debt and financial expectations an individual and household level analysis in this article we show that optimistic financial expectations impact positively on both the quantity of debt and the growth in debt at the individual and household levels our theoretical model shows that this association is predicted under a variety of plausible scenarios in the empirical analysis we explore the determinants of debt and of growth in debt using british data we find convincing support for our theoretical priors and show that it is optimistic financial expectations per se that are important in influencing debt rather than the accuracy of individuals predictions regarding their future financial situation jel d18 d84 d91

the role of demand in land re development abstract vacant previously developed land in cities can generate negative externalities on surrounding areas and is often the target of policies to promote re development this paper provides estimates of the price sensitivity of land re development a crucial parameter for the success of these policies my estimates measure how prices affect long run conversion of unused or underused previously developed land in england the empirical strategy uses school test scores and admission district boundaries in a boundary discontinuity design to generate variation in housing demand that is orthogonal to re development costs results show that the probability of re development is effectively sensitive to housing prices estimates indicate that a 1 increase in prices leads to a 0 07 percentage point reduction in the fraction of hectares containing brownfield land price differences or substantial subsidies could lead to a significant amount of re development in the long run this is confirmed by observed land use changes between 2007 and 2011 being disproportionately concentrated in high price areas

planning under incomplete information and the ratchet effect abstract central planning of production is usually performed under asymmetric information the firm in general has more information about its productive possibilities than the central planner from now on for short cp this justifies the use of incentives schemes in which the cp does not directly fix activity levels casual observation of such existing schemes suggests that the time dimensions is crucial for their working typically the cp revises the incentive scheme over time to take into account the information provided by the firm s performance managers of centrally planned economies as well as economists have long recognized that this revision induces firms to underproduce in order to avoid demanding schemes in the future this is the ratchet effect it is purpose of the present paper to study the ratchet effect under the non commitment assumption which we believe to be more realistic the inadequacy of conceptual tools made if difficult in the past to consider such an assumption now basic research on dynamic games with incomplete information recently resulted in new ideas which look particularly relevant for a theoretical analysis of the problem

redevelopment and the urban land price gradient abstract this paper presents the first careful test of an equilibrium model of urban redevelopment in addition it demonstrates a new methodology for recovering vacant urban land prices in areas that have already been developed using data on single family detached homes sold in vancouver b c we estimate the price of vacant land based on properties that were sold and redeveloped the price of developed land is also estimated based on properties that were sold and not redeveloped various tests overwhelmingly support the hypothesis that housing is redeveloped when the price of vacant land exceeds the price of land in its current use this result provides support for various theoretical models of urban spatial growth and indicates that one can recover vacant urban land prices by examining redeveloped properties

redevelopment decisions for commercial and industrial properties abstract the empirical work in this study serves as a test of the principle that redevelopment of a property will occur when the value of the existing bundle plus demolition costs is less than or equal to the price of vacant land the probability of a commercial or industrial property being redeveloped is predicted using the difference in the estimated value of a parcel in its redeveloped state and its current use correcting for sample selection bias the empirical results support the hypothesis that land is redeveloped when its value in the redeveloped state is high relative to its value in the current use

risk based pricing of interest rates for consumer loans abstract by focusing on observable default risk s role in loan terms and the subsequent consequences for household behavior this paper shows that lenders increasingly used risk based pricing of interest rates in consumer loan markets during the mid 1990s it tests three resulting predictions first the premium paid per unit of risk should have increased over this period second debt levels should have reacted accordingly third fewer high risk households should have been denied credit further contributing to the interest rate spread between the highest and lowest risk borrowers for people obtaining loans the premium paid per unit of risk did indeed become significantly larger after the mid 1990s for example for a 0 01 increase in the probability of bankruptcy the corresponding interest rate increase tripled for first mortgages doubled for automobile loans and rose nearly six fold for second mortgages additionally changes in borrowing levels and debt access reflected these new pricing practices particularly for secured debt borrowing increased most for the low risk households who saw their relative borrowing costs fall furthermore while very high risk households gained expanded access to credit the increases in their risk premiums implied that their borrowing as a whole either rose less or sometimes fell

