the effects of entry regulation on oligopolistic interaction the uruguayan banking sector this article develops a methodology to test alternative oligopoly models and to analyze the effects of entry restrictions on conduct this methodology is applied to the uruguayan banking sector whose legal entry barriers were significantly relaxed during the late 1970s the results are consistent with a von stackelberg type of industry where the degree of oligopolistic interaction among the leading firms is reduced as a consequence of the relaxation of the legal entry barriers

interbank networks in prewar japan structure and implications forthcoming as interbank networks in prewar japan structure and implications with michiru sawada industrial and corporate change 2011

the non linear link between electricity consumption and temperature in europe a threshold panel approach this paper investigates the relationship between electricity demand and temperature in the european union we address this issue by means of a panel threshold regression model on 15 european countries over the last two decades our results confirm the non linearity of the link between electricity consumption and temperature found in more limited geographical areas in previous studies by distinguishing between north and south countries we also find that this non linear pattern is more pronounced in the warm countries finally rolling regressions show that the sensitivity of electricity consumption to temperature in summer has increased in the recent period

are high growth firms one hit wonders evidence from sweden most firms do not grow and a small number of high growth firms seem to create most new jobs these firms have therefore received increasing attention among policymakers the question is whether high growth tends to persist we investigate this question using firm level data from sweden during 1997 2008 we find that high growth firms had declining growth rates in the previous 3 year period and their probability of repeating high growth rates was very low thus these are essentially one hit wonders and it is doubtful whether policymakers can improve economic outcomes by targeting them

gibrat s law and persistence of growth in greek manufacturing this study makes use of a sample of greek manufacturing firms during 1995 2001 in order to analyze gibrat s law we find gibrat s law is rejected for the total sample of firms since persistence of growth plays a key role the classification of firms in size and age groups however yields more interesting results gibrat s law is rejected for micro small and young firms since an inverse relationship between firm growth and initial firm size is found along with a persistence of growth rates in subsequent periods in contrast gibrat s law is accepted for medium large and old firms implying that the growth patterns of these categories follow a random walk and do not tend to persist in subsequent periods

domestic and international determinants of bank profits foreign banks in australia abstract this paper develops and tests a model that integrates the existing multinational bank literature with the domestic bank profits literature using data for australia this paper demonstrates that an integrated model results in a small increase in explanatory power when compared to models drawn solely from the multinational banking literature the paper finds that profits are a negative function of competitor market share and bank licence status and a positive function of australian size and home gdp growth it is argued that there is incomplete integration between the market segments of domestic and multinational banks due to the first mover advantages of incumbent banks

sales growth of spanish tourist firms some implications of gibrat s law on marketing management abstract the research presented in this paper is targeted towards empirical validation of three hypotheses deduced from gibrat s law and concerning sales growth in the spanish tourism industry the research refers to the years 1997 2000 and uses a sample of 1131 surviving firms all of which are devoted to tourism activities regression correlation and automatic interaction detection techniques were used throughout the sample the results show the existence of two firm growth segments set apart by a threshold size reached only when initial size is measured in sales terms firms above the threshold size grow at a significantly lower accumulated rate than firms below it thus contradicting gibrat s law however no relationship was observed for successive inter annual growth rates this in turn suggests that marketing actions and programmes have rather a medium and long term effect than a short term effect over sales growth sound implications about the firms degree of market opportunity management strategic interdependence and market orientation were deduced from these results

firm growth and liquidity constraints a dynamic analysis using a large unbalanced panel data set of portuguese manufacturing firms surviving over the period from 1990 to 2001 the purpose of this paper is to examine whether liquidity constraints faced by business firms affect firm growth we use a gmm system to estimate a dynamic panel data model of firm growth that incorporates cash flow as a measure of liquidity constraints and persistence of growth the model is estimated for all size classes including micro firms our findings reveal that smaller and younger firms have higher growth cash flow sensitivities than larger and more mature firms this is consistent with the suggestion that financial constraints on firm growth may be relatively more severe for small and young firms nevertheless the same finding can be interpreted in a different way if we consider the more recent literature which interpret the higher investment cash flow sensitivity of younger and smaller firm in absence of financial market imperfection as the outcome of these firms reaction to the fact that realisation of their cash flows reveals them the direction to go in presence of uncertainty of their growth prospect besides firms that were small and young at the beginning of the sample period exhibited more persistent growth than those that were large and old finally these results have significant policy implications

breaking the bank a probabilistic assessment of euro area bank profitability this paper explores the determinants of profitability across large euro area banks using an approach based on conditional profitability distributions the most reliable determinants of bank profitability are real gdp growth and the nonperforming loan npl ratio the estimated conditional distributions reveal that while higher growth would raise profits on average a large swath of banks would most likely continue to struggle even amid a strong economic recovery therefore for some banks a determined reduction in npls combined with cost efficiency improvements and customized changes to their business models appears to be the most promising strategy for durably raising profitability

