financialisation income distribution and aggregate demand in the usa this paper investigates the effects of financialisation and functional income distribution on aggregate demand in the usa by estimating the effects of the increase in rentier income dividends and interest payments and housing and financial wealth on consumption and investment the redistribution of income in favour of profits suppresses consumption whereas the increase in the rentier income and wealth has positive effects a higher rentier income decreases investment without the wealth effects the overall effect of the changes in distribution on aggregate demand would have been negative thus a pro capital income distribution leads to a slightly negative effect on growth i e the usa economy is moderately wage led

real and money wages output and inflation in the semi industrialized world recent structuralist ideas about real and money wage changes are reviewed addressing six questions 1 in an economy closed to trade do real wage increases cause output to rise or fall 2 if output is at an upper bound what are the roles of real wage and wealth movements in macro adjustment 3 taking effective demand into account do money wage cuts stimulate employment 4 in an open economy does money wage reduction or devaluation make output rise 5 at an output bound what are the respective roles of wage reduction and monetary restraint in slowing inflation 6 if inflation is driven by cost with output below capacity how do wage dynamics affect stabilization programmes based on de indexation and price freezes institutional factors suggest that wage cutting may be a counterproductive answer to all these policy questions in semi industrialized economies

competition and corporate performance are people right to think that competition improves corporate performance my investigations indicate first that there are some theoretical reasons for believing this hypothesis to be correct but they are not overwhelming furthermore the existing empirical evidence on this question is weak however the results reported here based on an analysis of around 670 u k companies do provide some support for this view most important i present evidence that competition as measured by increased numbers of competitors or by lower levels of rents is associated with a significantly higher rate of total factor productivity growth

inflation growth and wage policy a brazilian perspective abstract a growth inflation model based on recent brazilian experience is developed the paper focuses on brazilian compulsory wage policy in order to analyse current stabilization policy issues in this context it is argued that orthodox stabilization policies as exemplified by an autonomous reduction in the rate of monetary growth implies both a temporary and a permanent decrease in output growth if the wage formula as in brazil provides for lagged price indexation the idea of promoting stabilization through full wage indexation is also examined

market share market value and innovation in a panel of british manufacturing firms this paper examines the empirical relationship between technological innovations market share and stock market value new developments in the estimation of dynamic count data models are used to control for unobserved firm specific heterogeneity we find a robust and positive effect of market share on observable headcounts of innovations and patents although increased product market competition in the industry tends to stimulate innovative activity furthermore the impact of innovation on market value is larger for firms with higher market shares we argue that our results are consistent with models where high market share firms have incentives to pre emptively innovate

the economics of small business finance the roles of private equity and debt markets in the financial growth cycle abstract this article examines the economics of financing small business in private equity and debt markets firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle we show the sources of small business finance and how capital structure varies with firm size and age the interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment we also analyze a number of research and policy issues review the literature and suggest topics for future research

the incidence of secured debt evidence from the small business community critics claim that theories of secured debt fail to explain the widespread use of collateral because they incorrectly predict when a loan will be secured this paper provides the first rigorous statistical test of the transaction cost models of secured debt data from two samples of over 1 000 small business loans generally support the common set of predictions of these theories the incidence of secured debt is positively related to probability of default loan size loan maturity and marketability of assets changes in the legal and economic environment also alter firms decisions regarding the pledging of collateral

international competition income distribution and economic growth this paper shows that the neo keynesian case for wage led growth does not generally hold in an open economy model wage increases cause a loss of competitiveness that reduces the trade balance if the economy is relatively open to trade and price elasticities satisfy certain restrictions the worsening of the trade balance more than outweighs the increase in workers consumption thus reducing the growth rate the main theoretical innovation is a flexible markup pricing rule that allows changes in unit labor costs and exchange rates to affect profit margins implications for international relations and class conflict are discussed copyright 1989 by oxford university press

