too big to be efficient the impact of implicit subsidies on estimates of scale economies for banks we examine whether too big to fail tbtf factors affect estimates of scale economies for large banks from a standard model of bank production that does not control for any tbtf factors we find evidence of scale economies for our sample of large banks we then control for tbtf factors by using a measure of the implicit subsidy that emerges from a reduction in tbtf banks funding costs due to investor expectations of government support we do this in two ways first we estimate scale economies from an augmented model of bank production that employs a proxy for the counterfactual price of debt that banks would face in the absence of any tbtf funding cost advantage second we estimate scale economies from a model of bank production that is estimated only for a sample of banks considered unlikely to be tbtf after controlling for tbtf factors using either method we no longer find evidence of scale economies for our sample of large banks these results suggest that estimated scale economies for large banks are affected by tbtf factors

the social costs and benefits of too big to fail banks a bounding exercise while the policy of too big to fail has received wide attention in the literature there is little agreement regarding economies of scale for financial firms we take the stand that systemic risk increases when the larger players in the financial sector have a larger share of output calculations indicate that the cost to the macro economy due to increased systemic risk is always much larger than the potential benefit due to scale economies when distributional and intergenerational issues are considered the potential benefits to economies of scale are unlikely to ever exceed the potential costs due to increased risk of a banking crisis

global warming economics in the long run a conceptual framework economic models of climate change typically analyze its short run effects for example up to the year 2100 or for a doubling of atmospheric co2 this is a potentially serious shortcoming since under a business as usual scenario atmospheric co2 concentrations could more than quadruple we introduce a framework that endogenously accounts for long run climate change and examine the implications of alternative mitigation strategies one in which the rates of annual emissions are reduced and one that places absolute limits on the total amount of carbon released we discuss alternative valuation frameworks drawing on the debate surrounding the stern review

historical wealth accounts for britain progress and puzzles in measuring the sustainability of economic growth we thank the leverhulme trust for funding this research under the project history and the future

optimal growth resource amenities and the preservation of natural environments this paper examines the conditions for which it is optimal to permanently preserve natural environments in which a productive natural resource is found the conditions are more restrictive than those previously indicated in the literature on the economics of natural environments increasing consumption and declining commodity prices are not sufficient to warrant permanent preservation the initial capital stock can be an important determinant of the optimal level of preservation in addition resource amenity values will increase the initial resource price and decrease the rate of growth of the resource price the natural world provides a variety of services to the human community natural resources are essential inputs in the production of goods and services in addition the natural world generates a variety of amenity services including the scientific recreational and aesthetic value of preserved natural environments krutilla 1967 krutilla and fisher 1975a this paper examines the impact of resource amenity values on the optimal growth of an economy which depends upon natural resource inputs for the production of goods and services in particular the paper examines the conditions under which it is optimal to permanently preserve some natural environments in which the productive resource is found the conditions which warrant permanent preservation are more restrictive than previously indicated by the literature on the economics of natural environments increasing consumption and declining commodity prices are not sufficient to warrant permanent preservation in addition the initial capital endowment can be an important determinant of the optimal level of preservation

scale economies and the volume of trade in this paper we split the number of actual years of schooling into five components effective years repeated years skipped years inefficient routing years and dropout years estimation of earnings equations using these explanatory variables produces some interesting empirical and theoretical results the main empirical finding is that the concepts of actual and effective years of schooling that are usually used in the estimation of earnings equations are statistically inferior to our classification both concepts pro

intra industry trade in financial services abstract intra industry trade iit has been central to increasing the variety of products available to consumers unlike traditional trade theories the recent trade theories have placed an emphasis on the role of foreign direct investment fdi in generating trade and increasing the volume of iit this study is the first study of intra industry trade in banking services in which the key elements of the new trade theories of iit have been taken into account in measuring the determinants of iit in banking services the empirical results of the determinants of iit in banking services indicate that factor endowments average per capita income fdi in banking economies of scale in the banking sector trade intensity between the us and its partners and market openness make a positive contribution to the volume of iit in banking services furthermore the empirical results indicate that intra trade activities amongst the us multinational corporations reduce the level of iit in banking services for the us

economic cost scale efficiency and competitive viability in banking this paper addresses the issue of the competitive viability of banks of different scales and scopes of operation and the implications that this may have for the evolving structure of the banking and financial services industry unlike previous papers this paper is the first to include both production and opportunity costs in an empirical evaluation of bank efficiency no consistent evidence is reported to suggest that banking organizations can achieve further gains in either production or economic efficiency by expanding beyond 2 billion dollars of total assets thus it is likely that smaller less diversified banking organizations will remain competitively viable copyright 1996 by ohio state university press

resource use institutions and sustainability a tale of two pacific island cultures this paper examines two pacific island cultures easter island and tikopia and the relationship between natural resource systems human made capital population growth and institutional change easter island followed a preindustrial society pattern of overshoot and collapse however tikopia evolved cultural practices leading to zero population growth and sustainable resource use using a modified lotka volterra predator prey model we find 1 investment in human made capital does not necessarily eliminate the boom and bust cycles of economic activity and population observed in many past societies and 2 institutional adaptation and resource conservation can be critical in achieving population stability

misclassification of the dependent variable in binary choice models evidence from five latin american countries misclassification of the dependent variable in binary choice models can result in inconsistency of the parameter estimates i estimate probit models that treat misclassification probabilities as estimable parameters for three labour market outcomes formal sector employment pension contribution and job change i use living standards measurement study lsms data from nicaragua peru brazil guatemala and panama i find that there is a significant misclassification in 11 of the 16 cases that i investigate if misclassification is present but is ignored estimates of the probit parameters and their ses are biased toward zero in most cases predicted probabilities of the outcomes are significantly affected by misclassification of the dependent variable even a moderate degree of misclassification can have substantial effects on the estimated parameters and on many of the predictions

