the diffusion of health technologies cultural and biological divergence abstract this paper proposes the hypothesis that genetic distance to the health frontier influences population health outcomes evidence from a world sample suggests that genetic distance interpreted as long term cultural and biological divergence is an important factor in understanding health inequalities across countries specifically the paper documents a remarkably robust negative link between genetic distance to the united states and population health as measured by life expectancy at birth and the adult survival rate even after accounting for an extensive set of possible confounders such as gdp per capita and various climatic factors consistent with the interpretation that genetic distance is related to population health indirectly through human barriers to the diffusion of modern health technologies the evidence indicates that the gene gradient emerges at the onset of the international epidemiological transition

support systems for the diffusion of renewable energy technologies an investor perspective concern over climate change impacts and the projected depletion of fossil fuels has urged more governments to adopt policies that stimulate the diffusion of renewable energy technologies ret with an increasingly diverse suite of support instruments the question emerges as to which instruments or combinations are able to achieve faster more substantial diffusion results although various support instruments were extensively addressed in policy studies there is still no consensus this is partly because many policy studies take a policy maker approach in comparing support instruments leaving relationships between policy design and policy results as a black box this paper proposes an investor oriented perspective to analyze the diffusion potential of support systems for ret the main argument is that it is not the type of support instrument but rather its risk profitability characteristics that influence investor behavior and the rate of diffusion the two instruments most frequently discussed and compared are the feed in tariff and the quota model the analysis in this paper concludes that policy design is crucial while often feed in tariffs are applauded and quota system feared feed in tariffs may also bring about disappointing diffusion results when poorly designed while quota systems may be also conceived as attractive instruments for independent power producers

financing renewable energy infrastructure formulation pricing and impact of a carbon revenue bond abstract renewable energy systems depend on large financial incentives to compete with conventional generation methods market based incentives including state level rec markets and international carbon markets have been proposed as solutions to increase renewable energy investment in this paper we introduce and formulate a carbon revenue bond a financing tool to complement environmental credit markets to encourage renewable energy investment to illustrate its use we value the bond by predicting future revenue using stochastic processes after analyzing historical price data three illustrative examples are presented for renewable energy development in three different markets europe australia and new jersey our findings reveal that the sale of a carbon revenue bond with a ten year maturity can finance a significant portion of a project s initial cost

parametric pricing of higher order moments in s p500 options a general parametric framework based on the generalized student t distribution is developed for pricing s p500 options higher order moments in stock returns as well as time varying volatility are priced an important computational advantage of the proposed framework over monte carlo based pricing methods is that options can be priced using one dimensional quadrature integration the empirical application is based on s p500 options traded on select days in april 1995 a total sample of over 100 000 observations a range of performance criteria are used to evaluate the proposed model as well as a number of alternative models the empirical results show that pricing higher order moments and time varying volatility yields improvements in the pricing of options as well as correcting the volatility skew associated with the black scholes model

the pricing of options on assets with stochastic volatilities one option pricing problem that has hitherto been unsolved is the pricing of a european call on an asset that has a stochastic volatility this paper examines this problem the option price is determined in series form for the case in which the stochastic volatility is independent of the stock price numerical solutions are also produced for the case in which the volatility is correlated with the stock price it is found that the black scholes price frequently overprices options and that the degree of overpricing increases with the time to maturity one option pricing problem that has hitherto remained unsolved is the pricing of a european call on a stock that has a stochastic volatility from the work of merton 12 garman 6 and cox ingersoll and ross 3 the differential equation that the option must satisfy is known the solution of this differential equation is independent of risk preferences if a the volatility is a traded asset or b the volatility is uncorrelated with aggregate consumption if either of these conditions holds the risk neutral valuation arguments of cox and ross 4 can be used in a straightfoward way this paper produces a solution in series form for the situation in which the stock price is instantaneously uncorrelated with the volatility we do not assume that the volatility is a traded asset also a constant correlation between the instantaneous rate of change of the volatility and the rate of change of aggregate consumption can be accommodated the option price is lower than the blackscholes b s 1 price when the option is close to being at the money and higher when it is deep in or deep out of the money the exercise prices for which overpricing by b s takes place are within about ten percent of the security price this is the range of exercise prices over which most option trading takes place so we may in general expect the b s price to overprice options this effect is exaggerated as the time to maturity increases one of the most surprising implications of this is that if the b s equation is used to determine the implied volatility of a near the money option the longer the time to maturity the lower the implied volatility numerical solutions for the case in which the volatility is correlated with the stock price are also examined the stochastic volatility problem has been examined by merton 13 geske 7 johnson 10 johnson and shanno 11 eisenberg 5 wiggins 16 and

