Does foreign direct investment crowd out domestic entrepreneurship?

In analyzing firm entry and exit across Belgian manufacturing industries,this paper presents evidence that import competition and foreign directinvestment discourage entry and stimulate exit of domestic entrepreneurs.These results are in line with theoretical occupational choice modelsthat predict foreign direct investment would crowd out domesticentrepreneurs through their selections in product and labor markets.However, the empirical results also suggest that this crowding out effectmay be moderated or even reversed in the long-run due to the long termpositive effects of FDI on domestic entrpreneurship as a result oflearning, demonstration, networking and linkage effects between foreignand domestic firms.

Bundling electronic journals and competition among publishers

Site licensing of e-journals has been revolutionizing the way academicinformation is distributed. However, many librarians are concerned aboutthe possibility that publishers might abuse site licensing by practicingbundling. In this paper, we analyze the private and social incentives forthe publishers to use bundling in the context of STM electronic journalmarket. In the short run in which the number of journals is exogenouslygiven, we find a strong conflict between the two incentives: each publisherfinds bundling optimal and bundling increases the industry profit butreduces social welfare. However, in the long run we find that publishersmight have higher incentives to introduce new journals under bundlingthan without bundling and, in this case, bundling can reduce the industryprofit while increasing social welfare. Finally, we examine publishers incentive to provide links to the websites of the rival publishers underbundling and show that even asymmetric publishers have incentive tointerconnect.

Banks, liquidity crises and economic growth

How do the liquidity functions of banks affect investment and growth at different stages ofeconomic development? How do financial fragility and the costs of banking crises evolve with the level of wealth of countries? We analyze these issues using an overlapping generations growth model where agents, who experience idiosyncratic liquidity shocks, can invest in a liquid storage technology or in a partially illiquid Cobb Douglas technology. By pooling liquidity risk, banks play a growth enhancing role in reducing inefficient liquidation of long term projects, but they may face liquidity crises associated with severe output losses. We show that middle income economies may find optimal to be exposed to liquidity crises, while poor and rich economies have more incentives to develop a fully covered banking system. Therefore, middle income economies could experience banking crises in the process of their development and, as they get richer, they eventually converge to a financially safe long run steady state. Finally, the model replicates the empirical fact of higher costs of banking crises for middle income economies.

Trade, migration and regional unemployment

We formulate a dynamic core-periphery model with frictions in the job matching process to study the interplay between trade costs, migration and regional unemploymentin the short- and long-run. We find that the spatial distribution of unemployment mirrors (inversely) the distribution of economic activities. Further, we highlight a contrast between the short-run and the long-run effects of trade-induced migration on regional unemployment. In particular, an inßow of immigrants from the periphery into the core reduces the unemployment gap in the short-run, but exacerbates unemployment disparities in the long-run.

Skill-biased technological change and the business cycle

Over the past two decades, technological progress in the United States hasbeen biased towards skilled labor. What does this imply for business cycles?We construct a quarterly skill premium from the CPS and use it to identifyskill-biased technology shocks in a VAR with long-run restrictions. Hours fallin response to skill-biased technology shocks, indicating that at least part of thetechnology-induced fall in total hours is due to a compositional shift in labordemand. Skill-biased technology shocks have no effect on the relative price ofinvestment, suggesting that capital and skill are not complementary in aggregateproduction.

Immigration and the survival of the welfare state

This paper analyzes the political sustainability of the welfare state in a model where immigration policy is also endogenous. In the model, the skills of the native population are affected by immigration and skill accumulation. Moreover, immigrants affect future policies, once they gain the right to vote. The main finding is that the long-run survival of redistributive policies is linked to an immigration policy specifying both skill and quantity restrictions. In particular, in steady state the unskilled majority admits a limited inflow of unskilled immigrants in order to offset growth in the fraction of skilled voters and maintain a high degree of income redistribution.Interestingly, equilibrium immigration policy shifts from unrestricted skilled immigration,when the country is skill-scarce, to restricted unskilled immigration, as the fraction of native skilled workers increases. The analysis also suggests a new set of variables that may help explain international differences in immigration restrictions.

Addressing the natural resource curse: An illustration from Nigeria

Some natural resources oil and minerals in particular exert a negative andnonlinear impact on growth via their deleterious impact on institutionalquality. We show this result to be very robust. The Nigerian experienceprovides telling confirmation of this aspect of natural resources. Wasteand corruption from oil rather than Dutch disease has been responsible forits poor long run economic performance. We propose a solution for addressingthis resource curse which involves directly distributing the oil revenuesto the public. Even with all the difficulties of corruption and inefficiencythat will no doubt plague its actual implementation, our proposal will, atthe least, be vastly superior to the status quo. At best, however, it couldfundamentally improve the quality of public institutions and, as a result,transform economics and politics in Nigeria.

