investment cash flow sensitivity and financial constraint a cluster analysis approach this article sheds light on the mixed empirical evidence concerning financial constraint and investment sensitivity to cash flow the literature suggests that measuring financial constraint is far from straightforward and we therefore propose a cluster analysis procedure to identify unambiguous groups of constrained firms we found the investment results to be highly sensitive to cash flow for financial constraint firms moreover in line with previous research our results showed that the traditional criteria used to identify financially constrained firms led to ambiguous interpretations overall our results propose that the cluster analysis can be used to encompass the various single criterion approaches thereby providing a finer measurement of the financial constraint construct and deeper insight into the relationship between investment sensitivity to cash flow and financial constraint

foreign ownership and the theory of trade and welfare some standard topics in the theory of international trade are reconsidered in this paper by distinguishing between national and aggregate income when fixed supplies of foreign inputs are present within the home country under conditions that would ensure a national welfare gain if foreign ownership were absent international transfer economic growth or tariff policy might cause a national welfare loss in the presence of foreign ownership the techniques developed could be applied to other domestic distinctions such as those based on race sex age or ethnicity and to the theory of customs unions in a three country world

volume flexibility and capacity investment under demand uncertainty the paper considers optimal capacity investment decisions under uncertainty taking a real options approach concerning the production decision we study a flexible and an inflexible scenario the flexible firm can costlessly adjust production over time with the capacity level as the upper bound while the inflexible firm fixes production at capacity level from the moment of investment onwards we find that the flexible firm invests in higher capacity than the inflexible firm where the capacity difference increases with uncertainty for the flexible firm the initial capacity utilization rate can be quite low especially when investment costs are concave and the economic environment is uncertain as to the timing of the investment there are two contrary effects first the flexible firm has an incentive to invest earlier because flexibility raises the project value second the flexible firm has an incentive to invest later because costs are larger due to the higher capacity level the latter effect dominates in highly uncertain economic environments our model being dynamic enables us to derive the at first sight counterintuitive result that an increase in capacity holding cost raises the capacity level the firm invests in

time to build and capacity choice abstract this paper studies how demand uncertainty and time to build interact in affecting irreversible investment activity using impulse control methods we find the optimal timing and size of investment for a firm such as an electric utility that considers expanding its capacity in order to meet an uncertain demand when the construction lag is short uncertainty delays investment while increasing its size once it takes place however for comparatively long and realistic times to build the sensitivity to uncertainty is drastically reduced and the results can even be reversed more uncertainty can speed up investment and reduce its size

upgrading in global value chains lessons from latin american clusters it has been shown that clustering helps local enterprises in industrial districts overcome growth constraints and compete in distant markets in advanced and less developed countries nevertheless recent contributions have stressed that more attention needs to be paid to external linkages and to the role played by global buyers to foster upgrading at cluster levels in this study we contribute to this debate focusing on the analysis of the relationships existing between clustering global value chains upgrading and sectoral patterns of innovation in latin america we find that sectoral specificities matter and influence the mode and the extent of upgrading in clusters integrated in global value chains

the private sector in agricultural research systems will it fill the gap abstract this article examines whether the private sector can fill the gap of declining public research in developing countries economic theory suggests private for profit research will focus on areas where returns to research are appropriable and reasonable profits are generated actual private for profit research activities concentrate on countries and industries with large markets appropriable returns strong science infrastructure and favorable government policies governments and donors can promote private research by easing constraints to private entry and operations but if governments stop funding research on public goods and technologies with limited market potential the private sector is unlikely to fill the gap completely

product market competition and the impact of price uncertainty on investment some evidence from us manufacturing industries the authors estimate the impact of price uncertainty on investment using a panel of u s manufacturing industries pooling the data for all industries uncertainty has no impact on current investment however for industries that have low levels of seller concentration and thus are likely to be highly competitive the estimated impact is negative and statistically significant while for industries with high levels of seller concentration the impact is always small and not significantly different from zero the finding of a negative relationship between investment and price uncertainty in competitive industries is broadly consistent with models that incorporate irreversibility of capital investment copyright 1996 by blackwell publishing ltd

the search for a new paradigm for the development of national agricultural research systems this paper first reviews trends in the recent evolution of investment in national agricultural research systems it then synthesizes the major elements of an emerging paradigm for viewing the future evolution of research systems this paradigm has arisen in response to the funding crisis in public research organizations in the 1990s and the declining capacity of many of these organizations key elements of this new paradigm are a pluralistic institutional structure a growing role for the private sector new mechanisms for research funding improved efficiency and effectiveness of public research organizations and strengthening of global scientific links

