local government structure and public expenditures the law of 1 n postulates a positive relationship betweenthe number of democratically electedrepresentative districts and governmentspending strong support for thisrelationship exists in legislatures in theunited states at both the state andnational level and across countries fewstudies have examined this relationship atthe local level despite the fact that localgovernments operate under constraintssimilar to those faced by representativelegislatures using a sample of georgiacounties we find the number of countycommissioners to be positively correlatedwith county government expenditures indicating support for the law of 1 nat the local level

budget processes and commitment to fiscal discipline abstract we present a framework of investigation into the political economy of the budget process our model suggests that institutional rules governing the budget process can be found to limit the importance of fiscal illusion empirical evidence supports that proposition the choice of rules depends on the political environment as well as the dominant source of uncertainty in the budget process

multinational operation ownership and efficiency differences in the international oil industry abstract although state involvement in market systems often leads to inefficiency this influence in the oil industry is not dwindling due to strong growth of some state oil companies based on this background there are concerns about how state firms can continue to stay relevant in the international oil industry by offsetting inefficiencies due to state control this study assesses the effects of multinational operations on the performance of oil firms this is achieved by comparing productive and scale efficiencies of state and private oil companies as well as state multinationals and private multinationals a dataset of 50 firms each year from 2001 to 2010 reveals that although multinational operation is important in reducing productive inefficiencies of state firms it does not mitigate scale inefficiencies of state owned firms state firms should therefore make multinational operations a key policy direction since this will provide a transformative agenda towards equally competing with their private counterparts however better efforts need to be paid in reducing scale inefficiencies that are pervasive among state owned oil firms providing better controls on firm size will provide better drive towards future efficient production levels

investor protection and equity markets we present a simple model of an entrepreneur going public in an environment with poor legal protection of outside shareholders the model incorporates elements of becker s j political econ 106 1968 172 crime and punishment framework into a corporate finance environment of jensen and meckling j financial econ 3 1976 305 we examine the entrepreneur s decision and the market equilibrium the model is consistent with a number of empirical regularities concerning the relation between investor protection and corporate finance it also sheds light on the patterns of capital flows between rich and poor countries and on the politics of reform of investor protection r 2002 elsevier science b v all rights reserved

total factor spillovers similarities and competitions in the petroleum industry this chapter investigates multi dimensional spillovers similarities and competitions in the petroleum industry spatial techniques are applied first in production function in order to observe the cross sectional dependence in each of the four dimensions product technology segment and region wide these four single dimensional spatial models are then aggregated by a model averaging method that assigns weights to different models based on their ability to explain data taking all dependences into consideration this chapter estimates the total factor spillovers similarities and competitions in the spirit of total factor productivity negative spillover effects are observed in all the four dimensions moreover segment wide competition has negative effect on productivity some policy implications concerning human capital globalization and development strategies are also discussed

can foreign firms bond themselves effectively by renting u s securities laws abstract the study tests the functional convergence hypothesis which states that foreign firms can leapfrog their countries weak legal institutions by listing equities in new york and agreeing to follow u s securities law evidence shows that the sec and minority shareholders have not effectively enforced the law against cross listed foreign firms detailed evidence from mexico further shows that while some insiders exploited this weak legal enforcement with impunity others that issued a cross listing and passed through an economic downturn with a clean reputation went on to receive privileged long term access to outside finance as compared with legal bonding reputational bonding better explains the success of cross listings

elections coalitions and legislative outcomes predictions of electoral behavior in a multiparty setting should be a function of the voters beliefs about how parties will perform following an election similarly party behavior in a legislature should be a function of electoral promises and rewards we develop a multistage game theoretic model of three party competition under proportional representation the final policy outcome of the game is generated by a noncooperative bargaining game between the parties in the elected legislature this game is essentially defined by the vote shares each party receives in the general election and the parties electoral policy positions at the electoral stage parties and voters are strategic in that they take account of the legislative implications of any electoral outcome we solve for equilibrium electoral positions by the parties and final policy outcomes

