politics growth and inequality in rural china does it pay to join the party abstract economic reform is often constrained because rank and file bureaucrats responsible for implementation have vested interests that oppose change drawing on an unusual longitudinal survey data set for a representative rural county in northern china we show an alternative positive scenario consistent with the presence of an implicit performance based incentive contract that ties the household incomes of local officials to market liberalization increases in consumer demand and the provision of local public goods the mechanisms appear to be tolerated as the fruits of growth are shared fairly equitably thus allowing implementation of a politically and economically self reinforcing reform process

dynamic jump intensities and risk premiums evidence from s p500 returns and options we build a new class of discrete time models that are relatively easy to estimate using returns and or options the distribution of returns is driven by two factors dynamic volatility and dynamic jump intensity each factor has its own risk premium the models significantly outperform standard models without jumps when estimated on s p500 returns we find very strong support for time varying jump intensities compared to the risk premium on dynamic volatility the risk premium on the dynamic jump intensity has a much larger impact on option prices we confirm these findings using joint estimation on returns and large option samples

dodging the grabbing hand the determinants of unofficial activity in 69 countries across 69 countries higher tax rates are associated with less unofficial activity as a percent of gdp but corruption is associated with more unofficial activity entrepreneurs go underground not to avoid official taxes but to reduce the burden of bureaucracy and corruption dodging the grabbing hand in this way reduces tax revenues as a percent of both official and total gdp as a result corrupt governments become small governments and only relatively uncorrupt governments can sustain high tax rates 2000 elsevier science s a all rights reserved

the skew risk premium in the equity index market we develop a new method for measuring moment risk premiums we find that the skew premium accounts for over 40 of the slope in the implied volatility curve in the s p 500 market skew risk is tightly related to variance risk in the sense that strategies designed to capture the one and hedge out exposure to the other earn an insignificant risk premium this provides a new testable restriction for asset pricing models trying to capture in particular disaster risk premiums we base our results on a general trading strategy by replicating contracts that swap implied for realized conditional asset moments

economic transformation and income inequality in urban china evidence from panel data using panel data of 4 730 urban residents drawn from 20 cities in china this article examines changes in income determinants between the prereform and reform eras to guide this empirical study a conceptual model is developed that emphasizes the coevolution of politics and markets to synthesize theoretical ideas in the recent debate on the transformation of state socialist societies the findings show significant changes in returns to education and in the rise of private hybrid firms in the reform era there is also strong evidence of institutional persistence in returns to positional power and in the organizational hierarchy these findings reveal multifaceted processes of transformation that call for more sophisticated theoretical models and in depth institutional analyses

political connections and entrepreneurial investment evidence from china s transition economy abstract recent literature in entrepreneurship suggests that market and legal institutions matter for entrepreneurial investment yet prior studies have focused on the role of formal institutions building on new institutional theory and political connections literature this study aims to evaluate the role of political connections in entrepreneurial reinvestment in less developed and transition economies the purpose of this paper is threefold first it aims to demonstrate systematically how political connections affect entrepreneurial reinvestment second it applies this relationship to a subsample group i e small and medium enterprises smes in order to empirically test whether political connections are more beneficial for large firms or smes third it demonstrates that political connections substitute for rather than complement formal market and legal institutions the empirical test uses a nationally representative sample of entrepreneurial firms from china s transition economy

parametric inference and dynamic state recovery from option panels we develop a new parametric estimation procedure for option panels observed with error we exploit asymptotic approximations assuming an ever increasing set of option prices in the moneyness cross sectional dimension but with a fixed time span we develop consistent estimators for the parameters and the dynamic realization of the state vector governing the option price dynamics the estimators converge stably to a mixed gaussian law and we develop feasible estimators for the limiting variance we also provide semiparametric tests for the option price dynamics based on the distance between the spot volatility extracted from the options and one constructed nonparametrically from high frequency data on the underlying asset furthermore we develop new tests for the day by day model fit over specific regions of the volatility surface and for the stability of the risk neutral dynamics over time a comprehensive monte carlo study indicates that the inference procedures work well in empirically realistic settings in an empirical application to s p 500 index options guided by the new diagnostic tests we extend existing asset pricing models by allowing for a flexible dynamic relation between volatility and priced jump tail risk importantly we document that the priced jump tail risk typically responds in a more pronounced and persistent manner than volatility to large negative market shocks