geography industrial organization and agglomeration this paper makes two contributions to the empirical literature on agglomeration economies first the paper uses a unique and rich database in conjunction with mapping software to measure the geographic extent of agglomerative externalities previous papers have been forced to assume that agglomeration economies are club goods that operate at a metropolitan scale second the paper tests for the existence of organizational agglomeration economies of the kind studied qualitatively by saxenian 1994 this is a potentially important source of increasing returns that previous empirical work has not considered results indicate that localization economies attenuate rapidly and that industrial organization affects the benefits of agglomeration

collusion and the banking structure of a duopoly the author shows that in credit relationships the choice of a lender may become a determinant of the extent of competition in downstream industries in the presence of imperfect output markets and asymmetric information in financial markets members of an industry may achieve a partial collusion in the output market by borrowing from the same bank in an oligopoly debt is procompetitive as it gives incentives to the borrowing firm to undertake an aggressive output strategy as both firms borrow the industry becomes more competitive and riskier the firms debt value is decreased a common lender can better control these incentive effects and hence limit the extent of competition in the output market

capital structure and product market rivalry how do we reconcile theory and evidence this paper presents empirical evidence on the interaction of capital structure decisions and product market behavior we examine when firms recapitalize and increase the proportion of debt in their capital structure the evidence in this paper shows that firms with low productivity plants in highly concentrated industries are more likely to recapitalize and increase debt financing this finding suggests that debt plays a role in highly concentrated industries where agency costs are not significantly reduced by product market competition following the empirical evidence we introduce the strategic investment effects of debt and argue that this effect in conjunction with agency costs appears to fit the data this abstract was borrowed from another version of this item

on prices and economic power explaining recent changes in intersectoral relations in the indian economy two contrasting views about the relationship between agriculture and industry and in particular about the optimal level of the terms of trade between these two sectors are identified and first set in the context of the political economy of contemporary india methodological issues relating to the correct measurement of intersectoral price shifts are taken up and it is shown that these have considerable bearing on current controversies it is argued in particular that single factor explanations of the behaviour of the terms of trade lack credibility and that these have to be analysed in the context of wider issues of growth and imbalance in developing economies

are women more risk averse we find that single women exhibit relatively more risk aversion in financial decision making than single men using u s sample data we examine household holdings of risky assets to determine whether there are gender differences in financial risk taking as wealth increases the proportion of wealth held as risky assets is estimated to increase by a smaller amount for single women than for single men gender differences in financial risk taking are also influenced by age race and number of children greater financial risk aversion may provide an explanation for women s lower levels of wealth compared with men s jel j16 d81 g11

product market competition and optimal debt contracts the limited liability effect revisited abstract this paper shows that asymmetric information between lenders and borrowers plays a crucial role in the existence of interactions between financial decisions and output market strategies lenders offer an optimal renegotiation proof financial contract which resembles a standard debt contract computing cournot equilibria debt causes firms to compete less aggressively the usual positive limited liability effect on quantities is offset by a negative one due to endogenous financial costs

technical inefficiency in manufacturing industries this article examines technical inefficiency of manufacturing industry in the united kingdom based on data for 19 023 establishments in 151 industries these data drawn from the annual census of production for 1977 have been used to estimate technical inefficiency in each industry by fitting translog stochastic frontier production functions and decomposing the residuals into two components one measuring inefficiency and the other unobservable random factors the work is the first step in a larger project to explain the sources of technical inefficiency and to compare efficiency between countries similar studies are currently taking place in australia the united states canada japan south korea and norway the first phase of estimation has been completed for the united states caves 1988 for the united kingdom green and mayes 1989 and australia harris 1989

growth distribution and inflation a centennial synthesis microeconomics at harvard a little more than a decade ago having become disenchanted with neoclassical economics i suggested to my students that the very neoclassical course i had just taught provided one way of characterising the workings of a capitalist economy but hardly the only way after a year of utility maximisation partial and general equili brium pareto optimality and the associated agonies of lagrangians hessians jacobians and fixed point theorems my students were able to contain their enthusiasm for this news they had expected not one way of looking at the world but at the very least a magical key to knowledge and wisdom it is probably accurate to say that my message was not received at all i shall always remember the incomprehension etched on their faces the next year the last i was to teach theory in that incarnation i decided to present at least a sketch of an alternative to the neoclassical orthodoxy i soon discovered there were at least two foundations on which to build one going back to marx who died one hundred years ago the other deriving from keynes whose birth centenary we celebrate this year these two approaches it was clear were as different from each other as from the neoclassical approach the analysis of neo keynesian neo marxian and neoclassical theories has been a major focus of my research ever since and provides the framework for these lectures 1

