credit constraints equity market liberalizations and international trade abstract this paper provides evidence that credit constraints are an important determinant of international trade flows i exploit shocks to the availability of external finance and examine the impact of equity market liberalizations on the export behavior of 91 countries in the 1980 1997 period i show that liberalizations increase exports disproportionately more in financially vulnerable sectors that require more outside finance or employ fewer collateralizable assets this result is not driven by cross country differences in factor endowments and is independent of simultaneous trade policy reforms moreover it obtains with equal strength in the full panel of countries as well as in both panel and event study analyses of countries which removed capital controls during the sample period finally the effects of liberalizations are more pronounced in economies with initially less active stock markets indicating that foreign equity flows may substitute for an underdeveloped domestic financial system similarly opening equity markets has a greater impact in the presence of higher trade costs caused by restrictive trade policies

capitalization of government support in agricultural land prices what do we know abstract the objective of this paper is to provide an overview of existing literature both theoretically and empirically on the extent to which agricultural subsidies do translate into higher land values and rents and finally benefit landowners instead of agricultural producers our review shows that agricultural support policy instruments contribute to increasing the rental price of farmland and that the extent of this increase closely depends on the level of the supply price elasticity of farmland relative to those of other factors inputs on the one hand and on the range of the possibilities of factor input substitution in agricultural production on the other hand the empirical literature shows that land prices and rents have in general a significant positive and inelastic response to government support such inelastic response is thought to reflect the uncertain future of the farm programmes and in general studies have indicated that land prices are more responsive to government based returns than to market based returns

a comprehensive analysis of farmland value determination a county level analysis this study develops a comprehensive model of farmland value determination to analyze the effects of various economic variables such as net farm income government payments macroeconomic factors and demographic conditions on farmland values for the counties along the snake river valley in idaho land values net farm income and population show considerable variation among the counties therefore use of county level cross sectional and time series data helps to assess the impacts of various factors on land values more accurately the empirical results show that net farm income wheat yield population and credit availability have positive effects and property tax rates interest rates and debt to asset ratio have negative effects on farmland values

stochastic revealed preference and the theory of demand this paper extends the deterministic revealed preference theory of consumers behavior to permit stochastic choices in this extended framework we introduce a restriction on stochastic choices that constitutes a stochastic counterpart of the weak axiom of revealed preference this restriction allows us to derive stochastic versions of nonpositivity of the own substitution effect and the demand theorem journal of economic literature classification number number d11

cash rents and land values in u s agriculture a firm level land valuation model is deduced which depends on the expected growth rate in net cash returns to land inflation expectations and property income and capital gains taxes it is then aggregated to obtain an aggregate two sector land valuation model that model is then estimated for twenty four individual states for the period 1960 81 in addition a pooled cross sectional regression model is estimated combining the twenty four state data the model results demonstrate that significant state differences exist in the land market and that in many states agricultural land values are influenced by nonagricultural demand for land

industry growth and capital allocation does having a market or bank based system matter are market based or bank based financial systems better at financing the expansion of industries that depend heavily on external finance facilitating the formation of new establishments and improving the efficiency of capital allocation across industries we find evidence for neither the market based nor the bank based hypothesis while legal system efficiency and overall financial development boost industry growth new establishment formation and efficient capital allocation having a bank based or market based system per se does not seem to matter much

the limits of attraction consumer research has documented dozens of instances in which the introduction of an irrelevant third option affects preferences between the remaining two in nearly all such cases the unattractive dominated option enhances the attractiveness of the option it most resembles a phenomenon known as the attraction effect in the studies presented here however the authors contend that this phenomenon may be restricted to stylized product representations in which every product dimension is represented by a number e g a toaster oven that has a durability rating of 7 2 and ease of cleaning rating of 5 5 such effects do not typically occur when consumers experience the product e g taste a drink or when even one of the product attributes is represented perceptually e g differently priced hotel rooms whose quality is depicted with a photo the authors posit that perceptual representations of attributes do not support the sorts of comparisons that drive the attraction effect with highly stylized e

determinants of land value volatility in the u s corn belt understanding land value volatility and its reaction to exogenous shocks helps land owners investors and lenders assess risk land value volatility the variance of the unpredictable component of

