repudiation risk and restitution costs toward understanding premiums on insured deposits this paper contains a theoretical development of the relationship of cd premiums to both the risks of the cd issuer and the third party government guarantor of those deposits the theoretical development shows that the risk of the guarantor derives from the possibility that the guarantee could be repudiated and or the restitution of the depositor s claim could be costly the empirical analysis of the premiums for insured cds indicates that during the years preceding the ultimate collapse of the fslic the market priced the risk of both the guarantor as well as the firm the guarantor risk pricing was responsive to the insolvency of the guarantor the attempts to recapitalize the guarantor and the efforts to resolve the insolvent thrifts during this eventful time period cd premiums rose to 187 basis points and averaged 79 and 54 basis points copyright 1994 by ohio state university press

a theory of socio economic disparities in health over the life cycle motivated by the observation that medical care explains only a relatively small part of the ses health gradient we present a life cycle model that incorporates several additional behaviours that potentially explain jointly a large part of observed disparities as a result the model provides not only a conceptual framework for the ses health gradient but more generally an improved framework for the production of health we derive novel predictions from the theory by performing comparative dynamic analyses more generally our comparative dynamic method can be applied to models of similar form e g human capital health deficits firm investment to name a few

does bankruptcy law affect business turnover evidence from new and existing business this study examines how differences in state bankruptcy laws specifically the homestead exemption affect business turnover by studying both new and existing businesses we focus on areas just near state boundaries to control for unobserved local attributes to better isolate the effect of more wealth protection we find that an increase in the homestead exemption attracts new businesses but also has a positive impact on existing businesses suggesting that asset protection through bankruptcy law encourages successful entrepreneurs to incur the risks our results indicate that the personal bankruptcy law is an important policy tool that governments can use to encourage business growth without causing business turnover jel k30 k36 r11 r1

bank lending channel in a dual banking system why are islamic banks so responsive we examine the interest rate sensitivity of both deposits and credits at islamic and conventional banks in turkey we find that the bank lending channel is especially operative for islamic banks impulse responses for conventional and islamic banks reveal that islamic bank depositors sensitivity to policy rate changes is substantially larger than that of conventional bank depositors next to heavily dependence on deposit funding we consider that inertia in islamic bank deposit rates impedes these banks to keep those depositors who consider the opportunity cost of monetary policy rates is unbearable on the lending side we obtain similar results implying that tight monetary policy leads to a larger contraction in islamic bank credits this finding is a reflection of the favourable attitude of islamic banks towards small and medium sized enterprise sme financing when similar relationships are analysed for currency and inflation shocks we again find larger responses for islamic banks showing the cyclical nature of sme credits

does deposit insurance retard the development of non bank financial markets whether and how the introduction of deposit insurance affects non bank financial market development depends on whether banks and non bank financial markets are substitutes or complements and theory has conflicting views using data on 134 countries over a 28 year period and several identification strategies we find that the introduction of deposit insurance retards the equity market the non bank depositaries sector and the banking sector when law and order is weak while strong law and order mitigates this effect it does not lead to a positive outcome for all markets for non bank financial markets the effect is greater in the long run so that while deposit insurance increases banking sector development in the long run it retards non bank financial markets regardless of the level of law and order finally several design features exacerbate the negative outcomes our results have important policy implications for implementing or altering deposit insurance schemes

to stay or go consumer bank switching behaviour after government interventions abstract we analyse whether and how individual savings and current account holders respond to government interventions due to the financial crisis at banks we employ a difference in difference analysis and distinguish between a nationalisation and a capital injection we show that current account holders of the nationalised bank are more likely to switch away shortly after the bail out second we find heterogeneity in consumer responses to government interventions depending on the type of intervention and banking product consumers who trust the government are less likely to switch their current account from a nationalised bank furthermore risk averse current account holders at a bank that received a capital injection are more likely to switch which suggests the presence of a wake up call effect finally we report that financial literate current account holders are more likely to switch away after a nationalisation and financial literate savings account holders are more likely to switch away from the recapitalised bank the latter finding also indicates that risk awareness increased