the impact of sukuk on the insolvency risk of conventional and islamic banks abstractthis paper investigates the impact of sukuk market development on bank insolvency risk using a sample comprising 72 islamic banks ibs and 145 conventional banks cbs spanning 15 countrie

controlling for the use of extreme weights in bank efficiency assessments during the financial crisis we propose a method for bank efficiency assessment based on weight restricted dea that limits banks abilities to use extreme weights corresponding to extreme judgements of the risk adjusted prices on funding sources and assets based on a data set comprising the largest european banks during the financial crisis we illustrate the impact of the proposed weight restrictions in two different efficiency models one related to banks funding mix and one related to their asset mix the results show that using a more balanced set of weights tend to reduce the estimated efficiency scores more for those banks which were bailed out during the crisis which confirms the potential bias within standard dea that does not control for extreme weights applied by highly risky banks we discuss the use of the proposed method as a regulatory tool to constrain discretion when complying with regulatory capital benchmarks such as the basel regulatory capital ratios

bank size and macroeconomic shock transmission does the credit channel operate through large or small banks in this paper i use u s call report data to construct a larger panel dataset with bank level observations i find that larger banks lending is considerably more sensitive to the strength of their borrowers and their own balance sheets compared to smaller banks and that the sensitivities to borrower balance sheets are larger in magnitude compared to lender balance sheets when i incorporate various macroeconomic shocks identified by an estimated dsge model into the empirical model i similarly find that the transmission of shocks to the real economy operates mostly through large bank lending and borrower balance sheets

the estimation of a joint wage hours labor supply model in this paper the standard cross sectional static model of labor supply is modified to make the wage endogenous and a joint wage hours model is estimated the econometric technique addresses the non linearity of the budget constraint by approximating the constraint by a series of discrete points the results show that the budget constraint is indeed nonlinear that hours affect the wage quadratically that true wage elasticities are lower as a result and that the model fits the hours distribution much better than the standard tobit model

efficiency and risk in taiwan banking sbm super dea estimation in this study we adopt the two data envelopment analysis dea methods including banker charnes cooper bcc and slacks based measure sbm super efficiency to investigate whether a bank s technical efficiency index s results incorporating account risk and not incorporating account risk differ significantly the information is obtained from 43 taiwanese banks for the period 1998 to 2002 we also employ the nonradial and slacks based malmquist total factor productivity tfp index to measure the impact of productivity change on the panel data our empirical results from the dea approach are summarized as follows 1 loan quality factors have an impact on a bank s efficiency in general the bank with a higher degree of problem loans drops down its efficiency by incorporating account risk however the bank with a lower degree of problem loans increases its efficiency by incorporating account risk 2 super efficiency provides a good framework for ranking efficient units 3 based on the nonradial an

banks buffer capital how important is risk abstract most banks hold a capital to asset ratio well above the required minimum defined by the present capital adequacy regulation basel i using bank level panel data from norway important hypotheses concerning the determination of this buffer capital are analyzed focus is on the importance of i risk ii the buffer as an insurance iii the competition effect iv supervisory discipline and v economic growth a negative or non significant risk effect is found which suggests that introducing a more risk sensitive capital regulation basel ii is likely to affect norwegian banks support is found for the hypothesis that buffer capital serves as an insurance against failure to meet the capital requirements

viewpoint sustainability malthus revisited the sustainability debate concerns whether the world will experience stable or improving living standards for the foreseeable future or whether the current trajectory will overtax the natural environment leading to a crash in living standards this paper selec tively reviews relevant research focusing on both ecological concerns and technological progress and asks whether sustainability would be problematic without rapid population growth i suggest that continued demographic transition to lower fertility is the primary requirement for achieving sustainable development this is effectively a modern transla tion of malthus 1798 the paper also discusses the role of the malthusian cycle in human evolution jel classification q56 j10

on the estimation of returns to scale using variable cost functions abstract this paper compares two methods of estimating returns to scale based on variable cost functions it shows specifically how the methods differ and indicates why it is important to select an appropriate method when drawing inferences about policy

stakeholder rights and economic performance the profitability of nonprofits abstract this paper explores whether ownership matters in a fundamental sense by comparing the performance of stockholder owned firms with the much less analyzed nonprofit firms no stakeholder has residual cash flow rights in nonprofit firms and the control rights are held by customers employees and community citizens accounting for differences in size and risk and comparing only firms in the same industry we find that stockholder owned firms do not outperform nonprofit firms this result is consistent with the notin that the monitoring function of stockholders may be successfully replaced by other mechanisms we find evidence that product market competition may play this role as a substitute monitoring mechanism

openness to trade in manufactures in the oecd abstract how open are the advanced economies to trade with each other in this paper openness is calculated relative to the predictions of the monopolistic competition trade model using data on manufacturing trade and production in the oecd in 1985 the paper finds that 1 japan imports much less than other large oecd countries while the european countries have larger import volumes than does the us 2 japan and the us engage in less intra industry trade than the rest of the oecd and 3 the eu countries are less open to imports from japan and the us than those countries are open to imports from the eu

