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Showing papers by "Stockholm School of Economics published in 2014"


Journal ArticleDOI
TL;DR: In this paper, the authors considered the case when the risk aversion depends dynamically on current wealth and provided an analytical solution where the equilibrium dollar amount invested in the risky asset is proportional to current wealth.
Abstract: The objective of this paper is to study the mean–variance portfolio optimization in continuous time. Since this problem is time inconsistent we attack it by placing the problem within a game theoretic framework and look for subgame perfect Nash equilibrium strategies. This particular problem has already been studied in [2] where the authors assumed a constant risk aversion parameter. This assumption leads to an equilibrium control where the dollar amount invested in the risky asset is independent of current wealth, and we argue that this result is unrealistic from an economic point of view. In order to have a more realistic model we instead study the case when the risk aversion depends dynamically on current wealth. This is a substantially more complicated problem than the one with constant risk aversion but, using the general theory of time inconsistent control developed in [4], we provide a fairly detailed analysis on the general case. In particular, when the risk aversion is inversely proportional to wealth, we provide an analytical solution where the equilibrium dollar amount invested in the risky asset is proportional to current wealth. The equilibrium for this model thus appears more reasonable than the one for the model with constant risk aversion.

460 citations


Journal ArticleDOI
TL;DR: In this paper, the authors show that wrongful discharge laws, particularly those that prohibit employers from acting in bad faith ex post, limit employers' ability to hold up innovating employees after the innovation is successful.
Abstract: We show that wrongful discharge laws - laws that protect employees against unjust dismissal - spur innovation and new firm creation. Wrongful discharge laws, particularly those that prohibit employers from acting in bad faith ex post, limit employers' ability to hold up innovating employees after the innovation is successful. By reducing the possibility of holdup, these laws enhance employees'innovative efforts and encourage firms to invest in risky but potentially mould-breaking projects. We develop a model and provide supporting empirical evidence of this effect using the staggered adoption of wrongful discharge laws across U.S. states.

308 citations


Journal ArticleDOI
TL;DR: The authors study CEOs with a career background in finance and find that financial expert CEOs are more financially sophisticated: they are less likely to use one companywide discount rate instead of a project-specific one, they manage financial policies more actively, and their firm investments are less sensitive to cash flows.

287 citations


Journal ArticleDOI
TL;DR: The results that anxiety/depression had the greatest impact on both TTO and VAS values underline the importance of mental health for individuals’ overall HRQoL and reduce some of the focusing effects potentially appearing in hypothetical valuation studies.
Abstract: Purpose To estimate Swedish experience-based value sets for EQ-5D health states using general population health survey data.

261 citations


Book ChapterDOI
TL;DR: This article reviewed the long run developments in the distribution of personal income and wealth and discussed suggested explanations for the observed patterns, and showed that inequality was historically high almost everywhere at the beginning of the twentieth century.
Abstract: This paper reviews the long run developments in the distribution of personal income and wealth. It also discusses suggested explanations for the observed patterns. We try to answer questions such as: What do we know, and how do we know, about the distribution of income and wealth over time? Are there common trends across countries or over the path of development? How do the facts relate to proposed theories about changes in inequality? We present the main inequality trends, in some cases starting as early as in the late eighteenth century, combining previous research with recent findings in the so-called top income literature and new evidence on wealth concentration. The picture that emerges shows that inequality was historically high almost everywhere at the beginning of the twentieth century. In some countries this situation was preceded by increasing concentration, but in most cases inequality seems to have been relatively constant at a high level in the nineteenth century. Over the twentieth century inequality decreased almost everywhere for the first 80 years, largely due to decreasing wealth concentration and decreasing capital incomes in the top of the distribution. Thereafter trends are more divergent across countries and also different across income and wealth distributions. Econometric evidence over the long run suggests that top shares increase in periods of above average growth while democracy and high marginal tax rates are associated with lower top shares.