the economics of small business finance the roles of private equity and debt markets in the financial growth cycle abstract this article examines the economics of financing small business in private equity and debt markets firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle we show the sources of small business finance and how capital structure varies with firm size and age the interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment we also analyze a number of research and policy issues review the literature and suggest topics for future research

the incidence of secured debt evidence from the small business community critics claim that theories of secured debt fail to explain the widespread use of collateral because they incorrectly predict when a loan will be secured this paper provides the first rigorous statistical test of the transaction cost models of secured debt data from two samples of over 1 000 small business loans generally support the common set of predictions of these theories the incidence of secured debt is positively related to probability of default loan size loan maturity and marketability of assets changes in the legal and economic environment also alter firms decisions regarding the pledging of collateral

econometric studies in health economics a survey of the british literature this paper provides a survey of british applied econometric work in the field of health economics as well as reviewing the literature it suggests some avenues for future research it covers six main areas the supply of health care the demand for health care non medical influences on health market and non price rationing evaluation of health care systems and planning budgeting and monitoring mechanisms

the family as the health producer when spouses are nash bargainers the grossman model is extended to a situation in which the family is regarded as the producer of individual health and spouses are nash bargainers the model has implications for the interaction between family structure income and the stocks of health capital and the bargaining strength of different family members the main insight is that the possibility of divorce affects the distribution of health capital between family members we analyse inter alia the impact on the distribution of health particularly regarding child health of changes in family policies related to the dissolution of the family

symmetrical information and credit rationing graphical demonstrations as this article shows the pro debtor u s bankruptcy code alone can cause credit rationing even without asymmetrical information in the market because the code entails substantial costs to lenders if borrowers file for bankruptcy in the absence of bankruptcy cost lenders are always justified in raising interest rates and clearing markets if the bankruptcy cost is nontrivial however lenders profits are concave in the relevant range of interest rates thus lenders cannot always clear the market by using higher rates the study reported here also found that the use of collateral in debt contracts can reduce rationing but that even 100 percent collateral does not eliminate all rationing possibilities a positive relationship was found between credit risk and the amount of pledged collateral which is not necessarily true with models based on asymmetrical information

when social and economic goals meet the double dividend of improving farmers health capital in uganda abstractfocusing on the relationship between farmers health and agricultural productivity we explore the potential effects of improving the current health care fee policy in uganda using a microsimulated general equilibrium model we show that alternative health fee reduction strategies might increase the chances of achieving simultaneous growth poverty reduction and improved access to health for households while maximising the public spending effectiveness however these results seem very sensitive to the potential disruptive effects on public facilities that such a policy might generate so they must be contextualised within a broader perspective on the health system s efficiency

do depositors punish banks for bad behavior market discipline deposit insurance and banking crises this paper empirically investigates two issues largely unexplored by the literature on market discipline we evaluate the interaction between market discipline and deposit insurance and the impact of banking crises on market discipline we focus on the experiences of argentina chile and mexico during the 1980s and 1990s we find that depositors discipline banks by withdrawing deposits and by requiring higher interest rates deposit insurance does not appear to diminish the extent of market discipline aggregate shocks affect deposits and interest rates during crises regardless of bank fundamentals and investors responsiveness to bank risk taking increases in the aftermath of crises

uncertainty and health care spending by the poor the health capital model revisited this short theoretical paper examines health care utilization by the poor in the context of grossman s 1972 health capital model earlier work has shown that uncertainty can reduce the attractiveness to the poor of health capital investments this paper demonstrates that uncertainty can also have precisely the opposite effect that is while there may be cases in which it is excessively risky for the poor to invest in their health there may also be cases in which the poor can ill afford the risks that arise from not making timely investments in their health

