an econometric investigation of capital flight this paper seeks to give a comprehensive empirical survey of private capital flight from developing countries first three alternative calcualtions of net private capital outflows are presented for 22 developing countries during 1978 85 it turns out that several of these countries had experienced major capital flight second using an economtric model which combines time series and cross section data a portfolio model is estimated in order to find some of the reasons for capital flight third on quarterly time series capital flight from mexico is determined in a time jseries model this analysis gives further insight into the causes of capital flight the overall result from both studies is that changes in the expected relative rate of return on assets between the foreign and domestic market are a major cause of capital flight

shifts in the composition of government spending in response to external debt burden abstract this paper examines the effects of external public debt burden on the composition of public spending in a sample of 47 developing countries for 1972 2001 we specify a system of equations for the relative spending shares of six economic categories and estimate it using several estimation methods and samples we find support for the adverse effect of the debt burden on capital expenditure in the full sample and in the middle east north africa and sub saharan africa subsamples where the debt burden was relatively high among components of current expenditure increased debt burden shifted the shares against nonwage goods services and subsidy and transfers while leaving the share of politically sensitive category of wages and salaries unscathed in most cases

claim timing and ex post adverse selection many health care treatments are not urgent and may be delayed if patients so choose because insurance coverage is typically determined by the treatment date individuals may have incentives to strategically delay treatments to minimize out of pocket costs the strategic delay of treatment a particular form of moral hazard can be an important source of subsequent adverse selection in which ex ante identical individuals select insurance coverage based on their differing accumulation of previously delayed treatments this article investigates these forces empirically in the context of the missing market for dental insurance using rich claim level data my analysis reveals that approximately 40 of individuals strategically delay dental treatments when incentivized to do so and this flexibility in delaying treatment can explain why the market for dental insurance has largely unraveled more generally the counterfactual analysis suggests features such as open enrolment periods and contracting on pre existing conditions may be helpful tools in overcoming adverse selection in insurance contexts where the timing of uncertainty is not contractible

a test of the rational expectations hypothesis using data from a natural experiment data on contestants choices in italian game show affari tuoi are analysed in a way that separates the effect of risk attitude preferences from that of beliefs concerning the amount of money that will be offered to contestants in future rounds this separate identification is possible by virtue of the fact that at a certain stage of the game beliefs are not relevant and risk attitude is the sole determinant of choice the rational expectations hypothesis is tested by comparing the estimated belief function with the true offer function which is estimated extraneously using data on offers actually made to contestants we find a close correspondence leading us to accept the rational expectations hypothesis the importance of belief formation is confirmed by the estimation of a mixture model which establishes that the vast majority of contestants are forward looking as opposed to myopic

game shows and economic behavior risk taking on card sharks this paper studies individual risk taking behavior with a unique data set risky decisions of contestants during the threeyear history of the television game show card sharks in the bonus round of the game individuals choose how much to wager on positive expected value gambles with known and varying probabilities and large possible payouts since no special skills or knowledge are involved empirical analysis is not complicated by a contestant s superior information about her own abilities stakes can reach 16 000 and average 3 200 few experimental budgets permit even one observation of this magnitude first i simply estimate how risk averse contestants behave under the assumption of expected utility maximization i estimate a lower bound for the coefficient of absolute risk aversion of 0 00031 which when multiplied by per capita u s personal income gives an estimate of relative risk aversion of 4 8 this estimate is higher than most econometric estimates of risk aversion contestants however do not act in a manner consistent with expected utility maximization so this number should not be given a structural interpretation rather it is simply a useful way to summarize average willingness to bear risk of individuals on the show second i explore how individual behavior is inconsistent with expected utility theory the amount a contestant wishes to wager depends critically on the amount of wealth she has accumulated in the bonus round and therefore on the size of the stakes this is at odds with expected utility theory since the size of the stakes although far from insignificant is small relative to a person s wealth contestants should then have close to constant absolute risk aversion with respect to accumulated winnings in the game a more striking result deals with contestants who had previ

