Gregor Philipp Reich, Divide and Conquer: A New Approach to Dynamic Discrete Choice with Serial Correlation, In: SSRN, No. ?, 2013. (Working Paper)
In this paper, we develop a method to efficiently estimate dynamic discrete choice models with AR(n) type serial correlation of the errors. First, to approximate the expected value function of the underlying dynamic problem, we use Gaussian quadrature, interpolation over an adaptively refined grid, and solve a potentially large non-linear system of equations. Second, to evaluate the likelihood function, we decompose the integral over the unobserved state variables in the likelihood function into a series of lower dimensional integrals, and successively approximate them using Gaussian quadrature rules. Finally, we solve the maximum likelihood problem using a nested fixed point algorithm. We then apply this method to obtain point estimates of the parameters of the bus engine replacement model of Rust [Econometrica, 55 (5): 999–1033, (1987)]: First, we verify the algorithm's ability to recover the parameters of an artificial data set, and second, we estimate the model using the original data, finding significant serial correlation for some subsamples. |
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Jacob Stromberg, Markus Leippold, Time-Changed Levy LIBOR Market Model for the Joint Estimation and Pricing of Caps and Swaptions, In: SFI Research Paper Series, No. 12-23, 2012. (Working Paper)
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Philipp Johannes Renner, Karl Schmedders, A polynomial optimization approach to principal-agent problems, In: Swiss Finance Institute Research Paper, No. 12-35, 2013. (Working Paper)
This paper presents a new method for the analysis of moral hazard principal-agent problems. The new approach avoids the stringent assumptions on the distribution of outcomes made by the classical first-order approach and instead only requires the agent's expected utility to be a rational function of the action. This assumption allows for a reformulation of the agent's utility maximization problem as an equivalent system of equations and inequalities. This reformulation in turn transforms the principal's utility maximization problem into a nonlinear program. Under the additional assumptions that the principal's expected utility is a polynomial and the agent's expected utility is rational in the wage, the final nonlinear program can be solved to global optimality. The paper also shows how to first approximate expected utility functions that are not rational by polynomials, so that the polynomial optimization approach can be applied to compute an approximate solution to non-polynomial problems. Finally, the paper demonstrates that the polynomial optimization approach, unlike the classical approach, extends to principal-agent models with multi-dimensional action sets. |
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Johannes Brumm, Michael Grill, Felix Kübler, Karl Schmedders, Margin Regulation and Volatility, In: Swiss Finance Institute Research Paper, No. 13-59, 2013. (Working Paper)
In this paper we examine the quantitative effects of margin regulation on volatility in asset markets. We consider a general equilibrium infinite-horizon economy with heterogeneous agents and collateral constraints. There are two assets in the economy which can be used as collateral for short-term loans. For the first asset the margin requirement is exogenously regulated while the margin requirement for the second asset is determined endogenously. In our calibrated economy, the presence of collateral constraints leads to strong excess volatility. Thus, a regulation of margin requirements may have stabilizing effects. However, in line with the empirical evidence on margin regulation in U.S. stock markets, we show that changes in the regulation of one class of assets may have only small effects on these assets' return volatility if investors have access to another (unregulated) class of collateralizable assets to take up leverage. In contrast, a countercyclical margin regulation of all asset classes in the economy has a very strong dampening effect on asset return volatility. |
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János Mayer, Thorsten Hens, Theory matters for financial advice!, In: NCCR FINRISK Working Paper, No. 866, 2013. (Working Paper)
We show that the optimal asset allocation for an investor depends crucially on the theory with which the investor is modeled. For the same market data and the same client data different theories lead to different portfolios. The market data we consider is standard asset allocation data. The client data is determined by a standard risk profiling question and the theories we apply are mean-variance analysis, expected utility analysis and cumulative prospect theory. |
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Hanna Hottenrott, Cindy Lopes-Bento, (International) R&D Collaboration and SMEs: The effectiveness of targeted public R&D support schemes. , In: ZEW Discussion Paper No. 12-086, Mannheim; CEPS Working Paper No. 2012-36, Esch-sur-Alzette, Luxembourg, No. 12-086, 2013. (Working Paper)
This study analyses the impact and effectiveness of targeted public support for R&D investment at the firm level. We test whether the policy design aiming at incentivizing (international) collaboration and R&D in SMEs achieves input as well as output additionality. Our results show that the targeted public subsidies trigger R&D spending, especially so in internationally collaborating SMEs. We further evaluate the different impact of privately financed and publicly-induced R&D investment on innovation performance. The results confirm that the publicly-induced R&D is productive as it translates into marketable product innovations. While both types of R&D investments trigger significant output effects, the effect of policy-induced R&D investment on sales from market novelties is highest for international collaborators as well as for SMEs. |