accessing modern science policy and institutional options for agricultural biotechnology in developing countries the paper highlights the complexity of the challenge in developing forms of collaboration between a variety of actors in the biotechnology area in developing countries national research systems with diverse capacities in biotechnology international research centers local private research and development companies and advanced research institutes in both industrialized and developing countries case studies are provided from strong programs such as india china and brazil which will be tool developers as well as users programs that are developing an adaptive capacity in biotech to use tools and methods in a large number of countries whose research systems have virtually no capacity in molecular biology each type program presents challenges and opportunities for accessing new technologies based on facilitation of private investments public private partnerships and local capacity to design proprietary technologies working with the consultative group on international agricultural research centers as intermediaries and partners and with regional consortia policy and institutional issues for accessing modern science are then discussed and many of the challenges involve developing strategies in intellectual property management while pubic research organizations will need to develop innovative means of segmenting markets to complement private sector interests

the effect of business cycles on growth keynes vs schumpeter i introduction do business cycles matter the question would have seemed recherche a scant decade ago when understanding and explaining business cycle phenomena were the bread and butter of macroeconomics but recently with the revival of interest in growth theory it has become customary to argue that business cycles are an unimportant second order problem the locus classicus for this position is lucas 1987 a particularly sharp statement of it launches the recent growth textbook by barro and sala i martin 1995 4 5 if we want to understand why countries differ dramatically in standards of living then we have to understand why countries experience such sharp divergences in long term growth rates even small differences in these growth rates when accumulated over a generation or more have much greater consequences for standards of living than the kind of short term business fluctuations that have typically occupied the attention of macro economists to put it another way if we can learn about government policy options that have even small effects on the long term growth rate then we can contribute much more to improvements in standards of living than has been provided by the entire history of macroeconomic analysis of countercyclical policy and fine tuning certainly there is a superficial ring of truth to this assertion since one s standard of living today is obviously higher in a rich country in a recession than in a poor country in a boom however to infer from this that business cycles are unimportant one needs to assume additionally a dichotomy between business cycles and growth so that explaining why economies grow and why they experience fluctuations are treated as analytically distinct questions 1 if the dichotomy is granted then the conclusion follows because a policy of eliminating business cycle fluctuations would have no effect on the growth rate and so would confer a smaller welfare benefit over a long time horizon than a small increase in the growth rate over that same horizon but in our view this is a false dichotomy we believe that business cycles can affect growth granted this are business cycles good or bad for growth much of the emerging literature seems to suggest that recessions are good for growth if correct this would seem to make countercyclical stabilization policy not just unimportant but positively harmful caballero and hammour 1994a b present models in which recessions are viewed as times of cleansing or a pit stop for the economy so that recessions are good for growth aghion and saint paul 1991 argue in the same vein at first glance these models would seem to suggest that recessions and therefore business cycles are good for growth but on closer inspection there are two analytically distinct questions i are recessions good for growth and ii are business cycles good for growth suppose one accepts the caballero hammour argument that recessions are good for growth pari passu it should follow symmetrically that booms are bad for growth so that the net effect of a business cycle washes out to a first order of approximation so that a fortiori a successful countercyclical policy which eliminated business cycles would have no first order effect on growth conlisk 1989 by contrast presents a model which focuses specifically on the second question one of the few such papers of which we are aware his model is a neo schumpeterian evolutionary growth model which predicts that business cycles will be good for growth because of greater opportunities for innovation we disagree with these conclusions a more severe business cycle leads to increased uncertainty for firms which we think ought to reduce the return to capital and hence reduce the incentive to invest this should lead to reduced capital accumulation and therefore to slower growth along the transitional path and also to a smaller steady state capital labour ratio in a neoclassical growth model or lead to a slower overall growth rate in an endogenous growth model

the interaction of debt financing cash grants and the optimal investment policy under uncertainty abstract significant progress has been made toward understanding a levered firm s optimal investment policy under uncertainty to date however not much work has concentrated on the time scale trade off and collectively held real options we employ a game theoretic real option model between a firm and a government to analyze the effect of uncertainty and investment stimulus in the form of cash grants on optimal investment timing financing and investment scaling we find that the jointly held real option between the firm and the government leads to underinvestment regardless of whether the firm has the possibility to issue debt subsidies however reduce the level of underinvestment notably the results indicate that even though levered firms receive less support they invest more than unlevered firms this challenges recent findings that a firm s optimal investment level is not affected by the way it finances a project similarly we find that for realistic parameter constellations the levered firm s optimal investment threshold can be higher than that of its unlevered counterpart this indicates that the availability of tax shield benefits does not necessarily serve as an incentive to invest earlier finally we show that the effect of cash flow uncertainty on the equilibrium level of grants is ambiguous and triggers the switch from a subsidy to non subsidy regime