assessing individual risk attitudes using field data from lottery games we use information from the television game show with the highest guaranteed average payoff in the united states hoosier millionaire to analyze risktaking in a high stakes experiment we characterize gambling decisions under alternative assumptions about contestant behavior and preferences and derive testable restrictions on individual risk attitudes based on this characterization we then use an extensive sample of gambling decisions to estimate distributions of risk aversion parameters consistent with the theoretical restrictions and revealed preferences we find that although most contestants display risk averse preferences the extent of the risk aversion implied by our estimates varies substantially with the stakes involved in the different decisions

how successfully do we measure capital flight the empirical evidence from five developing countries economists have proposed several different techniques for measuring capital flight each technique differs significantly in its definition of what constitutes capital flight principally on the limits to normal capital flows how to capitalise investment income and the inclusion of long term capital flight consequently estimates of the determinants and remedies for capital flight have been very mixed given that capital flight is not observable it is important to examine the information content and consistency between the different measures this article uses three different techniques over five countries to make that comparison and finds a limited amount of information in each measure but no obvious agreement between them econometric techniques which have been designed for measuring the hidden economy of oecd countries is likely to offer a better way of measuring capital flight

strategies can be expensive too the value spread and asset allocation in global equity markets abstractis the value spread useful for forecasting returns on quantitative equity strategies for country selection to test this we examine a sample of 120 country level equity strategies replicat

the effect of financial liberalization on capital flight in african economies summary in this paper we assess the effects of financial liberalization on capital flight in african economies a portfolio model in which capital flight is one of the assets is estimated on a sample of nine african countries for 1970 91 the estimation results suggest that financial liberalization induces a reduction in capital flight after augmenting the model with submodels for the banking sector the government sector and the external sector we conduct simulation experiments involving an interest rate deregulation a decrease in reserve requirements and a change in exchange rate policy the simulation results show that capital flight is reduced by all the three financial liberalization measures the effects however are very small considering both the estimation and simulation results we conclude that financial liberalization policies are useful in attempts to reduce capital flight in african economies but per se the policies may not be the panacea

external debt capital flight and political risk abstract this paper explains the simultaneous occurence of large external debts private capital outflows and low domestic capital formation we consider a general equilibrium model in which two government types with conflicting distributional goals randomly alternate in office uncertainty over the fiscal policies of future governments generates capital flight and small domestic investment and induces the government to overaccumulate external debt the model also predicts that left wing governments are more inclined to restrict capital outflows than right wing governments finally we examine how political uncertainty affects the risk premium and how debt repudiation may occur after a regime change

sudden stops are global and local investors alike the main goal of this paper is to characterize the determinants of sudden stops caused by domestic vis a vis foreign residents are the decisions of domestic investors to invest abroad or of foreign investors to cut off funds from the domestic economy governed by the same set of determinants given the distribution of different types of sudden stop episodes over time and its different macroeconomic consequences the authors argue that the determinants may not be alike using an effective sample of 82 countries with annual information over the period 1970 2007 the analysis finds that global investors are less likely to stop bringing their capital when their economy is growing and the world interest rate is lower domestic agents are more willing to invest abroad if the macroeconomic performance of the domestic economy is poor high inflation the financial system is weak and there are high external savings current account surpluses increasing financial openness makes the domestic country more vulnerable to sudden stops caused by either local or global investors finally countries with higher shares of foreign direct investment are less prone to inflow driven sudden stops whereas the opposite holds for outflow driven sudden stops

securing victory or not surrendering optimal play when facing simple calculations a natural experiment from the swedish and us jeopardy this article empirically investigates the common assumption of economicagents capabilities to process complex mathematical problems to findoptimal strategies applied in economic modelling by expl

capital flight in the presence of domestic borrowing evidence from eastern european economies summary we estimate capital flight from 10 central and eastern european countries for the period 1996 2009 capital flight from the transition economies is mainly an economic phenomenon driven by differences in interest rates and investors perceptions of economic conditions in their countries as well as by the ease with which they are able to obtain funds that can be transferred overseas through domestic loans and capital inflows domestic credit expansion is an important source of financing for capital flight paradoxically financial liberalization has fueled rather than reduced capital flight by reducing its costs and increasing the funds that can be moved abroad

