perceived credit constraints in the european union the promotion and support of small and medium sized enterprises smes is an essential component of policies designed to help improve europe s economic performance a crucial issue is whether smes face difficulty obtaining bank loans using pre crisis survey data from 2005 and 2006 for nearly 3 500 smes firms with fewer than 250 employees in the european union eu we investigate the determinants of perceived bank loan accessibility at the firm level and at the country level based on hierarchical multi level binomial logit regressions our findings show that the youngest and smallest smes have the worst perception of access to bank loans the smes in nations with concentrated banking sectors are more positive about loan accessibility in addition a high fraction of foreign owned banks is associated with improved perception of loan accessibility in the eu 15 but not in the eu 10

intergovernmental transfers and fiscal behavior insurance versus aggregate discipline abstract this paper evaluates the trade off between the advantages of risk sharing and the perils of common pool problems in federal fiscal arrangements under the assumption of asymmetric information we evaluate two alternative regimes of intergovernmental transfers in one regime the central government pre commits to a certain level of transfers that compensate vertical fiscal imbalances and provide some limited ex ante insurance in the other regime it accommodates ex post the fiscal needs of the different provinces in this second case full insurance results but the economy is subject to a tragedy of the fiscal commons with excessive subnational spending insufficient local taxation and reduced production of federal public goods we find the range of parameters for which one or the other institutional regime will be preferable the result is a fiscal federalism version of the usual trade off between rules and discretion

depressing dependence transfers and economic growth in the german states 1975 2005 abstractdepressing dependence transfers and economic growth in the german states 1975 2005 regional studies most countries pay substantial intergovernmental transfers to poor regions with the aim of achieving regional convergence consequently transfers should have a positive effect on economic growth however it is equally possible that transfers perpetuate underdevelopment this paper studies empirically the effect of intergovernmental transfers on economic growth with a panel of west german states over the period 1975 2005 the findings suggest that transfers do not foster economic growth presumably because the recipients use them to subsidize declining industries

constitutional rules of exclusion in jurisdiction formation the rules under which jurisdictions nations provinces can deny immigration or expel residents are generally governed by a constitution but there do not exist either positive or normative analyses to suggest what types of exclusion rules are best we stylize this problem by suggesting four constitutional rules of admission free mobility admission by majority vote admission by unanimous consent admission by a demand threshold for public goods in a simple model we characterize the equilibria that result from these rules and provide a positive theory for which constitutional rules will be chosen

local public goods risk sharing and private information in federal systems abstract we examine the implications of information asymmetries for the optimal design of interregional insurance schemes and the allocation of local public goods we have good and bad news the good news is that the presence of informational asymmetries is not in itself sufficient to deny federations the attainment of either efficiency or egalitarian goals the bad news is that not only the first best may not be incentive compatible but also the incentive compatible optimum may violate participation constraints federations may have to content themselves with fourth best allocations as a result of strategic manipulation of information by privately informed jurisdictions

do firms get the financing they want measuring credit rationing experienced by small businesses in the u s this paper measures the extent to which small businesses in the united states in the late 1980s were able to access the external credit finance they desired we argue that a comprehensive definition of credit rationing must account for both a creditworthy firms that apply for and are denied financing and b creditworthy firms that decide not to apply for desired external financing given expectations about how long it may take to obtain financing and the evolution of investment opportunities

channels of interstate risk sharing united states 1963 1990 we develop a framework for quantifying the amount of risk sharing among states in the united states and construct data that allow us to decompose the cross sectional variance in gross state product into several components which we refer to as levels of smoothing we find that 39 percent of shocks to gross state product are smoothed by capital markets 13 percent are smoothed by the federal government and 23 percent are smoothed by credit markets the remaining 25 percent are not smoothed we also decompose the federal government smoothing into subcategories taxes transfers and grants to states

are small innovators credit rationed drawing upon a sample of 256 small firms who applied for bank loans the current paper is concerned with the extent to which innovativeness is associated with a lower level of loan application success the paper records the proportion of loan successfully applied for and estimates a series of tobit models utilising a number of proxy measures for innovation in terms of inputs outputs and commercial significance to the firm and incorporating standard controls in general the models suggest as anticipated that the most innovative firms are less successful in loan markets than their less innovative peers though there is some variation by proxy moreover there is tentative evidence that a little innovation may be a good thing