approximate option valuation for arbitrary stochastic processes abstract we show how a given probability distribution can be approximated by an arbitrary distribution in terms of a series expansion involving second and higher moments this theoretical development is specialized to the problem of option valuation where the underlying security distribution if not lognormal can be approximated by a lognormally distributed random variable the resulting option price is expressed as the sum of a black scholes price plus adjustment terms which depend on the second and higher moments of the underlying security stochastic process this approach permits the impact on the option price of skewness and kurtosis of the underlying stock s distribution to be evaluated

health and democracy in spite of the inexorable march of democracy around the globe just how democratic institutions a ect human well being is open to debate the evidence that democracy promotes prosperity is neither strong nor robust moreover which aspects of policy making and human well being are promoted by democracies is still a subject of debate 1 even if correlations between democracy and outcome measures can be found there is an overriding di culty of interpreting them as causal e ects whether democracy matters per se or simply serves as a proxy for societal and political development presents a di cult problem for research in this area thinkers such as lipset 1959 have argued that democracy can thrive only when conditions are right if this is correct then becoming democratic may only serve as a proxy for these hard to measure cultural and societal preconditions this paper explores these issues further by reconsidering the link between democracy and health using panel data from a cross section of countries the

the distribution of exchange rate returns and the pricing of currency options an empirical model of the distribution of exchange rate returns based on a combination of the generalized student t distribution and conditional variance specifications is formulated and estimated for four daily bilateral exchange rates over the period 1984 to 1991 the empirical results show that the stylized characteristics of exchange rate returns such as volatility clustering leptokurtosis and skewness are consistently captured by this model in contrast with other model specifications based on more restrictive distributional assumptions implications of the analysis are also investigated for the pricing of currency options including comparisons with black scholes prices

renewable energy policy evaluation using real option model the case of taiwan abstract this study presents a policy benefit evaluation model that integrates cost efficiency curve information on renewable power generation technologies into real options analysis roa methods the proposed model evaluates quantitatively the policy value provided by developing renewable energy re in the face of uncertain fossil fuel prices and re policy related factors the economic intuition underlying the policy making process is elucidated while empirical analysis illustrates the option value embedded in the current development policy in taiwan for wind power in addition to revealing the benefits that re development provides when considering real options analytical results indicate that roa is a highly effective means of quantifying how policy planning uncertainty including managerial flexibility influences re development in addition to assessing the policy value of current re development policy this study also compares policy values in terms of internalized external costs and varying feed in tariff fit simulation results demonstrate that the re development policy with internalized co2 emission costs is appropriate policy planning from sustainability point of view furthermore relationship between varying fit and policy values can be shown quantitatively and appropriate fit level could be determined accordingly

portfolio choice of government incentives the case of commercialization of a new coal based technology economic and financial incentives have become accepted tools for the implementation of government policies such as encouraging the widespread use of new technologies that offer significant economic and political benefits at the macroeconomic level but are not well perceived by managers at the micro level due to significant retrofitting costs this study using portfolio and real investment theories develops a quantitative methodology for selecting the optimal mix of incentives based on financial and operating factor sensitivities of the targeted firms in an uncertain environment the proposed methodology overcomes several shortcomings of previous studies the study applies the suggested method to a recent dod doe 1995 g project data that estimates the net benefits of a new coal based technology the results show that government policies based on a combination of incentives are more effective than individual incentive based policies the empirical analysis of firms which account for the 163 boiler sites in the sample reveals that the optimal incentive package is weighted about 2 1 in favor of tax incentives versus research and development subsidies

trade openness and child health a heterogeneous panel cointegration analysis in this paper we examine the impact of trade openness on child health based on a cross country panel data set covering 66 countries for the period 1960 2013 to account for the time series proper

implied volatility functions empirical tests derman and kani 1994 dupire 1994 and rubinstein 1994 hypothesize that asset return volatility is a deterministic function of asset price and time and develop a deterministic volatility function dvf option valuation model that has the potential of fitting the observed cross section of option prices exactly using s p 500 options from june 1988 through december 1993 we examine the predictive and hedging performance of the dvf option valuation model and find it is no better than an ad hoc procedure that merely smooths black scholes 1973 implied volatilities across exercise prices and times to expiration

optimal technology choice and investment timing a stochastic model of industrial cogeneration vs heat only production abstract in this paper we develop an economic model that explains the decision making problem under uncertainty of an industrial firm that wants to invest in a process technology more specifically the decision is between making an irreversible investment in a combined heat and power production cogeneration system or to invest in a conventional heat only generation system steam boiler and to purchase all electricity from the grid in our model we include the main economic and technical variables of the investment decision process we also account for the risk and uncertainty inherent in volatile energy prices that can greatly affect the valuation of the investment project the dynamic stochastic model presented allows us to simultaneously determine the optimal technology choice and investment timing we apply the theoretical model and illustrate our main findings with a numerical example that is based on realistic cost values for industrial oil or gas fired cogeneration and heat only generation in switzerland we also briefly discuss expected effects of a co 2 tax on the investment decision

