50th anniversary article option pricing valuation models and applications this paper surveys the literature on option pricing from its origins to the present an extensive review of valuation methods for european and american style claims is provided applications to complex securities and numerical methods are surveyed emphasis is placed on recent trends and developments in methodology and modeling

what can we learn about financial access from u s immigrants the role of country of origin institutions and immigrant beliefs immigrants from countries with more effective institutions are more likely than other immigrants to have a relationship with a bank and to use formal financial markets more extensively the evidence that a country s institutional environment shapes beliefs and by extension the use of financial services provides support for policies that focus on institutional reforms in promoting financial access after holding wealth education and other factors constant the impact of institutional quality in the country of origin affects the financial market participation of all immigrant groups except those who have lived in the united states for more than 28 years these findings are robust to alternative measures of institutional effectiveness to controlling for additional country of origin characteristics and to various methods for addressing potential biases caused by immigrant self selection

the glass ceiling in politics formalization and empirical tests there is a scarcity of women at the apex of political power as well as a lack of methods to disentangle the potential sources of this under representation this article suggests a four step method to test for whether women s under representation can be explained by the existence of a glass ceiling we emphasize that this concept implies discrimination in promotions within the political organization that the discriminatory promotions increase in severity at the top levels of power and that they increase in severity during an individual s career trajectory the proposed method is applied to subnational politics in sweden a long standing world leader in women s descriptive representation the results support the conjecture that a glass ceiling is hindering elected women s rise to political power in this context

estimating the effect of campaign spending on senate election outcomes using instrumental variables o examine the traditional view that challenger spending is more effective than incumbent spending 7 i reestimate the effects of spending using instrumental variables that affect a candidate s ability to raise campaign funds such as candidate wealth levels hhen the endogeneity of candidate spending levels is properly taken into account the marginal effects of incumbent and challenger spending are roughly equal in contrast to previous research showing that because of higher marginal returns to challenger spending the incumbent s spending advantage cannot explain high incumbent reelection rates this article shows that in an average senate election the incumbent s spending advantage yields a 6 increase in the incumbent s vote share that incumbent spending wins elections has direct implications regarding the consequences of campaign finance reform my findings imply that equalizing spending levels may significantly increase incumbent defeat rates and caps on candidate spending may improve the chances of challengers in american congressional elections incumbents routinely win reelection even in the 1994 republican landslide change in the partisan makeup of congress occurred mainly through open seats switching from the democrats to the republicans a common explanation for high congressional reelection rates is the large campaign spending advantage enjoyed by incumbents it is widely believed that challenger spending is very important but there is surprisingly little evidence in the academic literature that incumbent campaign spending has an important effect on congressional election outcomes in light of the substantial effort incumbents devote to fundraising as well as some nagging methodological questions about existing academic studies the effect of incumbent spending on election outcomes remains an unresolved issue accurately measuring how incumbent spending leads to votes is of obvious importance politicians want to win elections and so if money matters then this will influence their behavior if campaign spending effects are trivial then concerns about politicians being

estimating sensitivities of temperature based weather derivatives pricing of temperature based weather derivatives has been studied in the literature however there is no analysis of the estimation of the sensitivities of weather derivatives in a stochastic model of temperatures we use pathwise derivative and kernel methods to derive monte carlo estimators for the sensitivity greeks of temperature based weather derivatives these sensitivities can be used by investors for choosing the most suitable weather contracts for partial hedging or speculation temperature data from new york atlanta and chicago are used in the discussion of numerical results

a quick algorithm for pricing european average options an algorithm is described that prices european average options the algorithm is tested against monte carlo estimates and is shown to be accurate the speed of the algorithm is comparable to the black scholes algorithm a closed form solution is derived for european geometric average options