236 citations


Journal ArticleDOI
TL;DR: This article identified common genetic variants associated with cognitive performance using a two-stage approach, which they call the proxy-phenotype method, and measured the association of these education-associated SNPs with the cognitive performance.
Abstract: We identify common genetic variants associated with cognitive performance using a two-stage approach, which we call the proxy-phenotype method. First, we conduct a genome-wide association study of educational attainment in a large sample (n = 106,736), which produces a set of 69 education-associated SNPs. Second, using independent samples (n = 24,189), we measure the association of these education-associated SNPs with cognitive performance. Three SNPs (rs1487441, rs7923609, and rs2721173) are significantly associated with cognitive performance after correction for multiple hypothesis testing. In an independent sample of older Americans (n = 8,652), we also show that a polygenic score derived from the education-associated SNPs is associated with memory and absence of dementia. Convergent evidence from a set of bioinformatics analyses implicates four specific genes (KNCMA1, NRXN1, POU2F3, and SCRT). All of these genes are associated with a particular neurotransmitter pathway involved in synaptic plasticity, the main cellular mechanism for learning and memory.

229 citations


Journal ArticleDOI
TL;DR: A theory for a general class of discrete-time stochastic control problems that, in various ways, are time-inconsistent in the sense that they do not admit a Bellman optimality principle is developed.
Abstract: We develop a theory for a general class of discrete-time stochastic control problems that, in various ways, are time-inconsistent in the sense that they do not admit a Bellman optimality principle. We attack these problems by viewing them within a game theoretic framework, and we look for subgame perfect Nash equilibrium points. For a general controlled Markov process and a fairly general objective functional, we derive an extension of the standard Bellman equation, in the form of a system of nonlinear equations, for the determination of the equilibrium strategy as well as the equilibrium value function. Most known examples of time-inconsistent stochastic control problems in the literature are easily seen to be special cases of the present theory. We also prove that for every time-inconsistent problem, there exists an associated time-consistent problem such that the optimal control and the optimal value function for the consistent problem coincide with the equilibrium control and value function, respectively for the time-inconsistent problem. To exemplify the theory, we study some concrete examples, such as hyperbolic discounting and mean–variance control.

188 citations


Journal ArticleDOI
TL;DR: The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.
Abstract: AW is supported by a postdoctoral fellowship by The James S. McDonnell Foundation. AJT acknowledges support from Bill & Melinda Gates Foundation grants (#49446 and #OPP1032350), NIH/NIAID grant (U19AI089674), and the RAPIDD program of the Science & Technology Directorate, Department of Homeland Security, and the Fogarty International Center, National Institutes of Health. COB was supported by the Models of Infectious Disease Agent Study program (cooperative agreement 1U54GM088558). The content is solely the responsibility of the authors and does not necessarily represent the official views of the National Institute of General Medical Sciences or the National Institutes of Health. The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.

186 citations


Journal ArticleDOI
TL;DR: In this paper, the gender differences among adolescents in Sweden in preferences for competition, altruism and risk were investigated. And they found that boys and girls are equally likely to self-select into competition in a verbal task but that boys are significantly more likely to choose to compete in a mathematical task.
Abstract: We look at gender differences among adolescents in Sweden in preferences for competition, altruism and risk. For competitiveness, we explore two different tasks that differ in associated stereotypes. We find no gender difference in competitiveness when comparing performance under competition to that without competition. We further find that boys and girls are equally likely to self-select into competition in a verbal task, but that boys are significantly more likely to choose to compete in a mathematical task. This gender gap diminishes and becomes non-significant when we control for actual performance, beliefs about relative performance, and risk preferences, or for beliefs only. Girls are also more altruistic and less risk taking than boys.