the production tax credit for wind turbine powerplants is an ineffective incentive abstract the us energy policy act epact of 1992 created a production tax credit of 1 5 kwh available for 10 years to promote certain renewable energy technologies including wind turbines this paper argues that the impact of the wind turbine production tax credit will be minimal the argument depends entirely on the nature of the project finance structure used by the private power industry for wind turbine development we show that tax credits can only be absorbed by equity investors if there is a large fraction of equity in the project capital structure this raises the financing cost of wind turbine projects compared to conventional power technology which relies on a large fraction of low cost debt if the tax credit were paid as a cash subsidy the capital structure could be shifted to low cost debt and financing costs could be significantly reduced

has democratization reduced infant mortality in sub saharan africa evidence from micro data does democracy help babies survive in sub saharan africa by using retrospective fertility surveys conducted in 28 african countries i compare the survival of infants born to the same mother before and after democratization to disentangle the effect of democracy from that of changes in population characteristics which is infeasible with country level statistics on infant mortality i find that infant mortality falls by 1 2 percentage points 12 of the sample mean after democratization in the post cold war period relevant aspects of democracy appear to be the combination of multiparty elections and leadership change

benchmarking across borders electoral accountability and the necessity of comparison when the economy in a single country contracts voters often punish the government when many economies contract voters turn against their governments much less frequently this suggests that the international context matters for the domestic vote yet most research on electoral accountability assumes that voters treat their national economies as autarkic we decompose two key economic aggregates growth in real gross domestic product and unemployment into their international and domestic components and demonstrate that voters hold incumbents more electorally accountable for the domestic than for the international component of growth voters in a wide variety of democracies benchmark national economic growth against that abroad punishing rewarding incumbents for national outcomes that underperform outperform an international comparison tests suggest that this effect arises not from highly informed voters making direct comparisons but from pre benchmarking by the media when reporting on the economy the effect of benchmarked growth exceeds that of aggregate national growth by up to a factor of two and outstrips the international component of growth by an even larger margin implying that previous research may have underestimated the strength of the economy on the vote

voting technology political responsiveness and infant health evidence from brazil this paper studies the introduction of electronic voting technology in brazilian elections estimates exploiting a regression discontinuity design indicate that electronic voting reduced residual error ridden and uncounted votes and promoted a large de facto enfranchisement of mainly less educated citizens estimates exploiting the unique pattern of the technology s phase in across states over time suggest that as predicted by political economy models it shifted government spending toward health care which is particularly beneficial to the poor positive effects on both the utilization of health services prenatal visits and newborn health low weight births are also found for less educated mothers but not for the more educated

energy tax credits and housing improvement this paper investigates whether federal and state tax credits allowed to households who make energy saving improvements to their residence lead to an increase in improvement activity a two period utility maximization model of household behaviour is used to determine the theoretical influence of tax credits energy prices and other factors on the optimal magnitude of conservation capital improvement regressions using various qualitative measures of conservation improvement as the dependent variable are estimated using household level energy consumption and improvement data consistent with evidence from earlier surveys the empirical results do not support the hypothesis that energy tax credits lead to more widespread or more extensive energy conservation improvement activity

government policy and industrial investment in cogeneration in the usa abstract this paper presents an economic analysis of investment in cogeneration in selected industries and assesses the impact of investment tax credits policy directed at cogeneration we use a dynamic partial equilibrium model that is derived under the assumption that investment in cogeneration occurs if and when the annualized cost of the incremental investment is less than the annualized benefits of avoiding electricity purchase from the utilities policy simulations show that investment in cogeneration is economically feasible even without the tax credits the tax credit policy marginally increases investment in cogeneration the welfare distortions and revenue loss to the us treasury are also estimated external benefits required per barrel of oil to offset distortion costs would come to 2 83

pricing multivariate contingent claims using estimated risk neutral density functions abstract many asset price series exhibit time varying volatility jumps and other features inconsistent with assumptions about the underlying price process made by standard multivariate contingent claims mvcc pricing models this article develops an interpolative technique for pricing mvccs flexible nls pricing that involves the estimation of a flexible multivariate risk neutral density function implied by existing asset prices as an application the flexible nls pricing technique is used to value several bivariate contingent claims dependent on foreign exchange rates in 1993 and 1994 the bivariate flexible risk neutral density function more accurately prices existing options than the bivariate log normal density implied by a multivariate geometric brownian motion in addition the bivariate contingent claims analyzed have substantially different prices using the two density functions suggesting flexible nls pricing may improve accuracy over standard methods

impact of tax reform on renewable energy and cogeneration projects abstract this study examines the sensitivity of renewable energy and cogeneration project returns to proposed changes in the federal tax code specifically to reforms proposed in 1985 by president reagan we examine six different technologies by defining typical configurations project cash flows are projected over a twelve year horizon and the investor s internal rate of return irr is calculated we calculate changes in irr as various proposed tax changes are assumed to take effect we find that capital intensive projects such as geothermal and small hydro suffer most from proposed tax code changes conversely the least capital intensive projects cogeneration fare best

