The optimal behaviour of firms facing stochastic costs

This paper aims at assessing the optimal behavior of a firm facing stochastic costs of production. In an imperfectly competitive setting, we evaluate to what extent a firm may decide to locate part of its production in other markets different from which it is actually settled. This decision is taken in a stochastic environment. Portfolio theory is used to derive the optimal solution for the intertemporal profit maximization problem. In such a framework, splitting production between different locations may be optimal when a firm is able to charge different prices in the different local markets.

Labour market frictions, social policies, and barriers to technology adoption

Barriers to technological changes have recently been shown to be a key element in explaining differences in output per worker across countries. This study examines the role that labour market features and institutions have in explaining barriers to technology adoption. I build a model that includes labour market frictions, capital market imperfections and heterogeneity in workers' skills. I found that the unemployment rate together with the welfare losses that workers experiment after displacement are key factors in explaining the existence of barriers to technology adoption. Moreover, I found that none of these factors alone is sufficient to build these barriers. The theory also suggests that welfare policies like the unemployment insurance system may enhance these kinds of barriers while policies like a severance payment system financed by an income tax seem to be more effective in eliminating them.

Optimal technology policy: subsidies versus monitoring

We analyze the optimal technology policy to solve a free-riding problem between the members of a RJV. We assume that when intervening the Government suffers an additional adverse selection problem because it is not able to distinguish the value of the potential innovation. Although subsidies and monitoring may be equivalent policy tools to solve firms' free-riding problem, they imply different social losses if the Government is not able to perfectly distinguish the value of the potential innovation. The supremacy of monitoring tools over subsidies is proved to depend on which type of information the Government is able to obtain about firms' R&D performance.

Resum de la tasca realitzada al Center Biomedical Engineering (CBE) del Massachussets Institute of Technology (MIT). Juliol-Agost 2005

Estudi elaborat a partir d’una estada al Center Biomedical Engineering (CBE) del Massachussets Institute of Technology (MIT), durant els mesos de juliol i agost del 2005. S’investiga una metodologia amb l’objectiu d’obtenir biomaterials que puguin actuar de bastida en la interfície os/cartílag, afavorint la diferenciació i creixement cel·lular de cartílag ossificat que pugui actuar d’unió entre l’articulació i l’os. S’experimenta una metodologia per a establir quins són els péptids afavoridors de la formació de teixit ossi utilitzats en materials d’hidroxiapatita. Es conclou que la tecnologia desenvolupada permet disposar d’una plataforma per assajar l’estudi del signaling sobre cèl·lules embrionàries, que permeti desenvolupar materials amb més capacitat diferenciadora.

Research work in Tokyo Institute of Technology

Research carried out in Tokyo Institute of Technology. The objective is to determine the influence of Interfacial Transition Zone (ITZ) around Lightweight aggregate in concrete on Chloride ion diffusivity. The ITZ of conventional concretes is the weakest point of concrete. The accumulating water on ITZ zone forms the most permeable area inside the concrete. Hence ITZ paves the way for chloride ion diffusion. The quality of ITZ depends on type and quality of aggregates used, water-cement ratio and also the method used for the production of concrete. It has been used two types of lightweight aggregates will be used, Chinese and Japanese, with different absorption capacities. The idea is to produce concrete with same effective water - cement ratio, using the same aggregates in two different conditions, dry and saturated, and compare the chloride ion diffusivity in these concretes (by diffusion test). A comparison of ITZ thickness of these concretes by SEM and EDAX-maps is also proposed. The chloride ion diffusion of concretes produced with the same effective water – cement ratio and same aggregates (dry and ssd) will depend, mainly, on ITZ.

Transferring QTL technology to the pig breeding industry (PigQTech) - a demonstration project

The aim of the project has been to demonstrate how the farm animal breeding industry can utilise gene mapping technology to accelerate genetic improvement. Previous theoretical studies had suggested that the use of marker assisted selection could potentially increase the annual improvement for quantitative traits like backfat with about 10% and for more difficult traits such as meat quality and reproduction by as much as 40-60% compared with existing technology. The work has comprised two major tasks: 1. Commercially relevant populations have been screened for segregation at QTLs identified in experimental populations. The aim has been to establish optimal strategies for QTL detection in commercial pig populations and the extent to which QTLs explaining major phenotypic differences between divergent lines used in experimental studies also explain quantitative variation within commercial lines. The results are important for specifying future strategies for finding economically valuable QTLs. 2. Marker assisted backcrossing has been used to demonstrate how a QTL allele can be introgressed from one breed to another. The work has focused on the major fatness QTL on pig chromosome 4 previously identified in a wild pig/Large White intercross. The end result was not designed to be a commercially viable product in its own right, but the process has validated a number of points of major importance for the exploitation of QTLs in livestock.

