Product and Process Innovation in a Growth Model of Firm Selection

Recent empirical evidence based on firm level data emphasizes firm heterogeneity in innovation activities and the different effects of process and product innovations on the productivity level and productivity growth. To match this evidence, this paper develops an endogenous growth model with two sources of firm heterogeneity: production efficiency and product quality.Both attributes evolve endogenously through firms’ innovation choices. Growth is driven by innovation and self-selection of firms and sustained by entrants who imitate incumbents. Calibrating the economy to match the Spanish manufacturing sector, the model enables to quantify the different effects of selection, innovation, and imitation as well as product and process innovation on growth. Compared to single attribute models of firm heterogeneity, the model provides a more complete characterization of firms’ innovation choices explaining the partition of firms along different innovation strategies and generating consistent firm size distributions.endogenous growth theory, firm dynamics, heterogeneous firms, productivity, quality, innovation

Restructuring in privatised firms: a Statis approach

We analyse the dynamics and evolution of the corporate restructuring process in the Portuguese banking sector, where 10 banks were privatised during the period 1989-1996. We apply a novel methodological approach in this context, using a multidimensional measure of restructuring that links product and labour market variables. We find evidence of considerable heterogeneity in the restructuring process, where firms adjust at different speeds and intensities. We also find that the wage level is by far the firm attribute that changed more, which is shown to reflect substantial changes in terms of composition, and not size, of the workforce. Our empirical evidence also suggests that privatisation is associated with a higher level of rent sharing.Statis, Privatisation, Portuguese banking

Efficient conjoint choice designs in the presence of respondent heterogeneity.

The authors propose a fast and efficient algorithm for constructing D-optimal conjoint choice designs for mixed logit models in the presence of respondent heterogeneity. With this new algorithm, the construction of semi-Bayesian D-optimal mixed logit designs with large numbers of attributes and attribute levels becomes practically feasible. The results from the comparison of eight designs (ranging from the simple locally D-optimal design for the multinomial logit model and the nearly orthogonal design generated by Sawtooth (CBC) to the complex semi-Bayesian mixed logit design) across wide ranges of parameter values show that the semi-Bayesian mixed logit approach outperforms the competing designs not only in terms of estimation efficiency but also in terms of prediction accuracy. In particular, it was found that semi-Bayesian mixed logit designs constructed with large heterogeneity parameters are most robust against the misspecification of the values for the mean of the individual level coefficients for making precise estimations and predictions.Keywords:semi-Bayesianmixedlogitdesign,heterogeneity,predictionaccuracy,multinomiallogitdesign,model-robustdesign,D-optimality,algorithmAlgorithm; D-Optimality; Heterogeneity; Model-robust design; Multinomial logit design; Prediction accuracy; Semi-Bayesian mixed logit design;

Wage risk and employment risk over the life cycle

We specify a structural life-cycle model of consumption, labour supply and job mobility in an economy with search frictions that allows us to distinguish between different sources of risk and to estimate their effects. The sources of risk are shocks to productivity, job destruction, the process of job arrival when employed and unemployed and match level heterogeneity. Our model allows for four main social insurance programmes. In contrast to simpler models that attribute all income fluctuations to shocks, our framework allows us to disentangle the effects of the shocks from the responses to these shocks. Estimates of productivity risk, once we control for employment risk and for individual labour supply choices, are substantially lower than estimates that attribute all wage variation to productivity risk. Increases in productivity risk impose a considerable welfare loss on individuals and induce substantial precautionary saving. Increases in employment risk have large effects on output and, primarily through this channel, affect welfare. The welfare value of government programs such as food stamps which partially insure productivity risk is greater than the value of unemployment insurance which provides (partial) insurance against employment risk and no insurance against persistent shocks.Uncertainty, life-cycle models, unemployment, precautionary savings