aid and resource mobilisation in sub saharan africa the role of reverse flows abstract this article seeks to ascertain the role of reverse flows in explaining the observed limited impact of aid on resource mobilisation in sub saharan africa it departs from the previous empirical literature on aid and resource mobilisation by abandoning the pervasive but untenable assumption that aid either displaces domestic saving increases consumption or increases investment some aid is in fact used to finance reverse flows debt servicing capital flight and reserve accumulation the evidence suggests that for the period covering 1980 to 2006 nearly 50 per cent of aid to sub saharan african countries was used to finance reverse flows

resistance to reform status quo bias in the presence of individual specific uncertainty comment why do governments so often fail to adopt policies which economists consider to be efficiency enhancing our answer to this question relies on uncertainty regarding the distribution of gains and losses from reform we show that there is a bias towards the status quo and hence against efficiency enhancing reforms whenever some of the individual gainers and losers from reform cannot be identified beforehand there are reforms which once adopted will receive adequate political support but would have failed to carry the day ex ante the argument does not rely on risk aversion irrationality or hysteresis due to sunk costs jel d72 f13 why do governments so often fail to adopt policies that economists consider to be efficiency enhancing this is one of the fundamental questions of political economy the answer usually relies on what may be

capital flight from latin america abstract this paper focuses on capital flight from latin america during the 1970s and 1980s after estimating the extent of such flight i suggest that capital flight imposes growth costs erodes the tax base and worsens income distribution i then use regression analysis to investigate the causes of capital flight as well as the role of capital controls and imf programs in slowing flight i conclude by criticizing the current policy approach to the capital flight problem and suggesting some new directions

anchoring in financial decision making evidence from jeopardy abstract this paper analyzes 12 596 daily double wagering decisions of 6064 contestants in the us game show jeopardy we exploit a situation in which a player has to unexpectedly wager on responding correctly to an unknown clue known as a daily double clue we find evidence consistent with the hypothesis of contestants anchoring heavily on the initial dollar value of a clue in wagering this positive relationship remains statistically significant at the one percent level after controlling for other characteristics that may independently affect wagering decisions such as scores clue categories time trends individual jeopardy experience and player fixed effects exploiting within player variation only raising the anchoring amount by 100 translates to an increase of 29 in the wager an alternative explanation of underlying strategic considerations appears unlikely and results are consistent throughout a number of robustness checks overall these findings suggest that anchoring can play a substantial role in financial decision making under pressure

how effective are capital controls a number of authors have recently argued that in order to avoid financial instability emerging countries should rely on capital controls two type of controls have been considered controls on capital outflows and controls on capital inflows in this paper i review the historical evidence on the effectiveness of these two type of controls i argue that controls on outflows have been ineffective they are circumvented and breed corruption i also analyze chile s recent experience with controls on inflows and i argue that their effectiveness has been exaggerated

rejecting small gambles under expected utility this paper contributes to an important recent debate around expected utility and risk aversion rejecting a gamble over a given range of wealth levels imposes a lower bound on risk aversion using this lower bound and empirical evidence on the range of the risk aversion coefficient we calibrate the relationship between risk attitudes over small stakes and large stakes gambles we find that rejecting small gambles is consistent with expected utility contrary to a recent literature that concludes that expected utility is fundamentally unfit to explain decisions under uncertainty paradoxical behavior is only obtained when calibrations are made in a region of the parameter space that is not empirically relevant

china s capital flight pre and post crisis experiences abstract we study china s illicit capital flow and document a change in its pattern specifically we observe that china s capital flight especially the one measured by trade misinvoicing exhibits a weakened response in the post 2007 period to the covered interest disparity which is a theoretical determinant of capital flight further analyses indicate that the post 2007 behavior is influenced by quantitative easing and other factors including exchange rate variability capital control policy and trade frictions our study confirms that china s capital flight pattern and its determinants are affected by the crisis event further both the canonical and additional explanatory variables have different effects on different measures of capital flight these results highlight the challenges of managing china s capital flight which requires information on the period and the type of capital flight that the policy authorities would like to target