assessing progress in research on industrial evolution and economic growth a review article this article reviews a new three volume collection of previously published articles on how industry structures change edited by david audretsch and steven klepper central themes in the chosen contributions are summarized and the disproportionate emphasis on relatively new rather than clearly seminal articles is noted a more detailed analysis is undertaken on how the chosen articles illuminate the determinants of incumbent firms survival and growth advantages i e scale economies first mover advantages organizational competence and growth affecting strategies such as preemptive innovation and mergers

structural and behavioural characteristics of informal service employment evidence from a survey in new delhi this article argues that at least two distinct categories within the informal sector informal services and informal manufacturing exhibit different structural and behavioural characteristics while some segments of informal manufacturing may indeed be dynamic as noted by some recent studies the hypothesis is tested for the informal service employment on the basis of a survey by the author in new delhi india it examines investment earnings returns to human capital socio economic characteristics and scope for upward mobility of informal service employment it finds formal education does not explain differences in earnings in the sample but background characteristics do earnings in the informal service sector are neither the lowest in the economy nor are they comparable to wages in the urban formal unskilled sector when differences between migrants and non migrants are taken into account on the basis of these results the paper reflects on the nature of growth and structural change in the indi

how significant is the alleged unfair advantage enjoyed by state owned banks in germany the european commission argues that the state owned banks in germany enjoy an unfair advantage over the private sector banks in the cost of borrowing funds in the financial markets because of state guarantees that public sector banks are perceived to enjoy this note demonstrates that the blame for the comparatively poor profitability of private sector banks in germany cannot be laid at the door of the relatively cheaper funds that the public sector banks can raise in the wholesale markets copyright 2006 oxford university press

savings growth and the path of utility we derive an expression relating the change in instantaneous utility to the growth of net genuine saving in an economy with multiple stocks and externalities that maxi mizes welfare in the utilitarian sense this result is then shown to hold for decentralized competitive efficient economies as well to yield an extension of the hartwick rule instan taneous utility is non declining along a development path if genuine saving is decreasing by way of example the rule is applied as a constant genuine saving rate rule in a simple dasgupta heal solow stiglitzeconomy the rule yields a path with unbounded consump tion and higher wealth than on the standard hartwick constant consumption path jel classification q01 q56 o13

easter island historical anecdote or warning for the future two standard solutions for the malthusian trap involve institutional reforms and technological progress using easter island as an example we investigate the hypothetical role that technological progress and population management reform might have played in preventing the collapse of the island s civilization the model includes a composite manufactured good and a composite harvested renewable resource fertility is assumed to rise with per capita income the resource s carrying capacity and intrinsic growth rate as well as labor s harvesting productivity are subject to technological progress fertility is subject to population management reform the model yields a system of two simultaneous nonlinear non autonomous differential equations we first study the system s steady states the system is then parameterized for easter island and its comparative dynamics are investigated in simulations we find that technological progress can generate large fluctuations in population renewable resources and per capita utility sometimes resulting in system collapse with high fertility rates the population and the resource vanish none of the simulations investigated here exhibit a constantly growing per capita utility over time finally we evaluate the applicability of these results to contemporary societies 2000 elsevier science b v all rights reserved

markets and institutions global perspectives abstract the purpose of this paper is to highlight some of the key developments of markets and institutions at the global level over the past few decades by referring to the evolution of institutions from the government led system to a market led system the paper argues that innovation and deregulation in the financial sector led to acceleration of the process of globalisation in which both markets and institutions are becoming increasingly integrated and more efficient the paper highlights the role of trade liberalisation in financial services as a way of increasing efficiency and better use of national resources the paper also highlights the role of consolidation of financial institutions as one of the ingredients of the new developments of markets and institutions the paper also provides brief highlights of six other papers in this special issue that analyse and discuss some of the global aspects of markets and institutions

deposit insurance regulation and moral hazard in the thrift industry evidence from the 1930 s this paper compares risk taking of insured and uninsured thrifts operating under strict and less strict regulatory regimes during the 1930 s analysis of balance sheet data indicates that while newly insured thrifts undertook less risk than their uninsured counterparts possibly because of screening by deposit insurance authorities moral hazard emerged gradually insured institutions operating under relatively permissive regulatory regimes were more prone to undertake risky lending activities than their more tightly regulated counterparts possibly because of screening by deposit insurance authorities moral hazard emerged gradually insured institutions operating under relatively premissive regulatory regimes were more prone to undertake risky lending activities than their more tightly regulated counterparts given the current system of deposit insurance the results suggest that effective regulation and supervision will play a key role in maintaining thrift stability in the 1990s copyright 1992 by american economic association

an environmental economic measure of sustainable development abstract a central issue in the study of sustainable development is the interplay of growth and sacrifice in a dynamic economy this paper investigates the relationship among current consumption sacrifice and sustainability improvement in a general context and in two canonical stylized economies we argue that the maximin value of utility measures what is sustainable and provides the limit to growth maximin value is interpreted as a dynamic environmental economic carrying capacity and current utility as an environmental economic footprint the time derivative of maximin value is interpreted as net investment in sustainability improvement it is called durable savings to distinguish it from genuine savings usually computed with discounted utilitarian prices

characterizing sustainability the converse of hartwick s rule this note offers a general proof of the converse of hartwick s rule namely that in an economy with stationary instantaneous preferences and a stationary technology an efficient constant utility path is characterized by the value of net investments being zero at each point in time in a one consumption economy with two stocks a stock of a natural resource and a stock of man made capital this means that if consumption remains constant at the maximum sustainable level then the accumulation of man made capital always exactly compensates in value for the depletion of the natural resource