does social capital affect investment in human capital family ties and schooling decisions we analyse whether traditional sharing norms within kinship networks affect education decisions of poor black households in kwazulu natal theory predicts that the size of the kinship network ambiguously impacts on the incentive to invest in human capital due to opposing empathy and free rider effects our empirical analysis based on a range of different estimators suggests the latter effect dominates forced solidarity within the network discourages investments in human capital

the multitask theory of state enterprise reform empirical evidence from china the degree of state ownership remains significant in the chinese economy despite more than two decades of economic reform since 1979 most of the remaining state owned enterprises soes are money losing and the few exceptional ones tend to be sheltered by government protection in selected industries yet china has been enjoying one of the most spectacular growth experiences in world history and much of the growth is driven by non state owned enterprises non soes given the poor financial performance of soes the co existence of state ownership and non state ownership in china is a puzzling phenomenon does state ownership exist solely for the benefit of politicians or has state ownership played any role in china s spectacular growth is there any rationale behind china s gradual and selective approach towards privatizing its soes what types of soes does the chinese government choose to privatize what are the consequences of privatization in this paper we offer a multitask theory of soe reform in the context of china which has predictions about the types of soes to be chosen for privatization and the results of privatization we then present empirical evidence supporting the basic premise of the theory and its predictions

the informal sector in developed and less developed countries a literature survey the main goal of this study is two fold 1 to provide ageneral overview of the contributions to the literature on theinformal sector with a special focus on the public choiceapproach and 2 to compare these contributions across twoinstitutionally different types of countries developed andless developed developing and transition countries thepaper focuses on the criteria used to define the informalsector the relationship between the formal and informaleconomy tax evasion and public choice analysis it isstressed throughout this paper that the distinction betweenthe two types of countries is of key importance

lag length selection and tests of granger causality between money and income one of the most widely accepred relationships in macroeconomics is the positive relationship between the rate of growth of the money supply and the rate of growth of income a diversity of opinion arises however with the attempt to identify a causal relationship between these variables while friedman and schwartz 1963 initiated the empirical investigation of money income causality sims 1972 made the most significant contribution to this literature with a practical application of the criterion developed by granger 1969 for identifying a causal relationship since the appearance of sims s approach and an alternative one advanced by sargent 1976 many researchers have applied these techniques to the investigation of the causal relationship between money and income l with two exceptions hsiao 1981 and mcmillin and fackler 1984 these researchers have arbitrarily chosen the lengths of their distributed lags the purpose of this paper is to test for granger causality between money and income this paper differs from previous work in that considerably more attention is focused on the effect of the lag specification on the test results in particular we investigate the extent to which rules of thumb arbitrary lag specifications and

institutional environment public private hybrid forms and entrepreneurial reinvestment in a transition economy abstract many less developed and especially transition economies have had high levels of entrepreneurial reinvestment for relatively long periods despite the absence of developed government institutions to resolve this puzzle this study proposes that many entrepreneurial firms in these economies have been actively engaged in political activities through which organizational arrangements are created to co opt government agencies into their organizational structures to manipulate and even control unfavorable institutional environments it empirically evaluates the role of one such organizational arrangement public private hybrid forms in china s gradual reform period it suggests that through protecting property rights and facilitating access to key resources and opportunities public private hybrid forms may act as a substitute for deficient market and legal institutions thus facilitating entrepreneurial reinvestment the findings from a national sample of chinese entrepreneurial firms support our propositions in general entrepreneurial firms adopting public private hybrid forms enjoy higher entrepreneurial reinvestment rates than pure private firms during gradual reform and this may be the case because such forms help to both protect private property rights and access key resources and opportunities in addition the association between the forms and reinvestment rate is found higher under less developed government institutions

a new approach to measuring financial contagion this article proposes a new approach to evaluate contagion in financial markets our measure of contagion captures the coincidence of extreme return shocks across countries within a region and across regions we characterize the extent of contagion its economic significance and its determinants using a multinomial logistic regression model applying our approach to daily returns of emerging markets during the 1990s we find that contagion is predictable and depends on regional interest rates exchange rate changes and conditional stock return volatility evidence that contagion is stronger for extreme negative returns than for extreme positive returns is mixed