an econometric model of the two part decision process in the demand for health the decision to contact a physician and the decision about how often to contact a physician are determined by different decisionmakers we introduce a negative binomial distributed hurdle model that specifies the two stages of the decisionmaking process as different stochastic processes while at the same time taking care of the discrete nature of the data empirical results are based on a cross section of the west german socioeconomic panel specification tests reveal that the two stages of the process need to be treated as two distinct processes this in turn implies that ignoring this distinction leads to serious misinterpretation

the demand for health with uncertainty and insurance this paper develops michael grossman s demand for health model by letting the depreciation rate depend upon the level of health by letting the incidence and size of illness be uncertain and by investigating how the individual s demand for health would be affected by the introduction of insurance beside the more theoretical results there are also some results with important policy implications when formulating the hypothetical scenario in willingness to pay wtp studies it is important whether the individual believes that the level of health is uncertain or not the existence of insurance could also affect the stated wtp amount taking this into account could therefore explain some of the differences in the wtp for seemingly identical health care programs in different countries or different areas in the same country

demand for medical care consumption and cointegration abstract this paper considers a generalized version of grossman s health capital model and derives a cointegration restriction the restriction is tested using aggregate us data and the results are consistent with the prediction of the model

an empirical test of the incentive effects of deposit insurance the case of junk bonds at savings and loan associations this paper analyzes how financial markets reacted to s l diversification into junk bonds the authors report that junk bond holdings are positively correlated with both the volatility of s l equity returns and the interest rates paid on large cds next they examine the impact of junk bonds on equity returns for poorly capitalized s ls greater risk taking increases the value of deposit insurance and should lead to higher stock returns however a well capitalized institution that increases junk bond holdings should not experience stock price gains the authors find that this is the case for the sample of s ls they studied copyright 1994 by ohio state university press

determinants of health care expenditure in africa a cross sectional study the paper presents some quantitative evidence on the relationship between certain socioeconomic and demographic factors and per capita health care expenditure in africa first gnp per capita percentage of births attended by health staff and foreign aid received per capita together explained 78 3 of the variance in health care expenditure second per capita gnp is the most significant factor explaining differences in health care expenditure contrary to what has been found in comparisons of health care expenditure in the organization for economic cooperation and development oecd countries we found that the income elasticity is close to unity furthermore aid was consistently significant and positive in the three models estimated third variables such as crude birth rate and the population under 15 years of age as percentage of total population were not significant

does deposit insurance increase banking system stability an empirical investigation based on evidence of 61 countries in 1980 97 the authors find that explicit deposit insurance tends to be detrimental to bank stability the more so where bank interest rates are deregulated and the institutional environment is weak the adverse impact of deposit insurance on bank stability tends to be stronger the more extensive is the coverage offered to depositors and where the scheme is funded and run by the government rather than the private sector

collateral type of lender and relationship banking as determinants of credit risk abstract this paper analyses the determinants of the probability of default pd of bank loans we focus the discussion on the role of a limited set of variables collateral type of lender and bank borrower relationship while controlling for the other explanatory variables the study uses information on the more than three million loans entered into by spanish credit institutions over a complete business cycle 1988 2000 collected by the bank of spain s credit register central de informacion de riesgos we find that collateralised loans have a higher pd loans granted by savings banks are riskier and finally that a close bank borrower relationship increases the willingness to take more risk

preventive care underused even when free is there something else at work explaining the rationale of preventive care underuse is a difficult task considering its great benefits for health underuse is even more difficult to explain in countries like italy where preventive care can be obtained for free in this article we investigate the determinants of prevention underuse with an empirical model based on human capital theory which also includes three factors to which little attention has been paid so far role played by the general practitioner gp nonmonetary barriers to access and health beliefs we apply a recursive probit model explaining both recourse to prevention and to the gp which allows us to adequately measure the effect of the latter on the former and to quantitatively compare the determinants of curative and preventive care we find that the gp plays a minor role in prevention use but that nonmonetary barriers to access and health beliefs are strong determinants of preventive care demand finally we also find support for both grossman s capital depreciation the