the fischler reform of the common agricultural policy and agricultural land prices based on 7 300 agricultural land sales transactions we estimate the effect of the 2003 reform of the e u common agricultural policy on land prices as opposed to the main body of the literature on agricultural land values we do not start from a demand oriented net present value approach or hedonic pricing method but derive our reduced form pricing equation from a spatial land sales market model our empirical model accounts for spatial dependence and endogeneity of explanatory variables a reduction of payments by 50 ha would decrease land sales prices by 445 ha before and by 984 ha after the reform jel q15 q18

an analysis of growth of u s farmland prices 1963 82 increases in expected inflation or real growth in net rental income to land have been proposed as alternative explanations of the dramatic real growth in u s farmland prices in the 1970s in this paper the effect of inflation is shown to be theoretically ambiguous an empirical analysis using u s and international farmland prices suggests that most of the real land price growth can be explained by real growth in net rental income to land increases in expected inflation have had a negative effect on real land prices but the effect of inflation has been comparatively small

imprecision as an account of the preference reversal phenomenon many individuals choices and valuations involve a degree of uncertainty imprecision this paper reports an experiment designed to obtain some measure of imprecision and to examine the extent to which it can explain preference reversals of two opposite forms one of which appears not to have been reported previously the model of imprecision we examine not only predicts both patterns but also provides an account of earlier results that are otherwise not well explained the results suggest that any successful descriptive theory of choice and valuation will need to allow in some way for the imprecision surrounding people s decisions

the impacts of different farm programs on cash rents county level annual observations for iowa from 1996 through 2000 were used to measure the impacts of farm program payments on cash rental rates the econometric analysis explicitly incorporates spatial autocorrelation cash rental rates were found to increase by almost one dollar per acre for each additional dollar per acre paid for market loss assistance and production flexibility contracts whereas conservation reserve program payments appear to exert no effect on cash rental rates a counterintuitive finding that warrants further examination is the small but negative impact of deficiency payments on cash rental rates

the relevance of irrelevant alternatives abstract in an experimental setting subjects face a standard elicitation task for certainty equivalents we show that when a third objectively irrelevant option is added to the standard task the willingness to take risks increases

salience and consumer choice we present a theory of context dependent choice in which a consumer s attention is drawn to salient attributes of goods such as quality or price an attribute is salient for a good when it stands out among the good s attributes relative to that attribute s average level in the choice set or more broadly the choice context consumers attach disproportionately high weight to salient attributes and their choices are tilted toward goods with higher quality price ratios the model accounts for a variety of disparate evidence including decoy effects and context dependent willingness to pay it also suggests a novel theory of misleading sales

financial markets the pattern of industrial specialization and comparative advantage evidence from oecd countries due to underlying technological and organizational differences industries differ in their need for external finance since services provided by the financial sector are largely immobile across countries the pattern of industrial specialization should be influenced by the level of financial development among oecd countries we find a strong causal effect of the financial sector on industrial specialization further the financial sector is a source of comparative advantage in a way consistent with the hecksher ohlin vanek model results are also presented on which aspects of financial systems are important for specialization and comparative advantage

determinants of patent rights a cross national study abstract this paper presents an index of patent rights for 110 countries for the period 1960 1990 the index is used to examine what factors or characteristics of economies determine how strongly patent rights will be protected the evidence does indicate that more developed economies tend to provide stronger protection but the underlying factors which influence patent protection levels are the country s level of research and development r d activity market environment and international integration which are correlated with its level of development the results qualify however that r d activity influences patent protection levels after a nation s research sector reaches a critical size an implication of this is that to raise patent protection levels in weakly protecting countries it is important to foster a significant research base in those countries and thereby create incentives for protecting patent rights

insecurity and the pattern of trade an empirical investigation corruption and imperfect contract enforcement dramatically reduce international trade this paper estimates the reduction using a structural model of import demand in which insecurity acts as a hidden tax on trade we find that inadequate institutions constrain trade as much as tariffs do we also find that omission of indices of institutional quality biases the estimates of typical gravity models obscuring a negative relationship between per capita income and the share of total expenditure devoted to traded goods finally we argue that cross country variation in the effectiveness of institutions and the consequent variation in the prices of traded goods offer a simple explanation for the stylized fact that high income capital abundant countries trade disproportionately with each other

finance and trade a cross country empirical analysis on the impact of financial development and asset tangibility on international trade summary this paper investigates the interplay between financial development asset tangibility and international trade using industry level data on firms dependence on external finance and firms asset tangibility for 27 industries in 42 countries we find that economies with higher levels of financial development have higher export shares and trade balance in industries with more intangible assets using the same dataset we also show that the interplay between property rights protection and asset tangibility influences the pattern of trade higher levels of property rights protection lead to higher export shares and trade balance in industries with more intangible assets