the relationship between size growth and profitability of commercial banks using a dynamic panel model for more than 15 000 banks from 148 countries from 1988 to 2010 we investigate the interaction between size growth and profitability of banks for our total sample we cannot reject the hypotheses that the variability of bank profitability and the level and variability of bank growth are independent of bank size however in high income organization for economic cooperation and development oecd countries bigger banks grow slower but are more profitable than small banks while bank growth is not persistent bank profitability is persistent finally we find that bank growth and bank profitability are independent of each other

on the performance of differently regulated financial institutions some empirical evidence abstract the paper raises two questions about the industrial economics of banking first why are financial market configurations so different across nations we discuss the theoretical arguments by following the sequence regulation structure performance section 2 second do the differences in regulation and structure matter section 3 provides empirical evidence pertaining to that question throughout the paper we refer to two polar cases of financial systems market m and bank b based systems as for banks we distinguish between specialised and universal banks universal banking is a particular institutional representation of b systems a first empirical test relating macroeconomic growth to financial variables suggests that these variables matter we then test with a set of 88 banks the effects of regulatory and structural variables on the level and variability of bank performance we conclude that universal banks achieve a better risk return trade off due to superior monitoring and information collection capacity

the decision to establish a foreign bank branch or subsidiary an application of binary classification procedures this paper has two purposes first we model a key decision for inter national banks using data on the foreign direct investment fdi behavior of foreign banks in japan and california second we examine the utility of linear discriminant analysis and maximum likelihood logit analysis as statistical techniques for relating a qualitative dependent variable to a vector of inde pendent variables we apply these techniques to the decision by parent banks as to whether or not to have a subsidiary branch in california japan we treat the deci sion as a binary choice based on a consideration of various relevant factors the population for each of the countries consists of those foreign to the host country banks that already have a presence in the country the research ques tion then becomes given that a foreign bank is in the country does the extent of the parent bank s experience internationally and in the host country affect the probability that it will deepen its presence the choice of statis tical tools by which to examine this question gives rise to our methodological concerns

international evidence on tradables and nontradables inflation abstract using 1970 1985 sectoral data for the oecd we find that inflation in nontradable goods exceeds inflation in tradables we identify a demand shift towards nontradables and faster growth of total factor productivity in the tradable goods sector as the prime causes of the differential inflation in addition disinflation attempts and the exchange rate regime appear to have exerted significant influence on the relative inflation rate

hidden effects of bank recapitalizations abstract given the importance of capital regulation in the banking industry how and why a bank s behavior reacts to a recapitalization has profound consequences to this end we investigate the effects of 306 seasoned equity offerings seos conducted by listed european banks between 2002 and 2014 we use propensity score matching and find that seos lead to asset expansion as opposed to any deleveraging further we find a decrease in lending in the short term followed by a subsequent increase a reduction in profitability and an increase in systemic risk regulators might not have fully considered this last negative externality when they imposed the tougher basel iii capital requirements the effects of seos strongly depend on the reasons behind the recapitalizations

the growth of us credit unions abstract the growth of us credit unions during the 1990s is investigated empirically using univariate and multivariate cross sectional and panel estimation techniques univariate tests of the law of proportionate effect suggest that in general large credit unions grew faster than their smaller counterparts on average credit unions with above average growth in one period tended to experience below average growth in the next smaller credit unions tended to have more variable growth than large ones while credit unions share a common co operative philosophy they differ in terms of age profile scope for membership growth charter type and financial structure and performance in estimations of a multivariate growth model most of these characteristics are found to have a significant influence on the size growth relationship while large state chartered credit unions grew faster than their smaller counterparts the reverse was true for federally chartered credit unions in general if larger credit unions grew faster than smaller ones they tended to do so for specific reasons because their charters were less restrictive because they were more efficient or because they had a financial structure that was more conducive to growth therefore credit union growth was not random but highly systematic

international banking a survey two distinct sets of issues are involved in the analysis of international banking one set the industrial organization issues centers on the patterns of expansion of foreign branches and subsidiaries of banks headquartered in the united states great britain japan and a few other industrial countries and on the nature of the advantage that these branches and subsidiaries have in relation to their host country competitors the second set the international finance issues involves the role of banks in cross border and cross currency financial flows both from their head offices and from their foreign branches and subsidiaries despite the attention to international banking there are few uniquely international institutions rather international banks are a subset of domestic banks with significant numbers of foreign branches and subsidiaries moreover there are few uniquely international banking activities although foreign exchange trading may seem to be one in many countries most or all foreign exchange trading involves domestic banks with few if any foreign branches the growth of foreign branches and subsidiaries of major banks occurred in two waves the first occurred in the decades before world war i when the war started

