Pros and Cons of Backing Winners in Innovation Policy

In the economics profession there is a fierce debate whether industrial and innovation policy should be targeted to specific sectors or firms. This paper discusses the welfare effects of such targeted policies in a third-market international trade model under imperfect competition. A theoretical case for picking winners through a preferential innovation policy is discussed, which is shown to hold without evoking retaliation from foreign competitors. However, in practice information uncertainties remain a concern. The question whether in this case ‘backing winners’ is a wise policy option depends on the characteristics of the information asymmetries and on the extent the government is able to design selection procedures in a way to minimize the transaction costs that may be caused from the market participants’ opportunistic behavior.Innovation policy; R&D subsidies, strategic trade policy, asymmetric information, spill-over effects

A cointegration model for search equilibrium wage formation

In flow models of the labor market, wages are determined by negotiations between workers and employers on the surplus value of a realized match. From this perspective, this paper presents an econometric analysis of the influence of labor market flows on wage formation as an alternative to the traditional specification of wage equations in which unemployment represents Phillips-curve or wage-curve effects. The paper estimates a dynamic wage equation for the Netherlands using a cointegration approach. It finds that labor flows, and notably flows from outside the labor market, are important determinants of both short-run and long-run wage setting.wage curve, labor market flows, cointegration model

Molecular dynamics simulations of the dipolar-induced formation of magnetic nanochains and nanorings

Iron, cobalt and nickel nanoparticles, grown in the gas phase, are known to arrange in chains and bracelet-like rings due to the long-range dipolar interaction between the ferromagnetic (or super-paramagnetic) particles. We investigate the dynamics and thermodynamics of such magnetic dipolar nanoparticles for low densities using molecular dynamics simulations and analyze the influence of temperature and external magnetic fields on two- and three-dimensional systems. The obtained phase diagrams can be understood by using simple energetic arguments.Comment: 6 pages, 6 figure

The transaction costs perspectives on costs and benefits of government regulation

This paper explores the feasibility to extend the Standard Cost Model (SCM) for calculating the costs of government regulation by taking all transaction costs into account which stem from the principal/agent relationship between regulatory authorities and economic entities. From that perspective these transaction costs do not only relate to the bonding costs of the regulated entities – part of these costs can be regarded as the administrative burden of regulation for the private sector – but also to the monitoring costs of the regulators and to the residual loss. These latter costs can be regarded as cost to society due to e.g. miscommunication on the aims of regulation, and are, of course, hard to quantify. A cost calculation using the (extended) SCM presumes that the regulatory rules are given and set autonomously by the regulatory authorities. However, it may be welfare enhancing if regulations are fashioned in such a way that net benefits are optimized. From that perspective the paper looks at the possibility to select optimal regulation by means of a cost benefit analysis. A major argument is that the benefits of regulatory measures, e.g. to internalize external effects, comprise avoiding societal costs associated with no or less regulation