what went wrong with the recent reforms in the southern cone this paper describes and interprets the outcome of the reform packages in chile argentina and uruguay during 1974 83 it is shown that all three countries experienced initial success with the rescue operation from the severe macroeconomic disequilibrium at the inception of the reforms the paper then discusses the areas in which the reforms were successful and why the countries experienced boom bust cycles resulting in large increases in external indebtedness and internal financial crises the paper attributes the failure of the reforms to a combination of policy inconsistencies implementation difficulties and market frictions jointly these factors generated a sustained appreciation of the real exchange rate and a large spread between the cost of dollar denominated and peso denominated loans in turn the appreciation and interest rate difference created protracted opportunities for arbitrage that distracted firms from the business of production

financial shocks and corporate investment in emerging markets we examine how cross firm and cross country heterogeneity shapes the responses of corporate investment in emerging markets to changes in u s monetary policy and financial market volatility the latter proxying for uncertainty we find that in response to increases in u s monetary policy rates or financial market volatility financially weaker firms reduce investment by more than financially strong firms we also show that firms with stronger balance sheets delay investment voluntarily when faced with higher uncertainty finally we find that stronger macroeconomic fundamentals lower public debt or higher international reserves help to buffer corporate investment from increases in u s monetary policy rates

safety first criteria and their measures of risk a cardinal measure of risk which represents the safety first criteria is defined the functional form of that measure is determined for a subgroup of risk averse agents that do not have money illusion an empirical illustration of possible applications of that measure shows a method of identifying the subgroup of agents for which a given alternative dominates the others in a group of risky alternatives when none of these alternatives dominates any of the others according to the first and the second criteria of stochastic dominance

financial development and financing constraints international evidence from the structural investment model this article provides evidence that financial development impacts growth by reducing financing constraints that would otherwise distort efficient allocation of investment the financing constraints are inferred from the investment euler equation by assuming that the firm s stochastic discount factor is a function of the firm s financial position specifically the stock of liquid assets the magnitude of the changes in the cost of capital is twice as large in a country with a low level of financial development as in a country with an average level of financial development the size effect business cycles and legal environment effects are also considered copyright 2003 oxford university press

antitakeover charter amendments and stockholder wealth abstract many large corporations have recently adopted antitakeover charter amendments which make the transfer of corporate control more difficult this paper develops and tests competing theoretical explanations for the passage of these amendments in one view antitakeover provisions are adopted because incumbent management seeks job protection at stockholders expense the alternative hypothesis is that antitakeover provisions benefit stockholders perhaps by extracting greater payment in exchange for corporate control although inconclusive the evidence provides weak preliminary support for the hypothesis that antitakeover amendments are best explained as a device for managerial entrenchment

risks and returns from soil conservation evidence from low income farms in the philippines abstract this paper examines risks and returns associated with soil conservation on hillside farms in the philippines stochastic efficiency analysis is combined with a heteroskedastic regression model to assess the impacts of contour hedgerows on low income corn farms regression analysis indicates that over time contour hedgerows can improve yields up to 15 compared with conventional practices the analysis also provides weak support for a hypothesis that hedgerows are variance reducing however results show that the reduction in yield variability afforded by hedgerows is modest and that yield variability may increase by as much as 5 as hedgerow intensity rises tests for stochastic dominance show that compared with the conventional tillage system hedgerows do not constitute an unambiguously dominant production strategy stochastic efficiency with respect to a function is used to identify a range for the coefficient of relative risk aversion within which hedgerows dominate conventional tillage results suggest this range would be rather high hedgerows dominate the conventional cropping strategy only for decision makers with relative risk aversion coefficients in the range 3 5 5 implications for soil conservation adoption in low income settings are discussed

the impact of capital market imperfections on investment cash flow sensitivity abstract we examine the investment cash flow sensitivity of us manufacturing firms in relation to five factors associated with capital market imperfections fund flows institutional ownership analyst following bond ratings and an index of antitakeover amendments we find a steady decline in the estimated sensitivity over time furthermore we find that investment cash flow sensitivity decreases with increasing fund flows institutional ownership analyst following antitakeover amendments and with the existence of a bond rating the overall evidence suggests that investment cash flow sensitivity decreases with factors that reduce capital market imperfections

