Articles

Rainer Winkelmann. Copula bivariate probit models: with an application to medical expenditures

The bivariate probit model is frequently used for estimating the effect of an endogenous binary regressor on a binary outcome variable. This paper discusses simple modifications that maintain the probit assumption for the marginal distributions while introducing non-normal dependence among the two variables using copulas. Simulation results and evidence from two applications, one on the effect of insurance status on ambulatory expenditure and one on the effect of completing high school on subseq...

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Mariana Mazzucato. A Computational Model of Economies of Scale and Market Share Instability

Replicator dynamics and computer simulation techniques are used to construct a reduced-form model which explores negative and positive feedback between the rate of a firm's cost reduction and its market share (‘dynamic’ returns to scale). Life-cycle phenomena are explored by combining positive and negative feedback in a firm's cost function. The objective of the model is to reproduce the patterns of concentration and instability found across a wide set of industries. Simulation results find th...

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Jochen Röpke. Evolution and Innovation

Our knowledge about evolutionary change is limited. Evolutionary economics is still in its infancy; indeed we are on thin theoretical ice in linking evolution and innovation. If we are to reach a new level of understanding we must engage in quasiscientific speculation in order to generate new theories, better able to explain the facts of economic life. Such new theories have been developed in recent years, and even if they do not yet possess a paradigmatic standing in the scientific community,...

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Igor Letina. The road not taken: competition and the R&D portfolio

When firms decide to invest in R&D, they have to choose not only the amount of resources to invest, but also which research projects to develop. This paper investigates the market portfolio of research projects. Contrary to most of the literature, which focuses only on the level of investment in innovation, this model captures both the variety of research projects undertaken and the amount of duplication of research. A characterization of the equilibrium market portfolio is provided. It is sho...

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