Increasing Returns and All That: A View From Trade

Do scale economies contribute to our understanding of international trade? Do international trade flows encode information about the extent of scale economies? To answer these questions we examine the large class of general equilibrium theories that imply Helpman-Krugman variants of the Vanek factor content prediction. Using an ambitious database on output, trade flows, and factor endowments, we find that scale economies significantly increase our understanding of the sources of comparative advantage. Further, the Helpman-Krugman framework provides a remarkable lens for viewing the general equilibrium scale elasticities encoded in trade flows. In particular, we find that a third of all goods-producing industries are characterized by scale. (The modal range of scale elasticities for this group is 1.10-1.20 and the economy-wide scale elasticity is 1.05.) Implications are drawn for the trade-and-wages debate (skill-biased scale effects) and endogenous growth.

Is Free Trade Good for the Environment?

This paper sets out a theory of how openness to international goods markets affects pollution concentrations. We develop a theoretical model to divide trade's impact on pollution into scale, technique, and composition effects and then examine this theory using data on sulfur dioxide concentrations when it alters the composition, and hence the pollution intensity, of national output. Our estimates of the associated technique and scale efforts created by trade imply a net reduction in pollution from these sources. Combining our estimates of scale, composition, and technique efforts yields a somewhat surprising conclusion: freer trade appears to be good for the environment.

Venture-Capital Syndication: Improved Venture Selection vs. The Value-Added Hypothesis

Syndication arises when venture capitalists jointly invest in projects. We model and test two possible reasons for syndication: project selection, as an additional venture capitalist provides an informative second opinion; and complementary management skills of additional venture capitalists. The central question is whether venture capitalists are engaged primarily in selection or in managerial value added. These alternatives imply contrasting predictions about comparative returns to syndicated and standalone investments. Our empirical analysis, using Canadian data, finds that syndicated investments have higher returns, favoring the value‐added interpretation. We also discuss risk sharing and project scale as possible reasons for syndication

Cross-Border Trade in Electricity

This paper develops an economic theory of cross-border two-way trade in electricity in which regulated electric utilities engage in profitable trading opportunities when they have sufficient reserve capacity. Electricity demand is stochastic. Twoway trade emerges in similarity to models of ‘reciprocal dumping. ’ Whereas in those models firms engage in rent-seeking reciprocal market access, in the present model electric utilities simply exploit cost variations in order to enhance economic efficiency through ‘reciprocal load smoothing. ’ After deriving estimating equations, the model is tested with cross-border trade data, exports from Canadian provinces to U.S. states. The empirical tests strongly support the theoretical model. Reciprocal load smoothing provides an economically significant rationale for integrating North America’s fragmented interconnections into a continental ‘supergrid.

Remember Gerhard Richter in the Thunderstorm of Beethoven: The Influence of Cross-Sensory Coupling on Memory, Intercultural Communication, and the Verbalization of Paintings and Sounds

This interdisciplinary study focuses on the perception and verbalization of messages conveyed through instrumental music, soundscapes, and contemporary paintings. International young-adult university students learning German participated in a series of experiments conducted at Friedrich Schiller University in Jena, Germany. To incorporate globalization and cultural difference into this analysis, the author compared the reactions of Western and Asian participants to auditory and visual stimuli. This paper explores the concepts of mixed media, cross-sensory coupling, and esthetic synesthesia, and throws new light on the contribution of cross-sensory coupling to verbalization and to long-term memory processes, from encoding to retrieval. In addition, the author demonstrates how intercultural communication is based upon universal emotions aroused by contemporary paintings, instrumental music and soundscapes

Globalization, Roundaboutness, and Relative Wages

We depart from the trade and wages literature and its emphasis on North-South trade, examining North-North by developing the basic linkages between trade-based integration and relative wages in an Ethier-type division of labor model. Using this model we identify a formal relationship between international trade, productivity, and wages. We then examine the trivariate relationship between trade, growth in total factor productivity (TFP), and the skill premium in a vector autoregression framework. We find evidence of a long-run relationship between growth in intermediate goods and changes in TFP. Controlling for this relationship we also find a positive relationship between trade and the skill-premium

Big Data Fusion Model for Heterogeneous Financial Market Data (FinDF)

The dawn of big data has seen the volume, variety, and velocity of data sources increase dramatically. Enormous amounts of structured, semi-structured and unstructured heterogeneous data can be garnered at a rapid rate, making analysis of such big data a herculean task. This has never been truer for data relating to financial stock markets, the biggest challenge being the 7 Vs of big data which relate to the collection, pre-processing, storage and real-time processing of such huge quantities of disparate data sources. Data fusion techniques have been adopted in a wide number of fields to cope with such vast amounts of heterogeneous data from multiple sources and fuse them together in order to produce a more comprehensive view of the data and its underlying relationships. Research into the fusing of heterogeneous financial data is scant within the literature, with existing work only taking into consideration the fusing of text-based financial documents. The lack of integration between financial stock market data, social media comments, financial discussion board posts and broker agencies means that the benefits of data fusion are not being realised to their full potential. This paper proposes a novel data fusion model, inspired by the data fusion model introduced by the Joint Directors of Laboratories, for the fusing of disparate data sources relating to financial stocks. Data with a diverse set of features from different data sources will supplement each other in order to obtain a Smart Data Layer, which will assist in scenarios such as irregularity detection and prediction of stock prices

Liquidity Provision and Cross Arbitrage in Continuous Double-Auction Prediction Markets

Continuous double-auction prediction markets often exhibit low transaction volume due to substantial bid-ask spreads. This paper explores a novel method of providing artificial liquidity in continuous double-auction prediction markets by introducing an automated market maker that engages in zero-profit cross-arbitrage in multi-contract markets. Empirical analysis of observed bid-ask spreads, liquidity, offer acceptance, and order sizes in the 2008 UBC Election Stock Market provides additional new insights into the micro-structure of prediction markets.

LONG-TERM PREDICTION MARKETS

Most prediction markets focus on events with a short time horizon such as forthcoming elections. Contracts are typically traded for periods measured in weeks, but rarely exceeding a year. There is great interest in using prediction markets for events with a long time horizon such as climate change outcomes. This paper develops an analytic framework for exploring the time horizon limitations of prediction markets and suggests a simple, practical solution: the market operator must invest cash holdings in a diversified financial portfolio that generates returns that reflect individual traders’ heterogeneous attitudes towards risk and return. The analytic framework identifies how the presence of an opportunity cost for investors reduces market liquidity through a participation constraint and biases the equilibrium price through an inherent money-at-risk asymmetry between long and short positions in a prediction market. This paper explores continuous outcome markets, which are relevant for science-related long-term predictions, along with familiar winner-takes-all markets