Poor Kids: A Report on Children in Poverty

Media coverage of income inequality and the economic plight of the middle class fails to analyze the long-term effects of growing inequality and to consider possible solutions. The article examines the literature on media coverage of income inequality and the middle class, and then examines how three competing models, the neoclassical economic model, the propaganda model, and the institutionalist model, explain the inadequate coverage of the effects and solutions.     

Rational Addiction and Alcohol Consumption: Evidence from the Nordic countries

The purpose of this paper is to test Becker and Murphy's (1988) rational addiction model on 35 years of time series data on alcohol consumption in each of the four Nordic countries: Denmark, Finland, Norway, and Sweden. The empirical relevance of rational addiction theory is assessed by examining the influence of past and future consumption and contemporaneous prices on current consumption. More precisely, the rational addiction model maintains that past and future consumption should have a positive effect and that current price should have the conventional negative effect on consumption. In addition, some parameter restrictions (regarding past and future prices and consumption) implied by rational addiction are tested. Finally, the own-price elasticities from rational addiction specifications are compared to those obtained from more conventional demand specifications which ignore addiction. Ignoring addiction may provide misleading estimates of the price sensitivity of alcohol consumption and this may, in turn, lead to underestimation of the effects of major changes in price policy such as those currently taking place in the Nordic countries.     

¿Han sido el IBEX35 y el IPC definiciones financieramente eficientes del portafolio de mercado?

The present paper questions the financial efficiency of the most used market portfolio proxies in Spain and Mexico (IBEX35 and IPC) in order to determine if these can be considered a proper market portfolio proxy. The paper questions if they can be used as “neutrals”, according to Black & Litterman (1992) proposals in portfolio management. For this purpose, two discrete event simulations that use the Markowtiz-Tobin-Sharpe-Linter model (Markowitz, 1987, p.5) are performed with monthly data of the stock members of these indices in a February 2001 to December 2010 time window. The results are compared by using the Sharpe ratio (Sharpe, 1966) and show that the equilibrium assumptions in the market do not hold, leading to conclude that these market portfolio proxies are inefficient.     

Spillovers in R&D activities: An empirical analysis of the Nordic countries

This paper analyzes the impact of public research and development (R&D) on private sector output. It is argued that giving away public R&D will increase the input supply of private R&D and, accordingly, will enlarge business sector output. A model based on panel data for all five Nordic countries is estimated by a maximum likelihood procedure allowing for nonlinear relationships. The hypothesis is also tested within a cointegration methodology framework. Evidence is present concerning national spillovers from public R&D to private R&D in Denmark, Finland, and Iceland. For Norway and Sweden, international spillover effects seem to be more dominant. An earlier version of this paper was presented at the International Atlantic Economic Conference, October 7–10, 1999, Montreal, Canada. The authors are grateful to conference discussants and an anonymous referee for useful comments.     

R&D and productivity in Danish firms: some empirical evidence

The aim of the paper is to examine the relationship between R&D capital and productivity using microdata for Danish manufacturing firms. The influence of factors such as ownership, innovative characteristics and source of funding accounted for. The return to accumulated R&D capital is estimated to be in the neighbourhood of 9–12%, whereas the short-run effect of R&D is insignificant. Furthermore, the direct influence from foreign ownership, source of funding accounted for, innovative characteristics and ownership dispersion on productivity are analysed. However, none of the factors seem to have an impact on firm productivity. The same is the case for the indirect influence coming from interaction with accumulated R&D capital.     

Persistence in Corporate Performance? Empirical Evidence from Panel Unit Root Tests

Persistence in corporate performance is analyzed in the framework of empirical tests of unit root behavior concerning firm profits. Data for firm-specific rates of return is applied in a set of panel unit root tests to address the question of persistence in profits both at firm level and for the aggregate level of industry-specific profits. The firm data all reject a null hypothesis of random walk behavior of profits but when smoothing profit rates at a two-digit NACE-code level for industries, the empirical evidence is more mixed as most industries show up with a unit root in aggregate rates of return, i.e. indicating persistence in corporate performance.     

Do firms’ growth rates depend on firm size?

The empirical literature dealing with corporate growth does not in general give support to Gibrat??s Law stating that the expected increase in firm size is proportionate to its initial size, leaving their growth rates independent of size. Using a relatively large and representative sample of approximately 2,500 Danish firms representing all industries, we have evaluated the validity of Gibrat??s Law over the period 1990?C2004. The present analysis addresses this question by applying econometric methods to test Gibrat??s Law and correcting for problems related to autocorrelation. The empirical findings of our study do not generally support Gibrat??s Law, but in contrast to the results of earlier studies, the analysis reveals that firms?? growth rates are more likely to be positively related to firm size.     

Determinants of CEO and Board Turnover

The purpose of this paper is twofold. First, to document changes in top management and board of directors in Danish firms during 1996–98. Second, to examine whether these changes are related to the performance of firms during the preceding years. Our study differs from earlier investigations in that we not only consider removal of CEOs but also turnover of board chairmen and board members. We find that turnovers of CEOs, board chairs and members have a number of common determinants like firm size and age of the firm. Risks of removals increase with lower rates of solvency but are unaffected by profitability changes. The hypothesis that competition increases the turnover risk is not supported by the estimations.