oil growth and health what does the cross country evidence really show we show that previous results from the body of literature on the resource curse have primarily been driven by the collapse in oil prices during the mid 1980s by exploiting cross country variations in the size of initial oil endowments and the timing of oil discoveries we find that there is a stable positive relationship between oil abundance and long run economic growth using dynamic panel data methods we also find that there is no evidence that higher oil rents hinder growth however to focus on material gain means that the welfare gain from oil is understated because oil rich countries benefit more by the reduction in infant mortality and the gain in longevity interestingly such oil led health improvements are more pronounced in non democratic countries where initial heath conditions were poor and oil wealth is concentrated among the ruling elites

on the existence of an optimal capital structure theory and evidence one of the most contentious issues in the theory of finance during the past quarter century has been the theory of capital structure the geneses of this controversy were the seminal contributions by modigliani and miller 18 19 the general academic view by the mid 1970s although not a consensus was that the optimal capital structure involves balancing the tax advantage of debt against the present value of bankruptcy costs no sooner did this general view become prevalent in the profession than miller 16 presented a new challenge by showing that under certain conditions the tax advantage of debt financing at the firm level is exactly offset by the tax disadvantage of debt at the personal level since then there has developed a burgeoning theoretical literature attempting to reconcile miller s model with the balancing theory of optimal capital structure e g deangelo and masulis 5 kim 12 and modigliani 17 the general result of this work is that if there are significant leverage related costs such as bankruptcy costs agency costs of debt and loss of non debt tax shields and if the income from equity is untaxed then the marginal bondholder s tax rate will be less than the corporate rate and there will be a positive net tax advantage to corporate debt financing the firm s optimal capital structure will involve the trade off between the tax advantage of debt and various leverage related costs the upshot of these extensions of miller s model is the recognition that the existence of an optimal capital structure is essentially an empirical issue as to whether or not the various leverage related costs are economically significant enough to influence the costs of corporate borrowing the miller model and its theoretical extensions have inspired several timeseries studies which provide evidence on the existence of leverage related costs trczinka 28 reports that from examining differences in average yields between taxable corporate bonds and tax exempt municipal bonds one cannot reject the miller hypothesis that the marginal bondholder s tax rate is not different from the corporate tax rate however trczinka is careful to point out that this finding does not necessarily imply that there is no tax advantage of corporate debt if the personal tax rate on equity is positive indeed buser and hess 1 using a longer time series of data and more sophisticated econometric techniques estimate that the average effective personal tax rate on equity is statistically positive and is not of a trivial magnitude more importantly they document evidence that is consistent with the existence of significant leverage related costs in the economy

seminonparametric estimation of conditionally constrained heterogeneous processes asset pricing applications the overidentifying restrictions of the intertemporal capital asset pricing model are usually rejected when tested using data on consumption growth and asset returns particu larly when additively separable constant relative risk utility is attributed to the representa tive agent this article investigates the extent to which specification error can explain these rejections the empirical strategy is limited information maximum likelihood in conjunc tion with seminonparametric expanding parameter space representations for both the law of motion and utility we find that consumption growth and asset returns display conditional heterogeneity but this fact does not account for rejection of the overidentifying restrictions as might be anticipated from the work of hansen singleton and others using generalized method of moments methods we also find that expansion of the parameter space in the direction of nonseparable utility causes the overidentifying restrictions to be accepted our estimation strategy provides information on the manner in which the restrictions distort the law of motion in particular imposition of additively separable constant relative risk aversion utility causes the conditional variance of consumption growth to be overpredicted the conditional covariance of asset returns with consumption growth to be overpredicted and an equity premium imposition of nonseparable seminon parametric utility causes distortion in these same directions though the distortions are much smaller which is consistent with the outcomes of the tests of the restrictions

financing investments in renewable energy the impacts of policy design abstract the costs of electric power projects utilizing renewable energy technologies rets are highly sensitive to financing terms consequently as the electricity industry is restructured and new renewables policies are created it is important for policymakers to consider the impacts of renewables policy design on ret financing this paper reviews the power plant financing process for renewable energy projects estimates the impact of financing terms on levelized energy costs and provides insights to policymakers on the important nexus between renewables policy design and financing we review five case studies of renewable energy policies and find that one of the key reasons that ret policies are not more effective is that project development and financing processes are frequently ignored or misunderstood when designing and implementing renewable energy policies the case studies specifically show that policies that do not provide long term stability or that have negative secondary impacts on investment decisions will increase financing costs sometimes dramatically reducing the effectiveness of the program within u s electricity restructuring proceedings new renewable energy policies are being created and restructuring itself is changing the way rets are financed as these new policies are created and implemented it is essential that policymakers acknowledge the financing difficulties faced by renewables developers and pay special attention to the impacts of renewables policy design on financing as shown in this paper a renewables policy that is carefully designed can reduce renewable energy costs dramatically by providing revenue certainty that will in turn reduce financing risk premiums