regional institutional development political connections and entrepreneurial performance in china s transition economy while previous research emphasizes the role of political connections in facilitating entrepreneurial performance during china s early reform period 1978 1999 this study argues that regional institutions were increasingly conducive to entrepreneurial activities and thus also played a key role in china s entrepreneurial success during that period the purpose of this study is twofold first it aims to demonstrate how regional institutional development facilitated entrepreneurial performance in china second it aims to understand how formal institutional development among chinese regions affected the role of political connections using a two level hierarchical dataset on chinese private enterprises this study finds that not only legal protection of property rights but also the development of market systems mattered for entrepreneurial performance in addition it shows that political connections played a diminishing role during regional institutional development in china

financial development and economic growth the case of taiwan this paper examines the relationship between financial development and economic growth in taiwan from 1962 to 1998 using a four variable var model the competing hypotheses of demand following versus supply leading are empirically tested the results from granger causality tests based on vector error correction models vecm suggest unidirectional causality running from financial development measured as the ratio of m2 to gdp to economic growth this result supports the supply leading hypothesis for taiwan this finding highlights the importance of financial development in taiwan s recent growth

the risk premia embedded in index options we study the dynamic relation between aggregate stock market risks and risk premia via an exploration of the time series of equity index option surfaces the analysis is based on estimating a general parametric asset pricing model for the risk neutral equity market dynamics using a panel of options on the s p 500 index while remaining fully nonparametric about the actual evolution of market risks we nd that the risk neutral jump intensity which controls the pricing of left tail risk cannot be spanned by the market volatility and its components so an additional factor is required to account for its dynamics this tail factor has no incremental predictive power for future equity return volatility or jumps beyond what is captured by the current and past level of volatility in contrast the novel factor is critical in predicting the future market excess returns over horizons up to one year and it explains a large fraction of the future variance risk premium we contrast our ndings with those implied by structural asset pricing models that seek to rationalize the predictive power of option data relative to those studies our ndings suggest a wider wedge between the dynamics of equity market risks and the corresponding risk premia with the latter typically displaying a far more persistent reaction following market crises

financial development and economic growth international evidence the importance of the relationship between financial development and economic growth has been well recognized and emphasized in the field of economic development 1 although recent writings on this subject seem to accept the hypothesis that financial development is crucial for successful economic growth 2 patrick asked the critical question which sector financial or real leads in the dynamic process of economic development patrick identified two possible patterns in the causal relationship between financial development and economic growth in the first growth induces an expansion of the financial system 3 according to this view called demand following the lack of financial growth is a manifestation of the lack of demand for financial services as the real side of the economy develops its demands for various new financial services materialize and these are met rather passively from the financial side in the second pattern the expansion of the financial system precedes the demand for its services channeling scarce resources from small savers to large investors according to relative rates of return the financial sector precedes and induces real growth the deliberate establishment and promotion of financial institutions in many less developed countries ldcs might reflect this belief in the supply leading relationship between the two developments a natural question then concerns the direction of causality between financial development and economic growth patrick asserted that the direction of causality changes over the course of development in his view financial development is able to induce real innovation type investment before sustained modern economic growth gets under way and as the process of real growth occurs the supply leading impetus gradually becomes less important and the demand following financial response

does financial development lead economic growth a vector auto regression appraisal using a vector autoregression var approach several hypotheses are re examined suggested by the literature concerning the relationship between financial development and economic growth investment and productivity the models use quarterly time series data from ten oecd countries and china innovation accounting or variance decomposition and impulse response function analysis is applied to examine interrelationships between variables in the var system and therefore differs from the more usual granger causality approach in particular it examines the relationship between financial development proxied by total credit at best weak support is found for the hypothesis that financial development leads economic growth

