Convergence of utility indifference prices to the superreplication price in a multiple‐priors framework

This paper formulates a utility indifference pricing model for investors trading in a discrete time financial market under nondominated model uncertainty. Investor preferences are described by possibly random utility functions defined on the positive axis. We prove that when the investors's absolute risk aversion tends to infinity, the multiple‐priors utility indifference prices of a contingent claim converge to its multiple‐priors superreplication price. We also revisit the notion of certainty equivalent for multiple‐priors and establish its relation with risk aversion.     

The economics of taxes with equivalent effects to tariffs

Developing countries are faced with the issue of tariff replacement at an early stage of their development, due to their increased commitments through Free Trade Arrangements with developed countries. As tariff replacement through VAT, or more sophisticated tools such as income tax, is neither practically nor economically desirable in these economies, this paper investigates the effects of an alternative replacement tax that only affects categories of goods not produced locally. This tax, denominated tax with equivalent effects to tariffs (TEET), is indeed a consumption tax as it concerns all goods, whether imported or potentially produced in the country. Based on a simple diagrammatic approach, the study shows that this tool tends to generate more welfare than tariffs if final prices of goods are left unchanged. It shows that a government can continue to maintain its revenues and increase the welfare of consumers through this fiscal replacement. Additionally, the political and economic reserves associated with this tool are discussed. The TEET are therefore useful mainly for small and non-diversified economies. It also remains that the use of this tool is, in practice, conditioned by the level of tolerance of developed countries, which tend to prohibit it in bilateral agreements with developing countries.     

State provision of constitutional goods

This paper investigates the impact of constitutional rights on the level of public expenditure in a large sample of countries. To do so, we construct a panel of 73 countries from 1960 to 2011. We first investigate factors that drive constitutional changes regarding constitutional rights. To address potential endogeneity concerns in the choice of constitutional rules, we rely on an instrumental variable within estimation (country and time fixed effects) to estimate the impact of constitutional rights on government size. We find that larger governments tend to inscribe fewer rights in their constitutions, but we do not detect any impact of constitutional rights on the government size.     

Featuring Capability: How Carmakers Organize to Deploy Innovative Features across Products

Innovative features such as hands‐free car entry and ignition systems, stop‐start devices, telematics systems, and panoramic windshields are increasingly important to carmakers' innovation strategies. However, while product‐centric innovation has been extensively studied, there is less insight into the way companies implement their feature‐innovation strategies. The capability to explore, integrate, and deploy such attractive features is a critical dynamic capability; it allows carmakers to refresh their products, develop their competences, and maintain the efficiency of their traditional new product development. This research investigates the structures and processes of feature innovation in the automotive industry. It is based on a global investigation encompassing 9 generalist carmakers and 26 cases of feature innovation. The results show a clear trend, over the past decade, toward a structure of autonomous “advanced engineering” units and processes that are responsible for exploring innovative features and transferring them to multiple products. This paper details the key attributes of these units, and the role they play along the multiproduct learning cycle. Supplementing this structural analysis, the paper also identifies the coordination patterns between exploration and new product development activities. These results provide industry‐level insights into the way firms organize their feature‐innovation capability, and bring empirical elements to the ambidexterity literature.     

Still puzzling: evaluating the price puzzle in an empirically identified structural vector autoregression

The price puzzle, an increase in the price level associated with a contractionary monetary shock, is investigated in a rich, 12-variable SVAR in which various factors that have been mooted as solutions are considered jointly. SVARs for the pre-1980 and post-1990 periods are identified empirically using a graph-theoretic causal search algorithm combined with formal tests of the implied overidentifying restrictions. In this SVAR, the pre-1980 price puzzle depends on the characterization of monetary policy, and the post-1990 price puzzle is statistically insignificant. Commonly suggested theoretical resolutions to the price puzzle are shown to have causal implications inconsistent with the data.     

Green shoots and double dips in the euro area: A real time measure

In order to perform real-time business cycle inferences and forecasts of GDP growth rates in the euro area, we use an extension of the Markov-switching dynamic factor models that accounts for the features of the day-to-day monitoring of economic developments, such as ragged edges, mixed frequencies and data revisions. We provide examples that show the nonlinear nature of the relationships between data revisions, point forecasts and forecast uncertainty. Based on our empirical results, we think that the real-time probabilities of recession inferred from the model are an appropriate statistic for capturing what the press call green shoots, and for monitoring double-dip recessions.     

Ethnic minority participation in British and French cities: a historical–institutionalist perspective

In this article, I set out to explain cross–national variations between styles of ethnic minority incorporation in the conventional political systems of British and French cities. To this aim, I draw inspiration from, and refine, institutionalist approaches to minority participation. I focus on a comparison of two cases, Birmingham (England) and Lille (France). I construct a parsimonious explanatory framework focused on three institutional factors: central–local relations in each country and local party politics and styles of local government in each city. I argue that these elements combine in different ways in each country to produce different local political environments for the politics of ethnic minorities, thereby shaping patterns of participation and conditioning their success, or absence thereof, in the electoral process of cities. Because of local specificities, my two cases are not entirely representative of other cities, but they provide an illustration of the political processes at work in most cities. In Birmingham, minorities participate successfully in Labour party politics, while in Lille, they are submitted to persistent political exclusion at the hands of a powerful Socialist party machine. Cet article vise à expliquer les variations transnationales entre les styles d’intégration des minorités ethniques dans les systèmes politiques classiques de villes britanniques et françaises. Dans ce but, il s’inspire, en les affinant, des approches institutionnalistes de la participation des minorités, et s’appuie sur la comparaison de deux cas: Birmingham (Royaume–Uni) et Lille (France). Ce travail élabore un simplifié cadre explicatif reposant sur trois facteurs institutionnels: les relations central–local dans chaque pays, la politique locale/parti, ainsi que les styles de gouvernement local dans chaque ville. Ces éléments se combinent différemment dans chaque pays et génèrent des environnements politiques locaux distincts pour la politique des minorités ethniques, façonnant ainsi des modèles de participation et conditionnant leur réussite ou échec dans le processus électoral urbain. A cause des spécificités locales, les deux cas ne sont pas tout à fait représentatifs d’autres villes, mais ils illustrent les processus politiques opérant dans la plupart d’entre elles. A Birmingham, les minorités participent avec succès à la politique du parti travailliste tandis qu’à Lille, elles sont soumises à une exclusion politique persistante face à la puissante machine du parti socialiste.     

Trade liberalization and intersectoral labor movements

This paper examines the impact of trade liberalization episodes on movements of labor across sectors. The aim is to assess empirically whether increased trade openness leads to increased structural change and, if so, to what extent. Results for a set of 25 liberalization episodes suggest weakly negative effects of liberalization on the extent of intersectoral labor shifts at the economy-wide 1-digit level of disaggregation. We do uncover increased sectoral change after liberalization at the 3-digit level within manufacturing, although the estimated effects are statistically weak and small in magnitude. The effects of liberalization on labor shifts differ across individual countries, in a way related to the scope and depth of reforms.     

Death and development

Analyzing a variety of cross-national and sub-national data, we argue that high adult mortality reduces economic growth by shortening time horizons. Paying careful attention to the age pattern of mortality and to endogeneity issues, we find that a greater risk of death during the prime productive years is associated with higher levels of risky behavior, higher fertility, and lower investment in physical capital, even when controlling for infant mortality. In our regressions, adult mortality explains almost all of Africa’s growth tragedy. This analysis underscores grim forecasts of the long-run economic costs of the ongoing AIDS epidemic. Most of the work for this paper was completed prior to the tragic passing away of our dear friend and colleague John McMillan in March of 2007.