Settling the Smoke: Public Policy and Shareholder Wealth in the Cigarette Industry

This article uses daily data on stock returns of five U.S. publicly traded cigarette producers to document the wealth effects of antismoking policies initiated in the period 1964 to 1971. The authors find significant abnormal returns across 23 dates corresponding to important regulatory events. The second-stage estimation shows that wealth effects are also influenced by firm characteristics, such as market share, advertising intensity, percentage of sales of filter-tip cigarettes, percentage of advertising expenditures devoted to TV and radio, and tobacco leaf inventories. Overall, the article estimates that industry losses from antismoking policies amounted to approximately $1.5 billion. (JEL L66 , G14 , I18 )     

The effect of violent crime on sector-specific FDI in Latin America

ABSTRACT

This article looks at the impact of violent crime on FDI into Latin America and the Caribbean during the 1996–2010 period. FDI is disaggregated into primary, secondary and tertiary sectors and three variables related to violent crime are used: homicides, crime victimization and organized crime. Controlling for institutions and the traditional determinants of FDI, we find that the impact of crime on FDI depends on the sector and types of crime considered. Higher homicide rates are associated with less FDI in the secondary sector while organized crime reduces tertiary sector FDI. Crime victimization has a robust significant negative impact on the tertiary sector and in some estimations of the secondary sector. Crime has no impact on primary sector FDI. Our study highlights the need to continue efforts to decrease crime as we show in our analysis that crime has a negative effect on FDI in the secondary and tertiary sector.     

Regional Trade Agreements and the Pattern of Trade: A Networks Approach

This paper uses a complex network approach for the analysis trade effects from regional trade agreements on world trade flows. We use bilateral trade data to compute the network community structure for every year between 1970 and 2000. We compare this to null community structures that emerge from various models based on regional and geographical classifications, the implementation of RTA's and gravity models of trade. Our results show that RTA formation appears to have a cyclical pattern on the world trade network community structure. We document periods where bilateral trade flows and the structure of the world trade network are consistent with those predicted by formation of RTAs. These cycles occur in 1980–86 and 1990–96. At the same time, we document periods in which the pattern in the world trade network is not explained by RTA formation. Two periods, 1986–90 and 1997–2000, show a pattern of bilateral trade flows that moves away from the prediction that results from assuming RTA formation as the driving force in the determination of the world trade network structure. Factors contributing to the latter parts of the cycle during our sample period include formation of regional trade networks in East Asia that account for a significant portion of world trade but are not formalised by RTAs in force.     

Recent Developments at DG Competition: 2018/2019

Review of Industrial Organization - The Directorate General for Competition at the European Commission enforces competition law in the areas of antitrust, merger control, and state aids. This...     

Identifying technological capabilities with different degrees of coherence: The challenge to achieve high technological sophistication in latecomer software companies (based on the Bulgarian case)

The paper introduces the notion of coherence of technological capabilities. It argues that in analysing technological capabilities (TC) the analysis needs to go beyond investigation of constituent capabilities and should take into account the level of coherence among the constituent capabilities. The phenomenon of different degree of coherence of TC is detected while exploring the TC in Bulgarian software companies. Significant differences emerge between the TC of domestic-oriented vs. export-driven companies in the accumulation of constituent capabilities. But it is the analysis of the coherence of TC, which proved capable to capture the real differences in capability accumulation: strong coherence occurs only in ‘export’ TC. This analysis revives the debate about possibilities for leapfrogging by latecomers by developing software industries. Based on the results the study revises the ‘walking on two legs’ hypothesis and also points that the optimistic forecasts about the possibilities for leapfrogging by the latecomer countries by developing indigenous software industries might have been overestimated.