government spending and budget deficits in the industrial economies fiscal policy nouriel roubini and jeffrey sachs this paper examines the evolution of the size of government and of budget deficits in oecd economies we highlight the rapid increase in government spending in the 1970s the sharp rise in budget deficits and public debt after 1973 and the reversal in these trends in the 1980s the increase in the size of government was associated in part with the slowdown in growth after 1973 but also reflected gradual adjustment of the ratio of spending to output towards a long run target which depends on political and institutional characteristics of the economy the political orientation of the government the degree of wage indexation and the degree of stability of the political system such factors also explain the size of budget deficits when faced with an adverse shock subsequent deficit reduction requires a measure of political consensus we note that such consensus is hard to achieve in multi party coalitions in consequence countries with such a political structure tended in consequence countries with such a political structure tended toin consequence countries with such a political structure tended to experience much more rapid increases in their debt gnp ratios

the effects of electricity reforms on productivity and efficiency of china s fossil fired power plants an empirical analysis abstract this paper investigates the effects of electricity reforms on productivity and efficiency of china s generation plants based on the third industrial census data and the first economic census data partial factor productivity pfp analysis indicates that the productivity improvements in labor and capital inputs associated with the reforms are approximately 26 and 45 respectively the effect of the reforms on fuel expense is weakly significant but there is evidence of significant productivity improvement in fuel usage further total factor productivity tfp analysis shows that the efficiency gain from the reforms is still significant when the substitution effect of labor and capital inputs are considered though the magnitude is much lower than that of the pfp analysis the effect of the reforms on technical efficiency becomes weakly significant when fuel expense is further included in tfp analysis but a significant positive effect is expected if fuel input is measured in physical quantity

data envelopment analysis for environmental assessment comparison between public and private ownership in petroleum industry abstract environmental assessment recently becomes a major policy issue in the world this study discusses how to apply data envelopment analysis dea for environmental assessment an important feature of the dea environmental assessment is that it needs to classify outputs into desirable good and undesirable bad outputs because private and public entities often produce not only desirable outputs but also undesirable outputs as a result of their production activities this study proposes the three types of unification for dea environmental assessment by using non radial dea models the first unification considers both an increase and a decrease in the input vector along with a decrease in the direction vector of undesirable outputs this type of unification measures unified efficiency the second unification considers a decrease in an input vector along with a decrease in the vector of undesirable outputs this type of unification is referred to as natural disposability and measures unified efficiency under natural disposability the third unification considers an increase in an input vector but a decrease in the vector of undesirable outputs this type of unification is referred to as managerial disposability and measures unified efficiency under managerial disposability all the unifications increase the vector of desirable outputs to document their practical implications this study has applied the proposed approach to compare the performance of national oil firms with that of international oil firms this study identifies two important findings on the petroleum industry one of the two findings is that national oil companies under public ownership outperform international oil companies under private ownership in terms of unified operational and environmental efficiency and unified efficiency under natural disposability however the performance of international oil companies exhibits an increasing trend in unified efficiency the other finding is that national oil companies need to satisfy the environmental standard of its own country while international oil companies need to satisfy the international standard that is more restricted than the national standards as a consequence international oil companies outperform national oil companies in terms of unified efficiency under managerial disposability

fragmented government effects on fiscal policy new evidence most industrialized countries entered the 1980s with their public finances in disarray at the time persistent deficits pushed up public debt to gdpratios despite such similarities deficit spending varies substantially between countries and within countries over time recent theoretical and empirical research has considered how differences in political arrangements affecting national policy formation might explain variation in fiscal policies pursued using a panel of 22 oecd countries over the 1971 1996 period this paper extends previous literature on the effects of fragmented government on fiscal policy outcomes in various directions first we focus on data relating to central government instead of general government as all theories refer to central government second not only do we analyze the effect of size fragmentation of government we also examine government s position vis a vis parliament and government s political fragmentation we find evidence that more fragmented government defined in terms of the number of political parties in a coalition or the number of spending ministers have higher deficits there is also some evidence that governments that dispose of excess seats in parliament have lower deficits right wing governments appear to have been fiscally more responsible in the seventies political fragmentation does not affect government s budget deficit

toehold acquisitions shareholder wealth and the market for corporate control this study examines the valuation consequences of control related outcomes that fol low toehold acquisitions we find evidence that toehold acquisitions facilitate valueenhancing control transfers the types of control transfers not only include takeovers but also internal mechanisms such as proxy fights and management turnovers we find that toehold targets experiencing such control transfers exhibit an abnormal increase in share value while those not experiencing such control transfers exhibit an abnormal de crease in share value the results suggest that the positive valuation effect associated with toehold acquisitions reflects the expected benefits of subsequent control transfers