financial constraints the distribution of wealth and international trade we develop a simple theoretical model to examine the impact of the distribution of wealth on the patterns of trade when capital markets are imperfect our model predicts that the dispersion of wealth can be a determinant of comparative advantage for low income countries with poor financial institutions we find support for these prediction using export and financial panel data from a large sample of countries

farmland accumulation and prices a model of farmland accumulation is developed to study factors influencing u s farmland values this model stresses the manner in which credit is allocated for land purchases to secure necessary loans for additional land to expand farm size the farmer provides as collateral his net accumulated wealth thus land acquisitions are made to increase profits and to provide leverage for further land expansion besides income and consumption the level of accumulated debt is one of the main determinants of farmland prices derived demand for farmland is developed and the pricing equation for farmland is estimated as part of a structural equation model

revealed p reference theory abstract this paper develops axiomatically a revealed preference theory of reference dependent choice behavior instead of taking the reference for an agent as exogenously given in the description of a choice problem we suitably relax the weak axiom of revealed preference to obtain endogenously the existence of reference alternatives as well as the structure of choice behavior conditional on those alternatives we show how this model captures some well known choice patterns such as the attraction effect jel d11 d81

on the existence of an optimal capital structure theory and evidence one of the most contentious issues in the theory of finance during the past quarter century has been the theory of capital structure the geneses of this controversy were the seminal contributions by modigliani and miller 18 19 the general academic view by the mid 1970s although not a consensus was that the optimal capital structure involves balancing the tax advantage of debt against the present value of bankruptcy costs no sooner did this general view become prevalent in the profession than miller 16 presented a new challenge by showing that under certain conditions the tax advantage of debt financing at the firm level is exactly offset by the tax disadvantage of debt at the personal level since then there has developed a burgeoning theoretical literature attempting to reconcile miller s model with the balancing theory of optimal capital structure e g deangelo and masulis 5 kim 12 and modigliani 17 the general result of this work is that if there are significant leverage related costs such as bankruptcy costs agency costs of debt and loss of non debt tax shields and if the income from equity is untaxed then the marginal bondholder s tax rate will be less than the corporate rate and there will be a positive net tax advantage to corporate debt financing the firm s optimal capital structure will involve the trade off between the tax advantage of debt and various leverage related costs the upshot of these extensions of miller s model is the recognition that the existence of an optimal capital structure is essentially an empirical issue as to whether or not the various leverage related costs are economically significant enough to influence the costs of corporate borrowing the miller model and its theoretical extensions have inspired several timeseries studies which provide evidence on the existence of leverage related costs trczinka 28 reports that from examining differences in average yields between taxable corporate bonds and tax exempt municipal bonds one cannot reject the miller hypothesis that the marginal bondholder s tax rate is not different from the corporate tax rate however trczinka is careful to point out that this finding does not necessarily imply that there is no tax advantage of corporate debt if the personal tax rate on equity is positive indeed buser and hess 1 using a longer time series of data and more sophisticated econometric techniques estimate that the average effective personal tax rate on equity is statistically positive and is not of a trivial magnitude more importantly they document evidence that is consistent with the existence of significant leverage related costs in the economy

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

the attraction effect and its explanations abstract the attraction effect violates choice consistency one of the central assumptions of economics i present a risky choice experiment to test it and disentangle some of its explanations i find the attraction effect but in a smaller magnitude than previously thought i uncover a range effect that shows that people weight more attributes whose range increases i also show that the aggregate results hide considerable heterogeneity between subjects

adding asymmetrically dominated alternatives violations of regularity and the similarity hypothesis an asymmetrically dominated alternative is dominated by one item in the set but not by another adding such an alternative to a choice set can increase the probability of choosing the item that dominates it this result points to the inadequacy of many current choice models and suggests product line strategies that might not otherwise be intuitively plausible

global sourcing and credit constraints this paper incorporates credit constraints into a model of global sourcing and heterogeneous firms following antras and helpman 2004 heterogeneous firms decide whether to outsource or integrate input suppliers financing of fixed organizational costs requires borrowing with credit constraints and collateral based on tangible assets the party that controls intermediate inputs is responsible for these financing costs sectors differ in their reliance on external finance and countries vary in their financial development the model predicts that increased financial development decreases the share of integration relative to outsourcing in a country the effect is more pronounced in sectors with a high reliance on external finance however this effect is mitigated by higher productivity tfp and headquarter intensity empirical examination confirms the predictions of the model an improvement in financial development from the 25th to the 75th percentile in industries at the 75th percentile in finance dependence relative to those at the 25th percentile is associated with a 16 8 decrease in the median share of us intra firm imports an increase in tfp from the 25th to the 75th percentile in the tfp triple interactions increase the share of us intra firm imports at the median by 3 2 an increase in headquarter intensity from the 25th to the 75th percentile in the headquarter intensity triple interactions increase the share of us intra firm imports at the median by 21

