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

the distribution of income in china preface notes on the contributors introduction k griffin z renwei part 1 the distribution of income household income and its distribution a r khan k griffin c riskin z renwei three features of the distribution of income during the transition to reform z renwei part 2 income and wealth in rural china the determinants of household income in rural china a r khan the distribution of wealth in rural china t mckinley income distribution and poverty in rural china c riskin part 3 employment and human capital workers in china s rural industries j knight s lina why urban wages differ in china j knight s lina the determinants of educational attainment j knight l shi annex the 1988 household sample survey m eichen z ming index

household carbon inequality in urban china its sources and determinants designing mitigation policies for households requires knowledge of household carbon distributions this study surveys the household carbon inequality in urban china and analyzes its sources and determinants using weighted household survey data different from existing literatures studying carbon inequality on the international or regional level we focus on the household aspect and first survey its characteristics by some comparisons by ascribing household carbon emissions calculated by the consumer lifestyle approach to several consumption categories with the method of gini coefficient decomposition we find that residential consumption with high carbon intensity is the most important source of household carbon inequality in urban china food consumption and the consumption of educational cultural and recreational services are the next largest sources because of the consumed quantities or carbon intensity the application of shapley decomposition shows the determinants of household carbon inequality in urban china and their contributions which are household demographic characteristics 59 74 household employment and income 24 31 household burdens 8 00 and household assets and financial plans 7 95 the policy implications of these results are also discussed

entrepreneurship and income inequality in southern ethiopia this article uses inequality decomposition techniques in order to analyze the consequences of entrepreneurial activities to household income inequality in southern ethiopia a uniform increase in entrepreneurial income reduces per capita household income inequality this implies that encouraging rural entrepreneurship may be favorable for both income growth and income distribution such policies could be particularly successful if directed at the low income low wealth and relatively uneducated segments of the society

knowledge accumulation within an organization in this article we consider a knowledge accumulation problem within an organization that cannot prevent the worker from quitting and using the knowledge outside the organization we show that knowledge accumulation is delayed the fraction of working time allocated to knowledge creation is highest at the early career stage falls gradually then rises again before falling finally toward zero we determine the effect of a change in the severity of the enforcement problem or the specificity of knowledge we also discuss the form of the optimal life cycle wage profiles the role of the initial knowledge level and the role of discounting

macroeconomic shocks and banking regulation the recent crisis has brought to the fore the cyclical properties of banking regulation countercyclical buffers and enhanced capital requirements meant to stabilize banks balance sheets across the cycle are not costless and a delicate balance needs to be reached between providing incentives to generate value and discouraging excessive risk taking the paper develops a model in which in contrast with modigliani miller outside equity and capital requirements matter it analyses banking regulation in the presence of macroeconomic shocks and studies the desirability of self insurance mechanisms such as countercyclical capital buffers or dynamic provisioning as well as macro hedges such as cocos and capital insurance

electricity demand estimates under increasing block rates using price variables calculated at observed consumption levels this study finds significant bias in ordinary least squares estimates of price elasticities of electricity demand the bias is most severe for specifications using observed average price the finding is important for future econometric work since this type of rate structure is becoming more common the evidence indicates that inappropriate use of ordinary least squares ols overestimates that rate structure premium effect on demand and may underestimate the marginal price elasticity the use of an instrumental variables technique applied to actual rate schedules proves consistent parameter estimates regardless of the rate structure 20 references 3 tables

rational beliefs and security design this article studies the security design problem of a cash constrained firm facing investors with diverse beliefs investor rational beliefs are modeled as varying and yet rational in the sense of kurz 1994 with two investors optimal designs are similar under rational beliefs and rational expectations with many investors however optimal securities under rational beliefs maximize investor differences of opinion while under rational expectations optimal designs minimize disagreements we demonstrate that the common practice of issuing multiple securities backed by a single asset is optimal under rational beliefs but not under rational expectations researching market beliefs can create substantial value for firms article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

rethinking inequality decomposition with evidence from rural china we examine inequality decompositions by income source and describe a general regression based approach for decomposing inequality the approach provides an efficient and flexible way to quantify the roles of variables like education and age in a multivariate context we illustrate the method using survey data from china the empirical results demonstrate how sharply different conclusions can emerge for different decomposition rules we explain how these differences reflect the treatment of equally distributed sources of income and we discuss implications for how results from inequality decomposition are interpreted a renewed interest in economic growth political economy and the distribution of income has again placed the economics of income inequality firmly on the academic research agenda relatively poor performances in latin america have been contrasted with success stories in east asia and recent evidence on the changing income distributions of emerging economic giants like china has

technology invention and diffusion in residential energy consumption a stochastic frontier approach traditional large appliances absorb a large share of residential electricity consumption and represent important targets of energy policy strategies aimed at achieving energy security despite being characterized by rather mature technologies this group of appliances still offers large potential in terms of efficiency gains due to their pervasive diffusion in this paper we analyse the electricity consumption of a set of four traditional white goods in a panel of ten eu countries observed over 21 years 1990 2010 with the aim of disentangling the amount of technical efficiency from the overall energy saving the technical efficiency trend is modelled through a set of technology components representing both the invention and adoption process by the means of specific patents weighted by production and bilateral import flows which allows to overcome the rigid stochastic frontier framework in modelling the effect of technical change our results show that the derived energy demand and inefficiency trends are both related to changes in the amount of available technology embodied in energy efficient appliances the effect is significant both in its domestic and international components and suggests an active role of innovation and trade policies for achieving efficiency targets which directly impact the amount of electricity consumed by households

multitask agency problems focus and task clustering abstract this short paper discusses recent insights of multitask agency theory it considers in turn the issues of effort substitution conflicts between tasks and implicit incentives and mission it concludes by addressing the problem of optimal task clustering

