regional bias in new firm formation in the uk whittington r c 1984 regional bias in new firm formation in the uk reg studies 18 253 256 theories explaining regional differences in new firm formation rates are tested and refining previous theory a model is constructed the major influences on new firm formation rates are found to be the regional proportions of manual workers and home ownership and the change in the rate of regional unemployment in the preceding year new firm formation rates are measured by new vat registrations the implications of these results for government small firm policy are discussed

on taxation in a two sector endogenous growth model with endogenous labor supply abstract this paper studies the effects of taxation on long run growth in a two sector endogenous growth model with i physical capital as an input in the education sector and ii leisure as an additional argument in the utility function income taxation the same rate applies for capital and labor income reduces the growth rate the same is true if only labor income is taxed however if only capital income is taxed the positive effect of an increase in total non leisure time may dominate the direct negative effect implying that capital taxation increases the long run growth rate

price setting during low and high inflation evidence from mexico this paper provides new insight into the relationship between inflation and the setting of individual prices by examining a large data set of mexican consumer prices covering episodes of both low and high inflation when the annual rate of inflation is low below 10 15 the frequency of price changes comoves weakly with inflation because movements in the frequency of price decreases and increases partly offset each other in contrast the average magnitude of price changes correlates strongly with inflation because it is sensitive to movements in the relative shares of price increases and decreases when inflation rises beyond 10 15 few price decreases are observed and both the frequency and average magnitude are important determinants of inflation i show that a menu cost model with idiosyncratic technology shocks predicts the average frequency and magnitude of price changes well over a range of inflation similar to that experienced by mexico

closing the regional equity capital gap the role of informal venture capital there is evidence from a number of countries that small firms encounter a shortage of long term investment finance particularly at start up and initial growth expansion of the institutional venture capital industry has done little to fill this equity gap on account of its preference for making large investments in established companies and management leveraged buyouts moreover the supply of venture capital exhibits a high level of spatial concentration initiatives by state provincial and local governments most notably in economically lagging regions to increase the supply of risk capital for start ups and early stage businesses have at best provided a very partial and often costly solution a more appropriate approach to increasing the supply of start up and early stage finance is to facilitate the more efficient operation of theinformal venture capital market informal investors or business angels are private investors who provide risk capital directly to new and growing businesses in which they have no family connection most business angels are unable to find sufficient investment opportunities and so have substantial uncommitted funds available there is also considerable scope for expanding the population of business angels the most cost effective means of closing the equity gap is therefore for the public sector to underwrite the operating costs of business introduction services whose objective is to overcome the two main sources of inefficiency in the informal venture capital market namely the invisibility of business angels and the high search costs of angels seeking investment opportunities and entrepreneurs seeking investors by the provision of a channel of communication between informal investors and entrepreneurs seeking finance

the regional dimension of competitiveness in manufacturing productivity employment and wages in northern ireland and the united kingdom borooah v k and lee k c 1991 the regional dimension of competitiveness in manufacturing productivity employment and wages in northern ireland and the united kingdom reg studies 25 219 229 the regional dimension of competitiveness in manufacturing industry is examined by comparing the uk with one of its poorest regions northern ireland an overview is provided of total factor productivity and real wage developments in northern ireland and the uk over the last two decades these developments are then investigated econometrically through the estimation of labour demand and wage equations the paper identifies a number of factors which may have eroded the competitiveness and hence the employment prospects of the region relative to the uk as a whole over the period borooah v k et lee k c 1991 la competitivite de l industrie manufacturiere sous un optique regional productivite emploi et salaires en irlande du nord et au royaume uni reg studies 25 219 229 on examine les aspects region