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

understanding farmland price changes this paper develops a structural model of land prices which includes the multidimensional effects of inflation on capital erosion savings return erosion and real debt reduction as well as the effect of changes in the opportunity cost of capital the results show that inflation and changes in the real returns on capital are major explanatory factors in farmland price swings in addition to returns to farming additionally the effects of credit market constraints and expectations schemes are considered explicitly in the analytical model

implications of intertemporal optimization for house and land prices the euler equation is used for the intertemporal allocation of durable goods in conjunction with a simple model of housing flow supply to derive implications for the relation between house and land prices data from england and wales fails a key time series test in this respect the rejection of the theory is shown to be mainly due to the specification of the housebuilding industry perfect competition makes house prices cointegrated with land prices and housebuilding costs there is also evidence that borrowing constraints impair the validity of the representative agent framework for the housing sector

comparative advantage in manufactured goods a re appraisal japanese input coefficients are used to investigate the pattern of comparative advantage in the exportation of manufactured products in a cross country framework estimates are made for the imports of manufactured products as well as for net exports also alternative techniques of estimation are utilized and an attempt to explain the residuals in the regression equations and to indicate the predictive power of these equations is made the paper shows that patterns of comparative advantage in manufactured goods can be explained by reference to commodity characteristics and country characteristics in turn intercountry differences in the extent of trade orientation the concentration of exports and foreign direct investment explain part of the residuals of the cross country regression equations finally it has been found that the method applied permits projecting the factor intensity of trade for individual countries

context dependent preferences the standard theory of choice based on value maximization associates with each option a real value such that given an offered set the decision maker chooses the option with the highest value despite its simplicity and intuitive appeal there is a growing body of data that is inconsistent with this theory in particular the relative attractiveness of x compared to y often depends on the presence or absence of a third option z and the market share of an option can actually be increased by enlarging the offered set we review recent empirical findings that are inconsistent with value maximization and present a context dependent model that expresses the value of each option as an additive combination of two components a contingent weighting process that captures the effect of the background context and a binary comparison process that describes the effect of the local context the model accounts for observed violations of the standard theory and provides a framework for analyzing context dependent p

a model of focusing in economic choice we present a generally applicable theory of focusing based on the hypothesis that a person focuses more on and hence overweights attributes in which her options dier more our model predicts that the decisionmaker is too prone to choose options with concentrated advantages relative to alternatives but maximizes utility when the advantages and disadvantages of alternatives are equally concentrated in intertemporal choice because the relative concentrations of an option s costs and benets can be dierent from the perspective of a single period and the perspective of the entire choice problem the decisionmaker often exhibits a form of time inconsistency she is present biased when the costs of current misbehavior are distributed over many future dates such as in harmful consumption but future biased when the benet of many

choice based on reasons the case of attraction and compromise effects building on previous research this article proposes that choice behavior under preference uncertainty may be easier to explain by assuming that consumers select the alternative supported by the best reasons this approach provides an explanation for the so called attraction effect and leads to the prediction of a compromise effect consistent with the hypotheses the results indicate that 1 brands tend to gain share when they become compromise alternatives in a choice set 2 attraction and compromise effects tend to be stronger among subjects who expect to justify their decisions to others and 3 selections of dominating and compromise brands are associated with more elaborate and difficult decisions

decoy effects in choice experiments and contingent valuation asymmetric dominance while a dominated choice involves a situation in which one option clearly dominates another on all relevant dimensions an asymmetrically dominated choice typically arises where at least two options do not dominate each other and one but not both of those options does dominate a third option we demonstrate that the introduction of such an asymmetrically dominated option can have a significant impact upon choices between non dominated options within the same choice set for non market goods furthermore we show that this effect can then translate into significant impacts upon subsequent valuations for those non dominated options

