An Econometric Analysis of the Role of Knowledge in Economic Performance

We conduct a regression analysis of the effects of knowledge on aggregate economic performance using data from the United Nations Development Program (UNDP) and the World Bank for four groups of countries during 1995–2001. Our results indicate that knowledge is a key driver of economic growth for each group of countries. More importantly, we find that variation in economic performance among these groups may be related to the timing of investment in education, R&D, and information technology, as well as economic policies that affect trade and foreign direct investment.     

The strategy of raising counterfeiters’ costs in luxury markets

A luxury monopolist can prefer increasing its net profits by raising the costs of a competitive fringe of counterfeiters compared to a situation where it can completely drive them out of the market. The mechanism underpinning this outcome results from the fact that counterfeiters can generate net revenues for the luxury monopolist because (1) sanctions imposed to counterfeiters are shaped and pocketed by the luxury monopolist under cover of deterrence (2) costs and profit loss due to counterfeiters and incurred by the luxury monopolist can be less than what is usually assumed. Moreover, the presence of counterfeits can be considered as promotional devices that signal the true luxury cachet, increases the snob value of the counterfeited brand and rewards high-end designers in a non-monetary way. In short, counterfeiting is like the light of the sun: it can burn the genuine firm but living without can be more harmful for the genuine firm.