All seminars meet in Room 2.12 Sir William Duncan Building, 130 Rottenrow, Glasgow G4 0GE on Wednesdays at 16:15 unless otherwise noted.
FIRST SEMESTERThe following seminars take place in the first semester of 2012/2013.
26 SEPTEMBER 2012
Maria Eugenia Sanin, University of Montpellier 1 and Ecole Polytechnique
“Environmental policy commitment under R&D competition” (with Anna Creti and Till Requate)
We study a model of environmental R&D with product differentiation on the R&D level. Two R&D firms engage in the development of new abatement technologies being of different value for the downstream users. The R&D firms choose both the level of their innovation (for example reduction of an emission coefficient) and the price of their technology. The marginal user that adopts the new technology is indifferent between the two. Besides, each R&D firm has a hinterland of firms that only buy from that specific firm. We study first-best scenarios with a suitable instrument as well as second-best policy scenarios where a regulator can only choose environmental policy. We consider two different commitment regimes of environmental policy: ex post taxation or ex ante commitment before R&D activity. We study the second best taxes ranking them with respect to welfare. We find that the ranking differs from Requate (2005) and David, Sinclair (2005) due to the introduction of R&D competition. A future step is to undertake the same exercise adding an R&D subsidy to study the interaction between R&D regulation and environmental policy.
3 OCTOBER 2012
Professor Martin Richardson, Australian National University
Faddists, enthusiasts and Canadian divas: a model of the recorded music market (joint with Simon Wilkie)
This paper constructs a model of the provision of commercial music in which some consumers (enthusiasts) enjoy diversity and others (faddists) prefer to follow what is popular. Record companies sign up bands, only some of whom will ‘succeed’ – a process modelled in a number of alternate ways – and radio stations broadcast recordings. Consumers hear music on the radio and purchase recordings, where the likelihood of purchase depends, in part, on the extent of radio airplay for a particular recording. We show that consumers’ taste for diversity leads to under-entry in general and we illustrate the working of the model by considering the impact of a local content quota in broadcasting. It is shown that a quota that restricts the airtime devoted to foreign music induces a shift in the pattern of band entry into ‘international’ genres. But a mild quota is welfare-improving in this model: even though the diversity of local music is reduced, the quota increases the number of new entrants, drawn in by the increased profitability of success. We also discuss the consequences of a quota that requires increased broadcasting of ‘new’ music and show that, while the addition of the ‘new’ band component decreases the total amount of time devoted to listening to the radio by consumers (yielding a welfare loss), it does nothing to a record company’s incentives to sign up new bands
24 OCTOBER 2012
Joscha Beckmann, University of Duisburg-Essen
Forecasting exchange rates using dynamic model averaging
A straightforward explanation for the poor and varying forecasting performance of exchange rate models first outlined by Meese and Rogoff (1983) is the issue of parameter instability. Although fundamentals contain information with regard to future exchange rate movements, identifying the best predictive model remains a major caveat, owing to the poor performance of model selection criteria (Sarno and Valente, 2009). Intuitively, a possible solution for solving this issue is a combination of different models. In this vein, the present study contributes to the literature by applying a novel dynamic model averaging (DMA) approach, first proposed by Raftery, Karny and Ettler (2010) and Koop and Korobilis (2012) for forecasting exchange rates. The main advantage of this framework is that both the coefficients and the forecasting model are allowed to change. On the contrary, conventional Bayesian model averaging (BMA) recently applied by Wright (2008) in the context of exchange rate forecasting assumes that one model configuration embedded in the set of fundamentals is the correct one. Based on this framework, we systematically evaluate the forecasting ability over different time horizons for 5 major exchange rates and a broad set of fundamentals not only statistically, but also against the background of the economical value of predictability as recently proposed by Abhyankar et al. (2005) and Della Corte et al. (2008).