effects of government characteristics on fiscal deficits in 18 oecd countries 1961 1994 political economists studying industrialized countries have claimed that certain institutional characteristics of governments such as majority status the number of parties in government and stability affect levels of public deficits they have specifically argued that weak unstable governments produce higher deficits than strong stable ones the author tests the validity of such claims by examining empirical data from 18 organization for economic cooperation and development oecd countries between 1961 and 1994 it is shown that evidence does not support the deficit prone weak governments thesis if anything there is some evidence to suggest that deficits are lower under what political economists call weak unstable governments such as minority governments coalition governments or less durable governments it is further shown that there is extremely limited evidence to support another line of argument that the strength stability of governments does not necessarily create deficits but does affec

multiparty government and economic policy making multiparty government has often been associated with poor economic policy making with distortions like lower growth rates and high budget deficits one proposed reason for such distortions is that coalition governments face more severe common pool problems since parties use their control over specific ministries to advance their specific spending priorities rather than practice budgetary discipline we suggest that this view of multiparty government is incomplete and that we need to take into account that coalitions may have established certain control mechanisms to deal with such problems one such mechanism is the drafting of a coalition agreement our results when focusing on the spending behavior of cabinets formed in 17 western european countries 1970 1998 support our claim that coalition agreements matter for the performance of multiparty cabinets in economic policy making more specifically we find clear support for an original conditional hypothesis suggesting that coalition agreements significantly reduce the negative effect of government fragmentation on government spending in those institutional contexts where prime ministerial power is low

political determinants of budget deficits coalition effects versus minority effects this paper reexamines some recent empirical evidence on the hypothesis that institutional arrangements in the political process affect budget deficits the results of roubini and sachs 1989b are replicated and sensitivity analysis indicate that their results are robust however the main conclusion of roubini and sachs that coalition governments are less capable of budgetary discipline needs to be modified a reformulation of their variable representing political cohesion reveals that it captures the effects of minority governments rather than majority coalition governments the data support the hypothesis that it is harder to negotiate in parliament than within a government

the productivity and efficiency of the australian electricity supply industry australia s electricity supply industry has been through a period of reform over the last 10 years the purpose of this paper is to analyse the changes that have occurred to the australian electricity supply industry over the past 30 years in order to evaluate to what degree these reforms have improved the productivity and efficiency performance of the industry

efficiency differences between private and state owned enterprises in the international petroleum industry technical managerial scale and allocative efficiency differences between private and state owned firms in the international petroleum industry are estimated the estimation of aigner chu deterministic frontiers maximum likelihood stochastic frontiers and maximum likelihood gamma frontiers make this analysis the most complete and sophisticated testing of property rights theory available the empirical findings suggestceteris paribus that state firms could satisfy the demand for their output with something less than half of their current resource inputs simply by being converted to private for profit enterprizes

investor protection and corporate governance recent research has documented large differences among countries in ownership concentration in publicly traded firms in the breadth and depth of capital markets in dividend policies and in the access of firms to external finance a common element to the explanations of these differences is how well investors both shareholders and creditors are protected by law from expropriation by the managers and controlling shareholders of firms we describe the differences in laws and the effectiveness of their enforcement across countries discuss the possible origins of these differences summarize their consequences and assess potential strategies of corporate governance reform we argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank centered and market centered financial systems

portable country governance and cross border acquisitions the agency theory and law and finance literatures show good country governance encourages financial development mitigates agency problems and increases firm value drawing on these literatures we develop a theory that benefits from good country governance are portable by firms across countries through cross border acquisitions using acquisitions from 56 countries from 1990 to 2007 we find that acquirers can transport the benefits from good country governance so that they gain more from acquiring targets with worse country governance than their own as predicted the acquirer s stock price reaction to acquisitions increases with the country governance distance between the acquirer and the target

