beliefs equilibria in an overlapping generations model we consider a standard two generations version of the overlapping generations model agents predict inflation rates on the basis of a perceived law of motion which is estimated by running a linear regression on past inflation rates we introduce the notion of beliefs equilibrium at such an equilibrium i the perceived law of motion is such that it fits the time series of inflation rates best and ii this time series of actual inflation rates is generated when agents use that perceived law of motion we show that beliefs might converge although inflation rates keep on fluctuating these fluctuations are consistent with the limit belief

market share market value and innovation in a panel of british manufacturing firms this paper examines the empirical relationship between technological innovations market share and stock market value new developments in the estimation of dynamic count data models are used to control for unobserved firm specific heterogeneity we find a robust and positive effect of market share on observable headcounts of innovations and patents although increased product market competition in the industry tends to stimulate innovative activity furthermore the impact of innovation on market value is larger for firms with higher market shares we argue that our results are consistent with models where high market share firms have incentives to pre emptively innovate

information technology effects on firm performance as measured by tobin s q despite increasing anecdotal evidence that information technology it assets contribute to firm performance and future growth potential of firms the empirical results relating it investments to firm performance measures have been equivocal however the bulk of the studies have relied exclusively on accounting based measures of firm performance which largely tend to ignore it s contribution to performance dimensions such as strategic flexibility and intangible value in this paper we use tobin s q a financial market based measure of firm performance and examine the association between it investments and firm q values after controlling for a variety of industry factors and firm specific variables the results based on data from 1988 1993 indicate that in all of the five years the inclusion of the it expenditure variable in the model increased the variance explained in q significantly the results also showed that for all five years it investments had a significantly positive association with tobin s q value our results are consistent with the notion that it contributes to a firm s future performance potential which a forward looking measure such as the q is better able to capture

industry self regulation without sanctions the chemical industry s responsible care program industry self regulation the voluntary association of firms to control their collective action has been proposed as a complement to government regulation proponents argue that the establishment of

environmental policy government and the market environmental policy is made in a context of both market failure and government failure on the one hand leaving environmental protection to the free market relying on notions of corporate social responsibility and altruistic consumer and shareholder preferences will not deliver optimal results on the other hand nationalizing the delivery of environmental protection is likely to fail because nation states rarely have the depth and quality of information required to instruct all the relevant agents to make appropriate decisions thus as for many areas of policy appropriate models of environmental intervention will lie between these two extremes while it is impossible to specify general rules concerning the precise form of intervention in part because the type of intervention depends upon value judgements this paper sets out some of the considerations that are particular to environmental policy and explores several principles for policy design including information coordination and principal agent problems with a particular focus on the international context

public investment and industry incentives in life science research life science research has shifted rapidly from the public to the private sector raising questions about government s remaining role we shed light on the issue by employing a dynamic investment response model to examine the public s impact on industry life science research effort and success we find that government expenditures in both basic biological research and agricultural and medical science create substantial spillovers for private firms the spillovers are unfortunately partly nullified by government competition for scarce research inputs yet even after accounting for such competition public investment has been strongly complementary to private investment indeed opportunities created through public research are the principal source of growth in industry life sciences copyright 2007 oxford university press

sample autocorrelation learning in a capital market model adaptive agent models are supposed to result in the same limit behavior as models with perfectly rational agents in this article we show that this claim cannot by accepted in general even in a simple capital market model where the agents apply sample autocorrelation learning to perform their forecasts by applying this learning algorithm the agents use sample means the sample autocorrelation coefficient and the sample variances of prices to predict the future prices and to determine the demand for the risky asset therefore even if the agents are not perfectly rational we require that the agents forecasts are consistent with the underlying information in this article a sufficient condition for convergence is derived analytically and checked by means of simulations the price sequence as well as the sequence of parameters estimated by means of sample autocorrelation learning converge if the initial value of the price sequence is sufficiently close to the steady state equilibrium and a random variable derived from the dividend process is not too volatile to skip the price trajectory out of the attracting region therefore the market price can even diverge and the region of convergence could become very small depending on the underlying parameters thus divergence of the price sequences is not a pathological example since it possibly occurs over a wide range of parameters therefore the often claimed coincidence of adaptive agents models and ration agent models cannot be observed even in a simple capital market model author s abstract