private foreign asset accumulation not just capital flight evidence from the philippines external debt problems have been accompanied in many developing countries with large private capital outflows the latter phenomenon is usually identified in the literature as capital flight this article argues that private foreign asset accumulation is a more appropriate term and compares a great variety of definitions and measurement methods and applies these to philippine data for 1971 88 outcomes show striking differences in assessment of the magnitude of the phenomenon in the preferred definition of this study applied to the philippines unrecorded workers remittances from abroad a factor omitted in other studies represent a major source of foreign exchange earnings which indirectly support private foreign asset accumulation other definitions appear to severely underestimate private capital outflows econometric evidence on the causes of private foreign asset acquisition shows a strong sensitivity to the applied definition regression analysis for six alternative definitions shows that the ex

the small sample bias of the gini coefficient results and implications for empirical research the gini coefficient is a downward biased measure of inequality in small populations when income is generated by one of three common distributions the paper discusses the sources of bias and argues that this property is far more general this has implications for i the comparison of inequality among subsamples some of which may be small and ii the use of the gini in measuring firm size inequality in markets with a small number of firms the small sample bias has often led to misperceptions about trends in industry concentration a small sample adjustment results in a reduced bias which can no longer be signed this remaining bias rises with the dispersion and falls with increasing skewness of the distribution finally an empirical example illustrates the importance of using the adjusted gini in this example it is shown that controlling for market characteristics larger shipping cartels include a set of firms that is stochastically identical in terms of relative size to those of smaller shipp

why are stabilizations delayed when a stabilization has significant distributional implications e g tax increases to eliminate a large budget deficit socioeconomic groups may attempt to shift the burden of stabilization onto other groups the process leading to stabilization becomes a war of attrition each group attempting to wait the others out and stabilization occurring only when one group concedes and bears a disproportionate share of the burden the authors solve for the expected time of stabilization in a model of rational delay and relate it to several political and economic variables they motivate this approach and its results by comparison to historical and current episodes copyright 1991 by american economic association

capital flight and political risk abstract this paper provides the first serious attempt to examine the relationship between political risk and capital flight for a large set of developing countries the outcomes of the analysis show that in most cases political risk variables do have a statistically robust relationship to capital flight once domestic and international macroeconomic circumstances are added at least when the robustness test as proposed by sala i martin is applied we conclude that on the basis of the analysis in this paper we have found support for the hypothesis that political risk leads to increased capital flight

the informative role of the value line investment survey evidence from stock highlights i examine abnormal stock returns associated with stock highlights published by the value line investment survey at the time of their publication stock highlights elicit strong positive abnormal returns they also have positive abnormal returns at the time of the earnings announcement preceding stock highlight publications post earnings announcement drift is present but is much too small to explain abnormal returns at the time of the publication of stock highlights thus value line stock highlights provide useful information to investors this information is rapidly reflected in stock prices consistent with market efficiency

equilibrium selection payoff or risk dominance the case of the weakest link abstract when a game has more than one nash equilibrium a coordination issue arises pareto and risk dominations are two available criteria to select one of them there is a debate on how to use these criteria when they point in different directions we study the first wave of the weakest link show broadcast in france to generate field data on this issue observed behavior can be rationalized in terms of pareto and risk domination the payoff dominant equilibrium is selected if it is not too risky otherwise players coordinate themselves according to risk dominance this rationalization is in line with the experimental literature

seigniorage and political instability the importance of seigniorage relative to other sources of government revenue differs markedly across countries this paper tries to explain this regularity by studying a political model of tax reform the model implies that countries with a more unstable and polarized political system will have more inefficient tax structures and thus will rely more heavily on seigniorage this prediction of the model is tested on cross sectional data for seventy countries the authors find that after controlling for other variables political instability is positively associated with seigniorage copyright 1992 by american economic association