utility consistent discrete continuous choices in soil conservation a utility consistent model of participation and participation intensity choices for a voluntary soil conservation program is developed a modified form of roy s identity is used to derive a two equation system that links the discrete dichotomous choice participation and the continuous choice intensity to the same utility function the model corrects for selectivity bias that arises in single equation approaches an application to a filter strip program in two counties in illinois and michigan demonstrates that different factors affect responses to the program across the sample regions estimated willingness to accept payments for participation in the program suggest policy impacts are not uniform across locations

state credit programs and the peasantry under populist regimes lessons from the apra experience in the peruvian amazon abstract a study near iquitos peru finds that a national agricultural program implemented in the late 1980s which provided peasants with access to credit secure land tenure and grassroots organization promised to reduce rather than improve the welfare of intended beneficiaries new economic conditions and strategic behaviors engendered by the program threatened to combine through a process of community enclosure and competitive exclusion to undermine the subsistence viability of peasant communities general lessons are drawn for more effective rural development programs ones that pay particular attention to direct and indirect feedback effects of macroeconomic policy the factors that limit peasant economic competitiveness and to the fundamental spatiality of development processes

adoption of agricultural innovations in developing countries a survey this paper reviews various studies which have provided a description and possible explanation to patterns of innovation adoption in the agricultural sector the survey points out that the tendency of many studies to consider innovation adoption in dichotomous terms adoption nonadoption may not be appropriate in many cases where the actual decisions are defined over a more continuous range more attention needs to be given to the socio cultural and institutional environment in area studies so that their interrelation with economic factors affecting adoption can be inferred the presence of several interrelated innovations is another aspect that needs to be considered more carefully in future research since a number of simultaneous decisions may be involved furthermore the possibility of regular sequential patterns in adopting components of a new technological package should be specifically addressed in future studies finally the impact of differential adoption rates on land holding distribution merits attention in future research

consumption risk farm characteristics and soil conservation adoption among low income farmers in the philippines abstract this paper investigates patterns of soil conservation adoption among low income farmers in the philippines a model is presented that focuses attention on the role of assets and consumption risk in influencing soil conservation adoption decisions results from a reduced form probit model of adoption are reported these econometric findings indicate that patterns of soil conservation adoption reflect relative risk considerations in addition to farm and household characteristics farm size tenure security labor availability and land quality all exhibit a positive association with soil conservation adoption in contrast controlling on these and other household characteristics the probability of adoption falls as consumption risk rises these results underscore a need for greater sensitivity among policymakers to the role of consumption risk in influencing soil conservation decisions in low income settings

the impact of labor unions on investment cash flow sensitivity abstract this paper empirically examines how labor unions affect investment cash flow sensitivity using samples from the us covering the period of 1984 2009 we find a significant positive union effect using a q model of investment the capital expenditures of firms are 1 71 times more sensitive to internal cash flows when unionization rates increase one standard deviation from the mean this effect holds when we control for other proxies of financial constraints in addition unionized firms are associated with lower cash cash flow sensitivity which suggests that the higher investment cash flow sensitivity in unionized firms is primarily driven by the incentive of these firms to reduce liquidity and enhance bargaining power against the union we also show that the above union effects become more pronounced during labor contract negotiation years

poverty consumption risk and soil conservation abstract this paper studies the impact of poverty and uninsured consumption risk on incentives to invest in soil conservation a stochastic dynamic model is used to show how consumption risks and costs of investment influence incentives to adopt soil conservation measures on low income farms the model is calibrated using production data from hillside farms in the philippines simulations with the model demonstrate how the value of soil conservation depends on the cost of investing the risk characteristics of the soil conservation method and differences among households in capacity to bear risk model predictions are compared with empirical adoption patterns as described by a probit model and nonparametric kernel regressions of adoption probability empirical findings show how differences in farm size tenure security risk exposure and access to credit help to explain patterns of soil conservation adoption implications for policy are discussed

risk management in gathering economies abstract this article extends the literature on the interplay of environmental risk and welfare into the setting of coastal fisheries gathering it reviews the sources of covariate and idiosyncratic production risk creating income shocks to gatherers and discusses the institutions that best mediate shocks across different settings we rely upon a principal agent framework between larva gathering agents employed by boat owning principals who supply seed to shrimp farms two datasets from a central american fishery are used to test the hypotheses concerning contractual performance across environments which contract provides the highest mean income and variation depends upon the underlying production catch data in the farm production records dataset with strong catch trends a simplified relative payments contract would perform better in reducing income risk in locations of stronger covariate shocks but at the price of significantly lower mean earnings for gatherers in areas of idiosyncratic shocks su