the capital crunch neither a borrower nor a lender be the dramatic reduction in the growth rate of bank lending associated with the 1990 91 recession particularly in new england has evoked claims by many observers of a credit crunch however because of the difficulty in determining whether the observed slow credit growth is a demand or supply phenomenon convincing evidence of the practical importance of credit crunches for economic activity remains elusive we overcome this obstacle by examining a cross section of banks in new england that have experienced the same economic downturn effectively controlling for changes in demand we find empirical support for a capital crunch whereby poorly capitalized institutions shrink to satisfy capital requirements this alone is not a sufficient condition for a credit crunch however we find s6me additional evidence that the ca ital crunch may have limited credit availability in new england

explaining saving investment correlations national saving and investment rates are highly positively correlated in virtually all countries this is puzzling as it apparently implies a low degree of international capital mobility this paper shows that the observed positive correlation between national saving and investment rates arises naturally within a quantitatively restricted equilibrium model with perfect mobility of financial and physical capital the model is consistent with the fact that saving investment correlations are larger for larger countries but are still substantial for small countries further the model is consistent with the finding that current account deficits tend to be associated with investment booms copyright 1993 by american economic association

pricing operating efficiency and profitability among large commercial banks abstract this study uses statistical cost accounting techniques to examine the relationship between bank profitability and two dimensions of operating performance pricing and operating efficiency the traditional statistical cost accounting model which relates a firm s income to its asset and liability mix is expanded to account for differences in market structure regional demand and supply conditions and macroeconomics factors the study focuses on large above 500 million in domestic deposits banks comparing a sample of relatively profitable banks against a matched group of much less profitable banks over the period 1970 1977 after allowing for regional supply and demand factors the high and low profit banks are estimated to earn equal market rates of return on individual assets and liabilities there is virtually no evidence that differential prices are an important discriminator between the two bank groups some evidence is found that the high earnings banks experience lower operating costs on some liabilities but the opposite is true with respect to selected asset items after taxes are taken into account however any such cost differentials virtually disappear overall there is no compelling evidence that high profit banks are characterized by greater operating efficiency than their low earnings counterparts this finding is consistent with the view that over time and especially among relatively large banks information flows and competitive pressures act to reduce operating efficiency differences that may appear in the short run

the role of location related factors in u s banking involvement abroad an empirical examination this study examines the role of major location specific advantages in the international branch banking involvement of u s banks using pooled time series 1976 82 cross sectional thirty countries regression analysis this study finds that the u s business presence in foreign country has a strong positive effect on u s branch banking activity in that country in contrast the local market opportunity appears to have no significant effect these results hold for the entire set of countries as well as each of five subsets developed less developed european latin american and asian countries the openness of the host country to the establishment of new foreign bank branches does affect u s branch banking involvement this effect is most pronounced in the less developed countries particularly those in asia

determinants of foreign investment of u s advertising agencies this paper investigates the impact of several factors on the foreign investment of u s advertising agencies by using the theories on the determinants of foreign direct investment by manufacturing firms for the two years examined the hypotheses about the impact of host country market size host country geographic proximity firm size firm s international operations experience oligopolistic reaction and presence of home country customers abroad are all confirmed this paper also investigates the impact of oligopolistic reaction among the top ten and the second ten largest agencies and finds a stronger impact for the former

economic freedom and migration a metro area level analysis we examine the determinants of intra u s population migration at the metropolitan area level msa with an emphasis on the presence of policies that are consistent with economic freedom we are the first to produce a multivariate regression analysis of migration and economic freedom at the local level combining a 1993 2014 unbalanced panel of msa to msa migration data from the internal revenue service with a new economic freedom index for u s metropolitan areas we find that a 10 increase in economic freedom of a destination msa relative to the economic freedom of an origin msa was associated with a 27 4 increase in net migration from the origin msa to the destination msa if we use mean net migration flows as a benchmark we would expect a 10 increase in relative economic freedom to increase net migration to the destination msa by 22 workers per year from each other msa