the effect of capital market characteristics on the value of start up firms we develop an equilibrium model of contracting bargaining and search in which the relative scarcity of venture capital affects the bargaining power of entrepreneurs and venture capitalists this in turn affects the pricing contracting and value creation in start ups the relative scarcity of venture capital is endogenous and depends on the profitability of venture capital investments entry costs and transparency of the venture capital market supply and demand conditions also affect the incentives of venture capitalists to screen projects ex ante we characterize both the short and long run dynamics of the venture capital industry which provides us with a stylized picture of the internet boom and bust periods our model is consistent with existing evidence and provides a number of new empirical predictions

inflation deflation expectations and economic stability in a kaleckian system abstract in this paper we analyze the impact of inflation deflation expectations and the effect of the monetary authority s inflation targeting policy in a kaleckian system on the basis of macro foundation approaches for this purpose we build a dynamical system composed of four variables the rate of utilization the wage share the nominal rate of interest and the expected rate of inflation and examine the properties especially stability of this dynamical system we then find that the existence of adaptive inflation deflation expectations always destabilizes our kaleckian system irrespective of the revision speed of expectations while that the monetary authority s intensive inflation targeting policy can make the system stable but the effect of this policy depends heavily upon the public credibility of it we also perform numerical simulations to check that our analysis is valid

harsanyi values of large economies nonequivalence to competitive equilibria abstract we consider economies with many agents and compare the competitive equilibria and the value allocations of the resulting coalitional games in particular we provide a smooth and robust example where the value principle does not hold for the harsanyi ntu value there is a unique competitive equilibrium which however does not belong to the nonempty set of harsanyi value allocations journal of economic literature classification numbers c71 d51

product market competition and the financing of new ventures this paper examines the interaction between venture risk product market competition and the entrepreneur s choice between bank financing and venture capital vc financing under bank financing a debt type contract emerges as optimal which allows the entrepreneur to retain full control of the venture and thus yields strong effort incentives as long as the entrepreneur can service the debt repayment however this leads to liquidation in the case of default making the venture s success quite sensitive to exogenous even temporary shocks that may hinder debt repayment under vc financing an equity type contract emerges as optimal although it is not sensitive to exogenous shocks this contract requires the entrepreneur to share a fraction of the rents with the financier thus yielding lower effort incentives for the entrepreneur there exists a threshold level of venture risk such that bank financing is optimal if and only if venture risk is below that threshold product market competition increases the value of stronger entrepreneurial incentives and thus increases the maximum level of risk the entrepreneur is willing to take before switching from bank financing to vc financing this is a robust result that is shown to hold in various models of competition including the hotelling salop dixit stiglitz and cournot to bertrand switch this paper was accepted by lee fleming entrepreneurship and innovation

distribution aggregate demand and unemployment in oecd countries the primary aim of this paper is to investigate the role of income distribution in the determination of unemployment to this end the author develops a post keynesian model that shows that unemployment is effectively determined by income distribution aggregate demand and the inadequacy of capital equipment the deriv ed unemployment equation is applied to ten large industrial countries o ver the period 1976 89 the empirical findings provide strong support fo r the hypothesis that shifts in income distribution and inadequacy of capital equipment are major sources of unemployment copyright 1993 by royal economic society

