Entry into Export Markets and Product Quality

Using a rich data set of Chilean exporters, we analyse several issues regarding the relationship between entry into export markets and product quality. We find that every year, a large number of new exporting relationships are initiated, but the survival rate of these entries is very low and declines over time. Using unit values as a proxy for product quality, our estimations show that entry is generally associated with higher product quality. This higher quality, however, tends to reduce over time and eventually disappears three years after entry. In addition, our evidence suggests that the positive relationship between entry and quality is more prevalent in new exporters. To better identify this effect, we explore whether there are systematic differences across sectors. As expected, for sectors in which quality differentiation may be important, our findings reveal that reference‐price and differentiated products show a higher price in the year of entry and a longer convergence to incumbent prices. These results hold after controlling for potential sample selection bias.     

NO‐ARBITRAGE PRICING FOR DIVIDEND‐PAYING SECURITIES IN DISCRETE‐TIME MARKETS WITH TRANSACTION COSTS

We prove a version of First Fundamental Theorem of Asset Pricing under transaction costs for discrete‐time markets with dividend‐paying securities. Specifically, we show that the no‐arbitrage condition under the efficient friction assumption is equivalent to the existence of a risk‐neutral measure. We derive dual representations for the superhedging ask and subhedging bid price processes of a contingent claim contract. Our results are illustrated with a vanilla credit default swap contract.     

Well-connected short-sellers pay lower loan fees: A market-wide analysis

High loan fees generate short-selling constraints and, therefore, reduce price efficiency. Despite the importance of loan fees, empirical evidence on their determinants is scarce. Using a market-wide deal-by-deal data set on the Brazilian equity lending market which uniquely identifies borrowers, brokers, and lenders, we are able to construct a proxy of search costs at the borrower–stock–day level. We find that—for the same stock, on the same day—borrowers with higher search costs pay significantly higher loan fees. Our results suggest that regulators should encourage the use of a centralized lending platform to reduce search costs in the lending market.     

Outperformance Certificates: analysis, pricing, interpretation, and performance

In this paper we introduce a new financial product named Outperformance Certificates. We study the €43 billion sample by examining 1,507 issues of the certificates outstanding in August 2005 issued by banks in Europe. We present formulas to price the certificates and empirically examine the profits in the primary market for issuing the certificates. We find that issuance of the certificates is profitable for the issuers in our sample. Issuers sell the certificate at prices 3–5 % above the fair value based upon the components of the underlying assets. We also find that the dividend yields and ex-dividend dates play an important role in the profitability of the certificates. The underlying securities tend to have high dividend yield and large market capitalization. We also find the certificates tend to mature soon after the ex-dividend dates of the underlying assets.     

Impact of the dedicated infrastructure on bus service quality: an empirical analysis

An econometric analysis is conducted to quantify the impact of different variables on the service quality of the Santiago, Chile bus system. The indicators tested as measures of service quality are the average bus speed, the bus trip time coefficient of variation and the bus headway coefficient of variation. The analysis uses peak hour data obtained for all the routes served by the system’s various concessionaire operators. A separate multiple linear regression model is estimated for each indicator, with the latter as the explained variable. The main explanatory variables are a series of design factors representing different types of dedicated route infrastructure and the incorporation in some routes of segments of urban motorway. The results of the models show that the existence of dedicated bus route infrastructure positively impacts all three service quality indicators. The use of motorway segments in particular has a major positive effect on average speed. The model estimates also reveal that the main explanatory factor in headway variability at the end of a route is the headway variability at the start of it, the latter factor determined by operator management decisions regarding bus despatches.     

Life‐Cycle Expenditure and Retirees’ Cost of Living

The aim of this paper is twofold. First, we document the expenditure life‐cycle profile in the United Kingdom and show how differences in the consumption bundle of retirees and workers translate into different inflation experiences. Albeit different in given years, the inflation experienced by the two groups is not significantly different over a long time period. We also show how the distribution of household inflation evolved over time, with particular emphasis on the period around the latest financial crisis. Second, we estimate an Exact Affine Stone Index (EASI) demand system and compute the change in the cost of living and the substitution effect for both retirees and workers for the period 1990–2014. Finally, we show how pension income would evolve during that period under three alternative indexation measures for different cohorts of retirees. The indexation measure that results in the highest pension income depends on the time of retirement.     

Health and the evolution of welfare across Brazilian municipalities

This paper describes the pattern of reductions in mortality across Brazilian municipalities between 1970 and 2000, and analyzes its causes and consequences. It shows that, as in the international context, the relationship between income and life expectancy has shifted consistently in the recent past. But reductions in mortality within Brazil have been more homogeneously distributed than across countries. We use a compensating differentials approach to estimate the value of the observed reductions in mortality. The results suggest that gains in life expectancy had a welfare value equivalent to 39% of the growth in income per capita, being therefore responsible for 28% of the overall improvement in welfare. We then use a dynamic panel to conduct a preliminary assessment of the potential determinants of these gains. We show that improvements in education, access to water, and sanitation seem to be important determinants of the dimension of changes in life expectancy not correlated with income.     

Inventory service-level optimization within distribution network design problem

We propose a sequential heuristic approach to optimize inventory service levels in a two-stage supply chain. The proposed approach deals with service level and inventory decisions, simultaneously with network design decisions, and incorporating unfulfilled demand costs in a previous inventory-location model. A two-step formulation is considered, where the first step optimizes service level and the second step addresses location and inventory decisions. Each algorithm iteration solves an inventory-location model for a fixed service level, and then the service level is updated in order to reach an equilibrium condition between operating system and unfulfilled demand costs. The algorithm converged in three iterations for a set of sample instances, obtaining the same outcome in comparison with a more intuitive, exact, but more time-consuming search procedure.     

Venture Creation Speed and Subsequent Growth: Evidence from South America

Though time is an important dimension of the venture creation process, our understanding of why some entrepreneurs are able to act more quickly than others is limited. Equally, not much is known about the relationship between venture creation speed and the subsequent venture growth. In this paper, we use a resource‐based perspective to provide insights into the factors that quicken or retard venture creation and to explore how speed impacts on subsequent growth. This is important because the topic remains generally underresearched and because even less is understood about venture creation speed in the context of South American economies. Data were collected from face‐to‐face interviews with 647 entrepreneurs in Argentina, Brazil, Chile, and Peru. Using a multivariate regression framework, we find that entrepreneurs make use of their human and social capital resources to shape the speed by which their venture is created. Moreover, their perceptions of unfavorable environmental conditions seem to retard venture creation. Findings also suggest that entrepreneurs who take more time to create a more solid resource base tend to receive better growth outcomes. Implications from the findings are discussed.