federal deposit insurance regulatory policy and optimal bank capital this paper seeks to explain the combination of explicit and implicit pricing for deposit insurance employed by the fdic essentially the fdic sells two products insurance and regulation to span the product space it must and does set two prices we argue that the need to establish regulatory disincentives to bank risk taking is the heart of the controversy over the adequacy of bank capital and that the ability to close risky banks before exhausting their charter value i e the value of their right to continue in business stands at the center of these disincentives and in front of the fdic s insurance reserves just as a book shouldn t be judged by its cover a government agency shouldn t be judged by the words behind its initials with the fdic federal deposit insurance corporation the agency s name describes only part of its formal operations the fdic is quasi governmental has a regional structure and sells deposit insurance however the initials fail to convey the fdic s critical place in the governmental regulatory structure as the sole federal overseer of the approximately 8900 state chartered commercial banks that have chosen not to belong the federal reserve system reflecting the federal reserve s membership problem the number of these banks is growing year by year besides selling deposit insurance at bargain explicit rates the fdic performs four regulatory functions 1 entry regulation it passes on new banks applications for deposit insurance and on branch and merger proposals as well thereby protecting the value of existing bank charters 2 examination two thirds of fdic employees are concerned with inspecting bank records and supervising managerial activity 3 regulation of deposit rates and conditions for withdrawal by tradition fdic policies on these matters conform entirely with regulations applicable to federal reserve member banks and 4 disposition of failed banks when an insured bank fails the fdic usually chooses not to liquidate it 2

financial freedom and bank efficiency evidence from the european union this paper investigates the dynamics between the financial freedom counterparts of the economic freedom index drawn from the heritage foundation database and bank efficiency levels we rely on a large sample of commercial banks operating in the 27 european union member states over the 2000s after estimating bank specific efficiency scores using data envelopment analysis dea we develop a truncated regression model combined with bootstrapped confidence intervals to test our main hypotheses results suggest that the higher the degree of an economy s financial freedom the higher the benefits for banks in terms of cost advantages and overall efficiency our results also show that the effects of financial freedom on bank efficiency tend to be more pronounced in countries with freer political systems in which governments formulate and implement sound policies and higher quality governance

international lending patterns of u s commercial banks the international lending behavior of the u s commercial banks depends upon economic links between countries much of the difference between the international loan portfolios of u s banks and those of the non u s banks may be explained by the patterns of trade flows and investments by nonfinancial corporations these trade flows and investment patterns explain most of the variations in the bank lending patterns for 70 80 percent of the countries the analysis points to an increasing influence of economic ties on the lending process over time

institutions investment and growth new cross country and panel data evidence this paper outlines the alternative channels through which institutions affect growth and studies the empirical relationship between institutions investment and growth the empirical results indicate that i free market institutions have a positive effect on growth ii economic freedom affects growth through both a direct effect on total factor productivity and an indirect effect on investment iii political and civil liberties may stimulate investment iv an important interaction exists between freedom and human capital investment v milton friedman s conjectures on the relation between political and economic freedom are correct vi promoting economic freedom is an effective policy toward facilitating growth and other types of freedom jel o17 o40 p51

domestic saving and international capital movements in the long run and the short run the evidence and analysis in this paper support the earlier findings of feldstein and horioka 1980 that sustained increases in domestic savings rates induce approximately equal increases in domestic rates of investment new estimates for the post opec period 1974 79 imply that each extra dollar of domestic saving increases domestic investment by approximately 85 cents in a sample of 17 oecd countries an explicit analysis of the problems of identification and simultaneous equations bias suggests that the regression estimates are more relevant as a guide to the long run response of international capital flows than to their short run behavior coefficient estimates based on annual variations in savings and investment are subject to potentially severe simultaneous equations bias that is not present when annual observations are averaged over a decade or more and the regression is estimated with a cross country sample of these averages a portfolio model of international capital allocation that is presented in the paper indicates that the short run change in the rate of net foreign investment in response to a sustained increase in domestic saving is likely to be substantially greater than the ultimate steady state response this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

economic freedom government policy and the trade off between equity and economic growth this study investigates the role that economicfreedom plays in economic growth and in the distribution in marketincome the role of government policy in advancingeconomic progress and in promoting income equality and the effectthat the rate of economic progress has on thedistribution of market income structural and reduced formmodels are estimated that reveal that economic freedompromotes both economic growth and equity and that there is apositive but relatively small trade off between growth andincome inequality

firm size distributions in an industry with constrained resources we propose an equilibrium model for firm size distribution in an industry with a constrained essential input the model applies when the population of firms is small and homogeneous and the supply of the necessary input factor is perfectly inelastic we argue that although the gibrat assumption obtains this does not result in the lognormal distribution because of the entries exits and mergers of firms competing for the inelastic essential resource using our own 32 year database of firms we test the broken stick or random ordered interval model that we call the whitworth distribution successfully applied by others to a number of data sets including the abundances of bird species we propose the whitworth as the basic model of the equilibrium distribution of firm sizes for such supply constrained industries and find it fits our 31 year database best

the performance implications of relationship banking during macroeconomic expansion and contraction a study of japanese banks social relationships and overseas expansion we propose a social perspective emphasizing the opportunities and constraints of bank firm relationships to understand the determinants of relationship banks performance using japanese banks to test our theory using social exchange and role theories we found banks that have strong social relationships performed differently during japan s macroeconomic expansion and contraction cycles however our results indicate that social exchange and role relationships are context specific banks benefited from internationalization during a domestic macroeconomic expansion as a result of their home country social relationships but they were less constrained by the same social relationships in their international operations during a domestic macroeconomic contraction