On ignoring scientific evidence: The bumpy road to enlightenment

It is well accepted that people resist evidence that contradicts their beliefs.Moreover, despite their training, many scientists reject results that are inconsistent withtheir theories. This phenomenon is discussed in relation to the field of judgment anddecision making by describing four case studies. These concern findings that clinical judgment is less predictive than actuarial models; simple methods have proven superiorto more theoretically correct methods in times series forecasting; equal weighting ofvariables is often more accurate than using differential weights; and decisions cansometimes be improved by discarding relevant information. All findings relate to theapparently difficult-to-accept idea that simple models can predict complex phenomenabetter than complex ones. It is true that there is a scientific market place for ideas.However, like its economic counterpart, it is subject to inefficiencies (e.g., thinness,asymmetric information, and speculative bubbles). Unfortunately, the market is only correct in the long-run. The road to enlightenment is bumpy.

Endogeneizing know-how flows through the nature of R&D investments

In this paper we carefully link knowledge flows to and from a firm s innovation process with this firm s investment decisions. Three types of investments are considered: investments in applied research, investments in basic research, and investments in intellectual property protection. Only when basic research is performed, can the firm effectively access incoming knowledge flows and these incoming spillovers serve to increase the efficiency of own applied research. The firm can at the same time influence outgoing knowledge flows, improving appropriability of its innovations, by investing in protection. Our results indicate that firms with small budgets for innovation will not invest in basic research. This occurs in the short run, when the budget for know-how creation is restricted, or in the long-run, when market opportunities are low, when legal protection is not very important, or, when the pool of accessible and relevant external know-how is limited. The ratio of basic to applied research is non-decreasing in the size of the pool of accessible external know-how, the size and opportunity of the market, and, the effectiveness of intellectual property rights protection. This indicates the existence of economies of scale in basic research due to external market related factors. Empirical evidence from a sample of innovative manufacturing firms in Belgium confirms the economies of scale in basic research as a consequence of the firm s capacity to access external knowledge flows and to protectintellectual property, as well as the complementarity between legal and strategic investments.

Quantifying quantitative literacy: Age heaping and the history of human capital

Age data frequently display excess frequencies at round or attractive ages, such as even numbers and multiples of five. This phenomenon of age heaping has been viewed as a problem in previous research, especially in demography and epidemiology. We see it as an opportunity and propose its use as a measure of human capital that can yield comparable estimates across a wide range of historical contexts. A simulation study yields methodological guidelines for measuring and interpreting differences in ageheaping, while analysis of contemporary and historical datasets demonstrates the existence of a robust correlation between age heaping and literacy at both the individual and aggregate level. To illustrate the method, we generate estimates of human capital in Europe over the very long run, which support the hypothesis of a major increase in human capital preceding the industrial revolution.

Firms vs. insiders as traders of last resort

We explore the role of corporate insiders vs. firms as traders of last resort. We develop a simple model of insider trading in which insiders provide price support, as well as liquidity, in security markets. Consistent with the model predictions we find that in the US markets insiders trading activities have a clear impact on return distributions. Furthermore, we provide empirical evidence on insiders transactions and firm transactions affecting returns in a different manner. In particular, while insiders transactions (both purchases and sales) have a strong impact on skewness in the short run and to a lesser extent in short run volatility, company repurchases only have a clear impact on volatility, both in the short and the long run. We provide explanations for this asymmetry.

The three horsemen of riches: Plague, war and urbanization in early modern Europe

How did Europe escape the "Iron Law of Wages?" We construct a simple Malthusian model withtwo sectors and multiple steady states, and use it to explain why European per capita incomes andurbanization rates increased during the period 1350-1700. Productivity growth can only explain a smallfraction of the rise in output per capita. Population dynamics changes of the birth and death schedules were far more important determinants of steady states. We show how a major shock to population cantrigger a transition to a new steady state with higher per-capita income. The Black Death was such ashock, raising wages substantially. Because of Engel's Law, demand for urban products increased, andurban centers grew in size. European cities were unhealthy, and rising urbanization pushed up aggregatedeath rates. This effect was reinforced by diseases spread through war, financed by higher tax revenues.In addition, rising trade also spread diseases. In this way higher wages themselves reduced populationpressure. We show in a calibration exercise that our model can account for the sustained rise in Europeanurbanization as well as permanently higher per capita incomes in 1700, without technological change.Wars contributed importantly to the "Rise of Europe", even if they had negative short-run effects. We thustrace Europe s precocious rise to economic riches to interactions of the plague shock with the belligerentpolitical environment and the nature of cities.

Nets: Network estimation for time series

This work proposes novel network analysis techniques for multivariate time series.We define the network of a multivariate time series as a graph where verticesdenote the components of the process and edges denote non zero long run partialcorrelations. We then introduce a two step LASSO procedure, called NETS, toestimate high dimensional sparse Long Run Partial Correlation networks. This approachis based on a VAR approximation of the process and allows to decomposethe long run linkages into the contribution of the dynamic and contemporaneousdependence relations of the system. The large sample properties of the estimatorare analysed and we establish conditions for consistent selection and estimation ofthe non zero long run partial correlations. The methodology is illustrated with anapplication to a panel of U.S. bluechips.