multistage capital budgeting with delayed consumption of slack capital budgeting frequently involves multiple stages at which firms can continue or abandon ongoing projects in this paper we study a project requiring two stages of investment failure to fund stage 1 of the investment precludes investment in stage 2 whereas failure to fund stage 2 results in early termination in contrast to the existing literature we assume that the firm can limit the manager s informational rents with the early termination of the project in this setting we find that the firm optimally commits to a capital allocation scheme whereby it forgoes positive net present value npv projects at stage 1 capital rationing whereas at stage 2 depending on the manager s previous report it sometimes implements projects with a negative continuation npv but in other situations forgoes implementing projects with positive continuation npvs this paper was accepted by mary barth accounting

creditor rights and debt allocation within multinationals we analyze the optimal debt structure of multinational corporations choosing between centralized or decentralized borrowing we identify how this choice is affected by creditor rights and bankruptcy costs taking into account managerial incentives and coinsurance considerations we find that partially centralized borrowing structures are optimal with either weak or strong creditor rights for intermediate levels of creditor rights fully decentralized centralized borrowing structures are optimal if managers have strong weak empire building tendencies decentralized borrowing is more attractive for companies focussing on short term profitability credits are rather taken in countries with better creditor rights and more efficient insolvency systems

disproportional control rights and the governance role of debt we examine the governance role of debt in the context of u s based dual class ownership structures we hypothesize that the use of debt alleviates the conflict between shareholder classes by balancing the power of controlling insiders we document that dual class firms have higher leverage and a greater propensity to issue private debt they also more frequently use cash sweeps and performance based covenants dual class firms with greater agency conflicts and a greater need to access the capital market appear to rely more extensively on debt these findings are consistent with controlling insiders bonding against the agency costs associated with dual class ownership the governance role of debt is further corroborated by the valuation effect of debt for dual class companies private debt issuances trigger greater positive market reactions to the inferior dual class stock in relation to both the superior dual class stock and a matched sample of single class firms further leverage attenuates the previou

managing local commons theoretical issues in incentive design local commons encompass a wide range of resources whose shared feature is the need for some form of collective management in what follows we shall be concerned mainly with the problems of implementing a collective management plan whatever the mechanisms invoked many recent contributions to the literature have stressed that relatively informal collective management of common property resources can in the right circumstances avoid the severe resource degradation predicted by the tragedy of the commons nevertheless both empirical and theoretical arguments suggest that cooperative behavior may be only partial and the incentives of short term self interest only partially held in check under what circumstances then can more formal implementation mechanisms make good the deficiency and given that formal incentives are typically stronger than informal ones are there any reasons why informal incentives might nevertheless sometimes be preferred

residential electricity demand dynamics in turkey abstract this article provides fresh empirical evidences for the income and price elasticies of the residential energy demand both in the short run and long run for turkey over the period 1968 2005 using the bounds testing procedure to cointegration the computed elasticities of income and price are consistent with the previous studies and as expected the long run elasticities are greater than the short run elasticities an augmented form of granger causality analysis is implemented among residential electricity income price and urbanization in the long run causality runs interactively through the error correction term from income price and urbanization to residential energy but the short run causality tests are inconclusive the parameter stability of the short run as well as long run coefficients in the residential energy demand function are tested the results of these tests display a stable pattern

control rights and capital structure an empirical investigation we show that incentive conflicts between firms and their creditors have a large impact on corporate debt policy net debt issuing activity experiences a sharp and persistent decline following debt covenant violations when creditors use their acceleration and termination rights to increase interest rates and reduce the availability of credit the effect of creditor actions on debt policy is strongest when the borrower s alternative sources of finance are costly in addition despite the less favorable terms offered by existing creditors borrowers rarely switch lenders following a violation a fundamental question in financial economics is how do firms choose their financial policies extant empirical research on this question has focused primarily on the presence of taxes and bankruptcy costs e g scott 1976 information asymmetry e g myers and majluf 1984 and more recently market timing behavior e g baker and wurgler 2002 however beginning with jensen and meckling 1976 a large body of theoretical research examines how incentive conflicts between managers and external investors affect corporate financial policies in particular theoretical research on financial contracting shows that in the presence of incentive conflicts optimal debt contracts will allocate certain rights to creditors after negative performance in order to help firms secure financing ex ante e g aghion and bolton 1992 and dewatripont and tirole

covenants in venture capital contracts this paper studies how covenants are included in contracts between venture capitalists vcs and entrepreneurs i show that vcs hold covenanted veto rights even though they are shareholders who have access to other powerful governance solutions unlike bank loans and bonds venture capital vc contracts exhibit considerable variation in their contractual designs i exploit this variation to confirm the argument that covenants are in place to overcome a conflict of interest that arises from debt like contractual features of a venture capitalist s preferred stock in particular i find that contracts with higher fixed payoffs include 1 6 more covenants than do contracts with lower fixed payoffs similarly vc contracts with no vc board majority requirement include 0 6 more covenants than do contracts that require a vc board majority covenants are also more common with older companies and when fewer vcs invest in a round my findings contribute to both the debt covenant literature and the entrepreneurial finance literature this paper was accepted by brad barber finance

the evolution of income inequality in rural china abstract in this article we analyze trends in income inequality and the distribution of income in rural china from 1987 to 1999 we find an uneven but long run increase in inequality in rural china and show that nearly half of the rural population was not much better off in 1999 than at the start of the period we rule out geography as the most important factor for explaining income differences and the increases that occurred over time much more important were growing differences between households living in the same village province or region we also find that access to nonagricultural incomes from local wage employment and family businesses contributes to inequality but that employment outside the county in which a household lives and accessed through temporary migration is relatively equalizing finally we document important strengths and weaknesses of the primary data set used for our analyses relative to other data sources available for study of inequality and poverty in rural china