competition and the ratchet effect in labor markets the ratchet effect refers to a situation where workers subject to performance pay choose to restrict their output because they rationally anticipate that firms will respond to higher output levels by raising output requirements or by cutting pay we model this effect as a multiperiod principal agent problem with hidden information and study its robustness to labor market competition both theoretically and experimentally consistent with our theoretical model we observe substantial ratchet effects in the absence of competition which are nearly eliminated when competition is introduced this is true regardless of whether market conditions favor firms or workers

explaining the puzzle of cross state differences in bankruptcy rates abstract bankruptcy rates vary tremendously across states and it is not obvious why the number of candidate explanations is large relative to the number of states to overcome this problem we use zip code level data to identify the importance of demographic variables using within state variation this preserves state level degrees of freedom to identify the impact of state policy variables demographics wage garnishment restrictions and the fraction of bankruptcies filed under chapter 13 explain 70 percent of the variation in filing rates across states exemption rates size of public safety nets and payday loan regulations contribute virtually nothing to the cross state variance in filing rates our findings suggest that state bankruptcy rates reflect the relative costs of filing for formal bankruptcy versus informal default states without effective wage garnishment provisions allow easy informal default furthermore repayment plans mandated under chapter 13 bankruptcy often lead to repeated bank

credit card debt and default over the life cycle this paper solves an empirically parameterized model of life cycle consumption which allows for uncollaterized borrowing and the possibility of default the simulation results show that i social stigma and credit limit have a very large impact on default rates ii education level also has a significant effect on the probability of default namely through differences in the shape of lifetime labor income profiles and iii the response of simulated default rates to labor income shocks is determined by the nature of labor income uncertainty temporary versus permanent additionally the model generates simultaneous consumer holdings of credit card debt and liquid assets

looking behind mortgage delinquencies abstract delinquency rates for mortgages originated before and after the financial crisis are examined using a novel and large panel obtained by merging data from tax records and credit registers first we estimate the selection into the mortgage market using an exogenous index of local credit supply as exclusion restriction second controlling for selection we estimate the impact of income shocks on the delinquency rate we find that since 2008 the selection process has led to the halving of the delinquency rate conditional on the creation of a new mortgage job losses nearly double the delinquency risk estimates uncorrected for selection are severely downward biased

consumer durables and risky borrowing the effects of bankruptcy protection abstract there exist substantial differences in the generosity of bankruptcy protection across u s states this paper exploits cross state variation in exemption levels to assess the dual role of durable goods as informal collateral for unsecured debt and self insurance against bad shocks to earnings the generosity of bankruptcy protection is found to change both the incentives and the ability of households to accumulate durable wealth the gains from a high level of insurance are reduced by the effect of tighter credit constraints so that the net effects of a change in exemption are very small a more generous bankruptcy regulation reduces net durable wealth in the first half of the life cycle in addition the optimal level of exemption is positive but low

bankruptcy as implicit health insurance this paper examines the implicit health insurance that households receive from the ability to declare bankruptcy exploiting multiple sources of variation in asset exemption law i show that uninsured households with a greater financial cost of bankruptcy make higher out of pocket medical payments conditional on the amount of care received in turn i find that households with greater wealth at risk are more likely to hold health insurance the implicit insurance from bankruptcy distorts the insurance coverage decision using a microsimulation model i calculate that the optimal pigovian penalties are three quarters as large as the average penalties under the affordable care act