prepayment and the valuation of mortgage backed securities this paper puts forward a valuation framework for mortgage backed securities rather than imposing an optimal value minimizing call condition we assume that at each point in time there exists a probability of prepaying this conditional probability depends upon the prevailing state of the economy to implement our valuation procedure we use maximum likelihood techniques to estimate a prepayment function in light of recent aggregate gnma prepayment experience by integrating this empirical prepayment function into our valuation framework we provide a complete model to value mortgagebacked securities given an optimal value minimizing call policy a mortgage should never be called when its market value is less than its call price similarly a mortgage should be called if it is worth more than its call price however mortgagors often call their loans when the prevailing refinancing rate exceeds the contract rate on the loan dunn and mcconnell 1981 in addition some mortgagors do not call their loans when the loan s contract rate exceeds the prevailing refinancing rate the purpose of this paper is to put forward a valuation framework for mortgagebacked securities consistent with these stylized facts associated with mortgage prepayments the mortgagor s prepayment decision is integral to our valuation framework however we do not impose an optimal value minimizing call condition to price these securities rather we assume that at each point in time there exists a probability of prepaying this conditional probability depending upon the prevailing state of the economy by integrating this prepayment function into our valuation framework we provide a complete model to value mortgage backed securities to implement our valuation procedures we estimate a prepayment function given recent gnma prepayment experience we follow green and shoven 1986 by using a proportional hazards model to estimate the influence of various explanatory variables or covariates on the mortgagor s prepayment decision distinct from green and shoven we explicitly model the effects of seasoning as well as investigating the influence of interest cost savings from refinancing in addition we also consider the effects of lagged refinancing rates heterogeneity

political selection and persistence of bad governments we study dynamic selection of governments under different political institutions with a special focus on institutional flexibility a government consists of a subset of the individuals in the society the competence level of the government in office determines collective utilities e g by determining the amount and quality of public goods and each individual derives additional utility from being part of the government e g rents from holding office we characterize the dynamic evolution of governments and determine the structure of stable governments which arise and persist in equilibrium in our model perfect democracy where current members of the government do not have veto power over changes in governments always leads to the emergence of the most competent government however any deviation from perfect democracy to any regime with incumbency veto power destroys this result there is always at least one other less competent government that is also stable and can persist forever and even the least competent government can persist forever in office we also show that there is a nonmonotonic relationship between the degree of incumbency veto power and the quality of government in contrast in the presence of stochastic shocks or changes in the environment a regime with less incumbency veto power has greater flexibility and greater probability that high competence governments will come to power this result suggests that a particular advantage of democratic regimes with a limited number of veto players may be their greater adaptability to changes rather than their performance under given conditions finally we show that royalty like dictatorships may be more successful than junta like dictatorships because in these regimes veto players are less afraid of change

monte carlo methods for security pricing the monte carlo approach has proved to be a valuable and flexible computational tool in modern finance this paper discusses some of the recent applications of the monte carlo method to security pricing problems with emphasis on improvements in efficiency we first review some variance reduction methods that have proved useful in finance then we describe the use of deterministic low discrepancy sequences also known as quasi monte carlo methods for the valuation of complex derivative securities we summarize some recent applications of the monte carlo method to the estimation of partial derivatives or risk sensitivities and to the valuation of american options we conclude by mentioning other applications

equilibria in campaign spending games theory and data we present a formal game theoretic model to explain the simultaneity problem that makes it difficult to obtain unbiased estimates of the effects of both incumbent and challenger spending in u s house elections the model predicts a particular form of correlation between the expected closeness of the race and the level of spending by both candidates which implies that the simultaneity problem should not be present in close races and should be progressively more severe in the range of safe races that are empirically observed this is confirmed by comparing simple ols regression of races that are expected to be close with races that are not using house incumbent races spanning two decades

