ESTIMATION AND INFERENCE BY THE METHOD OF PROJECTION MINIMUM DISTANCE: AN APPLICATION TO THE NEW KEYNESIAN HYBRID PHILLIPS CURVE*

The stability of the solution path in a macroeconomic model implies that it admits a Wold representation. This Wold representation can be estimated semi‐parametrically by local projections and used to estimate the model's parameters by minimum distance techniques even when the stochastic process for the solution path is unknown or unconventional. We name this two‐step estimation procedure “projection minimum distance” and investigate its statistical properties for the broad class of models where the mapping between Wold coefficients and parameters is linear. This includes many situations with likelihood score functions nonlinear in the parameters that would otherwise require numerical optimization routines.     

Devaluating projects and the investment–uncertainty relationship

Sarkar (2000. On the investment–uncertainty relationship in a real options model. Journal of Economic Dynamics and Control, 24, 219–225) analyzes the investment–uncertainty relationship in a real-options model demonstrating that the widely accepted conclusion that uncertainty harms investment can be reversed. Wong (2006. The effect of uncertainty on investment timing in a real options model. Journal of Economic Dynamics and Control, forthcoming) confirms this point showing that more uncertainty can reduce the expected time to exercise the investment option. This paper deals with such an issue and attempts to integrate both Sarkar's and Wong's analysis.For risk-neutral investors, we show that uncertainty can favor investment only if projects devaluate over time. This conclusion does not hold in a CAPM framework, where we demonstrate that the relationship uncertainty/investment can be positive (a) even when the investment threshold increases with uncertainty and (b) in the case of projects negatively correlated with the market portfolio.     

A study of determinant factors of stakeholder environmental pressure perceived by industrial companies

Although several articles have studied the effect that stakeholder pressure has on the environmental behavior of firms, little research has attempted to identify the contingencies that explain such pressure. This article investigates the effects of six relevant variables on stakeholder environmental pressure perceived by industrial companies: size, internationalization, location of manufacturing activities, position in the supply chain, industrial sector, and managerial values and attitudes. The effect is theoretically determined by distinguishing between pressure intensity and perception capacity and empirically tested with a sample of 186 Spanish manufacturers. The analyses reveal two dimensions of stakeholder pressure, governmental and nongovernmental, and show that variables such as environmental awareness among managers, internationalization, industrial sector and company size play important roles in determining both dimensions. Copyright © 2008 John Wiley & Sons, Ltd and ERP Environment.     

A Class of Bonferroni Inequality Indices

The purpose of this paper is to propose a family of inequality measures obtained from the Bonferroni curve as a distribution function. This family characterizes the income distribution, given the mean income, as well as other families considered in this paper. Although all of the families show a clear formal analogy and are mutually determined, their elements include very different value judgments for measuring inequality and social welfare. Normative aspects are analyzed by means of the preference distributions associated to the indexes. This allows us to compare the indexes, and in some cases, rank them according to their degree of inequality aversion, as well as studying their behavior regarding different principles of transfer.     

Varieties of Multinationals: Adapting Employment Practices in Central Eastern Europe

"Home-country effects" on multinational companies' practices abroad are assessed by comparing twelve German- and U.S.-owned plants within the same sector in the "institutionally permissive" Poland, Hungary, and Slovenia. Differences are detected on functional flexibility, corporate culture and working time, but not on participation. Work organization seems more integral to national productive models than industrial relations. Moreover, considerable intramodel variation reflects product- and labor-market contingencies. The results support the interpretation of national models as internally heterogeneous and dynamic.     

Manufacturing Skill‐biased Wage Inequality,Natural Resources and Institutions

We use an extensive dataset on occupational wages to measure the manufacturing skill premium and assess, for the first time, the influence of natural resources and institutional quality—in addition to traditional drivers—for advanced and less‐advanced countries and the full sample. The new findings, regarding 21 countries between 1988 and 2008 in the main panel estimations, suggest the premium of advanced countries rises with tertiary enrollment, net foreign direct investment (FDI) and institutional quality, and falls with centralized wage negotiations and geographically diffuse natural resource activities, mainly re‐exportation related. In less‐advanced countries, the premium rises with net FDI, scale effects, centralized wage negotiations and geographically concentrated natural resource activities (absorbing scarce skilled workers), and falls with trade, diffuse natural resource exploration (using mainly unskilled workers) and high‐technology exports, as emerging national low‐end technology industrial exporters may lower skill pay compared with foreign industrial exporters. In the full sample, the premium rises with scale effects, trade, institutional quality and concentrated natural resources, and falls with the relative skilled‐labor supply, centralized wage negotiations and diffuse natural resources. The results account for a wider diversity of situations compared with the previous studies.     

Endogenous Growth and Intellectual Property Rights: A North–South Modelling Proposal with Population Ageing

This paper studies the effect of intellectual property rights (IPR) on economic growth, in the light of population ageing, i.e., in a more realistic context. The analysis is motivated by the implications of population ageing on economic growth. Moreover, this study analyses this relationship in a north–south framework where there is a healthcare sector. We conclude that population ageing has no impact on the sign of the IPR effect on economic growth. However, it positively affects the steady‐state growth rate. Finally, under some conditions, the presence of the healthcare sector also increases the steady‐state growth rate.     

THE ECONOMIC VALUE OF PROTECTING INVENTORIED ROADLESS AREAS: A SPATIAL HEDONIC PRICE STUDY IN NEW MEXICO

The objective of this paper is to examine the off‐site benefits, as capitalized into housing values, of protecting 1.6 million acres of Inventoried Roadless Areas (IRAs) in the state of New Mexico, United States. In light of petitions filed by various U.S. states to maintain the status of IRAs as roadless lands, spatial hedonic price models are estimated and used to calculate the implicit value of IRAs in New Mexico. Findings show that a two‐stage least squares (2‐SLS), robust spatial‐lag model is the most appropriate econometric representation of the hedonic price function, and that IRA lands are a significant and positive determinant of house value. After controlling for the presence of Wilderness Areas (WAs) and other characteristics, results indicate that, on average, there is a 5.6% gain in the property value of a house from being located in, or adjacent to, a Census tract with IRAs. In the aggregate, this gain represents 3.5% of the value of all owner‐occupied units in New Mexico ($1.9 billion in capitalized value, or an annualized value in perpetuity of $95 million, assuming a 5% interest rate). (JEL R22, H40, Q51, C21)     

Mergers and Acquisitions Accounting and the Diversification Discount

q‐based measures of the diversification discount are biased upward by mergers and acquisitions and its accounting implications. Under purchase accounting, acquired assets are reported at their transaction value, which typically exceeds the target's pre‐merger book value. Thus, measured q tends to be lower for the merged firm than for the portfolio of pre‐merger entities. Because conglomerates are more acquisitive than focused firms, their q tends to be lower. To mitigate this bias, I subtract goodwill from the book value of assets and a substantial part of the diversification discount is eliminated. Market‐to‐sales‐based measures do not have this bias.