do regulated microfinance institutions achieve better sustainability and outreach cross country evidence in spite of increasing pressure on microfinance institutions mfis operating in developing countries to transform into regulated financial intermediaries to date no study has investigated whether regulated mfis actually achieve better financial results and reach more poor clients than nonregulated mfis this article explores the impact of regulation on mfi performance using newly released data for 114 mfis from 62 countries in an empirical model where performance is specified as a function of mfi specific regulatory macroeconomic and institutional variables consistent with recent cross country evidence on the impact of banking regulations on bank performance barth et al 2004 this article finds that regulatory involvement does not directly affect performance either in terms of operational self sustainability or outreach the article also finds that less leveraged mfis have better sustainability the policy implication is that mfis transformation into regulated financial institutions is may not

optimal financial instruments debt and equity are developed as optimal financial instruments in a model where cash flows and control rights are allocated to investors endogenously when investment decisions must be made by a single party the debtholder s cash flows are fixed in order to provide the equityholder with efficient incentives for investment ownership of control may be transferred to the debtholder to attenuate the impact of asymmetric information concerning the investment opportunity on the efficiency of the decision making since the classic article by modigliani and miller 1958 a great deal of attention has been focused on the problem of determining the optimal capital structure of the firm spanning taxes and or transaction cost agency cost and signalling arguments have been offered as explanations for why a firm s cash flows might be split between debt and equity claimants in a particular way here we address the more basic question of the optimal design of the securities that firms issue the majority of the existing literature takes the form of the allowable financial instruments as given in defense of this approach it may be noted that to a first approximation firms have used two standard financial instruments debt and equity we argue here however that the characterization of the standard instruments used in much of the literature has been incomplete and that the incentives of decision makers within the firm cannot be completely understood until the problem is addressed from a more basic level than is typically done by concentrating on the cash flow characteristics of these instruments the equally important issue of the way the standard instruments distribute the control rights of the firm has been ignored as a consequence the objectives in corporate decision making have been assumed rather than developed endogenously we consider the allocation of cash flows and the distribution of control rights to optimal financial instruments in a security design problem by considering the design of securities in this way we are able to consider the

markets and inequality in transitional economies toward testable theories nee s 1989 and in this issue market transition theory contested by xie and hannum in this issue claims that market mechanisms have predictable implications for inequality compared to nonmarket allocation market exchange enhances the bargaining power of producers nee p 910 the core argument is that cadre advantages shall decline to the extent that markets replace redistribution as the dominant mode of economic allocation while in successive publications nee has altered his judgment about how far the market transition has proceeded in rural china and whether his theory does predict a decline of cadre privilege he has not altered the core claim about market allocation market economies vary widely in their patterns of power and privilege in ways unrelated to the extent to which a market economy has been established the variability of market economies warns against attempts to predict changes in inequality without first specifying the kinds of enterprises and other institutions that characterize the emerging market economy or even the characteristics of markets themselves we have been tempted into these predictions by the memorable polanyian contrast between two ideal typical economies redistributive and market that has proven a rich source of hypotheses about stratification szelenyi 1978 1983 and the theory of the firm kornai 1992 under state socialism this contrast has crystallized a research agenda by posing an important historical question about the social impact of the rise of market allocation in planned economies especially as it concerns the fate of communist officials but many now find that these ideal types and the continuum that bridges them are a poor guide to the analysis of emerging market economies see bian and logan 1996 lin 1995 rona tas 1994 1995 walder 1992 1995 and stark and xie and hannum in this issue general claims about the impact of markets should be viewed skeptically for the impact of markets works through the allocation of assets the characteristics of emerging markets and the political processes by which market economies are established markets per se are not the issue

a theory of market transition from redistribution to markets in state socialism state socialist redistributive economies are characterized by the allocation and distribution of goods through central planning this paper develops a theory of market transition which argues that in reforming socialist economies the transition from redistributive to market coordination shifts sources of power and privilege to favor direct producers relative to redistributors the shit improves incentives for direct producers stimulates the growth of private markets and provides to entrepreneurs an alternative path for socioeconomic mobility a set of hypotheses test the market transition theory with householdand village level data

information and control in ventures and alliances this paper develops a theory of control as a signal of congruence of objectives and applies it to nancial contracting between an investor and a privately informed entrepreneur we show that formal investor control is i increasing in the information asymmetries ex ante ii increasing in the uncertainty surrounding the venture ex post iii decreasing in the entrepreneur s resources and iv increasing in the entrepreneur s incentive consict in contrast real investor control that is actual investor interference is decreasing in information asymmetries control rights are further such that control shifts to the investor in bad states of nature

the impact of income components on the distribution of family incomes attempts have recently been made to assign inequality contributions to various components of income this paper discusses the issues involved in such assignments and highlights the problems that follow from having a number of possible decomposition rules u s data on the distribution of family incomes are used to examine the relative influence of these income components and to evaluate empirically the performance of different decomposition rules a wide range of inequality contributions can be obtained even when restricted to only naturally derived decomposition rules some of the results are plainly absurd and serve to warn against the indiscriminate use of decomposition formulae without first investigating their properties

rural residential demand for electricity a simulateous equation partial adjustment model of rural electric cooperatives recs residential demand for electricity highlights the characteristics of rural energy demand and the tendency of rural customers to make greater short term adjustments to price changes the differences between rural and urban use patterns however are not consistent throughout the country the model also points to how changes in the number of households and per capita income can affect rural demand in planning for the future the cooperatives must identify and be aware of the unique features of their service areas not only in respect to regional characteristics but also in terms of the distinctive patterns or rural demand 17 references