encouraging private sector research for tropical agriculture summary agricultural needs in poor tropical countries differ significantly from those in temperate rich countries yet little agricultural research is performed on products for the tropics private research is particularly concentrated in rich countries this is a result of significant failures in the market for research and development r d in particular the difficulty of preventing the resale of seed in developing countries to encourage private r d in tropical agriculture traditional funding of research may be usefully supplemented by a commitment to reward developers of specific new agricultural technologies rewards tied to adoption may be especially useful in increasing up take an illustration of how a commitment to reward developers of new agricultural technologies might work is provided

making enduring choices uncertainty and public policy abstract this paper provides an experimental test of the theory of investment under uncertainty and applies the theory to a group of policy decisions investment under uncertainty describes a class of problems characterized by uncertainty that resolves itself over time sunk costs that cannot be fully recovered and the ability of the decision maker to wait without loss of strategic advantage it also implies a bad news principle under which decision makers are motivated by expected costs but not expected benefits the theory is illustrated as a two period model for which the decision maker can either invest in the first period and receive a known current return plus an uncertain future return or defer until the second period when uncertainty is resolved by foregoing current period benefits a cost that is sometimes referred to as an option value is incurred parameter values are specified and an experimental test the results of which closely track the predictions of the theory is described three cases the structuring of contingent valuation questionnaires the operalization of the precautionary principle in risk analysis and the development of public policy to stimulate private investments as for energy saving products are used to illustrate potential public policy applications

the international transmission of financial shocks the case of japan one of the more dramatic financial events of the late 1980s and early 1990s was the surge in japanese stock prices that was immediately followed by a very sharp decline of more than 50 percent while the unprecedented fluctuations in japanese stock prices were domestic financial shocks the unique institutional characteristics of the japanese economy produce a framework that is particularly suited to the transmission of such shocks to other countries through the behavior of the japanese banking system the large size of japanese bank lending operations in the united states enables us to use u s banking data to investigate the extent to which this domestic japanese financial shock was transmitted to the united states as well as to identify a supply shock to u s bank lending that is independent of u s loan demand we find that binding risk based capital requirements associated with the decline in the japanese stock market resulted in a decline in commercial lending by japanese banks in the united states that was both economically and statistically significant this finding has added importance given the severe real estate loan problems currently faced by japanese banks how japanese bank regulators decide to resolve these problems will have significant implications for credit availability in the united states as well as in other countries with a significant japanese bank presence

optimal tariffs and income taxes under imperfect and uncertain foreign investment international investment as well as international trade is now a wide phenomenon and optimal policies to be selected in the presence of both international trade and investment have been a great concern jones 7 and kemp 9 have done pioneering works in this area of study previous studies however have mostly postulated that international capital movements are perfect while perfect capital mobility is expected in the long run bhagwati and brecher 2 and brecher and bhagwati 3 emphasized short run sluggishness of foreign investment that is even in the presence of international differentials in rates of return to capital the amount of foreign capital existing in the host country is fixed in the short run a realistic case however will be between complete fixity and perfect mobility of foreign capital this is especially true in the medium run in such a case the amount of foreign capital existing in a country at a particular future point in time may be reasonably conceived as uncertain to that country uncertainty may arise for various reasons the case includes uncertainty about the level of the rate of return to capital in the world market and also uncertainty about production technology employed by foreign investors these cause amounts of foreign capital to be received by the host country uncertain to it even under perfect international capital mobility uncertainties in such a case are relevant when the host country government has a long run perspective and is concerned with the long run consequences of its policies this paper addresses the open question of levels of optimal policies to be chosen when foreign capital movements are uncertain as well as imperfect and examines whether they modify or make intact the optimal policies established traditionally policies considered here are import tariff and income tax by the host country since these are prevalent and have attracted much attention in the literature of international trade and investment

public and private returns from joint venture research an example from agriculture public research institutions are turning increasingly to the private sector for additional financial support such a trend in the short run lessens the need for public research expenditures but may in the long run prove to be very costly to the economy as a whole this is because private funding increases the chance that the direction of research will shift so that private benefits are enhanced such a shift is especially costly if public research funds are then not forthcoming that would have the potential of producing the maximum level of benefits to the economy as a whole a case study of canadian barley research is used to illustrate this problem

