measuring excess capital capacity in agricultural production we introduce the concept excess capital capacity and employ a stochastic input requirement frontier to measure excess capital capacity in agricultural production we also propose a two step estimation method that allows endogenous regressors in stochastic frontier models the first step uses generalized method of moments to get consistent estimates of the frontier parameters in the presence of endogenous regressors the second step uses maximum likelihood to measure excess capital capacity and evaluate the factors that influence it the empirical application to dutch cash crop farms found varying degrees of excess capital capacity the policy implications of excess capital capacity are discussed

productivity in swedish electricity retail distribution this paper examines productivity growth in electricity retail distribution in sweden in a multiple output multiple input framework the approach used is nonparametric data envelopment analysis dea productivity is measured by means of the malmquist index productivity comparisons are made between different types of ownership and between different service areas the study indicates a high rate of productivity growth due to economies of density when measured over a period of 17 years the results show no significant differences in productivity growth between different types of ownership or economic organization

liquidity constraints and labor supply abstract in this paper we shed some light on how restrictions in financial markets the so called liquidity constraints might act in affecting labour supply decisions of italian workers one way to neutralize the existence of binding liquidity constraints is simply by supplying additional labor instead of reducing consumption we estimate whether resorting to additional labor supply as a smoothing consumption device is at work by using the italian survey of households income and wealth shiw the longitudinal dimension of the shiw dataset allows us to control for individual unobserved heterogeneity we also use an iv strategy to address the endogeneity of our measure for credit constraints in labor supply equations due to time varying factors our results show that liquidity constraints increase the intensity in the supply of men s labor constrained men work on average 4 hours more than their unconstrained counterpart self employed workers turn out to be more sensitive to binding liquidity constraints possibly because they are more flexible in adjusting the intensity of their labor supply

nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

banking development socioeconomic structure and income inequality abstract using rich unique data from the italian local credit markets provinces this paper investigates the impact of local banking development on income inequality and the role of the socioeconomic structure in this link exploiting the italian historical banking regulation to instrument for the local presence of bank branches we find that local banking development mitigates income inequality however the finance inequality nexus manifests itself only in relatively advanced areas when we study the structural channels of influence we uncover evidence that banking development can reduce inequality by affecting geographical mobility and urbanization while it has modest effects through the development of material infrastructures and human capital

the finance growth nexus evidence from bank branch deregulation this paper provides evidence that financial markets can directly affect economic growth by studying the relaxation of bank branch restrictions in the united states we find that the rates of real per capita growth in income and output increase significantly following intrastate branch reform we also argue that the observed changes in growth are the result of changes in the banking system improvements in the quality of bank lending not increased volume of bank lending appear to be responsible for faster growth

financial intermediation and endogenous growth an endogenous growth model with multiple assets is developed agents who face random future liquidity needs accumulate capital and a liquid but unproductive asset the effects of introducing financial intermediation into this environment are considered conditions are provided under which the introduction of intermediaries shifts the composition of savings toward capital causing intermediation to be growth promoting in addition intermediaries generally reduce socially unnecessary capital liquidation again tending to promote growth

financial integration capital mobility and income convergence recent studies have found that capital moves uphill from poor to rich countries and brings little or no growth dividend when it does flow into poor economies we show that europe does not conform to this paradigm in the european experience of financial integration capital has flown from rich to poor countries and such inflows have been associated with significant acceleration of income convergence analysing broader samples of countries we find that downhill capital flows tend to be observed above certain thresholds in institutional quality and financial integration but europe remains different even when allowing for such threshold effects and its experience is similar to that of interstate flows within the united states our findings are consistent with the notion that financial diversification reduces countries incentives to save in order to self insure against specific shocks abdul abiad daniel leigh and ashoka mody

relative performance of public and private ownership under yardstick competition electricity retail distribution abstract this paper focuses on productive efficiency in swedish retail electricity distribution during 1970 1990 using hedonic output s constructed from physical outputs and their qualities and network characteristics the main focus is on efficiency of privately owned municipal utilities municipal companies and companies with mixed ownerships three different approaches are used to examine whether ownership of the distribution companies has any systematic impact on the above issues we also examine returns to scale and technical change empirical results from the three alternative approaches show that privately owned companies are relatively more efficient we find evidence of scale economies and technical progress

technical efficiency and impacts of deregulation an analysis of three functions in u s electric power utilities during the period from 1992 through 2000 the main purpose of this study is to examine the impacts of deregulation on technical efficiency and its changes over time for large scale u s electric power utilities during the period from 1992 through 2000 we analyze the efficiency of three individual functions i e generation transmission distribution and general administration and the deregulatory impacts on each of them in order to implement the analysis we estimate an input distance function by using a stochastic frontier analysis the results indicate that there is a significant impact of deregulation on efficiency in the generation and general administration functions while no effects are observed in the transmission distribution function