optimality free mobility and the regional authority in a federation abstract this paper examines the efficiency properties of a federation characterized by strategically competing regions and freely mobile homogeneous individuals analyses of this economy have concluded that achieving a pareto optimal will require intervention by a national authority this paper makes one basic point the nash equilibrium of regional authority behavior is pareto optimal the implication is that there is no role for a national authority in either providing interregional transfers or correcting for decentralized provision of public goods the nash equilibrium involves samuelson public goods provision and regions purchasing preferred population distributions with optimal interregional transfers

the impressive contribution of canadian economists to fiscal federalism theory and policy the study of fiscal federalism has been central to the research of canadian economists since the rowell sirois report to mark the 50th anniversary of the founding of the canadian economics association it is fitting to take stock of their contributions we focus on the period since 1982 and emphasize the main scholarly publications of an inclusive array of canadian economists and economists in canadian universities our attention is devoted to applications in the context of federal and provincial governments setting aside related issues in municipal government finance we briefly discuss instances where the fiscal federalism literature has informed policy debates including through policy research institutes government commissions and international organizations la contribution impressionnante des economistes canadiens a la theorie et a la politique du federalisme fiscal l etude du federalisme fiscal a ete un element central de la recherche des economistes canadiens depuis la commission rowell sirois au moment de celebrer le 50eme anniversaire de la fondation de l association canadienne d economique le moment est approprie pour prendre la mesure de leurs contributions on se concentre sur la periode apres 1982 et on souligne les principales publications savantes d un ensemble inclusif d economistes canadiens et d economistes dans les universites canadiennes une attention particuliere est portee aux applications dans le contexte federal et provincial mettant de cote les enjeux relies a la finance municipale on discute brievement des instances ou la litterature sur le federalisme fiscal a eclaire les debats de politiques publiques y compris a travers les instituts de recherche sur les politiques publiques les commissions gouvernementales et les organisations internationales

firm foundations and the role of financing constraints improving the economic conditions for small and medium sized firms as well as start ups is high on the agenda of policy makers in this paper we discuss some policy options for fostering the creation of new enterprises the discussion focuses on measures which aim at helping start ups to overcome liquidity constraints in order to provide the background for this discussion the paper provides some new empirical results on the determinants of firm foundations as well as some stylised facts on the occurence of liquidity constraints in west germany we analyse the regional distribution of start up intensity and offer several hypotheses to explain this distribution to a large extent the regional distribution of start ups can be explained by the existing industry structure regional human capital as well as the regional public traffic infrastructure moreover we show that liquidity constraints occur more often in small and young firms

introduction funding gaps theoretical and empirical foundations of government policies to plug alleged business funding gaps are highly controversial but rarely subject to wide ranging in depth debate this symposium from major scholars in the field provides a counterbalance topics addressed cover the theory of lending under asymmetric information its implications for overlending relationship lending as a market solution to information asymmetries government emulation of private sector decision making to eliminate underprovision of high tech equity and theoretically based empirical work testing for funding deficiencies in the high tech sector despite the very different and potentially contradictory contributions the result is surprisingly a set of mutually agreed policy conclusions

federalism equalization and risk aversion abstract what causes a group of countries to agree to form a federation other alternative arrangements which often are chosen instead are to form a unitary state or to remain autonomous federations usually allow for considerable freedom of movement among constituent regions they also provide a fairly limited redistribution of any rents earned in these regions these two features together imply that residents of poor regions can share in the rents in rich regions by migration this fiscal migration may waste resources why not simply share the rents equally among residents of all regions such a unitary arrangement although efficient would not appeal to residents of a country which is likely to be the best off region in a federation complete autonomy may expose residents of the separate countries to considerable idiosyncratic risk here i demonstrate that federation may be chosen by a group of countries even though it is a more wasteful arrangement than either other alternative if asymmetries among countries and the degree of risk aversion are large federal states also often implement transfers among the regions these transfers can be viewed as substitutes for fiscal migration i also show that the possibility of transfers even without any commitment to specifics makes federalism a more attractive option a federal constitution which requires transfers in excess of what would be made voluntarily may make federalism more attractive still