167 citations


Journal ArticleDOI
TL;DR: In this paper, a comparative case study of six MNEs from the United States and Sweden is presented, where the authors identify four strategic responses by which subunits shape, transpose and evade institutions in the pursuit of competitive advantage: innovation, arbitrage, circumventing and adaptation.
Abstract: Scholars increasingly emphasize the impact of institutions on multinational enterprises (MNEs), but the opposite relationship has attracted less research – that is, MNE agency in relation to institutions. Based on a comparative case study of six MNEs from the United States and Sweden, this paper remedies this. It explores and explicates MNE subunits’ strategic responses to host country institutional constraints and opportunities in five different regions. A new-institutional approach is adopted, which allows for an investigation of MNE subunit agency in relation to normative and cognitive institutions, as well as regulative ones. This fine-grained analysis reveals not only what kinds of responses MNE subunits invoke, but why and how they are able to respond. We identify four strategic responses by which subunits shape, transpose and evade institutions in the pursuit of competitive advantage: Innovation, Arbitrage, Circumvention and Adaptation. These responses are driven by three key enablers: multinationality, foreignness and institutional ambiguity – that serve to enhance and heighten three mechanisms: reflexivity, role expectations and resources. By linking the enablers and the mechanisms to specific types of strategic responses in a framework and typology, the paper not only contributes to emerging research on the interplay between MNEs, institutions and strategy, but to strategy practice.

165 citations


Journal ArticleDOI
TL;DR: The research on entrepreneurial exit has focused on exit as a dichotomous outcome whereby exit is viewed negatively and survival positively as discussed by the authors, and this perspective is quite different from that of...
Abstract: Much of the research on entrepreneurial exit has focused on exit as a dichotomous outcome whereby exit is viewed negatively and survival positively. This perspective is quite different from that of...

Journal ArticleDOI
TL;DR: The authors examined the act of entrepreneurial reentry by entrepreneurs who exit a failed business and found that negative social and economic sanctions that are associated with stigma markings speak only to one side of the entrepreneurship phenomenon.
Abstract: We use data from global entrepreneurship monitor to examine the act of entrepreneurial reentry by entrepreneurs who exit a failed business. We study reentry by mode of entry and by form of organizing. We find that, in countries where the levels of stigma and regulatory conveyance of stigma markings were at their highest, entrepreneurs who exited failed businesses were less likely to reenter into entrepreneurial activity. Our finding suggests that negative social and economic sanctions that are associated with stigma markings speak only to one side of the entrepreneurship phenomenon. On the other side, stigma can function as a stimulus for entrepreneurs to defy the illegitimacy of the failed business and to actively seek out and engage in innovative behaviors that contribute to the overall diversity of entrepreneurial activities in their country.

Journal ArticleDOI
TL;DR: In this article, the authors argue that the positive experience-performance relationship only appears to expert entrepreneurs, while novice entrepreneurs may actually perform increasingly worse because of their inability to generalize their experiential knowledge accurately into new ventures.

Journal ArticleDOI
TL;DR: In this paper, the authors study firms' incentives to acquire costly information in booms and recessions to understand the role of endogenous information in explaining business cycles, and they find that when the economy has been in a recession in the previous period, and firms enter the current period with a pessimistic belief, the incentive to acquire information is stronger than when they share an optimistic belief.
Abstract: We study firms’ incentives to acquire costly information in booms and recessions to understand the role of endogenous information in explaining business cycles. We find that when the economy has been in a recession in the previous period, and firms enter the current period with a pessimistic belief, the incentive to acquire information is stronger than when the economy has been in a boom and firms share an optimistic belief. The cyclicality of the aggregate learning outcome is moderated by the price system, which transmits information from informed to uninformed firms, thus dampening information demand. Though learning from equilibrium prices acts to stabilize fluctuations by discouraging information acquisition, it can be welfare-enhancing to make information prohibitively costly to obtain.