the effect of public health expenditure on infant mortality evidence from a panel of indian states 1983 1984 to 2011 2012 abstractusing a panel data set of indian states between 1983 1984 and 2011 2012 this paper studies the impact of public health expenditure on the infant mortality rate imr after controlling for other relevant covariates like political competition per capita income female literacy and urbanisation we find that public expenditure on health care reduces the imr our baseline specification shows that an increase in public health expenditure by 1 per cent of state level net domestic product is associated with a reduction in the imr by about nine infant deaths per 1000 live births we also find that political competition female literacy and urbanisation reduce the imr

political regimes and economic growth arguments that relate regimes to growth focus on property rights pressures for immediate consumption and the autonomy of dictators while everyone seems to agree that secure property rights foster growth it is controversial whether democracies or dictatorships better secure these rights the main mechanism by which democracy is thought to hinder growth is pressure for immediate consumption which reduces investment only states that are institutionally insulated from such pressures can resist them and democratic states are not the main argument against dictatorships is that authoritarian rulers have no interest in maximizing total output these views are summarized in turn

financial contagion and asset pricing abstract asset market interconnectedness can give rise to significant contagion risks during periods of financial crises that extend beyond the risks associated with changes in volatilities and correlations these channels include the transmission of shocks operating through changes in the higher order comoments of asset returns including changes in coskewness arising from changes in the interaction between volatility and average returns across asset markets these additional contagion channels have nontrivial implications for the pricing of options through changes in the payoff probability structure and more generally in the management of financial risks the effects of incorrectly pricing risk has proved to be significant during many financial crises including the subprime crisis from mid 2007 to mid 2008 the great recession beginning 2008 and the european debt crisis from 2010 using an exchange options model the effects of changes in the comoments of asset returns across asset markets are investigated with special emphasis given to understanding the effects on hedging risk during financial crises the results reveal that by not correctly pricing the risks arising from higher order moments during financial crises there is significant mispricing of options while hedged portfolios during noncrisis periods become exposed to price movements in times of crises

the bot option conflicts and compromises the build operate and transfer bot and the build operate and own boo arrangements have emerged as the most important private power investment options in developing countries although there is a huge market for such arrangements since they are complex to negotiate involve perceptions of risk that are not always properly understood and involve unusual cost contracting cash flow and returns to equity issues the number of projects successfully launched have been few this paper is concerned with exploring these issues in a systematic way dispelling certain myths and discussing how mutually useful arrangements can be reached between a host utility and private developers on a fair and level playing field

design of an economically efficient feed in tariff structure for renewable energy development abstract evidence suggests albeit tentatively that feed in tariffs fits are more effective than alternative support schemes in promoting renewable energy technologies rets fits provide long term financial stability for investors in rets which at the prevailing market price of electricity are not currently cost efficient enough to compete with traditional fossil fuel technologies on the other hand if not properly designed fits can be economically inefficient as is widely regarded to have been the case under the public utility regulatory policies act of 1978 purpa under purpa too high a guaranteed price led to the creation of so called purpa machines poorly performing generating units that could survive financially only because of heavy subsidies that came at the expense of retail customers similarly because of their adverse impacts on retail electricity rates german fits have been subject to increasing political pressure from utilities and customers in this paper we propose an innovative two part fit consisting of both a capacity payment and a market based energy payment which can be used to meet the renewables policy goals of regulators our two part tariff design draws on the strengths of traditional fits relies on market mechanisms is easy to implement and avoids the problems caused by distorting wholesale energy markets through above market energy payments the approach is modeled on forward capacity market designs that have been recently implemented by several regional transmission organizations in the usa to address needs for new generating capacity to ensure system reliability

recovering an asset s implied pdf from option prices an application to crude oil during the gulf crisis we develop a general method for estimating the implied martingale equivalent probability density function pdf for futures prices from american options prices the early exercise feature of american options precludes expressing the price of the option in terms of the pdf there exist tight bounds for the price of american options in terms of the pdf we demonstrate how these bounds together with observed option prices can be used to estimate the parameters of the pdf we estimate the distribution for crude oil during the persian gulf crisis and find the distribution differs significantly from that recovered using standard techniques

a closed form garch option valuation model this paper develops a closed form option valuation formula for a spot asset whose variance follows a garch p q process that can be correlated with the returns of the spot asset it provides the first readily computed option formula for a random volatility model that can be estimated and implemented solely on the basis of observables the single lag version of this model contains heston s 1993 stochastic volatility model as a continuous time limit empirical analysis on s p500 index options shows that the out of sample valuation errors from the single lag version of the garch model are substantially lower than the ad hoc black scholes model of dumas fleming and whaley 1998 that uses a separate implied volatility for each option to fit to the smirk smile in implied volatilities the garch model remains superior even though the parameters of the garch model are held constant and volatility is filtered from the history of asset prices while the ad hoc black scholes model is updated every period the improvement is largely due to the ability of the garch model to simultaneously capture the correlation of volatility with spot returns and the path dependence in volatility article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