female labor force participation in developing and developed countries consideration of the informal sector t he steady increase in the labor force participation of married women in the united states over the last few decades has stimulated considerable interest in the economic analysis of a woman s decision to work pioneering work by mincer 1962 and cain 1966 has served as a theoretical and empirical foundation for numerous studies of female labor force participation this research typically treats a woman s current labor force status measured as a dummy variable for the individual and as a rate for the population as a measure of labor supply which depends upon economic and demographic characteristics such as female earnings male earnings non earnings income schooling work experience age number of children and so on notable examples are bowen and finegan 1969 cogan 1975 1978 gronau 1973 heckman 1974 1980 and schultz 1980 while the associated theoretical models and statistical techniques have been refined considerably especially by lewis 1972 ben porath 1973 and heckman 1974 1979 the coefficients estimated using u s data have remained reasonably robust also there is substantial agreement among micro level and aggregate results see cain 1966 and bowen and finegan 1969 for comparisons as this body of literature has grown the economic models developed within it have been implemented to analyze the labor force behavior of women in other countries however there is no consistent international pattern in the behavioral trends of the female labor force perhaps the most notable difference in the economic opportunities available to women in many other countries is that they may work in the informal sector of the labor market women may be considered economically active and may be counted as being in the labor force as they produce goods at home for market sale work on the family farm or work in a small family run business the most convenient means of categorizing workers as being in the informal sector is by their employment status following jaffe and azumi 1960 we assume that women reported as self employed or as family workers are engaged in the informal sector of the labor force almost all women in the u s labor force work as employees only 6 6 worked as self employed or family workers in 1978 given japan s advanced economic development a surprisingly large fraction 38 4 in 1978 of its female labor force comprises self employed and family workers clearly in the united states and countries with a similar distribution of the labor force by employment status the labor force participation decision may be treated as the choice to work or not to work however if individuals regard the decision to enter the labor force as an employee as being distinct from the choice to enter the labor force as a family worker then economic models of labor force participation which treat these choices as identical will incorporate a specification bias the labor force participation decision may differ between these two sectors for several reasons first the wage offers may differ by sector second while entering the informal sector may be virtually frictionless there may be fixed costs among them commuting time and child care associated with working in the formal sector third family workers may face more flexible working schedules than paid employees the latter group may be subject to contractual working hours in order to treat the labor force decisions in coiuntines with significant informal sectors this received for publication march 16 1981 revision accepted for publication september 15 1982 rutgers university this paper is a revision of work begun with my doctoral dissertation i would like to thank h gregg lewis and t dudley wallace for their suggestions and hideo okamoto for providing the data set i would also like to thank david crawford toshiaki tachibanaki two anonymous referees and the participants of the columbia labor workshop the japan economic seminar and the yale labor and population workshop for their comments remaining errors are my own this research was supported by a postdoctoral fellowship from the national institutes of health additional funding was provided by the william and flora hewlett foundation grant to the yale economic demography program i statistical abstract of the u s and japan statistical yearbook

university start up formation and technology licensing with firms that go public a resource based view of academic entrepreneurship abstract although academic entrepreneurship is a topic receiving some attention in the literature higher education s appetite for expanding technology transfer activities suggests that more research is needed to inform practice this study investigates the effects of particular resource sets on two university commercialization activities the number of start up companies formed and the number of initial public offering ipo firms to which a university had previously licensed a technology utilizing multisource data on 120 universities and a resource based view of the firm framework a set of university financial human capital and organizational resources were found to be significant predictors of one or both outcomes

determinants of entrepreneurial activities in china abstract the institutional environment including protection of private properties and contract enforcement has been rather unfavorable for the emergence and development of china s private enterprises this is in sharp contrast to the case of the developed economies where the institutional environment is conductive to the entrepreneurial activities and only the personal attributes of would be entrepreneurs determine their entrepreneurship decision we thus propose a theoretical framework for the entrepreneurship decision in china with a focus on the role of the institutional environment using a life histories survey data of 2854 respondents from twenty cities in china we find strong support for the impacts of the institutional environment and its interactions with other determinants of entrepreneurship decision

