Exact arbitrage, well-diversified portfolios and asset pricing in large markets

For a market with an atomless continuum of assets, we formulate the intuitive idea of a “well-diversified” portfolio, and present a notion of “exact arbitrage”, strictly weaker than the more conventional notion of “asymptotic arbitrage”, and necessary and sufficient for the validity of an APT pricing formula. Our formula involves “essential” risk, one based on a specific index portfolio constructed from factors and factor loadings that are endogenously extracted to satisfy an optimality property involving a finite number of factors. We illustrate how our results can be translated to markets with a large but finite number of assets.     

Is there really a gap between aggregate productivity and technology?

The important contribution by Basu and Fernald (2002 Basu, S and Fernald, JG. 2002. Aggregate productivity and aggregate technology. European Economic Review, 46: 963–91.  [Google Scholar]) shows that, in practice, there is a statistically significant gap between aggregate productivity and technology that can be attributed to inefficient product and labour markets. This is important, as it implies that the Solow residual is an imperfect index for aggregate technology change. We take a related approach and find that when we control for capacity utilization, time varying markup and account for externalities between industries, by employing a superior system estimator, the gap between the aggregate productivity and technology is shown to narrow considerably.     

An Empirical Analysis of the Determinants of Foreign Aid: A Panel Approach

This paper uses a panel approach to examine the determinants of foreign aid. It examines the extent to which taxes on international trade and the scope of government activities, ethnicity, private credit, and education determine foreign aid. The paper specifies and estimates a model that explains the allocation of foreign aid among 151 countries over the period 1975 to 1998. The key empirical finding suggests that Taxes on Trade increases foreign aid dependency. Moreover, trade, private credit, foreign direct investment, GDP per worker, and government consumption are important determinants of foreign aid. The factors that appear to decrease foreign aid include: Years of schooling, private credit, trade, and GDP per worker. The factors that appear to increase foreign aid include: Taxes on international trade, ethnicity, and government consumption.     

The dominant borrower syndrome

The financing channel of a fiscal stimulus matters for the size and the sign of the fiscal multiplier. We develop a general equilibrium model where a fiscal stimulus is partially bank-funded and the government becomes the dominant borrower from banks relative to entrepreneurs. This leads to a negative impact on credit spreads, investment and a contraction in output. We support our story with a structural vector autoregression for a sample of developing countries featuring the dominant borrower syndrome.     

European integration, productivity growth and real convergence

This paper derives a stochastic endogenous growth model to investigate the impact of European Union (EU) integration on convergence and productivity growth. The theoretical model implies both temporary and permanent positive effects of the integration process. The empirical part of the analysis uses structural break tests and data envelopment analysis to examine the accession process of five recent members to the EU15. The results show (i) endogenously identified accession dates as structural breaks, (ii) improved rates of productivity growth after accession over and above the Union benchmark level, and (iii) increased pace of overall growth due to capital accumulation as a result of institutional features of the Union such as Structural and Cohesion Funds. These findings support the theoretical model, implying that economic integration is beneficial for member countries, especially from a long-run perspective, and Cohesion and Structural funds help the new members catch up with the core-EU members’ standard of living.     

Spatial patterns and economic contributions of mining and tourism in biodiversity hotspots: A case study in China

Mining activities and tourism are both growing fast in biodiversity intense areas globally. However, the dynamic and interactions between mining and tourism when they both occur in biodiversity hotspots, and how they together may impact the economy and environment in these biodiversity rich areas, remain unclear. This paper examined how the two industries interact in terms of their economic contributions and spatial patterns in a biodiversity hotspot, Yunnan, China. We used correlation analyses to measure the relationships between mining activities, tourism visits and local gross domestic productions. We also employed a distance-based technique to investigate the nature of any dependency between mining and tourism sites. Results showed that mining activities tend to be in relatively fluent areas while tourism tends to occur in less developed areas. Our results showed that the location of tourism and mining sites are likely to be close to one another but the two industries usually perform better economically when they are apart from each other. These findings can provide insights on how mining and tourism together may impact the economy and environment in biodiversity rich areas, and provide important information for managers and planners on balancing mining and tourism development in these areas.     

Knowledge spillovers through FDI and trade: the moderating role of quality-adjusted human capital

The paper extends the findings of the Coe and Helpman (Eur Econ Rev 39(5):859-887, 1995) model of R&D spillovers by considering foreign direct investment (FDI) as a channel for knowledge spillovers in addition to imports. Deeper insights on the issue are provided by examining the inter-relationship between knowledge spillovers from imports and inward FDI. Furthermore, human capital is added to the discussion as one of the appropriability factors for knowledge spillovers, with special focus on its quality-content, using journal publications and patent applications. Applying cointegration estimation method on 20 European countries from 1995 to 2010, the direct effects of FDI-related as well as import-related spillovers on domestic productivity are confirmed. Furthermore, a strong complementary relationship is found between knowledge spillovers through the channels of imports and inward FDI. When considering quality-adjusted human capital, countries with better human capital are found to benefit not only from direct productivity effects, but also from absorption and transmission of international knowledge spillovers through imports and inward FDI. Finally, technological distance with the frontier does not appear to play a role in the absorption of import and FDI related knowledge spillovers.     

Religious Perceptions and Hegemony on Tourism Development: the Case of the Islamic Republic of Iran

This paper highlights tourism development constraints with regard to religious perceptions in a religion‐dominated country, Iran. The ruling class does not want to discount any of the fundamental social and cultural values in the process of preparing strategies for national tourism development plans. Countries such as Iran, concerned about potential negative influences of tourism development, de‐emphasize potential positive economic impacts. In post‐revolutionary Iran, tourism development and promotion follow unique, religiously‐based strategies. The current five‐year development plan is a first step towards a transition to the recognition of the importance of tourism for economic development and improved international relations. Copyright © 2014 John Wiley & Sons, Ltd.     

Market Orientation,Strategy and Revenue Growth in the Turkish Hotel Industry

This empirical analysis of hotel properties in south-western Turkey draws on the market orientation, strategy, and capabilities literature to highlight the benefits of a differentiation strategy and customer-value focus for competitors in this industry. Relationship management and organizational resource management are key drivers of sales growth in this industry, and hotel operators facing high competitive intensity are particularly encouraged to develop these capabilities and to adopt a differentiation strategy instead of resorting to price cutting and other pricing and promotional tactics to grow revenues. Notable opportunities for future research include examining relationships between market orientation, customer satisfaction, and employee satisfaction in the Turkish hotel industry.