the effect of green investment on corporate behavior this paper explores the effect of exclusionary ethical investing on corporate behavior in a risk averse equilibrium setting while arguments exist that ethical investing can influence a firm s cost of capital and so affect investment no equilibrium model has been presented to do so we show that exclusionary ethical investing leads to polluting firms being held by fewer investors since green investors eschew polluting firms stock this lack of risk sharing among non green investors leads to lower stock prices for polluting firms thus raising their cost of capital if the higher cost of capital more than overcomes a cost of reforming i e a polluting firm cleaning up its activities then polluting firms will become socially responsible because of exclusionary ethical investing a key determinant of the incentive for polluting firms to reform is the fraction of funds controlled by green investors in our model empirically reasonable parameter estimates indicate that more than 20 green investors are required to induce any polluting firmss to reform existing empirical evidence indicates that at most 10 of funds are invested by green investors

rational thinking under costly information macroeconomic implications abstract the notion of optimized rational behavior in the formation of expectations is used in this note to study the dynamics of a simple macroeconomic model in a setting where departures from stability are not possible under perfect foresight the selection of an optimal degree of rationality may lead to the generation of long term endogenous fluctuations

the value of control in emerging markets when a developed country multinational firm acquires majority control of a firm in an emerging market there is an economically large and statistically significant increase in the acquiring firm s stock price in 1986 2006 developed market acquirers experienced positive and significant abnormal returns of 1 16 on average over a three day event window positive acquirer returns and dollar value gains appear unique to emerging market mergers and acquisitions and are not replicated when the same developed market acquirers take over firms in developed markets the size of the stock price increase is more pronounced a the weaker the contracting environment in the emerging market and b for industries with high asset intangibility the author 2009 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oxfordjournals org oxford university press

can agents learn their way out of chaos abstract in an olg model with adaptive learning forecast errors of the agents are analyzed in regions where the resulting dynamical system behaves chaoticly agents think they are living in stochastic world it is shown that they cannot reject the hypothesis that mean and autocorrelation coefficients of their forecast errors are 0 thus they have no incentive to switch to another learning rule predictions cannot be unmasked as being wrong because of the limited statistical tools the agents possess bounded rationality these phenomena occur in the olg model even with a cobb douglas utility function

ordinary least squares learning and nonlinearities in macroeconomics the paper reviews the literature on adaptive learning in macroeconomic settings where the formation of expectations is particularly relevant special attention will be given to simple two period overlapping generations models with a unique fixed point perfect foresight equilibrium in this kind of scenario eventual long term periodic and a periodic cycles are exclusively the result of the process of learning the outcome that high rates of money growth have a potentially destabilizing effect generating periodic fluctuations and chaos is emphasized the persistence of systematic forecast errors in a scenario where agents are supposed to act rationally is relevant in this context and it will be thoroughly discussed resorting to the notions of self fulfilling mistakes consistent expectations equilibria and beliefs equilibria

the economics of corporate social responsibility a firm level perspective survey this paper analyzes the economics of corporate social responsibility csr as a private response to market imperfections in order to satisfy social preferences depending on whether they affect regulation competition or contracts market imperfections driving csr decisions are classified in three categories public goods and bads and altruism imperfect competition and incomplete contracts we successively present these drivers of csr decisions and highlight the nature of incentives external or internal at work and the testable and tested hypotheses in the reviewed studies we finally review the link between csr and financial performance as well as between csr and social and environmental performance a twofold discrepancy appears in the literature opening future research paths a disconnection between our understanding of csr drivers and csr impacts and a knowledge gap between csr financial and social consequences the latter having received little attention

the returns to r d in tobin q models and the option value of future r d abstract this paper argues that the tobin q literature under estimates the r d stock used by investors in calculating market values and significantly over estimates the returns to r d thereby questioning the conclusion that there is private under investment in r d

determinants of cross national knowledge transfer and its effect on firm innovation this study examines the determinants of international knowledge flow from a resource based perspective it evaluates the impact of cross national knowledge transfer on firm innovative performance based on 56 027 us patents owned by 53 selected firms in the us based pharmaceutical industry the results suggest that innovative performance is a curvilinear function of the international knowledge content used by a firm to innovate as hypothesized it was found that at 1 low and moderate levels of international knowledge content a firm s strategy to transfer international knowledge improves its innovative performance and at 2 higher levels of international knowledge content there are diminishing marginal returns to transferring knowledge from overseas

complicated endogenous business cycles under gross substitutability abstract in this paper we investigate the global behaviour of the output equilibrium time paths in a two dimensional overlapping generations model with productive investment and capital accumulation where agents behave rationally and markets are competitive we show that equilibrium time paths can converge to complicated chaotic attractors as well as periodic attractors when the substitution effect dominates the income effect everywhere the occurrence of complicated equilibrium paths is guaranteed by homoclinic intersections of the stable and unstable manifolds of the autarkic steady state journal of economic literature classificiation number e32

