Investment,interest rate rules,and equilibrium determinacy

Summary. By adding endogenous investment to a flexible-price, money-in-the-utility-function model, this paper studies the role that physical capital plays in stabilizing the real side of the economy when the monetary authority follows interest-rate feedback rules. We show that with inelastic labor supply equilibrium uniqueness is ensured under both active and passive monetary policies. For the case where money affects both preferences and technology, the uniqueness result remains true under active monetary policy. With endogenous labor supply, the uniqueness result holds again regardless of the stance of monetary policies for the case with separable leisure, but indeterminacy remains likely under both active and passive monetary policies when leisure is nonseparable.Received: 19 December 2001, Revised: 12 May 2003, JEL Classification Numbers: E52, O42.We are grateful to Jess Benhabib and an anonymous referee for helpful comments and suggestions. Correspondence to: C.K. Yip     

NONPARAMETRIC SURVEY RESPONSE ERRORS*

I present nonparametric methods to identify and estimate the biases associated with response errors. When applied to survey data, these methods can be used to analyze how observable and unobservable characteristics of the respondent, and characteristics of the design of the survey, affect errors in the responses. This provides a method to correct the biases that those errors generate, by using the estimated response errors to “undo” those biases. The results are useful also to design better surveys, since they point at characteristics of the design and of subpopulations of respondents that can provide identification of response errors. Several models are considered.     

Assessing collaborative, pre-competitive R&D projects: the case of the UK LINK scheme

The paper addresses the evaluation of outcomes of collaborative, pre-competitive R&D projects. It draws on some empirical analysis carried out on data and information gathered under the UK 'LINK' scheme, a programme supporting R&D collaborative projects and assessing collaboration outcomes. A new indicator of performance, based on the outputs of LINK projects, has been constructed. It provides a relative and quite consistent measure of performance for making comparisons among different LINK projects. However it does not correlate with the more subjective grade applied by LINK's own management. For further improving evaluating mechanisms, more attention should be paid to the benefits that universities and companies as well as governments are drawing from R&D collaborations.     

How bank capital buffers vary across countries: The influence of cost of deposits,market power and bank regulation

This paper analyzes the bank and country determinants of capital buffers using a panel data of 1337 banks in 70 countries between 1992 and 2002. After controlling for adjustment costs and the endogeneity of explanatory variables, the results show that capital buffers are positively related to the cost of deposits and bank market power, although the relations vary across countries depending on regulation, supervision, and institutions. Their impact is the result of two generally opposing effects: restrictions on bank activities and official supervision reduce the incentives to hold capital buffers by weakening market discipline, but at the same time they promote higher capital buffers by increasing market power. Institutional quality has the two opposite effects. Better accounting disclosure and less generous deposit insurance, however, have a clear positive effect on capital buffers by both strengthening market discipline and making charter value better able to reduce risk-taking incentives.     

Legal Framework of Decentralized Energy Business Models in Germany: Challenges and Opportunities for Municipal Utilities

Feasible and profitable business models to better integrate and harness decentrally generated renewable energy are expected to constitute a key element for the energy transition in Germany. Until now, generated electricity of decentralized systems is to the largest extent only used by the property owner directly or fed into the public grid. To make better use of the generated electricity, it is necessary to find business models that provide an opportunity for different market actors, such as municipal utilities and residential prosumers. Due to the importance, yet low-anticipated monetary potential of such solutions, the legislator encourages their implementation by exemption of statutory fees, levies and taxes as well as by offering public remunerations, premiums and compensations in some cases. Capitalizing on these benefits, however, is only feasible under compliance with the legal requirements. In the light of the considerations above, this work states and analyzes the legal and regulatory framework of different business models within the German energy landscape. The major aim is to identify opportunities and challenges for the implementation of the business models self consumption, direct consumption, direct marketing, demand response, community electricity storage and net metering at the municipal level. The findings show that the profitability of various decentralized on-site business models depends primarily on the current statutory cost exemptions and compensations. At the same time, the regulation is characterized by unsystematic specific exemptions which leads to uncertainty regarding long-term planning. Additionally, although not directly privileged by the existing legal framework, municipal utilities are better suited to handle the legal burdens due to their experience and their administrative infrastructure.     

Antecedents and Consequences of Mutual Trust in PPPs

This article aims to identify the antecedents and consequences of mutual trust in public-private partnerships (PPPs), making use of the theory of mutual trust to develop the conceptual model. The article then tests hypotheses to find the role of trust in PPPs and also to identify the antecedents and consequences. Data have been collected from personnel working in government, corporate and non-profit sectors related to a post-earthquake psychological rehabilitation program in China. A total of 234 usable responses have been obtained with a return rate of 69.2%. The results of structural equation modeling show that while mutual communication, corporate reputation, and shared value influence mutual trust between partners positively, opportunism exerts negative influence on trust; in addition, trust also influences performance, commitment, and long-term relationships between partners. We conclude that mutual trust eliminates opportunism and increases confidence between partners, leading to improved inter-firm performance. If the partners establish trust in the PPP, they reap all other benefits of cooperation of PPPs.     

The Role of Local Agglomeration Economies and Regional Characteristics in Attracting FDI: Italian Evidence

The objective of this paper is to test for the importance of local agglomeration externalities in determining inward foreign direct investment (FDI) intensity, viewed as a measure of regional attractiveness to FDI. The links between the degree of FDI inflow penetration into Italy and its determinants at the regional level are examined using alternative fixed effects panel data model specifications, also extended to include spatial effects. It is found that sectoral and regional specificities are relevant in attracting inward FDI into Italy and the different effects of intra‐sector and inter‐sector spillovers can be distinguished. There is also evidence that the importance of agglomeration spillovers connected to the geographical distance varies across regions, indicating both substitution and complementarity effects from FDI inflows into neighboring regions.     

Are there pecuniary compensations for working conditions?

In this paper we assess the relative contribution of working conditions to wage determination with an emphasis on differences along the earnings distribution. A survey of British employees in 2001 rich in questions regarding the job post enables us to separate the contribution of working conditions, job attributes and individual characteristics to the process of wage determination. Standard wage equations reveal that covariates such as having “repetitive job” and using generic skills such as “literacy” or “customer handling skills” are associated with significant premiums and penalties. Quantile regressions confirm the presence of penalties to poor working conditions, such as “working to tight deadlines”, that are significant in the middle section of the earnings distribution and robust to the inclusion of a wide range of controls for person, firm and other job characteristics. Counterfactual decompositions at quantiles show that, despite the apparent penalty, there are pecuniary compensations to poor working conditions around the first quartile and the median of the earnings distribution.