covenants and collateral as incentives to monitor although monitoring borrowers is thought to be a major function of financial institutions the presence of other claimants reduces an institutional lender s incentives to do this thus loan contracts must be structured to enhance the lender s incentives to monitor covenants make a loan s effective maturity and the ability to collateralize makes a loan s effective priority contingent on monitoring by the lender thus both covenants and collateral can be motivated as contractual devices that increase a lender s incentive to monitor these results are consistent with a number of stylized facts about the use of covenants and collateral in institutional lending modern finance theory suggests that financial intermediaries such as commercial banks insurance companies and finance companies monitor and control their borrowers on behalf of other investors 1 this article investigates how the loans made by these institutions can be structured so as to best enhance the institutions role as delegated monitors covenants and collateral are common features of loans made by financial institutions but these features are somewhat difficult to justify consider loan covenants clauses in a loan contract that require the borrower to take or refrain from various actions berlin and mester 1992 magee and sridhar 1994 and park 1994 show that by giving institutions the right to renegotiate or call loans when covenants are violated covenants serve as tripwires that enhance the flexibility and efficiency of financial contracting also as documented in smith and warner 1979 control rights from covenants reduce borrower adverse selection or moral hazard nevertheless by allowing institutions to demand repayment based on any information contractible or not

microeconomic determinants of income inequality in rural pakistan abstract inequality matters for poverty reduction however it is often unclear what policy could do to change the distribution of income as to date there is little quantitative evidence about the household characteristics that determine the level of income inequality and its changes over time this paper sets out to identify these determinants by adapting a regression based inequality decomposition technique and applying it to panel data from rural pakistan land ownership is key to explaining the level of inequality but not its changes in contrast higher education drives changes but not the level of inequality household location affects both reflecting growing differences in market access across regions

ambivalent investment and the hold up problem in this paper we add to the foundations of incomplete contracting literature we study the hold up problem with ambivalent investment where investment benefits the investing party if ex post the right decision is undertaken but harms the investing party if the wrong decision is made in this context we show that the power of contracts to provide investment incentives depends on three factors the commitment value of contracts the amount of quasirents that the investing party can expect in the case of out of contract renegotiation and the degree of ambivalence of investment first contracts provide first best investment incentives when parties can commit to a contract regardless of the type of investment second with sufficiently ambivalent investment if parties cannot commit not to renegotiate a contract and if the investing party s bargaining power is intermediate contracts cannot improve investment incentives above those provided by no contract in contrast a simple buyer or seller option contract is optimal when the investing party s bargaining power is extreme jel d23 k12 l22

estimation of residential electricity demand in hong kong under electricity charge subsidies abstract over the past decade the hong kong hk government provided electricity charges subsidies for residential accounts to alleviate the burden of inflation and later the burden of economic downturn in this study we estimate an econometric model of residential electricity demand and test the existence of a stable long run relationship for the period 1980 2016 while accounting for the relief measures set out by the hk government since 2008 empirical results suggest that there exists a long run relationship among residential electricity consumption electricity price income per capita and weather variables temperature or cooling degree days in the absence of electricity charge subsidies the demand is found to be both price and income inelastic on the other hand hk s residential electricity consumers are unresponsive to price and income changes when electricity subsidies are in place following its new carbon reduction plan hk is gradually phasing out coal for electricity generation to replace it mainly with natural gas our results suggest that new residential electricity charge subsidies can lessen the effectiveness of6 climate policies aimed at reducing electricity consumption through increases in the electricity price

social inequalities in reforming state socialism between redistribution and markets in china this article extends market transition theory to an analysis of inequality under the conditions of partial reform in china logit regression analysis indicates cadres officials have no greater odds than other households of being among the privileged or avoiding poverty entrepreneurs andformer team cadres however are advantaged despite the rise of a hybrid elite of entrepreneurs who are currently cadres that capitalizes on redistributive power to gain competitive advantage in the marketplace increases in income inequality are modest when market reform stimulates improved economic performance the poor appear to benefit and experience comparable improvements in household income as a result there is only a slight increase in inequality at least in the early stages of market reform the empirical analysis is based on survey data collected in rural china in 1985

does having a cadre parent pay evidence from the first job offers of chinese college graduates abstract we estimate the wage premium associated with having a cadre parent in china using a recent survey of college graduates carried out by the authors the wage premium of having a cadre parent is 15 and this premium cannot be explained by other observables such as college entrance exam scores quality of colleges and majors a full set of college human capital attributes and job characteristics these results suggest that the remaining premium could be the true wage premium of having a cadre parent

should banks own equity stakes in their borrowers a contractual solution to hold up problems abstract this paper develops a model to answer the question whether a bank should hold a share of the equity of a borrowing firm the model shows that a small equity stake held by the bank can have a significant and positive impact on the lending relationship the benefit of bank equity participation arises from the reduced ability of the bank to extract rents from the firm in multiple rounds of financing this in turn improves the firm s incentive to make investments in profitable projects that require future outside finance the benefit is likely to be significant for small to medium size firms growth firms and firms with ongoing capital needs the paper addresses from a corporate finance perspective the current debate about whether banks should be allowed to own equity stakes in corporations and how large these equity stakes should be

short and long run elasticities in us residential electricity demand a co integration approach abstract co integration techniques show promise in the analysis of short and long run effects of economic variables on energy use we use these techniques to develop an error correction model of annual us residential electricity demand we construct equipment stock indices and estimate the model for 1949 1993 our analysis suggests a structural shift in consumption during the 1960s we discuss reasons for this shift report the short and long run elasticities provide forecasts for 1994 1995 and compare the model s forecasts with other published forecasts