the geography of equity listing why do companies list abroad this paper documents aggregate trends in the foreign listings of companies and analyzes their distinctive prelisting characteristics and postlisting performance in 1986 1997 many european companies listed abroad mainly on u s exchanges while the number of u s companies listed in europe decreased european companies that cross list tend to be large and recently privatized firms and expand their foreign sales after listing abroad they differ sharply depending on where they cross list the u s exchanges attract high tech and export oriented companies that expand rapidly without significant leveraging companies cross listing within europe do not grow unusually fast and increase their leverage after cross listing foreign listings are becoming an increasingly important strategic issue for companies and stock exchanges alike as companies become global in their product market and investment strategies direct access to foreign capital markets via an equity listing can yield important benefits at the same time the international integration of capital markets has led to unprecedented levels of competition among stock exchanges in this competitive struggle the winners are the exchanges that manage to attract more foreign listings and the attendant trading volume and business opportunities despite the importance of these issues still little is known about which exchanges succeed in capturing more listings from abroad and why this question is intimately related to a second issue namely which advantages companies expect to get from a foreign listing securing cheap equity capital for new investment allowing controlling shareholders to divest on a liquid market preparing for foreign acquisitions or simply enhancing the compa

potential for reducing carbon emissions from non annex b countries through changes in technology abstract continued questions surrounding the efficacy and enforceability of the kyoto protocol make it worthwhile to examine alternative cost effective approaches to climate policy this paper examines the feasibility of an approach that does avoid the problem of targets and timetables and concentrates on solving the most obvious gap in the kyoto protocol how to change the future trajectory of emissions from the non annex b eastern european and former soviet union countries the paper begins by estimating how large a near term reduction in emissions could be achieved if these countries were moved to levels of carbon intensity of annex b countries this static calculation shows that such an improvement in china india eastern europe and russia would provide annual emission reductions two to three times as large as those to which the annex b countries would be committed under the kyoto protocol in 2010 the paper also extends a dynamic model of economic growth with embodied technology improvement based on swan swan t w 1956 economic growth and capital accumulation economic record 32 2 334 361 and solow solow r m 1960 investment and technology progress stanford symposium of mathematical methods in the social sciences eds kenneth j arrow samuel karlin and patrick suppes stanford university press the key feature of this model is the new investment increases total factor productivity by embodying new technology and it can be adapted to include the assumption that new investment also embodies technology with lower carbon emissions the model reveals that even though new investment in non annex b countries has far lower emissions per unit of output than the existing capital stock new investment still does not embody the level of technology observed in annex b countries the model estimates that the potential for reducing emissions through changing technology in developing countries over the next 15 years is similar in magnitude to the reductions in emissions that would be achieved if all annex b countries were to achieve their kyoto protocol emission caps

cross listing and legal bonding evidence from mergers and acquisitions abstract using a sample of foreign acquisitions of us targets this study examines the extent to which cross listing in the us leads to legal and regulatory bonding and or whether reputational bonding proxied by financial intermediaries monitoring an often ignored component of the bonding mechanism is an important factor in us investors decision to hold shares in cross listed firms we find that compared to us firms cross listed firms are less likely to use equity in takeovers of us targets further cross listed firms from countries with poorer legal protections are less likely to finance with equity and pay higher premiums than cross listed firms from countries with better legal protections using analysts coverage and institutional following as proxies for financial intermediary monitoring we find some support for the importance of reputational bonding the evidence suggests that while cross listing reduces barriers to investment there are limits to its ability to completely subsume both the legal environment and the importance of the monitoring of financial intermediaries this further suggests that the extent of actual legal and regulatory bonding by cross listed firms may be more limited than often assumed

domestic liquidity and cross listing in the united states abstract this study examines changes in domestic liquidity after cross listing in the united states our liquidity measures are based on intraday data from domestic markets for a large sample of firms that cross list in the united states and for a matched sample of firms that do not cross list we find that unadjusted liquidity significantly improves after cross listing however after controlling for contemporaneous changes in liquidity for a matched sample of firms that do not cross list there is no evidence of improvements in domestic liquidity due to cross listing our results offer no support for the bonding hypothesis or for the hypothesis that cross listing improves domestic liquidity because of increased intermarket competition and additional order flow

internationalization and changes in tax policy in oecd countries the importance of domestic veto players this article examines the role that economic and political factors played in tax reform in organization for economic cooperation and development oecd countries from 1986 to 1990 some writers argue that economic integration forced states to reform their tax systems the authors findings indicate that economic openness had an indirect effect on the level of change in marginal tax rates the institutional structure of a country was most important countries that had only one veto player or only one institution or party whose approval was necessary for a bill to become law enacted more sweeping reform than states that had more than one veto player these results suggest that even when international or domestic economic factors might dictate a change in policy reform will not be as sweeping in countries in which agreement among several institutions and or parties is necessary