Journal ArticleDOI
TL;DR: In this paper, a regression discontinuity (RD) design was used to compare municipalities where an Islamic party barely won or lost elections and found that, over a period of six years, Islamic rule increased female secular high school education.
Abstract: Does Islamic political control affect women's empowerment? Several countries have recently experienced Islamic parties coming to power through democratic elections. Due to strong support among religious conservatives, constituencies with Islamic rule often tend to exhibit poor women's rights. Whether this reflects a causal relationship or a spurious one has so far gone unexplored. I provide the first piece of evidence using a new and unique data set of Turkish municipalities. In 1994, an Islamic party won multiple municipal mayor seats across the country. Using a regression discontinuity (RD) design, I compare municipalities where this Islamic party barely won or lost elections. Despite negative raw correlations, the RD results reveal that, over a period of six years, Islamic rule increased female secular high school education. Corresponding effects for men are systematically smaller and less precise. In the longer run, the effect on female education remained persistent up to 17 years after, and also reduced adolescent marriages. An analysis of long-run political effects of Islamic rule shows increased female political participation and an overall decrease in Islamic political preferences. The results are consistent with an explanation that emphasizes the Islamic party's effectiveness in overcoming barriers to female entry for the poor and pious.

Journal ArticleDOI
TL;DR: The combined evidence suggests that political ideology constitutes a fundamental aspect of one’s genetically informed psychological disposition, but as Fisher proposed long ago, genetic influences on complex traits will be composed of thousands of markers of very small effects and it will require extremely large samples to have enough power to identify specific polymorphisms related to complex social traits.
Abstract: Almost 40 years ago, evidence from large studies of adult twins and their relatives suggested that between 30 and 60 % of the variance in social and political attitudes could be explained by genetic influences. However, these findings have not been widely accepted or incorporated into the dominant paradigms that explain the etiology of political ideology. This has been attributed in part to measurement and sample limitations, as well the relative absence of molecular genetic studies. Here we present results from original analyses of a combined sample of over 12,000 twins pairs, ascertained from nine different studies conducted in five democracies, sampled over the course of four decades. We provide evidence that genetic factors play a role in the formation of political ideology, regardless of how ideology is measured, the era, or the population sampled. The only exception is a question that explicitly uses the phrase “Left–Right”. We then present results from one of the first genome-wide association studies on political ideology using data from three samples: a 1990 Australian sample involving 6,894 individuals from 3,516 families; a 2008 Australian sample of 1,160 related individuals from 635 families and a 2010 Swedish sample involving 3,334 individuals from 2,607 families. No polymorphisms reached genome-wide significance in the meta-analysis. The combined evidence suggests that political ideology constitutes a fundamental aspect of one’s genetically informed psychological disposition, but as Fisher proposed long ago, genetic influences on complex traits will be composed of thousands of markers of very small effects and it will require extremely large samples to have enough power in order to identify specific polymorphisms related to complex social traits.

ReportDOI
Abstract: This paper investigates risk-taking in the liquid portfolios held by a large panel of Swedish twins. We document that the portfolio share invested in risky assets is an increasing and concave function of financial wealth, leading to different risk sensitivities across investors. Human capital, which we estimate directly from individual labor income, also affects risk-taking positively, while internal habit and expenditure commitments tend to reduce it. Our microfindings lend strong support to decreasing relative risk aversion and habit formation preferences. Furthermore, heterogeneous risk sensitivities across investors help reconcile individual preferences with representative-agent models.

Journal ArticleDOI
TL;DR: It is indicated that a smartphone administered stress intervention based on ACT can reduce perceived stress and increase general health among Swedish middle managers in the private sector.

Journal ArticleDOI
TL;DR: It is found that men who experience a greater increase in bioactive testosterone take on more risk, an association that remains when controlling for whether the participant won the competition, and individual differences in testosterone reactivity, rather than the act of winning or losing, influence financial risk-taking.