bank mergers and crime the real and social effects of credit market competition using a unique sample of commercial loans and mergers between large banks we provide micro level within county evidence linking credit conditions to economic development and find a spillover effect on crime neighborhoods that experience more bank mergers are subject to higher interest rates diminished local construction lower prices an influx of poorer households and higher property crime in subsequent years the elasticity of property crime with respect to merger induced banking concentration is 0 18 we show that these results are not likely due to reverse causation and confirm the central findings using state branching deregulation to instrument for bank competition we examine the real and social impact of local credit competition by documenting a link between the competitiveness of the local banking market credit conditions urban development and crime several recent studies peek and rosengren 2000 cetorelli and gambera 2001 klein peek and rosengren 2002 and burgess and pande 2003 tie credit market imperfections to diminished real economic activity and growth other studies connect the economic environment to property crime freeman 1999 levitt 2001 raphael and winter ebmer 2001 and nilsson 2004 it is reasonable to hypothesize therefore that reductions in bank competition may lead to economic decline and subsequently increases in property crime we empirically investigate the effects of bank consolidation and increased market power on credit availability and real activity using a unique sample of commercial loans and mergers between large banks in the 1990s we provide micro level evidence that garmaise is from the ucla anderson school and moskowitz is from the graduate school of business university of chicago and nber we have benefited from the suggestions and comments of tony bernardo marianne bertrand phillip bond doug diamond mark duggan eugene fama

regional growth and finance in europe is there a quality effect of bank efficiency abstract in this study we test whether regional growth in 11 european countries depends on financial development and suggest the use of cost and profit efficiency estimates as quality measures of financial institutions contrary to the usual quantitative proxies of financial development the quality of financial institutions is measured in this study as the relative ability of banks to intermediate funds an improvement in bank efficiency spurs five times more regional growth then an identical increase in credit does more credit provided by efficient banks exerts an independent growth effect in addition to direct quantity and quality channel effects

board structure and firm technical efficiency evidence from canadian state owned enterprises abstract the objective of the study is to analyze the board performance relationship for a group of 14 canadian soes this context is unique because soes do not have major control devices other than the board as the interaction effect if any between the board and other corporate governance structures is expected to be low we do not have to fully control for the potential impact of different control devices or to disentangle them completely from influencing board composition the performance is also measured using data envelopment analysis dea a linear programming method used for the first time in this research area as such this study contributes to the operational research literature while applying dea method to untraditional fields of research the results from the multivariate analysis suggest that board size and board independence are positively related to firm technical efficiency only when soes are exposed to market discipline in other words product market competition is a precondition for boards to be effective

dynamic yardstick mechanisms abstract this paper shows that the inability of principals to commit to long term contracts is irrelevant when dealing with several agents whose private information is correlated this sharply contrasts with the dynamics of contracting without such correlation the paper also explores what limitations on yardstick mechanisms can justify the use of long term contracts we found that the inability of a principal to commit not to renegotiate long term contracts is without consequence even if there is a bound on transfers that an agent can be asked to pay in contrast short term contracting fails to implement the commitment solution with constraints on transfers second absent current yardstick the possibility of using correlated mechanisms in the future allows the principal to implement the first best with a renegotiation proof long term contract whereas this cannot be achieved with short term contracting

the real costs of credit access evidence from the payday lending market using geographic differences in the availability of payday loans i estimate the real effects of credit access among low income households payday loans are small high interest rate loans that constitute the marginal source of credit for many high risk borrowers i find no evidence that payday loans alleviate economic hardship to the contrary loan access leads to increased difficulty paying mortgage rent and utilities bills the empirical design isolates variation in loan access that is uninfluenced by lenders location decisions and state regulatory decisions two factors that might otherwise correlate with economic hardship measures further analysis of differences in loan availability over time and across income groups rules out a number of alternative explanations for the estimated effects counter to the view that improving credit access facilitates important expenditures the results suggest that for some low income households the debt service burden imposed by borrowing inhibits their ability to pay important bills copyright 2011 oxford university press

labour use efficiency in swedish social insurance offices this paper considers the estimation of frontier production functions in panel data models it proposes a multi stage method to obtain estimates of 1 the parameters of a flexible input requirement function and 2 technical inefficiency decomposed into time invariant firm specific time varying and the residual components the proposed method is used to analyse labour use efficiency of swedish local social insurance offices on the basis of a large panel of observations during the time period 1974 84 empirical results show 1 substantial variations in labour use efficiency among these offices with the mean efficiencies declining over time 2 presence of economies of scale thereby meaning that most of the offices were of suboptimal size