economic factors in farmer adoption of agroforestry patterns observed in western kenya abstract a study of agroforestry adoption by 3 000 project participants in siaya and south nyanza districts in kenya supports three hypotheses 1 1 historical increases in tree domestication and management intensity are responses to declining supply of uncultivated tree resources increased subsistence and commercial demand for tree products and perceived risks of ecological degradation adoption of agroforestry is most likely where consistent with economic incentives for land use change 2 2 high variability in individual farmers tree growing strategies reflects differences in resources and livelihood strategies and household level returns to agroforestry relative to alternative options for meeting specific objectives 3 3 farmers reduce risks associated with new agroforestry practices through incremental adoption and adaptation and cost and risk reducing modifications in technology design

using the semivariance to estimate safety first rules tion an example of a safety first rule is choose the fertilization level to maximize income subject to the constraint that there is a 5 or less probability of not being able to pay for the fertilizer from crop revenues de janvry safety first rules are used by de janvry nakajima and roumasset to analyze production decisions of low income farmers in developing countries wright provides an application to the nineteenth century cotton industry telser applies it to hedging and boussard and petit use a safety first model to explain cropping patterns for a theoretical review of various safety first rules see pyle and turnovsky there are at least three methods to estimate the probability mass in the lower part of the revenue distribution although the best method is to use the observed frequency itself often there are insufficient observations in the tails a second

directed credit financial development and financial structure theory and evidence the recent initiative of the rbi in reviving the policy of directed credit allocation in a period dominated by the neoliberal philosophy necessitates reconsideration of the role of policy directed

asymmetry partial moments and production risk partial moment functions are proposed as a flexible way to characterize and estimate asymmetric effects of inputs on output distributions methods for econometric estimation of partial moment functions and tests for input symmetry and location scale distributions are presented a monte carlo study demonstrates properties of proposed tests a study of ecuadorian potato production illustrates the methods hypotheses of input symmetry and location scale are rejected a risk value model based on partial moments implies that fertilizer is risk increasing and fungicides and labor are risk reducing in potato production whereas an expected utility model based on full moments has the opposite implications

consequences of a food security strategy for economic welfare income distribution and land degradation the philippine case like many developing countries the philippines pursues a food security strategy in which self sufficiency and price stabilization feature prominently in addition to their widely debated welfare effects food policies based on price and trade restrictions may also accelerate land degradation by promoting expansion of relatively erosive grain crops the paper explores the welfare and environmental implications of food policies first with a simple heuristic model then with an applied general equilibrium model comparing market restrictions with technical progress as alternative food policy strategies the authors find that the former increase land degradation and reduce welfare moreover anti poverty and distributional benefits often claimed for such interventions may be illusory

the impact of structural adjustment programs on manufacturing lessons from nicaragua abstract since 1988 nicaragua has applied structural adjustment programs including stabilization and liberalization measures as of 1991 these measures succeeded in combating inflation but they did not lead to increased production nor to an improved trade balance the nicaraguan manufacturing sector was especially vulnerable because of a decade long lack of investment and the non market environment in which firms operated in the 1980s the combination of trade liberalization with an overvalued exchange rate and financial liberalization had in particular negative effects on manufacturing production and investment in addition specific industrial policies are necessary to increase manufacturing competitiveness

optimal soil conservation and the reform of agricultural pricing policies abstract soil degradation is often blamed for the poor performance of agriculture in developing economies so too are policies which keep the prices of both outputs and inputs artificially low some economists have argued that pricing reforms will encourage soil depletion others say that such reforms will encourage soil conservation to evaluate these claims this paper develops models of the optimal control of soil erosion and soil fertility it is shown that the effect could go either way but that there are strong reasons for suspecting that pricing reforms will not affect soil conservation dramatically

links between rural poverty and the environment in developing countries asset categories and investment poverty abstract this paper presents a framework for analyzing the links between poverty and the environment in rural areas of developing countries it introduces the concept of investment poverty and relates it to other measures of poverty in analysis of these links the notion of poverty is examined in the context of categories of assets and categories of environment change with particular focus on farm household income generation and investment strategies as determinants of the links the strength and direction of the poverty environment links are shown to differ even invert depending on the composition of the assets held by the rural poor and the types of environmental problems they face policy strategies need to focus on conditioning variables that affect market development community wealth infrastructure household asset distribution and the affordability and appropriateness of natural resource conservation technologies