Journal ArticleDOI
TL;DR: The results show that large and therefore well-powered genome-wide-association studies can identify replicable genetic associations with behavioral traits and remain predictive in regressions with stringent controls for stratification and in new within-family analyses.
Abstract: A recent genome-wide-association study of educational attainment identified three single-nucleotide polymorphisms (SNPs) whose associations, despite their small effect sizes (each R2 ≈ 0.02%), reached genome-wide significance (p < 5 × 10−8) in a large discovery sample and were replicated in an independent sample (p < .05). The study also reported associations between educational attainment and indices of SNPs called “polygenic scores.” In three studies, we evaluated the robustness of these findings. Study 1 showed that the associations with all three SNPs were replicated in another large (N = 34,428) independent sample. We also found that the scores remained predictive (R2 ≈ 2%) in regressions with stringent controls for stratification (Study 2) and in new within-family analyses (Study 3). Our results show that large and therefore well-powered genome-wide-association studies can identify replicable genetic associations with behavioral traits. The small effect sizes of individual SNPs are likely to be a ma...

Journal ArticleDOI
TL;DR: In this article, the authors pointed out that if marketing is to develop as a discipline and contribute to solving complex business and societal challenges, it should question the neoclassical view of marketing.
Abstract: Several researchers have pointed out that if marketing is to develop as a discipline and contribute to solving complex business and societal challenges, it should question the neoclassical view of

Journal ArticleDOI
TL;DR: In this article, the authors assess the resources used to create resilience in organizations and how each of these resources relates to organizational creativity, and they show that organizational resilience is positively related with organizational creativity.
Abstract: How do companies manage to compete in a marketplace marked by turbulence, and not be outcompeted? In our study we assess the resources used to create resilience in organizations and how each of these resources relates to organizational creativity. We show that organizational resilience is positively related to organizational creativity. Specifically, our study highlights that cognitive, emotional, and structural resources are important resources for organizations wanting to become creative. Our results are based upon a pilot in-depth qualitative case study followed by a survey of medium-sized firms. The results in our study advance the emergent literature on resilience and on the practical applications of resilience in organizations. From a practical point of view, managers may realize that they have to develop a capacity for resilience (i.e. what they have to do) in order to have a creative organization, but a far bigger challenge is to understand the how; how the capacity for resilience is built. Our research shows that if managers truly want to manage in turbulence and still have a creative organization, they need to put a strong emphasis on the soft skills in the organization, in addition to the structural resources.

Journal ArticleDOI
TL;DR: In this paper, the authors integrate insights from family business and organizational ecology into the entrepreneurship field by constructing a theoretical framework that explains how the regional context impacts family and non-family start-ups in differing ways.

Journal ArticleDOI
TL;DR: The Glaserian grounded theory methodology contains elements of positivism, hermeneutics, and pragmatism as mentioned in this paper, and it can be seen as a combination of the three perspectives.
Abstract: Glaserian grounded theory methodology, which has been widely adopted as a scientific methodology in recent decades, has been variously characterised as “hermeneutic” and “positivist.” This commentary therefore takes a different approach to characterising grounded theory by undertaking a comprehensive analysis of: (a) the philosophical paradigms of positivism, hermeneutics, and pragmatism; and (b) the general philosophical questions of the aims of science and the issue of choosing a scientific methodology. The commentary then seeks to position grounded theory methodology in terms of these philosophical perspectives. The study concludes that grounded theory methodology contains elements of positivism, hermeneutics, and pragmatism. In coming to this conclusion, the study clarifies the degree to which these three perspectives are found within Glaserian grounded theory methodology. Key Words: Grounded Theory, Positivism, Hermeneutics, Pragmatism.