Wage Risk and Employment Risk over the Life Cycle

We specify a structural life-cycle model of consumption, labour supply and job mobility in an economy with search frictions that allows us to distinguish between different sources of risk and to estimate their effects. The sources of risk are shocks to productivity, job destruction, the process of job arrival when employed and unemployed and match level heterogeneity. Our model allows for four main social insurance programmes. In contrast to simpler models that attribute all income fluctuations to shocks, our framework allows us to disentangle the effects of the shocks from the responses to these shocks. Estimates of productivity risk, once we control for employment risk and for individual labour supply choices, are substantially lower than estimates that attribute all wage variation to productivity risk. Increases in productivity risk impose a considerable welfare loss on individuals and induce substantial precautionary saving. Increases in employment risk have large effects on output and, primarily through this channel, affect welfare. The welfare value of government programs such as food stamps which partially insure productivity risk is greater than the value of unemployment insurance which provides (partial) insurance against employment risk and no insurance against persistent shocks.uncertainty, life-cycle models, unemployment, precautionary savings

Revealing additional preference heterogeneity with an extended random parameter logit model: the case of extra virgin olive oil

Methods that account for preference heterogeneity have received a significant amount of attention in recent literature. Most of them have focused on preference heterogeneity around the mean of the random parameters, which has been specified as a function of socio-demographic characteristics. This paper aims at analyzing consumers' preferences towards extra-virgin olive oil in Catalonia using a methodological framework with two novelties over past studies: 1) it accounts for both preference heterogeneity around the mean and the variance; and 2) it considers both socio-demographic characteristics of consumers as well as their attitudinal factors. Estimated coefficients and moments of willingness to pay (WTP) distributions are compared with those obtained from alternative Random Parameter Logit (RPL) models. Results suggest that the proposed framework increases the goodness-of-fit and provides more useful insights for policy analysis. The most important attributes affecting consumers' preferences towards extra virgin olive oil are the price and the product's origin. The consumers perceive the organic olive oil attribute negatively, as they think that it is not worth paying a premium for a product that is healthy in nature.Postprint (published version

Assessing drivers' preferences for hybrid electric vehicles (HEV) in Spain

With the aim of analyzing preferences for hybrid electric vehicles (HEVs), two stated preference methods (a contingent valuation exercise and a discrete choice experiment (DCE)) were used in a survey conducted in a representative sample of Spanish drivers. Overall, our findings show robustness between the willingness to pay (WTP) estimates elicited via a latent class model (LCM) and those from a payment card questionPostprint (published version

Controlling for the effects of information in a public goods discrete choice model

This paper develops a reduced form method of controlling for differences in information sets of subjects in public good discrete choice models, using stated preference data. The main contribution of our method comes from accounting for the effect of information provided during a survey on the mean and the variance of individual-specific scale parameters. In this way we incorporate both scale heterogeneity as well as observed and unobserved preference heterogeneity to investigate differences across and within information treatments. Our approach will also be useful to researchers who want to combine stated preference data sets while controlling for scale differences. We illustrate our approach using the data from a discrete choice experiment study of a biodiversity conservation program and find that the mean of individual-specific scale parameters and its variance in the sample is sensitive to the information set provided to the respondents

Modelling heterogeneity in response behaviour towards a sequence of discrete choice questions: a latent class approach

There is a growing body of evidence in the non-market valuation literature suggesting that responses to a sequence of discrete choice questions tend to violate the assumptions typically made by analysts regarding independence of responses and stability of preferences. Heuristics such as value learning and strategic misrepresentation have been offered as explanations for these results. While a few studies have tested these heuristics as competing hypotheses, none have investigated the possibility that each explains the response behaviour of a subgroup of the population. In this paper, we make a contribution towards addressing this research gap by presenting an equality-constrained latent class model designed to estimate the proportion of respondents employing each of the proposed heuristics. We demonstrate the model on binary and multinomial choice data sources and find three distinct types of response behaviour. The results suggest that accounting for heterogeneity in response behaviour may be a better way forward than attempting to identify a single heuristic to explain the behaviour of all respondents