local financial development and household welfare in vietnam evidence from a panel survey we examine the impact of local financial development on household welfare in vietnam we employ household level panel data for the periods 2007 2008 2010 and 2013 covering three provinces and mea

three decades of italian comparative advantages he structure of italian exports its characteristics its changes over time its causes and implications in terms of income and growth employment and fragility with respect to domestic and international shocks has been the issue around which at least three generations of italian economists have discussed and disagreed over the last 30 years if one has to attribute to one single cause the origin of this multi faceted debate that very cause would be the perplexity associated with the evidence of italy being on the one hand a large industrialised country with per capita income comparable to the top high income oecd members world bank 2004 and on the other hand being characterised by an export composition where traditional low skilled labour intensive sectors oecd 2001 and peneder 2003 such as textiles wearing apparel leather products furniture and footwear still play a relevant role this anomaly in the italian trade structure with respect to one of its fellow members of the g7 and its high level of persistence is what makes of italy a case in the international trading system this paper describes the primary feature giving rise to this debate the italian export composition and its evolution over time the analysis makes use of the revealed comparative advantage rca index associated with the name of bela balassa and through non parametric statistical techniques estimates the empirical the author is very grateful to miur prin pie 2003 and jetro for the financial support and to giancarlo spagnolo for his encouragement discussions with matteo bugamelli giuliano conti davide castellani sergio de nardis paolo guerrieri fabrizio onida and lucia tajoli are gratefully acknowledged the author thanks riccardo faini for sharing his work on the topic and lucia piscitello for making her districts taxonomy available he also benefited from the comments of two anonymous referees that largely influenced the restructuring of the paper many of the arguments of this paper come from the inspiring discussions the author had over the years with massimo tamberi all remaining errors and omissions are the author s own responsibility the data sets and the rscript used in the paper can be downloaded from the webpage http www economiamc org debenedictis

personal bankruptcy and credit supply and demand this paper examines how personal bankruptcy and bankruptcy exemptions affect the supply and demand for credit while generous state level bankruptcy exemptions are probably viewed by most policy makers as benefiting less well off borrowers our results using data from the 1983 survey of consumer finances suggest that they increase the amount of credit held by high asset households and reduce the availability and amount of credit to low asset households conditioning on observable characteristics thus bankruptcy exemptions redistribute credit toward borrowers with high assets interest rates on automobile loans for low asset households also appear to be higher in high exemption states

economies of scale in norwegian electricity distribution a quantile regression approach in this article we investigate scale economies in norwegian electricity distribution companies using a quantile regression approach to the best of our knowledge this is the first attempt to apply this estimation technique when analysing scale economies we estimate the cost elasticities of the two output components network length and number of customers to calculate returns to scale our results show large potential of scale economies particularly for the smallest companies we also find that returns to scale is increasing over time these findings have important implications for policymakers when they are deciding the structure of the industry in the future

regulation and preemptive technology adoption two rival firms must decide if and when to adopt a new technology knowing how adoption costs decline over time and how profit flows vary with adoption patterns in many cases price and entry regulations beneficially slow technology adoption by making preemption strategies less attractive in some cases these regulations can so discourage a firm from preemption as to change the order in which firms adopt new technologies speeding one firm s adoption date and slowing the other s in the context of a particular scenario for cable and telephone companies adoption of new fiber optic technologies the case for lifting the cross ownership ban depends on the extent to which telephone companies are able to implement a superior technology reregulation of cable companies strengthens this case

what constrains financial inclusion for women evidence from indian micro data summary the role and relevance of gender in financial inclusion has been an evolving area of research in recent times although there are several cross country studies on this aspect few within country studies have addressed this issue in a comprehensive manner in this context exploiting disaggregated household level data for india we analyze the interface between gender and finance more specifically we examine whether gender matters for financial inclusion and if so what are the possible factors that influence this relationship our findings suggest significant disparity in both the access to as well as the use of finance by gender on average female headed households are 8 less likely to access formal finance and 6 more likely to access informal finance as compared to households that are headed by males after taking into account other relevant household and state level characteristics that are important in explaining financial access by households similar evidence carries over to the use of finance households headed by female use 20 less cash loans as compared to male headed households subsequently we investigate the possible channels which impede financial inclusion for female headed households our analysis highlights that for female headed households education and wages are more relevant in explaining the access to finance whereas political and social factors are much more germane in explaining the use of finance