insolvency in agriculture bad managers or the common agricultural policy bad management is often blamed for the failure of firms yet an empirical investigation of the annual rate of insolvency in agriculture and horticulture in england and wales revealed a relationship with the price of land the rate of insolvency was negatively related to the current price of land but the lag structure estimated suggests that the rate of insolvency could be positively related to the land price two years previously this result is in accordance with a theoretical model which shows that the optimal gearing strategy under rising land prices induces farmers to increase their indebtedness since common agricultural policy price support has become capitalized into land prices this suggests that some of the insolvency in agriculture and horticulture was the result of previous agricultural policy the results do however underline farm management advice that farmers should beware of relying on capital gains to remain in business

the impact of decoupled payments on u s cropland values an extensive literature has shown that various farm programs may influence the value of farmland but other studies have not examined the cropland price effects of direct or decoupled payments separate from countercyclical payments this study uses nationally representative confidential field level panel data with farmer reported per acre land values we analyze the impact of decoupled and other farm program payments on farmland values using a fixed effects model and controlling for various factors that influence farmland values we find that an additional dollar of decoupled payments has a large and statistically significant impact on farmland values of about 18 per acre these results are comparable with similar studies undertaken in europe

the effect of agricultural policy on farmland values the extent to which agricultural support programs have been capitalized into farmland prices has been examined in this study a present value land price model was developed which decomposes returns to the land base into its two possible sources farm production and government subsidies and allows the discount rates associated with these two income sources to vary the empirical results indicate that government payments are discounted less than marketbased returns in ontario thus government payments have been viewed as a more stable source of income to ontario farm operators during the last half century than market based returns

impacts of trade liberalizations under the uruguay round on the world sugar market the impacts of the uruguay round policy provisions on the world sugar market show that these policies will stabilize the world sugar price at slightly higher levels than in the baseline global sugar consumption will increase as a result of the income growth caused by the uruguay round economic resources will be allocated more efficiently among the sugar industries of the various countries however the impacts on the sugar industries in countries with strong producer supports will be rather small because the negotiation process of the uruguay round has accommodated the changes in sugar policies already implemented by individual countries in the past few years low cost sugar producing countries will benefit from the higher world sugar price and consumers in countries with protected markets will benefit from lower domestic prices

the impact of decoupled payments on farm choices conceptual and methodological challenges abstract in this paper we review the methodological framework for analysing decoupled payments in models of agricultural production market and technological uncertainty farm efficiency credit constraints farm household choices involving extra agricultural decisions policy uncertainty and long run impact of decoupling on investment and land values are the relevant issues that should be pursued by methodological and empirical analysis future research should refine the analysis of decoupled payments mainly trying to provide results that can be useful for policy simulation to bridge the gap between analysis at the individual level and sector policy models

a monetary measure of the strength and robustness of the attraction effect the attraction effect has been studied in conditions of indifference among options and measured at the aggregate level we introduce a new within subjects design based on induced preferences and psychometrics our method yields two individual level measures the traditional frequency measure and a new monetary indicator the monetary indicator measures the robustness of the effect to decreases in the relative utility of the target with respect to the competitor we find choice frequencies consistent with the literature our monetary measure shows that subjects still prefer the target up to the point where it is 8 more expensive than the competitor

asymmetric decoy effects on lower quality versus higher quality brands meta analytic and experimental evidence prior research demonstrates that adding decoys to choice sets can increase choice shares of brands similar to decoys while reducing shares of brands dissimilar to decoys such effects have been dubbed attraction effects and violate the principles of independence of irrelevant alternatives ha and regularity we report a meta analysis that in addition to revealing heretofore unsupported range effects demonstrates an effect of brand quality decoys reduce shares of lower quality competitors more than they reduce shares of higher quality competitors moreover whereas iia is violated throughout regularity is violated only when higher quality brands are targeted decoys increase shares of higher quality brands but typically do not increase shares of lower quality brands to assess the generalizability of the meta analytic pattern we tested decoy effects on two distinct populations in a large experiment the more traditional population replicated the meta analytic pattern standard asymmetry while the more nontraditional population reversed it these findings suggest that while the standard asymmetry is replicable it may not generalize to all market segments

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

econometric modeling of the capitalization formula for farmland prices an econometric model is formulated to explain the dynamic behavior in farmland prices a second order rational distributed lag on net crop share rents received by landlords captures the dynamic movements of prices and performs well in conditional post sample forecasts the adjustment path of land prices in response to a perturbation in rents is a protracted dampened cycle the implicitly estimated tax free capitalization rate on rent associated with equilibrium land price is 4 0 neither the expected rate of inflation nor an exponential trend on rent expectations has a significant effect on land prices