Effect of water and citrate solubility on agronomic effectiveness of acidulated phosphates in three consecutive corn crops

In the process of phosphate rock acidulation, several impure P compounds may be formed along with the desirable Ca and NH4 phosphates. Such compounds normally reduce the content of water-soluble P and thus the agronomic effectiveness of commercial fertilizers. In order to study this problem, a greenhouse experiment consisting of three consecutive corn crops was conducted in samples of a Red-Yellow Latosol (Typical Hapludox) in a completely randomized design (6 x 2 x 2), with four replicates. Six commercial fertilizers were added to 2 kg of soil at a rate of 70 mg kg-1 P, based on the content of soluble P in neutral ammonium citrate plus water (NAC + H2O) of the fertilizers. Fertilizer application occurred either in the original form or leached to remove the water-soluble fraction, either by mixing the fertilizer with the whole soil in the pots or with only 1 % of its volume. The corn plants were harvested 40 days after emergence to determine the shoot dry matter and accumulated P. For the first crop and localized application, the elimination of water-soluble P from the original fertilizers resulted in less bioavailable P for the plants. For the second and third crops, the effects of P source, leaching and application methods were not as evident as for the first, suggesting that the tested P sources may have similar efficiencies when considering successive cropping. The conclusion was drawn that the water-insoluble but NAC-soluble fractions of commercial P fertilizers are not necessarily inert because they can provide P in the long run.

Comparaison des réponses hémodynamiques d'un repas modérément salé et d'un repas riche en sel : une hypothèse pour expliquer l'hypertrophie ventriculaire gauche des régimes hypersodés

De nombreuses études cliniques ont révélé une corrélation étroite entre un régime alimentaire riche en sel et le développement d'une hypertrophie ventriculaire gauche. Cette association a été classiquement attribuée aux effets hypertensifs à long terme d'une alimentation riche en sel. Toutefois, les études épidémiologiques ont également démontré que l'hypertrophie ventriculaire gauche peut survenir indépendamment de changements de pression artérielle.¦L'ingestion de sel n'étant pas distribuée de manière homogène durant la journée mais ayant lieu principalement durant les repas, nous émettons l'hypothèse que chaque repas riche en sel induit une augmentation aiguë de la pression artérielle, des pressions de remplissage cardiaque, du volume d'éjection systolique et du débit cardiaque. L'augmentation résultante du travail cardiaque pourrait ainsi à la longue entraîner une hypertrophie cardiaque.¦Pour tester si un repas riche en sel conduit à des modifications hémodynamiques favorisant l'hypertrophie cardiaque, nous avons comparé chez la même personne jeune et en bonne santé la réponse hémodynamique à un repas modérément salé (45 mmol) à celle d'un repas riche en sel (165 mmol de sodium). Les repas ont été pris de manière randomisée à 7 jours d'intervalle. Divers paramètres hémodynamiques ont été mesurés en continu avant et jusqu'à 140 minutes après chaque repas. Nos résultats montrent que les augmentations post-prandiales du volume d'éjection systolique et du travail cardiaque ont été plus prononcées après un repas à haute teneur en sel par rapport à un repas modérément salé.¦Nous spéculons que des apports chroniques en sel induisent des charges hémodynamiques répétées. Etant donné que la concentration plasmatique de sodium, qui est augmentée après un repas salé, est également capable de stimuler la croissance des myocytes cardiaques, il est possible que la combinaison sur des mois ou des années de pics hypernatrémiques post-prandiaux et de charges cardiaques soit responsable de l'hypertrophie cardiaque souvent observée avec une alimentation riche en sel.¦-¦Many clinical studies have shown a close correlation between a chronic high salt diet and the development of left ventricular hypertrophy. This association has been classically attributed to the long-term hypertensive effects of a high salt diet. However, epidemiological studies have also shown that left ventricular hypertrophy may occur independently of changes in arterial pressure.¦Since salt ingestion during a high salt diet is not distributed evenly over a 24-hr period, but occurs essentially during meal periods, we speculate that each acute salt load could lead to greater acute increases in blood pressure, heart filling pressure, stroke volume and cardiac output, putting an additional work load on the heart, promoting in the long run cardiac hypertrophy.¦To test whether a high salt meal leads to hemodynamic changes that may favor cardiac hypertrophy, we compared in the same healthy young individual the response to a moderately salted meal (45 mmol) and to a high-salt meal (165 mmol sodium), given in a random order on separate days, on various cardiovascular parameters that were continuously monitored before and up to 140 minutes after the meal. Our results show that the post-prandial increases in stroke volume, and cardiac work were more pronounced after a high-salt meal than after a low-salt meal.¦We speculate that repetitive salt loads associated with a high salt diet may lead to repetitive hemodynamic loads. Since plasma sodium concentration, which is increased after a salty meal, is also capable to stimulate myocyte growth, it is possible that the combination of post-prandial hypernatremic peaks and of cardiac loads may be responsible, when repeated many times over period of months, of the cardiac hypertrophy often seen with a high salt diet.