Some large-concentration-parameter asymptotics for the k-class estimators

A sufficient condition is derived in this paper for the consistency and asymptotic normality of the k-class estimators (k-stochastic or nonstochastic) as the concentration parameter increases indefinitely, with the sample size either staying fixed or also increasing. It is further shown that the limited-information maximum likelihood estimator satisfies this condition. Since large sample size implies a large concentration parameter, but not vice versa, the usual conditions for consistency and asymptotic normality of the k-class estimators as the sample size increases can be inferred from the results given in this paper. But more importantly, the results in this paper shed further light on the small-sample properties of the stochastic k-class estimators and can serve as a starting point for the derivation of asymptotic approximations for these estimators as the concentration parameter goes to infinity, while the sample size either stays fixed or also goes to infinity.     

The role of credibility in the cyclical properties of macroeconomic policies in emerging economies

Optimal stabilization policy is countercyclical, aiming at keeping output close to its potential. However it has been traditionally argued that emerging countries are unable to adopt countercyclical monetary and fiscal policies. Here we argue that the cyclical properties of macroeconomic policies depend critically on policy credibility. We test this proposition by making use of recent panel data for eleven emerging market economies and time series data for Chile. The evidence supports that countries with higher credibility, as reflected by lower country risk levels, are able to conduct countercyclical fiscal and monetary policies. Conversely, countries with less credible policies (and, therefore, with higher country risk spreads) contribute to larger cyclical fluctuations by applying procyclical policies. For Chile we find that both monetary and fiscal policies have been largely countercyclical after 1993. JEL no. E43, E52, E62     

Design,Meanings, and Radical Innovation: A Metamodel and a Research Agenda*

Recent studies on design management have helped us to better comprehend how companies can apply design to get closer to users and to better understand their needs; this is an approach usually referred to as user‐centered design. Yet analysis of design‐intensive manufacturers such as Alessi, Artemide, and other leading Italian firms shows that their innovation process hardly starts from a close observation of user needs and requirements. Rather, they follow a different strategy called design‐driven innovation in this paper. This strategy aims at radically change the emotional and symbolic content of products (i.e., their meanings and languages) through a deep understanding of broader changes in society, culture, and technology. Rather than being pulled by user requirements, design‐driven innovation is pushed by a firm's vision about possible new product meanings and languages that could diffuse in society. Design‐driven innovation, which plays such a crucial role in the innovation strategy of design intensive firms, has still remained largely unexplored. This paper aims at providing a possible direction to fill this empty spot in innovation management literature. In particular, first it proposes a metamodel for investigating design‐driven innovation in which a manufacturer's ability to understand, anticipate, and influence emergence of new product meanings is built by relying on external interpreters (e.g., designers, firms in other industries, suppliers, schools, artists, the media) that share its same problem: to understand the evolution of sociocultural models and to propose new visions and meanings. Managing design‐driven innovation therefore implies managing the interaction with these interpreters to access, share, and internalize knowledge on product languages and to influence shifts in sociocultural models. Second, the paper proposes a possible direction to scientifically investigate the management of this networked and collective research process. In particular, it shows that the process of creating breakthrough innovations of meanings partially mirrors the process of creating breakthrough technological innovations. Studies of design‐driven innovation may therefore benefit significantly from the existing body of theories in the field of technology management. The analysis of the analogies between these two types of radical innovations (i.e., meanings and technologies) allows a research agenda to be set for exploration of design‐driven innovation, a relevant as well as underinvestigated phenomenon.     

Social learning and costly information acquisition

Summary. Short-lived agents want to predict a random variable q\theta and have to decide how much effort to devote to collect private information and consequently how much to rely on public information. The latter is just a noisy average of past predictions. It is shown that costly information acquisition prevents an unbounded accumulation of public information if (and only if) the marginal cost to acquire information is positive at zero (C￠(0) > 0)(C^\prime (0) > 0). When C￠(0) = 0C^\prime (0) = 0 public precision at period n, _boxclose_boxclose\tau_n, tends to infinity with n but the rate of convergence of public information to q\theta is slowed down with respect to the exogenous information case. At the market outcome agents acquire too little private information. This happens either with respect to a (decentralized) first best benchmark or, for n large, with respect to a (decentralized) second best benchmark. For high discount factors the limit point of market public precision always falls short of the welfare benchmarks whenever C￠(0) > 0C^\prime (0) > 0. In the extreme, as the discount factor tends to one public precision tends to infinity in the welfare-optimal programs while it remains bounded at the market solution. Otherwise, if C￠(0) = 0C^\prime (0) = 0 public precision accumulates in an unbounded way both at the first and second best solutions. More public information may hurt at either the market or second best solutions.     