peru s return toward an open economy macroeconomic complications and structural questions abstract the peruvian program of stabilization and liberalization initiated in august 1990 has been more extreme than those in mexico in the 1980s or in chile in the pinochet period it has involved exceptionally high costs potentially constructive changes are interacting with each other in ways adverse for recovery of production employment and exports it could worsen the country s persisting strains of poverty and violence or could on the contrary help answer them depending on how liberalization is pursued comparisons with other liberalization programs especially with the two different versions used in chile point to alternatives that might be helpful for peru and for the design of such programs in other countries

impacts of tenancy arrangements on investment and efficiency evidence from pakistan in this article we use farm level data from the punjab province in pakistan to analyze the impact of three tenancy contracts on investment in soil improving and productivity enhancing measures and farm productivity a multivariate tobit model that accounts for potential substitutability and complementarity of investment options as well as endogeneity of tenure arrangements was employed in the empirical analysis our empirical results indicate that land tenure arrangements influence farmers decisions to invest in soil improving and productivity enhancing measures in particular owner cultivators with secured tenancy arrangements were found to be more likely to invest in soil improving and productivity enhancing measures compared to those on leased contracts we also find that output per hectare was highest on land cultivated by owners and lowest on land under sharecropping tenancy lending support to the marshallian inefficiency hypothesis

the evolution of buyout pricing and financial structure in the 1980s we examine changes in the pricing and financial structure of large management buyouts in the 1980s over time 1 buyout price to cash flow ratios rose in absolute terms particularly in deals financed using public junk bonds 2 required bank principal repayments accelerated leading to sharply lower ratios of cash flow to total debt obligations 3 private subordinated and bank debt were replaced by public junk debt and 4 management teams and dealmakers took more money out of transactions up front these patterns are consistent with an overheating phenomenon in the buyout market preliminary post buyout evidence lends some support to this interpretation

investment cash flow sensitivity cannot be a good measure of financial constraints evidence from the time series abstract investment cash flow sensitivity has declined and disappeared even during the 2007 2009 credit crunch if one believes that financial constraints have not disappeared then investment cash flow sensitivity cannot be a good measure of financial constraints the decline and disappearance are robust to considerations of r d and cash reserves and across groups of firms the information content in cash flow regarding investment opportunities has declined but measurement error in tobin s q does not completely explain the patterns in investment cash flow sensitivity the decline and disappearance cannot be explained by changes in sample composition corporate governance or market power and remain a puzzle

economics of erosion control and seed fertilizer technologies for hillside farming in honduras abstract with population growth still at very high rates and large scale commercial farmers and cattle ranchers owning much of the more fertile valley land small scale farmers are concentrated on increasingly marginal steeply sloping hillsides in central america the continuing soil erosion and land degradation in these low input staple crop production hillside farming systems lead many to be pessimistic about increasing the agricultural incomes of these farmers however this study shows that the appropriate combination of improved technologies and agricultural policy or alternative production diversification strategies can improve the incomes of small scale hillside farmers in southern honduras by over 50 the technology components considered are stone walls and ditches combined with living tree barriers to prevent erosion of the hillsides and a package of improved sorghum seed seed treatment and modest doses of nitrogenous fertilizer a whole farm mathematical programming framework is used to determine the potential farm level income effects of the soil conservation and seed fertilizer technologies the main conclusion is that erosion control devices and yield increasing crop varieties and fertilizer are an effective technology introduction strategy for the erosion prone hillside landholdings found in many areas of central america if policy actions or diversification strategies for disposal of surplus grain are found which are effective in reducing the risk of low income from cereal price reductions in high production years adoption of the improved technologies is shown to be profitable for small scale farmers another benefit not explicitly considered would be to slow the very rapid growth of urban poverty in these countries sensitivity analysis results indicated that neither risk aversion nor the increased availability of crop land or initial cash have any substantial effects on the predicted adoption level of the improved technologies or on their income impacts for these farmers