general equilibrium macroeconomic models of unemployment can they explain the unemployment path in the oecd several theories which seek to explain the high and apparently persistent unemployment in the oecd countries over the past two decades have arisen within the framework of imperfections in the goods and labour markets probably the most prominent theories within this class of models are the general equilibrium models of phelps 1994 layard and nickell 1986 and layard et al 1991 labelled structuralist theories of unemployment by phelps 1994 common to the structuralist theories is that the low frequency movements in unemployment or the nairu are determined by structural variables such as unemployment benefits taxes real interest rates etc however the high frequency movements in unemployment are determined by wage and price surprises and in the layard and nickell 1986 model also by cyclical mark ups employment is entirely determined by the firms willingness to supply and the firms are never sales constrained by contrast the general equilibrium model of sarantis 1993 which is in post keynesian spirit suggests that unemployment on all frequencies is mainly an outcome of demand side factors in this model imperfections in the goods and labour markets are less important determinants of unemployment in this paper i estimate the extent to which the models of phelps 1994 layard and nickell 1986 henceforth l n and sarantis 1993 are able to explain the unemployment path of the oecd countries using annual data over the period 1960 to 1993 the theoretical set up of the models is presented in section 1 and the empirical estimates are set out in section 2

the labour share and the dynamics of output abstractwe derive a new keynesian is curve that is augmented to capture the direct effects of the labour share on output our derivation shows that the direct effect of the labour share on output is ambiguous furthermore theory suggests that the expected labour share negatively affects output empirically we find that the labour share plays a significant role in driving output dynamics however contrary to theoretical expectation the expected labour share positively affects output in some cases a finding we call the labour share puzzle we also find that over time there seems to be a general shift in aggregate demand dynamics towards being profit led i e rising labour share decreases output we conclude that policymakers should not ignore the labour share in their decisions

early stage financing and firm growth in new industries this paper shows that active investors such as venture capitalists can affect the speed at which new ventures grow in the absence of product market competition new ventures financed by active investors grow faster initially though in the long run those financed by passive investors are able to catch up by contrast in a competitive product market new ventures financed by active investors may prey on rivals that are financed by passive investors by strategically overinvesting early on resulting in long run differences in investment profits and firm growth the value of active investors is greater in highly competitive industries as well as in industries with learning curves economies of scope and network effects as is typical for many new economy industries for such industries our model predicts that start ups with access to venture capital may dominate their industry peers in the long run

financing and advising optimal financial contracts with venture capitalists this paper analyses the joint provision of effort by an entrepreneur and by an advisor to improve the productivity of an investment project without moral hazard it is optimal that both exert effort with moral hazard if the entrepreneur s effort is more efficient less costly than the advisor s effort the latter is not hired if she does not provide funds outside financing arises endogenously this explains why investors like venture capitalists are value enhancing the level of outside financing determines whether common stocks or convertible bonds should be issued in response to incentives

a stagnationist model of economic growth in an economy subject to persistent excess capacity demand related factors will play a key role in determining patterns of secular change this thesis has a long history in econ omics sometimes in the underworld and occasionally at the height of fashion as recounted by rowthorn 1982 recent manifestations in the first world are the theories of monopoly capitalism of baran and sweezy 1966 and steindl 1952 who in turn follow kalecki 1971 hobson 1902 luxemburg 1951 and the marx of realisation crises and reproduction schemes in volume ii of capital other radicals such as boddy and crotty 1975 add a profit squeeze explanation of the cycle which underlays the dynamics of the growth model specified here in developing countries difficulties in both realisation and sectoral proportions are emphasised as obstacles to growth witness lustig s 1980 review of latin american structuralist theory and dutt s 1984 model which formalises an ongoing controversy in india about how income redistribution might affect prospects for industrialisation all these authors are stagnationist in assuming that both the growth rate and the level of capacity utilisation can be different under different conditions of income distribution and or macroeconomic policy their preferred policies will presumably lead to greater equality increase utilisation or step up growth they typically ask two analytical ques tions how does output respond in the short run to shifts in the income distribution how do output adjustments feed back into distributional dynamics especially under conditions when price and wage inflation rates may be influenced by employment levels productivity changes and conflicting income claims in what follows we set out a simple model to address these questions and explore the implications for macroeconomic policy of the answers that arise since the approach is not familiar to economists with a standard training a verbal description of the growth model is given first those who wish to jump directly into a formal presentation can proceed to section 1 output x is assumed to meet demand in an instantaneous short run we measure activity as the ratio of firms net cash inflow to the value of capital stock i e the rate of profit r during the short run the price level p is fixed by a mark up rule p 1 x wb where r is the mark up rate w the money wage and b the labor output ratio with this rule the share of profits or mark up income in the value of output is r l t let u stand for the output capital ratio or capacity utilization xik by simple identity