retrospectives the lost art of economics economists generally divide economics into two distinct categories positive and normative but how applied economics fits within these categories is unclear this paper argues that applied economics belongs in neither normative nor positive economics instead it belongs in a third category the art of economics currently many economists are trying to use a methodology appropriate for positive economics to guide their applied work work that properly belongs in the art of economics this three part distinction is not mine but dates back to a classic book the scope and method of political economy 1891 by john neville keynes in his book keynes argued that economists failure to distinguish the art of economics as a separate branch from positive and normative economics would lead to serious problems one hundred years later he has turned out to be clairvoyant

the impact of regional financial depth on outbound cross border mergers and acquisitions abstract drawing on china s experience this study examines the role of source province credit conditions and its interplay with host country financial openness in determining the intensity of cross border mergers and acquisitions m as we first show that improved credit conditions in source provinces of china measured by the number of newly established bank branches boost the volume and frequency of their firms cross border m as the effect is stronger for deals where cash is mainly used as the payment method then we identify a complementary effect between the financial openness in host countries and the improved financial depth in source regions more importantly by defining the members of china s the belt and road initiative as countries with higher political openness to china we find that acquirers in china especially the firms affiliated to central government are more political oriented than market oriented when choosing target countries additionally we show that acquirers facing lower political uncertainty from source province benefit more from the enhanced bank access

historical antisemitism ethnic specialization and financial development historically european jews have specialized in financial services while being the victims of antisemitism we find that the present day demand for finance is lower in german counties where historical antisemitism was higher compared to otherwise similar counties households in counties with high historical antisemitism have similar saving rates but invest less in stocks hold lower saving deposits and are less likely to get a mortgage to finance homeownership after controlling for wealth and a rich set of current and historical covariates present day antisemitism and supply side forces do not fully explain the results households in counties where historical antisemitism was higher distrust the financial sector more a potential cultural externality of historical antisemitism that reduces wealth accumulation in the long run

financial development and pathways of growth state branching and deposit insurance laws in the united states 1900 1940 abstract this paper studies the effect of state level banking regulation on financial development and on components of state level growth in the united states from 1900 to 1940 we use these banking laws to assess the findings of a large recent literature that has argued that financial development contributes to economic growth we contend that the institutional mechanism leading to financial development is important in determining its consequences and that some types of financial development can even retard economic growth for the united states from 1900 to 1940 we argue that the financial expansion induced by expanded bank branching accelerated the mechanization of agriculture and spurred growth in manufacturing in contrast financial expansions induced by state deposit insurance had negative consequences for both the agricultural and manufacturing sectors

productivity and efficiency dynamics in indian banking an input distance function approach incorporating quality of inputs and outputs summary banking technology is typically characterized by multiple inputs and multiple outputs that are associated with various attributes such as different types of deposits loans number of accounts classes of employees and location of branches these quality differentials in inputs and outputs are mostly ignored in empirical studies these omissions make the practical value of productivity studies in organizations like banks questionable because quality is a key component of performance this paper proposes using hedonic aggregator functions as a tool of aggregating inputs and outputs with quality attributes within an input distance function framework and analyzes the impact of banking deregulation on efficiency and total factor productivity tfp change in the indian banking industry using panel data for the period 1996 2005 empirical results indicate that banks have improved their efficiency from 61 in 1996 to 72 in 2005 during the post deregulation period and the gain in efficiency of state owned banks has surpassed that of private banks improvement in capital base as indicated by increased capital adequacy ratio played an important role in ushering efficiency gain the return to scale estimate suggests that state owned banks are operating far above their efficient scale and cost savings can be obtained by reducing their size of operations overall tfp growth was above 3 5 annually both technical progress and technical efficiency change consistently played an important role in shaping tfp growth copyright 2010 john wiley sons ltd

privatization of electricity distribution in the northeast of brazil the good the bad the ugly or the naive this paper analyzes the evolution of five electricity distribution companies in the northeast of brazil using technical and financial indicators three privatized and two public firms were analyzed between 1997 and 2008 the financial indicators are used as proxies for the capacity of the business to generate value for shareholders while the technical indicators are used as proxies for service quality provided to consumers we observed that the privatized firms had their financial indicators improved after privatization increasing the value of the firm for the shareholders however there is no evidence that privatization affected the quality of service provided to consumers

bank competition and firm creation we investigate the effects of competition in the financial sector on the creation of firms in the nonfinancial sector explicitly allowing for heterogeneous effects across borrowers characterized by different degrees of asymmetric information we find evidence of a bell shaped relationship between bank competition and firm creation in addition consistently with theories arguing that competition may reduce the availability of credit to informationally opaque firms we find that bank competition results less favorable to the emergence of new firms in industrial sectors where informational asymmetries are more important

