Profitability, uncertainty and multi-product firm product proliferation: The Spanish car industry

This article studies how product introduction decisions relate to profitability and uncertainty in the context of multi-product firms and product differentiation. These two features, common to many modern industries, have not received much attention in the literature as compared to the classical problem of firm entry, even if the determinants of firm and product entry are quite different. The theoretical predictions about the sign of the impact of uncertainty on product entry are not conclusive. Therefore, an econometric model relating firms’ product introduction decisions with profitability and profit uncertainty is proposed. Firm’s estimated profits are obtained from a structural model of product demand and supply, and uncertainty is proxied by profits’ variance. The empirical analysis is carried out using data on the Spanish car industry for the period 1990-2000. The results show a positive relationship between product introduction and profitability, and a negative one with respect to profit variability. Interestingly, the degree of uncertainty appears to be a driving force of entry stronger than profitability, suggesting that the product proliferation process in the Spanish car market may have been mainly a consequence of lower uncertainty rather than the result of having a more profitable market. Keywords: Product introduction, entry, uncertainty, multiproduct firms, automobile JEL codes: L11, L13

Profitability, uncertainty and multi-product firm product proliferation: The Spanish car industry

This article studies how product introduction decisions relate to profitability and uncertainty in the context of multi-product firms and product differentiation. These two features, common to many modern industries, have not received much attention in the literature as compared to the classical problem of firm entry, even if the determinants of firm and product entry are quite different. The theoretical predictions about the sign of the impact of uncertainty on product entry are not conclusive. Therefore, an econometric model relating firms’ product introduction decisions with profitability and profit uncertainty is proposed. Firm’s estimated profits are obtained from a structural model of product demand and supply, and uncertainty is proxied by profits’ variance. The empirical analysis is carried out using data on the Spanish car industry for the period 1990-2000. The results show a positive relationship between product introduction and profitability, and a negative one with respect to profit variability. Interestingly, the degree of uncertainty appears to be a driving force of entry stronger than profitability, suggesting that the product proliferation process in the Spanish car market may have been mainly a consequence of lower uncertainty rather than the result of having a more profitable market

On the impact of fundamentals, liquidity and coordination on market stability

We develop a coordination game to model interactions betweenfundamentals and liquidity during unstable periods in financial markets.We then propose a flexible econometric framework for estimationof the model and analysis of its quantitative implications. The specificempirical application is carry trades in the yen dollar market, includingthe turmoil of 1998. We find a generally very deep market, withlow information disparities amongst agents. We observe occasionallyepisodes of market fragility, or turmoil with up by the escalator, downby the elevator patterns in prices. The key role of strategic behaviorin the econometric model is also confirmed.

Modelling state dependence and feedback effects between poverty, employment and parental home emancipation among European youth

Youth is one of the phases in the life-cycle when some of the most decisivelife transitions take place. Entering the labour market or leaving parentalhome are events with important consequences for the economic well-beingof young adults. In this paper, the interrelationship between employment,residential emancipation and poverty dynamics is studied for eight Europeancountries by means of an econometric model with feedback effects. Resultsshow that youth poverty genuine state dependence is positive and highly significant.Evidence proves there is a strong causal effect between poverty andleaving home in Scandinavian countries, however, time in economic hardshipdoes not last long. In Southern Europe, instead, youth tend to leave theirparental home much later in order to avoid falling into a poverty state that ismore persistent. Past poverty has negative consequences on the likelihood ofemployment.

Is football an indicator of development at the international level?

[spa] El objetivo de este trabajo es examinar si el fútbol puede ser considerado como un indicador de desarrollo a nivel internacional. Se ha diseñado un modelo econométrico empírico con el fin de analizar el desarrollo en términos de niveles de PIB per cápita y del crecimiento del PIB. Se utiliza información transversal y temporal. Los resultados sugieren que la clasificación FIFA de las selecciones nacionales se puede utilizar para complementar nuestra comprensión del desarrollo multidimensional en aquellos países donde la disponibilidad de la información no es tan buena como los investigadores quisieran.

Is football an indicator of development at the international level?

[spa] El objetivo de este trabajo es examinar si el fútbol puede ser considerado como un indicador de desarrollo a nivel internacional. Se ha diseñado un modelo econométrico empírico con el fin de analizar el desarrollo en términos de niveles de PIB per cápita y del crecimiento del PIB. Se utiliza información transversal y temporal. Los resultados sugieren que la clasificación FIFA de las selecciones nacionales se puede utilizar para complementar nuestra comprensión del desarrollo multidimensional en aquellos países donde la disponibilidad de la información no es tan buena como los investigadores quisieran.