testing agency theory with entrepreneur effort and wealth we develop a principal agent model in an entrepreneurial setting and test the model s predictions using unique data on entrepreneurial effort and wealth in privately held firms accounting for unobserved firm heterogeneity using instrumental variables techniques we find that entrepreneurial ownership shares increase with outside wealth and decrease with firm risk effort increases with ownership and effort increases firm performance the magnitude of the effects in the cross section of firms suggests that agency costs may help explain why entrepreneurs concentrate large fractions of their wealth in firm equity

capital market imperfections and countercyclical markups theory and evidence during recessions output prices seem to rise relative to wages and raw material prices one explanation is that imperfectly competitive firms compete less aggressively during recessions that is markups of price over marginal cost are countercyclical the authors present a model of countercyclical markups based on capital market imperfections during recessions liquidity constrained firms boost short run profits by raising prices to cut their investments in market share the authors provide evidence from the supermarket industry in support of this theory during regional and macroeconomic recessions more financially constrained supermarket chains raise their prices relative to less financially constrained chains copyright 1996 by american economic association

measuring market power and cost efficiency effects of industrial concentration in this paper i show how appelbaum s framework for testing price taking behavior in a single industry can be formally extended to consider concentration explicitly in so doing i separate the market power effect of concentration from its cost efficiency effect data from the us beef packing industry are used to illustrate an empirical application of the model the findings support oligopsonistic market power and slaughter cost efficiency in the industry however the cost efficiency effect outweighs the market power effect

a global model of recovery and rebalancing this paper presents an investigation of global recovery from the great recession and the rebalancing of global external imbalances using a global model of 16 countries and composite regions the model applies to the short term and only to the real side key features are demand driven output determination pro cyclical aggregate labour productivity imperfect competition in product markets and simple bargaining in non clearing labour markets which together determine the functional distribution of income trade is modelled in a bilateral import matrix particular attention is paid to international adjustment simulation results suggest that early exit from fiscal support threatens a fragile recovery further domestic demand expansion and revaluation in real terms in surplus countries are necessary for rebalancing and a variety of measures can be employed to achieve these goals copyright oxford university press

product and process innovation as a response to increasing imports and foreign direct investment the paper analyses the hypotheses that imports and inward foreign direct investment fdi have positive effects on the innovative activity of domestic firms because competition on the domestic market is thereby increased and domestic firms have to perform more efficiently to maintain their market position chamberlain s random effects probit approach which may account for individual heterogeneity depending on exogenous variables is used to analyse a panel data set containing 1270 firms of the german manufacturing industry from 1984 to 1988 it turns out that both import share and fdi share have positive and significant effects on product and process innovations

optimal debt structure and the number of creditors within an optimal contracting framework we analyze the optimal number of creditors a company borrows from we also analyze the optimal allocation of security interests among creditors and intercreditor voting rules that govern renegotiation of debt contracts the key to our analysis is the idea that these aspects of the debt structure affect the outcome of debt renegotiation following a default debt structures that lead to inefficient renegotiation are beneficial in that they deter default but they are also costly if default is beyond a manager s control the optimal debt structure balances these effects we characterize how the optimal debt structure depends on firm characteristics such as its technology its credit rating and the market for its assets

bargaining power effective demand and technical progress a kaleckian model of growth following the kaleckian tradition this paper presents a demand led growth model in which the distribution of income is fully endogenised this is done by introducing claims on income by workers and firms the bargaining power of these two groups affects through distribution the patterns of accumulation and inflation in turn the bargaining power of workers is affected by the rate of change of employment the paper discusses the model s static and dynamic implications including the effects of exogenous and induced technical progress the model confirms all the typical kaleckian results including the fact that increases in real wages may lead to accelerating accumulation as well as inflation it also produces a new result it is possible that an increase in the rate of change of labour productivity may not lead to an increase in the rate of change of employment

