Inference in the presence of redundant moment conditions and the impact of government health expenditure on health outcomes in England

In his 1999 article with Breusch, Qian, and Wyhowski in the Journal of Econometrics, Peter Schmidt introduced the concept of “redundant” moment conditions. Such conditions arise when estimation is based on moment conditions that are valid and can be divided into two subsets: one that identifies the parameters and another that provides no further information. Their framework highlights an important concept in the moment-based estimation literature, namely, that not all valid moment conditions need be informative about the parameters of interest. In this article, we demonstrate the empirical relevance of the concept in the context of the impact of government health expenditure on health outcomes in England. Using a simulation study calibrated to this data, we perform a comparative study of the finite performance of inference procedures based on the Generalized Method of Moment (GMM) and info-metric (IM) estimators. The results indicate that the properties of GMM procedures deteriorate as the number of redundant moment conditions increases; in contrast, the IM methods provide reliable point estimators, but the performance of associated inference techniques based on first order asymptotic theory, such as confidence intervals and overidentifying restriction tests, deteriorates as the number of redundant moment conditions increases. However, for IM methods, it is shown that bootstrap procedures can provide reliable inferences; we illustrate such methods when analysing the impact of government health expenditure on health outcomes in England.     

Institutions and the Diversity and Prevalence of Multinationals’ Knowledge‐Augmenting Subsidiaries

Multinational corporations (MNCs) increasingly seek to gain access to, and exploit, locationally specific sources of advanced knowledge and technological capabilities, creating a need to explain (1) the diversity among these facilities and (2) how institutions influence MNCs’ abilities to invest in different subsidiary types. Extending debates on firms’ knowledge‐augmenting activities, the authors integrate institutions into their analytical framework to a greater extent than previous work has done. Moreover, existing contributions provide typologies of R&D subsidiaries. In contrast, the authors focus on a particular subset of subsidiaries, knowledge‐augmenting ones, and put forward a theory to explain their variety and their prevalence, enabling them to identify previously neglected subsidiary types that have important managerial and policy implications. By downplaying the diversity of these subsidiaries, existing work has not been able to capture the full range of managerial challenges as well as the costs and benefits of different subsidiary types to host countries. The authors, therefore, problematize firms’ abilities to gain access to foreign knowledge‐generating assets, highlight the importance of institutional environments, provide policy recommendations and identify areas for future research.     

Overcoming Incentive Constraints by Linking Decisions1

Consider a Bayesian collective decision problem in which the preferences of agents are private information. We provide a general demonstration that the utility costs associated with incentive constraints become negligible when the decision problem is linked with a large number of independent copies of itself. This is established by defining a mechanism in which agents must budget their representations of preferences so that the frequency of preferences across problems mirrors the underlying distribution of preferences, and then arguing that agents' incentives are to satisfy their budget by being as truthful as possible. We also show that all equilibria of the linking mechanisms converge to the target utility levels. The mechanisms do not require transferable utility or interpersonal comparisons of utility, and are immune to manipulations by coalitions.     

Market Entry Costs,Producer Heterogeneity,and Export Dynamics

As the exchange rate, foreign demand, and production costs evolve, domestic producers are continually faced with two choices: whether to be an exporter and, if so, how much to export. We develop a dynamic structural model of export supply that characterizes these two decisions. The model embodies plant‐level heterogeneity in export profits, uncertainty about the determinants of future profits, and market entry costs for new exporters. Using a Bayesian Monte Carlo Markov chain estimator, we fit this model to plant‐level panel data on three Colombian manufacturing industries. We obtain profit function and sunk entry cost coefficients, and use them to simulate export responses to shifts in the exchange‐rate process and several types of export subsidies. In each case, the aggregate export response depends on entry costs, expectations about the exchange rate process, prior exporting experience, and producer heterogeneity. Export revenue subsidies are far more effective at stimulating exports than policies that subsidize entry costs.     

Land Use Regulation and Welfare

We evaluate the effect of land use regulation on the value of land and on welfare. Our estimates are based on a decomposition of the effects of regulation into three components: an own‐lot effect, which reflects the cost of regulatory constraints to the owner of a parcel; an external effect, which reflects the value of regulatory constraints on one's neighbors; a supply effect, which reflects the effect of regulated scarcity of developable land. Using this decomposition, we arrive at a novel strategy for estimating a plausibly causal effect of land use regulation on land value and welfare. This strategy exploits cross‐border changes in development, prices, and regulation in regions near municipal borders. Our estimates suggest large negative effects of regulation on the value of land and welfare in these regions.     

Applying firm attention theory to assess the antecedents of firm participation in regulatory processes

This study applies firm attention theory to explain how factors including regulatory inspection ratings, media coverage of regulatory issues, new regulations, and the political activities of opposing interest groups influence firm participation in regulatory processes. Findings suggest that firm political participation is driven by factors that attract firm attention to political processes as well as by factors that threaten to draw stakeholder attention to political processes and firm operations. These relationships are explored by examining automobile manufacturer participation in National Highway Traffic and Safety Administration rulemaking comment periods.     

The evolving role of the medical director.

A medical group, be it under one roof, as a single or multispecialty group, or in separate offices, as an independent practice association, develops with the size and make-up of its patient base. In this article we document the growth of selective contracting by third-party payers with medical groups in California and discuss the implications of these trends on the structure and management of medical practices. Specifically, we focus on the emerging role of the medical director.     

A stratified unrelated question randomized response model

This paper presents a new randomized response model that combines Kim and Warde's (2004) stratified Warner's randomized response technique using optimal allocation with the unrelated question randomized response model. The empirical studies performed show that, for the prior information given, the new model is more efficient in terms of variance (in the case of completely truthful reporting) and mean square error (in the case of less than completely truthful reporting) than its component models.