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Hanna Hottenrott, Cindy Lopes-Bento, Quantity or Quality? Knowledge alliances and their effect on patents., In: ZEW Discussion Paper No. 12-047, Mannheim, Germany; CEPS Working Paper No. 2012-29, Esch-sur-Alzette, Luxembourg, No. 12-047, 2013. (Working Paper)
This study shows for a large sample of R&D-active manufacturing firms over the period 2000-2009 that knowledge alliances have a positive effect on patenting in terms of both quantity and quality. However, when distinguishing between alliances that aim at joint creation of new knowledge and alliances that aim at the exchange of knowledge, results suggest that creation alliances lead to more valuable patents as they receive significantly more forward citations per patent. Knowledge exchange alliances, on the other hand, are associated with patent quantity, but not quality. |
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Dirk Czarnitzki, Cindy Lopes-Bento, Innovation subsidies: Does the funding source matter for innovation intensity and performance? , In: ZEW Discussion Paper No. 11-053, Mannheim, Germany; CEPS Working Paper No. 2011-42, Esch-sur-Alzette, Luxembourg, No. 11-053, 2013. (Working Paper)
In this paper we consider European and national funding for corporate innovation projects as heterogeneous treatments and analyze their effect on innovation input and output at the firm level. In terms of innovation input, we do not find evidence that one policy crowds out the effect of the other. Instead the policies are complements. In terms of output, we find that subsidy recipients are more active with respect to patenting. A citation analysis of patents reveals that the subsidy recipients file patents that are more valuable (in terms of forward citations) than those filed in the counterfactual situation of receiving no public support. These results suggest that public funding actually triggers socially beneficial research projects and that the co-existence of national and European policies does not lead to crowding-out effects when compared to a hypothetical world of a closed economy with no supplemental European policies. |
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Stephan Nüesch, Delegation and value creation, In: University of Konstanz, Working Paper Series, No. 13, 2013. (Working Paper)
Many scholars argue that the delegation of decision rights to independent institutions promotes trust and specific investments. We test this conjecture with variations of the trust game in which the back transfer decision is delegated to a third party. A randomly chosen third party with a fixed payment induces larger investments over time although the experimental design rules out reputation building. Changes in the third party’s selection procedure eliminate this benefit. If the third party gets a reward for the appointment, delegation actually destroys trust. Investors (unwarrantedly) fear a diffusion of responsibility and lower back transfers in this case. |
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Mathias Beck, Andrea Schenker-Wicki, Cooperating with External Partners: The Importance of Diversity for Innovation Performance, In: UZH Business Working Paper Series, No. 331, 2013. (Working Paper)
Innovations are rarely generated in complete isolation. Due to inherent uncertainty, high knowledge requirements, and high financial investments, many firms search for external partners to develop new products and processes. However, there is an ongoing debate as to whether firms who cooperate with diverse external partners such as suppliers, customers and governmental research institutions see increased innovation performance as compared to firms who cooperate with a less diverse range of collaborators. This paper investigates how diversity in cooperation networks affects firms' innovation performance output as measured by sales share of innovative products. To address this question, the authors analyze a large-scale sample of microdata from Swiss firms from four waves (1999, 2002, 2005, and 2008) of the Swiss innovation survey using panel data analysis. The findings suggest that firms with greater diversity in their cooperation network benefit by generating new product innovations, and that small firms benefit more from diversity of collaborators as compared to other firm sizes. The study further detects a curvilinear relationship between diversity of collaborator types and innovation performance, and emphasizes the importance of appropriate HRM and knowledge management policies and practices to provide firms with an effective mechanism for maximizing benefits from a diversified cooperation network. |
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Kerstin Pull, Uschi Backes-Gellner, (Self-)Selection, Incentives and Resources - a Personnel Economics Perspective on Academia and Higher Education, In: UZH Business Working Paper, No. 338, 2013. (Working Paper)
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Johannes Brumm, Simon Scheidegger, Using adaptive sparse grids to solve high-dimensional dynamic models, In: SSRN, No. 2349281, 2013. (Working Paper)
We present a flexible and scalable method to compute global solutions of high-dimensional non-smooth dynamic models. Within a time-iteration setup, we interpolate policy functions using an adaptive sparse grid algorithm with piecewise multi-linear (hierarchical) basis functions. As the dimensionality increases, sparse grids grow considerably slower than standard tensor product grids. In addition, the grid scheme we use is automatically refined locally and can thus capture steep gradients or even non-differentiabilities. To further increase the maximal problem size we can handle, our implementation is fully hybrid parallel, i.e. using a combination of MPI and OpenMP. This parallelization enables us to efficiently use modern high-performance computing architectures. Our time iteration algorithm scales up nicely to more than one thousand parallel processes. To demonstrate the performance of our method, we apply it to high-dimensional international real business cycle models with capital adjustment costs and irreversible investment. |