a new data set measuring income inequality this article presents a new data set on inequality in the distribution of income the authors explain the criteria they applied in selecting data on gini coefficients and on individual quintile groups income shares comparison of the new data set with existing compilations reveals that the data assembled here represent an improvement in quality and a significant expansion in coverage although differences in the definition of the underlying data might still affect inter temporal and international comparability based on this new data set the authors do not find a systematic link between growth and changes in aggregate inequality they do find a strong positive relationship between growth and reduction of poverty

moral hazard hold up and the optimal allocation of control rights i examine the optimal allocation of control rights in a model with manager moral hazard where the manager and investor may hold up each other ex post the control allocation determines both the likelihood of hold up and the agents renegotiation payoffs in equilibrium only two control allocations are optimal either exclusive investor control or a contingent control allocation that allows the manager to remain in control if and only if interim performance is good thus my model explains why it may be optimal to link control to thefirm s performance such that managers retain control only following good performance

reranking and pro poor growth decompositions for china and vietnam abstract reranking in the move from one income distribution to another makes it impossible to infer from changes in lorenz and generalised lorenz curves how income growth among those toward the bottom of the initial income distribution compares to that among those toward the top and whether there has been income growth among those who were initially poor decompositions allowing for reranking indicate that economic growth in china and vietnam has been better for households who were initially poor than changes in the lorenz and generalised lorenz curve and poverty growth curve would suggest

does the japanese governance system enhance shareholder wealth evidence from the stock price effects of top management turnover this article examines the stock price effects of top management turnover announcements for 432 japanese corporations from 1985 to 1990 we find that these announcements are associated with significantly positive abnormal returns the returns are greater when turnover is forced than when turnover represents normal succession the stock price effects are also significantly positive when turnover is forced and the successor is appointed from outside the firm we find that large shareholders play an important role during outside succession this evidence suggests that the disciplinary decisions of japanese governance mechanisms are consistent with shareholder wealth maximization article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

a theory of debt and equity diversity of securities and manager shareholder congruence this paper shows how the optimal financial structure of a firm complements incentive schemes to discipline managers and how the securities return streams determine the claim holders incentives to intervene in management the theory rationalizes 1 the multipucity of securities 2 the observed correlation between return streams and control rights of securities and 3 the partial congruence between managerial and equity holder preferences over policy choices and monetary rewards as well as the low level of interference of equity in management the theory also offers new prospects for a reappraisal of the earlier corporate finance literature

capital structure under costly enforcement we consider financial structure and repayment behavior in a setting where cash flows are private information to the entrepreneur and the cost of enforcing repayment differs across security holders if enforcement costs are lower for shareholders than for creditors a mixed capital structure with debt and equity can obtain in equilibrium under a mixed capital structure creditors intervene in low cash flow states while shareholders intervene in high cash flow states moreover strategic defaults costly bankruptcy shareholder intervention and violation of absolute priority occur with positive probability on the equilibrium path several of the predictions from our framework are consistent with evidence not readily explainable by existing theories

chinese rural poverty marginalized or dispersed imagine two models of rural poverty distribution one which might be called the ecological model pictures the poor as confined to poverty regions of great natural adversity separate and apart from normal regions in the normal areas on the other hand there might be growing inequality but there is little or no absolute poverty the second model the socioeconomic model sees poor rich and middle class physically interspersed or living in proximity to one another which of these models more closely approximates reality is an important question it affects the visibility of extremes of wealth and poverty which is a politically sensitive matter also characteristics of antipoverty policy will be very different according to whether it is necessary to identify and treat individual households and neighborhoods widely scattered among the nonpoor population or whether it is possible to target entire poor regions in china the ecological model is official

electricity consumption in g7 countries a panel cointegration analysis of residential demand elasticities this article applies recently developed panel unit root and panel cointegration techniques to estimate the long run and short run income and price elasticities for residential demand for electricity in g7 countries the panel results indicate that in the long run residential demand for electricity is price elastic and income inelastic the study concludes that from an environmental perspective there is potential to use pricing policies in the g7 countries to curtail residential electricity demand and thus curb carbon emissions in the long run

voluntary environmental agreements and competition policy voluntary environmental agreements are oftensuspected to promote collusive practicesbetween participating firms the paperaddresses the antitrust implications ofgermany s voluntary dual management system forpackaging waste collection and recycling dsd it uses analytical tools of the economictheory of the firm to examine features ofdsd s governance structure that were oftenidentified to impede competition while thepaper does not argue that dsd performs asefficiently as a hypothetical solution in amore competitive setting it shows that thesefeatures have an economic rationale from theviewpoint of the theory of the firm thegeneral conclusion is that it is necessary tocarefully analyze the institutional fine tuningof a voluntary agreement in order to derive theoverall impact stemming from a formal lack ofcompetition a more case to case oriented institutional research approach could thereforefruitfully supplement model driven theoreticalanalyses of voluntary environmental agreementsand their effect on market competition

the first shall be last entrepreneurship and communist cadres in the transition from socialism this article reviews the sociological literature on the transition from socialism to capitalism it distinguishes between the erosion and transition phases and between traditional and corporate segments in the emerging private sector panel survey data from hungary show that during the transition ex communist cadres maintain their advantageous position and do especially well in the more dynamic corporate segment they are successful because human capital is important in both capitalism and socialism and because the cadres are able to convert past political power to economic advantage contrary to the findings of studies based only on agriculture the transition increases income inequalities

