Do Firms Time Their Pollution Abatement Investments Optimally?

In this paper we develop an equilibrium business-cycle model for an economy with both clean and dirty (polluting) plants. We conclude that the best time to implement cleaner production technologies is during a slowdown of the economy. Due to external effects and market failures the timing of pollution abatement investments is not expected to be optimal in the real world. We test the optimality of the timing of those investments with data for Germany, the Netherlands, and the USA. It appears that for more than 25 per cent of the sectors pollution abatement investments show significant counter-cyclical behaviour, while in 10 per cent of the sectors these investments are pro-cyclical.     

The Postal Sector as a Vector of Financial Inclusion

Access to finance has become a major policy issue under the term Financial Inclusion. In this paper, we focus on the role of postal operators in financial inclusion policies. In developing countries, postal firms typically manage a dense network of counters with a unique coverage of rural areas where the banking sector is totally absent. We use a formal location model for postal counters and bank agencies to show that in rural areas a post‐bank partnership can be a vector of financial inclusion and that this can be done profitably.     

EMPLOYMENT PROTECTION,TECHNOLOGY CHOICE,AND WORKER ALLOCATION

We show empirically that high‐risk sectors, which contribute strongly to aggregate productivity growth, are relatively small and have relatively low productivity growth in countries with strict employment protection legislation (EPL). To understand these findings, we develop a two‐sector matching model where firms endogenously choose between a safe technology and a risky technology. For firms that have chosen the risky technology, EPL raises the costs of shedding workers in case they receive a low productivity draw. According to our calibrated model, high‐EPL countries benefit less from the arrival of new risky technologies than low‐EPL countries. Parameters estimated through reduced‐form regressions of employment and productivity on exit costs, riskiness, and in particular their interaction are qualitatively similar for actual cross‐country data and simulated model data. Our model is consistent with the slowdown in productivity in the European Union relative to the United States since the mid‐1990s.     

Environmental taxation and mergers in oligopoly markets with product differentiation

We analyze the effect of mergers on optimal environmental taxation in a Cournot oligopoly market with product differentiation. Our result indicates that the adjustment in emission tax crucially depends on the post-merger output distortion and pollution intensities. Specifically, we find that the optimal emission tax increases post-merger as long as pollution intensity of firms is higher and output distortion smaller post-merger than pre-merger. Furthermore, our result suggests that there is no need to revise environmental policy in markets where pollution intensity of firms does not change post-merger and (i) products are completely differentiated, or (ii) there are many firms for any degree of product differentiation.     

The behaviour of producer prices: evidence from French PPI micro data

This paper provides some new empirical findings for how French producers set prices. We used the micro data that composes the producer and business-service price indices from 1994 to 2005. First we address how producer prices are collected. Then we present the main characteristics of how producers change their prices: they are modified infrequently and in small amounts. Also, a behavioural heterogeneity across sectors is observed. Business-service prices change less often than industrial producer prices. The data corroborates both time and state-dependent model predictions. Taylor contracts are not unusual, but a firm’s prices will also react to its economic situation. Nevertheless, the most relevant models, to explain producer price rigidity, are time-dependent.

“The fact that some prices are rigid or sticky, while others are variable, has attracted a good deal of comments from economists in recent years” Tucker (1938)

This study was conducted in the context of the Eurosystem Inflation Persistence Network. Data were processed under the responsibility of INSEE in the context of an agreement between INSEE and the Banque de France (20B-21B-E301/R05019/2005).     

Strategic bypass deterrence

In liberalized network industries, competitors can either compete for service using the existing infrastructure (access) or deploy their own capacity (bypass). We revisit this make-or-buy problem making two contributions to the literature. First we analyze both the profit maximizing behavior of an incumbent and the welfare maximizing behavior when the entrant chooses between access and bypass. Second, we extend the baseline model studied in the literature by allowing for fixed costs of network installation. By analogy to the literature on strategic entry deterrence, we distinguish three régimes of blockaded bypass, deterred bypass and accommodated bypass depending on the entrant’s unit cost. We show that the make-or-buy decision of the entrant is not necessarily technologically efficient: when bypass is chosen, it is always the cheapest option but access may be chosen when it is not cost effective.     

Price competition under universal service obligations

In industries like telecom, postal services or energy provision, universal service obligations (uniform price and universal coverage) are often imposed on one market participant. Universal service obligations are likely to alter firms' strategic behavior in such competitive markets. In the present paper, we show that, depending on the entrant's market coverage and the degree of product differentiation, the Nash equilibrium in prices involves either pure or mixed strategies. We show that the pure strategy market sharing equilibrium, as identified by Valletti, Hoernig, and Barros (2002), defines a lower bound on the level of equilibrium prices.     

Linking Purchasing to Ethical Decision-Making: An Empirical Investigation

The aim of this study is to examine the decision-making processes at work among French buyers—whether beginners or more experienced individuals, when confronted with a dilemma involving an ethical or non-ethical choice to be made. We go on to illustrate these dilemmas through the use of five original scenarios that reproduce typical situations that arise in a purchasing context in relation to the environment, physical integrity, conflict of interest, or paternalism. Based on 172 participants, the results of our study show that, ethical decision-making depends very clearly on two main factors: expertise and gender. The study also reveals that there is not always a coherent link between ethical choices made and the reasons and justifications given for those choices. Ethical options chosen are not exclusively justified on the grounds of purely ethical reasons but also on the grounds of commercial or economic reasons, or else reasons of avoidance.