living in an imaginary world that looks real abstract in the paper we show using standard approaches general equilibrium modeling and the assumption of complete rationality that the macroeconomic environment is endogenous and is indeterminate specifically it is argued without resorting to sunspot type arguments that microeconomic fundamentals do not suffice to characterize the economy at the macro level in particular we show how perceptions of rational agents of the workings of the economy a shape the environment b affect the environment sufficiently to ensure that rational economic agents find the observed environment consistent with their beliefs even though it is not as a by product we illustrate that endogenous macro uncertainty can arise as an outcome if rational economic agents whose expectations are anchored on endogenous variables expect them to arise finally we show that systematic errors can persist indefinitely under rationality

co ownership of intellectual property exploring the value appropriation and value creation implications of co patenting with different partners combining both interview data and empirical analyses at the patent and firm levels we explore the value appropriation and value creation implications of r d collaboration resulting in the co ownership of intellectual property i e co patents we make an explicit distinction between three different types of co patenting partners intra industry partners inter industry partners and universities our findings indicate that the value appropriation challenges of ip sharing are clearly evident with intra industry co patenting where partners are more likely to encounter overlapping exploitation domains co patenting with universities is associated with higher market value since appropriation challenges are unlikely to play a role and collaboration may signal novel technological opportunities although we find some evidence that co patenting corresponds to higher patent value patents co owned with firms are significantly less likely to receive self citations indicating constraints on the future exploitation and development of co owned technologies

determinants of pollution abatement in developing countries evidence from south and southeast asia abstract developing countries pa ticularly those in asia are fast adopting industrial pollution control standards similar to those in developed countries formal regulation has been greatly hampered however by the absence of clear and legally binding regulations limited institutional capacity lack of appropriate equipment and trained personnel and inadequate information on emissions one would predict highly pollution intensive production under such conditions our research however has uncovered strongly contradictory evidence despite weak or nonexistent formal regulation there are many clean plants in the developing countries of south and southeast asia of course there are also many plants which are among the world s most serious polluters what explains such extreme interplant variation this paper reviews evidence drawn from three empirical studies of plant level abatement practices conducted 1992 1994 the analyses test the importance of plant characteristics economic considerations and external pressure in determining environmental performance the results consistently show that pollution intensity is negatively associated with scale productive efficiency and the use of new process technology it is strongly and positively associated with public ownership but foreign ownership has no significant effect once other plant characteristics are taken into account among external sources of pressure community action or informal regulation emerges as a clear source of interplant differences in all three studies the results suggest that local income and education are powerful predictors of the effectiveness of informal regulation they also show that existing formal regulation has measurably beneficial effects even when it is quite weakly developed

corporate social responsibility business strategy and the environment we examine the concept of firms sacrificing profits in the social interest within the environmental realm with particular focus on the case of the united states by addressing four key questions may they do so within the scope of their fiduciary responsibilities to their shareholders can they do so on a sustainable basis or will the forces of a competitivemarketplace render such efforts and their impacts transient at best do firms in fact frequently or at least sometimes behave this way reducing their earnings by voluntarily engaging in environmental stewardship should firms carryout such profit sacrificing activities i e is this an efficient use of social resources we address these questions through the lens of economics including insights from legal and business scholarship

the value of intellectual property rights to firms and society economists view intellectual property rights iprs as policy tools for encouraging innovation but they recognize that they can also inhibit competition there are many types of iprs and institutions concerned with their administration we begin by outlining how these complex and varied rights are supposed to work and how they interact with other characteristics of firms and markets we then survey the available literature on patents trade marks and copyright to assess the value of these iprs to firms and the costs to firms of acquiring and defending their rights the paper concludes with suggestions for topics requiring further research to inform public policy better

a family production overlapping generations economy abstract this paper provides a theoretical analysis of an overlapping generations economy in which production decisions and input output allocations are all carried out at the family level i consider a single class of output allocation schemes and various degrees of knowledge about the production technology under complete knowledge i show that a family organizational structure in which everyone receives his marginal contribution to output invests less in physical capital than under a perfectly competitive equilibrium environment under incomplete knowledge i analyze and compare how beliefs about the input output relationship affect the physical capital accumulation dynamics and the long run standards of living

market value r d and patents abstract a significant relationship is found between the market value of the firm and its intangible capital proxied by past r d expenditures and the number of patents based on a time series cross section analysis of data for large u s firms