characteristics of households in the informal sector of an emerging economy using the case study of trinidad and tobago we investigate the socio economic demographic and attitudinal characteristics of households that participate in the informal sector of an emerging economy and their perception of the risk of detection by tax authorities while doing so data are gathered from a cross sectional field survey covering 570 households results using multinomial logit and ordered probit models suggest that households are motivated to participate in the informal sector when members spend little time in formal sector activity believe that taxes are too high and their incomes are too low have dependents to support and believe that the resulting tax evasion will go undetected their perception of the risk of detection by the tax authority is determined largely by the income they earn in the formal sector and the extent of government bureaucracy prevailing there

who are china s entrepreneurs it has been increasingly recognized that entrepreneurship plays a crucial role in successful economies the schumpeterian approach to growth aghion and howitt 1997 advances the view that entrepreneurial dynamism is the key to innovation and growth a growing body of policy work emphasizes the important role of entrepreneurs in economic development world bank 2003 yet research on entrepreneurship in economics is rather limited there are three distinct perspectives on entrepreneurship in social sciences the first perspective focuses on the role of economic political and legal institutions in fostering or restricting entrepreneurship institutional problems are seen in credit constraints that make it impossible to borrow and set up businesses insecurity of property rights that provides insufficient incentives for entrepreneurs and regulatory burdens that make setting up new enterprises difficult the second perspective focuses on the sociological variables shaping entrepreneurship for example sociologists study the role of values and social networks in promoting or discouraging entrepreneurial activities social networks may work through a variety of channels such as family friends or ethnic groups the third perspective emphasizes individual characteristics of entrepreneurs psychologists have studied the traits associated with entrepreneurship such as a personal need for achievement belief in the effect of personal effort on outcomes attitudes towards risk and individual self confidence although there are studies on each perspective little work looks at each of these factors taking the other into account this is precisely what we do in this paper using a new data set of chinese entrepreneurs and a matching sample of non entrepreneurs with similar age gender and educational characteristics the survey covers both entrepreneurs and non entrepreneurs in order to understand how they differ in individual characteristics family background social networks values and beliefs and perceptions of the institutional environment the data further allow us to separate chinese entrepreneurs into two groups by necessity and by opportunity and to differentiate non entrepreneurs in three groups those who never thought to be entrepreneurs those who thought but never became entrepreneurs and those who became entrepreneurs but eventually failed this is a richer data set than a previous survey in russia

property rights and finance which is the tighter constraint on private sector investment weak property rights or limited access to external finance from a survey of new firms in post communist countries we find that weak property rights discourage firms from reinvesting their profits even when bank loans are available where property rights are relatively strong firms reinvest their profits where they are relatively weak entrepreneurs do not want to invest from retained earnings

exploring return dynamics via corridor implied volatility some fundamental questions regarding equity index return dynamics are difficult to address due to the latent character of spot volatility we exploit tick by tick option quotes to compute a novel corridor volatility index which may serve as an observable proxy for short term volatility exploiting this index we find that equity index volatility jumps are common symmetrically distributed and cojump with the underlying returns moreover the return volatility asymmetry is more pronounced than is generally recognized and is in force for both diffusive and jump innovations in volatility finally the index performs admirably during turbulent market conditions constituting a useful real time gauge of market stress

productivity and territorial specialization on the basis of a relatively free trade world and global economy specialization tends to increase the comparative advantages of a country but in this scenario not countries but cities are the territorial organizations that play the main role cities concentrate the economic activity and political influential household that reflects economic changes the purpose of this study is to explore the principles underlie the distribution of population on a territory and the likely effect of economic development on redistributing population geographically

autoregressive modelling and money income causality detection abstract a step wise procedure based on granger s concept of causality and abaike s final prediction error criterion is suggested as a practical means to identify the order of lags of each variable in a multivariate autoregressive process the model seems useful because it can serve as a reduced form formulation to avoid imposing often spurious or false restrictions of the model it also provides a reasonably powerful test of causality the idea is applied to u s postwar money and income data it is found that between m1 and gnp a bivariate feedback model fits the data best between m2 and gnp a one way causal model from money to income performs better diagnostic checks applied to our model seem to indicate the adequacy of our approach

