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This paper uses a simple model to explore the effects of "increasing demand risk" on business fixed investment. We show that within a putty-clay framework an increase in demand uncertainty can be expected to have two countervailing effects. On the one hand increasing risk tends to induce a firm to increase its capacity, but on the other hand the optimal capital intensity of that capacity decreases.

We investigate how labor and investment demand at the firm level (gross as well as net and replacement investment separately) differs in French, German and U.S. manufacturing, and has changed since the 1974–75 crisis. We use three consistent panel data samples of large firms for 1970–79, and rely on simple models of the accelerator-profits type. We find that the accelarator effects and the profits effects did not vary much between 1970–73 and 1976–79, and were quite comparable in the three countries, the former being of a more permanent nature and the latter more transitory. To a large extent these effects account for the important changes and differences in labor and investment demand between the two subperiods and across the three countries.

In this paper, we present a theoretical model for adjustment costs and investment utilisation that illustrates their causes and types and shows in which phases of an investment they occur. Furthermore, we develop an empirical framework for analysing the size and the timing of adjustment costs and investment utilisation. We apply this methodology to a large panel data set of Danish pig producers with 9,281 observations between 1996 and 2008. The paper further contributes with a thorough discussion of the calculation and deflation of capital input from microeconomic data. We estimate an output distance function as a stochastic frontier model and explain the estimated technical inefficiencies with lagged investments, farm size and age of the farmer. We allow for interaction effects between these variables and derive the formula for calculating the marginal effects on technical efficiency. The results show that investments have a negative effect on farm efficiency in the year of the investment and the year after accruing from adjustment costs. There is a large positive effect on efficiency two and three years after the investment. The farmer’s age and the farm size significantly influence technical efficiency, as well as the effect of investments on adjustment costs and investment utilisation. These results are robust to different ways of measuring capital.

There is a well established theoretical literature about the private individual investment in education decision, based upon the traditional neoclassical literature, dating back to Becker. This framework also addresses the issue of the employer’s investment in training, although it is less successful in capturing decision making in this more complex area. The present paper argues that subsequent developments make this framework seem a little tired, and in need of integrating what other disciplines have say about the employers’ training decision. The authors attempt to present a more wide-ranging and complex theoretical framework, which both economists and other disciplines can associate with, but one that retains the outcomes of the Becker model as special cases. Steps have been taken to begin testing this framework using international comparative data, and some of these results will be presented alongside the theoretical model at the conference (although not currently available for the submission deadline).

Analizamos los efectos del liderazgo en la banca cuando existe competencia oligopólica en el mercado de depósitos. Estos efectos los evaluamos comparando el desempeño de sistemas bancarios que sólo difieren en sus interacciones estratégicas. Específicamente, comparamos los resultados asociados a estrategias de tipo Cournot y Stackelberg (estrategias de competencia simétrica y líder-seguidor). Nuestros principales hallazgos sugieren que hay beneficios privados y sociales asociados al liderazgo. Los resultados sugieren que éste induce altos niveles de depósitos, de retornos y de consumo para los depositantes de largo plazo. Más aún, el liderazgo induce una mayor estabilidad financiera y eficiencia en la banca.

En este artículo desarrollamos un marco microeconómico para estudiar las relaciones entre la privatización, la competencia por depósitos y el desempeño bancarios. Particularmente analizamos la privatización bancaria cuando se permiten estrategias competitivas de los tipos Cournot y Stackelberg. Nuestros hallazgos muestran que ciertas condiciones son necesarias para justificarla bajo los siguientes criterios: (i) eficiencia, (ii) poder de mercado/estabilidad financiera y (iii) disponibilidad de consumo para los depositantes. También muestran que la privatización es relativamente sencilla de justificar cuando se permiten relaciones líder-seguidor en el sistema bancario. Incluso, los ingresos gubernamentales, por privatizar, son más altos cuando existen estas relaciones.