persistence of power elites and institutions we construct a model to study the implications of changes in political insti tutions for economic institutions a change in political institutions alters the distribution of de jure political power but creates incentives for investments in de facto political power to partially or even fully offset change in de jure power the model can imply a pattern of captured democracy whereby a democratic regime may survive but choose economic institutions favoring an elite the model provides conditions under which economic or policy outcomes will be invariant to changes in political institutions and economic institutions them selves will persist over time jel d02 d72 the domination of an organized minority over the unor ganized majority is inevitable the power of any minority is irresistible as against each single individual in the majority who stands alone before the totality of the organized minor ity at the same time the minority is organized for the very reason that it is a minority

opportunistic underinvestment in debt renegotiation and capital structure abstract this paper models debt renegotiation as a bargaining game between debtholders and shareholder oriented management in which management credibly threatens to run down firm assets to force concessions from the creditors creditors anticipate this opportunistic behavior by management creating an upper bound on debt capacity that is less than the value of the firm if an advantage to debt is introduced such as favorable tax treatment an interior optimal capital structure obtains even in the absence of realized bankruptcy costs our model also explains variations in debt equity ratios and the use of certain puzzling debt covenants

the countervailing effects of competition on public goods provision when bargaining inefficiencies lead to bad outcomes political competition is widely recognized as a mediator of public goods provision through its salutary effect on incumbents electoral incentives we argue that political competition additionally mediates public goods provision by reducing the efficiency of legislative bargaining these countervailing forces may produce a net negative effect in places with weak parties and low transparency typical of many young democracies we provide evidence of a robust negative relationship between political competition and local public goods using panel data from mali tests of mechanisms corroborate our interpretation of this relationship as evidence of legislative bargaining inefficiencies to explore the generalizability of these findings we analyze cross country panel data and show that political competition leads to better worse public goods provision under high low levels of party system institutionalization the paper sheds light on why political competition is only selectively beneficial and underscores the importance of considering both the electoral and legislative arenas

resource windfalls political regimes and political stability abstract we study theoretically and empirically whether natural resource windfalls affect political regimes we show that windfalls have no effect on democracies while they have heterogeneous political consequences in autocracies in deeply entrenched autocracies the effect of windfalls is virtually nil while in moderately entrenched autocracies windfalls significantly exacerbate the autocratic nature of the political system to frame the empirical work we present a simple model in which political incumbents choose the degree of political contestability and potential challengers decide whether to try to unseat the incumbents the model uncovers a mechanism for the asymmetric impact of resource windfalls on democracies and autocracies as well as the the differential impact within autocracies

do electoral institutions have an impact on population health there is an emerging political economics literature which purports to show that legislatures elected based on proportional electoral rules spend more and redistribute more than legislatures elected based on majoritarian electoral rules going a step further the authors of this paper consider whether degree of electoral proportionality has an impact on population health and in particular the health of the least advantaged members of society a panel of 24 parliamentary democracies for the years 1960 2004 is used to examine the relationship between electoral institutions and health the authors find that greater electoral proportionality is positively associated with overall population health as indicated by life expectancy and with the health of the poorest as indicated by a reduction in infant mortality a panel of 17 countries for the years 1970 2004 is then used to show to that electoral permissiveness modifies the impact of health spending on infant mortality

chasing success health sector aid and mortality summary as many cases studies show successful public health measures are being implemented in many places around the globe and country level mortality has fallen significantly in recent decades in all but a few countries are the two linked does development assistance for health dah improve on balance recipient countries mortality trajectory using a new data source containing dah on 96 high mortality countries the regression analysis shows no effect of dah on mortality other types of aid including water development also have no effect economic growth on the other hand has a strong negative effect on mortality these findings confirm and build upon recent work by williamson 2008 and are shown to be robust to a variety of sensitivity analyses and alternative model specifications and estimation methods this analysis also shows that the effectiveness of dah has not increased over time even as the level of that funding has increased fourfold though spending on infectious diseases and family planning may have caused small reductions in mortality furthermore even though it is encouraging that dah has tended to go where the need is highest it also goes to states that have experienced the greatest mortality reductions in the recent past in other words dah appears to be following success rather than causing it

does the option market produce superior forecasts of noise corrected volatility measures this paper presents a comprehensive empirical evaluation of option implied and returns based forecasts of volatility in which recent developments related to the impact on measured volatility of market microstructure noise are taken into account the paper also assesses the robustness of the performance of the option implied forecasts to the way in which those forecasts are extracted from the option market using a test for superior predictive ability model free implied volatility which aggregates information across the volatility smile and at the money implied volatility which ignores such information are both tested as benchmark forecasts the forecasting assessment is conducted using intraday data for three dow jones industrial average djia stocks and the s p500 index over the 1996 2006 period with future volatility proxied by a range of alternative noise corrected realized measures the results provide compelling evidence against the model free forecast with its poor performance linked to both the bias and excess variability that it exhibits as a forecast of actual volatility the positive bias in particular is consistent with the option market factoring in a substantial premium for volatility risk in contrast implied volatility constructed from liquid at the money options is given strong support as a forecast of volatility at least for the djia stocks neither benchmark is supported for the s p500 index importantly the qualitative results are robust to the measure used to proxy future volatility although there is some evidence to suggest that any option implied forecast may perform less well in forecasting the measure that excludes jump information namely bi power variation