tail risk concerns everywhere we show that the beta with respect to an index of global ex ante tail risk concerns x1d53e x1d540 x1d54f which we construct using out of the money options on multiple global assets negatively drives cross sectional return variations across asset classes including international equity indices foreign currencies and government bond futures the pricing power of x1d53e x1d540 x1d54f becomes stronger when more asset class level tail risk concerns are incorporated in the index construction x1d53e x1d540 x1d54f also dominates asset class level tail risk concerns in pricing assets within each asset class these evidences imply that the pricing effect of tail risk concerns works predominantly as a global channel the x1d53e x1d540 x1d54f pricing effect is distinct from that of tail risk factors based on historical realizations consistent with the interpretation that tail risk concerns likely reflect investors ex ante subjective belief about tail risk this paper was accepted by neng wang finance

the effect of social capital on post earthquake reconstruction programmes in nantou county taiwan an assessment the study aims through an examination of social capital on post earthquake reconstruction programmes to assess the impact of government s programmes on integrated community development and to draw policy implications to this end the study explores the programmes implemented by the government in the communities of nantou county after the earthquake the findings show that of the three measurements infrastructure improvement satisfied most respondents in the three survey areas but in lugu township and in nantou city further improvements are needed in unemployment reduction and respondents betterment

a jump diffusion model for option pricing brownian motion and normal distribution have been widely used in the black scholes option pricing framework to model the return of assets however two puzzles emerge from many empirical investigations the leptokurtic feature that the return distribution of assets may have a higher peak and two asymmetric heavier tails than those of the normal distribution and an empirical phenomenon called volatility smile in option markets to incorporate both of them and to strike a balance between reality and tractability this paper proposes for the purpose of option pricing a double exponential jump diffusion model in particular the model is simple enough to produce analytical solutions for a variety of option pricing problems including call and put options interest rate derivatives and path dependent options equilibrium analysis and a psychological interpretation of the model are also presented

tails fears and risk premia we show that the compensation for rare events accounts for a large fraction of the average equity and variance risk premia exploiting the special structure of the jump tails and the pricing thereof we identify and estimate a new investor fears index the index reveals large time varying compensation for fears of disasters our empirical investigations involve new extreme value theory approximations and high frequency intraday data for estimating the expected jump tails under the statistical probability measure and short maturity out of the money options and new model free implied variation measures for estimating the corresponding risk neutral expectations

taxation and labour supply with risky activities consider the following three phenomena a in recent years dramatic shifts in the types of contract between london cabbies and the taxi owners have been observed b if one tries to hire a housepainter in the uk one is often quoted two rates one for official work during regular hours and for unofficial weekend and evening work c in two unrelated discussions with economics professors about the textbook model of taxation and labour supply each revealed to me that marginal hours released from his regular employment were spent not in the form of leisure but in participating in stock market speculation

a general framework for measuring vat compliance rates summary measures of value added tax vat compliance rates are valuable for identifying problem areas in vat implementation they are also essential for meaningful crosscountry and crosstime comparisons of vat compliance we present a comprehensive and general framework for calculating vat compliance rates at both the economy wide and detailed sectoral levels unlike existing measures of vat compliance our framework isolates a compliance measure from the effects on vat receipts of detailed features of vat systems as actually implemented by tax authorities these features include multiple vat rates exemptions registration rates refund limitations informal activity taxation of domestic nonresidents and undeclared imports we implement our comprehensive vat compliance measure for vietnam a country with a complex vat system our estimate of vietnam s vat compliance rate is about 13 percentage points higher than that calculated by the most popular measure of compliance collection efficiency ce our m

a quantitative reassessment of the finance growth nexus evidence from a multivariate var abstract the long run relationship between financial development and economic growth is examined in a multivariate vector autoregression var framework using 10 sample countries difficulties surrounding the cross country regressions and bivariate time series studies are outlined the long run financial development and output relationships are identified in a cointegrating framework through tests of over identifying restrictions we find bi directional causality between financial development and economic growth in all the sample countries conclusions that stand distinct from those in the existing empirical literature we attribute our findings to i analysis of a higher dimensional system ii a new method of identifying the long run economic relationships and iii a new approach to long run causality testing

income tax evasion labour supply and the equity efficiency tradeoff abstract this paper is an attempt to incorporate tax evasion into the analysis of optimum income taxation a model of variable labour supply with tax evasion is used to derive supply functions for labour in regular and irregular markets given taxpayer behaviour the government chooses tax rates penalties and the probability of detection to maximize a utilitarian social welfare function the results consist in the derivation of a formula for the optimum marginal tax rate and a characterization of the factors determining the choice between the penalty rate and the probability of detection as instruments for the control of tax evasion

