Why do global long‐term scenarios for agriculture differ? An overview of the AgMIP Global Economic Model Intercomparison

Recent studies assessing plausible futures for agricultural markets and global food security have had contradictory outcomes. To advance our understanding of the sources of the differences, 10 global economic models that produce long‐term scenarios were asked to compare a reference scenario with alternate socioeconomic, climate change, and bioenergy scenarios using a common set of key drivers. Several key conclusions emerge from this exercise: First, for a comparison of scenario results to be meaningful, a careful analysis of the interpretation of the relevant model variables is essential. For instance, the use of “real world commodity prices” differs widely across models, and comparing the prices without accounting for their different meanings can lead to misleading results. Second, results suggest that, once some key assumptions are harmonized, the variability in general trends across models declines but remains important. For example, given the common assumptions of the reference scenario, models show average annual rates of changes of real global producer prices for agricultural products on average ranging between ?0.4% and +0.7% between the 2005 base year and 2050. This compares to an average decline of real agricultural prices of 4% p.a. between the 1960s and the 2000s. Several other common trends are shown, for example, relating to key global growth areas for agricultural production and consumption. Third, differences in basic model parameters such as income and price elasticities, sometimes hidden in the way market behavior is modeled, result in significant differences in the details. Fourth, the analysis shows that agro‐economic modelers aiming to inform the agricultural and development policy debate require better data and analysis on both economic behavior and biophysical drivers. More interdisciplinary modeling efforts are required to cross‐fertilize analyses at different scales.     

Line,line, everywhere a line: Cultural considerations for waiting-line managers

Given the trend of increasing business globalization, management teams of multinational companies have taken steps to better understand consumers, local business partners, and local governments. Local queueing preferences present managers with additional challenges and opportunities in international markets. The world may be ‘flat,’ but it is foolish to believe that all cultures perceive lines and waiting through the same lens. As discussed herein, perceptions regarding waiting and management of queues vary greatly; therefore, managers should adopt different policies and procedures when managing waiting lines across natural and cultural borders. Considering queue management in a global context offers benefits. Thinking globally—and acting locally—can prioritize and clarify important decisions any waiting-line manager has to make.     

An analysis of bundle pricing: the case of biotech seeds

Biotechnology has provided opportunities for strategic management and pricing of patented products. This article analyzes the economics and strategy of bundling and bundle pricing of biotech traits in seeds. When the bundling of genes/traits is decided by biotech firms, firms may choose among subadditive pricing, component pricing, or superadditive pricing strategies. We argue that complementarity among component genes contributes to subadditive pricing, while substitution among components contributes to superadditive pricing. The nature of bundle pricing is explored empirically using U.S. seed corn data from 2000 to 2007. We document that subadditive bundle pricing of traits is commonly found in the seed corn market. However, we also present evidence of superadditive pricing and component pricing. The presence of different pricing and bundling strategies suggests a rapidly advancing and complex market. The preponderance of subadditive pricing suggests that trait bundling offers benefits to farmers exhibiting strong demand for multiple complementary genetic traits.     

Professional Directors and Governance Quality

We examine professional directors—board members with no employment outside of serving as independent directors. We find that boards with a higher percentage of professional directors engage in more acquisitions, experience lower acquisition announcement returns, and exhibit lower performance‐turnover sensitivity and lower financial performance. We also examine the returns surrounding the appointment‐announcement dates of professional directors and find that firms experience significantly lower cumulative abnormal returns upon the appointment announcement of professional directors as compared to nonprofessional directors. The negative returns are primarily experienced by firms that face greater agency issues, suggesting that the market does not value professional directors for stricter monitoring. Overall, our findings do not lend support for calls to professionalize corporate boards.     

Government Revenue and Child and Maternal Mortality

Open Economies Review - Most maternal and child deaths result from inadequate access to the critical determinants of health: clean water, sanitation, education and healthcare, which are also among...     

Assessing the Probability of Bankruptcy

We assess whether two popular accounting-based measures, Altmans (1968) Z-Score and Ohlsons (1980) O-Score, effectively summarize publicly-available information about the probability of bankruptcy. We compare the relative information content of these Scores to a market-based measure of the probability of bankruptcy that we develop based on the Black–Scholes–Merton option-pricing model, BSM-Prob. Our tests show that BSM-Prob provides significantly more information than either of the two accounting-based measures. This finding is robust to various modifications of Z-Score and O-Score, including updating the coefficients, making industry adjustments, and decomposing them into their lagged levels and changes. We recommend that researchers use BSM-Prob instead of Z-Score and O-Score in their studies and provide the SAS code to calculate BSM-Prob.     

Financial Statement Complexity and Meeting Analysts’ Expectations

We examine whether firms with greater financial statement complexity are more likely to meet or beat analysts’ earnings expectations. We proxy for financial statement complexity using the firm's industry and year adjusted accounting policy disclosure length. Firms with more complex financial statements are more likely to just beat expectations than just miss expectations. Firms with complex financial statements appear to use expectations management to beat expectations, but do not use earnings management. Corroborating these findings, we find analysts rely more on management guidance for more complex firms. Firms with complex financial statements are also more likely to have analysts exclude items from actual “street earnings,” but tests suggest this strategy is not specifically used by complex firms to beat expectations. The effect we document is specific to analyst forecasts and not to other alternative benchmarks.     

State enterprise performance and soft budget constraints: The case of Bulgaria

This paper analyses the performance of state enterprises in Bulgaria during 1992-94. Consistent with the literature on other transitional economies, this paper finds that one key factor underlying (the lack of) enterprise adjustment in Bulgaria during this period was the availability of financing. Empirically, the (lack of) past adjustment and the softness of finance are the best predictors of current adjustment. Many state enterprises, mostly smaller ones, appear to have adjusted to the new economic structure, partly in response to tighter budget constraints. However, a number of large, hard-core lossmaking state enterprises did not adjust, due primarily to the soft budget constraints that they faced. These enterprises crowded out profitable enterprises, both public and private, through their large financing requirements, adversely affecting economic growth. Moreover, continued bank financing of these large loss-makers decapitalized the banking system, and budgetary financing of their losses, largely through tax arrears, has undermined fiscal policy. This lack of enterprise adjustment and the resulting financial indiscipline lies at the core of the macroeconomic difficulties that Bulgaria has recently faced.     

High yield spreads,real economic activity,and the financial accelerator

We study the leading properties of 30 US high yield spreads for economic growth between 1996 and 2012 and show that they disappeared in the second half of the 2000s. Our empirical findings demonstrate the unreliability of high yield spreads as leading indicators and cast doubts on the existence of a strong and functioning financial accelerator in recent years.     

Fuel inventory and price relationships in the U.S. electric power sector under regulatory and market change

Long-run relationships among coal inventories at U.S. electric power plants, corporate bond rates and coal, natural gas, and electricity prices are estimated over the period July 1976 to October 2014. Tests for constancy of the long-run relationships show periods of instability which coincide with major regulatory events in the electric power sector. Deregulation of the natural gas and electricity markets are likely sources of instability for the period mid-1994 to mid-2001. Additionally, inventory behavior may have had a smoothing effect over instability caused by natural gas prices during the recent U.S. shale boom. Policy makers should be aware that altering the regulatory environment can result in considerable fluctuations in how firms’ inventory decisions interact with input and output markets and opportunity costs in the long run.