factors influencing the likelihood of regulatory changes in renewable electricity policies abstract the renewable electricity literature has expanded in recent years from the analysis of policies focused on research and development rd the coherence of the policies the size and variety of the coalitions supporting and opposing renewable electricity and the brussels effect the importance of these factors is evaluated in the case of three major markets of renewable electricity germany the netherlands and denmark

feed in tariff vs renewable portfolio standard an empirical test of their relative effectiveness in promoting wind capacity development abstract this paper examines the relative effectiveness of feed in tariff fit and renewable portfolio standard rps in promoting wind capacity development using panel data conservative estimates suggest that on average across countries fit increases total wind capacity more than rps by a magnitude of about 1800 mw when using time variant policy indicators the difference between the two policies increases to nearly 2000 mw roughly 8 of 2009 cumulative capacity in germany as for annual wind capacity since 2005 this paper has found no significant difference between fit and rps it is also found that wind energy development responds to high electricity demand and high oil dependence

trade liberalization and child mortality a synthetic control method abstract we study the effect of trade liberalization on child mortality using data from emerging and developing countries over the 1960 2010 period to capture possible heterogeneity of effects we use the synthetic control method scm for comparative case studies the scm allows to compare the trajectory of post reform health outcomes of treated countries those which experienced trade liberalization with the trajectory of a combination of similar but untreated countries on average trade liberalization significantly reduced child mortality the average reduction is around 9 ten years after the liberalization but there is significant heterogeneity in the impact for the cases for which the scm could provide a reliable counterfactual trade liberalization significantly reduced child mortality in approximately half the cases in most other cases there was no significant effect in the majority of the significant cases the reduction in child mortality was more than 20 on average trade liberalization reduced child mortality more a in democracies compared to autocracies b when incomes were higher and c when it reduced taxation of farmers

aid fragmentation or aid pluralism the effect of multiple donors on child survival in developing countries 1990 2010 while most policy makers and researchers stress the negative impact of aid fragmentation on development outcomes in recipient countries we argue that the greater diversity of perspectives entailed by higher multiplicity of donors can help select better policies we hypothesize a u shaped relationship countries with a moderate number of donors fare better than countries with either few or many donors the hypothesis is supported by a generalized method of moments gmm analysis of the relationship between health aid donors and child survival in 110 low and middle income countries during 1990 2010

investment under uncertain climate policy a practitioners perspective on carbon risk this paper introduces the concept of payment probability as an important component of carbon risk the financial risk associated with co2 emissions under uncertain climate policy in modeling power plant investment decisions most existing literature uses the expected carbon price e g the price of traded permits or carbon tax as a proxy for carbon risk in contrast this paper identifies expected carbon payment as a more accurate measure of carbon risk as perceived by industry practitioners this measure of carbon risk incorporates both expected price and the probability that this price would actually be faced in the case of a particular investment this concept helps explain both the surge of activity in 2005 2006 and the subsequent decline in interest in coal fired power plant development in the u s the data for this case study comes from an extensive online survey of 700 u s energy professionals completed in 2006 as well as interviews conducted with industry representatives from 2007 to 2009 by analyzing industry views on policy uncertainty and future carbon legislation we gain a better understanding of investor attitudes toward carbon risk this understanding will help policy makers design better incentives for investing in low carbon technologies

revisiting the modernization hypothesis longevity and democracy summary modernization theory claims that changes in economic fundamentals like e g income per capita and education levels affect the political structure of a country in a causal way as an important marker of development life expectancy can also be conjectured to have a direct effect on political structures in this paper we estimate the impact of improvements in life expectancy on democracy for the purpose of identification we use data from the international epidemiological transition to construct an instrument for life expectancy we find a statistically and economically significant positive causal effect of improvements in life expectancy on democracy

the main support mechanisms to finance renewable energy development considering that the major part of greenhouse gases is carbon dioxide there is a global concern aimed at reducing carbon emissions additionally major consumer countries are looking for alternati