money and votes reconsidered congressional elections 1972 1982 the evolution of congressional campaign finance over the past decade is characterized by steady growth in campaign spending and other notable changes in campaign finance practices the main purpose of the research reported here was to determine whether these changes have altered the effects of campaign spending on election outcomes this required reexamination of auxiliary questions concerning how sending effects operate and can be measured it also required facing the limits of what analysis of aggregate campaign spending data can tell us about money in elections replication of ols and 2sls analyses of campaign spending effects produced solidly consistent results over the six congressional elections held between 1972 and 1982 taken at face value the evidence is overwhelming that the challenger s level of spending has a strong impact on the vote whereas that of the incumbent has virtually no impact at all but the evidence remains open to doubt on two grounds one is the probable inadequacy of the 2sls model or perhaps any possible model leaving the issue of simultaneity bias unsettled if bias remains the estimates exaggerate the electoral effects of the challenger s campaign expenditures the issue cannot be resolved with more of the same data but rather requires data of a different sort surveys taken over the course of a sample of campaigns would do the trick meanwhile i think it would be foolish to make policy on the assumption that bias is in fact substantial the greatest likelihood remains that restrictions on campaign money will have the general effect of hurting challengers jacobson 1979 the other doubtful albeit equally stable finding is that incumbents do not gain votes by spending in campaigns no incumbent seems to believe it and there is at least circumstantial evidence from for example the 1982 elections that their skepticism is quite justified if so the problem lies in the limits of what aggregate data of the kind analyzed here can tell us few incumbents do not spend heavily when they are strongly challenged if both candidates spend beyond the point needed to become thoroughly familiar to voters then the substance of the campaigns the contents of campaign messages become the dominant factors incumbents may need to spend money in order to change the message as new circumstances arise to frame new issues that would help them most or damage them least to win the battle of establishing the real issues like nonincumbents sitting members may sometimes need to spend beyond a certain threshold to remain competitive but nearly all of them do so when the necessity arises so aggregate spending data are largely uninformative how the money is spent rather than how much is what matters the two most notable developments in congressional campaign finance have opposing implications national party organizations particularly the republican have assumed an increasingly important role in financing campaigns greater central control leads to a more efficient distribution of the party s collective campaign resources which among other things promises to raise the overall level of electoral competition it also leads to more coordinated campaigning with greater emphasis on national themes and programs thus it should foster more cooperation and loyalty among fellow partisans in congress but pacs have also grown in numbers and in financial importance because most concentrate on gaining access to incumbents they do little to make elections more competitive because they usually pursue narrowly defined interests their influence fragments the congress and weakens party coalitions in this and other ways parties and pacs are natural rivals the most consequential decisions taken in the next round in campaign finance policy will be those which affect the relative importance of parties and pacs see u s congress 1984 for comments on this and other current campaign finance issues

institutions and financial development evidence from international migrants in the united states abstract we investigate the impact of institutions on financial development by analyzing the financial behavior of immigrants in the united states we find that immigrants from countries with institutions that more effectively protect private property are more likely to own stock in the united states the effect of home country institutions is persistent and absorbed early in life the impact of institutions is amplified for immigrants who live in metropolitan areas with many other immigrants from the same country these findings are robust to alternative measures of institutional effectiveness and to various methods of controlling for unobserved individual characteristics including specifications with country fixed effects

hedging using simulation a least squares approach abstract this paper presents a new and flexible computational approach to derivative hedging it is based on the use of least squares regression in order to compute the hedging portfolio this nonparametric methodology can be readily applied to any derivative contract written on a single underlying risky asset in a complete market with continuous markov price paths we illustrate this technique computing sensitivities on plain vanilla and exotic options with both european and american exercise style the achieved numerical accuracy is always comparable with the best simulation and semianalytic techniques presented in the literature

optimal investment with s shaped utility and trading and value at risk constraints an application to defined contribution pension plan abstract in this paper we investigate an optimal investment problem under loss aversion s shaped utility and with trading and value at risk var constraints faced by a defined contribution dc pension fund manager we apply the concavification and dual control method to solve the problem and derive the closed form representation of the optimal terminal wealth in terms of a controlled dual state variable we propose a simple and effective algorithm for computing the initial dual state value the lagrange multiplier and the optimal terminal wealth theoretical and numerical results show that the var constraint can significantly impact the distribution of the optimal terminal wealth and may greatly reduce the risk of losses in bad economic states due to loss aversion

are there cultural effects on saving some cross sectional evidence why are there such large differences in saving rates across countries conventional economic analyses have not been successful in explaining international saving differences so economists have sometimes suggested that national saving differences may be explained by cultural differences this paper tests the hypothesis that cultural factors influence saving by comparing saving patterns of immigrants to canada from different cultures using data from the canadian survey of family expenditures we find no evidence of cultural effects on saving

incumbent challenger and open seat elections in a spatial model of political competition in groseclose am j political sci 45 862 886 2001 candidates with asymmetric valence scores and varying degrees of policy motivation simultaneously choose divergent policies i take a version of the groseclose model with policy motivated candidates and extend it to allow for sequential policy announcements this may be a suitable approach for incumbent challenger elections because the incumbent s policy is typically known before the challenger s i show that policy divergence is greater when candidates announce policies sequentially as opposed to simultaneously i also show that policy motivated incumbents benefit from a first mover advantage

