Showing papers by "Libera Università Internazionale degli Studi Sociali Guido Carli published in 2008"

Uncertainty and the market valuation of R&D within a real options logic

Abstract: The aim of this study is to provide new theoretical insights and empirical evidence on the effect of market and technological uncertainty on the market valuation of a firm's R&D capital. A set of hypotheses is developed adopting a real options logic and tested on a panel dataset of 290 manufacturing firms traded in the UK. Consistently with our theoretical model, we show that market and technological uncertainty have distinct effects on the valuation of R&D investments. The results have several important implications for resource allocation to R&D under uncertainty, which we discuss in the concluding section. Copyright © 2008 John Wiley & Sons, Ltd.

Oil Price Dynamics and Speculation: A Multivariate Financial Approach

Abstract: This paper assesses empirically whether speculation affects oil price dynamics. The growing presence of financial operators in the oil markets has led to the diffusion of trading techniques based on extrapolative expectations. Strategies of this kind foster feedback trading that may cause large departures of prices from their fundamental values. We investigate this hypothesis using a modified CAPM that follows Shiller (1984) and Sentana and Wadhwani (1992). At first, a univariate GARCH(1,1)-M is estimated assuming that the risk premium is a function of the conditional oil price volatility. The single factor model, however, is outperformed by the multifactor ICAPM (Merton, 1973) which takes into account a larger investment opportunity set. The analysis is then carried out using a trivariate CCC GARCH-M model with complex nonlinear conditional mean equations where oil price dynamics are associated with both stock market and exchange rate behavior. We find strong evidence that oil price shifts are negatively related to stock price and exchange rate changes and that a complex web of time varying first and second order conditional moment interactions affect both the CAPM and feedback trading components of the model. Despite the difficulties, we identify a significant role of speculation in the oil market which is consistent with the observed large daily upward and downward shifts in prices. A clear evidence that it is not a fundamentals-driven market. Thus, from a policy point of view - given the impact of volatile oil prices on global inflation and growth - actions that monitor more effectively speculative activities on commodity markets are to be welcomed.

A spatially filtered mixture of β-convergence regressions for EU regions, 1980–2002

Abstract: Assessing regional growth and convergence across Europe is a matter of primary relevance. Empirical models that do not account for structural heterogeneities and spatial effects may face serious misspecification problems. In this work, a mixture regression approach is applied to the β-convergence model, in order to produce an endogenous selection of regional growth patterns. A priori choices, such as North–South or centre-periphery divisions, are avoided. In addition to this, we deal with the spatial dependence existing in the data, applying a local filter to the data. The results indicate that spatial effects matter, and either absolute, conditional, or club convergence, if extended to the whole sample, might be restrictive assumptions. Excluding a small number of regions that behave as outliers, only a few regions show an appreciable rate of convergence. The majority of data show slow convergence, or no convergence at all. Furthermore, a dualistic phenomenon seems to be present inside some States, reinforcing the “diverging-convergence” paradox.

Pension Funds with a Minimum Guarantee: A Stochastic Control Approach

Abstract: In this paper we propose and study a continuous time stochastic model of optimal allocation for a defined contribution pension fund with a minimum guarantee. Usually, portfolio selection models for pension funds maximize the expected utility from final wealth over a finite horizon (the retirement time), whereas our target is to maximize the expected utility from current wealth over an infinite horizon since we adopt the point of view of the fund manager. In our model the dynamics of wealth takes directly into account the flows of contributions and benefits and the level of wealth is constrained to stay above a solvency level. The fund manager can invest in a riskless asset and in a risky asset but borrowing and short selling are prohibited. We concentrate the analysis on the effect of the solvency constraint, analyzing in particular what happens when the fund wealth reaches the allowed minimum value represented by the solvency level. The model is naturally formulated as an optimal stochastic control problem and is treated by the dynamic programming approach. We show that the value function of the problem is a regular solution of the associated Hamilton-Jacobi-Bellman equation. Then we apply verification techniques to get the optimal allocation strategy in feedback form and to study its properties. We finally give a special example with explicit solution.