are scale economies in banking elusive or illusive evidence obtained by incorporating capital structure and risk taking into models of bank production abstract this paper explores how to incorporate banks capital structure and risk taking into models of production in doing so the paper bridges the gulf between 1 the banking literature that studies moral hazard effects of bank regulation without considering the underlying microeconomics of production and 2 the literature that uses dual profit and cost functions to study the microeconomics of bank production without explicitly considering how banks production decisions influence their riskiness various production models that differ in how they account for capital structure and in the objectives they impute to bank managers cost minimization versus value maximization are estimated using u s data on highest level bank holding companies modeling the bank s objective as value maximization conveniently incorporates both market priced risk and expected cash flow into managers ranking and choice of production plans estimated scale economies are found to depend critically on how banks capital structure and risk taking are modeled in particular when equity capital in addition to debt is included in the production model and cost is computed from the value maximizing expansion path rather than the cost minimizing path banks are found to have large scale economies that increase with size moreover better diversification is associated with larger scale economies while increased risk taking and inefficient risk taking are associated with smaller scale economies

the effect of subsistence on collapse and institutional adaptation in population resource societies abstract we extend the brander taylor model of population and resource development in an isolated society by adding a resource subsistence requirement to people s preferences this improves plausibility amplifies population overshoot and collapse and can destabilize the steady state and allows for complete cessation of non harvesting activities in line with archaeological evidence for many societies we then use bifurcation techniques to give a global analysis of four types of institutional adaptation an ad valorem resource tax and quotas on total resource harvest total harvest effort and per capita effort in all cases we find that a higher subsistence requirement makes it harder or often impossible for adaptation to avoid overshoot and collapse

do large banks have lower costs new estimates of returns to scale for u s banks this paper presents new fully nonparametric estimates of ray scale and expansion path scale economies for u s banks based on a model of bank costs unlike prior studies that use models with restrictive parametric assumptions or limited samples our methodology uses local polynomial estimators and data on all u s banks over the period 1984 2006 our estimates indicate that as recently as 2006 most u s banks faced increasing returns to scale suggesting that scale economies are a plausible but not necessarily only reason for the growth in average bank size and that the tendency toward increasing scale is likely to continue unless checked by government intervention

labor market segmentation and the determination of wages in the public private formal and informal sectors in san jose costa rica a striking feature of many cities in less developed countries ldcs is the coexistence of large well organized high technology firms with the small street vendors who own little but a wooden box to sit on this apparent dualism in the urban economy has been a concern of students of economic development for many years several international agencies notably the international labour organisation ilo and the world bank have focused attention on this phenomenon the ilo popularized the terms formal sector and informal sector to describe this dichotomy to many economists one consequence of this dualism is labor market segmentation labor market segmentation plays a crucial role in explanations provided for some important issues such as rural urban migration urban poverty unemployment underemployment and growth 2 in this article i examine the hypothesis that labor market segmentation exists in san jos6 costa rica between the public and private formal sectors and between the privateformal and informal sectors defined in the appendix i define labor market segmentation as a situation where because of institutional barriers to occupational mobility between sectors a worker in the lower sector has less than full access to a job in the upper sector held by an observationally identical worker 3 if there were no barriers workers in the low wage sector would enter the high wage sector and force the wages in that sector down until wages across sectors were equalized that is labor market segmentation implies differences in wages for observationally identical workers relying on this inference most of the empirical literature on labor market segmen

genuine savings and sustainability genuine savings gs has emerged as the leading economic indicator of sustainable economic development at the country level it derives from the literatures on weak sustainability wealth accounting and national income accounting we discuss the theoretical underpinnings of gs focusing on the relationship between changes in a nation s extended capital stock and the future path of consumption the indicator has entered widespread use propelled by the world bank s publications despite its varying performance as a predictor for future consumption notwithstanding the extensive body of literature reviewed promising future research avenues are identified

creative destruction and human resources discussion about demography of firms and industries is asking not only for the entity of organizations but also for processes of entry and exit changes and shifts in the overall structure of enterprises are very often regarded as reflections of market forces which are leaded by company strategies and their management elites too less attention is paid to some overall trends in which deaths and births of firms are embedded the paper tries to discuss some developments in the structure of the labour force which are regarded as an autonomous interpretation scheme for new occupations markets and firms the secular sectoral transformation towards the service sector is connected to the course of productivity which provides in itself the breeding ground for new organizations analysing long term social and economic changes is one of the necessary perspectives to understand recent trends in economy and society and to arrive at a better understanding of future developments the argument in the paper is a conceptual one which is highlighted by empirical observations evolutionary processes of creative destruction must be understood best by an integrated interdisciplinary approach including different aspects of market formations and socioeconomic dimensions such as labour market trends social stratification issues and life style elements

multinationals multi plant economies and the gains from trade a general equilibrium model of a multinational enterprise based on economies of multi plant operation is developed these economies are modelled as arising from the existence of a joint input whose productivity in each production facility is independent of the number of facilities maintained by a firm the multinational thus offers the world increased technical efficiency by eliminating the duplication of the joint input that would occur with independent national firms since this technical efficiency may come at the expense of increased market power the full determinants of home country host country and world welfare are considered