the regional financial sector a scottish case study dow s c 1992 the regional financial sector a scottish case study reg studies 26 619 631 the regional finance literature suggests that financial market segmentation may affect regional economic activity but that the uk financial sector is sufficiently integrated to rule out this effect this paper attempts to broaden the scope of the debate by considering the credit creating behaviour of the banking sector together with the interdependent financial behaviour of all other sectors in a region it is concluded that financial behaviour in this broad sense affects regional activity even in an integrated national financial market in particular financial integration may adversely affect the allocation of new credit to a peripheral region the argument is assessed by considering the scottish case dow s c 1992 le secteur financier regional cas d etude de l ecosse reg studies 26 619 631 la documentation relative au secteur financier regional laisse supposer que la segmentation du marche finan

competitive equilibrium in the credit market under asymmetric information abstract we study a competitive credit market equilibrium in which all agents are risk neutral and lenders a priori unaware of borrowers default probabilities admissible credit contracts are characterized by the credit granting probability the loan quantity the loan interest rate and the collateral required the principal result is that in equilibrium lower risk borrowers pay higher interest rates than higher risk borrowers moreover the lower risk borrowers get more credit in equilibrium than they would with full information no credit is rationed and collateral requirements are higher for the lower risk borrowers

inflation and welfare in a monetary economy it is in everyone s private interest to try to get someone else to hold non interest bearing cash and reserves but someone has to hold it all so these efforts must simply cancel out all of us spend several hours per year in this effort and employ thousands of talented and highly trained people to help us these person hours are simply thrown away wasted on a task that should not have to be performed at all

price dispersion and the border effect abstract cross country price differences could reflect regional market segmentation within countries or national segmentation at the border in a search based model of price setting identifying national versus regional segmentation requires data on regional trade flows a calibration to u s and canadian data implies predominantly regional frictions u s producers are three times more likely to sell in their home region than another u s region and canadian producers are seven times more likely to sell in their home region than another canadian region frictions vis a vis foreign regions are only slightly higher models that ignore regional segmentation can misstate the severity of frictions at the border

tax audits fines and optimal tax evasion in a dynamic context abstract in a dynamic optimisation framework we show that the optimal tax evasion can be either a positive or a negative function of the tax rate according to the form of the fine to be paid when evasion is detected

tax evasion and uncertainty in a dynamic context we study optimal dynamic compliance decisions in an uncertain environment contrary to the static literature greater uncertainty affects consumption not the optimal tax evasion rule thus audit and sanctions rather than fiscal uncertainty should be used to control tax evasion

endogenous search price dispersion and welfare abstract this paper studies the welfare cost of inflation in a frictional monetary economy with endogenous consumer search equilibrium entails price dispersion where sellers compete for buyers by posting prices we identify three channels through which inflation affects welfare the real balance channel is the source of welfare loss its interaction with the price posting channel generates a welfare cost larger than lucas 2000 the search channel reduces the welfare cost by more than one half through general equilibrium effect the aggregate effect of these three channels on welfare is non monotonic additionally the welfare cost of inflation fluctuations is negligible

factors influencing take up rates on the loan guarantee scheme this paper uses time series analysis to model explicitly the take up rate of the uk government s loan guarantee scheme over the 1980s in doing so we consider the rationale for the scheme in the context of empirical and theoretical research into the financing of small businesses and in particular the nature of the small firm bank relationship to begin we discuss the history and evolution of the scheme from its inception in 1981 a theoretical model is then outlined in which lgs funds are used to maximise the utility of capital constrained entrepreneurs

inflation tax in the lab a theoretical and experimental study of competitive search equilibrium with inflation in this paper we measure the effect of the inflation tax on economic activity and welfare within a controlled setting to do so we develop a model of price posting and monetary exchange with inflation and finite populations the model which provides a game theoretic foundation to rocheteau and wright 2005 s competitive search monetary equilibrium is used to derive theoretical propositions regarding the effects of inflation in this environment which we test with a laboratory experiment that closely implements the theoretical framework we find that the inflation tax is harmful with cash holdings production and welfare all falling as inflation rises and that its effect is relatively larger at low inflation rates than at higher rates for instance for inflation rates between 0 and 5 welfare in the two markets we consider 2 seller 2 buyer and 3 2 falls by roughly 1 percent for each percentage point rise in inflation compared with 0 4 percent over the range from 5 to 30 our findings lead us to conclude that the impact of the inflation tax should not be underestimated even under low inflation