the real effects of banking shocks evidence from oecd countries abstract this paper studies the impact of shocks to banks balance sheets on real economic activity the sample consists of 18 oecd countries observed annually from 1979 to 2003 using the rajan zingales method i find that industries that depend more heavily on external finance respond more strongly to bank income shocks suggesting that banking shocks propagate to the real economy the bank effect lasts for 2 years but it is economically significant mainly for large shocks which are relatively rare similar findings are obtained by comparing durable versus non durable goods and by estimating aggregate bank effects

size growth and transnationality among the world s largest banks this essay investigates the relationship between size and growth rate of large international banks and then relates these to the banks degree of transnationality we test two sets of three propositions each the first three propositions are pi that the growth rate of each bank over some period is independent of its size p2 that the variability of growth rates is independent of the banks size and p3 that the banks growth rates in two consecutive periods are independent of each other the second three propositions are p4 that there is no association between size and transnationality p5 that transnationality and growth are independent and p6 that there is no relationship between transnationality and the variability of growth rates the growth referred to is primarily that of assets as a measure of size for the two propositions concerning the variability of growth rates we supplement this measure with one of the market value of the banks equity the results have implications for concentration in internathis paper investigates six propositions relating to gibrat s law of proportionate growth the growth referred to is that of book assets and total market value the results have implications for concentration in international banking and for depositor safety and the social cost of insuring it and provide evidence on economies of scale and on the transnational spread of the industry

the impact of economic freedom on the black white income gap abstract using state level data from 1980 2010 we examine whether economic freedom as measured by the economic freedom of north america index has had any impact in increasing or decreasing the ratio of median income for black households to the median income of white households to our knowledge there has been no research on racial income disparities and the role that economic freedom might have in alleviating or exacerbating the problem we find evidence that economic freedom is associated with an increase in the racial income gap

stratification by regulation are bootleggers and baptists biased this paper investigates whether and to what extent regulation may be associated with wage inequality using regulation measures created by al ubaydli and mclaughlin regul govern 11 109 123 2017 i find that regulation is associated with larger within occupation wage inequality specifically i show that a worker at the 90th wage percentile realizes a raise of 1 19 per hour relative to the 10th percentile earner for each standard deviation increase in regulation that represents a 3 5 raise for a worker at the 90th percentile overall increases in the regulatory burden are associated with 42 45 of the change in the 90th 10th percentile wage ratio from 2002 through 2014

the law of proportionate effect and oecd bank sectors the paper investigates the growth dynamics of the bank sectors in the oecd area over the period 1985 1994 and examines whether the structural financial reforms of the late 1980s have affected their growth path based on a test of gibrat s law of proportionate effect it is found that the 1985 89 period was characterized by size convergence implying that smaller bank sectors were expanding more rapidly however in the 1990 1994 period the pattern reversed to proportionate growth the analysis of the determinants of bank market growth reveals that macroeconomic growth operational bank efficiency credit quality and capitalization are the main drivers of bank industry growth

monetary policy and bank profitability in a low interest rate environment we analyse the impact of standard and non standard monetary policy on bank profitability we use both proprietary and commercial data on individual euro area bank balance sheets and market prices our results show that a monetary policy easing a decrease in short term interest rates and or a flattening of the yield curve is not associated with lower bank profits once we control for the endogeneity of the policy measures to expected macroeconomic and financial conditions accommodative monetary conditions asymmetrically affect the main components of bank profitability with a positive impact on loan loss provisions and non interest income offsetting the negative one on net interest income a protracted period of low monetary rates has a negative effect on profits that however only materializes after a long time period and is counterbalanced by improved macroeconomic conditions monetary policy easing surprises during the low interest rate period improve bank stock prices and cds

income inequality and economic freedom in the u s states this paper examines the impact of economic freedom on income inequality using cross sectional data for u s states while previous research has explored this relationship internationally the results have been conflicting in addition while it seems obvious that the large institutional differences across countries will impact income inequality it isn t so obvious that the smaller variation in policies among u s states can have a measurable impact can improvements in income inequality be used as a justification for marginal pro market policy reforms at the state level or is this argument applicable only to national level institutional reforms

simple banking profitability and the yield curve how does bank profitability vary with interest rates we present a model of a monopolistically competitive bank subject to repricing frictions and test the model s predictions using a unique panel data set on uk banks we find evidence that large banks retain a residual exposure to interest rates even after accounting for hedging activity operating through the trading book in the long run both level and slope of the yield curve contribute positively to profitability in the short run however increases in market rates compress interest margins consistent with the presence of nonnegligible loan pricing frictions