the pricing of tail risk and the equity premium evidence from international option markets we explore the pricing of tail risk as manifest in index options across international equity markets the risk premium associated with negative tail events displays persistent shifts unrelated to

benefits and costs of international financial integration theory and facts the author provides a selective review of the recent analytical and empirical literature on the benefits and costs of international financial integration he discusses the impact of financial openness on consumption investment and growth and the impact of foreign bank entry on the domestic financial system consistent with some recent studies the author argues that financial integration must be carefully prepared and managed to ensure that the benefits outweigh the short run risks prudent macroeconomic management adequate supervision and prudential regulation of the financial system greater transparency and improved capacity to manage risk in the private sector are important requirements for coping with potentially abrupt reversals in pro cyclical short term capital flows the author adopts a more skeptical view than some assessments in two areas however first only foreign direct investment appears to provide dynamic gains and improved prospects for growth the evidence on the benefits of other types of capital flows remains weak second empirical research on the net benefits associated with foreign bank penetration is far from conclusive in particular the possibility that such penetration may lead to adverse changes in the allocation of credit among domestic firms cannot be dismissed on the basis of the existing evidence

causality between financial development and economic growth an application of vector error correction and variance decomposition methods to saudi arabia this article makes an attempt to test the possible directions of causality between financial development and economic growth which were labelled by patrick 1966 as the supply leading and demand following hypothesis saudi arabia is taken as a case study the methods applied are the error correction and variance decompositions techniques including the most recently developed long run structural modelling lrsm pesaran and shin 2002 which by imposing exactly identifying and overidentifying restrictions on the cointegrating vector has taken care of a major limitation of the conventional cointegrating estimates in that they were atheoretical in nature to the best of our knowledge there has not been any study on this issue with the application of the techniques that incorporate lrsm the stability of the functions has also been tested by cumulative sum cusum cumulative sum of squares cusumsq and chow test chow tests our findings based on the above mentioned rigorous techniques tend to s

defining and estimating underground and informal economies the new institutional economics approach abstract a taxonomy of underground economies is elaborated based on the new institutional approach to economic development members of formal sectors confront different sets of transformation and transaction costs than do members of informal sectors and these differences are regarded as crucial to the development process the paper distinguishes illegal unreported unrecorded and informal economies and examines the conceptual and empirical linkages among them alternative micro and macro methodologies for measuring underground activities are reviewed and evaluated including census and survey procedures discrepancy and monetary methods when you cannot measure your knowledge is meager and unsatisfactory lord kelvin inscription at harper library university of chicago

elite opportunity in transitional economies command economies gave communist era elites administrative control and material privilege but severely restricted money income and private wealth markets and privatization have injected new value into public assets and create unprecedented opportunities for elite insiders these opportunities depend on the extent of regime change and barriers to asset appropriation regime change varies from the survival of the entire party hierarchy to its rapid collapse and defeat in competitive elections barriers to asset appropriation vary with the extent pace and form of privatization and the concentration and liquidity of assets different combinations of such circumstances jointly affect the extent to which prior elites obtain ownership or control of privatized assets use political office to extract larger incomes move into salaried elite occupations or fall out of the elite altogether regime change and barriers to asset appropriation affect change at the national level but outcomes vary across economic sectors because of characteristics of organizations elite positions and assets this elementary theory serves to integrate varied findings from recent research on central europe china and russia and yields predictions for other regions

job matching and occupational choice this paper presents a model of job matching the generalizes the existing literature by allowing for different jobs types or occupations such differences affect the value of job specific experience inducing a career profile where certain types are sampled before others more specifically the analysis shows that it is optimal for the young and inexperienced to gravitate toward jobs exhibiting a certain kind of risk then after deriving the equilibrium job turnover rate for an economy in which people do not switch occupations panel data are used to estimate its underlying parameters the hypothesis that people do not switch occupations is rejected against the alternative that they do thus providing empirical support for the theoretical extension undertaken here