investment cash flow sensitivity under changing information asymmetry abstract empirical studies on whether investments are sensitive to cash flows in imperfect markets often report conflicting results and have been criticized on conceptual and methodological grounds our study mitigates some of these problems using a research design that relates changes in investment cash flow sensitivity to changes in the bid ask spread measure of information asymmetry surrounding i implementation of the sarbanes oxley sox act and ii deregulation of firms in the transportation telecommunication and petroleum and natural gas industries consistent with our hypotheses we find that information asymmetry decreases following sox and that there is a corresponding decrease in the investment cash flow sensitivity pre to post sox further greater decreases in information asymmetry following sox are associated with greater decreases in investment cash flow sensitivity the results for the deregulation sample are also consistent with our hypothesis wherein we observe an increase in information asymmetry and corresponding increase in the investment cash flow sensitivity following deregulation

testing expected utility maximization under price and quantity risk with a heterogeneous panel refutable implications based on the curvature properties of the indirect utility function for the competitive firm operating under uncertainty are extended to the case of both price and quantity uncertainty using unit roots and cointegration tests for heterogeneous panels a model of us agricultural production is developed based on the time series properties of a panel of state level data most refutable hypotheses under output price and output quantity risk are not rejected but symmetry conditions implied by a twice continuously differentiable indirect utility function are rejected the same test conclusions are obtained from a traditional model that presumes stationarity in all variables

equity financing and innovation is europe different from the united states during the mid and late 1990s young high tech firms in the u s experienced a supply shift in both internal and external equity fueling a finance driven boom in corporate r d this paper exami

systematic liquidity and the funding liquidity hypothesis abstract in order to reconcile weak evidence of supply side determinants of commonality in liquidity in previous studies we examine commonality in liquidity in china over the period 1995 2012 consistent with supply side explanations we find that market declines and market volatility increase liquidity commonality to identify the direct relationship between the supply side determinants and commonality in liquidity we provide two specific tests and show that an increase in market participants has a negative effect on liquidity commonality while the split share structure reform in 2005 2007 that results in a large increase in shares supply has a positive impact on liquidity commonality finally we find that commonality in liquidity also has a real impact on the economy

the impact of negative cash flow and influential observations on investment cash flow sensitivity estimates abstract kaplan and zingales quart j econ 112 1997 169 and clearly j finance 54 2 1999 673 diverge from the large literature on investment cash flow sensitivity by showing that investment is most sensitive to cash flow for the least financially constrained firms we examine if this result can be explained by the fact that when firms are in sufficiently bad shape incurring cash losses investment cannot respond to cash flow we find that while cleary s results can be explained by such negative cash flow observations the kaplan zingales results are driven more by a few influential observations in a small sample we also record a decline in investment cash flow sensitivity over the 1977 1996 period particularly for the most constrained firms

takeover threats and managerial myopia this paper examines the familiar argument that takeover pressure can be damaging because it leads managers to sacrifice long term interests in order to boost current profits if stockholders are imperfectly informed temporarily low earnings may cause the stock to become undervalued increasing the likelihood of a takeover at an unfavorable price hence the managerial concern with current bottom line the magnitude of the problem depends on a variety of factors including the attitudes and beliefs of shareholders the extent to which corporate raiders have inside information and the degree to which managers are concerned with retaining control of their firms

what drives investment cash flow sensitivity around the world an asset tangibility perspective motivated by ongoing debates on investment cash flow sensitivity icfs and its documented decline and disappearance in the u s we investigate the determinants of icfs using firm level data across 41 countries for the 1993 2013 period we document an important role of asset tangibility in explaining the patterns in icfs asset tangibility affects icfs through two channels investment intensity and cash flow persistence as the share of tangible capital investment and cash flow persistence has fallen in developed economies icfs has declined in contrast as developing economies operate with more tangible capital have higher investment rates and more persistent cash flows their icfs is more stable the results support our explanation of icfs as a reflection of capital investment intensity and income predictability rather than a measure of financial constraints

evidence on the role of cash flow for investment abstract recent work in macroeconomics argues that imperfections in capital markets may lead to business cycle fluctuations by propagating relatively modest shocks evidence for such a mechanism also known as the financial accelerator consists largely of firm level studies showing that cash flow is an important predictor of investment but this evidence is often viewed with skepticism because cash flow is also a good indicator of investment opportunities in this paper we develop a framework for estimating the extent to which the predictive power of cash flow can be attributed to its role as a fundamental versus its role in alleviating credit frictions for firms with access to commercial paper and bond markets we find that the perfect capital markets model of investment can fully account for the role of cash flow for firms with only limited access to capital markets as indicated by lack of participation in public debt markets however investment appears to be excessively sensitive to fluctuations in cash flow these results thus clarify the role of cash flow in investment equations and provide support for the existence of a financial accelerator