growth profits and foreign ownership in the brazilian banking industry the deregulation of the financial markets and their progressive globalization has favoured the internationalization of banking moreover during the international financial crisis the presence of

on the profitability of commercial banks the sri lankan case abstractthis study determines the factors affecting the profitability of licensed commercial banks lcbs in sri lanka including the effect of the prolonged conflict which ended in 2009 using an error correction model together with data for the period 2006 2014 of 10 major lcbs the results reveal that in the short run capital and liquidity have a positive effect on bank profitability and default loans interest margin im operating cost and interest rates irs have a negative effect in the long run bank profitability is significantly impacted by default loans im real gdp inflation irs capital operating cost and conflict the ending of the prolonged conflict has significantly contributed to improved bank performance

international retail banking as a strategy an assessment we assess the viability of a bank s strategy of entering into retail banking worldwide wherever regulations permit via a review of literature and evidence on foreign direct investment in banking issues we discuss include the roles of regulation the costs of operating at a distance and in an unfamiliar environment and the advantages or offsetting factors which foreign banks may possess relative to their local competitors the factors the paper examines are uncompetitive host markets product differentiation economies of scale management and technology cost of capital government support and vertical integration

the determinants of international reserves in the emerging countries a nonlinear approach in this article we adopt a nonlinear approach to examine the dynamics of the international reserves holdings by the emerging economies to do so we estimate the demand for international reserves with a panel smooth transition regression pstr model that loosens two restricting hypotheses homogeneity and time stability we find evidence for the presence of a nonlinear behaviour in the demand for international reserves a result that is new to the literature the coefficients are found to change smoothly as a function of two threshold variables out of five candidates tested in total our specification accounts for the acceleration of foreign exchange reserves accumulation that the linear specifications fail to explain

economic freedom and equality friends or foes how does economic freedom mainly how property rights are designed and protected relate to income equality whilst this is argued to be theoretically ambiguous the empirical results reveal that there is a positive relationship between changes in economic freedom and equality the more a country increased its economic freedom between 1975 and 1985 the higher the level of equality around 1985 most important in this regard is trade liberalization and financial deregulation also there are signs that the level of economic freedom in 1985 is negatively related to the level of equality around that year plausibly because of less redistribution

the political economy of growth a critical survey of the recent literature this article reviews the recent literature on the political economy of growth focusing on the research that has developed at the intersection of the endogenous growth literature and the new political economy it explores the relationship among four key variables economic growth and capital accumulation political instability political freedom and democratic institutions and income inequality

proxies for economic freedom a critique of the hanson critique economic freedom indicators have become quite popular recently as a useful tool to quantify the relationship between a country s institutions and its prosperity in a recent article hanson 2003 criticizes these types of studies for i failing to adequately distinguish between different proxies for economic freedom ii not considering the potential for endogeneity and iii accepting significance of economic freedom s ability to promote prosperity even though regression analysis generates nonsensical results closer inspection reveals that most of his arguments are questionable do not apply to much of the literature or are not original and that he is guilty of misinterpreting his own econometric evidence relating freedom to the level of gdp

economic freedom and migration flows between u s states a modified gravity model is estimated using a cross section of data drawn from the u s census bureau survey of 2000 in order to analyze the impact of economic freedom on gross migration flows among the lower 48 states spatial econometric methods are utilized in order to capture spatial effects not detected by distance in addition the economic freedom of north america index is decomposed to determine the individual impact of various policies results show that states with higher relative economic freedom experience greater migration inflow through its direct impact on income and employment growth in aggregate the findings indicate that individuals migrate toward states with relatively higher government consumption expenditures relatively lower tax burdens and states with more freedom with respect to labor decisions in the form of less restrictive minimum wages less concentration of unions and less dependence on public employment

domestic savings intra national and intra european union capital flows 1971 1991 abstract this paper examines the relationship between savings and investment for the pre 1995 twelve members of the eu during the period 1971 1991 the results of the statistical analysis suggest that the capital market of the members of the eu resembles that of intra national regions implying a considerable degree of capital market integration this conclusion however is subject to several caveats the relationship between savings and investment in the case of portugal for example is unusual

commercial bank ownership and performance in china this study examines the determinants of bank performance based on proxy variables that assess the quality of assets profitability liquidity and overall performance using a sample of 111 chinese commercial banks over the period of 2000 2012 we find that foreign banks appear to have better asset quality and overall performance although lower profitability compared to domestic banks in contrast the state owned banks tend to be more profitable and have better liquidity position compared with other domestic banks and foreign banks at bank level equity liability ratio exerts significant influence on overall bank performance while at the macroeconomic level per capital gdp gdp growth inflation and unemployment rates appear to have a bearing on bank performance

