THE EXTENDED ECONOMETRIC INPUT–OUTPUT MODEL WITH HETEROGENEOUS HOUSEHOLD DEMAND SYSTEM

This paper proposes an extension to the regional econometric input–output model (REIM) [Conway, R.S. (1990) The Washington Projection and Simulation Model: A Regional Interindustry Econometric Model. International Regional Science Review, 13, 141–165; Israilevich, P.R., G.J.D. Hewings, M. Sonis and G.R. Schindler (1997) Forecasting Structural Change with a Regional Econometric Input–Output Model. Journal of Regional Science, 37, 565–590]. We integrate a demand system with age and income parameters into the REIM. The extended model thus addresses concerns about the effects of household heterogeneity. The initial testing is conducted with a model for the Chicago metropolitan area. First, using aggregate expenditure data by income and age groups, the almost ideal demand system with group fixed effects is constructed. Next, the estimated demand system is linked to the REIM to reflect long-term changes in the age and income distribution of households. The long-range simulation from the extended model takes into account structural changes in expenditure type stemming from changing demographic composition. The extended model further broadens the scope of impact analysis under various scenarios associated with age and income changes.     

Horizontal mergers and product quality

We study the effects of a horizontal merger when firms compete on price and quality. In a Salop framework with three symmetric firms, several striking results appear. First, the merging firms reduce quality but possibly also price, whereas the outside firm increases both price and quality. As a result, the average price in the market increases, but also the average quality. Second, the outside firm benefits more than the merging firms from the merger, and the merger can be unprofitable for the merger partners, i.e., the “merger paradox” may appear. Third, the merger always reduces total consumer utility (though some consumers may benefit), but total welfare can increase due to endogenous quality cost savings. In a generalized framework with n firms, we identify two key factors for the merger effects: (i) the magnitude of marginal variable quality costs, which determines the nature of strategic interaction and (ii) the cross‐quality and cross‐price demand effects, which determines the intensity of price relative to quality competition. These findings have implications for antitrust policy in industries where quality is a key strategic variable for the firms.     

Functional income distribution and growth in Thailand: A post Keynesian econometric analysis

The aim of this article is to analyze the effect of the income distribution between labor and capital on the growth performance of Thailand from a post Keynesian view. It rests on the theoretical model of Bhaduri and Marglin (1990 Bhaduri, A., and Marglin, S. “Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies.” Cambridge Journal of Economics, December 1990, 14 (4), 375–393.[Crossref], [Web of Science ®] , [Google Scholar]) to see if an increase in the labor income share has a sufficient positive effect on consumption to offset a negative effect on investment and export demand. In order to investigate the question empirically we adopt and develop the approach of Stockhammer, Onaran, and Ederer (2009 Stockhammer, E.; Onaran, Ö.; and Ederer, S. “Functional Income Distribution and Aggregate Demand in the Euro-area.” Cambridge Journal of Economics, 2009, 33 (1), 139–159.[Crossref], [Web of Science ®] , [Google Scholar]). Several measures of the labor income share are calculated to take into account the fact that wage labor represents only half of the total labor force and check the robustness of our results. We also introduce a new treatment of external trade to better integrate the price competitiveness of Thailand. The econometric investigation shows that the growth regime is profit-led over the period 1970–2011, which shows that rebalancing the Thai economy will be difficult and requires an overall change of strategy going beyond a simple prolabor policy.     

Income segregation and local progressive taxation: Empirical evidence from Switzerland

This study investigates spatial income segregation in fiscally decentralized urban areas. The theoretical part proposes the progressivity of local income taxes as a new theoretical explanation for income segregation. The empirical part studies how income tax differentials across municipalities affect the households' location decisions. I use data from the Swiss metropolitan area of Basel that contains tax information on all moving households in 1997. The location choice of the households is investigated within the framework of the random utility maximization model. Different econometric specifications of the error term structure, such as conditional logit, nested logit and multinomial probit, are compared. The empirical results show that rich households are significantly and substantially more likely to move to low-tax municipalities than poor households. This result holds after controlling for alternative explanations of segregation. Social interactions and distance from the central business district are established as other major factors for income segregation. Households in general tend to choose locations close to other households like themselves.     

Quality in reflective thinking: elicitation and classification of reflective acts

The concept of reflective thinking needs to be instantiated for more effective educational implementations and practice in the process of thinking and learning. This article therefore expounds on the elicitation and classification of the Reflective Acts derived primarily from various studies conducted on reflective practice, student reflections and metacognition. In order to elicit and classify the Reflective Acts, the study employed three sequential phases of analyses: qualitative meta-analysis, purport analysis and Intention Clustering Method. As a result, 17 types of reflective acts were identified and classified into four main categories: Interpretive, Associative, Transformative and Affective. It is concluded in the article that through the presence and awareness of Reflective Acts, the concept of reflective thinking will be better comprehended, perceived and retained, engendering the process of reflective thinking into a straightforward practice to guide individuals to perform structured, efficacious and successful reflective acts in order to improve the quality of their reflective thinking and learning.     

How Do Financial Constraints Relate to Financial Reporting Quality? Evidence from Seasoned Equity Offerings

This paper examines how constraints on firms’ financing capacity relate to managers’ discretionary accounting choices. Three hypotheses of earnings management – the opportunism hypothesis, the rational expectations hypothesis, and the signaling hypothesis – predict that constrained firms engage in greater upward earnings management than unconstrained firms when selling equity. Using a sample of seasoned equity offerings (SEOs) announced between 1983 and 2014, I find support for this prediction. The relation between financial constraints and earnings management is robust to including controls such as offer size, growth opportunities, analyst following, and chief executive officer equity holdings, as well as to using the instrumental variable approach. Investors’ reaction around and following the SEO announcement supports the rational expectations hypothesis. I find that aggressive earnings management by constrained issuers is associated with lower SEO announcement returns but is not followed by negative abnormal returns in the long run. The evidence suggests that constrained issuers’ aggressive use of income-increasing accruals is an outcome of managerial myopia caused by capital market pressure, not managerial opportunism intended to mislead investors.     

Building a financial sector in Central and Eastern Europe

The public mission of the European Bank for Reconstruction and Development (EBRD) is to foster the transition toward an open, market‐oriented financial sector. It combines private‐sector principles in making investments, building institutions, privatizing banks, and raising equity with policy dialogue with all stakeholders, lawmakers, central banks, regulators, shareholders, and clients. Wellstructured creative individual projects, tailor‐made for the specific situation and executed in a pragmatic and successful way, provide a strong demonstration effect to market participants. Today the financial sector in Central and Eastern Europe is sound, competitive, and provides the fuel for sustained economic growth. Challenges remain, however. © 2008 Wiley Periodicals, Inc.     

Internet Based Benchmarking

We discuss the design of interactive, internet based benchmarking using parametric (statistical) as well as non-parametric (DEA) models. The user receives benchmarks and improvement potentials. The user is also given the possibility to search different efficiency frontiers and hereby to explore alternative improvement strategies. Implementations of both a parametric and a non-parametric model are presented.