discussion of michelacci and schivardi n.
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Discussion of Michelacci and Schivardi. Francesco Caselli. Four Questions on Intepretation. Theoretical Motivation. Productivity (Endogenous). Volatility of returns in high return projects (exogenous). Theoretical Motivation. Productivity (Endogenous). With good risk-sharing

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theoretical motivation
Theoretical Motivation

Productivity

(Endogenous)

Volatility of returns

in high return projects

(exogenous)

theoretical motivation1
Theoretical Motivation

Productivity

(Endogenous)

With good

risk-sharing

Opportunities

With poor

risk-sharing

Opportunities

Volatility of returns

in high return projects

(exogenous)

empirical result
Empirical Result
  • Negative coefficent on

(Risk-Sharing Opportunity) X (Volatitlity)

  • Consistent with theoretical framework …
but also consistent with
… but also consistent with

Productivity

(Endogenous)

With good

risk-sharing

Opportunities

With poor

risk-sharing

Opportunities

Volatility of returns

in high return projects

(exogenous)

or with
or with

Productivity

(Endogenous)

With good

risk-sharing

Opportunities

With poor

risk-sharing

Opportunities

Volatility of returns

in high return projects

(exogenous)

or even with
or even with

Productivity

(Endogenous)

With good

risk-sharing

Opportunities

With poor

risk-sharing

Opportunities

Volatility of returns

in high return projects

(exogenous)

therefore
Therefore
  • I am not yet convinced that

Idiosyncratic risk discourages entrepreneurial activity and hinders growth (from abstract)

  • Finding seems to concern the role of risk-diversification opportunities, not risk per se
  • Does this call for a change of title?
  • Role of risk remains an open question
from levels to growth rates
From levels to growth rates
  • Theoretical argument framed in temrs of levels
  • Empirics in terms of growth rates
  • Transition is not entirely trivial
from project returns to size of investments
From project returns to size of investments
  • Theory: investment size constant, but different returns
  • Empirics: results driven partially by amounts invested
  • Reconciliation: high-return projects more capital intensive?
  • That would be interesting
family firms as inverse measure of risk sharing opportunities
Family firms as (inverse) measure of risk-sharing opportunities
  • Idea: concentrated ownership results from lack of diversification opportunities
  • But: many other interpretations possible
  • E.g. suppose family firms are intrinsically more risk averse. Then (family X risk) interaction would be negative
  • Not sure that instrumenting with demographic shocks helps: it isolates variation in family ownership not due to lack of risk-sharing opportunities. Seems to be the opposite of what you want
blonde blue eye dummy
Blonde-Blue-Eye Dummy
  • Identification assumption: Dnk, Nor, Swe, Fin have same coefficients in risk regression
  • Next year: paper by a Scandinavian economist assuming that Portugal, Spain, Italy and Greece have same coefficients in some regression
conclusion
Conclusion
  • Should paper be recast in terms of effects of risk sharing opportunities, rather than risk per se?
  • Tighter link between theoretical arguments and empirical estimates (levels v. growth, productivity v. investment)
  • Can we think of a more convincing measure of risk-sharing opportunities?