Taxation and Durable Goods Monopoly*

This paper studies the role of taxation in durable good markets with dynamic monopolies. By conditioning the marginal tax rate on the volume of trade, the regulator can provide incentives for the monopolist to accelerate trade. When marginal cost pricing generates a loss for the monopolist, strategic delay cannot be avoided under regulatory budget constraint and the effects of tax policy depend on the monopolist's ability to commit. In the context of binary consumer types, we find a tax policy involving “back-loaded subsidy” that achieves the second-best outcome with commitment. In contrast, without commitment, a “front-loaded subsidy” improves welfare.     

WHAT MAKES INTERNATIONAL CAPITAL FLOWS PROMOTE ECONOMIC GROWTH? AN INTERNATIONAL CROSS‐COUNTRY ANALYSIS

This paper re‐examines the relationship between international capital flows and economic growth within the context of various ‘conditional factors’ that possibly have the potential to influence such relationships. It achieves this by employing panel data for 80 countries that cover 1976–2007. International capital inflow is broken down into foreign direct investments (FDI) and foreign portfolio investments (FPI). We find interesting evidence that only FDI has a positive effect on growth and that FPI has an unfavorable, if not negative, effect on growth. The conditional variables of banking liberalization, high‐income level, twin crises, lower corruption, and human capital mitigate the positive impacts of FDI on growth. In contrast, the middle‐income level and good shareholder protection have a positive effect. As concerns FPI, the level of financial liberalization, being in a Latin American region, the wealth of countries, and market governance all influence the way that FPI affects growth, whereas the conditional variables of twin crises and human capital do not influence the effect of FPI on economic growth.     

Treatment effect analysis of early reemployment bonus program: panel MLE and mode-based semiparametric estimator for interval truncation

We use Korean data to find the effects of Early Reemployment Bonus (ERB) on unemployment duration; ERB is a bonus that the eligible unemployed receive if they find a job before their unemployment insurance benefit expires. A naive approach would be comparing the ERB receiving group with the non-receiving group, but the ERB receipt is partly determined by the unemployment duration itself (thus, an endogeneity problem). Interestingly, there were many individuals who did not receive the ERB despite being fully eligible, and this is attributed to being unaware of the ERB scheme. Taking this as a ??pseudo randomization??, we construct treatment and control groups using only the eligible. Our data set is an unbalanced panel with the response variable interval-truncated due to eligibility requirement of the ERB. We propose a panel random-effect MLE and a semiparametric ??mode-based?? estimator for the interval-truncated response. Our empirical finding is that the effect varies much, depending on individual characteristics. As for the mean effects, whereas the MLE indicates large duration-shortening effects, the semiparametric estimator shows much weaker and mostly insignificant effects.     

Dynamic modelling of real estate investment trusts and stock markets

Taiwan launched the first case of real estate securitization in 2005. The interrelationship between Taiwan Real Estate Investment Trusts (T-REITs) and the aggregate equity markets and segmented industries has drawn the interests of both investors and academia. This paper employs Toda and Yamamoto's (1995) procedure and the generalized impulse response approach to uncover the extent and the magnitude of the relationship between T-REITs and aggregate and segmented stock prices. We collected daily data of the first two issued T-REITs, Fubon No.1 and Cathay No. 1, from March 2005 to March 2010 and October 2005 to March 2010, respectively, to examine their causal relationships with aggregate stock markets, the financial sector, and the construction sector. The empirical results indicate that all variables have break points, reflecting shocks from the Subprime Mortgage Crisis or deregulation of the Qualified Domestic Institutional Investors (QDII) for Mainland Chinese to invest in Taiwan. We also discover that an individual T-REIT may lead or lag behind stock price indices due to its capitalization scale or business type. The transitory initial impacts of innovations in T-REITs on stock price indices are observed herein.     