banks regional development disparity and growth evidence from turkey in this paper we analyse the impact of credits provided by banks on provincial growth in turkey where state owned banks have an implicit role of reducing disparity by allocating loans in underdeveloped regions that are ignored by private banks we find a paradoxical effect of state owned banks on regional development their credits contribute significantly to the growth of more developed provinces whereas they fail to encourage the well being of less developed provinces on the other hand credits provided by private banks in general positively impact the per capita real gross domestic product gdp in both developed and less developed provinces contrary to their purpose of existence our results suggest that state owned banks did not reduce economic disparity among turkish provinces in the trade off between growth and income disparity our results suggest that state owned banks should improve their lending behaviour especially in the less developed regions in order to broaden their development role to the whole economy copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

poolability and the finance growth nexus a cautionary note abstract the present contribution tests whether countries can be pooled when studying the finance growth nexus overall our results point toward a pragmatic positive answer though considerable heterogeneity is present among developing countries

business cycles and the relationship between concentration and price cost margins using a newly constructed panel data base we examine changes in price cost margins in 284 manufacturing industries between 1958 and 1981 a key finding is a dramatic narrowing of the spread between the margins of concentrated and unconcentrated industries over this period we provide evidence that this narrowing is a result of the greater sensitivity of price cost margins in more concentrated industries to demand fluctuations this finding is robust to the inclusion of other industry variables and to measures of import competition the results indicate that cross sectional estimates of the concentration margins relationship are likely to be both biased and misleading

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

law finance and firm growth we investigate how differences in legal and financial systems affect firms use of external financing to fund growth we show that in countries whose legal systems score high on an efficiency index a greater proportion of firms use long term external financing an active though not necessarily large stock market and a large banking sector are also associated with externally financed firm growth the increased reliance on external financing occurs in part because established firms in countries with well functioning institutions have lower profit rates government subsidies to industry do not increase the proportion of firms relying on external financing the corporate finance literature suggests that market imperfections caused by conflicts of interest and informational asymmetries between corporate insiders and investors constrain firms in their ability to fund investment projects the magnitude of these imperfections depends in part on the effectiveness of the legal and financial systems because these systems differ across countries the literature implies that there should exist systematic cross country differences in firms ability to obtain external capital to finance investment in this paper we examine whether the underdevelopment of legal and financial systems does prevent firms in some countries from investing in potentially profitable growth opportunities in particular we focus on the use of long term debt or external equity to fund growth see our earlier work demirgut kunt and maksimovic 1996a which compares firms financial structures in developed and developing countries and finds the greatest difference to be in the provision of long term credit we estimate a financial planning model to obtain the maximum growth rate that each firm in our thirty country sample could attain without access to long term financing we then compare these predicted growth rates to growth rates realized by firms in countries with differing degrees of development in their legal and financial systems our approach enables us to identify specific characteristics of the legal and financial systems that are associated with long term financing of firm growth thus we provide a micro level test of the hypoth

do regulation and ownership drive the efficiency of electricity distribution evidence from latin america abstract we analyze the impact of alternative regulatory regimes on the labor productivity of electricity distribution firms in latin america we find that i incentive based regimes lead to higher labor productivity than rate of return regulation and ii privatized firms operating under rate of return have at most similar labor productivity as public firms

how important are banks for development national banks in the united states 1870 1900 abstract do banks matter for growth and if so how this paper examines the effects of national banks in the united states from 1870 to 1900 i use the discontinuity in entry caused by a large minimum size requirement to identify the effects of banking for the counties on the margin between getting a bank and not gaining a bank increased production per person by 10 national banks in rural areas improved agriculture over manufacturing moving counties toward geographic comparative advantage since these banks made few long term loans the evidence suggests that the provision of working capital and liquidity matters for growth

a dynamic model for firm response to non credible incentive regulation regimes economic network regulation increasingly use quantitative performance models from econometrics and engineering to set revenues in theory high powered incentive regulation such as revenue caps induces firms to cost efficient behavior independent of underlying model however anecdotal evidence shows regulated firms occasionally maintaining cost inefficiency under incentive regulation even under slumping profitability we present a model for firm level efficiency under a regime with a probability of failure explaining this phenomenon the model is based on the hypothesis that the regulatory choice of method can be associated with intrinsic flaws leading to judicial repeal and replacement of it by a low powered regime the results show that the cost efficiency policy is proportional to the type of firm cost of effort value of time discount factor and the credibility of the method risk of failure a panel data set for 2000 2006 for 128 electricity distributors in sweden is used to validate the model predictions radical productivity slowdown failing profitability and efficiency at the launch and demise of a non credible regulation method the work highlights the fallacy of viewing incentive regulation as a method independent instrument a result applicable in any infrastructure regulation