personal bankruptcy and credit market competition we document a link between u s credit supply and rising personal bankruptcy rates we exploit the exogenous variation in market contestability brought on by banking deregulation the relaxation of entry restrictions in the 1980s and 1990s at the state level we find deregulation explains at least 10 of the rise in bankruptcy rates we also find that deregulation leads to increased lending lower loss rates on loans and higher lending productivity our findings indicate that increased competition prompted banks to adopt sophisticated credit rating technology allowing for new credit extension to existing and previously excluded households the last quarter century saw a dramatic increase in the share of u s con sumers filing for personal bankruptcy thereby seeking a discharge of their unsecured debt in 2005 this increase led to the most comprehensive change to u s bankruptcy law since 1978 while several causes for the rise in bankruptcies have been advanced and it is the subject of ongoing research two potentially significant changes occurred during this period banking deregulation the relaxation of bank entry restrictions in the 1980s and 1990s and technological change in consumer lending banking deregulation by removing barriers to entry increases credit market competition and there fore affects the supply of credit new screening technologies change the way loans are made allowing for interest rates to better reflect underlying risk and thus facilitating lending to riskier borrowers in this paper we examine whether banking deregulation and technological change played a role in the increase in consumer bankruptcy the empirical literature has mostly focused on cross sectional differences in personal bankruptcy in particular it has revolved around legal institutions as a way to answer whether consumers file due to adverse events as part of a rational financial calculation or as a consequence of unfair or deceptive lending practices usually researchers have exploited the different asset exemptions across u s states i e the amount of personal assets protected from creditors

are private markets and filtering a viable source of low income housing estimates from a repeat income model while filtering has long been considered the primary mechanism by which markets supply low income housing direct estimates of that process have been absent this has contributed to doubts about the viability of markets and to misplaced policy i fill this gap by estimating a repeat income model using 1985 2011 panel data real annual filtering rates are faster for rental housing 2 5 percent than owner occupied 0 5 percent vary inversely with the income elasticity of demand and house price inflation and are sensitive to tenure transitions as homes age for most locations filtering is robust which lends support for housing voucher programs jel r21 r31 r38

personal bankruptcy and credit supply and demand this paper examines how personal bankruptcy and bankruptcy exemptions affect the supply and demand for credit while generous state level bankruptcy exemptions are probably viewed by most policy makers as benefiting less well off borrowers our results using data from the 1983 survey of consumer finances suggest that they increase the amount of credit held by high asset households and reduce the availability and amount of credit to low asset households conditioning on observable characteristics thus bankruptcy exemptions redistribute credit toward borrowers with high assets interest rates on automobile loans for low asset households also appear to be higher in high exemption states

consumer bankruptcy a fresh start consumer bankruptcy provides partial insurance against bad luck but by driving up interest rates makes life cycle smoothing more difficult we argue that to assess this trade off one needs a quantitative model of consumer bankruptcy with three key features life cycle component idiosyncratic earnings uncertainty and expense uncertainty exogenous negative shocks to household balance sheets we find that transitory and persistent earnings shocks have very different implications for evaluating bankruptcy rules more persistent shocks make the bankruptcy option more desirable larger transitory shocks have the opposite effect our findings suggest the current us bankruptcy system may be desirable for reasonable parameter values jel d14 d91 k35

is public r d a complement or substitute for private r d a review of the econometric evidence is public r d spending complementary and thus additional to private r d spending or does it substitute for and tend to crowd out private r d conflicting answers are given to this question we survey the body of available econometric evidence accumulated over the past 35 years a framework for analysis of the problem is developed to help organize and summarize the findings of econometric studies based on time series and cross section data from various levels of aggregation laboratory firm industry country the findings overall are ambivalent and the existing literature as a whole is subject to the criticism that the nature of the experiment s that the investigators envisage is not adequately specified we conclude by offering suggestions for improving future empirical research on this issue

comparative statics of the optimal dynamic incentive contract abstract each period a firm must carry out an indivisible project the cost of which depends on the firm s constant efficiency and its variable level of effort only the cost is observed by the regulator who has to choose the incentive scheme the optimal dynamic mechanism is derived under possible commitment of the regulator over time then under non commitment it is shown that there are four types of continuation equilibria also the profile of effort levels is compared to the commitment case finally some numerical comparative statics is performed and it is shown that all types of equilibria can be optimal

r d and subsidies at the firm level an application of parametric and semi parametric two step selection models this paper analyzes the effects of public r d subsidies on r d expenditure in the german manufacturing sector the focus is on the question whether public r d funding stimulates or crowds out private investment cross sectional data at the firm level is used by apllying parametric and semiparametric selection models it turns out that public funding increases firms r d expenditure altough the magnitude of the treatment effect depends on the assumpions imposed by the particular selection model