hartwick s rule and maximin paths when the exhaustible resource has an amenity value abstract this paper studies the maximin paths of the canonical dasgupta heal solow model when the stock of natural capital is a direct argument of well being besides consumption hartwick s rule then appears as an efficient tool to characterize solutions in a variety of settings we start with the case without technical progress we obtain an explicit solution of the maximin problem in the case where production and utility are cobb douglas when the utility function is ces with a low elasticity of substitution between consumption and natural capital we show that it is optimal to preserve forever a critical level of natural capital determined endogeneously we then study how technical progress affects the optimal maximin paths in the cobb douglas utility case on the long run path of the economy capital production and consumption grow at a common constant rate while the resource stock decreases at a constant rate and is therefore completely depleted in the very long run a higher amenity value of the resource stock leads to faster economic growth but to a lower long run rate of depletion we then develop a complete analysis of the dynamics of the maximin problem when the sole source of well being is consumption and provide a numerical resolution of the model with resource amenity the economy consumes produces and invests less in the short run if the resource has an amenity value than if it does not whereas it is the contrary in the medium and long runs however and without surprise the resource stock remains for ever higher with resource amenity than without

commercial policy and intra industry trade abstract this paper constructs a model of intra industry trade within a multi product industry whose output range is limited to that obtainable from a particular type of capital intra industry trade is a natural outcome in this structure without requiring increasing returns to scale or imperfectly competitive markets and with its pattern determined along traditional relative factor abundance lines the volume of this trade will vary inversely with the level of trade restrictions as observed empirically other policies are then considered for their influence on the range rather than the level of domestic production since the former is the more likely policy objective under these circumstances

coupled societies are more robust against collapse a hypothetical look at easter island inspired by the challenges of environmental change and the resource limitations experienced by modern society recent decades have seen an increased interest in understanding the collapse of past societies modelling efforts so far have focused on single isolated societies while multi patch dynamical models representing networks of coupled socio environmental systems have received limited attention we propose a model of societal evolution that describes the dynamics of a population that harvests renewable resources and manufactures products that have positive effects on population growth collapse is driven by a critical transition that occurs when the rate of natural resource extraction passes beyond a certain point for which we present numerical and analytical results applying the model to easter island gives a good fit to the archaeological record subsequently we investigate what effects emerge from the movement of people goods and resources between two societies that share the characteristics of easter island we analyse how diffusive coupling and wealth driven coupling change the population levels and their distribution across the two societies compared to non interacting societies we find that the region of parameter space in which societies can stably survive in the long term is significantly enlarged when coupling occurs in both social and environmental variables

output allocative and technical efficiency of banks abstract in this paper we calculate output allocative and technical efficiency for a sample of small banks operating in 1982 we do so by estimating a shephard type output distance function as a deterministic frontier in general we find that the banks in our sample are output inefficient

the performance of universal banks evidence from switzerland abstract this paper examines the performance of swiss banks from 1996 to 1999 using a broad definition of bank output we find evidence of large relative cost and profit inefficiencies in swiss banks a more narrow definition that focuses on only traditional activities leads to efficiency estimates that are even lower we also find evidence of economies of scale for small and mid size banks but little evidence that significant scale economies remain for the very largest banks finally evidence on scope economies is weak for the largest banks that are involved in a wide variety of financial activities taken together these results suggest few obvious benefits from the trend toward larger universal banks in switzerland

constant savings rates and quasi arithmetic population growth under exhaustible resource constraints in the dasgupta heal solow stiglitz dhss model of capital accumulation and resource depletion we show the following equivalence if an efficient path has constant gross and net of population growth savings rates then population growth must be quasi arithmetic and the path is a maximin or a classical utilitarian optimum conversely if a path is optimal according to maximin or classical utilitarianism with constant elasticity of marginal utility under quasi arithmetic population growth then the gross and net of population growth savings rates converge asymptotically to constants

the role of demandable debt in structuring optimal banking arrangements demandable debt finance by banks warrants explanation because it entails costs of bank suspension liquidation and idle reserve holdings an explanation is developed in which demandable debt provides incentive compatible intermediation where the banker has comparative advantage in allocating investment funds but may act against the interests of uninformed depositors demandable debt attracts funds by giving depositors an option to force liquidation its usefulness in transacting follows from information sharing between monitors and nonmonitors copyright 1991 by american economic association

new firm survival new results using a hazard function a limitation of audretsch s 1991 study of new firm survival was the level of aggregation to industries this precluded linking establishment specific characteristics such as organizational structure and size to post entry performance the purpose of this paper is to relate the post entry performance of individual establishments not only to their technological and market structure environments but also to establishment specific characteristics we do this by estimating a hazard duration function for more than 12 000 individual establishments in u s manufacturing started in 1976 by tracking their subsequent performance over a ten year period we conclude that establishment specific characteristics which audretsch was not able to capture in his earlier study play an important role in shaping the exposure to risk confronting new establishments copyright 1995 by mit press

intertemporal equity and hartwick s rule in an exhaustible resource model in a standard exhaustible resource model it is known that if along a competitive path investment in the augmentable capital good equals the rents on the exhaustible resource known as hartwick s rule then the path is equitable in the sense that the consumption level is constant over time in this paper we show the converse of this result if a competitive path is equitable then it must satisfy hartwick s rule

the concept and measurement of subsistence a survey of the literature abstract subsistence is a widely used concept but most of the time its precise meaning is not property stated this study attempts to provide an appropriate exposition of the concept by examining the manner in which it is used and the role it plays in different theoretical analyses and policy formulations it has been shown that contrary to the conventional notion of a minimum standard of physical needs only subsistence is an absolute minimum standard of physical and mental survival and productive efficiency the lowest standard of social desirability is given by the needs of physical and mental survival in addition to these the standard of subsistence includes the needs of physical and mental efficiency for productive living in the society the attainment of a certain minimum of physical mental and social magnitudes provides the standard of subsistence commodities or their characteristics are the needs of this standard income by providing the command over these needs affords an individual the capability to attain it hence income is used to characterize subsistence three different methods of subsistence determination have been identified the most commonly used methods the social and the scientific ones are found to be arbitrary the determination of subsistence from the analysis of the agents declaration or behavior seems to be a better method while the declaration or expenditure based studies suffer from various limitations studies based on the behavior of income earning offer a better direction

