The relationship between earnings' yield,market value and return for NYSE common stocks: Further evidence

The empirical relationship between earnings' yield, firm size and returns on the common stock of NYSE firms is examined in this paper. The results confirm that the common stock of high E/P firms earn, on average, higher risk-adjusted returns than the common stock of low E/P firms and that this effect is clearly significant even if experimental control is exercised over differences in firm size. On the other hand, while the common stock of small NYSE firms appear to have earned substantially higher returns than the common stock of large NYSE firms, the size effect virtually disappears when returns are controlled for differences in risk and E/P ratios. The evidence presented here indicates that the E/P effect, however, is not entirely independent of firm size and that the effect of both variables on expected returns is considerably more complicated than previously documented in the literature.     

ESTIMATING PERSON‐CENTERED TREATMENT (PeT) EFFECTS USING INSTRUMENTAL VARIABLES: AN APPLICATION TO EVALUATING PROSTATE CANCER TREATMENTS

This paper builds on the methods of local instrumental variables developed by Heckman and Vytlacil (1999, 2001, 2005) to estimate person‐centered treatment (PeT) effects that are conditioned on the person's observed characteristics and averaged over the potential conditional distribution of unobserved characteristics that lead them to their observed treatment choices. PeT effects are more individualized than conditional treatment effects from a randomized setting with the same observed characteristics. PeT effects can be easily aggregated to construct any of the mean treatment effect parameters and, more importantly, are well suited to comprehend individual‐level treatment effect heterogeneity. The paper presents the theory behind PeT effects, and applies it to study the variation in individual‐level comparative effects of prostate cancer treatments on overall survival and costs. Copyright © 2013 John Wiley & Sons, Ltd.     

Class struggle and economic fluctuations: VAR analysis of the post-war US economy

Building on Marx’s insights in Chapter 25, Volume I of Capital, an augmented version of the cyclical profit squeeze (CPS) theory offers a plausible explanation of macroeconomic fluctuations under capitalism. The pattern of dynamic interactions that emerges from a 3-variable (profit share, unemployment rate and nonresidential fixed investment) vector autoregression estimated with quarterly data for the postwar U.S. economy is consistent with the CPS theory for the regulated (1949Q4--1975Q1) as well as for the neoliberal periods (starting in 1980 or in 1985). Hence, the CPS mechanism seems to be in operation even under neoliberalism.     

What drives customers toward proximity payment services? An integrated theory of planned behavior perspective

Proximity mobile payment (PMP) services facilitate mobile payments between payer and payee who are at same location thorough a proximity technology such as QR codes, Bluetooth, and near-field communication. It has potential to drastically change consumers' payment methods in developing countries where traditional finance infrastructure is lacking. However, there are various challenges to adopting PMP in such countries. This study aims to explore users' opinions on and motivations for using PMP by proposing an extended theory of planned behavior (TPB) model. It also seeks to resolve inconsistencies in PMP adoption studies regarding the role of user's trust in PMP services. A survey instrument was used to collect data from PMP users in a developing country. The data were analyzed using structural equation modeling. This study highlights trust as a mitigator of the negative effect induced by the perceived risk of using PMP services. It also validates that the TPB, coupled with other contextual factors, explains the adoption of PMP services in developing countries.     

Capital adjustment cost and inconsistency in income‐based dynamic panel models with fixed effects

After the seminal work of Nickell (1981), a vast literature demonstrates the inconsistency of ‘conditional convergence’ estimator in income‐based dynamic panel models with fixed effects when the time horizon (T) is short but the sample of countries (N) is large. Less attention is given to the economic root of inconsistency of the fixed effects estimator when T is also large. Using a variant of the Ramsey growth model with long‐run adjustment cost of capital, we demonstrate that the fixed effects estimator of such models could be inconsistent when T is large. This inconsistency arises because of the long‐run adjustment cost of capital which gives rise to a negative moving average coefficient in the error term. Income convergence will be thus overestimated. We theoretically characterize the order of this inconsistency. Our Monte Carlo simulation demonstrates that the size of the bias is substantial and it is greater in economies with higher capital adjustment costs. We show that the use of instrumental variables that take into account the presence of the negative moving average term in the error will overcome this bias.     

Redistributive innovation policy,inequality, and efficiency

We examine the efficiency and distributional effects of regressive and progressive public R&D policies that target high‐tech and low‐tech sectors using a heterogenous‐agent growth model with in‐house R&D and incomplete capital markets. We find that such policies have important implications for efficiency and inequality. A regressive public R&D investment financed by income tax could boost growth and welfare via a positive effect on individual savings and effort. It could, however, also lower growth and welfare via its effect on the efficiency–inequality trade‐off. Thus, the relationship between public R&D spending and welfare is hump‐shaped, admitting an optimal degree of regressivity in public R&D spending. Using our baseline model, and the US state‐level GDP data, we derive the degree of regressiveness of public R&D investment in US states. We find that US states are more regressive in their R&D investment than the optimal regressiveness implied by our growth model.     

A measure of authorship by publications

Measuring publication success of a researcher is a complicated task as publications are often co-authored by multiple authors, and so, it requires comparison of solo publications with joint publications. In this paper, like Price (1981), we argue for an egalitarian perspective in accomplishing this task. More specifically, we justify the need for an ethical perspective in quantifying academic author by identifying certain ethical difficulties of some popular contemporary indices used for this purpose. And then we show that for any given dataset of research papers, the unique method satisfying the ethical notions of identity independence and performance invariance must be the egaliatarian E-index proposed by Bose, Pal, and Sappington (2010) and Price (1981). In our setting, this egalitarian method divides authorship of joint projects equally among authors and sums across all publications of each author.     

Label performance and the willingness to pay for Fair Trade coffee: a cross‐national perspective

In this paper, we investigate how label information detailing the performance of the Fair Trade labelling programme with respect to coffee affect consumers' willingness to pay in the US and in Germany. We provide respondents (university students in the US and Germany) information regarding the hypothetical benefits of the Fair Trade coffee programme on its intended beneficiaries on the production side [the revenue gains to participating marginal farmers (scope of the programme)] and, using stated preference conjoint methods, test how this performance criterion relates to the willingness to pay for Fair Trade coffee. Our empirical results identify a ‘threshold’ property of performance‐based labels. In effect, the willingness‐to‐pay for performance‐based Fair Trade labelled coffee exhibits an inverted U shape in the sense that the willingness to pay is positively related to the scope of the programme, but only up to a critical level. Thereafter, the willingness to pay declines as the income gains to participating growers increase further. Interestingly, this inverted U property is exhibited by both the US and German respondents with different critical thresholds.     

Efficiency wages,unemployment and international factor movements

This paper examines the implications of unemployment resulting from efficiency wages for international factor movements in a standard Heckscher-Ohlin model where the relative size of the endowments of skilled and unskilled workers and the efficiency wage induced unemployment level in the unskilled labour market are simultaneously determined given the population, supply of capital and its distribution in the economy. Capital in the economy is used only to train individuals for the skilled labour market, where workers are fully employed. It is shown that the optimum labour inflow in the market with domestic distortion and the optimum capital inflow are always positive because they reduce the severity of distortion by raising employment and income for the residents. The income and employment of foreigners also increase. Under this situation the optimum labour or capital outflow on the other hand is always zero. These conclusions directly contradict the result obtained for international factor movements in the presence of exogenously determined unemployment.