what factors drive inequalities in carbon tax incidence decomposing socioeconomic inequalities in carbon tax incidence in ireland abstract carbon taxes increase the cost of necessary household energy expenditures in many developed countries carbon taxes are regressive as they comprise a greater proportion of a poorer household s income certain socioeconomic groups are more negatively affected by these impacts than others while inequality of incidence by income group has received great attention in the literature a gap exists to quantify the inequality associated with socioeconomic characteristics this information is policy relevant as it may inform the most effective means to offset negative welfare impacts through changes to taxes and or social transfers this paper provides this contribution first the inequality of carbon tax incidence across the income spectrum is quantified using the concentration index methodology a subsequent multivariate decomposition quantifies the contribution each socioeconomic factor makes towards this inequality of incidence this is carried out for electricity motor fuel and all other home fuels to elicit variation of socioeconomic incidence by source while income contributes a great deal towards inequality of incidence for other home fuels other socioeconomic characteristics are the primary determinants of electricity and motor fuel related carbon tax incidence the relative importance of each characteristic in determining regressive impacts is quantified and this varies by carbon tax source

monitoring and structure of debt contracts this paper presents a theory of optimal debt structure when the moral hazard problem is severe the main idea is that the optimal debt contract delegates monitoring to a single senior lender and that seniority allows the monitoring senior lender to appropriate the full return from his monitoring activities the theory explains i why debt contracts are prioritized ii why short term debt is senior to long term debt and iii why financial intermediaries usually hold short term senior debt whereas long term junior debt is widely held another implication of the theory is that covenant and maturity structures will be set to conform to the seniority structure

electricity consumption and metropolitan economic performance in guangzhou 1950 2013 abstract this study analyzes the relationship between electricity consumption and metropolitan economic growth for guangzhou china using 64 years of annual frequency data the capital stock is used as a control variable because of its role in mediating the relationship between energy utilization and economic output empirical results indicate unidirectional granger causality from electricity consumption to metropolitan economic performance in the short run this is consistent with the argument that dependable electricity infrastructure and service can play a vital role in facilitating economic growth implications for conservation efforts and regional development are discussed

comment on the interpretation and misinterpretation of inequality decompositions by income sources summary this paper discusses interpretations of different inequality decomposition rules when inequality is decomposed by income sources it argues that authors of a recent article based their conclusions on misinterpreted decomposition results it also argues that marginal effects derived as elasticities of inequality with respect to uniform increases in income from each source are easily interpreted and can be compared across different decomposition rules

capital and ownership structures and the market for corporate control the author analyzes optimal capital and ownership structures as resulting from anticipated future control contests he focuses on leverage as a device that enables the incumbent management to extract the maximum value from the rival he shows that firm value depends on both capital and ownership structures the analysis leads to the following predictions 1 more efficient managers use less debt 2 firms facing better rivals for control issue more debt and 3 firms with supermajority rules issue less debt several predictions are consistent with known empirical regularities article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

poverty and inequality in java examining the impact of the changing age educational and industrial structure abstract this paper uses the method of dinardo et al dinardo j fortin n m lemieux t 1996 labor market institutions and the distribution of wages 1973 1992 a semiparametric approach econometrica 64 5 sept 1001 1044 to examine the distribution of the benefits of growth in java dinardo et al s method presents the decompositions visually rather than in the form of opaque summary statistics in this paper it was modified so that changes in the cumulative distribution functions lorenz curves and generalized lorenz curves are decomposed the change in the distribution of per capita income between 1984 and 1990 is related to the aging of the population decreased reliance on agriculture increased educational attainment and changes in incomes within industry and age education categories

the design of internal control and capital structure we study the design of internal control and capital structure we pose the question when is control allocated only to shareholders and when is it allocated to other stakeholders such as debtholders or the management team we show that shareholders debtholders get control when the firm s cash flow is relatively sensitive insensitive to managerial effort our theory implies that the signs of the correlations between endogenous variables when shareholders have absolute control are reversed when debtholders have veto power in particular debt level and firm value are negatively positively correlated when debtholders have veto power shareholders have absolute control article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the value of creditor control in corporate bonds this paper introduces a measure that captures the premium in bond prices that is due to the value of creditor control we estimate the premium as the difference in the bond price and an equivalent synthetic bond without control rights that is constructed using credit default swap cds contracts we find empirically that this premium increases as firm credit quality decreases and around important credit events such as defaults bankruptcies and covenant violations the increase is greatest for bonds most pivotal to changes in control changes in bond and cds liquidity do not appear to drive increases in the premium

residential electricity consumption in seattle abstract recent empirical research for different regions of the united states indicates that residential electricity may be an inferior good whose consumption is negatively correlated with income that is a provocative result that runs counter to what many earlier econometric studies indicate given that it makes sense to examine how electricity consumption behaves in different regional service areas even if residential electricity is an inferior good whose usage declines as income rises there is no guarantee that this will be the case across all service areas this study examines residential electricity consumption for seattle washington the largest metropolitan economy in the northwestern region of the united states results from a dynamic error correction modeling approach indicate that residential electricity consumption reacts in statistically significant manners to changes in real price real income and cold weather in the short run residential electricity is a normal good in this metropolitan economy in the long run residential electricity appears to be an inferior good in seattle all else equal whenever real per capita income growth exceeds 1 2 per capita residential electricity usage declines in seattle

the impact of ceo turnover on equity volatility this study investigates the effect on stock price volatility of a significant event in the life of the firm a change in its ceo we find significant long lived increases in volatility following ceo turnover after controlling for firm characteristics and marketwide volatility these increases are larger after forced departures and outside successions following voluntary departures stock prices also respond more strongly to earnings announcements following turnovers these results are consistent with more informative signals of value driving the increased volatility helping resolve two sources of uncertainty possible changes in the firm s strategy and doubt about the successor ceo s ability