bank capitalization and cost evidence of scale economies in risk management and signaling we amend the standard cost model to account for the role of financial capital in banking the cost function is conditioned on the level of capital but we model the demand for financial capital so that it can serve as a cushion against insolvency for potentially risk averse managers and as a signal of risk for less informed outsiders scale economies are then computed without assuming that the bank chooses a level of capitalization that minimizes cost we find evidence of substantial scale economies and that bank managers are risk averse and use the level of financial capital to signal the level of risk

economies of scale in banking indeterminacy and monetary policy this paper investigates economies of scale es in financial intermediation as a source of equilibrium indeterminacy consumption in the model can be purchased with currency and deposits and es in intermediation implies that deposit costs are decreasing in aggregate deposits the results suggest that indeterminacy does not depend on a large degree of es nor a large intermediation sector but on monetary policy and the determination of nominal interest rates monetary policies not targeting nominal rates allow for indeterminacy to arise for any degree of es while policies targeting nominal rates eliminates indeterminacy for all degrees of es

deregulation and bank financial policy the standard view that banks can value maximize by exploiting non risk rated deposit insurance ignores the potential loss of a valuable bank charter due to insolvency recognition of this effect changes the bank s optimal financial policy and can induce extreme risk averting as well as risk taking behavior however as the value of the bank charter falls the risk taking strategy is more apt to dominate therefore current deregulation of the banking industry by easing entry and devaluing charters holds the potential for increases in the incidence of insolvency unless offsetting policies are instituted

sustained development of a society with a renewable resource abstract a maximin program is applied to a policy of sustaining a simple society whose population is dependent on a resource subject to logistic growth regular and non regular paths are characterized there are continua of both regular and non regular solutions the type depending on the initial conditions a non regular path involves an intermediate part in which the sustainment constraint is not effective all solutions are time consistent and pareto optimal because a problem may not be regular it is not valid to assume that sustainment implies constant utility

de novo bank exit newly chartered banks provide an additional credit source for small businesses but the staying power of new banks can be weak a multi state exit model is estimated for u s commercial banks chartered between 1980 and 1985 and for a benchmark sample of small established banks the determinants of failure are similar for both samples but new bank failure is more sensitive to adverse environmental conditions the timing of new bank exit by failure follows a life cycle pattern but the timing of new bank exit by acquisition does not there is mixed evidence on the efficacy of regulations aimed at reducing new bank fragility

constant utility paths and irreversible global warming this paper shows that the hartwick rule for sustainable utility with depletable resources still applies to the case of the greenhouse effect from fossil fuel carbon emissions although a carbon tax is necessary for sustainable utility it is sufficient that the sum of net energy rents and carbon tax revenues is invested in reproducible capital examination of recent savings rates and energy cost shares suggests that this may be difficult to achieve with current global savings rates jel classification q32

intra industry trade and strategic interaction theory and evidence abstract we conduct a theory based empirical study of intraindustry trade in homogeneous products we derive an oligopolistic model of intra industry trade which is an extension of the segmented market model of trade initially proposed by brander j a 1981 intra industry trade in identical commodities journal of international economics 11 1 14 the empirical implementations of the model are investigated in the context of the petrochemical industry our analysis employs a unique data set containing detailed product and location specific data on the petrochemical industries in germany and the united states allowing for different empirical specifications we find that cross product variations in bilateral intra industry trade of petrochemicals are well explained by the variables suggested by the theoretical model

a characterization of sustainability with indicators abstract economists favor the use of criteria to characterize sustainability in practice policy makers use indicators i e measurements based on the current economic state and decisions representing given sustainability issues in this paper i introduce a criterion characterizing sustainability with indicators and thresholds acting as constraints i interpret the thresholds as minimal rights to be guaranteed to all generations and define sustainable trajectories as those satisfying all the constraints at all times the new criterion is a generalized maximin criterion the approach is applied to a simple production consumption economy with non renewable resources to derive some policy recommendations on the use of indicators to deal with sustainability i discuss the implications of such a criterion in terms of trade off between sustainability thresholds efficiency and time consistency in particular the resulting problem is time inconsistent and sustainability thresholds may be revised over time following the time inconsistent policy based on indicators with dynamic revision of the thresholds may however result in a sustained utility path and even in utility growth

the risk of financial intermediaries this paper reconsiders the formal estimation of bank risk using the variability of the profit function in our model point estimates of the variability of profits are derived from a model where this variability is endogenous to other bank characteristics such as capital and liquidity we estimate the new model on the entire panel of us banks spanning the period 1985q1 2012q4 the findings show that bank risk was fairly stable up to 2001 and accelerated quickly thereafter up to 2007 we also establish that the risk of the relatively large banks and banks that failed in the subprime crisis is higher than the industry s average thus we provide a new leading indicator which is able to forecast future solvency problems of banks

measuring competition using the boone relative profit difference indicator this paper suggests a method for implementing the theoretical relative profit difference test for intensity of competition due to boone 2008 an empirical illustration is given for banking systems in emerging economies