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

rules of thumb for social learning this paper studies agents who consider the experiences of their neighbors in deciding which of two technologies to use we analyze two learning environments one in which the same technology is optimal for all players and another in which each technology is better for some of them in both environments players use exogenously specified rules of thumb that ignore historical data but may incorporate a tendency to use the more popular technology in some cases these naive rules can lead to fairly efficient decisions in the long run but adjustment can be slow when a superior technology is first introduced

reaching out access to and use of banking services across countries the authors 1 present new indicators of banking sector penetration across 99 countries based on a survey of bank regulatory authorities 2 show that these indicators predict household and firm use of banking services 3 explore the association between the outreach indicators and measures of financial institutional and infrastructure development across countries and 4 relate these banking outreach indicators to measures of firms financing constraints in particular they find that greater outreach is correlated with standard measures of financial development as well as with economic activity controlling for these factors the authors find that better communication and transport infrastructure and better governance are also associated with greater outreach government ownership of financial institutions translates into lower access while more concentrated banking systems are associated with greater outreach finally firms in countries with higher branch and atm penetration and higher use of loan services report lower financing obstacles thus linking banking sector outreach to the alleviation of firms financing constraints

the quality of political institutions and the curse of natural resources we propose a theoretical model to explain empirical regularities related to the curse of natural resources which emphasises the behaviour and incentives of politicians we extend the standard voting model to give voters political control beyond the elections this gives rise to a new restriction that policies should not give rise to a revolution our model clarifies when resource discoveries might lead to revolutions namely in countries with weak institutions it also suggests that for bad political institutions human capital depends negatively on natural resources while for high institutional quality the dependence is reversed this finding is corroborated in cross section regressions

the role of social capital in financial development to identify the effect of social capital on financial development we exploit social capital differences within italy in high social capital areas households are more likely to use checks invest less in cash and more in stock have higher access to institutional credit and make less use of informal credit the effect of social capital is stronger where legal enforcement is weaker and among less educated people these results are not driven by omitted environmental variables since we show that the behavior of movers is still affected by the level of social capital of the province where they were born

inside the crisis an empirical analysis of banking systems in distress much of the substantial literature on banking crises focuses on early warning indicators the authors look at what happens to the economy and the banking sector after a banking crisis breaks out much of the theory of banking crises assigns a central role to depositor runs with vulnerability to runs viewed as a basic characteristic of banks as financial intermediaries but banking systems can be financially distressed even when depositors do not withdraw their deposits if other bank creditors rush for the exit or if banks become insolvent are contemporary banking crises characterized by large declines in deposits the authors find that contemporary banking crises are not accompanied by declines in aggregate bank deposits and credit does not fall relative to output but the growth of both deposits and credit does slow down substantially output recovery begins the second year after the crisis and is not led by a resumption of credit growth instead banks including the stronger banks reallocate their asset portfolio away from loans this suggests that protecting deposits during a banking crisis may not be enough to protect bank credit as lack of usable collateral and poor borrower creditworthiness discourage banks from lending however protecting bank credit may not be a priority right after a crisis as the real economy can rebound without it at least while there is substantial under used capacity

a natural experiment on discrimination in elections abstract we exploit a natural experiment to study discrimination in elections in illinois republican presidential primaries voters vote for delegates bound to presidential candidates but delegates names convey information about their race and gender we identify discrimination from variation in vote totals among delegates bound to the same presidential candidate and who face the same voters examining delegate vote totals from 2000 to 2016 we estimate nonwhite delegates receive 9 fewer votes we find essentially no gender discrimination negligible incentives for statistical discrimination costs to preferred presidential candidates and heterogeneity are consistent with an interpretation of this behavior as taste based