federal fiscal constitutions risk sharing and redistribution the paper studies the political and economic determinants of regional public transfers specifically it focuses on how such transfers are shaped by alternative fiscal constitutions where a constitution is an allocation of fiscal instruments across different levels of governments plus a procedure for the collective choice of these instruments realistic restrictions on fiscal instruments introduce a tradeoff between risk sharing and redistribution different constitutions produce very different results in particular a federal social insurance scheme chosen by voting provides overinsurance whereas an intergovernmental transfer scheme chosen by bargaining provides underinsurance

efficient tax exporting in a multijurisdiction economy with free mobility of households between communities some portion of any community s tax is incident upon nonresident landowners it is shown that when the objective of a community is taken to be the level of satisfaction of its residents a fully efficient allocation is a nash equilibrium of the decentralized game in general no local tax structure that restricts a community s tax base to residents can attain the optimum thus tax exporting is necessary for independent local government behavior to be consistent with efficiency

factor mobility risk and redistribution in the welfare state economic integration reduces the costs of factor mobility producing efficiency gains and contributing to equalization of net factor returns this raises the cost of income redistribution policy thus threatening a basic function of the welfare state a simple model of costly factor mobility under uncertainty shows that greater factor mobility enables factor owners to pool industry specific region specific or occupation specific risks due to uncertain technology or terms of trade economic integration may thus reduce some of the potential social insurance benefits of redistributive policy

collateral and rationing sorting equilibria in monopolistic and competitive credit markets the authors examine how market structure affects credit allocation under universal risk neutrality and asymmetric information about borrowers they consider both monopolistic and perf ectly competitive banks and examine the role of collateral in each ca se when a bank is a monopolist on the loan side they find collatera l is never used and asymmetric information results in reduced bank le nding under perfect competition collateral has a useful sorting rol e moreover rationing is possible even with collateral availability and perfectly elastic deposit supply in this setting the authors sh ow co signers are valuable social welfare properties of the monopoly and competitive equilibria are also compared copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

migration with fiscal externalities abstract this paper analyses the distribution of a country s population among regions when migration involves fiscal externalities the main question addressed is whether a decentralized decision making of regional governments can produce an optimal population distribution as recently asserted or a centralized intervention is indispensable as argued before in the literature in analysing this issue it is assumed that migration is costly and accordingly the problem is modelled in a dynamic setup it turns out that while with costless mobility the fiscal externality is fully internalized by voluntary interregional transfers with costly mobility centrally coordinated transfers still remain indispensable for achieving the socially optimal allocation

attachment to home and efficient purchases of population in a fiscal externality economy abstract this paper examines the efficiency properties of an economy characterized by strategically competing regions and individuals with varying degrees of attachment to home in an otherwise standard fiscal externality setting regional authorities may make interregional transfers in purchasing preferred populations however there is a range of distributions of resources over which neither region makes transfers nevertheless all equilibrium allocations resulting from the nash behavior of regional authorities including those that involve no transfers are efficient therefore in contrast to the standard conclusions of the fiscal externality literature there is no efficiency role for a central authority

opacity of young businesses evidence from rating disagreements abstract a conventional wisdom in the contemporary corporate finance literature argues that small and medium sized enterprises smes are informationally opaque we use data from two credit information companies and in particular their disagreements over the creditworthiness of smes to study the empirical relevance of this often invoked assumption our panel data analysis shows that once unobserved firm effects are controlled for the disagreements i e rating splits are inversely related to the age of firms we are not able to document such a robust relationship between the disagreements and the size of firms this finding holds a lesson for empirical corporate finance researchers who need firm level proxies for informational imperfections and asymmetries of the two often used proxies firm size is not as closely related to informational opacity as firm age is