social licence corporate social responsibility and coal seam gas framing the new political dynamics of contestation abstract this paper explores the contestation dynamics between the unconventional gas mining sector and its challengers through the prism of the social licence to operate social licence is a dominant narrative in the mining sector today and as a signifier of the sector s csr credentials the term is an influential one its capacity to confer project legitimacy and hence avoid the risks of community opposition helps explain why most companies seek to gain one today both gas proponents and opponents talk the language of social licence the former to defend their projects the latter to challenge them yet beyond rhetoric the precise meaning of social licence remains elusive this paper uses a case study of community opposition to primarily coal seam gas projects in an eastern australian region to explore how the absence of a precise meaning for social licence has created a strategic opportunity space for the industry s opponents to invest social licence with a potent democracy frame this democracy framing has proved particularly effective as a contestation tool and helps explain the outcomes in this case

managerial contracting and corporate social responsibility abstract this paper presents a theory of corporate social responsibility in the form of the private provision of public goods and private redistribution by a firm these social expenditures are determined by a manager operating under a compensation contract chosen by shareholders in a capital market that prices social expenditures the theory incorporates three explanations for compensation systems that encompass social performance first consumers may reward the firm for its social expenditures second managers may have personal preferences for contributing to social causes and third the shareholder clientele a firm attracts may prefer social expenditures social incentives are higher powered the more consumers reward the firm and the stronger are shareholders warm glow preferences for social expenditures profit incentives are higher powered the more consumers reward the firm but are independent of shareholder preferences when consumers reward the firm for its social expenditures firms with higher ability managers have both higher operating profits and higher social expenditures when times are good so a positive correlation is predicted in bad times however the correlation is negative except for firms with very low ability managers in very bad times where the correlation is zero

the value of u s patents by owner and patent characteristics abstract this paper uses renewal data to estimate the value of u s patents controlling for patent and owner characteristics estimates of u s patent value are substantially larger than estimates for european patents however the ratio of u s patent value to r d for firms is only about 3 contrary to a common assertion patents issued to small patentees are much less valuable than those issued to large corporations litigated patents are more valuable as are highly cited patents however patent citations explain little variance in value suggesting limits to their use as a measure of patent quality

chaotic learning equilibria chaotic temporary equilibrium trajectories under least squares learning are shown to exist in a standard version of the overlapping generations model theses trajectories show forecast errors that never vanish thus we do not find convergence to an equilibrium in which agents have perfect foresight complex trajectories can even be found in the case of savings functions which are monotonically decreasing in the expected gross rate of inflation in this case no cyclical or chaotic trajectories with perfect foresight exist thus learning alone is a source of chaotic dynamic journal of economic literature classification numbers d83 d84

community pressure and clean technology in the informal sector an econometric analysis of the adoption of propane by traditional mexican brickmakers abstract in many developing countries the informal sector comprised of low technology unlicensed micro enterprises is a major source of pollution environmental management in this sector is exceptionally challenging though clean technologies offer a means of mitigating the problem to our knowledge there has been no rigorous empirical research on why informal or even small scale firms do and do not adopt them as a first step toward filling this gap this paper presents the results of an econometric analysis of the diffusion of propane among informal traditional brickmakers in cd juarez mexico a leading source of air pollution owing to their reliance on cheap highly polluting fuels such as used tires and scrap wood the two key policy implications of our analysis are that 1 it is possible to successfully promote the adoption of a clean technology by intensely competitive informal firms even when the new technology significantly raises variable costs and 2 community pressure applied by competing firms and private sector local organizations can generate incentives for adoption

on the consistency of backward looking expectations the case of the cobweb in dynamic models of economic fluctuations backward looking expectations with systematic forecasting errors are inconsistent with rational behaviour in non linear dynamic models exhibiting seemingly unpredictable chaotic fluctuations however simple habitual rule of thumb backward looking expectation rules may yield non zero but nevertheless non systematic forecasting errors in a chaotic model expectational forecasting errors may have zero autocorrelations at all lags even for rational agents patterns in these forecasting errors may be very difficult to detect especially in the presence of small noise backward looking expectations are then not necessarily inconsistent with rational behaviour we investigate whether simple expectation schemes such as naive or adaptive expectations can be consistent with rational behaviour in the simplest of all non linear dynamic economic models the non linear cobweb model

imperfect foresight and chaos an example of a self fulfilling mistake abstract we consider an overlapping generations economy with a single production sector and a government first we assume that the households have imperfect foresight in the sense that they cannot distinguish between the trajectories of a deterministic chaotic system and a stochastic process it is shown that mistaking a deterministic chaotic system for a stochastic one is a self fulfilling mistake because the possibility of making this mistake arises only when it is made the unique perfect foresight equilibrium is proved to exhibit simple dynamics for most parameter values finally we show that when agents apply simple econometric models to build their expectations the resulting dynamics resemble the chaotic dynamics of the imperfect foresight equilibrium under certain parameter constellations while they are close to the simple dynamics of the perfect foresight equilibrium for other parameter values