Global Democracy: For and Against. Ethical Theory, Institutional Design, and Social Struggles

Abstract: Part 1: Introduction 1. Democracy and Transnational Exclusion Part 2: For Global Democracy 2. Ethical Theory for Global Democracy: All-Inclusive Cosmopolitanism 3. Institutional Design for Global Democracy: Multilayered Cosmopolitanism 4. Social Struggle for Global Democracy: Rooted and Subaltern Cosmopolitanism Part 3: Against Global Democracy 5. Political Communities 6. Liberal Internationalism Part 4: Global Democracy 7. Cosmo-Federalism 8. Conclusions

The Determinants of Suppliers’ Performance in E-Procurement: Evidence from the Italian Government’s E-Procurement Platform

Abstract: Participation of small businesses in the market for public contracts is widely recognized as a key policy issue. It is also commonly held that the adoption of e-procurement solutions can be effective in pursuing such an objective. To this end, we analyze the transactions completed in the period 2004-2007 through the Italian Government's e-procurement platform, that is, the marketplace managed by the Italian Public Procurement Agency (Consip S.p.A.). Although descriptive statistics indicate that micro suppliers are the most represented group of firms in the marketplace, our econometric treatment provides some evidence that the former are less successful than all other suppliers in getting public contracts. Degree of loyalty with buyers, location and the use of other MEPA negotiation tools, also emerge as relevant factors of success in the e-procurement market.

The role of knowledge‐based supply specialisation for competitiveness: A spatial econometric approach*

Abstract: . This paper aims to assess to what extent deterioration of Italy's trade competitiveness in manufacturing over the decade 1993–2004 has been determined by the evolution of localised comparative advantages in knowledge based industries. Stressing Kaldor's idea of dynamic increasing returns in manufacturing industries, we adopted a spatial econometric approach in order to account for the role of geographical proximity in facilitating the exchange of knowledge flows. We estimated a canonical regional export demand function for the 103 NUTS 3 explicitly introducing specialization in high-tech goods. Export competitiveness is shown to be deeply rooted at the local level with the role of knowledge-based competitiveness declining in the centre and north and world demand remaining the only engine of export growth in the south. Resumen. Este articulo se centra en evaluar hasta que punto el deterioro de la competitividad comercial italiana en productos manufacturados en la decada 1993–2004 ha estado determinado por la evolucion de ventajas comparativas locales en industrias basadas en conocimiento. Con un enfasis en la idea de Kaldor de rendimientos crecientes dinamicos en industrias manufactureras, adoptamos un enfoque econometrico espacial para tomar en cuenta el papel de la proximidad geografica en facilitar el intercambio de flujos de conocimiento. Estimamos una funcion de demanda de exportacion regional canonica para las 103 NUTS 3, introduciendo explicitamente una especializacion en productos de alta tecnologia. Se muestra que la competitividad en la exportacion esta profundamente enraizada a nivel local con el papel de la competitividad basada en conocimiento disminuyendo en el centro y el norte y siendo la demanda mundial el unico motor que queda de crecimiento de la exportacion en el sur.

Does Idiosyncratic Business Risk Matter

Abstract: Financial market imperfections can prevent entrepreneurs from diversifying away the idiosyncratic risk of their business. As a result idiosyncratic risk discourages entrepreneurial activity and hinders growth, with the effects being stronger in economies with lower risk diversification opportunities. In accordance with this prediction we find that OECD countries with low levels of risk diversification opportunities (as measured by the relevance of family firms or of widely held companies) perform relatively worse (in terms of productivity, investment, and business creation) in sectors characterized by high idiosyncratic volatility. Given that volatility is endogenous with respect to risk diversification opportunities, we instrument its value at the country-sector level with the corresponding sectoral volatility in the US, a country where financial imperfections are less relevant than elsewhere. Diversification measures are instrumented using demographic changes induced by World War II. We also provide firm-level evidence suggesting that firms controlled by less diversified owners display lower mean and dispersion of productivity growth.

The non-random walk of stock prices: the long-term correlation between signs and sizes

Abstract: We investigate the random walk of prices by developing a simple model relating the properties of the signs and absolute values of individual price changes to the diffusion rate (volatility) of prices at longer time scales. We show that this benchmark model is unable to reproduce the diffusion properties of real prices. Specifically, we find that for one hour intervals this model consistently over-predicts the volatility of real price series by about 70%, and that this effect becomes stronger as the length of the intervals increases. By selectively shuffling some components of the data while preserving others we are able to show that this discrepancy is caused by a subtle but long-range non-contemporaneous correlation between the signs and sizes of individual returns. We conjecture that this is related to the long-memory of transaction signs and the need to enforce market efficiency.

VirtuE: a formal model of virtual enterprises for information markets

Abstract: A vital part of a modern economy is an information market. In this market, information products are being traded in countless ways. Information is bought, modified, integrated, incorporated into other products, and then sold again. Often, the manufacturing of an information product requires the collaboration of several participants. A virtual enterprise is a community of business entities that collaborate on the manufacturing of complex products. This collaboration is often ad hoc, for a specific product only, after which the virtual enterprise may dismantle. The virtual enterprise paradigm is particularly appealing for modeling collaborations for manufacturing information products, and in this paper we present a new model, called VirtuE, for modeling such activities. VirtuE has three principal components. First, it defines a distributed infrastructure with concepts such as members, products, inventories, and production plans. Second, it defines transactions among members, to enable collaborative production of complex products. Finally, it provides means for the instrumentation of enterprises, to measure their performance and to govern their behavior.