does market structure matter on banks profitability and stability emerging vs advanced economies abstract we empirically investigate the effects of market structure on profitability and stability for 1929 banks in 40 emerging and advanced economies over 1999 2008 by incorporating the traditional structure conduct performance scp and relative market power rmp hypotheses we observe that a greater market share leads to higher bank profitability being biased toward the rmp hypothesis in advanced economies yet neither of the hypotheses is supported for profitability in emerging economies the scp appears to exert a destabilising effect on advanced banks suggesting that a more concentrated banking system may be vulnerable to financial instability however the rmp seems to perform a stabilising effect in both economies evidence also highlights that profitability and stability increase with an increased interest margin revenues in a less competitive environment for emerging markets overall these results suggest that although policy measures to promote competition may dampen economic rent excessive implementation may have an undesired destabilising impact on banks

domestic savings and intra national capital flows abstract regional british data on savings and investment are shown to be uncorrelated consistent with the hypothesis of perfectly mobile intra national capital flows

firm growth and liquidity constraints evidence from the manufacturing and service sectors in italy abstractwe use a large firm level panel data set to analyse the relevance of liquidity constraints on firm growth in italy in most european countries mainstream financial institutions are scantly able to provide affordable credit facilities to small firms thus these firms are forced to finance their growth almost exclusively through retained earnings we estimate a dynamic version of gibrat law incorporating cash flow as a measure of financial constraints for two different size classes within small and medium size enterprises and for several industries in manufacturing and service sectors the findings show that in general small manufacturing firms have higher growth cash flow sensitivities with respect to medium firms conversely our results highlight for the services a significant heterogeneity in the impact of liquidity constraints on firm growth in particular the sensitivity of growth rates to the cash flow appears relatively high for small firms belonging to knowledge intensive business

theory and evidence on the political economy of the minimum wage this paper examines how closely the minimum wage has been set to the most popularly stated goals of minimun wage policy i first estimate these goals the minimum wage rate at which the relevant labor demand is unitary elastic maximizing the total earnings of minimum wage workers about 5 35 and the level that would lift a typical minimum wage worker s family out of poverty about 5 17 i can reject that the actual minimum wage policy has been driven by desire to achieve these goals and find that a simple interest group model best explains the historical path of the minimum wage rate

economic freedom and social capital this article brings together two growing literatures social capital and economic freedom to examine whether economic freedom contributes to social capital more specifically using us state level data from 1986 to 2004 and both ols and system gmm dynamic panel estimation we find that there is no clear trade off between economic freedom and either the level or growth of social capital

who benefits from economic freedom unraveling the effect of economic freedom on subjective well being who benefits from economic freedom results from a panel of 86 countries over the 1990 2005 period suggest that overall economic freedom has a significant positive effect on subjective well being its dimensions legal security and property rights sound money and regulation are in particular strong predictors of higher well being the overall positive effect is not affected by socio demographics the effects of individual dimensions vary however developing countries profit more from higher economic freedom in particular from reducing the regulatory burden culture moderates the effect societies that are more tolerant and have a positive attitude toward the market economy profit the most

the determinants of us banking activity abroad abstract the banking industry provides an excellent example of the internationalization of world business and economic interdependencies across countries analysis of the past growth of international banking operations can also prove useful to banks interested in augmenting their current business or expanding their international coverage and to banks who anticipated future competition in their markets from new or strengthened foreign competitors this study provides the most comprehensive examination of the development of us bank branches in other countries is presented and tested in order to facilitate the understanding of the expansion of international banking

market concentration and the likelihood of financial crises abstract according to theory market concentration affects the likelihood of a financial crisis in different ways the concentration stability and the concentration fragility hypotheses suggest opposing effects operating through specific channels using data of 160 countries for the period 1970 2009 this paper empirically tests these indirect effects of financial market structure we set up a simultaneous system in order to jointly estimate financial stability and the relevant channel variables as endogenous variables our findings provide support for the assumption of channel effects in general and both the concentration stability and the concentration fragility hypothesis in particular the effects are found to vary between high and low income countries

savings investment and international capital flows abstract the high correlation between national savings and domestic investment rateshas been interpreted as evidence that capital is not internationally mobile this paper surveys the theory and evidence on the relationship between savings and investment in a sample of 23 oecd countries a positive correlation between savings and investment rates is found in both the short and long runs however a wide variety of models generate such co movements in savings and investment in response to exogenous disturbances even under conditions of complete financial markets thus the savings investment correlation provides little evidence on the question of international capital mobility