31 OCTOBER 2012
SIRE Young Researchers Forum
Farid Toubal (ENS Cachan and PSE)
Native Language, Spoken Language, Translation and Trade, with Jacques Melitz (Heriot-Watt University and CEPR)
The Junior Researchers:
Arjunan Subramanian (University of Glasgow)
Reliability of agricultural statistics in developing countries: Reflections from a comprehensive village survey on crop area statistics in India.
Stephan Heblich (University of Stirling)
E-Lections: Voting Behavior and the Internet
Further information is available on the SIRE Young Researchers Forum website.
14 NOVEMBER 2012
Professor Gordon Hughes, University of Edinburgh
To be confirmed
To be confirmed
21 NOVEMBER 2012
Professor Lutz Killian, University of Michigan
The real price of oil and price risk analysis
To be confirmed
12 DECEMBER 2012
Rodney Strachan, Australian National University
Efficient Computation and Invariant Inference in the Static Factor Model
Download the paper here - Strachan
Factor models are used in a wide range of areas. Two issues with Bayesian versions of these models are a lack of invariance to ordering of the variables and computational inefficiency. This paper develops efficient and invariant Bayesian methods for estimating static factor models. This approach leads to inference on the number of factors that does not depend upon the ordering of the variables, and we provide arguments to explain this invariance. Beginning from identified parameters in which no ordering is imposed, we use parameter expansions to obtain a specification with standard conditional posteriors. Identifying restrictions that are commonly employed result in interpretable factors or loadings and, using our approach, these can be imposed ex-post. This allows us to investigate several alternative identifying schemes without the need to respecify and resample the model. We show significant gains in computational efficiency. We apply our methods to a simple example using a macroeconomic dataset.
SECOND SEMESTERThe following seminars take place in the second semester of 2012/2013.
23 JANUARY 2013
Chris Wallace, University of Leicester
Persuasion and Stubbornness in a Dynamic Trading Game
We propose a dynamic model of bilateral trade in which the parties can generate and verifiably disclose (or secretly conceal) 'hard' signals about the good's value. We find that in equilibrium the seller may keep offering a high price, accepted only by a buyer who is concealing a good signal, until eventually settling on a lower price that is accepted for sure. During this 'delay' an uninformed buyer becomes increasingly convinced that the seller is concealing an unfavourable signal. The period of no trade without signal disclosure (interpreted as stubbornness) is shorter if the seller is initially more optimistic (or the buyer more pessimistic) about the good's value, or if the time horizon is longer, or if the parties are more likely to receive a concealable hard signal.
13 FEBRUARY 2013
Michela Vecchi, Middlesex University
ICT Spillovers, Absorptive Capacity and Productivity Performance
Download the paper here - Vecchi
We analyse the impact of ICT spillovers on productivity in the uptake of the new technology using company data for the U.S. We account for inter- and intra-industry spillovers and assess the role played by firm’s absorptive capacity. Our results show that intra-industry ICT spillovers have a contemporaneous negative effect that turns positive 5 years after the initial investment. By contrast, inter-industry spillovers are important both in the short and in the long run. In the short run, companies’ innovative effort is complementary to ICT spillovers, but such complementarity disappears with the more pervasive adoption and diffusion of the technology.
27 FEBRUARY 2013
Alberto Zazzaro, Polytechnic University of Marche
Download the paper here - Zazzaro
Rationing Traps - Claudia Pigini Università di Perugia, Andrea F. Presbitero Università Politecnica delle Marche and MoFiR and Alberto Zazzaro Università Politecnica delle Marche and MoFiR
Under information asymmetries between banks and firms, a temporary negative shock to firms' assets may precipitate the economy in a credit trap, leading to falling investment and output. In this paper we investigate the dynamics of credit rationing traps at the firm level. To separate the persistence in the state of rationing (the rationing trap) from the propensity to be rationed independently of previous outcomes, we model rationing transitions between two consecutive quarters by means of a first order Markov model. To account for the credit demand and supply-side effects on credit rationing, we estimate a quadrivariate probit model, consisting of two equations for credit demand and rationing in t and two equations for those same outcomes in t-1, which control for initial conditions.