why did the incumbency advantage in u s house elections grow theory a simple rational entry argument suggests that the value of incumbency consists not just of a direct effect reflecting the value of resources such as staff attached to legislative office but also of an indirect effect reflecting the fact that stronger challengers are less likely to contest incumbent held seats the indirect effect is the product of a scare off effect the ability of incumbents to scare off high quality challengers and a quality effect reflecting how much electoral advantage a party accrues when it has an experienced rather than an inexperienced candidate hypothesis the growth of the overall incumbency advantage was driven principally by increases in the quality effect methods we use a simple two equation model estimated by ordinary least squares regression to analyze u s house election data from 1948 to 1990 results most of the increase in the incumbency advantage at least down to 1980 came through increases in the quality effect i e the advantage to the incumbent party of having a low quality challenger this suggests that the task for those wishing to explain the growth in the vote denominated incumbency advantage is to explain why the quality effect grew it also suggests that resource based explanations of the growth in the incumbency advantage cannot provide a full explanation

estimating security price derivatives using simulation simulation has proved to be a valuable tool for estimating security prices for which simple closed form solutions do not exist in this paper we present two direct methods a pathwise method and a likelihood ratio method for estimating derivatives of security prices using simulation with the direct methods the information from a single simulation can be used to estimate multiple derivatives along with a security s price the main advantage of the direct methods over resimulation is increased computational speed another advantage is that the direct methods give unbiased estimates of derivatives whereas the estimates obtained by resimulation are biased computational results are given for both direct methods and comparisons are made to the standard method of resimulation to estimate derivatives the methods are illustrated for a path independent model european options a path dependent model asian options and a model with multiple state variables options with stochastic volatility

a new database on the structure and development of the financial sector this article introduces a new database of indicators of financial structure and financial development across countries and over time the database is unique in that it combines a wide variety of indicators that measure the size activity and efficiency of financial intermediaries and markets it improves on previous efforts by presenting data on the public share of commercial banks introducing indicators of the size and activity of nonbank financial institutions and constructing measures of the size of bond and primary equity markets this article introduces a new database the first to provide comprehensive measures of the development structure and performance of the financial sector this database is the first to define and construct indicators of the size and activity of nonbank financial intermediaries such as insurance companies pension funds and non deposit money banks it is also the first to include indicators of the size of primary equity markets and primary and secondary bond markets in constructing the database authors carefully deflate measures and match stock and flow variables

trust in public institutions over the business cycle this paper explores the link between two coincident events the great recession and the current high levels of mistrust the american people have for public institutions we begin by documenting the recent sharp decline in the con fidence the american public has in their govern ment financial and business sectors and to a lesser extent their media and their courts we are motivated by our own casual empiricism which suggests that widespread mistrust has been an important constraint on policymakers attempt ing to pass expansionary macroeconomic poli cies in the wake of the great recession we then assess whether this decline in trust is a standard cyclical response whether it reflects other fac tors or whether it is due to the specific character of the current downturn yet there is little exist ing literature documenting the cyclically of trust and indeed robert z lawrence 1997 p 132 notes that our understanding of the links between economic performance and trust leaves much to be desired our contribution therefore lies in our demonstration of how trust moves with the business cycle using data on the united states and cross country comparisons

challenger entry and voter learning we develop a model of strategic interaction between voters and potential electoral challengers to sitting incumbents in which the very fact of a costly challenge conveys relevant information to voters given incumbent failure in office challenger entry is more likely but the threat of entry by inferior challengers creates an incentive for citizens to become more politically informed at the same time challenges to incumbents who perform well can neutralize a voter s positive assessment of incumbent qualifications how a voter becomes politically informed can in turn deter challengers of different levels of competence from running depending on the electoral environment the model permits us to sharpen our understanding of retrospective voting the incumbency advantage and the relationship between electoral competition and voter welfare while pointing to new interpretations of and future avenues for empirical research on elections