policy review section in this policy review section gerry stoker of the institute of local government studies presents a critical review of the role of urban development corporations udcs in comparing the experience of the udcs consideration is given to the varying nature of the land and property market in each udc area to the relationship with local authorities and other local bodies and the regeneration strategies pursued by the udcs this is followed by an assessment of the impact of the udcs in economic social and political terms in the second article john britton of the university of toronto examines the theoretical case for interventionist public policies to assist the innovation process in small and medium sized enterprises these arguments are supported by a review of the experience of various national support programmes introduced in the uk in particular the manufacturing advisory service introduced in 1978 and the design advisory service launched in 1982

new firm formation and regional economic development an introduction and review of the scottish experience this paper introduces this special edition ofsmall business economics on new firm formation and regional economic development it integrates the articles appearing in this volume with others presented at the economic and social research council urban and regional economics seminar group conference on this theme in january 1994 in ayr scotland many of the studies are derived from a scottish enterprise research programme on the contribution of new enterprises and entrepreneurs to economic development and the factors explaining the low levels of business start ups in scotland comparative data research and experiences from across the uk european union and us are called upon to improve the understanding of the processes involved the findings are sometimes unsuspected challenging the super structure of business development agencies and their attitudes and behaviour towards indigenous potential entrepreneurs

growth effect of taxes in an endogenous growth model to what extent do taxes affect economic growth abstract this paper presents an endogenous growth model comprising of financial human and physical capital and incorporating major features of a general tax system technology and preference parameter values in the model are chosen to fit the actual growth experiences of the united states and a rapidly growing east asian nic using the calibrated model i assess the role of differences in taxes and other variables in explaining the difference in growth rates the main findings are i the difference in tax systems across countries explains a significant proportion around 30 of the difference in growth rates ii the difference in preferences explains at most 4 and iii differences in labor income tax debt equity ratio and inflation can be important in explaining the growth difference further i evaluate the contribution of the monetary factor to the growth rate gap and the growth effect of us tax reforms e g revenue neutral changes in relative tax structure

menu costs and phillips curves this paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation sellers can change price only by incurring a real menu cost we calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new u s data set of individual prices due to klenow and kryvtsov the prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well with international evidence from various studies the model is also used to conduct numerical experiments on the economy s response to various shocks in none of the simulations we conducted did monetary shocks induce large or persistent real responses

collateral loan quality and bank risk abstract most commercial loans are made on a secured basis yet little is known about the relationship between collateral and credit risk several theoretical studies find that when borrowers have private information about risk the lowest risk borrowers tend to pledge collateral in contrast conventional wisdom holds that when risk is observable the highest risk borrowers tend to pledge collateral an additional issue is whether secured loans as opposed to secured borrowers tend to be safer or riskier than unsecured loans empirical evidence presented here strongly suggests that collateral is most often associated with riskier borrowers riskier loans and riskier banks

price setting under uncertainty about inflation abstract we analyze the manipulation of inflation statistics that occurred in argentina starting in 2007 to test the relevance of informational frictions in price setting we estimate that the manipulation of statistics was associated with a higher degree of price dispersion this effect is analyzed in the context of a quantitative general equilibrium model in which firms use information about the inflation rate to set prices reporting inaccurate measures of the cpi entails significant welfare losses especially in economies with volatile monetary policy

the optimal inflation rate under schumpeterian growth abstract to analyze the relationship between inflation and economic growth we construct an endogenous growth model with creative destruction incorporating sticky prices due to menu costs price changes reduce the reward for innovation and thus lower the frequency of creative destruction central banks can maximize the growth rate by setting their inflation target at the negative of a fundamental growth rate while the optimal inflation rate may be greater than the growth maximizing inflation rate our calibrated model shows that the optimal inflation rate is close to the growth maximizing inflation rate and that a deviation from the optimal level has sizable impacts