teardowns and land values in the chicago metropolitan area an empirical model of residential housing demolitions and the redevelopment process in the chicago metropolitan area supports the theoretical prediction that the sales price of teardown property is approximately equal to its land value we control for sample selection bias associated with non random demolition permit applications using a probit model that accounts for misclassification of the dependent variable the probit models provide statistically significant evidence of misclassification and suggest that prime teardown candidates are small older homes near public transportation and traditional village centers

hedonic pricing with redevelopment options a new approach to estimating depreciation effects abstract the standard hedonic model of durable assets is a special case of a more general model that contains two additive terms 1 use value of the existing hedonic vector and 2 the value of the option to reconfigure hedonic characteristics one empirical implication is that the two parts of value are related e g use value increases with interior area whereas option value decreases with intensity the ratio of structure value divided by land value increases in building age reduce use value but increase option value data from greenwich connecticut indicate that intensity has the expected negative effect coefficients on building age are shown to be better measures of depreciation when intensity variables are included in the regression

old homes externalities and poor neighborhoods a model of urban decline and renewal abstract this paper investigates urban decline and renewal in the united states using three panels that follow neighborhoods on a geographically consistent basis over extended periods of time findings indicate that change in neighborhood economic status is common averaging roughly 13 percent per decade roughly two thirds of neighborhoods studied in 1950 were of quite different economic status fifty years later panel unit root tests for 35 msas indicate that neighborhood economic status is a stationary process consistent with long running cycles of decline and renewal in philadelphia county a complete cycle appears to last up to 100 years aging housing stocks and redevelopment contribute to these patterns as do local externalities associated with social interactions lower income neighborhoods appear to be especially sensitive to the presence of individuals that provide social capital many of the factors that drive change at the local level have large and policy relevant effects

language fluency and earnings estimation with misclassified language indicators we use panel data to analyze the determinants of speaking fluency and wages of immigrants our model takes account of two problems that may bias ols estimates of the impact of speaking fluency on earnings first subjective variables on an ordinal discrete scale such as self reported language ability can suffer from misclassification errors the model decomposes misclassification errors into a time persistent and a time varying component second the model accounts for correlated unobserved heterogeneity in language and earnings equation the main finding is that these two generalizations of the standard model both lead to substantial changes in the estimated effect of speaking fluency on earnings

efficiency improving investment and the ratchet effect abstract in a long term relationship between a regulator and a firm the production technology may change due to investment this paper investigates how the introduction of such an investment possibility influences the dynamic regulation problem when long term commitments are infeasible contractible investment is shown to reduce the ratchet effect by increasing separation in the first period due to the separation effect of investment the first period optimal scheme converges toward the optimal scheme with commitment as investment increases finally assuming noncontractible investment the paper analyzes the relationship between separation and the degree of under investment

procurement and renegotiation parties bound by an incomplete contract have an incentive to renegotiate after acquiring new information the issue of the parties investment in the relationship before renegotiation is analyzed in a simple two period procurement model the firm invests in the first period it then learns its production cost and the sponsor learns its value for the project williamson s underinvestment presumption is shown to hold under very general assumptions about bargaining and about the ex post asymmetry of information as long as the firm s investment is not observable by the sponsor the introduction of a cancellation fee may well lead to even less investment contrary to what is sometimes argued the role of ex ante price fixing as an alternative way to reintroduce some form of commitment and the problem of cost overruns are discussed last it is shown that if investment is observable by the sponsor andthus may become a joint decision variable the two parties may choose to under or overinvest

the dynamics of incentive contracts the paper studies a simple two period principal agent model in which the principal updates the incentive scheme after observing the agent s first period performance the agent has superior information about his ability the principal offers a first period incentive scheme and observes some measure of the agent s first period performance cost or profit which depends on the agent s ability and unobservable first period effort the relationship is entirely run by short term contracts in the second period the principal updates the incentive scheme and the agent is free to accept the new incentive scheme or to quit the strategies are required to be perfect and updating of the principal s beliefs about the agent s ability follows bayes rule the central theme of the paper is that the ratchet effect leads to much pooling in the first period first for any first period incentive scheme there exists no separating equilibrium second when the uncertainty about the agent s ability is small the optimal scheme must involve a large amount of pooling the paper also gives necessary and sufficient conditions for the existence of partition equilibria and looks at the effect of cost uncertainty