mapping technological trajectories of the green revolution and the gene revolution from modernization to globalization abstract the dynamics of technology development along the technological trajectories of the green revolution and the gene revolution could be explicated by the social morphologies of modernization and globalization the green revolution was shaped by the exigencies of modernization while the gene revolution is being shaped by the imperatives of neo liberal economic globalization innovation development and diffusion of technologies followed different trajectories in these two realms because of being part of different innovation systems considerations of private gain and profit in the form of high returns to shareholders of agro biotech corporations of global reach largely determine the dynamics of technological innovation in the gene revolution technology transfer and local adaptive work in the green revolution was carried out in the international public domain with the objective of developing research capacity in post colonial third world agriculture to increase food production to avert hunger led political insurrection during the cold war differentiating these two trajectories is important not only due to the normative implications inherent in comparing the impacts of these two revolutions but also due to the important lessons we learn about how different contexts of innovation in the same technology cluster could evolve into contrasting research policy regimes

willingness to pay compensating variation and the cost of commitment hicksian welfare theory is static in nature but many decisions are made in a dynamic environment we present a dynamic model of an agent s decision to purchase or sell a good under the realistic conditions of uncertainty irreversibility and learning over time her willingness to pay wtp contains both the intrinsic value of the good as in hicksian theory plus a commitment cost associated with delaying to obtain more information the hicksian equivalence between wtp willingness to accept wta and compensating and equivalent variations no longer holds the wtp and wta divergence may arise and observed wtp values are not always appropriate for welfare analysis jel d60 d83

international factor movements commodity trade and commercial policy in a specific factor model two events in the decade of the 1970s had a major impact on world trade and factor movements the collapse of the bretton woods fixed exchange rate system and opec s success in raising petroleum prices the enormous current account surplus accruing to some of the opec members was successfully recycled by the international capital markets to among others the oil importing developing countries in addition the vastly increased tempo of investment in the capital rich labour poor opec members in west asia attracted migration of labour skilled as well as unskilled to these countries from some of the oil importing developing countries the remittances from these workers in turn eased the problem of the labourexporting countries in adjusting to the increased cost of oil imports thus both borrowing from private capital markets and export of labour became very important elements in cushioning the oil shock for a number of countries the post opec movements of labour and financial capital while dramatic are only the more recent instances of a phenomenon of much greater antiquity the seventeenth and eighteenth centuries saw vast migration of people out of europe though these movements were the result of conquests and colonization rather than movements from one sovereign state into another but the nineteenth century particularly the latter half saw migration of the latter kind from europe to countries of north and south america as well as capital investment by residents of europe in these

private research and public benefit the private seed industry for sorghum and pearl millet in india in contrast to conventional wisdom private firms are spending substantial amounts of money on research to develop new cultivars for small farmer subsistence agriculture indian firms spend almost as much as the government on breeding pearl millet and sorghum the hybrids developed by firms are becoming popular with farmers about 900 000 ha were planted with private pearl millet and sorghum hybrids in 1987 the higher yields of private hybrids increased grain output by at least 200 000 t although prices for seed of private hybrids are higher than seed of cultivars developed by government research most of the benefits from private breeding research accrue to farmers and consumers the research for this paper was primarily financed by usaid new delhi we also received support from icrisat we would like to thank the scientists of the aicsip a1cpmip iari officials of the ministry of agriculture nsc sscs and executives of private seed companies for their cooperation we also appreciate the comments of john witcombe tom walker and wayne freeman on earlier drafts of this paper the opinions expressed in the paper are those of the authors and do not represent the opinions of usaid or icrisat

the private delivery of public crop varieties rice in andhra pradesh although there has been a considerable growth of private seed enterprises in developing countries there are few examples of the private delivery of seed of public crop varieties that are not hybrids this paper discusses the example of rice in andhra pradesh where private enterprise is supplying an increasing proportion of the seed used by farmers the institutional conditions for private expansion into rice seed are examined the paper discusses instances where low transaction costs allow for the emergence of a wide range of seed enterprises but despite the success of private seed delivery inadequate attention has been given to incentives for variety promotion and to the importance of consumer education

