Populism and the return of the “Paranoid Style”: Some evidence and a simple model of demand for incompetence as insurance against elite betrayal

We present a simple model of populism as the rejection of “disloyal” leaders. We show that adding the assumption that people are worse off when they experience low income as a result of leader betrayal (than when it is the result of bad luck) to a simple voter choice model yields a preference for incompetent leaders even if all leaders have the same underlying probability of betrayal. These deliver worse material outcomes in general, but they reduce the feelings of betrayal during bad times. Some evidence consistent with our model is gathered from the Trump–Clinton 2016 election: on average, subjects primed with the importance of competence in policymaking decrease their support for Trump, the candidate who scores lower on competence in our survey (even amongst Trump supporters). But two groups respond to the treatment with a large (approximately 5 percentage points) increase in their support for Donald Trump: those living in rural areas and those that are low educated, white and living in urban and suburban areas.     

Risk management and value creation: new evidence for Brazilian non-financial companies

The practice of financial risk management with derivatives has received attention both from the academia and the market. In Brazil, there is a growing use of these instruments by companies, in line with the growth of such market in the global economy. This article aims to investigate the relationship between the financial risk management and the value creation to the shareholder for non-financial Brazilian companies. The sample was made up of 1794 firm-year observations from 2006 to 2014. Results obtained via panel data, including the GMM, point out that companies which used derivatives did not add value during the period analysed. An explanation for this result is that most of the companies use derivatives in order to manage the cash flow and not to add value.     

Using mean-Gini and stochastic dominance to choose project portfolios with parameter uncertainty

Although a variety of models have been studied for project portfolio selection, many organizations still struggle to choose a potentially diverse range of projects while ensuring the most beneficial results. The use of the mean-Gini framework and stochastic dominance to select portfolios of research and development (R&D) projects has been gaining attention in the literature despite the fact that such approaches do not consider uncertainty regarding the projects’ parameters. This article discusses, with relation to project portfolio selection through a mean-Gini approach and stochastic dominance, the impact of uncertainty on project parameters. In the process, Monte Carlo simulation is considered in evaluating the impact of parametric uncertainty on project selection. The results show that the influence of uncertainty is significant enough to mislead managers. A more robust selection policy using the mean-Gini approach and Monte Carlo simulation is proposed.     

INTERNATIONALIZATION STRATEGIES IN OLIGOPOLY WITH HETEROGENEOUS FIRMS

This paper examines the foreign direct investment (FDI) versus exports decision of foreign oligopolistic firms under cost heterogeneity. An additional motivation for firms to invest abroad is the technological sourcing via spillovers, which flow from the host more efficient firm to foreign less advantaged firms. For intermediate values of the set‐up costs associated with FDI entry, it is shown that foreign firms choose opposite entry strategies. An equilibrium where the less efficient foreign firm exports whereas the more efficient invests is more likely to happen when foreign firms become more heterogeneous, the larger the trade costs and not too big oligopolistic profitability. Interestingly, the opposite may also be an equilibrium thus finding that the more efficient firm does not choose to invest, a result that emphasizes the relevance of the strategic setting under consideration. The latter result identifies a market failure since welfare in the host market is higher when both firms undertake FDI; a finding that calls attention to how appropriate are host government policies towards internationalization strategies.     

Anger and Regulation

We study a model in which agents experience anger when they see a firm that has displayed insufficient concern for the welfare of its clients (i.e., altruism) making high profits. Regulation can increase welfare, for example, through fines (even with no changes in prices). Besides the standard channel (i.e., efficiency), regulation affects welfare through two other channels. (i) Regulation calms down existing consumers, because a reduction in the profits of an unkind firm increases total welfare by reducing consumer anger. (ii) Individuals who were out of the market when they were angry in the unregulated market decide to purchase once the firm is regulated.     

Affective commitment and future purchase intentions in the performing arts: An empirical approach

We examine whether affective commitment can influence customers' future purchase intentions. Our empirical approach focuses on the performing arts sector in which we interviewed 927 theatregoers at the entrances or exits to 150 theatres throughout Spain. The theoretical relationship management model proposed herein provides an analysis of the role played by satisfaction, trust, and commitment in future purchase intentions. Our findings reveal that affective commitment mediates the relationship between future purchase intention and both satisfaction and trust. We discuss the theoretical and management implications of our findings and identify some possible future research directions. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd.     

A Simultaneous-Equations Model of Trade, Conflict, and Cooperation

A simultaneous-equations model is developed for the reciprocal relationship among bilateral trade value, conflict, and cooperation by modeling the actions of exporters, importers, and governments. The model is estimated separately for each of the dyads among the US, the USSR, China, Japan, and (West) Germany for the yearly data from 1948 to 1992. The direction of the effects of conflict or cooperation on trade and that of trade on conflict or cooperation are generally mixed, as expected. Certain reciprocal relationship patterns emerge depending on whether countries belong to the East or West block.     

Europe vs America: Institutional hysteresis in a simple normative model

We show how the differences in US and European institutions can arise in a normative model. The paper focuses on the labor market and the government's decision to set unemployment benefits in response to an unemployment shock. The government balances insurance considerations with the tax burden of benefits and the possibility that they introduce adverse “incentive effects” whereby benefits increase unemployment. It is found that when an adverse shock occurs, benefits should be increased most when the adverse incentive effects of benefits are largest. Adjustment costs of changing benefits introduce hysteresis and can help explain why post-oil shock benefits remained high in Europe but not in the US. Desirable features of the model are that we obtain an asymmetry out of a symmetric environment and that the mechanism yielding hysteresis is both simple (requires the third derivative of the utility function to be non-negative) and self-correcting. Empirical evidence concerning the role of corporatism is discussed.     

Macroeconomic performance and convergence in OECD countries

This paper investigates the robustness of the correlation between growth and a set of variables which comprises accumulation rates in human and physical capital and medium term macroeconomic indicators in OECD countries. We include these variables as additional regressors in the standard growth equation that comes from the human capital-augmented Solow model. Our results show that variables related to medium term macroeconomic performance affect both growth and convergence. In some periods these variables even outperform the explanatory power of the conventional growth variables such as the accumulation rates. Our results also suggest that it is difficult to analyse the contribution to growth of any particular macroeconomic indicator in an isolated way. Rather, these effects should be studied in a framework that accounts for the macroeconomic performance of a country.