what happens when information leaves a market evidence from postbankruptcy consumers federal law mandates the removal of personal bankruptcies from credit reports after 10 years the removal s effect is market efficiency in reverse the short term effect is a spurious boost in apparent creditworthiness especially for the more creditworthy bankrupts delivering a substantial increase in both credit scores and the number and aggregate limit of bank cards the longer term effect is lower scores and higher delinquency than initial full information scores predict these findings relate to both the debate over the bankruptcy code and the wisdom of influencing market clearing by removing information

evidence on the insurance effect of bankruptcy exemptions abstract defaulting on one s debts when experiencing an adverse event can help insure households against unexpected income risks but the effect of allowing default on debt levels is ambiguous not least because lenders may restrict access to credit hence the optimal punishment for bankruptcy is unclear the us states allows householders to keep a variety of assets when filing for bankruptcy the bankruptcy exemptions and these exemptions change substantially between states and over time by exploiting these differences this study shows that raising the exemptions i marginally decreases the level of unsecured debt that household s hold ii makes consumption smoother thus despite the effect on debt levels the generous provisions to debtors in arrears may be helping us households to insure themselves against income risk

assessing the policy mix of public support to business r d abstract this paper investigates whether the effectiveness of public support to business r d increases or decreases when firms benefit from different support schemes data on the amount received by individual firms in the available support schemes in belgium over the period 2003 2011 are matched with other firm level data estimations of this panel of firms permit to account for the time dimension and selection mechanism in public support as well as for observed and unobserved firm heterogeneity results on the impact of public support appear to depend on the econometric specification and estimation procedure that is considered robust results indicate that the effectiveness of r d support decreases when firms benefit from different schemes at the same time especially when firms combine subsidies with several tax benefits

an empirical analysis of personal bankruptcy and delinquency this article uses a new dataset of credit card accounts to analyze credit card delinquency personal bankruptcy and the stability of credit risk models we estimate duration models for default and assess the relative importance of different variables in predicting default we investigate how the propensity to default has changed over time disentangling the two leading explanations for the recent increase in default rates a deterioration in the risk composition of borrowers versus an increase in borrowers willingness to default due to declines in default costs even after controlling for risk composition and economic fundamentals the propensity to default significantly increased between 1995 and 1997 standard default models missed an important time varying default factor consistent with a decline in default costs debt issued by consumers is an understudied asset class there has been particularly little academic study of recent trends in default on this debt between 1994 and 1997 the number of personal bankruptcy filings in the united states rose by about 75 the 1 35 million filings in 1997 represented well over 1 of u s households delinquency rates on credit cards rose almost as sharply federal reserve bank of cleveland 1998 the resulting losses to lenders amounted to a sizable fraction of the interest payments they collect potentially raising the average cost of credit these trends in default both in bankruptcy and delinquency are especially surprising in light of the strong economy over the period they provide an unusually rich source of variation to test the stability of models that forecast personal default and of credit risk models more generally there are two leading explanations for these trends first the risk composition of borrowers might have worsened under the risk effect less

understanding gentrification an empirical analysis of the determinants of urban housing renovation abstract the back to the city phenomenon presented an unpredicted countercurrent in the prevalent tide of suburbanization and this process of upper income resettlement in the inner city has been thoroughly analyzed in the urban economic literature housing renovation a process that always accompanies gentrification and constitutes a significant portion of residential housing investment has been studied much less contrary to the expectation that location matters the existing empirical studies have concluded that most neighborhood amenities and structural attributes are insignificant as determinants of renovation using a detailed parcel level data set that documents all residential renovation activity in chicago between 1995 and 2000 this paper establishes that the characteristics of a building and its neighborhood do indeed influence the likelihood that it will be renovated