Why is it so Hard to Value Intangibles? Evidence from Investments in High-Technology Start-Ups

The paper uses a range of primary-source empirical evidence to address the question: ‘why is it to hard to value intangible assets?’ The setting is venture capital investment in high technology companies. While the investors are risk specialists and financial experts, the entrepreneurs are more knowledgeable about product innovation. Thus the context lends itself to analysis within a principal-agent framework, in which information asymmetry may give rise to adverse selection, pre-contract, and moral hazard, post-contract. We examine how the investor might attenuate such problems and attach a value to such high-tech investments in what are often merely intangible assets, through expert due diligence, monitoring and control. Qualitative evidence is used to qualify the more clear cut picture provided by a principal-agent approach to a more mixed picture in which the ‘art and science’ of investment appraisal are utilised by both parties alike

Firms in Scottish High Technology Clusters: software, life sciences, microelectronics, optoelectronics and digital media – preliminary evidence and analysis on firm size, growth and optimality

This paper reports on: (a) new primary source evidence on; and (b) statistical and econometric analysis of high technology clusters in Scotland. It focuses on the following sectors: software, life sciences, microelectronics, optoelectronics, and digital media. Evidence on a postal and e-mailed questionnaire is presented and discussed under the headings of: performance, resources, collaboration & cooperation, embeddedness, and innovation. The sampled firms are characterised as being small (viz. micro-firms and SMEs), knowledge intensive (largely graduate staff), research intensive (mean spend on R&D GBP 842k), and internationalised (mainly selling to markets beyond Europe). Preliminary statistical evidence is presented on Gibrat’s Law (independence of growth and size) and the Schumpeterian Hypothesis (scale economies in R&D). Estimates suggest a short-run equilibrium size of just 100 employees, but a long-run equilibrium size of 1000 employees. Further, to achieve the Schumpeterian effect (of marked scale economies in R&D), estimates suggest that firms have to grow to very much larger sizes of beyond 3,000 employees. We argue that the principal way of achieving the latter scale may need to be by takeovers and mergers, rather than by internally driven growth.

Electoral Uncertainty and the Deficit Bias in a New Keynesian Economy

Recent attempts to incorporate optimal fiscal policy into New Keynesian models subject to nominal inertia, have tended to assume that policy makers are benevolent and have access to a commitment technology. A separate literature, on the New Political Economy, has focused on real economies where there is strategic use of policy instruments in a world of political conflict. In this paper we combine these literatures and assume that policy is set in a New Keynesian economy by one of two policy makers facing electoral uncertainty (in terms of infrequent elections and an endogenous voting mechanism). The policy makers generally share the social welfare function, but differ in their preferences over fiscal expenditure (in its size and/or composition). Given the environment, policy shall be realistically constrained to be time-consistent. In a sticky-price economy, such heterogeneity gives rise to the possibility of one policy maker utilising (nominal) debt strategically to tie the hands of the other party, and influence the outcome of any future elections. This can give rise to a deficit bias, implying a sub-optimally high level of steady-state debt, and can also imply a sub-optimal response to shocks. The steady-state distortions and inflation bias this generates, combined with the volatility induced by the electoral cycle in a sticky-price environment, can significantly

Technology shocks and aggregate fluctuations in an estimated hybrid RBC model

This paper contributes to the on-going empirical debate regarding the role of the RBC model and in particular of technology shocks in explaining aggregate fluctuations. To this end we estimate the model’s posterior density using Markov-Chain Monte-Carlo (MCMC) methods. Within this framework we extend Ireland’s (2001, 2004) hybrid estimation approach to allow for a vector autoregressive moving average (VARMA) process to describe the movements and co-movements of the model’s errors not explained by the basic RBC model. The results of marginal likelihood ratio tests reveal that the more general model of the errors significantly improves the model’s fit relative to the VAR and AR alternatives. Moreover, despite setting the RBC model a more difficult task under the VARMA specification, our analysis, based on forecast error and spectral decompositions, suggests that the RBC model is still capable of explaining a significant fraction of the observed variation in macroeconomic aggregates in the post-war U.S. economy.

An investigation of customer order flow in the foreign exchange market

This paper examines the effect that heterogeneous customer orders flows have on exchange rates by using a new, and the largest, proprietary dataset of weekly net order flow segmented by customer type across nine of the most liquid currency pairs. We make several contributions. Firstly, we investigate the extent to which customer order flow can help to explain exchange rate movements over and above the influence of macroeconomic variables. Secondly, we address the issue of whether order flows contain (private) information which explain exchange rates changes. Thirdly, we look at the usefulness of order flow in forecasting exchange rate movements at longer horizons than those generally considered in the microstructure literature. Finally we address the question of whether the out-of-sample exchange rate forecasts generated by order flows can be employed profitably in the foreign exchange markets