empirical estimation and use of risk preferences an appraisal of estimation methods that use actual economic decisions the topic addressed in this paper concerns the conceptual basis estimation procedures and resources required for implementation of methods for estimating risk preferences by observing behavior an attempt is made to review and appraise previous literature as well as to explore some alternative approaches to begin it is important to contrast four general types of empirical settings of interest these are micro farm level macro market or other aggregations descriptive positivistic and prescriptive normative studies the prescriptive or conditionally normative studies seemingly have dominated agricultural economic studies of risk these generally have been micro in nature and have focused on

deciding on large scale investments abstractthis study analyses the importance of investment factors across investment sizes and the frequency of large investment decisions within the firms we use data from 1442 investment decisions made by 226 brazilian firms between 1997 and 2010 the results indicate that the influence of investment factors is different for investments of different sizes the results also indicate that the increase in the frequency of large scale investment decisions made by the firm influences especially the role of cash flow diminishing its importance as an investment factor this result allows one to argue that probably firms more experienced in large scale decisions could be bolder in their decision making process relying less on the accumulation of funds through cash flow

economic incentives and natural resource management among small scale farmers addressing the missing link small scale farmers face numerous challenges to invest in natural resource management practices the problems are interlinked with such perverse economic problems as high transaction costs and risk rooted in the lack of comprehensive institutional and organizational services to farmers for risk reduction and incentive creation failure to address such a missing link undermines success in natural resource management this paper ponders the importance of such a missing link and proposes analytic framework that explicitly integrates the economics of natural resource management into institutional and organizational analysis the framework features the instrumentality of integrated institutional and organizational innovation to create opportunities and incentives to small scale farmers to encourage investment in natural resource management practices

stochastic carbon sinks for combating carbon dioxide emissions in the eu abstract this paper carries out numerical calculations on the potential of carbon sinks in the eu emissions trading scheme ets and national commitments under conditions of stochastic carbon dioxide emissions from fossil fuels and carbon sequestration by forests chance constraint programming is used to analyze the role of stochastic carbon sinks for national and eu wide compliance costs the analytical results show that the inclusion of the carbon sink option can reduce costs for low enough marginal cost and risk discount but also that costless carbon sinks as by products from forestry are not part of a cost effective solution under a high reliability concern cost savings are reduced due to risk discounting under a reliability concern in particular when assigning chebyshev s inequality as compared with a normal probability distribution it is also shown that the supply of forest sinks on the market depends on the differences in marginal abatement cost between the trading and the non trading sectors and in risk discounting between achievements of the ets cap and the national commitment relatively low marginal abatement cost in the non trading sector and high risk discounting of national commitment achievements increase the supply of sinks in the market and hence reduces the equilibrium price the empirical application illustrates the importance of risk discounting for the magnitude of cost savings obtained from introducing forest carbon sinks in the eu ets and national commitments

firm characteristics and analyst following abstract this paper examines the major determinants of the number of analysts following a firm a simple model of analyst following is proposed and several firm characteristics are suggested that are likely to influence the extent of a firm s analyst following by either affecting the aggregate demand for or supply of analyst services or both for the firm almost all of these characteristics are found to be strongly significant in affecting the extent of analyst following of firms and the empirical results generally accord well with economic intuition

the story of the moment risk averse cypriot farmers respond to drought management this article illustrates the importance of estimating risk preferences when evaluating water policy using agricultural production data from the kiti region of cyprus we estimate farmers risk preferences a la antle journal of business and economic statistics 1 192 201 1983 american journal of agricultural economics 69 509 22 1987 and show sensitivity to higher order moments of profit such as skewness we show that farmers in the kiti region are risk averse with risk premiums in the region of 20 of expected profit we use these estimates to analyse the impact of a water quota from the perspective of three policy makers who differ only in their understanding of farmers risk preferences we show in the case of kiti that policy makers who model risk preferences incorrectly that is either a assume risk neutrality or b ignore down side risk wrongly predict the magnitude and direction of input responses and therefore the magnitude of welfare changes this highlights the importance of accomm