Damage Estimation and Its Accuracy Antitrust Policy Implication *

This paper empirically estimates antitrust damage based on the rich information on cost factors in the bid-rigged Texas school milk market. Empirical results demonstrate that damage estimate by antitrust agency is a significantly underestimated amount of the true damage. This understatement of true harm inevitably includes implementation biases in the antitrust system. [K21, L13, L40]     

R&D investment decision and optimal subsidy

This article assumes that a firm facing technological uncertainty must decide whether to purchase R&D capital at each instant. R&D capital exhibits both irreversibility and externality through the learning‐by‐doing effect. The combination of irreversibility and uncertainty drives agents to be more prudent; the maxim 'better safe than sorry' applies. This maxim is more important if uncertainty is greater, technology progresses at a lower pace, the externality is stronger, or a catastrophic event is less likely to occur. A firm ignoring the externality will both invest later and disinvest earlier than a social planner who internalizes the externality. An equal rate of investment tax credits should be given to both costlessly reversible investments and irreversible ones, and the same rate of taxation should be imposed on disinvestment.     

What Drives Target Price Forecasts and Their Investment Value?

This paper examines the informativeness of analysts’ target price forecasts by relating the investment value of target prices to their primary drivers. Decomposing target price forecasts into near‐term earnings forecasts and price‐to‐earnings ratio forecasts, we show that target price revisions reflect information from both components. In addition, we also find that the relative importance of each component in target price revisions is related to firm characteristics. A portfolio based on target price implied expected returns delivers significant abnormal returns. More importantly, we find that the abnormal returns are associated with both earnings and price‐to‐earnings forecasts, which suggests that the informativeness of target price forecasts comes not only from analysts’ ability to forecast short‐term earnings but also from their ability to assess risk and long‐term growth prospect implied in price‐to‐earnings forecasts.     

Transnational HR network learning in Korean business groups and the performance of their subsidiaries

This study explores (1) how two distinct dimensions of transnational human resources (HR) network learning, i.e. globally linked and locally leveraged learning, are related to the performance of the foreign subsidiaries of Korean business groups (chaebols) and (2) how strategic HR learning mediates the relationship between these two dimensions of transnational HR network learning and the performance of foreign subsidiaries. We propose that each dimension of transnational HR network learning is related independently and jointly to the performance of a chaebol's foreign subsidiaries. Our results suggest that locally leveraged HR learning has a stronger relationship with the performance of sales subsidiaries, whereas globally linked HR learning has a stronger relationship with the performance of manufacturing subsidiaries. In addition, we find that the interaction between the two dimensions of transnational HR network learning has a weaker positive relationship with the performance of foreign manufacturing subsidiaries than that of foreign sales subsidiaries.     

Lose weight for a raise only if overweight: Marginal integration for semi‐linear panel models

Some studies have shown that body mass index (BMI), weight (kg)/height (m)², has a negative (or no) effect on wage. But BMI representing obesity is a tightly specified function of weight and height, and there is a room for weight given height (i.e. obesity given height) to better explain wage when the tight specification gets relaxed. In this paper, we address the question of weight effect on wage given height, employing two‐wave panel data for white females and adopting a semi‐linear model consisting of a nonparametric function of weight and height and a linear function of the other regressors. We find that there is no weight effect on wage up to the average weight, beyond which a large negative effect kicks in. Linear BMI models give the incorrect impression of the presence of a ‘wage gain’ by becoming slimmer than the average and of a ‘wage loss’ that is less than what it actually is when going above the average. Copyright © 2010 John Wiley & Sons, Ltd.     

Control Function Approach for Partly Ordered Endogenous Treatments: Military Rank Premium in Wage

In treatment effect analysis, there are many cases where the treatment of interest is ordered (e.g. general‐education years or medicine doses) and the control treatment is not zero, but a different type of treatment (a vocational training or a surgery). We develop an approach to find effects of partly ordered treatments, while correcting for possible treatment endogeneity with nearly parametric control functions. We use this control function approach, along with its supplementary version, to estimate effects of military ranks (ordered treatments) on wage relative to non‐veteran status (control treatment) with the Wisconsin Longitudinal Study data. In our empirical analysis, the military rank effects differ much: officer has large positive effects, but enlisted ranks have small or no effects.