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Economic Mechanisms (economic + mechanism)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting75%

Selected Abstracts

Product Safety Provision and Consumers' Information

AUSTRALIAN ECONOMIC PAPERS, Issue 4 2000
Stephan Marette
Economic mechanisms related to the provision of product safety are explored, with particular attention paid to the structure of consumers' information. The case of perfect information, of experience goods (for which consumers detect product safety after consumption) and of credence goods (where consumers cannot link a disease to a particular product consumed in the past) are explored. Imperfect competition is assumed in the supply sector. In the case of both perfect information and experience goods, market equilibrium is characterised by a less-than-socially optimal provision of safety, when the safety effort is costly. With credence goods, imperfect information leads to the absence of safety effort and to a market closure. Different types of public regulation aiming at increasing consumer protection and circumventing market failures are explored. Particular attention is paid to minimum safety standards, labels and liability enforcement. The relative efficiency of these instruments depends on the information structure. In the cases of perfect information and experience goods, a minimum safety standard can be an efficient instrument. Regulation is necessary but not sufficient to avoid market failure in the case of credence goods. [source]

Capital-skill Complementarity and Inequality: A Macroeconomic Analysis

ECONOMETRICA, Issue 5 2000
Per Krusell
The supply and price of skilled labor relative to unskilled labor have changed dramatically over the postwar period. The relative quantity of skilled labor has increased substantially, and the skill premium, which is the wage of skilled labor relative to that of unskilled labor, has grown significantly since 1980. Many studies have found that accounting for the increase in the skill premium on the basis of observable variables is difficult and have concluded implicitly that latent skill-biased technological change must be the main factor responsible. This paper examines that view systematically. We develop a framework that provides a simple, explicit economic mechanism for understanding skill-biased technological change in terms of observable variables, and we use the framework to evaluate the fraction of variation in the skill premium that can be accounted for by changes in observed factor quantities. We find that with capital-skill complementarity, changes in observed inputs alone can account for most of the variations in the skill premium over the last 30 years. [source]

The Innovative Milieus Approach: Toward a Territorialized Understanding of the Economy?

ECONOMIC GEOGRAPHY, Issue 4 2004
Olivier Crevoisier
Abstract: Space has always been more or less present in economic theories. Nevertheless, traditional approaches, as well as the so-called new economic geography, introduce space subsequently. Economic theories are first built independently of spatial and temporal contexts, for example, through costs varying according to distance. The innovative milieus approach is based on the ideas that space,or, more precisely, territory,is the matrix of economic development and that economic mechanisms transform space. This article describes innovative milieus as an ideal type that articulates three paradigms: the technological paradigm, which stresses innovation, learning, and know-how as the most important competitive advantages; the organizational paradigm, which emphasizes the role of networks, competition, and rules of cooperation, as well as relational capital; and the territorial paradigm, which accounts for the role of proximity and distance and stresses the idea that competition occurs between regions. The originality of the innovative milieus approach is that it considers these three paradigms as a whole, thus providing a stabilized set of concepts that allow for an understanding of economic development processes in their space and time contexts. [source]

UNDERSTANDING SIZE AND THE BOOK-TO-MARKET RATIO: AN EMPIRICAL EXPLORATION OF BERK'S CRITIQUE

THE JOURNAL OF FINANCIAL RESEARCH, Issue 4 2005
Xinting Fan
Abstract Because they are scaled by price, the ability of size (i.e., the market capitalization of a firm) and the book-to-market equity ratio to determine expected returns may, according to Berk (1995), reflect only a simultaneity bias. The two-stage least squares approach is used to control for this bias and to investigate the economic meanings of these variables. We discover that size and the book-to-market ratio contain distinct and significant components of financial distress, growth options, the momentum effect, liquidity, and firm characteristics. Our findings support Berk in his contention that that size and the book-to-market ratio reflect a combination of different economic mechanisms that are misspecified in the expected return process. [source]