Lange's 1938 model: dynamics and the “optimum propensity to consume”

Abstract

Oskar Lange's 1938 article “The Rate of Interest and the Optimum Propensity to Consume” is usually associated with the original IS-LM approach of the late 1930s. However, Lange's article was not only an attempt to illuminate Keynes's main innovations but the first part of a wide project that included the development of a theory of economic evolution. This paper aims at showing that Lange's article can help in illuminating critical aspects of this project: in particular, Lange's idea that a synthesis between Kaldor's and Kalecki's theories and that of Schumpeter, might have been possible and that it represented (in intentions) a “modern” and consistent reconstruction of the Marxist theory of the business cycle. Section 2 clarifies Lange's early reflection on dynamics. Section 3 centres on Lange's 1938 static model and indicates the effects of a change of saving on investment. Section 4 suggests a dynamic reconstruction from which are addressed important arguments raised by Lange in a series of papers written between 1934 and 1942.     

Fiscal consolidations and public debt in Europe

The objective of this paper is to gain insights into the relationship between deficit-reducing policies and the evolution of the debt/GDP ratio. We consider past events of fiscal consolidation in a selected group of EU countries and check what is the associated change of the debt/GDP ratio both from a short- and medium-term perspective. In the analysis, we also differentiate between tax-based and savings-based fiscal consolidations and the pre-Euro and Euro periods. Our results point towards a positive short-term effect, while the medium-term effect turns out to be negative. Savings-based fiscal consolidations result to be less negative on the DGR evolution than tax-based ones. The Euro’s introduction seems not to have altered significantly the relationship studied.     

Making the most of your firm's capabilities

In this Executive Digest, we make the case that aggregate individual expertise as a resource and intrinsic capability of the firm are hidden in plain sight, or worse, are assumed to exist where they do not. With high levels of complexity, business diversity, and number of geographical locations, the issue becomes even more acute. We propose strategic resource mapping (SRM) as a methodology designed to provide top managers with a rapid, comprehensive, and penetrating assessment of a firm's ‘meta-capability’: an actionable overview of the capabilities that exist within the firm. Based on multiple successful implementations, we describe the key features of SRM and provide several illustrations.     

Old and new partners: Similarity and competition in the EU foreign agri-food trade

This paper analyses the trade relationships among the EU-15 members and some emerging partners: the NMS, Turkey and China. The EU expansion to include 10 new countries has modified quite remarkably the features of agri-food trade in Europe. Some of the NMS, such as Poland, Hungary and the Czech Republic, significantly contribute to the international agri-food trade and, since the beginning of the process of EU accession, they have modified dramatically the exchanges with the EU-15. More recently, other countries such as Turkey and China have established new relationships with the EU. Turkey is a large Mediterranean country and, as a candidate to the EU accession, enjoys a differential treatment in the agri-food trade relationships with the EU. China can be considered as a new international competitor, growing at faster pace after having joined the WTO and increasing its agri-food trade exchanges with the EU. The analysis will focus on the measurement of the similarity of the agri-food exports of Italy and the remaining EU-15 member States with the new partners entering the EU-15 market. It will be carried out with the support of three different indicators: the export structure similarity index (ES), the product similarity index (PSI) and the quality similarity index (QSI), using the Eurostat database with an eight “digit” merchandize disaggregation and with reference only to agri-food exchanges. Results will indicate that there is little similarity, especially when a comparison is made between the exports of the EU-15 countries to the EU market. Moreover, quality remains a crucial factor for Italian and European agri-food products when competing with external products.