Bidding for Complex Projects: Evidence From the Acquisitions of IT Services

Abstract: Competitive bidding (as auctions) is commonly used to procure goods and services Public buyers are often mandated by law to adopt competitive procedures to ensure transparency and promote full competition Recent theoretical literature, however, suggests that open competition can perform poorly in allocating complex projects In exploring the determinants of suppliers' bidding behavior in procurement auctions for complex IT services, we find results that are consistent with theory We find that price and quality do not exhibit the classical tradeoff one would expect: quite surprisingly, high quality is associated to low prices Furthermore, while quality is mainly driven by suppliers' experience, price is affected more by the scoring rule and by the level of expected competition These results might suggest that (scoring) auctions fail to appropriately incorporate buyers' complex price/quality preferences in the tender design

Fiscal Deficits, Current Account Dynamics and Monetary Policy*

Abstract: This paper develops a stochastic two-country "perpetual youth" Dynamic New Keynesian model of the international business cycle with incomplete international financial markets and stationary net foreign assets. The model allows for a thorough analysis of the interaction of endogenous monetary policy with endogenous, non-balanced budget fiscal policy. We derive the dynamic and cyclical properties of fiscal deficit feedback rules under alternative monetary regimes, discuss the international transmission of productivity shocks, and the implications for net foreign assets and exchange rate dynamics. Our results imply that the degree of "fiscal discipline", i.e. the extent to which the fiscal rule responds to debt dynamics, is crucial for the dynamics of net foreign assets. We show that under low fiscal discipline (characterizing most industrialized countries, first and foremost the U.S.) temporary positive productivity shocks may result in highly persistent deteriorations of the external position in the medium run. Our results also suggest that any attempt by monetary policy alone to stabilize the dynamics of net foreign assets would induce excessive and costly fluctuations of the exchange rate.

A System Dynamics Approach to the Paper Dematerialization Process in the Italian Public Administration

Abstract: The dematerialization problem is still young, it hasn’t been well analyzed yet and its definition is nearly absent in the literature. This paper concentrates on the problem with a methodological approach which will try to describe the underlying structures, the overall system behaviours, processes and stakeholders. We will give an interpretation of the not always linear relationships and of the feedback loops among the involved variables, also considering those soft interactions which typically arise in those complex systems connected with social environments and which often are not properly taken into account or even neglected. We will thus formalize a dynamical hypothesis so that, with a systemic approach, we can design a system dynamics model that may help us in validating those hypothesis and in building a useful decision support system, in order to provide the Public Administration Management with the chance to make policy analysis and strategic support concerning the major issues related to the dematerialization process.

Gender and Regional Differences in Self-Rated Health in Europe

Abstract: This paper shows that gender and regional differences in self-rated health in Europe are partly explained by differences in the prevalence of the various conditions. However, a non-negligible part of these differences is due to other causes, which may include differences in reporting own health. We employ the tool of "anchoring vignettes" to understand whether and how women and men living in different regions differently report levels in a number of health components or domains. We find that vignettes help identifying gender and regional differences in response scales. After controlling for these differences, both gender and regional variation in reported health is substantially reduced, although not entirely eliminated. Our results suggest that differences in response style should be taken into account when using self-assessment of health in socio-economic studies. Failing to do so may lead to misleading conclusions.

Optimal consumption policies in illiquid markets

Abstract: We investigate optimal consumption policies in the liquidity risk model introduced in Pham and Tankov (2007). Our main result is to derive smoothness results for the value functions of the portfolio/consumption choice problem. As an important consequence, we can prove the existence of the optimal control (portfolio/consumption strategy) which we characterize both in feedback form in terms of the derivatives of the value functions and as the solution of a second-order ODE. Finally, numerical illustrations of the behavior of optimal consumption strategies between two trading dates are given.

Vintage Capital in the AK growth model: a Dynamic Programming approach. Extended version

Abstract: This paper deals with an endogenous growth model with vintage capital and, more precisely, with the AK model proposed in [18]. In endogenous growth models the introduction of vintage capital allows to explain some growth facts but strongly increases the mathematical difficulties. So far, in this approach, the model is studied by the Maximum Principle; here we develop the Dynamic Programming approach to the same problem by obtaining sharper results and we provide more insight about the economic implications of the model. We explicitly find the value function, the closed loop formula that relates capital and investment, the optimal consumption paths and the long run equilibrium. The short run fluctuations of capital and investment and the relations with the standard AK model are analyzed. Finally the applicability to other models is also discussed.