property rights versus public spirit ownership and efficiency of u s electric utilities prior to rate of return regulation for over a century american economists have been engaged in a vigorous theoretical and empirical debate over the economic performance of publicly owned versus privately owned electric utilities the authors review the historical debate and use micro data collected by the u s commissioner of labor in 1897 98 to construct efficiency measures based on a nonparametric frontier production function since this is prior to state rate of return regulation regulatory effects do not confound the analysis the authors find that publicly owned electric utilities were significantly more efficient than their privately owned counterparts copyright 1991 by mit press

productivity growth and deregulation of japanese electricity distribution deregulation of japanese electric power industry began in 1995 after the amendment of electricity utility industry law in 1995 competition was partially introduced in a generation sector and retail competition started from 2000 eligibility to choose suppliers was gradually extended from larger to smaller customers as of 2008 almost all customers except households can choose their electricity suppliers based upon both previous implementation result of competition policy and review on their achievement japanese government will begin new policy debate in 2013 to assess further retail competition which includes household customers to prepare for policy suggestion on the future electric power industry this study examines the cost structure of japanese electricity distribution for the purpose we estimate a multi product translog cost function of japanese electricity distribution from 1983 to 2003 using the estimated cost function we calculate several economic measures such as productivity growth technical change and economies of scale and scope the empirical results of this study indicate the improvement in productivity growth after deregulation

informed lending and security design we examine the role of security design when lenders make inefficient accept or reject decisions after screening projects lenders may be either too conservative in which case they reject positive npv projects or too aggressive in which case they accept negative npv projects in the first case the uniquely optimal security is debt in the second case it is levered equity in equilibrium profitable projects that are relatively likely to break even are financed with debt while less profitable projects are financed with equity highly profitable projects are financed by uninformed arm slength lenders professional lenders have specialized expertise in screening projects unlike the typical entrepreneur to whom they lend they have been exposed to a wide variety of projects in the past professional lenders have experienced loan officers and analysts who know precisely what information is relevant how to treat soft information such as management quality and how to weigh the various pieces of information in making a forecast of the project s cash flows and default risk this paper examines how securities should be optimally designed when lenders make inefficient accept or reject decisions after screening projects in our model screening generates an informative albeit private signal about the project s profitability high signals indicate a positive net present value npv and low signals indicate a negative npv where the project s npv is increasing

capital structure decisions during a firm s life cycle the study reported here examines the financing choices of small and medium sized firms i e those most vulnerable to information and incentive problems through the lens of the business life cycle we argue that the controversy in the empirical literature regarding the determinants of capital structure decisions is based on a failure to take into account the different degrees of information opacity and consequently firms characteristics and needs at specific stages of their life cycles the results show that in a bank oriented country firms tend to adopt specific financing strategies and a different hierarchy of financial decision making as they progress through the phases of their business life cycle contrary to conventional wisdom debt is shown to be fundamental to business activities in the early stages representing the first choice by contrast in the maturity stage firms re balance their capital structure gradually substituting debt for internal capital and for firms that have consolidated their business the pecking order theory shows a high degree of application this financial life cycle pattern seems to be homogeneous for different industries and consistent over time

service quality in the electricity industry the role of privatization and managerial behavior abstract this paper analyzes the relationship between privatization and service quality in the electricity industry and tests the hypothesis that managerial behavior is a significant intervening factor the sample includes 31 italian distributors over the period 1998 2004 their quality performance is represented by continuity of supply an aspect of quality that is both contractible and regulated results of the empirical analysis suggest that the transfer of shareholdings to private investors does not lead to quality degradation the results also suggest that managerial dominance translates into a reduction in supply quality this effect is likely to be particularly strong for public sector utilities

non parametric efficiency progress and regress measures for panel data methodological aspects this purely methodological paper deals with the role of time in non parametric efficiency analysis using both fdh and dea technologies it first shows how each observation in a panel can be characterized in efficiency terms vis a vis three different kinds of frontiers i contemporaneous ii sequential and iii intertemporal these are then compared with window analysis next frontier shifts outward and inward interpreted as progress or regress are considered for the two kinds of technologies and computational methods are described in detail for evaluating such shifts in either case these are also contrasted with what is measured by the malmquist productivity index finally an alternative way of identifying progress and regress independent of the frontier notion and referring instead to some benchmark notion is extended here to panel data