moonlighting multiple motives and gender differences this paper examines the incidence and reasons for moonlighting with a focus on gender differences the study specifies and estimates a bivariate probit model of labour supply and the decision to hold more than one job it is found that the factors leading men and women to moonlight are similar a wage decomposition analysis reveals that 93 percent of the differential between male and female moonlighters wages is not explained by differences in characteristics and little connection is found between an individual s human capital and their moonlighting wage finally it is found that moonlighters are less likely to report their income

maximin viability and sustainability the maximin criterion defines the highest utility level that can be sustained in an intergenerational equity perspective the viability approach makes it possible to characterize all the economic trajectories sustaining a given not necessarily maximal utility level in this paper we exhibit the strong links between maximin and viability we show that the value function of the maximin problem can be obtained in the viability framework and that the maximin path is a particular viable path this result allows us to extend the recommendations of the maximin approach beyond optimality to characterize the sustainability of economic trajectories which differ from the maximin path attention is especially paid to non negative net investment at maximin accounting prices which is shown to be necessary to maintain the productive capacity of the economy whether the development path is optimal or not our results provide a new theoretical ground to account for sustainability in imperfect economies based on maximin prices

subsistence substitutability and sustainability in consumption we propose a representation of individual preferences with a subsistence requirement in consumption and examine its implications for substitutability and sustainability specifically we generalize the standard constant elasticity of substitution ces utility specification for manufactured goods and environmental services by adding a subsistence requirement for environmental services we find that the hicksian elasticity of substitution strictly monotonically increases with the consumption of environmental services above the subsistence requirement and approaches the standard ces value as consumption becomes very large whether the two goods are market substitutes depends on the level of income we further show that the subsistence requirement may jeopardize the existence of an intertemporally optimal and sustainable consumption path our results have important implications for growth development and environmental policy

sustainability of an economy relying on two reproducible assets evaluating the sustainability of a society requires a system of shadow or accounting values derived from the sustainability objective as a first step toward the derivation of such shadow values for a maximin objective this paper studies an economy composed of two reproducible assets each producing one of two consumption goods the effect of the substitutability between goods in utility is studied by postulating in turn neoclassical diminishing marginal substitutability perfect substitutability and perfect complementarity the degree of substitutability has strong effects on the maximin solution affecting the regularity or non regularity of the program and on the accounting values this has important consequences for the computation of genuine savings and the sustainability prospects of future generations

competition in fragmented markets new evidence from the german banking industry in the light of the subprime crisis abstract of all of the eu member states germany has the largest banking market however not all german banking institutions necessarily face fierce competition because the industry is highly fragmented strict separation of the three existing banking pillars may impede competition with negative effects on financial stability we assess the competitive stances of 1 888 universal banks from 2001 to 2009 by using the panzar rosse revenue test we find evidence that measuring competition at an average country level does not necessarily generate valid evaluations of fragmented markets in addition we find no clear indication that either the particular objectives of cooperative and savings banks or the legal protection of these institutions impedes competition or discriminates against private banks therefore as long as the relationship between competition and financial stability is dubious the overall effect and the social costs or benefits of political measures that influence the structure of the german banking market are at least questionable

intra industry specialization in a multi country and multi industry framework the paper tests alternative hypotheses as to the factors determining the extent of intra industry trade defined as the share of this trade in total trade in a multi country and multi industry framework the empirical results show that the extent of intra industry trade in a particular industry between any two countries depends on the characteristics of the industry and the countries concerned the explanatory power of the regressions for the entire group of countries exporting manufactured goods as well as for trade among the developed countries is relatively high and practically all the hypotheses concerning the impact of industry trade are supported by the empirical results lower coefficients of determination have been obtained for trade between developed and developing countries and for trade among developing countries but the estimates generally support the hypotheses put forward in the paper in these cases also

the demise of community banks local economic shocks are not to blame the number of us community banks is falling rapidly is this reduction being driven in part by banks desire to geographically diversify to reduce their vulnerability to local economic shocks a comparison of the performance of banks in counties that suffered economic shocks in the 1990s with similar banks in counties that did not suffer economic shocks shows that banks withstand local economic shocks quite well this result suggests that the geographic concentration risk that community banks must bear to focus on relationship lending is small and is not an important factor contributing to the decline of community banks

incorporating risk input into the analysis of bank productivity application to the taiwanese banking industry abstract this study reappraises banks productivity by using 42 taiwanese banks during 1999 2007 as observations it introduces an input oriented generalized metafrontier malmquist productivity index i gmmpi while considering the latent effect of risk taking behavior in the analytic framework we learn that public and private banks should face separate short term technological frontiers while the econometric model considering risk input can portray banks operating frontiers better moreover neglecting the influence of risk input would bring about distortions of efficiency technology and tfp dynamic estimations for banks meanwhile the degree of scale economies would also be overestimated the paper concludes that neglecting the risk taking essence in bank performance evaluation is equal to allowing banks to barter risk bearing as the term for further output growth consequently the potential cost is that banks may excessively aggrandize their scales of business implying the possibility of another financial crisis

the identification of technology regimes in banking implications for the market power fragility nexus neglecting the existence of different technologies in banking can contaminate efficiency market power and other performance measures by simultaneously estimating i technology regimes conditional on exogenous factors ii efficiency conditional on risk management and iii lerner indices of german banks we identify three distinct technology regimes public retail small specialized and universal relationship system estimation at the regional level reveals that greater bank market power increases bank profitability but also fosters corporate defaults corporate defaults in turn lead to higher probabilities of bank distress which supports the market power fragility hypothesis c 2009 elsevier b v all rights reserved