deposit insurance banking crises and market discipline evidence from a natural experiment on deposit flows and rates published in journal of money credit and banking volume 45 issue 1 february 2013 pages 179 200 as as deposit insurance banking crises and market discipline evidence from a natural experiment on deposit flows and rates

the effect of the bankruptcy reform act of 1978 on small business loan pricing abstract the bankruptcy reform act of 1978 contains several provisions that can affect the cost of producing loans for financial intermediaries in a competitive lending market the additional monitoring and expected foreclosure costs imposed by the change in the bankruptcy law should be passed on to the borrower using survey data from a sample of small business loans from commercial banks evidence is presented that the enactment of the new law resulted in higher contract rates of interest

financial distress stock returns and the 1978 bankruptcy reform act we study distress risk premia around a bankruptcy reform that shifts bargaining power in financial distress from debtholders to shareholders we find that the reform reduces risk factor loadings and returns of distressed stocks the reform effect is stronger for firms with lower firm level shareholder bargaining power an increase in credit spreads of riskier relative to safer firms in particular for firms with lower firm level shareholder bargaining power confirms a shift in bargaining power from bondholders to shareholders out of sample tests reveal that a reversal of the reform s effect leads to a reversal of factor loadings and returns

relationship lending and sme financing in the continental european bank based system this paper analyzes the relationship between banks and smes in the continental european bank based system we find that smes with longer bank relationships have enhanced access to loans but at the same time they bear a higher cost for their debt we also find that firms maintaining two bank relationships get the cheapest debt which establishes a limit for the degree of concentration of bank relationships our results also show that the existence of trust between firm and bank improves access to financing and reduces the borrowing costs whereas it increases the likelihood that guarantees will have to be provided as a consequence it seems that a relationship based on trust is a better strategy to improve smes access to finance than the establishment of longer or more concentrated relationships

comparative dynamic analysis of the full grossman model the paper applies the method of comparative dynamic analysis to the full grossman model for a particular class of solutions it derives the equations implicitly defining the complete trajectories of the endogenous variables relying on the concept of frisch decision functions the impact of any parametric change on an endogenous variable can be decomposed into a direct and an indirect effect the focus of the paper is on marginal changes in the rate of health capital depreciation it also analyses the impact of either initial financial wealth or the initial stock of health capital while the direction of most effects remains ambiguous in the full model the assumption of a zero consumption benefit of health is sufficient to obtain a definite for any direct or indirect effect

social security longevity and moral hazard abstract recently several authors have argued that social security can have positive effects on savings and welfare when individuals possess hidden information about their longevity that is when there is adverse selection in annuity markets this paper considers the related problem of the effects of social security when individuals can take hidden actions to affect their longevity that is when there is moral hazard in annuity markets in contrast to the adverse selection models we show that social security never raises welfare in a pure moral hazard economy as well social security may either increase or reduce longevity depending on the characteristics of the health related goods consumed it is suggested that a complete analysis of social security needs to consider both adverse selection and moral hazard

demand for medical care by the elderly a finite mixture approach summary in this article we develop a finite mixture negative binomial count model that accommodates unobserved heterogeneity in an intuitive and analytically tractable manner this model the standard negative binomial model and its hurdle extension are estimated for six measures of medical care demand by the elderly using a sample from the 1987 national medical expenditure survey the finite mixture model is preferred overall by statistical model selection criteria two points of support adequately describe the distribution of the unobserved heterogeneity suggesting two latent populations the healthy and the ill whose fitted distributions diaer substantially from each other 1997 by john wiley sons ltd

trust in banks abstract trust in banks is considered essential for an effective financial system yet little is known about what determines trust in banks only a handful of single country studies discuss the topic so this paper aims to fill the gap by providing a cross country analysis on the level and determinants of trust in banks using world values survey data covering 52 countries during the period 2010 2014 we observe large cross country differences in trust in banks and confirm the influence of several sociodemographic indicators our main findings include women tend to trust banks more than men trust in banks tends to increase with income but decrease with age and education and access to television enhances trust while internet access erodes trust additionally religious political and economic values affect trust in banks notably religious individuals tend to put greater trust in banks but differences are observed across denominations the holding of pro market economic views is also associated with greater trust in banks