coordination focal points and voting in strategic situations a natural experiment this paper studies coordination in a multi stage elimination tournament with large monetary incentives and a diversified subject pool drawn from the adult british population in the tournament members of an ad hoc team earn money by answering general knowledge questions and then eliminate one contestant by plurality voting without prior communication we find that in the early rounds of the tournament contestants use a focal principle and coordinate on one of the multiple nash equilibria in pure strategies by eliminating the weakest member of the team however in the later rounds contestants switch to playing a mixed strategy nash equilibrium

consistency of risk premium measures this research uses the results of a series of within sample experiments to elicit risk premium measures from agricultural producers results show that there is little consistency between measures in different contexts and using different elicitation methods suggesting that underlying risk preferences are not consistent these results highlight some of the difficulty with expected utility theory and risk measurement

lowest unmatched price auctions lowest unmatched price auctions lupas specify that the lowest bid placed by only one participant wins they are used in internet trading and tv and radio shows we model lupas as games with minimal restrictions in particular allowing players to place more than one bid since multiple bids have been observed in most actual lupas though lupas are games for which a closed form solution does not seem to exist in general our model generates several testable implications about the type of strategies played in equilibrium and the highest bid in a given lupa our analysis suggests that players follow strategic considerations and arrive at decisions which at least in the aggregate are generally consistent with theoretical predictions yet there are some remarkable deviations

decision making under uncertainty when the stakes are high evidence from a lottery game show illinois instant riches a televised set of three different games of chance provides a natural experiment for assessing the risk taking behavior of individuals recently there have been a limited number of other studies that have also used game shows as natural experiments including card sharks 6 jeopardy 11 and the price is right 1 an advantage of using game shows over most laboratory experiments is the ability to see how individuals respond to wagers involving relatively large sums instant riches is particularly interesting in this regard because it involves very high stakes across the three games played the potential winnings from wagers offered to contestants ranged from 2000 to 100 000 losses from 3000 to 35 000 and expected values from 10 938 to 15 000 given our data our primary research objective is to provide additional evidence on the degree of risk aversion under high stakes wagering to date that evidence is mixed gertner concludes that card sharks contestants are on average risk averse metrick could not reject the hypothesis that jeopardy contestants are risk neutral in respective experimental studies using indian peasant farmers and chinese university students binswanger 2 3 and kachelmeier and shehata 9 employed small nominal stakes that were nonetheless large relative to their subjects monthly incomes e g 20 percent to just over 100 percent of income both reported a shift toward risk aversion as stakes were increased but in the kachelmeier study the subjects remained largely risk neutral in another experimental study this time involving modest stakes e g hundreds of dollars goodman et al 7 found expected value to be the best predictor of las vegas casino patrons certainty equivalents a result implying risk neutrality in all these studies the stakes were lower than for instant riches

what determines productivity performance of telecommunications services industry a cross country analysis this article investigates the key factors that determine the productivity performance of telecommunications services industry a simple theoretical model is used to illustrate that the total factor productivity tfp growth is attributable to the effects of scale economies market competition and technical change we then examine empirically the effect of various factors on the tfp growth in the industry using panel data in 12 organization for economic co operation and development oecd countries for the period 1983 through 2003 the empirical results are consistent with the theoretical prediction a new finding in this article is that higher machinery and equipment m e capital intensity and human capital contribute to higher tfp growth in the telecommunications services industry the decomposition analysis also suggests that technical change induced by changes in m e capital intensity and human capital are important sources of productivity performance in the industry across the oecd countries contrib

what causes the failure of inflation stabilization plans abstract the paper discusses the causes of failure of inflation stabilization plans following a description of stylized facts of inflation stabilization a model of balance of payments crises is presented highlighting some of the main factors leading to the collapse of stabilizations empirical results obtained when estimating a binary probit model over a panel of 34 stabilizations identify real exchange rate appreciation lack of foreign reserves and government budget deficits as the main causes of failure of inflation stabilization plans this is consistent with the model presented in this paper with the stylized facts of stabilizations and with some of the models found in the literature

