A framework for mapping industrial emergence

The industrial landscape is becoming increasingly complex and dynamic, with innovative technologies stimulating the emergence of new applications, business models and industries. This paper presents a framework for mapping science and technology-based industrial emergence, in order to better understand the nature and characteristics of such phenomena, as a basis for improved strategy development. A full lifecycle perspective is included, emphasizing early stage phases associated with scientific and technological developments, together with key transitions between phases related to the conversion of scientific knowledge to technological capability, application, industrial activity and economic value. Roadmapping concepts are used to map industrial emergence phenomena from various perspectives that cover value creation and capture activities together with demand and supply-side factors. The framework has been tested by developing more than 25 diverse ‘emergence maps’ of historical industrial evolution, building confidence that the framework might be applicable to current and future emergence. Common characteristics of industrial emergence have been identified, including key events and milestones, focusing on a chain of demonstrators that delineate the various phases and transitions.     

Bernanke versus Taylor: a post mortem

Our analysis sheds light on the issue of whether the monetary policy contributed to the recent housing boom and bust. We have estimated and analysed a model that allows a comparison between the actual policy and several alternative Taylor rules. When the Taylor rule path was computed using revised data and the deflator for the GDP, we found a notable impact on key housing market variables, supporting Taylor’s critique of the Fed policy. However, the bulk of our evidence suggests that the policy as it would have been conducted under our real-time Taylor rules would not have had any significant impact on the housing market variables. This conclusion is robust with regard to the price index used as well as the relative weights used on the inflation and output gaps.     

Capital asset pricing models with default risk: Theory and application in insurance

The Capital Asset Pricing Model has been used frequently to derive a fair price of insurance. But the use of this model overestimates insurance premiums because it does not account for the insolvency risk of insurers. This paper examines how the insurance price should be fairly adjusted when insurers' default risk is considered. It develops a model which shows that fair insurance premiums are lower when insurance firms have a positive probability of being insolvent. Using data of property liability insurers during the period from 1943–99, the paper further estimates the effects of the insolvency risk on insurers' underwriting profit rate. It shows that the incorporation of the default risk of insurers in the model, by significantly reducing the required price for insurance, would lead to lower profit potentials. Some writers argue that including the insolvency risk when calculating insurance premiums is not so necessary because of the existence of states' guaranty insurance funds which protect consumers. However, as shown in the paper, these funds have provided inadequate protection to consumers. Therefore, because of the increase in the number of insolvencies in recent years, and because of the limited coverage provided by states' guaranty funds, it seems that considering the insolvency risk in insurance pricing has become very necessary.     

Heterogeneity and the evaluation of efficiency: the case of Italian universities

This study investigates the quarterly relationship between the quantity of cigarettes sold, real disposable income per capita, and the relative price level of cigarettes in Canada. Careful attention is paid to the nonstationarity of the data and the dynamic specification of the model. It is concluded that cigarette demand is extremely insensitive to price and income changes. This is evidence of the large consumer surplus smokers enjoy and the large revenue increasing potential of a cigarette tax increase policy, as opposed to cigarette bans.     

Temptation and social security in a dynastic framework

We investigate welfare and aggregate implications of a pay-as-you-go (PAYG) social security system in a dynastic framework in which individuals have self-control problems. The presence of self-control problems induces individuals to save less because of their urge for temptation towards current consumption. Individuals' efforts to balance between the short-term urge for temptation and the long-term commitment for consumption smoothing result in self-control costs. In this environment PAYG social security works as a self-control cost reducing device. In contrast, the presence of altruism induces individuals to save more. This in turn mitigates the adverse effects of self-control problems and PAYG social security on savings but magnifies the self-control costs. We find that in our environment the adverse welfare effects of a PAYG system are further mitigated relative to the environments that incorporate altruism and self control issues separately. However, the level of mitigation is quite modest.     

A child health production function estimated from longitudinal data. Cebu Study Team

Collaborating researchers used a multi equation model to analyze 3080 mother-infant pairs living on the island of Cebu in the central Philippines and to estimate a child health production function. The econometric methods used eliminated obstacles such as heterogeneity and endogeneity of significant explanatory factors. They also maximized the longitudinal quality of the data. The results showed that morbidity in 1 period reduced infant weight in following periods. For example, diarrhea and febrile respiratory infection reduced growth in the time period following the illnesses. Further effects of some contributing factors were great near birth not diminished with age. For example, breast feeding promoted growth and protected against infection, especially diarrhea and febrile respiratory infection, more substantially near birth than it did later. Further, in urban areas, preventive health care positively affected growth independently of its indirect influence on reducing respiratory infection. Yet it had little effect on diarrhea. Diarrhea had a strong adverse effect on growth. Exposure of the infant to enteric pathogens had the greatest influence on production of diarrhea. In urban areas, exposure included water supply contamination, exposure to feces, a more pathogenic diet, and community crowding. In rural areas, however, exposure included community crowding and increased rainfall which presumably washed feces into the water supply. Household crowding in both urban and rural areas and irritation from smoke in urban areas only tended to bring about febrile respiratory infection.     

Quality Uncertainty as Resolution of the Bertrand Paradox

It is well‐known that product differentiation eliminates the Bertrand paradox (i.e. marginal cost pricing under duopoly). While differentiation is often justified with reference to the consumer's ‘preference for variety’, the conditions under which such a preference is likely to arise are rarely considered. We investigate this question in a setting in which uncertainty about product quality can endogenously generate either convex or non‐convex preferences. We show that even when two goods are ex ante homogeneous, quality uncertainty can eliminate the Bertrand paradox.     

The consequences of managerial indiscretions: Sex,lies, and firm value

Personal managerial indiscretions are separate from a firm's business activities but provide information about the manager's integrity. Consequently, they could affect counterparties’ trust in the firm and the firm's value and operations. We find that companies of accused executives experience significant wealth deterioration, reduced operating margins, and lost business partners. Indiscretions are also associated with an increased probability of unrelated shareholder-initiated lawsuits, Department of Justice and Securities and Exchange Commission investigations, and managed earnings. Further, chief executive officers and boards face labor market consequences, including forced turnover, pay cuts, and lower shareholder votes at re-election. Indiscretions occur more often at poorly governed firms where disciplinary turnover is less likely.     

HETEROGENEITY IN REAL WAGE CYCLICALITY

This paper presents evidence that real wage cyclicality can be a particularly heterogeneous parameter, depending on different worker characteristics and also on the specific stage of the business cycle. Using matched employer–employee panel data for Portugal covering the period 1986–2004, real wages are shown to be considerably more procyclical during recessions than during expansions, resulting in relatively moderate overall levels of cyclicality (about −0.6). However, most of the procyclicality during downturns is shown to be driven by the younger employees, as older workers appear to be insulated from the business cycle. Moreover, movers between firms typically display higher cyclicality than workers that stay in the same firm, regardless of whether the latter move or not between job levels. Most results also hold when considering basic wages instead of total wages, except that the procyclicality of movers during downturns is substantially higher.