even the bad times are good a behavioural theory of transformation pressure a theory of transformation pressure was developed in sweden in the 1990s whichsuggested that structural changes rationalisations and innovations are stimulatedby pro t crises arising for example from negative demand shocks and restrictiveeconomic policies firms will then either become more creative or abandon anovercon dent risk prone and irrational status quo strategy a quali ed theorystates that productivity will increase as external pressures become stronger but onlyup to a certain point a competing quali ed theory maintains that productivity ismaximised if periods of hard pressure are succeeded by periods of nancial andtechnical consolidation scale advantages and weaker demands for defensive actionsto raise productivity key words transformation pressure x inef ciency productivity growth irratio nality economic psychologyjel classi cations d24 d81 l21 o31

estimating the performance effects of business groups in emerging markets business groups confederations of legally independent firms are ubiquitous in emerging economies yet very little is known about their effects on the performance of affiliated firms we conceive of business groups as responses to market failures and high transaction costs in doing so we develop hypotheses about the effects of group affiliation on firm profitability affiliation could either boost or depress firm profitability and members of a group are likely to earn rates of return similar to other members of the same group using a unique data set compiled largely from local sources we test for these effects in 14 emerging markets argentina brazil chile india indonesia israel mexico peru the philippines south africa south korea taiwan thailand and turkey we find evidence that business groups indeed affect the broad patterns of economic performance in 12 of the markets we examine group affiliation appears to have as profound an effect on profitability as does industry membership yet strategy scholars have a much clearer grasp of industries than of groups moreover membership in a group raises the profitability of the average group member in several of the markets we examine this runs contrary to the wisdom conventional in advanced economies that unrelated diversification depresses profitability overall our findings suggest that the roots of sustained differences in profitability may vary across institutional contexts conclusions drawn in one context may well not apply to another copyright 2001 john wiley sons ltd

maturity mismatch and financial crises evidence from emerging market corporations substantial attention has been paid in recent years to the risk of maturity mismatch in emerging markets although this risk is microeconomic in nature the evidence advanced thus far has taken the form of macro correlations we evaluate this mechanism empirically at the micro level by using a database of over 1500 publicly traded firms from fifteen emerging markets with special focus on latin america and east asia while east asia corporates have tended to issue more debt at short maturities than their latin american counterparts we show that this is generally matched by greater holdings of liquid assets as a result the distribution of net shortterm exposure is remarkably similar across regions we attempt to measure the risk of such exposure by estimating at the firm level the eect on investment of short term exposure under capital account volatility for the whole sample and in both regions individually this eect is statistically zero contrary to the prediction of the maturity mismatch hypothesis this conclusion is robust to using a variety of dierent estimators alternative measures of capital flows and controls for devaluation eects and access to international capital

option value uncertainty and the investment decision the options based approach to studying irreversible investment under uncertainty emphasizes that the opportunity cost of investment includes the value of the option to wait that is extinguished when an investment is undertaken thus the investment decision is affected by the determinants of the value of this option we extend and generalize a standard model of irreversible investment by introducing a second fully reversible technology and also incorporate partial reversibility by allowing capital to be abandoned at a cost as in the existing literature we find that the threshold value of the underlying asset in our case demand at which investment takes place is increasing in the uncertainty of demand we also find that the value of the option and thus the threshold value of the option value multiple at which investment takes place may be either increasing or decreasing in the uncertainty of demand in addition we find that for the case in which capital is used to replace the reversible technology the threshold value of the option value multiple is insensitive to the degree of reversibility of capital

institutions and the r d of gm crops abstract this paper analyzes how different institutional structures shape the research and development r d of genetically modified crops gm crops whether this r d is conducted within companies cooperatives or public research organizations both publicly and privately funded r d is expected to influence the type of crops and traits that are developed and therefore the effects on society and ecosystems that potentially could follow from the use of gm crops this issue is analyzed empirically by statistical analysis of 1323 notifications for field trials with gm crops that have been submitted under two eu directives in seven european countries the results show that the type of r d organization influences the traits and crops that are developed companies are more likely to submit notifications that concern gm crops that secure the potential for profit than are other types of r d organizations while r d organizations that are purely publicly funded are more likely to submit notifications that only concern biosafety research than are cooperatives and companies consideration of the environment food safety and food security might justify institutional reforms of r d of gm crops this might include increased public funding combined with changes in intellectual property rights

