Estimating reliability coefficients with heterogeneous item weightings using Stata: A factor based approach

We show how to estimate a Cronbach's alpha reliability coefficient in Stata after running a principal component or factor analysis. Alpha evaluates to what extent items measure the same underlying content when the items are combined into a scale or used for latent variable. Stata allows for testing the reliability coefficient (alpha) of a scale only when all items receive homogenous weights. We present a user-written program that computes reliability coefficients when implementation of principal component or factor analysis shows heterogeneous item loadings. We use data on management practices from Bloom and Van Reenen (2010) to explain how to implement and interpret the adjusted internal consistency measure using afa.afa, factor analysis, Cronbach's alpha, reliability, heterogeneous scale construction,latent variable

An economic perspective on the legalisation debate: the Dutch case

<!--StartFragment--> <p class="MsoNormal" style="text-align: justify; line-height: normal;"><span style="font-size: 13.0pt; font-family: Garamond; mso-bidi-font-family: Garamond; mso-ansi-language: EN-GB;">This paper reviews how economic modelling provides a deeper understanding of drug markets. The exercise focuses on ‘soft drugs’ (cannabinoids) in the Netherlands and outlines the effects of prohibition and legalisation. The purpose is to present an overview of analytical tools to non-economists. Based on a basic supply and demand framework the impact of enforcement, externalities, producer incentives and demand elasticity are highlighted. Results indicate that social welfare is maximized under legalisation given limited externalities associated with consumption and price inelastic demand. We recommend a liberalized soft drugs market that requires <em style="mso-bidi-font-style: normal;">inter alia</em> taxation, complemented with various health measures like quality controls and public campaigns. The Dutch case is exemplary, as this economic perspective offers universal building blocks relevant to the legalisation debate in other countries, and potentially to other substances.</span></p> <!--EndFragment--&gt

International activities of Dutch SMEs: A synopsis of the Utrecht Region in 2011

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De omvangrijke softdrugsmarkt

Vooral producenten profiteren van de omvangrijke softdrugsmarkt in Nederland. Legalisering van deze markt levert de overheid veel geld op door belastingheffing en afname van negatieve externaliteiten zoals criminaliteit

A resource-based view of internationalization in emerging economies

Chapter 2 in Impacts of Emerging Economies and Firms on International Business. One of the most remarkable phenomena of recent times is that a large number of firms from emerging economies have come to define and dominate new markets and enter the class of global innovation leaders. Firms that once specialized in cheap but high-quality substitutes (e.g. Brazil’s Embraer), or those that adopted fast second mover strategies (as the one followed by Korea’s Samsung), or firms that offered outsourcing services (for instance, India’s Wipro) are now firmly at the core of the global productivity and innovation frontier. In addition, many small and medium sized local firms that started as exporting joint ventures have moved abroad on their own account. So far, the international business literature has mostly used the eclectic ownership, location, and internalization (OLI) paradigm (Dunning, 2000) to explain the rise of emerging market multinational firms. This conceptual model examines internationalization drivers identifying motives typical for the internationalization strategic approaches of firms from emerging economies. Supplementing OLI paradigm with learning, leveraging, and linkages (LLL) framework (Mathews, 2002, 2006), which provides an understanding of how emerging economy firms create ownership advantages by integrating links with foreign partners. This integration leads to leveraging of specific assets and upgrading them by entering into new alliances and via acquisition

Capital regulation induced reaching for systematic yield: Financial instability through fire sales

Credit rating-based capital regulation induces financial institutions to take on additional systematic risk. In this paper, we uncover interconnected channels through which this systematic risk hoarding affects financial stability using a proprietary ECB bond holdings dataset. First, banks and insurance corporations effectively reduce their capital buffers by hoarding bonds with high systematic credit risk. Second, this hoarding increases the portfolio concentration of credit rating-constrained and unconstrained financial institutions. Third, in addition to the general tendency of regulated financial institutions to fire sale bonds after rating downgrades, we reveal even larger fire sales precisely when their regulatory advantages of reaching for systematic yield disappear. Using a shock in capital regulation, we establish this causal relationship between the severity of fire sales and the tendencies of regulatory-constrained financial institutions to seek bonds with high systematic credit risk. Such systematic risk hoarding reduces capital buffer by an additional 16% in economic downturns

Regional determinants of FDI in China: a factor-based approach

We empirically investigate the factors that drive the uneven regional distribution of foreign direct investment (FDI) across Chinese provinces from 1995 to 2006. We first perform a factor analysis to summarize information embodied in around 40 variables and derive four FDI determinants: ‘institutional quality’, ‘labour costs’, ‘market size’, and ‘geography’. Applying these estimated factors, we then employ instrumental variable (IV) estimation to account for endogeneity. In line with theoretical predictions, we find that foreign firms invest in provinces with good institutions, low labour costs, and large market size. The Arellano-Bond dynamic panel generalised method of moments (GMM) results show strong agglomeration effects that multinationals tend to invest in provinces which attract other foreign firms, consistent with the economic geography literature. Several robustness tests indicate that low labour costs combined with improvements in institutions are the key for attracting FDI in China