growth distribution and sectoral heterogeneity reading the kaleckians in latin america abstract the aim of this paper is to explore a parallelism between two episodes in the history of economic thought in order to suggest that the interaction between them can contribute to the research on kaleckian growth and distribution models first a brief summary of the theoretical development from steindl s stagnationist claims to the debate about demand regimes is offered then a more detailed account is provided of the latin american debate that began with furtado s stagnationist claims and resulted in the formulation of models of social articulation and disarticulation finally an analytical classification of kaleckian and latin american growth and distribution models is provided indicating the way in which sectoral heterogeneity and demand composition can act as a plausible link between growth and distribution

personal income inequality and aggregate demand this paper presents a theoretical and empirical investigation of how changes in the size distribution of income can aect aggregate demand and the demand regime of an economy after presenting empirical evidence for the us economy that the propensity to save increases signicantly from the bottom to the top quintile of wage earners we demonstrate that more equal distributions always lead to higher output in the traditional neo kaleckian macroeconomic model we also present conditions under which a reduction of income inequality among workers turns demand more wage led this view is supported by the results of an econometric study for the united states 1967 2010 which show that the rise after 1980 in income inequality has made the us economy more prot led

macro policy in the tropics how sensible people stand abstract a model for macro policy analysis is set out incorporating an inflation theory based on distributional conflict output and current account adjustment mechanisms and the money market classic structuralist results about contractionary devaluation and stagflationary monetary restriction are derived alternative closures of the model are considered monetarism and external strangulation or foreign exchange bonanzas and it is extended to deal with interest rate reform short term stabilization issues are analyzed monetary and fiscal policy import quotas and export subsidies as opposed to devaluation financial market complications food subsidies and public sector pricing and orthodox and heterodox anti inflationary programs finally medium term processes of inflation distribution and growth are described an example of an irreversible contractionary shock which leads the economy from a distributionally favorable to an unfavorable steady state is presented

the effects of income distribution and fiscal policy on aggregate demand investment and the budget balance the case of europe this paper develops a multi country post kaleckian model that incorporates the role of the government one key novelty of the model is that it integrates cross country effects of both changes in income distribution and fiscal policy the model is used to estimate econometrically the effects of income distribution and fiscal policy on the components of aggregate demand and the budget balance in eu15 countries the results show that a simultaneous increase in the wage share in all eu15 countries would increase demand and the primary budget balance in all countries a simultaneous increase in government spending turns out to boost economic activity in all the eu15 countries indicating the positive economic effects of expansionary fiscal policy moreover a progressive tax policy that would be implemented simultaneously at the eu level would lead to an increase in output in all countries

bank profitability leverage and financial instability a minsky harrod model this paper develops a stock flow consistent macroeconomic model where bank profitability and bank leverage play a crucial role in the determination of firms liability structure the model assumes that banks credit supply depends on bank profitability as well as firms profit interest ratio our analysis suggests that a strong expansionary effect of bank profitability on credit supply tends to destabilise the economy leading to cycles driven by the interactions between firms and banks financial behaviour the formal framework is used to discuss hyman minsky s proposal in his stabilizing an unstable economy for the control over the permissible leverage ratios and payout ratios of banks copyright oxford university press

product market competition and boundaries of the firm this paper studies the effects of product market competition on firm boundaries in a duopoly setting each retailer is associated with a manufacturer who must decide how to allocate property rights over a retail asset delegating property rights over the retail asset to an indepedent retailer disintegration transfers incentives from the manufacturer to the retailer and has the benefit of increasing product quality and profits owing to the retailer s superior efficiency however it also forces the manufacturer to forfeit part of the profits competition increases the net benefit from delegation and leads to more efficient vertically disintegrated structures cet article etudie la concurrence sur le marche des produits et ses effets sur les limites de l entreprise dans un modele de duopole chaque producteur associea un distributeur choisit soit une structure verticale integree dans laquelle le distributeur est son employe soit une structure desintegree dans laquelle le distributeur est independant plus efficace en termes d incitations au distributeur la structure desintegree genere des profits joints plus importants elle oblige cependant le producteur a partager les profits avec le distributeur la concurrence augmente le benefice et reduit le cout de la desintegration favorisant ainsi des structures verticales desintegrees et efficaces