where have the profits gone market efficiency and the disappearing equity anomalies in country and industry returns abstract we are the first to demonstrate the decline in the cross sectional predictability of country and industry returns in recent years we examine 53 anomalies in country and industry indices from 64 markets for the years 1973 2018 the profitability of the strategies has significantly decreased recently driven particularly by the disappearance of value and reversal effects the phenomenon is strongest in large developed markets neither changes in country and industry specific risks nor investor learning from the academic literature can explain the effect our findings support the view that the fall in return predictability is caused by the overall improvement in market efficiency

flight capital as a portfolio choice the authors examine flight capital in the context of portfolio choice they estimate the stock of flight capital held abroad and compare it with the stock of real nonfinancial capital held within each country for 51 countries they construct estimates as of 1990 of private domestic capital and flight capital which combined add up to domestic wealth there are large regional differences in the proportion of private wealth that is held abroad ranging from 3 percent in south asia to 39 percent in africa they explain differences in portfolio choice in terms of the capital to labor ratio indebtedness exchange rate distortions and risk ratings all proxies for differences in the risk adjusted rate of return on capital they then apply the results to four policy questions in which private portfolio choices are potentially important the effect of the east asian crisis on domestic capital outflows spillovers the effect of hipc debt relief on capital repatriation and why africa has so much of its private wealth outside the continent their conclusions 1 the four most severely affected east asian countries will eventually lose about 250 billion in domestic wealth as a result of the deterioration in risk between march 1997 and september 1998 2 they found some support for a spillover model 3 the effect of the hipc debt relief initiative on capital repatriation will vary massively between hipc eligible countries 4 africa has by far the lowest capital per worker which makes massive capital flight from africa all the more distinctive three variables explain capital flight in africa exchange rate overvaluation adverse investor risk ratings and high indebtedness

risk attitudes in large stake gambles evidence from a game show this article estimates the degree of risk aversion of contestants appearing on vas o no vas the mexican version of deal or no deal we consider both dynamic agents who fully backward induct and myopic agents that only look forward one period further we vary the level of forecasting sophistication by the agents we find substantial evidence of risk aversion the degree of which is more modest than what is typically reported in the literature

the gender of opponents explaining gender differences in performance and risk taking abstract analyzing 8169 contestants over 32 years of the us game show jeopardy we find that women compete more aggressively become marginally more competitive and take on more risk when paired against men specifically a woman is more likely to win a jeopardy episode and within the show to respond to a clue once responding she is also marginally more likely to respond correctly potentially most surprising even the sizeable gender gap in risk taking analyzing daily double wagering decisions disappears once a woman competes in an otherwise all male field of competitors men on the other hand wager significantly less when paired against women only but the gender of opponents does not affect their competitive performance otherwise our rich sample allows us to control for a host of potentially confounding factors and player fixed effects thereby eliminating potential biases from unobservable individual characteristics our findings are consistent with an explanation that emphasizes an adaptation to social norms applied to gender

financialization of the global economy the instability of the world financial system starkly revealed in the recent debacle is not the only problem it poses its secularly increasing dominance over the real economy is in itself a phenomenon that needs examining the article traces the source of this increasing dominance not just to the increasingly leveraged and increasingly incomprehensible forms of intermediation between savers and those in the real economy who need credit and insurance but also to the increasingly universal doctrine that maximizing shareholder value is the sole raison d etre of the firm and the promotion by governments of an equity culture some of the social consequences of financialization are exacerbating inequalities greater insecurity misdirection of talent and the erosion of trust copyright 2008 oxford university press