ageing cognitive abilities and retirement we investigate the relationship between ageing cognitive abilities and retirement using the survey on health ageing and retirement in europe share a household panel that offers the possibility of comparing several european countries using nationally representative samples of the population aged 50 the human capital framework suggests that retirement may cause an increase in cognitive decline since after retirement individuals lose the market incentive to invest in cognitive repair activities our empirical results based on an instrumental variable strategy to deal with the potential endogeneity of retirement confirm this key prediction they also indicate that education plays a fundamental role in explaining heterogeneity in the level of cognitive abilities

non monotonic health behaviours implications for individual health related behaviour in a demand for health framework a number of behaviours influence health in a non monotonic way physical activity and alcohol consumption for instance may be beneficial to one s health in moderate but detrimental in large quantities we develop a demand for health framework that incorporates the feature of a physiologically optimal level an individual may still choose a physiologically non optimal level because of the trade off in his or her preferences for health versus other utility affecting commodities however any deviation above or below the physiologically optimal level will be punished with respect to health distinguishing between two individual types we study a the qualitative properties of optimal time paths of health capital and health related behaviour b the perturbations of the optimal time paths that result from changes in exogenous parameters and c steady state properties predictions of the model and the implications for empirical analysis are discussed at length some comments on potential future extensions conclude the paper

an econometric analysis of health care expenditure a cross section study of the oecd countries this paper is an empirical examination of the determinants of aggregate health care expenditure the paper presents a systematic analysis of relationships across 19 oecd countries showing the effects of aggregate income institutional and socio demographic factors on health care expenditure the results indicate that institutional factors of the health systems in addition to per capita gross domestic product gdp contribute significantly to the explanation of the health care expenditure variation between countries for example the way physicians in outpatient care are paid and the mixture of public private funding and inpatient outpatient care

grossman s missing health threshold we present a generalized solution to grossman s model of health capital 1972 relaxing the widely used assumption that individuals can adjust their health stock instantaneously to an optimal level without adjustment costs the grossman model then predicts the existence of a health threshold above which individuals do not demand medical care our generalized solution addresses a significant criticism the model s prediction that health and medical care are positively related is consistently rejected by the data we suggest structural and reduced form equations to test our generalized solution and contrast the predictions of the model with the empirical literature

market discipline by thrift depositors this paper tests for the presence of depositor discipline by examining the effect of depository institutions risk on the pricing and growth of uninsured deposits the study analyzes a large panel of thrifts that includes detailed information on interest rate schedules this information allows the authors to develop a time consistent risk profile for thrifts their empirical findings support the presence of market discipline riskier banks are found to pay higher interest rates but attract smaller amounts of uninsured deposits the authors also find that qualitative results are similar for fully insured deposits although statistical significance is substantially lower

long run returns to education does schooling lead to an extended old age while there is no doubt that health is strongly correlated with education whether schooling exerts a causal impact on health is not firmly established we exploit a dutch compulsory schooling law to estimate the causal effect of education on mortality the reform provides a powerful instrument significantly raising years of schooling which in turn has a significant and robust negative effect on mortality for men surviving to age 81 an extra year of schooling is estimated to reduce the probability of dying before the age of 89 by almost three percentage points relative to a baseline of 50 percent

building an incentive compatible safety net abstract bank safety nets originally proposed as a means of stabilizing financial systems have become an important destabilizing influence government protection of bank debts encourages banks to undertake excessive risk particularly in response to adverse shocks to asset values reforms that would remove the destabilizing moral hazard consequences of government protection are considered both from the perspective of economic desirability and political feasibility requiring banks to maintain a minimal proportion of subordinated debt finance and restricting the means by which government recapitalization of insolvent banks occurs are the central features of promising reforms to the safety net

