory approach. We study how the group members' strategic interaction may result in continuing failing courses of action. Drawing on the Byzantine generals' problem, our model considers an iterative decision-making process where committee participants vote based on private information to escalate or not. Our article demonstrates that if decision-makers reset their beliefs based on the committee's previous decision, then EOC becomes perpetual.