It has long been recognized that the quality of property rights greatly impacts the economic development of a country and the use of its natural resources. Since Long (1975), the conventional wisdom has been that ownership risk induces a firm to overuse the stock of a resource. However, the empirical evidence is mixed. In particular, Bohn and Deacon (2000) finds that weak property rights have an ambiguous effect on present extraction. We provide a theoretical model supporting these mixed observations in a common-pool resource environment. We show that if ownership risk includes a risk of expropriation in which the identities of the excluded firms are unknown ex ante, then the present extraction of all firms may decrease along with a higher risk of expropriation. The elasticity of demand for the resource is key in explaining the effect of ownership risk on present extraction. Common-pool resource, Expropriation, Extraction behavior, Ownership risk, Property rights, Tragedy of the commons.

This paper studies a simple model of experimentation and innovation. Our analysis suggests that patents may improve the allocation of resources by encouraging rapid experimentation and efficient ex post transfer of knowledge across firms. Each firm receives a private signal on the success probability of one of many potential research projects and decides when and which project to implement. A successful innovation can be copied by other firms. Symmetric equilibria (where actions do not depend on the identity of the firm) always involve delayed and staggered experimentation, whereas the optimal allocation never involves delays and may involve simultaneous rather than staggered experimentation. The social cost of insufficient experimentation can be arbitrarily large. Appropriately-designed patents can implement the socially optimal allocation (in all equilibria). In contrast to patents, subsidies to experimentation, research, or innovation cannot typically achieve this objective. We also show that when signal quality differs across firms, the equilibrium may involve a nonmonotonicity, whereby players with stronger signals may experiment after those with weaker signals. We show that in this more general environment patents again encourage experimentation and reduce delays.

In sampling theory the large concentration of the population with respect to most surveyed variables constitutes a problem which is difficult to tackle by means of classical tools. One possible solution is given by cut-off sampling, which explicitly prescribes to discard part of the population; in particular, if the population is composed by firms or establishments, the method results in the exclusion of the “smallest” firms. Whereas this sampling scheme is common among practitioners, its theoretical foundations tend to be considered weak, because the inclusion probability of some units is equal to zero. In this paper we propose a framework to justify cut-off sampling and to determine the census and cut-off thresholds. We use an estimation model which assumes as known the weight of the discarded units with respect to each variable; we compute the variance of the estimator and its bias, which is caused by violations of the aforementioned hypothesis. We develop an algorithm which minimizes the MSE as a function of multivariate auxiliary information at the population level. Considering the combinatorial optimization nature of the model, we resort to the theory of stochastic relaxation: in particular, we use the simulated annealing algorithm.

In this paper, I present empirical evidence for …ve European countries (Germany, France, UK, Spain and Italy) and the Euro-zone on whether monetary policy shocks produce di¤erent e¤ects on real output growth depending on the phase of the business cycle that the economy is undergoing (the socalled ‘state’ asymmetry). To do so, I apply a multivariate extension of the Hamilton(1989)’s Markov switching methodology. I …nd evidence in favour of ‘state’ asymmetries at the aggregate level in all the countries whereby interest-rate shocks have larger e¤ects in recessions than in expansions. I also carry out the analysis at the sectorial level and observe that this asymmetric effect seems to be di¤erent in the analysed countries when I focus on a sectorial analysis.

This paper presents a simple model of the firm life cycle that cap- tures several stylized economic and financial features which usually require considerably more demanding approaches. We study the opti- mal capital accumulation policy of a financially constrained firm whose revenue is subject to an additive shock. Earnings can be paid as div- idends or reinvested with the goal to maximize shareholder value. In our model, the optimal policy of firms is to reinvest earnings (rather than paying dividends) when small, hold precautionary savings, and grow larger than is socially optimal. Smaller firms also have a higher bankruptcy risk and a more volatile market value than larger firms. We observe the leverage effect and excess returns of value stocks. In the presence of business cycles, investment and initial public offer- ings are pro-cyclical, the default probability is counter-cyclical, and monetary policy increases excess capital holdings but otherwise has a negligible impact.

This paper studies the asset pricing implications of a general equi- librium model in which real investment is reversible at a cost. Firms face higher costs in contracting than in expanding their capital stock and decide to invest when their productive capital is scarce relative to the overall capital of the economy. Positive shocks to the capital of the firm increase the size of the firm and reduce the value of growth options. As a result, the firm is burdened with more unproductive capital and its value lowers with respect to the accumulated capital. The optimal consumption policy alters the optimal allocation of re- sources and affects firm's value, generating mean-reverting dynamics