Posted Content
TL;DR: This article used surveys of company managers to measure the size of a shadow economy, based on the premise that company managers are the most likely to know how much business income and wages go unreported due to their unique position in dealing with both of these types of income.
Abstract: This study develops a method that uses surveys of company managers to measure the size of a shadow economy. Our method is based on the premise that company managers are the most likely to know how much business income and wages go unreported due to their unique position in dealing with both of these types of income. We use a range of survey design features to maximize the truthfulness of responses. Our method combines estimates of misreported business income, unregistered or hidden employees, and unreported wages, to arrive at an estimate of the size of a shadow economy as a percentage of GDP. This approach differs from most other studies of shadow economies, which largely focus on using macro indicators. We illustrate the application of our method to three new EU member countries. We also analyze the factors that influence companies’ participation in the shadow economy.

Journal ArticleDOI
TL;DR: In this article, employment and new hires among high growth firms (HGFs) in the Swedish knowledge-intensive sectors 1999-2002 were studied using matched employer-employee data, and they found that HGFs are more likely to emp...
Abstract: We study employment and new hires among high-growth firms (HGFs) in the Swedish knowledge-intensive sectors 1999-2002. Using matched employer-employee data, we find that HGFs are more likely to emp ...

Journal ArticleDOI
TL;DR: In this article, the authors focus on the role of three psychological traits that are believed to influence political participation: cognitive ability, personal control, and extraversion, and show that a common genetic factor can explain most of the relationship between these psychological traits and acts of political participation.
Abstract: Recent research demonstrates that a wide range of political attitudes, beliefs, and behaviors can be explained in part by genetic variation. However, these studies have not yet identified the mechanisms that generate such a relationship. Some scholars have speculated that psychological traits mediate the relationship between genes and political participation, but so far there have been no empirical tests. Here we focus on the role of three psychological traits that are believed to influence political participation: cognitive ability, personal control, and extraversion. Utilizing a unique sample of more than 2,000 Swedish twin pairs, we show that a common genetic factor can explain most of the relationship between these psychological traits and acts of political participation, as well as predispositions related to participation. While our analysis is not a definitive test, our results suggest an upper bound for a proposed mediation relationship between genes, psychological traits, and political participation.

Journal ArticleDOI
TL;DR: This paper explored the extent to which altruism, as measured by giving in a dictator game (DG), accounts for play in a noisy version of the repeated prisoner's dilemma and found that DG giving is correlated with cooperation in the repeated game when no cooperative equilibria exist, but not when cooperation is an equilibrium.
Abstract: We explore the extent to which altruism, as measured by giving in a dictator game (DG), accounts for play in a noisy version of the repeated prisoner's dilemma. We find that DG giving is correlated with cooperation in the repeated game when no cooperative equilibria exist, but not when cooperation is an equilibrium. Furthermore, none of the commonly observed strategies are better explained by inequity aversion or efficiency concerns than money maximization. Various survey questions provide additional evidence for the relative unimportance of social preferences. We conclude that cooperation in repeated games is primarily motivated by long-term payoff maximization and that even though some subjects may have other goals, this does not seem to be the key determinant of how play varies with the parameters of the repeated game. In particular, altruism does not seem to be a major source of the observed diversity of play.

BookDOI
TL;DR: It is shown that informed users are more likely to identify and challenge (mis)behavior by providers and as a result turn their focus to issues that they can manage locally.
Abstract: This paper presents the results of two field experiments on local accountability in primary health care in Uganda. Efforts to stimulate beneficiary control, coupled with the provision of report cards on staff performance, resulted in significant improvements in health care delivery and health outcomes in both the short and the longer run. Efforts to stimulate beneficiary control without providing information on performance had no impact on quality of care or health outcomes. The paper shows that informed users are more likely to identify and challenge (mis)behavior by providers and as a result turn their focus to issues that they can manage locally.

Journal ArticleDOI
TL;DR: In the immediate aftermath of World War II, millions of inner-German refugees were allowed to settle in the American occupation zone in Germany but not in the French occupation zone.
Abstract: In the immediate aftermath of World War II, millions of inner-German refugees were allowed to settle in the American occupation zone in Germany but not in the French occupation zone. Using a spatia ...