a note on soil depth failing markets and agricultural pricing comment abstract bulte and van soest bulte e van soest d 1999 a note on soil depth failing markets and agricultural pricing journal of development economics 58 245 254 argue that higher agricultural output prices result in greater soil conservation when labor markets function well but have ambiguous effects when labor markets are absent the latter result is not attributable to labor market failure but rather occurs whenever labor supply is less than perfectly elastic consistent with the more general model presented here empirical evidence from a number of developing countries suggests that well functioning labor markets are associated with decreases in investment in soils

derivative cash flows and corporate investment abstract according to an influential argument corporate hedging supports corporate investment when internal cash flows are volatile and external financing is costly froot scharfstein and stein 1993 despite its vast influence the predictions of this theory have not yet been directly tested using actual derivative cash flows this study uses hand collected data on cash flows from derivative positions in the oil and gas industry between 2000 and 2015 strikingly on average an extra dollar in derivative cash flows translates into one more dollar in capital expenditure during industry recessions the median ratio of derivative cash flows to capital expenditure rises to 20 for hedging firms suggesting that derivatives play a crucial role in sustaining investment when the cost of external financing rises abruptly

the impact of cash flows and firm size on investment the international evidence abstract this paper examines the degree to which cash flow availability influences firm investment in six oecd countries in particular we are interested in the extent to which the reliance on internal funds is affected by firm size since there is general agreement that smaller firms have less access to external capital markets and thus should be more affected by the availability of internal funds earlier work has concluded that the documented positive relationship between cash flow and investment is evidence of the existence of financial constraints we first examine all firms regardless of size in each country and we find that the amount of corporate investment is affected by internal resources in all six countries that is internal financing affects firm investment we then repeat the analysis segmenting the sample using three measures of firm size contrary to our a priori expectations we find that the cash flow investment sensitivity is generally highest in the large firm size group and smallest in the small firm size group we deduce that the explanations for these findings are grounded in managerial agency considerations and in the greater flexibility enjoyed by large firms in timing their investments thus we conclude that the degree of sensitivity of a firm s investments to its cash flows cannot be interpreted as an accurate measure of its access to capital markets as do kaplan s zingales l 1997 the quarterly journal of economics 169 215 since small firms are known to have less access to external markets

how sensitive is investment to cash flow when financing is frictionless i analyze the sensitivity of a rm s investment to its own cash ow in the benchmarkcase where nancing is frictionless this sensitivity has been proposed as a measure of nancing constraints in earlier studies i nd that the investment cash ow sensitivities that obtain in the frictionless benchmarkare very similar both in magnitude and in patterns they exhibit to those observed in the data in particular the sensitivity is higher for rms with high growth rates and low dividend payout ratios tobin s q is shown to be a more noisy measure of near term investment plans for these rms does a high sensitivityof a rm s investment to its own cash ow indicate that the rm is nancially constrained a large body of research starting with fazzari hubbard and petersen 1988 hereafter fhp suggests that rms facing nancing constraints should exhibit high investment cash ow sensitivities re ecting the wedge between the costs of external and internal funds empirical ndings seem to give support to this hypothesis since rms classi ed as constrained on a priori criteria such as size dividend payout or leverage do have higher cash ow sensitivities even after controlling for their investment opportunities by conditioning on tobin s q however the reliability of these results critically depends on whether q is a proper control for the investment opportunity set if q performs worse for certain classes of rms higher sensitivities may obtain for these rms simply because cash ow re ects information about investment opportunities this critique is not new in his discussion of fhp poterba 1988 was the rst to point out that measurement error in q may cloud the empirical results similar concerns have been raised in subsequent studies as well while the qualitative point is well known its quantitative impact on the investment cash ow sensitivity has not been analyzed can the linkbetween cash ow and the investment opportunity set account for the observed magnitudes of the sensitivity or are these magnitudes too large to be explained without nancing frictions

an exogeneity test for a simultaneous equation tobit model with an application to labor supply a test of weak exogeneity in the simultaneous equation tobit model is proposed and illustrated using a female labour supply model estimated using cross section data the test statistic can be simply output from any standard tobit maximum likelihood package and is asymptotically efficient the procedure provides consistent estimators for the simultaneous tobit model whose asymptotic covariance matrix is a simple extension of the usual tobit formula we also provide the lagrange multiplier test of weak exogeneity this abstract was borrowed from another version of this item