A Comparative Analysis of the Legal Obstacles to Institutional Investor Activism in Europe and in the US

Abstract: Starting from the observation that at the multilateral level shareholder activism is considered as an important aspect of good corporate governance, this paper examines several legal and economic obstacles to institutional investor activism in the EU and in the US. We also examine the voting record of 76 institutional investors in the US and of several others in the EU. We find that US investors seem to have easier access to proxy voting than in the EU (although recent EU legislation should remove several of the present legal obstacles); that conflicts of interest seem to limit the activism of several categories of institutional investors both in the US and in the EU; that some national legislations limit the ability of institutional investors to coordinate their voting policies; and that recourse to stock lending and other forms of separation of financial risk from voting rights seems to be practiced more by controlling shareholders at the expense of institutional investors than the opposite. We also find that institutional investors in the US seem to have a more adversarial voting pattern vis-a-vis company managements than in the UK; this might be due to the fewer voting rights given to shareholders by the US regulatory framework. As for Europe, institutional investors' voting pattern is by far the most adversarial in France, where there is a high incidence of control-enhancing mechanisms. Institutional investors seem to have an adversarial voting stance also in Greece, Belgium and Sweden, where control-enhancing mechanisms are also present, while in Italy they tend to have a low voting turnout. More in general, EU investors’ voting pattern seems to be sensitive to the presence of control-enhancing mechanisms, ownership concentration, and to the origin of the national legal system.

Analysing Business Models for Cross Border E-Services Provided by the Chambers of Commerce

Abstract: The term "Business Model" started to gain momentum in the early rise of the new economy and it is currently used both in business practice and scientific research. Under a general point of view BMs are considered as a contact point among technology, organization and strategy used to describe how an organization gets value from technology and uses it as a source of competitive advantage. Recent contributions suggest to use ontologies to define a shareable conceptualization of BM. The aim of this study is to investigate the role of BM Ontologies as a conceptual tool for the cooperation of subjects interested in achieving a common goal and operating in complex and innovative environments. This is the case for example of those contexts characterized by the deployment of e-services from multiple service providers in cross border environments. Through an extensive literature review on BM we selected the most suitable conceptual tool and studied its application to the LD-CAST project during a participatory action research activity in order to analyse the BM design process of a new organisation based on the cooperation of service providers (the Chambers of Commerce from Italy, Romania, Poland and Bulgaria) with different needs, legal constraints and cultural background.

The Euro and Firm Restructuring

Abstract: We test whether and how the adoption of the euro, narrowly defined as the end of competitive devaluations, has affected member states' productive structures, distinguishing between within and across sector reallocation. We find evidence that the euro has been accompanied by a reallocation of activity within rather than across sectors. Since its adoption, productivity growth has been relatively stronger in country-sectors that once relied more on competitive devaluations to regain price competitiveness. This effect is robust to potential omitted-variable bias and correlated effects. Firm-level evidence from Italian manufacturing confirms that low-tech businesses, which arguably benefitted most from devaluations, have been restructuring more since the adoption of the euro. Restructuring has entailed a shift of business focus from production to upstream and downstream activities, such as product design, advertising, marketing and distribution, and a corresponding reduction in the share of blue collar workers.

Interval Game Theoretic Division Rules

Abstract: Interval bankruptcy problems arise in situations where an estate has to be liquidated among a fixed number of creditors and uncertainty about the amounts of the estate and the claims is modeled by intervals. We extend in the interval setting the classic results by Curiel, Maschler and Tijs (Bankruptcy games, Zeitschrift fuer Operations Research, 31 (1987), A 143 - A 159) that characterize division rules which are solutions of the cooperative bankruptcy game.

Viscosity solutions to delay differential equations in demo-economy

Abstract: Economic and demographic models governed by linear delay differential equations are expressed as optimal control problems in infinite dimensions. A general objective function is considered and the concavity of the Hamiltonian is not required. The value function is a viscosity solution of the Hamilton-Jacobi-Bellman (HJB) equation and a verification theorem is proved.

The Determinants of Individual Behaviour in Network Formation: Some Experimental Evidence

Abstract: The role of social networks in shaping economic outcomes has received increasing attention in recent years. Network externalities have been extensively studied both in industrial organisations and, more recently, within the theory of social capital and development economics. Most of this literature however takes the structure of the social network as given and analyses the consequences of network externalities on outcomes.

Business Models and E-Services: an Ontological Approach in a Cross-border Environment

Abstract: In business practice and in scientific research business models seem to have caught much attention as this phenomenon has been investigated by many disciplines, with different objectives and point of views. Researchers’ general opinion on business models is based on value and information technology in an organization or a set of linked ones. Anyhow, a common agreed theoretical background and even a shared definition of business models are still missing. In this paper we will analyse the relevant literature on business models to increase understanding on this topic and identify future research directions. By discussing results of this analysis we will introduce an action research study on business models in cross-border e-services environment.