market structure internal capital markets and the boundaries of the firm we study how the creation of an internal capital market an icm can invite strategic responses in product markets that in turn shape firm boundaries icms provide ex post resource flexibility but come with ex ante commitment costs alternatively stand alones possess commitment ability but lack flexibility by creating flexibility integration can sometimes deter a rival s entry but commitment problems can also invite predatory capital raising these forces drive different organizational equilibria depending on the integrator s relation to the product market hybrid organizational forms like strategic alliances can sometimes dominate integration by offering some of its benefits with fewer strategic costs this paper develops a theory of the firm in which internal capital markets affect the ability to compete in product markets in our model a firm s decision to operate an internal capital market affects the fund raising behavior of its product market rivals an internal capital market can either scare away rival firms or else induce them to compete more aggressively raising more capital than they otherwise would in equilibrium these strategic interactions determine the boundaries of the firm

internal versus external capital markets this paper presents a framework for analyzing the costs and benefits of internal versus external capital allocation we focus pritnarily on comparing an internal capital market with bank lending while both represent centralized forms of financing in the former case the financing is owner provided while in the latter ceise it is not we argue that the ownership aspect of internal capital allocation has three important consequences 1 it leads to more monitoring than bank lending 2 it reduces managers entrepreneurial incentives and 3 it makes it easier to efficiently redeploy the assets of projects that are performing poorly under existing management

small and medium sized enterprises bank relationship strength and the use of venture capital we investigate the nexus between small and medium sized enterprises smes use of venture capital and bank financing relationships using a unique data set with detailed information on sme finance in italy germany and the uk the empirical regularities we uncover show that that entrepreneurial firms substitute venture capital for multiple banking relationships this substitution effect is primarily driven by expertise substitution and there is also some suggestive yet inconclusive indication in the data that smes turn to providers of venture capital to avoid rent extracting behavior by the firm s main bank our results do not support the view that firms obtain venture capital in instances when bank financing is difficult to obtain instead venture capital funds are used if bank funding is deemed not appropriate and firms do seem to be aware of which type of financing is more appropriate for them

the dynamics of leverage in a demand driven model with heterogeneous firms abstract this paper introduces heterogeneous microeconomic behavior into a demand driven macroeconomic model in order to study the joint dynamics of leverage and capital accumulation by identifying the links between firm level variables and aggregate quantities the paper contributes toward a reformulation of the minskyan formal analysis that explicitly considers the role of microeconomic factors in generating macroeconomic instability the aggregation of heterogeneous agents is not only performed numerically as in traditional agent based models but also by means of an innovative analytical methodology originally developed in statistical mechanics and recently imported into macroeconomics the distinctive feature is in that the joint analysis of the numerical and analytical solutions of the model sheds light on the effects of financial fragility at the firm level on the dynamics of the macroeconomy in particular the analysis of steady state and stability properties of the system provide additional insights on the role of behavioral and size heterogeneity of firms for the stocks of aggregate debt and capital

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

macroeconomic issues for latin america abstract recent macroeconomic issues in latin america are reviewed with an emphasis on theory topics covered include multiple equilibria from hysteresis or increasing returns exchange rate management and the output and asset market effects of devaluation speculation interest rate management and financial reform government behavior income distribution and growth inertial inflation and heterodox policy shocks and disequilibrium theories

long waves and short cycles in a model of endogenous financial fragility this paper presents a stock flow consistent macroeconomic model in which financial fragility in firm and household sectors evolves endogenously through the interaction between real and financial sectors changes in firms and households financial practices produce long waves the hopf bifurcation theorem is applied to clarify the conditions for the existence of limit cycles and simulations illustrate stable limit cycles the long waves are characterized by periodic economic crises following long expansions short cycles generated by the interaction between effective demand and labor market dynamics fluctuate around the long waves