crafting smallholder driven agricultural research systems in southern africa abstract the national agricultural research systems narss in sub saharan africa have made enormous progress over the past four decades in replacing european with african scientists increasing the number of scientists and shifting priorities from export to food crops nevertheless most narss are having difficulty in producing a steady stream of new technologies for small scale farms and in generating adequate financial support from their government zimbabwe and malawi are among the first countries in africa to mount indigenousled reforms of their narss this paper documents the steps taken by the agricultural research council of zimbabwe to generate a consensus among scientists farmers and policy makers to reform the national agricultural research system by increasing the voice of smallholders and other stakeholders in setting research priorities making scientists more accountable to smallholders and generating new sources of financial support from user fees and taxes on commodities malawi is pursuing a commodity approach to revitalizing its narss the experience of both zimbabwe and malawi has shown that there is no blueprint for reforming narss in africa donors can assist the reform process by supporting local initiatives to craft smallholder driven research systems that are staffed with accountable scientists who are adequately financed from local sources

the politics of technological upgrading international transfer to and adaptation of gm cotton in argentina summary we describe patterns of international transfer to and adaptation of genetically modified gm cotton in argentina and ask whether political bargaining between the technology owner a multinational enterprise mne and host country actors may have influenced upgrading we suggest that the mne was able to use its exclusive capacity to upgrade gm cotton technologies as a negotiation tool to persuade host actors to change the rules that affected its multi lines of business in the country this implies wider policy scope to encourage technology upgrading host actors could negotiate over a wider range of aspects of interest to mnes

on the adoption of genetically modified seeds in developing countries and the optimal types of government intervention given the proprietary nature of most genetically modified gm seed technologies the question arises as to how farmers in developing countries can gain proper access based on empirical observations a theoretical model is developed focusing on farmers adoption decisions in response to pricing strategies of a foreign monopolist and a domestic supplier of conventional seeds government interventions such as seed subsidies encouragement of r d and intellectual property rights ipr enforcement and their effects on gm coverage and national welfare are analyzed the possibility of the government obtaining a license to distribute gm seeds domestically through a transfer to the monopolist is also considered

the timing of land development an invariance result the arrow fisher henry afh analysis of land development under uncertainty has been conducted in a two period model recently capozza and helsley 1990 and batabyal 1995 have addressed the question of land development under uncertainty in a many period setting in this paper aspects of this literature are extended by analyzing the land development question in a markov decision theoretic framework inter alia it is shown that the timing of land development is invariant to the manner in which a landowner uses information about the consequences of development

investment under uncertainty testing the options model with professional traders abstract an important class of investment decisions is characterized by unrecoverable sunk costs resolution of uncertainty through time and the ability to invest in the future as an alternative to investing today the options model provides guidance in such settings including an investment decision rule called the bad news principle the downside investment state influences the investment decision whereas the upside investment state is ignored this study takes a new approach to examining predictions of the options model by using the tools of experimental economics our evidence drawn from student and professional trader subject pools is broadly consonant with the options model

credit quantity and credit quality bank competition and capital accumulation in this paper we show that bank competition has an intrinsically ambiguous impact on capital accumulation we further show that it is also responsible for the emergence of development traps in economies that otherwise would be characterized by unique equilibria these results explain the conflicting evidence emerging from the recent empirical studies of the effects of bank competition on economic growth we obtain them developing a dynamic general equilibrium model of capital accumulation where banks operate in a cournot oligopoly more banks lead to a higher quantity of credit available to entrepreneurs but also to diminished incentives to offer relationship services that improve the likelihood of success of investment projects we also show that conditioning on one key parameter resolves the theoretical ambiguity in economies where intrinsic market uncertainty is high low less more competition leads to higher capital accumulation

an economic analysis of deferred examination system evidence from a policy reform in japan we investigate how a deferred patent examination system promotes ex ante screening of patent applications which reduces both the number of granted patents and the use of economic resources for examinations without reducing the return from r d based on a real option theory we develop a model of examination request behaviors exploiting the responses of japanese firms to recent policy reform we find that the shortening of the allowable period for an examination request significantly increases both eventual and early requests controlling for the blocking use of a pending patent application this effect is stronger in technology areas with higher uncertainty these results support the importance of uncertainty for an applicant and of ex ante screening

the impact of economic reforms on r d by the indian seed industry abstract declining support for public research and advances in technology and new forms of legal protection have induced more private agricultural research in developing countries this has sparked a debate about appropriate policies regarding private research in this context we examine empirically the consequences of reforms in india s seed policies which loosened various restrictions on the private sector the period since the reforms has shown a remarkable increase in r d effort and an increase in the number of private technology suppliers we argue these changes were largely due to policy reforms