income and consumption inequality in urban china 1992 2003 abstract using the nationally representative urban household income and expenditure survey uhies conducted by the national bureau of statistics nbs of china we document a steadily rising trend in income and consumption inequality during the period from 1992 to 2003 in urban china despite the rising urban inequality over time the social welfare of urban residents unambiguously improved because every income group saw their income and consumption increase over this period higher income groups experienced faster increases moreover consumption inequality follows income inequality very closely labor income inequality accounts for about two thirds of total income inequality quite consistently over time we find that only about one third of urban inequality can be attributed to observable individual choices and characteristics of which education has increasing explanatory power while regional differences become less important over time we also find that restructuring of the soe sector urbanization

perception of price when price information is costly evidence from residential electricity demand a bstract residential electricity consumption is an example of a good for which it is costly to determine marginal price since price changes with the quantity purchased according to multistep block rate schedules this paper investigates the effect of the price information problem on consumers price perceptions an alternative hypothesis of average price perception is tested against the marginal price postulate which assumes wellinformed consumers the model which includes a price perception variable allows the estimation of the price to which consumers actually respond the empirical results support the hypothesis that consumers respond to average price perceived from the electricity bill

using deferred compensation to strengthen the ethics of financial regulation abstract defects in the corporate governance of government owned enterprises tempt opportunistic officials to breach duties of public stewardship corporate governance theory suggests that incentive based deferred compensation could intensify the force that common law duties actually exert on regulatory managers in principle a forfeitable fund of deferred compensation could be combined with provisions for measuring verifying and rewarding multiperiod performance to make top regulators accountable for maximizing the long run net social benefits their enterprise produces because government deposit insurance enterprises are purveyors of credit enhancements for which private substitute and reinsurance markets exist their performance could be measured accurately enough to make employment contracts for deposit insurance ceos a promising place to experiment with this kind of accountability reform

managerial legacies entrenchment and strategic inertia this paper argues that the legacy potential of a firm s strategy is an important deter minant of ceo compensation turnover and strategy change a legacy makes ceo replacement expensive because firm performance can only partially be attributed to a newly employed manager boards may therefore optimally allow an incumbent to be entrenched moreover when a firm changes strategy it is optimal to change the ceo because the incumbent has a vested interest in seeing the new strategy fail even though ceos have no specific skills in our model legacy issues can explain the empirical association between ceo and strategy change this paper proposes a model of ceo replacement and puts forward a novel determinant for turnover decisions the legacy potential of a firm s strategy we mean by this the extent to which a manager s decisions affect future firm cash flows potentially beyond the manager s own tenure the replacement of a ceo is arguably one of the most important decisions a firm takes yet the theoretical and empirical finance literature has relatively little to say about the firm and manager specific characteristics that lead to one manager being fired and replaced by another as brickley 2003 points out the only variable that predicts turnover empirically is poor firm performance but it has little pre dictive power theoretical papers on managerial turnover tend to reduce ceo successions to a sequence of static interactions see below for more details as such they do not distinguish between a ceo who is hired and can start a fresh project or one who is constrained in this choice because he inherits a prede cessor s long term strategy our paper focuses on this latter phenomenon and investigates turnover decisions when strategy choices have a legacy potential the fact that a dynamic link exists between a ceo and his predecessor is probably more recognized in the accounting literature than in finance pourciau both authors are from the toulouse school of economics and the institut d administration des

income inequalities in china evidence from household survey data on the basis of a household data set this paper compares household income inequality in urban and rural china decomposes inequality into intra and interprovincial components and analyzes the contribution of various income sources to total income equality the main findings of the paper are first that unlike in most developing economies income inequality in urban areas is lower than in rural areas second nationwide income inequality is due mostly to intraprovincial inequality third components of income associated with economic reforms are more unequally distributed than the rest

forecast of electricity consumption in cyprus up to the year 2030 the potential impact of climate change abstract this paper provides a forecast of electricity consumption in cyprus up to the year 2030 based on econometric analysis of energy use as a function of macroeconomic variables prices and weather conditions if past trends continue electricity use is expected to triple in the coming 20 25 years with the residential and commercial sectors increasing their already high shares in total consumption besides this reference scenario it was attempted to assess the impact of climate change on electricity use according to official projections the average temperature in the eastern mediterranean is expected to rise by about 1 c by the year 2030 using our econometrically estimated model we calculated that electricity consumption in cyprus may be about 2 9 higher in 2030 than in the reference scenario this might lead to a welfare loss of 15 million euros in 2020 and 45 million euros in 2030 for the entire period 2008 2030 the present value of costs may exceed 200 million euros all expressed in constant euros of 2007 moreover we assessed the additional peak electricity load requirements in the future because of climate change extra load may amount to 65 75 megawatts mw in the year 2020 and 85 95 mw in 2030

optimal leverage and aggregate investment we analyze the optimal financing of investment projects when managers must exert unobservable effort and can also switch to less profitable riskier ventures optimal financial contracts can be implemented by a combination of debt and equity when the risk shifting problem is the most severe while stock options are also needed when the effort problem is the most severe worsening of the moral hazard problems leads to decreases in investment and output at the macroeconomic level moreover aggregate leverage decreases with the risk shifting problem and increases with the effort problem

an empirical analysis of electricity consumption in cyprus abstract the paper presents the first empirical analysis of electricity consumption in cyprus using annual data from 1960 to 2004 we have examined electricity use in the residential and the services sectors which are the fastest growing electricity consumers in the island and its interaction with income prices and the weather the analysis was performed with the aid of time series analysis techniques such as unit root tests with and without a structural break in levels cointegration tests vector error correction models granger causality tests and impulse response functions results show long term elasticities of electricity use above unity for income and of the order of 0 3 to 0 4 for prices in the short term electricity consumption is rather inelastic mostly affected by weather fluctuations granger causality tests confirm exogeneity of electricity prices and bidirectional causality between residential electricity consumption and private income the commercial sector is less elastic and reverts faster to equilibrium than the residential sector despite the relatively small sample size results reported here are quite robust and can be used for forecasts and policy analyses