defining and estimating underground and informal economies the new institutional economics approach abstract a taxonomy of underground economies is elaborated based on the new institutional approach to economic development members of formal sectors confront different sets of transformation and transaction costs than do members of informal sectors and these differences are regarded as crucial to the development process the paper distinguishes illegal unreported unrecorded and informal economies and examines the conceptual and empirical linkages among them alternative micro and macro methodologies for measuring underground activities are reviewed and evaluated including census and survey procedures discrepancy and monetary methods when you cannot measure your knowledge is meager and unsatisfactory lord kelvin inscription at harper library university of chicago

trade policy issues and empirical analysis interest in u s trade policy has been stimulated in recent years by the massive american trade deficit by the belief that intervention by foreign governments in international markets has given other countries a competitive edge over the united states and by concern about the increase in protectionism among industrial countries in turn major analytical developments in international economics have revolutionized trade theory broadening its scope both by introducing in a more formal manner such concepts as imperfect competition increasing returns product differentiation and learning effects and by including the study of political and economic factors that shape trade policy decisions this collection of papers the result of a conference held by the nber applies these new trade theories to existing world cases and also presents complementary empirical studies that are grounded in more traditional trade theories the volume is divided into four parts the papers in part 1 consider the problem of imperfect competition empirically assessing the economic effect of various trade policies introduced in industries in which the new trade theory seems to apply those in part 2 isolate the effects of protection from the influences of the many economic changes that accompany actual periods of protection and also examine how the effects from exogenous changes in economic conditions vary with the form of protection part 3 provides new empirical evidence on the effect of foreign production by a country s firms on the home country s exports finally in part 4 two key bilateral issues are analyzed recent u s japanese trade tensions and the incident involving the threat of the imposition of countervailing duties by the united states on canadian softwood lumber

population growth and natural resource scarcity long run development under seemingly unfavorable conditions in this paper i consider an economy that is constrained by the use of natural resources and driven by knowledge accumulation resources are essential inputs in all sectors i show that population growth and poor input substitution are not detrimental but on the contrary are even necessary to obtain a sustainable consumption level i find a general rule to define the conditions for a constant innovation rate the rule does not apply to capital but to labor growth which is the crucial input in research furthermore the rule relates to the sectoral structure of the economy and to demographic transition the results continue to hold with a backstop technology and are extended for the case of minimum resource constraints

on the collapse of historical civilizations to explain the collapse of historical civilizations scholars typically point to suboptimal behaviors including misunderstanding the natural environment shortsightedness or a lack of institutions we examine the collapse of four historical societies with a model of endogenous population growth and renewable resources employing components of optimal resource management economic growth theory and the moral philosophy of social welfare function choice we find that these collapses may have been socially optimal further we show that the transient behavior of the system is more sensitive to assumptions than the equilibrium behavior and that focusing solely on equilibria may miss key insights copyright 2009 oxford university press

does risk aversion affect bank output loss the case of the eurozone abstract we propose a new model to infer the evolution of bank specific output losses due to the uncertainty in bank output prices losses are based on bank risk aversion with micro foundations tethered to the uncertainty regarding prices our model allows us to measure time varying bank specific output losses and risk aversion while taking into account all bank cross sectional heterogeneity we employ a panel data set to estimate the input and output elasticities with both parametric and non parametric techniques we are the first to document that increasing risk aversion among eurozone banks during the financial crisis resulted in sizable output losses although subdued thereafter losses have been resurging in recent years both conventional and unconventional monetary policy responses by the european central bank ecb mitigated uncertainty in bank output prices though unequally so across countries certain measures of unconventional monetary policy may have even enhanced bank risk aversion and thereby output losses but mainly so for large countries

tanzanian formal sector workers participation in informal production a theoretical model is developed explaining formal sector workers participation in the informal sector a reduced form informal sector participation function is derived from a specific utility function a specific informal sector production function and a specific informal sector earnings function the participation function can be estimated consistently and provides a solution to the problem that informal sector wages in developing countries are hard to observe a sample of tanzanian formal sector workers is used to estimate the participation function a majority of tanzanian formal sector workers participate in informal production participation in informal production is inversely related to household income to living in dar es salaam and to being a mother with small children participation is positively related to age and multiple job holding seems to play a very different role in the transition from work to retirement in tanzania compared to industrialized countries

testing for expense preference behavior mutual versus stock savings and loans this article investigates expense preference behavior in the savings and loan industry previous studies used an intercept test and in general concluded that managers of mutual s ls exhibit expense preference behavior i derive the necessary and sufficient conditions on cost functions for the intercept test to be valid these restrictions are rejected for the savings and loan industry stock and mutual s ls have different cost structures and both have non cobb douglas production technologies i derive a new more general test for expense preference behavior that does not require the restrictive assumptions of the intercept test the results of this test do not support earlier conclusions of managerial expense preferences

pre recession efficiencies and input allocation decisions of agricultural and critically insolvent banks abstractthe late 2000s economic recession is considered the longest economic downturn since the 1930s great depression declining real estate values ignited an increase in loan defaults and mortgage foreclosures that led to a surge of bank failures at a rate not experienced by the u s banking industry since the 1980s a total of 509 bank failures were recorded by the fdic from january 2007 december 2014 with nearly 60 of these failures occurring in 2009 and 2010 in contrast there were only 24 bank failures in the u s during the 7 year period prior to 2007 this study analyzed certain components of operating decisions made by banks that either survived or became critically insolvent during the late 2000s financial crisis using an input distance stochastic frontier function to estimate the technical efficiency te and allocative efficiency ae between agricultural banks and non agricultural banks this efficiency analysis was applied to a 7 year pre recession period and is designed to final out any