entrepreneurship and regional development some conceptual issues o farrell p n 1986 entrepreneurship and regional development some conceptual issues reg studies 20 565 574 this paper attempts to clarify and improve understanding of the concept of entrepreneurship in national and regional development the nature of entrepreneurship is discussed and it is shown that the entrepreneur and the capitalist are conceptually distinct that it is useful to differentiate between the entrepreneurial and managerial functions and that the essence of the concept is the initiation of entrepreneurial acts when the individual is behaving in an innovative way under uncertainty the distinction between entrepreneurship and arbitrage is briefly clarified and the relationship between entrepreneurship and large organizations is discussed our understanding of spatial variations in entrepreneurial behaviour is currently insufficient for the purpose of explanation and policy prescription

the measurement of capital services in production for uk regions 1968 78 harris r i d 1983 the measurement of capital services in production for uk regions 1968 78 reg studies 17 169 180 the purpose of this study is to obtain meaningful measures of the factor input capital so that estimation of the production function is possible at a regional level firstly gross stock measures are converted into a net stock series and the series obtained are then adjusted for levels of utilization finally some use of the data is made to look at various issues such as which regions have experienced rapid growth in capital stocks the composition of these stocks and changes in the capital labour ratios which have resulted

grant deadweight and profitability the case of northern ireland since the mid 1960s manufacturing firms in northern ireland have enjoyed a higher level of subsidy from government than firms in any other uk region this paper examines the cumulative impact of this support on northern ireland manufacturing using a combination of company accounts and government expenditure data the starting point for the study is the observation that northern ireland manufacturing companies were significantly more profitable than their counterparts in great britain in the year investigated 1988 this contrasts strongly with official figures relating to manufacturing productivity and wage levels which suggest that northern ireland firms ought to have had profit levels significantly below comparable uk companies the difference between firms expected and actual profit rates defines an unexplained profitability wedge estimating the cumulative effect of grants and subsidies on the aggregate accounts of northern ireland manufacturing suggests that grants and subsidies were increasing

from hyperination to stable prices argentina s evidence on menu cost models we review and extend several comparative statics results of xed menu cost models of price setting rms facing real idiosyncratic shocks such as the type studied by golosov and lucas 2007 as well as by many others these results are confronted with their empirical counterparts using the micro data underlying argentina s consumer price index for a time period where ination rates vary from almost 5000 per year

optimal inflation with corporate taxation and financial constraints abstract how does inflation affect the investment decisions of financially constrained firms in the presence of corporate taxation inflation interacts with corporate taxation via the deductibility of i capital expenditures and ii interest payments on debt through the first channel inflation increases firms taxable profits and further distorts their investment decisions through the second expected inflation affects the effective real interest rate and stimulates investment when debt is collateralized the second effect dominates therefore present a tax advantage to debt financing positive long run inflation enhances welfare by mitigating or even eliminating the investment distortion

an overview of the securitization of sba guaranteed loans originated by commercial banks securitization involves the repackaging of individual sba guaranteed loans made by financial institutions into pools of varying maturities for resale to intermediaries and final investors pool volume has been increasing at a rapid rate since the program s inception in 1985 national and regional investment companies acting as intermediaries are the major pool buyers investors in pools include banks savings loans associations and pension funds securitization has resulted in a major secondary market for institutions that make sba guaranteed loans public policy goals are served by the increase in sba lending activity that appears related to the securitization process

evaluating irish industrial policy in terms of deadweight and displacement a quantitative methodological approach evaluation should consider what would have happened in the absence of assistance to produce an assessment of this counter factual scenario involves considering the twin concepts of deadweight and displacement an evaluative framework is developed for measuring the impact of grant assistance to individual firms logit regression analysis is used to estimate predictive models for deadweight and displacement the data were gathered during face to face interviews with the managing directors of firms that received grants from shannon development in the shannon region of ireland self assessment approach the objective was to establish whether certain characteristics of grant assisted firms can predict probable deadweight and displacement effects in the case of deadweight it was found that grant type size of firm whether investment appraisal carried out by firm included grant received and whether firm was a first time or repeat grant recipient all impact on the level of deadweight regarding displacement