the effect of three mile island on utility bond risk premia a note could be expected to react to the possibility of losses related to nuclear accidents and to the prospect of larger marginal costs associated with compliance with stricter regulation by public utility commissions this study tests for the effects of the tmi accident on bond risk premia in the public utility industry the following four null hypotheses are tested 1 bond risk premia did not increase in the industry as a whole because of the accident at tmi 2 bond risk premia were not affected by a firm s commitment to generate nuclear power 3 bond risk premia were not affected by the extent of the firm s commitment to nuclear power generation 4 bond risk premia were not influenced by the brand of reactor operated section i of the study briefly reviews the research that documents the effects of tmi on utility equities and considers previous models of bond risk premia based on those findings section ii specifies the null hypotheses in a testable form using a model of the risk premium that is consistent with the previous bond risk literature and is designed to control for bond specific factors and for the state of the economy results of the hypothesis testing appear in section iii section iv contains the study s conclusions

diversity and the power of the elites in democratic societies evidence from indonesia this paper analyzes whether political outcomes in local democracies are determined by the preferences of the median typically poor agents or whether they reflect the wishes of the wealthy elites theory suggests that when politicians belonging to different groups can form coalitions the wealthy elites influence on policy choices is endogenously higher when there is diversity in preferences among the poor the pattern of public good provision by local governments in indonesia is consistent with this intuition our analysis indeed shows that when individuals have different preferences here due to different ethnicities democratic policy outcomes are closer to the preferences of the elites rather than the preferences of the poor majority

impact of public policy uncertainty on renewable energy investment wind power and the production tax credit abstract it is generally understood that the pattern of repeated expiration and short term renewal of the federal production tax credit ptc causes a boom bust cycle in wind power plant investment in the us this on off pattern is detrimental to the wind industry since ramp up and ramp down costs are high and players are deterred from making long term investments it is often assumed that the severe downturn in investment during off years implies that wind power is unviable without the ptc this assumption turns out to be unsubstantiated this paper demonstrates that it is not the absence of the ptc that causes the investment downturn during off years but rather the uncertainty over its return specifically it is the dynamic of power purchase agreement ppa negotiations in the face of ptc renewal uncertainty that drives investment volatility with contract negotiations prevalent in the renewable energy industry this finding suggests that reducing uncertainty is a crucial component of effective renewable energy policy the ptc as currently structured is not the only means existing or potential for encouraging wind power investment using data from a survey of energy professionals various policy instruments are compared in terms of their perceived stability for supporting long term investment

the political value of land political reform and land prices in chile in this article we argue that when patron client relations are grounded in economic relationships such as between landlord and worker we should expect clientelism to influence not just how public policy the state and the political system work but also how the economy works we develop a simple model of the economic consequences of electoral clientelism when voting behavior can be observed landlords patrons provide economic rents to workers and in exchange workers vote for parties favored by landlords as votes are used by the landlords to accumulate political rents vote control increases the demand for labor and for land the model implies that the introduction of the australian ballot which destroys this form of clientelism should lead to a fall in the price of land in those areas where patron client relationships are strongest we test the predictions of the model by examining in detail the evolution of land prices in chile around may 31 1958 for which we collected original data a characteristic of rural chile at this time were patron client relations based on the inquilinaje system by which a worker the inquilino entered into a long term often hereditary employment relationship with a landlord and lived on his landlord s estate we show that the introduction of the australian ballot in 1958 led to a fall of about 26 in land prices in the areas where these patron client relationships were predominant

mining away the preston curve summary i estimate the long term national health and education impacts of having a larger mining share in the economy by instrumenting the relative size of the mining sector with the natural geological variation in countries fossil fuel endowments i provide evidence suggestive of a causal relationship the findings suggest that countries with larger mining shares tend to have poorer health and education outcomes than countries with similar per capita incomes geographic characteristics and institutional quality doubling the mining share of an economy corresponds to on average the infant death rate being 20 higher life expectancy being 5 lower total years of education being 20 lower and 70 more people having no formal education divergences from the preston curve the concave relationship between cross country income and life expectancy that has long been of interest to economists demographers and epidemiologists are thus partly explained by the size of the mining sector within country evidence from indonesia paints a similar picture my results provide support for a growing body of evidence linking mining to poorer average living standards particularly vis a vis other types of income i also estimate the effects of national mining dependence on non mining income health and education investment and institutions

who invests in renewable electricity production empirical evidence and suggestions for further research transforming energy systems to fulfill the needs of a low carbon economy requires large investments in renewable electricity production res e recent literature underlines the need to take a closer look at the composition of the res e investor group in order to understand the motives and investment processes of different types of investors however existing energy policies generally consider res e investments made on a regional or national level and target investors who evaluate their res e investments according to least cost high profit criteria we present empirical evidence to show that res e investments are made by a heterogeneous group of investors that a variety of investors exist and that their formation varies among the different types of renewable sources this has direct implications for our understanding of the investment process in res e and for the study of motives and driving forces of res e investors we introduce a multi dimensional framework for analyzing differences between categories of investors which not only considers to the standard economic dimension which is predominant in the contemporary energy literature but also considers the entrepreneurship innovation adoption and institutional dimensions the framework emphasizes the influence of four main investor related factors on the investment process which should be studied in future research motives background resources and personal characteristics