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

determinants of the performance of japanese financial institutions in australia 1987 1992 this paper constructs a model that attempts to explain the performance of japanese financial institutions in australia in general the model proposed performs well for size measures but comparatively poorly for measures of profitability size as measured by home country equity was found to increase both australian assets and australian profitability institutional features in both australia and japan were found to have their greatest impact upon size measures net interest margin differences were found to have no significant relationship with any performance measure used however the results are not sufficiently conclusive to produce a definitive model to explain the performance of foreign owned banks in australia

vignettes on the world capital market this paper is motivated by a sense that we as a profession need to understand much better than we now do how the world capital market works we seem to be genuinely schizophrenic in the ways we build models many of them are closedeconomy models in which the rest of the world does not even appear yet others of them are models of the small open economy in which hardly any degree of freedom is left for economic policy to influence events lying behind the schizophrenia is i believe a genuine ignorance on our collective part of how the world capital market

too much of a good thing the adequacy of international reserves in the aftermath of crises this paper has a number of purposes first it revisits the older theory of reserve adequacy and optimality to see whether this can still be used and perhaps strengthened in ways that would inform the current debate second it explores the connection between reserve adequacy and currency crisis in the light of recent experience and empirical research third it critically investigates alternative rule of thumb measures of reserve adequacy fourth and drawing on the foregoing analysis it examines the extent to which crisis countries should seek to replenish and build up their international reserves in the post crisis period additional owned reserves represent a guaranteed and unconditional source of liquidity is this what is needed

the structure performance relationship for european banking abstract the relationship between market structure and performance has been studied extensively for american banking in contrast little work has been done to investigate this relationship for european banking two explanations of a positive correlation between profitability and concentration have been advanced the traditional structure performance hypothesis scp and the efficient structure hypothesis previous empirical tests of the alternative hypotheses have yielded mixed results but the tests were not robust because they did not incorporate measures of efficiency directly in the model this study applies a stochastic cost frontier as proposed by aigner et al 1977 to derive measures of x inefficiency and scale inefficiency under the assumption that the errors are distributed half normal we incorporate these measures of inefficiencies directly into the tests as proposed by berger and hannan 1993 we do not find a positive and significant relationship between concentration and profitability for a sample of banks across 11 european countries over a four year period 1988 1991 however we do find evidence to support one of the two versions of the efficient structure hypothesis for banks located in countries with low concentration of banks since little support is found for either of the scp hypotheses a simple policy of strict limitations on cross border acquisitions and growth is not warranted

sources of concentration related profits the relationship between industry structure and market performance plays a central role in the development and implementation of antitrust laws the overwhelming majority of economic studies reveal a positive though generally weak correlation between concentration a structure index and profitability a performance index however two radically different interpretations as to the causality of this relationship have resulted in diametrically opposite recommendations for antitrust policy the structural view asserts that the positive concentration profits correlation is evidence of collusive behavior by firms in oligopolistic industries it also maintains that larger firms do not have a substantial efficiency advantage over their smaller rivals for example in an exhaustive but limited sample study f m scherer et al 7 found that concentration across industries is considerably greater than required by scale economies 2 such findings have led structuralists to suggest that an antitrust policy which deconcentrates industries will not create a serious loss of productive efficiency the structural view is challenged by a group of economists led by harold demsetz who are skeptical that monopoly power can be sustained without government sanctions demsetz 3 argues that the positive relationship between industry concentration and profitability reflects the superior performance in a welfare sense of large firms a firm captures a large market share and earns above average profits by establishing a cost advantage over its rivals the cost advantage can be due to scale economies and or a downward shift of a positively sloped marginal cost curve consequently economists agreeing with demsetz believe a deconcentration policy will produce more inefficiency than it eliminates resulting in a net welfare loss to society there have been two basic methodologies employed to test the efficiency based explanations of the profits concentration relationship peltzman 4 has found a negative significant correlation between changes in concentration and unit cost changes for 165

concentration and other determinants of bank profitability in europe north america and australia abstract this study reviews the performance of banks in twelve countries or territories in europe north america and australia and examines the internal and external determination of profitability to circumvent some of the difficulties in making comparisons between banks in different countries the concept of value added is introduced results parallel those in domestic u s studies and provide some support for the edwards heggestad mingo hypothesis of risk avoidance by banks with a high degree of market power

does gibrat s law hold evidence from canadian retail and manufacturing firms this paper investigates the validity of gibrat s law holding for firms in manufacturing and retail trade sectors the object is to expand our knowledge of gibrat s law to include non manufacturing firms a unique longitudinal firm level database which contains information on canadian incorporated establishments enables the inter industry comparison the findings of the analysis are that gibrat s law is violated in both manufacturing and retail sectors violations of gibrat s law for both sectors include i growth rates that depend on firm size ii growth variability that depends on firm size and iii a negative persistence of firm growth finally age effects or selection effects are not the causes of these violations