new firm formation and regional development the italian case garofoli g 1994 new firm formation and regional development the italian case reg studies 28 381 393 the italian case appears to have had a very high firm birth rate mainly in manufacturing in comparison with the experience of other economically advanced countries regional differentiation in new firm formation has been very high in italy in the analysed period 1987 1991 the paper deals with the hypotheses to be tested for the interpretation of the regional differentiation in firm birth and analyses the problem of the choice of socio economic variables which must be examined the results of the regression analysis prove that production structure and mainly local productive specialization firms size social structure and professional employment structure are the most important explanatory variables for new firm formation and for its regional differentiation the level of local demand does not seem to be a significant factor and increases in unemployment appear to reduce firm births all t

stickiness synchronization and passthrough in intrafirm trade prices about forty percent of all u s international trades occurs between related parties or intra rm such as trades between a parent and subsidiary of the same multinational corporation this paper uses a transaction level dataset that distinguishes arm s length

some policy implications of bank participation in small business administration lending programs this study examines the relationship of bank participation in sba guaranteed lending programs to bank characteristics and market demographic characteristics band sba lending is related to per capita income in the bank s market area membership in a bank holding company the loan deposit ratio of the bank the percent business loans of the bank and the total assets of the bank in markets of 50 000 or less greater sba lending is associated with lower per capita income levels accordingly it appears that the economic development function of bank sba lending is linked to a greater extent with market areas of less than 50 000

optimal dynamic tax evasion abstract we study optimal dynamic tax evasion in the framework proposed by lin and yang 2001 and dzhumashev and gahramanov 2011 with some modifications a more flexible utility function a more realistic audit process and a penalty function which can be defined both on evaded income and evaded taxes in the former case the elasticity between tax rate and tax evasion is positive unless the subsistence consumption level is higher than a given threshold in the latter case the relationship is usually negative but the value of elasticity depends on the form of absolute risk aversion in particular we show that for increasing relative risk aversion for a tax rate higher than 50 the elasticity may even become positive us data are consistent with irra preferences

the optimal inflation rate in new keynesian models should central banks raise their inflation targets in light of the zero lower bound we study the effects of positive steady state inflation in new keynesian models subject to the zero bound on interest rates we derive the utility based welfare loss function taking into account the effects of positive steady state inflation and solve for the optimal level of inflation in the model for plausible calibrations with costly but infrequent episodes at the zero lower bound the optimal inflation rate is low typically less than two percent even after considering a variety of extensions including optimal stabilization policy price indexation endogenous and statedependent price stickiness capital formation model uncertainty and downward nominal wage rigidities on the normative side price level targeting delivers large welfare gains and a very low optimal inflation rate consistent with price stability these results suggest that raising the inflation target is too blunt an instrument to efficiently reduce the severe costs of zero bound episodes

evaluation of credit guarantee policy using propensity score matching in this article we evaluate the effect of the credit guarantee policy by comparing a large sample of guaranteed firms and matched non guaranteed firms from 2000 to 2003 the sample firms are compared with respect to growth rates of different performance indicators including productivity sales employment investment r d wage level and the survival of firms in the post crisis period in order to avoid the selectivity problem propensity score matching methodologies are adopted results suggest that credit guarantees influenced significantly firms ability to maintain their size and increase their survival rate but not to increase their r d and investment and hence their growth in productivity moreover due to the adverse selection problem firms with lower productivity were receiving guarantees

taxation risk taking and growth a continuous time stochastic general equilibrium analysis with labor leisure choice abstract this paper investigates the equilibrium relationship between taxation portfolio choice risk taking and capital accumulation specifically it examines how taxes affect risk taking and capital accumulation we extend the existing literature by relaxing two crucial assumptions in modelling risk taking behavior i that the investment opportunity set is fixed and ii that there is no distinction between attitudes towards risk and behavior towards intertemporal substitution we extend the investment opportunity set of individuals through optimally determined human capital and distinguish intertemporal substitution from attitudes towards risk via a recursive utility function in the presence of these extensions the paper successfully derives a closed form solution to the stochastic growth model with stochastic wage income

