The future role of government in knowledge-based economies

In this article, we draw together aspects of contemporary theories of knowledge (particularly organisational knowledge) and complexity theory to demonstrate how appropriate conceptual rigor enables both the role of government and the directions of policy development in knowledge-based economies to be identified. Specifically we ask, what is the role of government in helping shape the knowledge society of the future? We argue that knowledge policy regimes must go beyond the modes of policy analysis currently used in innovation, information and technology policy because they are based in an industrial rather than post-industrial analytical framework. We also argue that if we are to develop knowledge-based economies, more encompassing images of the future than currently obtain in policy discourse are required. We therefore seek to stimulate and provoke an array of lines of thought about government and policy for such economies. Our objective is to focus on ideas more than argument and persuasion.

A trader portfolio optimization of bilateral contracts in electricity retail markets

Electricity markets are systems for effecting the purchase and sale of electricity using supply and demand to set energy prices. Two major market models are often distinguished: pools and bilateral contracts. Pool prices tend to change quickly and variations are usually highly unpredictable. In this way, market participants often enter into bilateral contracts to hedge against pool price volatility. This article addresses the challenge of optimizing the portfolio of clients managed by trader agents. Typically, traders buy energy in day-ahead markets and sell it to a set of target clients, by negotiating bilateral contracts involving three-rate tariffs. Traders sell energy by considering the prices of a reference week and five different types of clients. They analyze several tariffs and determine the best share of customers, i.e., the share that maximizes profit. © 2014 IEEE.

The role of implicit contracts: Building public works in the 1840s in Portugal

Business History, Vol 50 No 2, p147-162

Optimal job design in the presence of implicit contracts

We characterize the optimal job design in a multitasking environment when the firms rely on implicit incentive contracts (i.e., bonus payments). Two natural forms of job design are compared: (i) individual accountability, where each agent is assigned to a particular job and assumes full responsibility for its outcome; and (ii) team accountability, where a group of agents share responsibility for a job and are jointly accountable for its outcome. The key trade-off is that team accountability mitigates the multitasking problem but may weaken the implicit contracts. The optimal job design follows a cut-off rule: firms with high reputation concerns opt for team accountability, whereas firms with low reputation concerns opt for individual accountability. Team accountability is more likely the more acute the multitasking problem is. However, the cut-off rule need not hold if the firm combines implicit incentives with explicit pay-per-performance contracts.

Politically driven cycles in fiscal policy: in depth analysis of the functional components of government expenditures

NIPE - WP 02/2016

Agency cost of government ownership: a study of voluntary audit comitte formation in China

In this paper, we investigate the agency costs of government ownership and their impact on corporate governance and firm value. China is used as a laboratory because of the prevalent state shareholdings in exchange-listed firms. In this context, we specifically consider the trade-offs involved in the voluntary formation of an audit committee when the controlling shareholder is the state. The decision to improve corporate governance (in this case, introduce an audit committee) is shown to be value relevant and a function of existing agency relationships and non-trivial implementation costs. Our findings are robust to the level of pyramid groups, the ownership-control wedge, and financial leverage. The research adds to the debate regarding the effect of government shareholdings on corporate culture and performance - a topic that hastaken on renewed importance in recent times.

Is it redistribution or centralization? On the determinants of government investment in infrastructure

The dilemma efficiency versus equity, together with political partisan interests, has received increasing attention to explain the territorial allocation of investments. However, centralization intended to introduce or reinforce hierarchization in the political system has not been object as of now of empirical analysis. Our main contribution to the literature is providing evidence that meta-political objectives related to the ordering of political power and administration influence regional investment. In this way, we find evidence that network mode’s (roads and railways) investment programs are influenced by the centralization strategy of investing near to the political capital, while investment effort in no-network modes (airports and ports) appears to be positively related to distance. Since investment in surface transportation infrastructures is much higher than that in airports and ports, and taken into account that regions surrounding the political capital are poorer than the average, we suggest that centralization rather than redistribution has been the driver for the concentration of public investment on these regions.

Fiscal foresight and the effects of government spending

We study the effects of government spending by using a structural, large dimensional, dynamic factor model. We find that the government spending shock is non-fundamental for the variables commonly used in the structural VAR literature, so that its impulse response functions cannot be consistently estimated by means of a VAR. Government spending raises both consumption and investment, with no evidence of crowding out. The impact multiplier is 1.7 and the long run multiplier is 0.6.

Tax evasion, technology shocks, and the cyclicality of government revenues

This paper analyzes the behavior of the tax revenue to output ratio over the business cycle. In order to replicate the empirical evidence, we develop a simple model combining the standard Ak growth model with the tax evasion phenomenon. When individuals conceal part of their true income from the tax authority, they face the risk of being audited and hence of paying the corresponding fine. Under the empirically plausible assumptions that the intertemporal elasticity of substitution exhibits a sufficiently small value and that productivity shocks are serially correlated, we show that the elasticity of government revenue with respect to output is larger than one, which agrees with the empirical evidence. This result holds even if the tax system displays flat tax rates. We extend the previous setup to generate larger fiscal deficits when the economy experiences a recession.

The Effects of government spending on the distribution of consumption

We study the effects of government spending on the distribution of consumption. We find a substantial degree of heterogeneity: consumption increases at the bottom and falls at the top of the distribution, implying a significant temporary reduction of consumption inequality. The effects of the shock display correlations of around -0.7/-0.9 with the percentage of stockholders within the decile. We interpret the results as in line and yielding support to models of limited participation where, while the Ricardian equivalence holds for rich households, for poor household, with no access to capital markets, the Keynesian multiplier is at work.

Fiscal foresight, forecast revisions and the effects of government spending in the open economy

This paper investigates the effects of government spending on the real exchange rate and the trade balance in the US using a new VAR identification procedure based on spending forecast revisions. I find that the real exchange rate appreciates and the trade balance deteriorates after a government spending shock, although the effects are quantitatively small. The findings broadly match the theoretical predictions of the standard Mundell-Fleming model and differ substantially from those existing in literature. Differences are attributable to the fact that, because of fiscal foresight, the government spending is non-fundamental for the variables typically used in open economy VARs. Here, on the contrary, the estimated shock is fundamental.