BUFFER-STOCK SAVING AND HOUSEHOLDS' RESPONSE TO INCOME SHOCKS

We exploit information on the joint dynamics of household labor income, consumption, and wealth in the Italian Survey of Household Income and Wealth to structurally estimate a buffer-stock saving model. We compare the degree of consumption smoothing implied by the model to the corresponding empirical estimates based on the same data set. We estimate that Italian households smooth 12% of permanent income shocks in the data that is comparable to the model counterpart of 11% . This result contrasts with existing evidence, and our own findings in this article, of substantially more consumption smoothing in U.S. data.     

Systemic liquidity contagion in the European interbank market

Systemic liquidity risk, defined by the International Monetary Fund as “the risk of simultaneous liquidity difficulties at multiple financial institutions,” is a key topic in financial stability studies and macroprudential policy-making. In this context, the complex web of interconnections of the interbank market plays the crucial role of allowing funding liquidity shortages to propagate between financial institutions. Here, we introduce a simple yet effective model of the interbank market in which liquidity shortages propagate through an epidemic-like contagion mechanism on the network of interbank loans. The model is defined by using aggregate balance sheet information of European banks, and it exploits country and bank-specific risk features to account for the heterogeneity of financial institutions. Moreover, in order to obtain the European-wide topology of the interbank network, we define a block reconstruction method based on the exchange flows between the various countries. We show that the proposed contagion model is able to estimate systemic liquidity risk across different years and countries. Results suggest that our effective contagion approach can be successfully used as a viable alternative to more realistic but complicated models, which not only require more specific balance sheet variables with high time resolution but also need assumptions on how banks respond to liquidity shocks.

     

Does Local Co-operation Matter? Evidence from Industrial Clusters in South Asia and Latin America

Comparing the Korean labour productivity growth in the last two decades with the Japanese and US labour productivity growth, data confirm a process of catching up in several important manufacturing sectors. The paper investigates its determinants using a non-neoclassical model. Investments in skills and capabilities are found to be crucial in explaining this trend. Important policy implications for developing countries are then discussed. In the long run, a targeted education policy with government intervention and a strong emphasis on technical education can give high pay-offs. This conclusion holds in particular when the aim of the country is to compete in the international markets, not along the low road to competitiveness, based on squeezing wages and profit margins, but along the high road (i.e. improving productivity, wages and profits).     

Arts Sponsorship Versus Sports Sponsorship: Which Is Better for Marketing Strategy?

This paper identifies the distinctive features of nonprofit arts sponsorship relative to profit driven sports sponsorship and shows that although arts sponsorship has been little researched, it is a potentially important means of marketing. The methodology employed was a literature review on sponsorship that attempted to distinguish arts sponsorship from sports sponsorship. Then, we present the findings from 23 in-depth interviews with arts sponsee managers, to reveal how they see themselves (as sponsees) being differentiated from sports sponsees. The literature and interview findings are brought together in a discussion that highlights the differences between arts sponsorship and sports sponsorship in terms of target audience, the relationship cost/benefit, range of emotions elicited, awareness, marketing metrics, goodwill, and learning potential. Finally, suggestions are made for future research.     

ANXIETY AND PERFORMANCE: AN ENDOGENOUS LEARNING‐BY‐DOING MODEL*

In this article, we show that a standard economic model, the endogenous learning‐by‐doing model, captures several major themes from the anxiety literature in psychology. In our model, anxiety is a fully endogenous construct that can be separated naturally into its cognitive and physiological components. As such, our results are directly comparable with hypotheses and evidence from psychology. We show that anxiety can serve a motivating function, which suggests potential applications in the principal–agent literature.

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Agency and Anxiety

In this paper, we introduce the psychological concept of anxiety into agency theory. An important benchmark in the anxiety literature is the inverted-U hypothesis, which states that an increase in anxiety improves performance when anxiety is low, but reduces it when anxiety is high. We show that the inverted-U hypothesis is consistent with evidence that high-powered incentives can reduce the agent's optimal effort and expected performance. In equilibrium, however, a profit-maximizing principal never offers such counterproductive incentives. We also show that the inverted-U hypothesis can explain empirical anomalies related to monitoring, the informativeness principle, and the risk–reward tradeoff.     

Note on differential weight averaging models in functional measurement

Averaging Models have a large diffusion in several different areas of psychological and social research. They consist of a two parameters representation: a scale value for the subjective location of the stimulus on the response dimension and a weight for its importance in the integrated response. In the present paper we suggest a light but significant modification of the traditional formula used to represent the model in order to make clear some relevant properties of the model, which are essential to obtain unique and unbiased parameter estimations when a differential-weight averaging model is considered. This representation favors a superior understanding of the distinction between scale-values and importance-weights in order to realize what differences in weight could mean when we analyze empirical data coherent with an Averaging Model.