supplying crop biotechnology to the poor opportunities and constraints abstract unlike the public sector research that launched the green revolution private firms based in industrialised countries have done the majority of agricultural biotechnology research and almost all commercialisation of genetically modified gm crops this paper examines consequences of the emergence of a few large companies as leaders in the commercialisation of biotechnology by addressing issues of access to technology costs of conducting research and distribution of economic benefits to provide context we first review the status of crop biotechnology research globally who is benefiting from the technology we then analyse the role of intellectual property rights market access and industry concentration public sector research and gm crop biosafety regulations in determining observed r d by firms the paper recommends policy measures that allow transfer of current technology to the poor and generate more biotechnology research focused on problems of the poor

corporate structure liquidity and investment evidence from japanese industrial groups this paper presents evidence suggesting that information and incentive problems in the capital market affect investment we come to this conclusion by examining two sets of japanese firms the first set has close financial ties to large japanese banks that serve as their primary source of external finance and are likely to be well informed about the firm the second set of firms has weaker links to a main bank and presumably faces greater problems raising capital investment is more sensitive to liquidity for the second set of firms than for the first set the analysis also highlights the role of financial intermediaries in the investment process

understanding investment irreversibility in general equilibrium miquel faig i introduction many forms of investment are irreversible a growing body of literature 1 has shown that irreversibility is important for firms investment decisions under uncertainty however we still know little about the consequences of investment irreversibility for the economy as a whole that is in general equilibrium learning about these consequences is not only important for a better understanding of capital accumulation it is also important for an understanding of the information that asset returns provide about the business cycle in fact recent papers by boldrin christiano and fisher 1995 beaudry and guay 1996 and jermann 1998 convincingly argue that impediments to the reallocation of capital are crucial to generate realistic dynamics for asset returns thus understanding the general equilibrium consequences of investment irreversibility is important to the theories of economic growth the business cycle and asset pricing in this article i advance an analytically tractable model to explore the consequences of investment irreversibility in general equilibrium the main contribution of this model to the existing literature is analytical tractability analytical results from the literature dealing with investment irreversibility in general equilibrium are scarce and mainly limited to general properties such as existence of solutions as in sargent 1980 and olson 1989 fortunately thanks to numerical simulations we know some of the effects of investment irreversibility in general equilibrium for example using an extension to the neoclassical growth model coleman 1997 documents that irreversibility significantly affects interest rates and it may increase aggregate investment even when no constraints are binding 2 in contrast firms behavioral analyses and the related competitive equilibrium model by leahy 1993 show that irreversibility typically discourages capital creation the model advanced in this paper helps to understand and to formalize why such contrast exists the model of this article extends the endogenous growth model found in barro 1990 the four main assumptions of the model are the following all production processes yield the same output which can be consumed or invested in many types of capital all factors of production are a type of capital the aggregate production function yields constant returns to scale preferences are homothetic and modeled along the lines of epstein and zin 1989 these preferences include as a special case the standard isoelastic time additive preferences but they allow to distinguish between the inter temporal elasticity of substitution and the inverse of the coefficient of relative risk aversion these two parameters play important and distinct roles in the analysis to attain strong analytical results the model in this article has to adopt the restrictive assumption that all factors of production are a form of capital however the model remains quite flexible to capture important elements of reality the model allows for many types of capital so some of them can be interpreted as human capital also the model allows great flexibility on the stochastic shocks affecting the production possibilities of the economy finally the model allows for the coexistence of irreversible and flexible types of capital with or without complementarities between them this diversity of capital types is important to generate endogenous interest rates and endogenous marginal products of capital also capital diversity allows for strongly binding irreversibility constraints even with positive gross investment as it has always been the model reveals that in general equilibrium there are three effects of irreversibility on aggregate investment the first is the obvious direct effect of preventing capital destruction in periods one may wish to consume part of the capital stock

small firm investment and financing decisions an option value approach this paper reviews and discusses recent developments undergone by investment theory and tries to address both financial and real decisions within an uncertain environment here the italian economy according to the recent option value approach to investment if differing degrees of reversibility characterize the accumulation process by groups of firms small and larger firms we should expect their investment decisions to differ under uncertainty on the other hand asset reversibility has an influence on firm financing policy given the observed relationship between asset and liability composition assuming a different degree of investment reversibility for small and larger firms we explore how they react to interest rate uncertainty using the italian experience during the 1980s as a benchmark the main result of this paper is that interest rate uncertainty exerts a negative influence on firms investment demand the relationship is stronger for large firms than for small firms another result is that firm leverage also shows a negative relationship with interest rate uncertainty