rebuttal to jacobson s new evidence for old arguments in salvation for the spendthrift incumbent green and krasno 1988 we argue that incumbent spending has a sizable effect on the house vote this stands in direct contrast to professor jacobson s well known view that campaign spending by incumbents is not related to how well they do at the polls jacobson 1983 42 emphasis in the original in his rebuttal jacobson criticizes our findings on three grounds first he argues that the instrument we use in our twostage least squares model for incumbent spending is invalid second he complains that our model fails to account for diminishing marginal returns finally jacobson asserts that our findings for the 1978 election do not hold for subsequent years in this paper we briefly respond to these criticisms using data drawn from the 1976 86 elections we demonstrate that incumbent spending has a substantial influence on the vote we then critique the assumptions underlying jacobson s individual level analysis in the end we find little empirical support for jacobson s contention that the effects of incumbent spending are substantively small and statistically insignificant much of jacobson s essay focuses on the question of whether incumbent spending is as effective as challenger spending this comparative question however occupies a minor place in our salvation essay our main objective was to show that incumbent spending has more than a trivial influence on electoral outcomes we do not disagree in fact with jacobson s position that the marginal effect of challenger spending exceeds that of incumbent spending but this is not the only way to gauge the relative importance of incumbent and challenger spending another way would be to compare the yield the number of votes purchased by challengers and incumbents in each district this standard takes into account the fact that incumbents typically outspend their opponents data from 1976 86 indicate that the yield from incumbent spending is both considerable and on par with the yield from challenger expenditures in sum access to financial resources represents one of the important advantages of incumbency for the spendthrift incumbent is able to offset the effects of campaign expenditures by the opposition

self selection and the earnings of immigrants this paper analyzes the way in which the earnings of the immigrant population may be expected to differ from the earnings of the native population because of the endogeneity of the decision to migrate the empirical study shows that differences in the u s earnings of immigrants with the same measured skills but from different home countries are attributable to variations in political and economic conditions in the countries of origin at the time of migration excerpt

american option sensitivities estimation via a generalized infinitesimal perturbation analysis approach in this paper we develop efficient monte carlo methods for estimating american option sensitivities the problem can be reformulated as how to perform sensitivity analysis for a stochastic optimization problem with model uncertainty we introduce a generalized infinitesimal perturbation analysis ipa approach to resolve the difficulty caused by discontinuity of the optimal decision with respect to the underlying parameter the ipa estimators are unbiased if the optimal decisions are explicitly known to quantify the estimation bias caused by intractable exercising policies in the case of pricing american options we also provide an approximation guarantee that relates the sensitivity under the optimal exercise policy to that computed under a suboptimal policy the price sensitivity estimators yielded from this approach demonstrate significant advantages numerically in both high dimensional environments and various process settings we can easily embed them into many of the most popular pricing algorithm

using repeat challengers to estimate the effect of campaign spending on election outcomes in the u s house previous studies of congressional spending have typically found a large positive effect of challenger spending but little evidence for effects of incumbent spending those studies however do not adequately control for inherent differences in vote getting ability across candidates high quality challengers are likely to receive a high fraction of the vote and have high campaign expenditures even if campaign spending has no impact on election outcomes to avoid that bias this paper examines elections in which the same two candidates face one another on more than one occasion differencing eliminates the influence of any fixed candidate or district attributes estimates of the effects of challenger spending are an order of magnitude below those of previous studies campaign spending has an extremely small impact on election outcomes regardless of who does the spending campaign spending limits appear socially desirable but public financing of campaigns does not

the euroization of bank deposits in eastern europe in central eastern and southeastern europe a substantial share of bank deposits are denominated in foreign currency deposit euroization poses key challenges for monetary policy and financial sector supervision on the one hand it limits the effectiveness of monetary policy interventions on the other hand it increases financial sector fragility by exposing banks to currency risk or currency induced credit risk policymakers disagree on whether countries in the region should tackle deposit euroization with dedollarization policies or should rather strive to adopt the euro as their legal tender assessing the potential effectiveness of dedollarization policies requires a clear understanding of which households hold foreign currency deposits and why they do so on the basis of survey data covering 16 375 households in ten countries in 2011 and 2012 we provide a comprehensive household level analysis of deposit euroization in central eastern and southeastern europe we examine how households preferences for and holding of foreign currency deposits are related to individual expectations about monetary conditions and network effects we also examine to what extent monetary expectations and deposit euroization are the legacy of past financial crises or the outflow of current policies and institutions in the region our findings suggest that deposit euroization in central eastern and southeastern europe can be partly tackled by prudent monetary and economic decisions by today s policymakers the preferences of households for euro deposits are partly driven by their distrust in the stability of their domestic currency which in turn is related to their assessment of current policies and institutions however our findings also suggest that a stable monetary policy may not be sufficient to deal with the hysteresis of deposit euroization across the region first we confirm that the holding of foreign currency deposits has become a habit in the region second we find that deposit euroization is still strongly influenced by households experiences of financial crises in the 1990s our findings question the effectiveness of supply side interventions e g bank regulation or demand side interventions e g local currency capital market development in de euroizing household savings first we show that deposit euroization is largely demand driven second we show that households already have access to a broad range of savings products in local currency