the effects of market segmentation and investor recognition on asset prices evidence from foreign stocks listing in the united states non u s firms cross listing shares on u s exchanges as american depositary receipts earn cumulative abnormal returns of 19 percent during the year before listing and an additional 1 20 percent during the listing week but incur a loss of 14 percent during the year following listing we show how these unusual share price changes are robust to changing market risk exposures and are related to an expansion of the shareholder base and to the amount of capital raised at the time of listing our tests provide support for the market segmentation hypothesis and merton s 1987 investor recognition hypothesis the globalization of u s capital markets has accelerated dramatically in the past decade increasing numbers of companies from overseas have chosen to either raise capital through global equity issues or prepare for future capital raising by way of cross listings on u s exchanges as of 1997 about 1 300 non u s companies have listed their shares for trading on the new york stock exchange nyse the american exchange amex the national association of securities dealers automation quotation nasdaq system or

hedge fund crowds and mispricing recent models and the popular press suggest that large groups of hedge funds follow similar strategies resulting in crowded equity positions that destabilize markets inconsistent with this assertion we find that hedge fund equity portfolios are remarkably independent moreover when hedge funds do buy and sell the same stocks their demand shocks are on average positively related to subsequent raw and risk adjusted returns even in periods of extreme market stress we find no evidence that hedge fund demand shocks are inversely related to subsequent returns our results have important implications for the ongoing debate regarding hedge fund regulation

green productivity growth in china s industrial economy abstract this paper uses a directional distance function ddf and the malmquist luenberger productivity index to estimate the changing patterns of green total factor productivity gtfp growth of 38 chinese industrial sectors during the period 1980 2010 unlike the measures of traditional total factor productivity tfp growth the ddf incorporates carbon dioxide emissions as an undesirable output directly into the production technology which credit sectors for simultaneously reducing their emissions and increasing their output our estimates of aggregate and sector level gtfp growth reveal that chinese industry is not yet on the path towards sustainable low carbon growth a dynamic panel data analysis of the determinants of gtfp across sectors is used to identify factors that might rectify this situation including state owned enterprise soe reform the growth of small private enterprises continued openness to foreign investment and higher spending on r d particularly in emission intensive sectors

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

a model of the operation and development of a national oil company we present a model of the exploration and development activities of a national oil company noc which uses similar technology to a private firm to extract a depletable resource however unlike the private firm the noc may have a wider range of objectives than maximizing the present value of profits specifically we assume an objective function that balances firm profitability against a political desire to favor domestic consumer surplus and domestic employment we find that the non commercial objectives faced by a noc tend to reinforce each other in their effects on profitability the timing of cash flows and employment

the determinants of western european government growth 1950 1980 european publics and politicians are concerned about big and growing governments such concern is not ill founded government size measured as the ratio of government expenditures to gross domestic product has marched upwards steadily since 1950 in the 12 european nations examined here the present research represents an initial step toward solving the mystery of why these governments have grown to begin a modest theoretical framework for understanding government growth is advanced next specific hypotheses of growth are fitted into the framework and operationalized for empirical testing finally statistical models to account for public sector expansion in each of the dozen nations over the 1950 1980 period are developed the models suggest that a variety of forces have worked to enlarge european governments with perhaps the most important being pressure for government assistance from groups disadvantaged by sour economic conditions

the heckman correction for sample selection and its critique this paper gives a short overview of monte carlo studies on the usefulness of heckman s 1976 1979 two step estimator for estimating selection models such models occur frequently in empirical work especially in microeconometrics when estimating wage equations or consumer expenditures it is shown that exploratory work to check for collinearity problems is strongly recommended before deciding on which estimator to apply in the absence of collinearity problems the full information maximum likelihood estimator is preferable to the limited information two step method of heckman although the latter also gives reasonable results if however collinearity problems prevail subsample ols or the two part model is the most robust amongst the simple to calculate estimators

short versus long coalitions electoral accountability and the size of the public sector this article examines the policy consequences of the number of parties in government we argue that parties externalize costs not borne by their support groups larger parties thus internalize more costs than small parties because they represent more groups this argument implies that the public sector should be larger the more parties there are in the government coalition we test this prediction using yearly time series cross sectional data from 1970 to 1998 in 17 european countries we find that increasing the number of parties in government increases the fraction of gdp accounted for by government spending by close to half a percentage point or more than one billion current dollars in the typical year we find little support for the alternative claim that the number of legislative parties affects the size of the public sector except via the number of parties in government