how efficient are african electricity companies evidence from the southern african countries this paper is a first attempt at documenting efficiency levels in africa s electricity firms their evolution and the sources of this evolution the analysis is based on a sample of 12 operators providing services in the 12 country members of the southern africa power pool we focus on the changes in total factor productivity tfp of the largest operators in each country between 1998 and 2005 we then rely on a data envelopment analysis dea decomposition to identify the sources of the changes in tfp the results suggest fairly comparable levels of efficiency in the region and performance levels and evolution quite independent of the degree of vertical integration the presence of a private actor or the main sources of energy supply the analysis suggest that although the companies have not made significant improvements during the period of analysis in using their capital and human assets they have done much better in adopting better technologies and better commercial practices no clear correlation could be associated with the adoption of reforms during the last decade and data limitations impede a more refined assessment of the impact of reforms on efficiency at this stage

impacts on investments and transmission distribution loss through power sector reforms abstract this study analyses original panel data from 86 countries between 1985 and 2006 econometric methods were used to identify the effects of different policy devices of power sector reforms on performance indicators installed capacity per capita transmission and distribution loss in the countries analyzed the research findings suggest that reform variables such as the entry of independent power producers ipps unbundling of generation and transmission establishment of regulatory agencies and the introduction of a wholesale spot market are the driving forces of increasing generation capacity as well as reducing transmission and distribution loss in the respective regions in this study we can assume that firstly different electric industry s reform policies measures have different impacts on geographically and economically diverse countries secondly a country s state of economic development has a different impact on policy effects of reforms thirdly coexistent with independent regulatory agencies reform policy becomes more powerful in realizing sector performances

is financial inclusion good for bank stability international evidence abstract financial inclusion has become an important public policy priority following the recent global financial crisis yet we know very little of how it impacts soundness of the providers of financial services using an international sample of 2635 banks in 86 countries over the period 2004 12 we find that higher level of financial inclusion contributes to greater bank stability the positive association is particularly pronounced with those banks that have higher customer deposit funding share and lower marginal costs of providing banking services and also with those that operate in countries with stronger institutional quality the results are robust to instrumental variables analysis controlling for bank fixed effects alternative measures of financial inclusion among several other robustness tests our results highlight that the importance of ensuring inclusive financial system is not only a development goal but also an issue that should be prioritised by banks as such a policy drive is good for their stability

mafia and public spending evidence on the fiscal multiplier from a quasi experiment a law issued to combat political corruption and mafia infiltration of city councils in italy has resulted in episodes of large unanticipated temporary contractions in local public spending using these episodes as instruments we estimate the output multiplier of spending cuts at provincial level controlling for national monetary and fiscal policy and holding the tax burden of local residents constant to be 1 5 assuming that lagged spending is exogenous to current output brings the estimate of the overall multiplier up to 1 9 these results suggest that local spending adjustment may be quite consequential for local activity jel d72 e62 h71 k42 the widespread resort to fiscal stimulus at the onset of the global crisis and more recently the emerging need to consolidate deficits in response to rising fiscal imbalances have revitalized the empirical debate on the transmission of fiscal policy the multiplier while the literature has mostly focused on aggregate effects at a national level several recent contributions reviewed below have called attention to the local dimension this shift in focus is motivated by specific policy questions combined with the opportunity to exploit institutional information to address econometric issues in identification 1

long lasting bank relationships and growth of firms a puzzling but consistent result in the empirical literature on banking is that firms with close bank ties do not grow faster than bank independent firms in this paper we reconsider the link between relationship lending and firm growth distinguishing firms by size and expansion contraction conditions the idea is that the beneficial effects of relationship lending on information asymmetries can be compensated by other negative capture risk and externality effects which make relational banks reluctant to support long term growth projects of client firms and that the strength of these compensating effects varies with firm size and health status we explore the influence of long lasting bank relationships on employment and asset growth of a large sample of italian firms the main finding is that relationship lending hampers the efforts of small firms to increase their size while it mitigates the negative growth of troubled medium large enterprises

corruption and inefficiency theory and evidence from electric utilities we investigate the determinants of the efficiency of firms with a focus on the role of corruption we construct a simple theoretical model where corruption increases factor requirements of firms because it diverts managerial effort away from factor coordination we then exploit a unique dataset comprising firm level information on 80 electricity distribution firms from 13 latin american countries for the years 1994 to 2001 as predicted by the model we find that more corruption in the country is strongly associated with more inefficient firms in the sense that they employ more inputs to produce a given level of output the economic magnitude of the effects is large the results hold both in models with country and firm fixed effects the results survive several robustness checks including different measures of output and efficiency and instrumenting for corruption other elements associated with inefficiency are public ownership inflation and lack of law and order but corruption appears to play a separate and more robust role