the disadvantaged incumbents estimating incumbency effects in indian state legislatures this paper estimates the incumbency effects using a large dataset on state legislative elections in india during 1975 2003 i use a regression discontinuity design rdd that estimates the causal effect of incumbency by comparing candidates in closely fought elections i find that there is a significant disadvantage to incumbency in indian state legislative elections and the adverse effect of incumbency has increased after 1991 also the incumbency disadvantage is higher in states that have lower availability of public goods such as health centers and lower employment poverty and per capita income

the economics of immigration this literature review concerns the impact of immigration on the economy of the host country focusing on the experience of the united states the emphasis is on the period from the 1970s to the 1990s the author shows that research earlier in this period generally concluded that the economic effects of immigration were positive but that more recent research on later migrations have generally concluded that immigration may be having an adverse effect on the earnings of native unskilled workers and be placing an increased burden on welfare programs the importance of such economic analysis for the formulation of appropriate migration policies is stressed

cultural determinants of household saving behavior relying on the epidemiological approach we show that culture is a significant driver of household saving behavior second generation immigrants from countries that put strong emphasis on thrift or wealth accumulation tend to save more in germany we confirm these results in data from the uk by linking parents to their children we show that these two cultural components affect the saving behavior of both first generation immigrants and their children and also provide suggestive evidence that long term orientation is related to saving behavior through the intergenerational transmission of language

a reform dilemma in polarized democracies abstract we study the feasibility and efficiency of policy reforms in democracies we develop a simple election model where i reforms are costly for voters and politicians and these costs increase with the extent of policy change and ii politicians differ in their ability to carry out reforms efficiently we identify a so called reform dilemma which manifests itself in two variants from a static perspective low reform ability politicians are elected when political parties are polarized who then impose high costs on citizens for each reform step this property of elections arises as low reform ability is a substitute for policy commitment from a dynamic perspective incumbents may choose socially undesirable policies to align the social need for reform with their own reform ability and are thus re elected regardless of their reform ability

candidate quality the personal vote and the incumbency advantage in congress most political observers agree that incumbent legislators have a considerable advantage over nonincumbents in modern congressional elections yet there is still disagreement over the exact source of this advantage and the explanation for its growth over time to address this debate we utilize a unique set of historical elections data to test for the presence of an incumbency advantage in late nineteenth century house elections 1872 1900 we find a modest direct effect of incumbency and a substantial candidate quality effect moreover the cartel like control of ballot access by nineteenth century political parties created competition in races that the modern market like system simply does not sustain our results suggest that candidate quality is a fundamental piece of the puzzle in understanding the historical development of the incumbency advantage in american politics

the effects of campaign spending in house elections new evidence for old arguments the question of how campaign spending affects election results remains open because the simultaneity problem has proven so intractable green and krasno s 1988 recent attempt to solve the problem and to demonstrate that marginal returns on spending are as great for incumbents as for challengers again comes up short a panel feature of the abc newslwashington post congressional district poll conducted during the 1986 elections offers a fresh perspective on the question analysis of changes in voting intentions during the final six weeks of the campaign shows that as the tainted ols studies have invariably suggested the amount spent by the challenger is far more important in accounting for voter s decisions than is the amount spent by the incumbent

the impact of campaign spending on votes in multiparty elections abstract the impact of candidate campaign spending on votes and abstention in multiparty elections is estimated from the specification of a structural model of voter behavior this model accounts for the endogeneity of campaign spending as well as the heterogeneity in voter preferences empirical results are estimated from aggregate actual election data the results demonstrate the importance of spending during the campaign period and voter heterogeneity with respect to these expenditures the own and cross expenditure vote share elasticity estimates reveal that political campaign spending not only redistributes voters across parties but also decreases the size of the abstaining group of the electorate