the causal factors of international inequality in hbox co _ 2 emissions per capita a regression based inequality decomposition analysis this paper uses the possibilities provided by the regression based inequality decomposition fields in res labor econ 22 1 38 2003 to explore the contribution of different explanatory factors to international inequality in hbox co 2 emissions per capita in contrast to previous emissions inequality decompositions which were based on identity relationships this methodology does not impose any a priori specific relationship thus it allows an assessment of the contribution to inequality of different relevant variables in short the paper appraises the relative contributions of affluence sectoral composition demographic factors and climate the analysis is applied to selected years of the period 1993 2007 the results show the important though decreasing share of the contribution of demographic factors as well as a significant contribution of affluence and sectoral composition

estimating residential demand for electricity in the united states 1965 2006 abstract this paper examines the residential demand for electricity in the us economy as a function of the per capita income the price of electricity the price of oil for heating purposes the weather conditions and the stock of occupied housing over the period 1965 2006 this paper has two novelties first the occupied stock of houses as a proxy for the stock of electrical appliances and second the identification of a possible equilibrium relationship among the variables is ascertained through the recently advanced ardl approach to cointegration our empirical findings give support to a stable long run relationship implying also short run and long run elasticities whose size and sign are comparable to other similar studies

the spatial contribution to income inequality in rural china an income function analysis is conducted of the 2 400 rural counties of china using cross section data income inequality among counties is considerable and accounts for the major part of inequality among rural households in china county income per capita is well explained by province terrain agricultural type location and the relative importance of non agriculture non agricultural activity in turn is strongly assisted by agricultural success an analysis of time series data suggests that a process of cumulative causation operated in the decade after the rural reforms of 1978 increasing spatial inequality in rural investment industrialization and income fiscal redistribution from richer to poorer areas weakened the process but failed to stem it copyright 1993 by oxford university press

wealth constraints and option contracts in models with sequential investments summary the paper investigates a model where two parties a and b invest sequentially in a joint project an asset investments and the asset value are nonverifiable and a is wealth constrained so that an initial outlay must be financed by either agent b insider financing or an external investor a bank c outsider financing we show that an option contract in combination with a loan arrangement facilitates first best investments and any arbitrary distribution of surplus if renegotiation is infeasible moreover the optimal strike price of the option is shown to dier across financing modes if renegotiation is admitted we identify conditions under which the first best can still be attained then either b financing or c financing may be strictly preferable and a combination of insider and outsider financing may be strictly optimal

competition policy in banking this paper summarizes some of the arguments relating competition and banking instability draws connections between regulation and competition policy and surveys and analyses the role of competition policy in the banking sector in a financial crisis it is argued that a trade off between competition and stability is bound to persist despite improvements in regulation that the banking sector specificity should be recognized by competition policy and that competition policy and regulation need close coordination copyright 2011 oxford university press

public trading and private incentives this article studies the link between public trading and the activity of a firm s large shareholder who can affect firm value public trading results in the formation of a stock price that is informative about the large shareholder s activity this increases the latter s incentives to engage in value increasing activities indeed if he has to liquidate part of his stake before the effect of his activity is publicly observed a more informative price rewards him for his activity implications are derived for the decision to go public capital structure and security design we consider a firm with a large shareholder and otherwise dispersed shares which are publicly traded the block holder is an insider in the sense that he can undertake actions that directly affect the firm s value moreover the insider might not take all value increasing actions as at least some of them involve a private cost for him in other words there is an incentive problem the article s main premise is that public trading as part of the price formation process generates information not only about exogenous factors affecting firm value but also about the insider s activity for instance as a result of public trading a firm s stock price will incorporate the market s evaluation of how a controlling shareholder allocates corporate resources we identify two sources of incentives for the insider to engage in activities that will increase firm value the first one is his stake in the firm since the insider participates in a value increase in proportion to his equity stake a larger stake increases the benefit to him from the firm value being high the view that large shareholders affect firm value is indeed widespread shleifer and vishny 1997 they alleviate the free rider problem pervasive in firms with passive dispersed investors unable or unwilling to affect the firm s operations that is outsiders

linking yitzhaki s and dagum s gini decompositions in this article we show that the gini coefficient is simultaneously decomposable both by sources of income and by populations of income receivers for nonoverlapping income distributions the so called first best gini multi decomposition we show that this multidimensional decomposition is useful for many reasons i it is related to the degree of inequality aversion of the decision maker ii it is especially well suited to study inequalities between poor and nonpoor people iii it enables one to measure the impact of marginal tax reforms on within and between group inequalities respectively

default and renegotiation a dynamic model of debt we analyze the role of debt in persuading an entrepreneur to pay out cash e ows rather than to divertthem in the e rstpartof the paper we study the optimal debt contract specie cally the trade off between the size of the loan and the repayment under the assumption that some debt contract is optimal in the second part we consider a more general class of nondebt contracts and derive sufficient conditions for debt to be optimal among these

average and marginal price changes and the demand for electricity an econometric study the empirical literature on the demand for electricity has hitherto failed to adequately deal with increasing block pricing while it is desirable in principle to include the entire price schedule in the demand function the convention has been to include as an argument either an average or a marginal price yet use of either to the exclusion of the other one leads inter alia to biased estimates of own price elasticity with this in mind a residential demand function is estimated employing both average and marginal price while a number of interesting results emerge it is significant that the coefficient on marginal price is right that is the expected inverse relationship between the quantity of electricity demanded and the marginal price it obtains on the other hand the positive sign on average price is troubling because average price is in this case exactly the same concept as the intra marginal payment a change in average price is exactly the same concept as a change in real income t