the determinants of the demand for private health insurance under medicare since the introduction of medicare in 1984 the proportion of the australian population with private health insurance has declined considerably insurance for health care consumption is compulsory for the public health sector but optional for the private health sector in this paper we explore a number of important issues in the demand for private health insurance in australia the socio economic variables which influence demand are examined using a binary logit model a number of simulations are performed to highlight the influence and relative importance of various characteristics such as age income health status and geographical location on demand a number of important policy issues in the private health insurance market are highlighted first evidence is provided of adverse selection in the private health insurance pool second the notion of the wealthy uninsured is refuted and finally it is confirmed that there are significant interstate differences in the demand for private health insurance

the family as the health producer when spouses act strategically the grossman model has been extended recently in order to take account of the fact that most people lead their lives in a family using frameworks in which family members respectively a have common preferences and b are nash bargainers these models however do not consider individual incentives for behaving strategically in the model presented in this paper spouses interact strategically both in the production of own health and in the production of health of other family members we analyse inter alia the impact on the distribution of health of changes in family policies such as child allowance and custody rules

the demand for health some new empirical evidence this paper presents some new estimates of the pure investment and pure consumption models of the demand for health in contrast to previous studies the paper presents parameter estimates of both reduced form and structural demand for health care equations the latter which are obtained by treating health capital as a latent variable in a recursive equation system provide a safer way of checking the consistency of the model s predictions with the data the present analysis of the pure consumption model differs from previous analyses in its recognition of the dependency of the shadow price of initial assets on the entire lifetime profiles of the model s exogenous variables the paper also explores the implications in terms of reliability of parameter estimates of the failure on the part of previous studies to recognize this

market discipline and deposit insurance cross country evidence presented in this paper suggests that explicit deposit insurance reduces required deposit interest rates while at the same time it lowers market discipline on bank risk taking internationally deposit insurance schemes vary widely in their coverage funding and management this reflects that there are widely differing views on how deposit insurance should optimally be structured to inform this debate we use a newly constructed data set of deposit insurance design features to examine how different design features affect deposit interest rates and market discipline

bankruptcy law and bank financing exploiting the timing of the 2005 2006 italian bankruptcy law reforms we disentangle the effects of reorganization and liquidation in bankruptcy on bank financing and firm investment a 2005 reform introduces reorganization procedures facilitating loan renegotiation the 2006 reform subsequently strengthens creditor rights in liquidation the first reform increases interest rates and reduces investment the second reform reduces interest rates and spurs investment our results highlight the importance of identifying the distinct effects of liquidation and reorganization as these procedures differently address the tension in bankruptcy law between the continuation of viable businesses and the preservation of repayment incentives

the importance of accounting changes in debt contracts the cost of flexibility in covenant calculations abstract in this paper we examine how the exclusion of voluntary and mandatory accounting changes from the calculation of covenant compliance affects the interest rate charged on the loan after controlling for self selection bias and other factors known to affect loan spreads we find that the rate charged is 84 basis points lower when voluntary accounting changes are excluded and 71 basis points lower when mandatory accounting changes are excluded our results suggest that borrowers are willing to pay substantially higher interest rates to retain accounting flexibility that may help them avoid covenant violations and to avoid duplicate record keeping costs

on adaptation and the demand for health the purpose of this paper is to analyse the impacts of adaptation to failing health this is done by integrating adaptation processes in a grossman type of pure consumption model model simulations show that adaptation affects the health variables by lowering the incentives to invest in health as well as smoothing the optimal health stock path over the life cycle whether or not the risk of mortality is an object of choice has important effects when studying adaptation as well as for the joint development of the health variables

demand for health a generalised grossman model the demand for health and medical care is analysed within a generalised grossman type health investment model its underlying assumptions are shown to differ from those employed earlier in a manner which avoids some of the criticisms levelled at grossman s model the comparative static predictions of the generalised model are examined and it is demonstrated that most previous health investment models are derivable from it also the present model is applicable to a new wider range of problems thus increasing the scope of economic explanations of health behaviour