public debts and private assets explaining capital flight from sub saharan african countries we investigate the determinants of capital flight from 30 sub saharan african countries including 24 countries classified as severely indebted low income countries for the period 1970 1996 the econometric analysis reveals that external borrowing is positively and significantly related to capital flight suggesting that to a large extent capital flight is debt fueled we estimate that for every dollar of external borrowing in the region roughly 80 cents flowed back as capital flight in the same year capital flight also exhibits a high degree of persistence in the sense that past capital flight is correlated with current and future capital flight the growth rate differential between the african country and its oecd trading partners is negatively related to capital flight we also explore the effects of several other factors inflation fiscal policy indicators the interest rate differential exchange rate appreciation financial development and indicators of the political environment and governance we discuss the implications of the results for debt relief and for policies aimed at preventing capital flight and attracting private capital held abroad

march madness strategic behavior in ncaa basketball tournament betting pools abstract this paper uses data from the natural experiment of ncaa basketball tournament betting pools in a descriptive study of strategic behavior the observed behavior in these pools differs from equilibrium behavior in a robust manner bettors overback the heaviest favorites the size of this bias falls slightly in larger pools where the induced profit opportunities are higher than in smaller pools this indicates that a small number of players are adjusting their behavior to reflect the changing strategic situation while the aggregate behavior remains away from equilibrium

risky choice in the limelight this paper examines how risk behavior in the limelight differs from that in anonymity in two separate experiments we find that subjects are more risk averse in the limelight however risky choices are similarly path dependent in the different treatments under both limelight and anonymous laboratory conditions a simple prospect theory model with a path dependent reference point provides a better explanation for subjects behavior than a flexible specification of expected utility theory additionally our findings suggest that ambiguity aversion depends on being in the limelight that passive experience has little effect on risk taking and that reference points are determined by imperfectly updated expectations

deal or no deal decision making under risk in a large payoff game show we examine the risky choices of contestants in the popular tv game show deal or no deal and related classroom experiments contrary to the traditional view of expected utility theory the choices can be explained in large part by previous outcomes experienced during the game risk aversion decreases after earlier expectations have been shattered by unfavorable outcomes or surpassed by favorable outcomes our results point to reference dependent choice theories such as prospect theory and suggest that path dependence is relevant even when the choice problems are simple and well defined and when large real monetary amounts are at stake

decision making under risk in deal or no deal we analyse the choices of 399 contestants in the australian version of the television game show deal or no deal we calculate risk aversion bounds for each contestant revealing considerable heterogeneity we then estimate a structural stochastic choice model that captures the dynamic decision problem faced by contestants to address individual heterogeneity we nest the dynamic problem within the settings of both a random effects and a random coefficients probit model our structural model produces plausible estimates of risk aversion confirms the role of individual heterogeneity and suggests that a model of stochastic choice is indeed appropriate we find mixed evidence of greater risk aversion by females we also examine generalizations to expected utility theory finding that the rank dependent utility model adds non negligible explanatory power and indicates optimism in probability weighting finally we test but are unable to confirm the existence of an endowment effect for lotteries copyright 2009 john wiley sons ltd

the revolving door external debt and capital flight a philippine case study abstract in recent decades the private citizens of a number of third world countries accumulated substantial external assets via capital flight at the same time their governments incurred large external debts this paper proposes a classification of hypothetical linkages between capital flight and external debt disbursements and examines the strength of these linkages in the philippines during 1962 86 econometric analysis and anecdotal evidence indicate that large sums of capital flowed into and out of the philippines through a financial revolving door on this basis i conclude that there is scope for political and legal challenges to the legitimacy of a substantial fraction of the country s external debt

estimating risk preferences from deductible choice we develop a structural econometric model to estimate risk preferences from data on deductible choices in auto insurance contracts we account for adverse selection by modeling unobserved heterogeneity in both risk claim rate and risk aversion we find large and skewed heterogeneity in risk attitudes in addition women are more risk averse than men risk aversion exhibits a u shape with respect to age and proxies for income and wealth are positively associated with absolute risk aversion finally unobserved heterogeneity in risk aversion is greater than that of risk and as we illustrate has important implications for insurance pricing