bank privatization finance and growth abstract this paper examines whether privatizing state owned banks improves finance and economic growth to do so we exploit regional banking variations in russia induced by the idiosyncratic creation of specialized banks in the last years of the soviet union 1988 91 that were subsequently privatized starting in 1999 private banks including surviving spetsbanks emerged as an important source of external finance for private firms and households we document that the regional concentration of spetsbanks in the early years of the russian federation is orthogonal to economic fundamentals that are related to growth after the emergence of bank finance results indicate that while privatized banking increased lending significantly it did not increase economic growth however privatization did increase growth when banks retained fewer political connections and when regional property rights were better protected highlighting the importance of both factors

cost function estimates scale economies and technological progress in the turkish electricity generation sector abstract turkish electricity sector has undergone significant institutional changes since 1984 the recent developments since 2001 including the setting up of a regulatory agency to undertake the regulation of the sector and increasing participation of private investors in the field of electricity generation are of special interest this paper estimates cost functions and investigates the degree of scale economies overinvestment and technological progress in the turkish electricity generation sector for the period 1984 2006 using long run and short run translog cost functions estimations were done for six groups of firms public and private the results indicate existence of scale economies throughout the period of analysis hence declining long run average costs the paper finds empirical support for the averch johnson effect until 2001 i e firms overinvested in an environment where there are excess returns to capital but this effect was reduced largely after 2002 technological progress deteriorated slightly from 1984 1993 to 1994 2001 but improved after 2002 overall the paper found that regulation of the market under the newly established regulating agency after 2002 was effective and there are potential gains from such regulation

household inequality entrepreneurial dynamism and corporate financing economic theories provide conflicting hypotheses on how wealth inequality affects entrepreneurial dynamism to empirically investigate its impact we construct local measures of household wealth inequality based on financial rents home equity and 1880 farmland we identify its effects on entrepreneurship by instrumenting it with land distribution under the 1862 homestead act or us states removal of death taxes wealth inequality decreases firm entry and exit and the proportion of high tech businesses across metropolitan statistical areas there is also less redistribution into public goods supportive of entrepreneurship such as schooling and the judiciary income per capita consequently grows more slowly

finance and the sources of growth the authors evaluate whether the level of development in the banking sector exerts a causal impact on economic growth and its sources total factor productivity growth physical capital accumulation and private saving they use 1 a pure cross country instrumental variable estimator to extract the exogenous component of banking development and 2 a new panel technique that controls for country specific effects and endogeneity they find that banks do exert a large causal impact on total factor productivity growth which feeds through to overall gdp gross domestic product growth the long run links between banking development and both capital growth and private savings are more tenuous

does local financial development matter we study the effects of differences in local financial development within an integrated financial market we construct a new indicator of financial development by estimating a regional effect on the probability that ceteris paribus a household is shut off from the credit market by using this indicator we find that financial development enhances the probability an individual starts his own business favors entry of new firms increases competition and promotes growth as predicted by theory these effects are weaker for larger firms which can more easily raise funds outside of the local area these effects are present even when we instrument our indicator with the structure of the local banking markets in 1936 which because of regulatory reasons affected the supply of credit in the following 50 years overall the results suggest local financial development is an important determinant of the economic success of an area even in an environment where there are no frictions to capital movements

financial development and economic growth views and agenda this critique argues that the preponderance of theoretical reasoning and empirical evidence suggests a positive first order relationship between financial development and economic growth the body of work would push even most skeptics toward the belief that the development of financial markets and institutions is a critical and inextricable part of the growth process and away from the view that the financial system is an inconsequential sideshow responding passively to economic growth many gaps remain however and the paper highlights areas in acute need of additional research

investment cash flow sensitivities credit rationing and financing constraints in small and medium sized firms the controversy on whether investment cash flow sensitivity is a good indicator of financing constraints is still unsolved we apply a comprehensive approach by cross validating our analysis with both balance sheet and qualitative data on self declared credit rationing and financing constraints on a sample of mainly small and medium sized firms our qualitative information shows that self declared credit rationing is weakly related to both traditional a priori factors such as firm size age and location and lenders rational decisions taken on the basis of their credit risk models we use the qualitative information on firms which were denied additional credit to provide evidence relevant to the investment cash flow sensitivity debate the evidence shows that self declared credit rationing significantly discriminates between firms which possess or not such sensitivity while a priori criteria do not the same result does not apply when we consider the wider group of financially constrained firms which do not seem to have a higher investment cash flow sensitivity supporting the more recent empirical evidence in this direction

the relative efficiency of public and private firms in a regulated environment the case of u s electric utilities abstract the relative efficiency of privately owned and publicly owned electric utilities is investigated using theoretical and econometric models that allow for the effects of both ownership type and regulation the estimation results indicate that the two types of firms are equally cost inefficient in the united states the average effect of inefficiency is to increase the cost of production by 2 4 percent holding output constant inefficiency increases the average quantities demanded of capital and labor and decreases the average quantity demanded of fuel