a unified framework for monetary theory and policy analysis search theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential however tractable versions of these models typically make strong assumptions that render them ill suited for monetary policy analysis we propose a new framework based on explicit micro foundations within which macro policy can be studied the framework is analytically tractable and easily quantifiable we calibrate the model to standard observations and use it to measure the cost of inflation we find that going from 10 percent to 0 percent inflation is worth between 3 and 5 percent of consumption much higher than previous estimates

evaluating guarantee fees for loans to small and medium sized enterprises governments all over the world regard loan guarantee schemes lgs as one of the most regularly used and relatively effective mechanisms to support small and medium sized enterprises smes financially by facilitating their access to debt capital due to its nature of involving implicit indirect subsidization a lgs is mostly evaluated in terms of the economic and social benefits created such as generation of export revenues and creation of employment opportunities although most government sponsored programs do not set up clear cut definitions for how to evaluate those benefits and what targets should be achieved they do have an initial aim of self financing since guarantee fees premiums represent the largest cash inflow for a guarantor and the most critical index to indicate a borrower s credit status this paper proposes a methodology that specifically aims for this self financing target by meeting at least default costs with income from premiums this is done by actuarially determining a guarantee fee for each loan based on market based information and risk neutrality concepts empirical evidence shows that real cash outflows costs of honoring defaults are very close to estimated cash inflows total guarantee fees which indicates that the objective of meeting budget constraints is achieved

the investment decision making process and investment determinants in the northern ireland manufacturing sector sheehan m 1994 the investment decision making process and investment determinants in the northern ireland manufacturing sector reg studies 28 511 520 the way in which companies make investment decisions is one of the least understood processes in the workings of an economy this paper is based on interviews with 45 manufacturing firms in northern ireland and sets out to 1 describe reasons for company investment and 2 extend this descriptive analysis by investigating how investment decisions are actually evaluated the paper also assesses how investment appraisals have been affected by government capital grants the results indicate that companies reasons for investing and required rates of return on investments have changed over time while it was found that a majority of companies formally evaluated investments the use of formal appraisal techniques were frequently abandoned sheehan m 1994 le processus de decision relatif a l investissement et les determinants de l investissement dans

a dynamic portfolio choice model of tax evasion comparative statics of tax rates and its implication for economic growth abstract this paper extends the portfolio choice model of tax evasion from a static to a dynamic setting it is shown that while higher tax rates repress tax evasion in the static model they encourage tax evasion in the dynamic model we explore a novel implication of this result and show that while growth is decreasing in tax rates in the absence of tax evasion it is u shaped in tax rates in the presence of tax evasion

the regional impact of the small firms loan guarantee scheme in the united kingdom harrison r t and mason c m 1986 the regional impact of the small firms loan guarantee scheme in the united kingdom reg studies 20 535 550 the small business loan guarantee scheme was introduced in the uk in 1981 in response to long standing concern about the problems encountered by small businesses in raising external finance although the scheme was introduced nationally its impact has varied among regions not unexpectedly the south east and east anglia account for the largest proportion of guarantees both by number and by value of loans this lends superficial support to the argument that nationally oriented small firms policies may actually contradict the aims of regional policy however this conclusion must be qualified in the light of the evidence once each region s share of the total stock of businesses is taken into account certain peripheral regions notably the north west join the south east east anglia region as having more than their expected share of loan guarantees evidence p

sticky prices and costly credit we develop a theory of money and credit as competing payment instruments then put it to work in applications agents use cash and credit because the former latter is subject to the inflation tax transaction costs frictions that make the choice of payment method interesting also imply equilibrium price dispersion we derive closed form solutions for money demand and show how to simultaneously account for the price change facts cash credit shares in micro data and money interest correlations in macro data the effects of inflation on welfare price dispersion and markups are discussed as are nonstationary equilibria with dynamics in the price distribution