robbing the riches capital flight institutions and debt abstract capital flight undermines economic growth and the effectiveness of debt relief and foreign aid and sometimes drains more resources from poor countries than does debt service in an analysis of a large panel of developing and emerging market countries using annual data for 1970 2001 we show that both institutions and macro policies robustly affect capital flight our study also supports the existence of a revolving door relationship between debt and capital flight more notably we find countries with weak institutions have a greater propensity to accumulate debt because weak institutions spur capital flight which in turn creates a financing need

entrepreneurship over the life cycle where are the young entrepreneurs most individuals do not start a business and if they do they start well into their 30s to explain these stylized facts i estimate a dynamic roy model with experience accumulation risk aversion and imperfect information about ability using the panel study of income dynamics information frictions and income risk reduce entrepreneurship by up to 40 and 35 respectively entry costs and information frictions explain most of the delayed entry results from counterfactual policies targeting delayed entry suggest that entrepreneurship education can yield higher returns than subsidies fostering young entrepreneurship yields higher returns than fostering old entrepreneurship

capital flight to germany two alternative measures abstract we use two measures to study two capital flight channels for germany one measure is based on the concept of trade misinvoicing and one on net claims and liabilities in the eurosystem of central banks for both measures we propose refinements to enhance the assessment of capital flight we find that capital flight towards germany via these two channels has been quite sizable in the recent decade and can tally to about 2 of gdp annually regarding their determinants we show that the two capital flight measures are driven by both common and measure specific factors traditional determinants such as covered interest differentials only play a limited role while crisis specific factors such as economic policy uncertainty the ecb collateral policy as well as currency misalignment are driving factors of the investors apparent flight to safety behavior

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

enabling mini grid development in rural india summary rural electrification rates in india lag behind government goals in part due to the inability of distribution companies discoms to fund central grid expansion in the absence of central grid electrification mini grids offer significant potential for an immediate pathway toward rural electrification and the attendant gains in economic growth and productivity yet private investment in mini grids has been virtually absent in india using a comprehensive life cycle cost analysis we find that mini grids based on solar pv power and storage are more economical than incumbent energy services available to households without central grid connection under current law a prospective entrepreneur in india does not require a license or certification in order to build a mini grid and subsequently provide electricity services in the area covered by said installation conversely there is no legal or regulatory framework that specifies what is to happen if the central grid were to be extended to an area that is already covered by a mini grid we report detailed survey evidence from interviews with entrepreneurs analysts and policymakers whose assessments converge on the same point mini grid investments would be jeopardized in the event of central grid extension precisely because discoms would by regulatory order provide electricity services at highly subsidized rates well below their full economic cost our fieldwork suggests that the threat of central grid extension is a gateway barrier preventing mini grid development in india the issues associated with the gateway barrier have common elements with the so called holdup problem as identified in the economics of organizations there have been two recent federal policy guidelines and one actual state level policy addressing the regulatory status of mini grids we examine the effectiveness of these policies proposals in terms of an entrepreneur s willingness to develop mini grids in the future

a natural experiment in jeopardy this paper uses the television game show jeopardy as a natural experiment to analyze behavior under uncertainty and the ability of players to choose strategic best responses the results suggest that while most players bet in a rational manner the failure rate for choosing best responses increases as the betting problem grows more complex and that players choices are affected by the frame of the problem however suboptimal betting tends to decrease as inferior players are driven from the game the data also allow for estimation of the extent of risk aversion the results imply near risk neutrality jel c72 c93

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

last place aversion evidence and redistributive implications we present evidence from laboratory experiments showing that individuals are last place averse participants choose gambles with the potential to move them out of last place that they reject when randomly placed in other parts of the distribution in modified dictator games participants randomly placed in second to last place are the most likely to give money to the person one rank above them instead of the person one rank below last place aversion suggests that low income individuals might oppose redistribution because it could differentially help the group just beneath them using survey data we show that individuals making just above the minimum wage are the most likely to oppose its increase similarly in the general social survey those above poverty but below median income support redistribution significantly less than their background characteristics would predict jel codes h23 d31 c91