Testing the lawyer-induced litigation hypothesis in Europe

Utilizing a European panel dataset, we contribute to the scant empirical literature on the lawyer-induced litigation hypothesis. To address endogeneity problems that arise when estimating the effect of the number of lawyers on civil litigation rates, we use two strategies. We first estimate our model by means of the 2SLS procedure. Second, we exploit the instrumental variable approach based on the linear GMM estimator of Arellano and Bond. The estimations result in a positive and significant effect of lawyers that is robust across the different model specifications and estimation methods in which we address endogeneity. In criminal litigation, where lawyers cannot induce demand, we find no such positive relation between lawyers and litigation.     

Poverty Lines as Context Deflators: A Method to Account for Regional Diversity with Application to the Democratic Republic of Congo

This paper proposes a particular methodology to render budget data more comparable over highly diverse regions. More specifically, a set of regional poverty lines will be derived and employed as deflators to correct household expenditures for spatial differences in prices and needs. The quality of these deflators depends on the extent to which the underlying poverty lines adhere to the principles of consistency and specificity. Central to reconciling both principles in practice is our pursuit for austerity in setting poverty thresholds as well as the view that differences in social norms mainly reflect differences in social inclusion needs. The particularity of the proposed method compared to standard practice lies in the combination of: (i) the pronounced subdivision in socio‐economic strata; (ii) the use of a differential calorie threshold per sector; (iii) the introduction of protein intake; (iv) the derivation of a minimal house rent; and (v) the use of an austere non‐food/non‐housing allowance. The impact of this method is illustrated using a budget survey of the Democratic Republic of Congo.     

Why married women's labor supply in the Netherlands has increased

Summary On the basis of cross-section data sets for 1979 and 1987 we determine: 1) the relative contribution of changes in participation and in hours of work to the increase in married women's labor supply; 2) how much of the change in participation and hours of work is determined by changes in preferences and in budget constraints; and 3) the causes of changes in market wages and reservation wages. The increase in the average unconditional hours of work is much more due to the rise in the participation rate than to the increase in conditional hours of work. Preference changes have contributed positively to the increase in married women's labor force participation over the period 1979–1987, whereas changes in market opportunities have contributed negatively. The change in the market wage and the reservation wage can be attributed mainly to changes in the population structure of married women. Changes in the model structure contributed negatively to the change in the real market and the reservation wage. The positive effect of the change in the population structure dominates the negative effect of the model structure. Finally, participants in the labor market have a comparative wage advantage over non-participants. Non-participants are a self-selecting group with a relatively high reservation wage.We like to thank Joop Hartog, Jules Theeuwes, Isolde Woittiez and two anonymous referees for their comments on a previous draft of this paper.     

The cross-section of stock returns in frontier emerging markets

We are the first to investigate the cross-section of stock returns in the new emerging equity markets, the so-called frontier emerging markets. Our unique survivorship-bias free data set consists of more than 1400 stocks over the period 1997 to 2008 and covers 24 of the most liquid frontier emerging markets. The major benefit of using individual stock characteristics is that it allows us to investigate whether return factors that have been documented in developed countries also exist in these markets. We document the presence of economically and statistically significant value and momentum effects, and a local size effect. Our results indicate that the value and momentum effects still exist when incorporating conservative assumptions of transaction costs. Additionally, we show that value, momentum, and local size returns in frontier markets cannot be explained by global risk factors.     

The welfare effects of innovative pharmaceuticals: an international perspective from the Dutch experience

Policy discussions on new medicines are often focused on cost containment rather than on the benefits they produce, such as health gains and cost savings in other sectors. In this study, we identify systematic differences in policies towards pharmaceuticals between countries and calculate the welfare gains of 39 innovative pharmaceuticals introduced in the Dutch market after 1997. Welfare gains are defined as the difference between the value of a QALY gained by innovative pharmaceuticals and their costs. The review shows that there are systematic differences among pharmaceutical policies and regulations between countries. It is further found that the welfare gains of pharmaceuticals are substantial and amount to €77 per capita per year in the Netherlands. The welfare gains could be higher if institutional barriers for an efficient utilization of innovative pharmaceuticals are removed.     

Novel naval technologies: Sustaining or disrupting naval doctrine

The defense sector is generally known to be simultaneously conservative and enthusiastic about novel technologies. Uptake of new technologies by the military may differ depending on the perceived impact of new technologies. Introduction of technological changes can sustain or disrupt doctrine and (promoters of) new technologies may be met with less or more resistance respectively. We analyzed dynamics in naval innovation cases to investigate how different types of technological change became associated with either sustaining or disruptive doctrinal innovations. In order to analyze dynamics in the cases, an analytical framework was developed which highlighted a set of factors shaping naval innovation processes.     

The <Emphasis Type="Italic">β</Emphasis>-variance gamma model

Kuznetsov (Ann Appl Prob, 2009) introduces a 10-parameter family of Lévy processes for which the Wiener-Hopf factors and the distribution of the running supremum (infimum) can be determined semi-analytically. In this text we will examine the numerical performance of this so-called β-family, both in the equity world and in the field of credit risk. In order to do this, we will calibrate a particular member of this family to a vanilla option surface (by means of the Fast Fourier Transform-technique due to Carr and Madan (J Comput Fin 2(4):61–73, 1999) and use the resulting parameters to determine the prices of a digital down-and-out barrier (DDOB) option, written on the same underlying. In a second experiment, we will try and calibrate the model to some real-life credit default swap (CDS) term structures. The parameters of the model under investigation are chosen such that its Lévy density is approximately equal to that of the famous Variance Gamma (VG) process, which will serve as a benchmark. Hence, the former will be referred to as the β-VG model. The option prices will be determined both semi-analytically [using the formulas derived by Kuznetsov (Ann Appl Prob, 2009)] and through a Monte-Carlo simulation. However, the CDS spreads will only be determined semi-analytically, due to the very close relation between pricing DDOB options and determining the par spread of a CDS. Furthermore, in both cases, the results will be compared with the ones obtained using the VG model [Cf. Schoutens (Lévy processes in finance: pricing financial derivatives, Wiley , Chichester, 2003) and, Cariboni and Schoutens (Levy processes in credit risk, Wiley, Chichester, 2009)]. It will turn out that, w.r.t. vanilla option prices, the β-VG model performs almost identically as the VG model, whereas the semi-analytical expressions by Kuznetsov (Ann Appl Prob, 2009) lead to a (fast and) accurate pricing of DDOB options and CDSs.