Economic Growth and Welfare in a Neoclassical Overlapping Generations Growth Model with Minimum Wages and Consumption Taxes

We examine the effects of minimum wages on both the long‐run per worker GDP and welfare in the textbook Diamond style overlapping generations economy. In addition, we assume the existence of unemployment benefits financed at a balanced budget with consumption taxes. Under suitable conditions, it is shown that a regulated‐wage economy with unemployment performs better than a competitive‐wage economy with full employment in the long run. Moreover, a welfare‐maximizing minimum wage exists. Our findings may have interesting policy implications.     

THE MYSTERY OF THE PRINTING PRESS: MONETARY POLICY AND SELF‐FULFILLING DEBT CRISES

We study the conditions under which unconventional (balance sheet) monetary policy can rule out self‐fulfilling sovereign default in a model with optimizing but discretionary fiscal and monetary policymakers. When purchasing sovereign debt, the central bank effectively swaps risky government paper for monetary liabilities only exposed to inflation risk, thus yielding a lower interest rate. As central bank purchases reduce the (ex ante) costs of debt, we characterize a critical threshold beyond which, absent fundamental fiscal stress, the government strictly prefers primary surplus adjustment to default. Because default may still occur for fundamental reasons, however, the central bank faces the risk of losses on sovereign debt holdings, which may generate inefficient inflation. We show that these losses do not necessarily undermine the credibility of a backstop, nor the monetary authorities' ability to pursue its inflation objectives. Backstops are credible if either the central bank enjoys fiscal backing or fiscal authorities are sufficiently averse to inflation. (JEL: E58, E63, H63)     

Complementary Resources, Appropriability and Vertical Interfirm Relations in the Italian Movie Industry

Resource-based view research plays a prominent role in strategic management studies. In this paper we investigate the relativistic interpretation of the 'scarcity' concept, the appropriability of complementary resources, the measurability of the contribution that a specific resource brings to the overall value of the firm. The theoretical issues have been made context specific trying to show (a) how a not-scarce complementary resource like movie theatres can help build value for the distributor, mainly through the creation of reputation for the subsequent TV broadcasting; (b) that this resource can be appropriated from different companies; (c) that companies can develop different kinds of interfirm relationships in order to control complementary resources; (d) that reliable and valid parameters can be provided to measure the value of resources and the related degree of control from the distributors. Supporting empirical evidence is provided and implications for managing complementary resources are discussed.     

Bounded Estimation in the Presence of Nuisance Parameters

The aim of this paper is to extend in a natural fashion the results on the treatment of nuisance parameters from the profile likelihood theory to the field of robust statistics. Similarly to what happens when there are no nuisance parameters, the attempt is to derive a bounded estimating function for a parameter of interest in the presence of nuisance parameters. The proposed method is based on a classical truncation argument of the theory of robustness applied to a generalized profile score function. By means of comparative studies, we show that this robust procedure for inference in the presence of a nuisance parameter can be used successfully in a parametric setting.     

Specialization Versus Diversification in EU Economies: A Challenge for Agro-Food?

Much attention has been paid to industrial differentiation versus specialization. In EU, the phenomenon of secondary production is important enough since it absorbs 6.3% of the total output at basic prices. Through the development of new symmetrical indicators, we point out the ability of economic branches to diversify, penetrate and invade others. This analysis is applied both to EU countries and to economic system branches, focusing the analysis on the challenges facing Agriculture and Food and beverage industry. We can assume that the most advanced countries belong to a post-modern or post-industrial stage of development. The only way to continue to stay on the market is to diversify production and to emphasize the search for a quality/price ratio attractive for the consumer. On the contrary, less advanced countries of Central and Eastern Europe are rather in the initial or intermediate stages of industrialization in which agriculture, crafts and traditional services still have a certain importance and, as we know, undertake more differentiated activities. What emerges is a watershed between continental and Mediterranean countries. Eastern Europe is still anchored to a traditional behavior. In synthesis we find three fundamental trends: (a) a long period continuity of those complementary activities that have always characterized agriculture; (b) the different structure of secondary production in the EU countries; (c) different barriers to entry, that explain asymmetries in the behavior of branches otherwise more or less related. Remark that these barriers may be not only physical or economical but also normative, thus introducing more differences in the behavior of different countries.     

Processes of Institutionalization and Differentiation in the Italian Third Sector

The article describes the recent evolution of the Italian third sector, focusing particularly on its changing role in relation to welfare policies and on its contribution to the development of the provision of social services. In contrast with those considering the emergence and development of the sector solely, or mainly, as a consequence of decisions made by external actors, especially public institutions, the article shows a more complex and dynamic picture. The article demonstrates that the Italian third sector, although at the present time largely engaged in contractual services with the public sector, has maintained a level of autonomy that allows for continuous innovation both within and external to the social service sector. The Italian case supports the need for further debate on the role of the third sector in modern society.     

THE INTERNATIONAL DIMENSION OF PRODUCTIVITY AND DEMAND SHOCKS IN THE US ECONOMY

This paper analyzes the cross‐country effects of productivity and demand disturbances in the United States identified with sign restrictions based on standard theory. Productivity gains in US manufacturing increase US consumption and investment vis‐à‐vis foreign countries, resulting in a trade deficit and higher international prices of US goods, despite the rise in their supply. Financial adjustment works via a higher global value of US equities, real dollar appreciation, and an expansion of US gross foreign liabilities as well as assets. Positive demand shocks to US manufacturing also increase investment and cause a real dollar appreciation, but have limited effects on the trade balance and net foreign assets. Our findings emphasize the importance for macroeconomic interdependence of endogenous fluctuations in aggregate demand across countries in response to business cycle shocks.     

Incomplete Contracts and Complexity Costs

This paper investigates, in a simple risk-sharing framework, the extent to which the incompleteness of contracts could be attributed to the complexity costs associated with the writing and the implementation of contracts. We show that, given any measure of complexity in a very general class, it is possible to find simple contracting problems such that, when complexity costs are explicitly taken into account, the contracting parties optimally choose an incomplete contract which coincides with the default division of surplus. Optimal contracts with complexity costs are constrained efficient in our model. We therefore interpret our results as saying that, in the absence of a strategic role for complexity costs, their effect is entirely determined by their size relative to the size of payoffs.