Análisis de convergencia de las regiones de la zona euro (1990-2010)

Since the birth of Economic and Monetary Union (EMU), policies have been implemented in the Member States of the European Union (EU) to lead them towards economic convergence. This article analyses the convergence of the 174 regions that exist in the 17 euro-zone countries in the years from 1990 to 2010. The article specifies a space-time econometric model using the hypotheses of conditioned beta-convergence and sigmaconvergence. The dependent variables of the model are per capita GDP and productivity and the explanatory variables are real economic variables. Beta-convergence is found to exist between the countries of the euro-zone in terms of per capita GDP, but there is divergence in terms of productivity, though only at country level. In other words, the hypothesis is confirmed that it is guidelines at country level that lead to hypothetical convergence and that the unfavourable performance of productivity is due, without doubt, to differences in behaviour between the active populations of the different euro zone countries

En respuesta a la ONU : ¿Es el fútbol un indicador del progreso y desarrollo en la esfera internacional?

[spa] El objetivo de este trabajo es corroborar la afirmación de la ONU de que el deporte es una herramienta poderosa para el progreso y el desarrollo. En este contexto, examinamos si el fútbol puede considerarse un indicador de desarrollo a nivel internacional. Un modelo empírico econométrico se diseña con el fin de analizar el desarrollo en términos de PIB per cápita, así como en términos del Índice de Desarrollo Humano. Se utiliza información transversal y temporal. Los resultados sugieren que la clasificación de la FIFA de selecciones nacionales puede ser utilizada para complementar nuestra comprensión del desarrollo multidimensional, en particular, en aquellos países donde la disponibilidad de información no es tan buena como los investigadores desearían.

En respuesta a la ONU : ¿Es el fútbol un indicador del progreso y desarrollo en la esfera internacional?

[spa] El objetivo de este trabajo es corroborar la afirmación de la ONU de que el deporte es una herramienta poderosa para el progreso y el desarrollo. En este contexto, examinamos si el fútbol puede considerarse un indicador de desarrollo a nivel internacional. Un modelo empírico econométrico se diseña con el fin de analizar el desarrollo en términos de PIB per cápita, así como en términos del Índice de Desarrollo Humano. Se utiliza información transversal y temporal. Los resultados sugieren que la clasificación de la FIFA de selecciones nacionales puede ser utilizada para complementar nuestra comprensión del desarrollo multidimensional, en particular, en aquellos países donde la disponibilidad de información no es tan buena como los investigadores desearían.

En respuesta a la ONU : ¿Es el fútbol un indicador del progreso y desarrollo en la esfera internacional?

[spa] El objetivo de este trabajo es corroborar la afirmación de la ONU de que el deporte es una herramienta poderosa para el progreso y el desarrollo. En este contexto, examinamos si el fútbol puede considerarse un indicador de desarrollo a nivel internacional. Un modelo empírico econométrico se diseña con el fin de analizar el desarrollo en términos de PIB per cápita, así como en términos del Índice de Desarrollo Humano. Se utiliza información transversal y temporal. Los resultados sugieren que la clasificación de la FIFA de selecciones nacionales puede ser utilizada para complementar nuestra comprensión del desarrollo multidimensional, en particular, en aquellos países donde la disponibilidad de información no es tan buena como los investigadores desearían.

Macroeconomics of extensive margins: a simple model

How do monopolistically competitive industries react to shocks in the context of a New Keynesian macro model? I bridge macroeconomics and trade theory by considering market dynamics. I use an analytically tractable closed-economy model with endogenous entry of firms and show the implications of markets structure for the transmission of real shocks on aggregate variables and welfare. Shock sources become crucial for the results: traditional productivity shocks cause an extensive effect on production; shocks on innovation cause an intensive impact. More patient populations bring the economy to a richer market, although it cushions the extensive effect after an innovation shock.

How to use the standard model with own data?

In this work discuss the use of the standard model for the calculation of the solvency capital requirement (SCR) when the company aims to use the specific parameters of the model on the basis of the experience of its portfolio. In particular, this analysis focuses on the formula presented in the latest quantitative impact study (2010 CEIOPS) for non-life underwriting premium and reserve risk. One of the keys of the standard model for premium and reserves risk is the correlation matrix between lines of business. In this work we present how the correlation matrix between lines of business could be estimated from a quantitative perspective, as well as the possibility of using a credibility model for the estimation of the matrix of correlation between lines of business that merge qualitative and quantitative perspective.

Inflation dynamics: A structural econometric analysis

We develop and estimate a structural model of inflation that allowsfor a fraction of firms that use a backward looking rule to setprices. The model nests the purely forward looking New KeynesianPhillips curve as a particular case. We use measures of marginalcosts as the relevant determinant of inflation, as the theorysuggests, instead of an ad-hoc output gap. Real marginal costsare a significant and quantitatively important determinant ofinflation. Backward looking price setting, while statisticallysignificant, is not quantitatively important. Thus, we concludethat the New Keynesian Phillips curve provides a good firstapproximation to the dynamics of inflation.