crises and confidence systemic banking crises and depositor behavior abstract we show that individuals who have experienced a systemic banking crisis are 11 percentage points less likely to use banks in the u s than otherwise similar individuals who emigrated from the same country but did not live through a crisis this finding is robust to controlling for exposure to other macroeconomic events and to various methods for addressing potential bias due to migrant self selection consistent with the view that personal experience plays an important role in decision making the effects are larger for individuals who were older and more likely to have had wealth entrusted to the banking system at the time of the crisis and for people who experienced crises in countries without deposit insurance

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

bank size and household financial sentiment surprising evidence from university of michigan surveys of consumers we analyze comparative advantages disadvantages of small and large banks in improving household sentiment regarding financial conditions we match sentiment data from the university of michigan surveys of consumers with local banking market data from 2000 to 2014 surprisingly the evidence suggests that large rather than small banks have significant comparative advantages in boosting household sentiment findings are robust to instrumental variables and other econometric methods additional analyses are consistent with both scale economies and the superior safety of large banks as channels behind the main findings these channels appear to more than offset stronger relationships with and greater trust in small banks

estimating incumbency advantage without bias in this paper we prove theoretically and demonstrate empirically that all existing measures of incumbency advantage in the congressional elections literature are biased or inconsistent we then provide an unbiased estimator based on a very simple linear regression model we apply this new method to congressional elections since 1900 providing the first evidence of a positive incumbency advantage in the first half of the century incumbency advantage is the most frequently studied factor in the last 15 years of congressional elections research discovery of the increase in incum bency advantage has sparked controversy over its origins historical pattern cur rent magnitude and electoral democratic and policy consequences even the most basic descriptive information about incumbency advantage is flawed be cause every previous measure based on aggregate data in this literature is plagued by selection bias inconsistencies and inefficiencies we prove this result and also propose a new unbiased and statistically efficient measure that is very easy to calculate congressional elections from 1900 to the present fit our theoretical model our empirical reanalyses do not challenge the existing scholarly consen sus that incumbency advantage is much larger than it once was however we do challenge the prevailing belief that incumbency advantage was nonexistent and the evidence that it was negative in house elections during the first half of this century alford and brady 1988 we show instead that the average advantage of incumbency in these elections was about two percentage points in section 1 of this paper we define incumbency advantage and section 2 gives an intuitive sense of the problems identifying it even in ideal electoral sys tems section 3 formally proves that sophomore surge and retirement slump are biased estimates of incumbency advantage and section 4 briefly reveals the flaws

field experiments testing the impact of radio advertisements on electoral competition results from previous studies of campaign spending imply that equal sized grants to both incumbents and challengers are a net benefit to challengers who on average spend less money and derive greater marginal returns from each additional dollar this study provides an experimental test of this proposition cities holding mayoral elections in november 2005 and 2006 were randomly assigned to broadcast nonpartisan radio ads that stated the names of the mayoral candidates reminded listeners about the date of the upcoming election and encouraged them to vote consistent with the findings of previous studies on the differential effects of incumbent and challenger campaign spending on election outcomes we find that these radio ads produced substantially more competitive elections the borderline statistical significance of our results however invites replication of this experiment

using multimember district elections to estimate the sources of the incumbency advantage in this article we use a novel research design that exploits unique features of multimember districts to estimate and decompose the incumbency advantage in state legislative elections like some existing related studies we also use repeated observations on the same candidates to account for unobserved factors that remain constant across observations multimember districts have the additional feature of copartisans competing for multiple seats within the same district this allows us to identify both the direct office holder benefits and the incumbent quality advantage over nonincumbent candidates from the same party we find that the overall incumbency advantage is of similar magnitude as that found in previous studies we attribute approximately half of this advantage to incumbents quality advantage over open seat candidates and the remainder to direct office holder benefits however we also find some evidence that direct office holder benefits are larger in competitive districts than in safe districts and in states with relatively large legislative budgets per capita