Laura Spierdijk

Assessing Competition with the Panzar-Rosse Model: The Role of Scale, Costs, and Equilibrium

The Panzar-Rosse test has been widely applied to assess competitive conduct, often in specifications controlling for firm scale or using a price equation. We show that neither a price equation nor a scaled revenue function yields a valid measure for competitive conduct. Moreover, even an unscaled revenue function generally requires additional information about costs and market equilibrium to infer the degree of competition. Our theoretical findings are confirmed by an empirical analysis of competition in banking, using a sample containing more than 100,000 bank-year observations on more than 17,000 banks in 63 countries during the years 1994 to 2004.

Enjoying the Quiet Life under Deregulation? Evidence from Adjusted Lerner Indices for U.S. Banks

The quiet life hypothesis posits that firms with market power incur inefficiencies rather than reap monopolistic rents. We propose a simple adjustment to Lerner indices to account for the possibility of forgone rents to test this hypothesis. For a large sample of U.S. commercial banks, we find that adjusted Lerner indices are significantly larger than conventional Lerner indices and trending upward over time. Instrumental variable regressions reject the quiet life hypothesis for cost inefficiencies. However, Lerner indices adjusted for profit inefficiencies reveal a quiet life among U.S. banks.

Nonparametric conditional hazard rate estimation: A local linear approach

A new nonparametric estimator for the conditional hazard rate is proposed, which is defined as the ratio of local linear estimators for the conditional density and survivor function. The resulting hazard rate estimator is shown to be pointwise consistent and asymptotically normally distributed under appropriate conditions. Furthermore, plug-in bandwidths based on normal and uniform reference distributions and minimizing the asymptotic mean squared error are derived. In terms of the mean squared error the new estimator is highly competitive in comparison to existing estimators for the conditional hazard rate. Moreover, its smoothing parameters are relatively robust to misspecification of the reference distributions, which facilitates bandwidth selection. Additionally, the new hazard rate estimator is conveniently calculated using standard software for local linear regression. The use of the local linear hazard rate is illustrated in an application to kidney transplant data.

Funding of pensions and economic growth : are they really related?

We show empirically that there is no relation between funding of pensions and economic growth in a sample of OECD- as well as non-OECD countries over the period 2001-2008. This finding contradicts findings of earlier studies, which do not control for capital market returns of pension funds. Our estimation procedure consists of two steps: In the first step we explain the change in the pension assets/GDP ratio by capital market returns of pension funds and demographic developments. In the second step we estimate a dynamic growth regression with the residual from the first step-regression as a proxy for funding.

Superstars without talent? The Yule distribution controversy

Chung and Cox (1994) provided an intuitively appealing stochastic model indicating that superstars may exist regardless of talent, giving rise to the Yule distribution. We adopt a different empirical approach and test its goodness of fit using a parametric bootstrap and several powerful test statistics. Just like the discrete Pareto distribution, it is overwhelmingly rejected: it is a fairly accurate approximation of the lower quantiles of the superstar distribution but overestimates the snowball effect that makes consumers purchase records of the most successful artists. In other words, the Yule distribution captures stardom, but not superstardom. A generalization of the Yule distribution provides an excellent fit in two of the three data sets.

The determinants of sick leave durations of Dutch self-employed

This paper analyzes sickness absenteeism among self-employed in the Netherlands. Using a unique data set provided by a large Dutch private insurance company, we assess the determinants of sick leave durations. Our study suggests that several risk factors affect the sick leave durations of self-employed in a similar way as they influence the absence spells of employees according to the literature. For example, the recovery rate decreases with age and claimants suffering from psychological diseases have a lower recovery rate relative to claimants with other disorders. Furthermore, the sick leave durations of self-employed last longer when the economy is booming. In contrast to what the literature generally documents for employees, we do not find any evidence for moral hazard effects with respect to the benefit compensation level. Moreover, the absence spells of self-employed last longer in periods of high unemployment, whereas the opposite effect is usually documented for employees. We do not establish any significant gender differences in the sick leave durations of self-employed. Contract-specific factors such as insurance brand and deferment period are typical characteristics of insurance contracts for self-employed and play an important role in explaining their sick leave durations. Finally, the introduction of insurer-based case management significantly increased the recovery rate of self-employed with an ongoing spell up to 1 year. By contrast, case management did not succeed in improving the recovery rate of claimants trapped in long-term sickness absence.

Are Commodity Futures a Good Hedge Against Inflation

This paper compares five measures for assessing the inflation hedging capacity of an asset. We start with a theoretical comparison, discussing important differences and similarities between the various definitions. The second part of our study illustrates the differences between the hedging measures by means of an empirical study, focusing on the hedging potential of the S&P GSCI Total Return Index during the period 1982 – 2010. We analyze the hedging potential of the commodity index for investment horizons ranging from one month up to ten years. Each method consistently finds that the commodity index has statistically significant hedging potential, which increases with the investment horizon. All measures apart from one establish an economically significant hedging capacity, particularly for investment horizons of one year and longer. We explain our empirical findings from the fact that four out of five hedging measures boil down to an increasing function of the Pearson correlation between inflation rates and nominal asset returns.This study assesses the hedging properties of commodity futures across three dimensions: market, investment horizon and time. Measured over the full sample period (1970-2011), commodity futures show significant ability to hedge US inflation, especially for investment horizons of at least one year. Particularly commodity futures in the markets energy, industrial metals, and live cattle have favorable hedging properties. However, the hedging capacity exhibits substantial variation over time. It has been increasing since the early 1980s and reaches an historical high towards the end of the sample period. Although we establish significant hedging ability for commodity futures indices, we observe a trade-off between the reduction in real return portfolio variance realized by adding commodity futures indices to the portfolio and the expected real portfolio return.

Funding of pensions and economic growth

We examine whether changes in the degree of pension funding affect economic growth. Our sample consists of 54 countries, Organization for Economic Co-operation and Development (OECD) as well as non-OECD, during 2001–10. We do not find any effect of changes in the degree of funding on growth in the short-run. For the long-run the evidence is mixed. Although a growth model with overlapping observations suggests that there is a positive effect of funding changes on economic growth, we find no effect in a simple cross-sectional model.

What factors increase the risk of incurring high market impact costs

This article applies quantile regression to assess the factors that influence the risk of incurring high trading costs. Using data on the equity trades of the worlds second largest pension fund in the first quarter of 2002, we show that trade timing, momentum, volatility and the type of broker intermediation are the major determinants of the risk of incurring high trading costs. Such risk is increased substantially by either high or low momentum and by strong volatility. Moreover, agency trades are substantially more risky in terms of trading costs than similar principal trades. Finally, we show that the quantile regression model succeeds well in forecasting future trading costs.

A Meta-Analytic Comparison of Determinants of Public Transport Use: Methodology and Application

Our aim in this paper is to apply principles from modern meta-analysis to identify differences and commonalities in patterns of explanatory variables for varying price elasticities for public transport in different countries. In addition to the synthesis and analysis of empirical data on these elasticity values with a view to selection of the main determinants of significant cross-national differences, a series of different analytical methods (notably rough set analysis, cluster analysis, and discriminant analysis) are applied in order to test not only the robustness of the results, but also—by way of a ‘meta-meta-analytic’ experiment—the variations in research findings caused by the use of different methods.