New Economics Papers
on Computational Economics
Issue of 2011‒08‒02
four papers chosen by

  1. Computational Results on Membership in R&D Cooperation Networks: To Be or Not To Be in a Research Joint Venture By Duarte Leite; Pedro Campos; Isabel Mota
  2. Taxation of nuclear rents: benfits, drawbacks and alternatives By Pieter HIMPENS; Joris MORBEE; Stef PROOST
  3. Investment/consumption problem in illiquid markets with regimes switching By Paul Gassiat; Fausto Gozzi; Huy\^en Pham
  4. Exogenous Oil Shocks, Fiscal Policy and Sector Reallocations in Oil Producing Countries By Alessandro Cologni; Matteo Manera

  1. By: Duarte Leite (LIAAD – INESC, LA, Faculdade de Economia do Porto, Universidade do Porto); Pedro Campos (LIAAD – INESC, LA, Faculdade de Economia do Porto, Universidade do Porto); Isabel Mota (CEF.UP, Faculdade de Economia do Porto, Universidade do Porto)
    Abstract: In this study, we analyze firms’ membership in R&D (Research and Development) cooperation networks. Our main research hypothesis is that the membership in cooperation networks is related to the degree of the knowledge spillover. The approach focus on both cost symmetry and cost asymmetry. For that purpose, our work is developed in two tasks: we first develop an analytical model with three stages: in the first, firms decide whether to participate in a cooperative research network; in the second they simultaneously choose the level of R&D output, and finally firms choose the level of output through Cournot competition under both cost symmetry and cost asymmetry. Then we proceed with computational simulations in order to verify our hypothesis. From our results, we were able to conclude that cooperation leads to an improvement on RJV firms’ position in the market as it allows them to produce more than others with the same production conditions. Additionally, cooperating firms have to spend fewer resources on research, which turns the network a tremendous success on the productive efficiency level.
    Keywords: R&D, networks, spillover, simulation, RJV
    JEL: D85 L24 C63
    Date: 2011–07
  2. By: Pieter HIMPENS; Joris MORBEE; Stef PROOST
    Abstract: The taxation of nuclear energy is studied using a stylized model of the electricity sector, with one dominant nuclear producer and a competitive fringe of fossil-fuel plants. We show that an unanticipated tax on nuclear production can generate significant government revenue in the short run without disturbing the market, but will harm investment incentives in the long run, especially if the government cannot credibly commit to a future tax rate. Even if the government is capable of credibly committing to an optimal long-run tax, government revenues from the long-run tax will be very low due to the market power of the incumbent. Lifetime extension agreements negotiated with multiple potential players, and competitive auctioning of new nuclear licenses are shown to be the most attractive policies. The analytical results are illustrated with a numerical simulation for the case of Belgium.
    Date: 2011–07
  3. By: Paul Gassiat; Fausto Gozzi; Huy\^en Pham
    Abstract: We consider an illiquid financial market with different regimes modeled by a continuous-time finite-state Markov chain. The investor can trade a stock only at the discrete arrival times of a Cox process with intensity depending on the market regime. Moreover, the risky asset price is subject to liquidity shocks, which change its rate of return and volatility, and induce jumps on its dynamics. In this setting, we study the problem of an economic agent optimizing her expected utility from consumption under a non-bankruptcy constraint. By using the dynamic programming method, we provide the characterization of the value function of this stochastic control problem in terms of the unique viscosity solution to a system of integro-partial differential equations. We next focus on the popular case of CRRA utility functions, for which we can prove smoothness $C^2$ results for the value function. As an important byproduct, this allows us to get the existence of optimal investment/consumption strategies characterized in feedback forms. We analyze a convergent numerical scheme for the resolution to our stochastic control problem, and we illustrate finally with some numerical experiments the effects of liquidity regimes in the investor's optimal decision.
    Date: 2011–07
  4. By: Alessandro Cologni (Edison Trading, Edison S.p.A); Matteo Manera
    Abstract: Previous literature has suggested that different mechanisms of transmission of exogenous oil shocks are responsible for the negative effects on the economic performances of oil exporting countries. This paper aims at providing further evidence on the role of sectoral reallocation between private and public sectors in explaining the impact of shocks to oil revenues on the economic growth rates of major oil producing countries (namely the GCC - Gulf Corporation Council - countries). The effects of oil shocks and expansionary fiscal policy on the business cycle of oil producing countries are examined. The possibility to distinguish between various components of public sector spending policy (that is, purchases of consumption goods, investments in productive activities and compensation for public employees) is, in particular, allowed for. A real business cycle (RBC) model is calibrated to fit the data on an “average” oil producing country. Results from the simulation of the theoretical model suggest that the possibility that crowding-out effects of public over private investments can explain a large fraction of the negative effects of shocks to oil revenues on the private sector of the economy. In addition, since the growth in size of the public sector is unable to compensate for the reduction in size of the private sector, an increase in oil revenues has the effect to decrease total output. An expansionary fiscal policy is argued to have significant positive effects on private investments, employment and overall production. On the contrary, a shock to government consumption expenditure impacts negatively the level of public investment. As employment in the public sector increases significantly, public output responds positively to a shock in government consumption expenditure. Finally, an instantaneous negative effect on total investments and on the stock of capital in the economy is predicted. However, driven by the increase of the number of employees in the economy, total output expands.
    Keywords: Oil Shocks, Dutch Disease, Resource Curse and Real Business Cycle Modelling
    JEL: C61 E22 E62 Q48
    Date: 2011–07

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