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Sajjad Zaheer, Steven Ongena, Sweder van Wijnbergen, The transmission of monetary policy through conventional and Islamic banks, In: European Banking Center Discussion Paper, No. 2011-018, 2013. (Working Paper)
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Simone Balestra, Uschi Backes-Gellner, Heterogeneous returns to education over the wage distribution: who profits the most?, In: Swiss Leading House "Economics of Education" Working Paper, No. 91, 2013. (Working Paper)
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Uschi Backes-Gellner, Shiho Futagami, Silvia Teuber, Andrea Willi, Differences in Initial Training and Wages of Japanese Engineering and Retailing Companies - Who Pays for Higher Training Costs?, In: Swiss Leading House "Economics of Education" Working Paper, No. 90, 2013. (Working Paper)
The optimal human resource and skill development strategy is one important factor of economic success. This paper, therefore, analyzes industry-specific differences in the training provision between engineering and retailing companies in Japan and focuses in particular on the initial training provision for intermediate skills at the firm level. Based on 11 in-depth interviews in the retailing and the engineering sector in Japan, we find that gross training costs per basic trainee are significantly higher in engineering than in retailing. However, not only the engineering companies, but also their employees bear higher costs than their counterparts in retailing. The absolute and relative entrance wages for production employees are significantly lower than the entrance wages of employees in sale. Even though wages in engineering increase significantly stronger within the first five years, the absolute and relative wages in engineering remain still significantly lower. The results relate to the qualification levels of new trainees and the career paths |
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Jens Mohrenweiser, Thomas Zwick, Uschi Backes-Gellner, Poaching and Firm-sponsored Training: First Clean Evidence, In: ZEW Discussion Paper, No. 37, 2013. (Working Paper)
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Christian Rupietta, Uschi Backes-Gellner, Combining knowledge stock and knowledge flow to generate superior incremental innovation performance - Evidence from Swiss manufacturing, In: Swiss Leading House "Economics of Education" Working Paper, No. 89, 2017. (Working Paper)
Firms generate new knowledge that leads to innovations by recombining existing knowledge sources. A successful recombination depends on the availability of a knowledge stock (human capital pool) and the flow of knowledge within the firm (induced by HRM systems). While human resource theory expects complementarities between human capital pools and HRM systems, it does not explicitly address how knowledge exchange may be guaranteed or fostered. Moreover, empirical approaches neglect the complexity of such complementarities. In this study we develop a model that integrates a firm’s knowledge stock and flow into a knowledge creation (KC) system comprising four ideal types. This system explains the occurrence of superior incremental innovation performance. We empirically analyze the KC system by applying fuzzy set qualitative comparative analysis (fsQCA) and identify configurations concurring with our ideal types. The results show that the use of human capital and HRM practices depends on firm size and industry dynamism. |
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Uschi Backes-Gellner, Sara Brunner, Duale Berufsbildung wird unterschätzt - Akademiker starten nicht immer von der Poleposition, In: Swiss Leading House "Economics of Education" Working Paper, No. 84, 2012. (Working Paper)
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Simon Janssen, Simone Tuor Sartore, Uschi Backes-Gellner, Social Norms and Firms' Discriminatory Pay-Setting, In: UZH Business Working Paper, No. 327, 2013. (Working Paper)
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Uschi Backes-Gellner, Silvia Teuber, How do companies adapt their organization to national institutions: evidence from matched-pair engineering companies, In: Swiss Leading House "Economics of Education" Working Paper, No. 82, 2012. (Working Paper)
Companies face competitive advantages or disadvantages depending on a country’s national institutional setting. The question is whether and how companies with highly similar product markets and technologies are able to stay competitive if they are located in disadvantaged national institutional settings. Building on the Varieties of Capitalism approach, we analyze the effect of different national institutional settings on one important characteristic of a company’s organizational structure, the span of control of production supervisors. Through plant interviews, we generated a unique dataset of matched-pair engineering companies in Germany, Switzerland, the UK, and the U.S. The findings indicate that the span of control is an important mechanism of adjustment to national institutional settings. Production supervisors in companies producing in coherently coordinated market economy like Germany have on average a broader span of control than those in coherently liberal market economy like the U.S. However, in mixed institutional settings like Switzerland and the UK, we find companies with a broad and companies with a narrow span of control, thus indicating that companies have the strategic power to adjust with their own company-level institutions to either complementing or substituting national institutions. |
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