We apply this strategy on a large and representative sample of Italian firms observed quarterly between 2008:q2 to 2010:q3. We find a robust evidence of the presence of rationing traps. In addition, our results indicate the presence of a discouragement effect, since firms that were rationed in t-1 have a much higher probability of not applying for a loan at time t, than firms that were not credit rationed in t-1. Since our data make it possible to exploit the credit market shock due to the bankruptcy of Lehman Brothers, we can show that the persistence rate increased by around 5% after September 2008, raising the average number of quarters in which a firm stays out from the credit market from 3.9 to more than 6. Finally, we show that the persistence effect is larger for firms located in markets served by large banks and for firms headquartered in less developed regions of South Italy.
6 MARCH 2013
Einar Hope, Norwegian School of Economics
Optimal regulation of the transmission network
To be confirmed
20 MARCH 2013 - CANCELLED
Francesco Mureddu, CRENoS, University of Cagliari
Is Agglomeration really good for Growth? Global Efficiency, Interregional Equity and Uneven Growth
According to NEG literature (Baldwin et al. (2004)), spatial concentration of industrial activities increases growth at the regional and aggregate level without generating regional growth differentials. This view is not supported by the data. We extend the canonical model with an additional sector producing non-tradable goods which benefits from localized knowledge spillovers coming from the R&D performing industrial sector. This view, motivated by the evidence, generates both an anti-growth and a pro-growth effect of agglomeration for both the deindustrializing and the industrializing regions and leads to two novel results: 1) when agglomeration takes place, growth is lower in the periphery; 2) agglomeration may have a negative effect on the growth rate of real income, both at the regional and at the aggregate level. Our conclusions have relevant policy implications: contrary to the standard view, current EU and US regional policies favouring industrial dispersion might be welfare-improving both at the regional and the aggregate level and may reduce regional income disparities.
8 MAY 2013
Federico Revelli, University of Torino
Tax limits and local democracy
Download paper here - Revelli
This paper investigates the consequences of hierarchical tax and expenditure limitations (TELs) on local democratic processes. Based on a theoretical model
where state limitation of local government policy elicits a move from private value (ideological bias) to common value (candidate competence) voting, I exploit
time-series and cross-locality variation in TEL rules in over 7,000 Italian municipalities during the 2000s to identify their impact on voter turnout and
political competition. The difference-in-differences estimation results show that TELs provoke: 1) a fall in voter turnout; 2) a fall in the number of mayor candidates;
3) a rise in elected mayors’ win margins. The evidence is compatible with the hypothesis of hierarchical tax and expenditure limitations fading the
ideological stakes of local elections, emphasizing candidates’ valence, and favouring voters’ party line crossing, thus questioning the influential accountability
postulate of the fiscal decentralization lore.
19 JUNE 2013
Andreas Haufler, Ludwig-Maximilians-Universität München
Reforming an Asymmetric Union: On the Virtues of Dual Tier Capital Taxation (with Christoph Lülfesmann)
Download paper here - Haufler
The tax competition for mobile capital, in particular the reluctance of small countries to agree on measures of tax coordination, has ongoing political and economic fallouts within Europe. We analyse the effects of introducing a two tier structure of capital taxation, where the asymmetric member states of a union choose a common, federal tax rate in the first stage, and then non-cooperatively set local tax rates in the second stage. We show that this mechanism effectively reduces competition for mobile capital between the members of the union. Moreover, it distributes the gains across the heterogeneous states in a way that yields a strict Pareto improvement over a one tier system of purely local tax choices. Finally, we present simulation results, and show that a dual structure of capital taxation has advantages even when side payments are feasible.
26 JUNE 2013
Loriane Py (Banque de France)
The impact of research tax credit on R&D and innovation: Evidence from French firms.
To be confirmed