growing firms and the credit constraint restricted access to finance either debt or equity or both is potentially a significant constraint on the growth of small businesses financing problems arise primarily as a consequence of information asymmetries the adverse effects of these may in part be counteracted by the use of collateral as a signalling and bonding mechanism and or by the development of a good working relationship between lender and borrower if the form of information asymmetry differs for growth firms or if the effects of information asymmetries are less easily ameliorated then growing firms may be more adversely affected by credit constraints if growth is contingent upon access to credit then the generalised implications for the economy may be significant and detrimental using evidence from a survery of over 6 000 firms conducted in 1992 this paper addresses the extent to which growth firms are adversely affected by a credit constraint the results suggest that the credit constraint for growing firms per se is no greater but growth firms may still experience a credit constraint as a consequence of their relative youth however there is evidence to suggest that firms expecting to grow in the future do perceive a rather tighter credit constraint but this may be partly or wholly offset by a generally better relationship with their bank

a theory of discouraged borrowers this paper examines the implications for the sme financing market of application costs that vary between firms and of imperfect screening of applicants by banks under these conditions discouraged borrowers can exist these are good borrowers who do not apply for a bank loan because they feel they will be rejected the paper shows that under a range of assumptions the scale of discouragement in an economy depends upon the screening error of the banks the scale of application costs and the extent to which the bank interest rate differs from that charged by the moneylender discouragement is shown to be at a maximum where there is some but not perfect information

debt bailouts and constitutions a demand based theory of sub national debt bailouts is presented it is shown that revenue sharing rs arrangements alter the demand for bailouts among politicians with regional constituencies as a bailout usually implies a shift of taxation to the federal tier automatic rs may lead to the formation of pro bailout coalitions formed by indebted states and states that are net recipients of the rs arrangement also rs can act as a commitment device for compensating payments among state representatives making a bailout politically rational the model shows that the state debt bailouts approved by the brazilian senate prior to the enactment of the fiscal responsibility act were fully consistent with politicians that maximize the proceeds accruing to their constituencies

federal fiscal transfer rules in monetary unions abstract this paper considers simple rules for federal fiscal transfers that automatically redistribute funds among member states of a monetary union to counteract adverse idiosyncratic shocks the transfer rules target regional differences in nominal gdp consumption spending labor income and fiscal deficits targeting regional fiscal deficits is the only rule that reduces consumption fluctuations and that promotes interregional consumption risk sharing but the overall welfare effect is negative in contrast targeting regional differences in labor income yields the largest welfare gains but it also yields the largest fluctuations in consumption and real gdp it is demonstrated that the welfare gains primarily stem from reducing the allocative inefficiency of input factors caused by nominal rigidities the optimal transfer rule essentially implies a combination of consumption spending and labor income targeting and it primarily targets the allocative inefficiency of factor inputs at the cost of lower interregional consumption risk sharing

fiscal federalism and monetary unions a quantitative assessment abstract in this paper i provide a quantitative analysis of three different forms of fiscal federalism in monetary unions fully decentralized regional fiscal authorities as the benchmark fiscal equalization with nominal tax revenue sharing and a common central fiscal authority i assess the capability of the different arrangements to stabilize regional consumption output and employment over the business cycle i also study the implications for interregional income consumption risk sharing and welfare from this analysis the following results emerge first a central fiscal authority stabilizes consumption fluctuations and increases the scope of interregional income and consumption risk sharing second fiscal equalization destabilizes consumption fluctuations and also reduces the scope of interregional income and consumption risk smoothing third a central fiscal authority leads to welfare gains whereas fiscal equalization leads to welfare losses

the illusion of wealth and its reversal abstractresearch on choice architecture is shaping policy around the world touching on areas ranging from retirement economics to environmental issues recently researchers and policy makers have begun paying more attention not just to choice architecture but also to information architecture or the format in which information is presented to people in this article the authors investigate information architecture as it applies to consumption in retirement specifically in three experiments they examine how people react to lump sums versus equivalent streams of monthly income their primary question of interest is whether people exhibit more or less sensitivity to changes in retirement wealth expressed as lump sums e g 100 000 or monthly equivalents e g 500 per month for life they also test whether people exhibit an illusion of wealth by which lump sums seem more adequate than monthly amounts in certain conditions as well as the opposite effect in which lump sums seem less adequate t