the elusive costs of inflation price dispersion during the u s great inflation a key policy question is how high an inflation rate should central banks target this depends crucially on the costs of inflation an important concern is that high inflation will lead to inefficient price dispersion workhorse new keynesian models imply that this cost of inflation is very large an increase in steady state inflation from 0 to 10 yields a welfare loss that is an order of magnitude greater than the welfare loss from business cycle fluctuations in output in these models we assess this prediction empirically using a new data set on price behavior during the great inflation of the late 1970s and early 1980s in the united states if price dispersion increases rapidly with inflation we should see the absolute size of price changes increasing with inflation price changes should become larger as prices drift further from their optimal level at higher inflation rates we find no evidence that the absolute size of price changes rose during the great inflation this suggests that the standard new keynesian analysis of the welfare costs of inflation is wrong and its implications for the optimal inflation rate need to be reassessed we also find that nonsale prices have not become more flexible over the past 40 years

regional determinants of small firm loans under the u k loan guarantee scheme the loan guarantee scheme was initiated in 1981 in order to alleviate a perceived constraint in the ability of small firms to secure bank finance due to a lack of collateral this paper shows that a national small firms support scheme has at the point of delivery had quite different coverage across regions briefly the initial evidence suggests that the northern regions of england have been the major net beneficiaries of the scheme primarily at the expense of northern ireland and scotland further analysis identified house prices as the single most important determinant of loan size acting via a collateral effect on loan numbers and value fixed regional effects were dominant particularly in the south east and north west

external financing and the role of financial frictions over the business cycle measurement and theory we examine the quantitative importance of financial market shocks in accounting for business cycle fluctuations we emphasize the role financial markets play in reallocating funds from cash rich low productivity firms to cash poor high productivity firms using evidence on financial flows at the firm level we find that for publicly traded firms in compustat almost all investment is financed internally however using an alternative data source amadeus we find that most investment by privately held firms is financed through borrowing motivated by these observations we build a quantitative model featuring publicly and privately held firms that face collateral constraints and idiosyncratic risk over productivity as well as non financial linkages in our calibrated model we find that a shock to the collateral constraints which generates a one standard deviation decline in the debt to asset ratio leads to a 0 5 decline in aggregate output on impact roughly comparable to the effect of a one standard deviation shock to aggregate productivity in a standard real business cycle model in this sense we find that disturbances in financial markets are a promising source of business cycle fluctuations when non financial linkages across firms are sufficiently strong

timing tax evasion standard models of tax evasion implicitly assume that evasion is either fully detected or not detected at all empirically this is not the case casting into doubt the traditional rationales for interior evasion choices i propose two alternative dynamic explanations for interior tax evasion rates first fines increasing in the duration of an evasion spell implying that the expected costs of evasion increase convexly with the time spent non reporting while the benefits increase linearly second different vintages of income sources subject to aggregate risk and fixed costs when switched between evasion states the dynamic approach yields a transparent representation of revenue losses and social costs due to tax evasion novel findings on the effect of policy on tax evasion and a tractable framework for the analysis of tax evasion dynamics

government financial assistance and manufacturing investment in northern ireland sheehan m 1993 government financial assistance and manufacturing investment in northern ireland reg studies 27 527 540 this paper analyses the influence of government grants on the investment decision making process in the northern ireland manufacturing sector the paper is based on detailed interviews with northern ireland manufacturing firms and focuses on two time periods 1985 88 and 1989 92 findings are presented on the impact of grant schemes on the level timing and quality of investment expenditure during the period 1985 88 two types of grant schemes were available for capital investment in northern ireland standard capital grants scgs which were automatic grants and selective financial assistance sfa the standard capital grant scheme was eliminated in 1988 the findings indicate that scgs had more effect on companies investment programmes than sfa due to the certainty of payment since 1988 sfa has become more important to companies and appears to be offsetting to a certain exte