financing agricultural research international investment patterns and policy perspectives abstract for much of the post wwii period governments in rich and poor countries alike have increased public spending on and performance of agricultural research the public involvement in and policies toward agricultural research and development r d have undergone a sea of change in more recent years in this article we document these changes focusing on the public and rapidly evolving private roles in financing agricultural r d and the international dimensions of these funding and policy issues we restate the principles for government intervention in research and highlight the financing aspects of these interventions before concluding the paper with some reflections on the implications of all these changes for internationally conceived and funded public agricultural r d

tariffs as insurance optimal commercial policy when domestic markets are incomplete free trade is not optimal for a small country that faces uncertain terms of trade if some factors are immobile ex post and markets for contingent claims are incomplete the government can improve social welfare by using commercial policy that serves as a partial substitute for missing insurance markets using a combination of analytical and simulation techniques we demonstrate that optimal policy for this purpose will often have an anti trade bias we also show that the usual preference by economists for factor or product taxes and subsidies over tariffs and export subsidies may not be justified in this context this abstract was borrowed from another version of this item

dollars dollars everywhere nor any dime to lend credit limit constraints on financial sector absorptive capacity we exploit an unexpected inflow of liquidity in an emerging market to study how capital is intermediated to firms we find that backward looking credit limit constraints imposed by banks make it difficult for firms to borrow despite readily available bank liquidity healthy aggregate demand and a sharply falling cost of capital the resulting aggregate failure to extend and retain capital in the economy suggests that agency costs that force banks to rely on sticky balance sheet based credit limits prevent emerging economies from effectively intermediating capital

why research partnerships really matter innovation theory institutional arrangements and implications for developing new technology for the poor abstract this paper explores the conceptual basis for existing and emergent institutional patterns in the context of partnership approaches to technology development drawing examples from recent studies of private enterprise activity in india smallholder horticulture it suggests that agricultural innovation as a process involves a wider range of organizational types than the conventional policy focus on public sector research organizations would tend to suggest it uses the concept of a national innovation system to argue that a partnership approach is adopted as a core methodology for engaging science and technology development with the livelihood demands of the poor

what do we know about investment under uncertainty recent theoretical developments relating to investment under uncertainty have highlighted the importance of irreversibility for the timing of investment expenditures and their expected returns this has subsequently stimulated a growing empirical literature which examines uncertainty and threshold effects on investment behaviour this paper presents a review of this literature a variety of methods have been used to investigate the empirical implication of irreversibility in investment the majority focusing on the relationship between investment flows and proxy measures of uncertainty a general conclusion is that increased uncertainty at both aggregate and disaggregate levels leads to lower investment rates this suggests that there is an irreversibility effect under which greater uncertainty raises the value of the call option to delay a commitment to investment this effect appears to dominate any positive impact on investment arising from the fact that greater uncertability under certain circumstances increases the marginal profitability of capital the methods used raise a number of issues which call into question the reliability of the findings and these are addressed in the paper however if such irreversibility effects are present then their omission from traditional investment models casts doubt on the efficacy of such specifications jel classification d81 d92 e22

saving determinants in colombia 1925 1994 abstract this paper analyzes the determinants of saving in colombia using the framework of an intertemporal model national saving partially responds to temporary changes in output according to the permanent income hypothesis higher government expenditures in relation to their permanent level are associated with lower national saving refuting the existence of ricardian equivalence the paper tests other common hypotheses in regard to saving behavior in particular we find that changes in national savings and changes in investment are perfectly correlated and that savings cause growth in the granger sense the results also indicate that increases in urbanization and age dependency have had a significantly negative effect on private saving in colombia finally we find that much of the recent reduction in private savings can be accounted by the effects of higher taxation

an argument for deregulating the transfer of agricultural technologies to developing countries in the past few decades many developing countries have liberalized trade and investment removing barriers to imports and allowing the introduction of new foreign technologies unfortunately agriculture often remains outside this reform process regulatory obstacles continue to restrain the transfer of technologies through private trade in seeds and other inputs industrial countries characteristically allow the transfer of private and public technologies through multiple channels developing countries often force technology transfer through a single channel controlled by government agencies with an emphasis on official performance tests this article analyzes the institutional arrangements governing the international transfer of new agricultural technologies examining the cases of agricultural machinery in bangladesh and seed varieties in turkey the analysis shows that allowing the private transfer of technologies and refocusing input regulations on externalities could lead to significant productivity and income gains in developing countries