welfare costs of inflation in a menu cost model recent years have seen substantial prog ress in our understanding of pricing decisions at the micro level access to large scale data sources on prices of individual products has given us rich information on how frequently prices change by what magnitude and how the aggregation of price changes in individual firms maps into aggregate inflation see among many others mark bils and peter j klenow 2005 these facts about price movements are a key input in recent quantitative models of the aggre gate effects of nominal rigidities e g mikhail golosov and robert e lucas 2007 in this paper we use both the new facts and the new quantitative models to revisit an old question namely that of quantifying the welfare benefits of low inflation our model includes two

optimal dynamic tax evasion a portfolio approach abstract most tax evasion models are set in a timeless environment though this is not suitable for a study of revenues from financial activities where tax evasion occurs in a dynamic environment this study examines a representative agent aiming to maximize the expected utility from inter temporal consumption and could invest in both riskless and risky assets through tax evasion is possible only in the latter case the investor must pay a fine when his her evasion is detected with a given probability we show that i optimal consumption is higher with tax evasion ii optimal evasion is affected by neither the return nor the volatility of the risky asset iii evasion reduces investment in the risky asset and increases investment in the riskless asset iv evasion can be reduced more efficiently by increasing the fine rather than by increasing the frequency of controls v for a sufficiently high tax rate on the riskless asset the optimal evasion is zero and vi if the fine is proportional to the amount of taxes for only sufficiently low fines the yitzhaki 1974 paradox is confirmed

cyclical changes in firm volatility we estimate changes in the volatility of firm level sales earnings and employment growth of us firms our method differs from existing measures for firm level sales and employment volatility in that it not only captures longer run changes in volatility but also measures cyclical changes in firm volatility we detect substantial cyclical variation in firm specific volatility around trend firm specific volatility was low in the early 1990s rose in the mid and late 1990s and was high around 2000 our results are consistent with the hypothesis deduced from models with financial frictions that rising idiosyncratic volatility before 2001 contributed to the coincident rise in the external finance premium and to the 2001 recession endogenous pricing models imply that price adjustment is less frequent and disinflation more costly when firm specific volatility is low consistent with endogenous pricing models we find that the output cost of disinflation was three times larger in the early 1990s than in the early 2000s

price dispersion and inflation new facts and theoretical implications abstract in workhorse macroeconomic models price dispersion is a central determinant of welfare the cost of business cycles optimal inflation and the tradeoff between inflation and output stability while price dispersion increases with inflation in the models this relationship is negative in the data due to sales prices the comovement of price dispersion and inflation for regular prices is positive a model with sales can quantitatively match the comovement in the data whereas a range of similar models without sales cannot even for regular prices these findings have important implications for welfare calculations optimal inflation and the effects of monetary shocks

private business sales environments in the united kingdom abstract when an owner manager of a business firm decides to sell the company it is not a trivial decision whether it is a sale forced by circumstances outside company control or a positive strategic choice it is certainly significant moreover the method of exit the advice taken and the deal that is eventually struck will clearly affect the nature of the owner s eventual lifestyle in such circumstances there are four choices open to the owner 1 sale to a third party 2 sale to the management and or employees 3 public quotation on the stock exchange 4 liquidation this research first analyzes the magnitude of activity in the united kingdom in each of the above categories during the five year period 1983 1987 the results show very clearly that there is a strategic loosening taking place in the corporate marketplace more firms are being sold and more owner managers are choosing to exit from ownership of their firms moreover the most frequently used exit route by far is that of the private advertized sale the second part of this paper analyzes in detail the data for the private advertized sale by means of principal component analysis and cluster analysis seven ecological incubator environments were constructed at a county level significant differences were observed between the environments in respect to private advertized sales private advertized sales rates and industrial structure these results show clearly that the nature of the supply of owner managers wishing to realize their ownership is geographically biased and is in part a reflection of the existing industrial and commercial base