the relationship between federal contract r d and company r d according to recent estimates federal budget outlays for research and development rd this component will rise 28 percent and absorb 70 percent of all federal r d spending in 1984 compared to under 50 percent in 1980 since work corresponding to about one half of the dollar value of the federal r d program is generally performed by private industrial firms under contract with federal agencies the rapid increase in federal r d outlays will presumably be reflected in a similar increase in the value of commitments by industrial firms to perform government r d one of the most important economic questions posed by the large prospective increase in resources allocated to federal contract r d concerns its consequences for the economy s rate of technical progress of productivity growth in the next section i argue that the ultimate impact on productivity depends on how company decisions to finance r d are affected by the availability of federal contract r d funds i then provide a brief review and critique of previous studies of the relationship between companyand federalfinanced r d performed in industry and present new estimates which differ from existing ones with respect to both methodology and implications these estimates are consistent with the hypothesis that increases in federal r d activity tend to be associated with significant reductions in companyfinanced r d a number of studies have attempted to determine the ceteris paribus effects of company and federal r d on the rate of productivity growth p by estimating variants of the equation

regulation with wage bargaining in many regulated industries labour unions are strong and there is clear empirical evidence of labour rent sharing in this paper we study optimal regulation in a model in which wages are determined endogenously by wage bargaining at the firm level a seemingly robust conclusion at least when worker bargaining power is considerable is that incentives for cost efficiency should be stronger than in the standard case in which wages do not depend on the regulatory regime

arm breaking consumer credit and personal bankruptcy the consumer credit transaction is analyzed as a contract which provides insurance as well as present consumption for the borrower creditors remedies such as arm breaking are shown to facilitate provision of insurance forgiveness of debts when lenders cannot monitor outcomes alternatively if outcomes are observable but lenders do not ex ante know the risk associated with each borrower the market may generate an excessive amount of arm breaking and agreements to forgo discharge following bankruptcy as low risk borrowers signal their characteristics suggesting that government limitations on such provisions might be efficient the secured credit transaction is shown to be a complex contract which attempts to provide efficient repayment seller incentives for performance and mitigation following default and insurance for the borrower garnishment and discharge of debts following bankruptcy are also considered

option value and the price of teardown properties abstract the introduction of uncertainty over the future price of structural capital into a model of teardowns implies a value to delaying the demolition vs preservation decision and that the market price of a redeveloped property may increase with its quantity of structural capital using data from an active teardown market we test the model s prediction that hedonic price function coefficients depend on the expected time between sale and demolition as predicted structural variables have significant effects on the sales prices of both teardown and non teardown properties and the effects are generally much larger the lower the estimated teardown probability

the household bankruptcy decision personal bankruptcy filings have risen from 0 3 percent of households per year in 1984 to around 1 35 percent in 1998 and 1999 transforming bankruptcy from a rare occurrence to a routine event lenders lost about 39 billion in 1998 due to personal bankruptcy filings but economists have little understanding of why households file for bankruptcy or why filings have increased so rapidly until very recently studying the household bankruptcy decision was very difficult because no household level data set existed that included information on bankruptcy filings in this paper we use new data from the panel study of income dynamics which includes information on bankruptcy filings to estimate a model of households bankruptcy decisions we find support for the strategic model of bankruptcy which predicts that households are more likely to file when their financial benefit from filing is higher our model predicts that an increase of 1 000 in households financial benefit from bankruptcy would result in a 7 percent increase in the number of bankruptcy filings our model also predicts that if the 1997 national bankruptcy review commission s proposed changes in bankruptcy exemption levels were implemented there would be a 16 percent increase in the number of bankruptcy filings each year but if the 100 000 cap on homestead exemptions recently passed by the u s senate were adopted our model predicts that there would be only a negligible effect on the number of filings we find little support for the nonstrategic model of bankruptcy which predicts that households file when adverse events occur which reduce their ability to repay finally controlling for state and time fixed effects our model shows that households are more likely to file for bankruptcy if they live in districts with higher aggregate filing rates

do the effects of r d tax credits vary across industries a meta regression analysis this paper presents a survey of the micro econometric literature on the effects of r d tax credits on firms innovation activities we focus on one specific aspect that has not received sufficient attention in previous research the sectoral dimension our meta regression analysis mra sets up a new database collecting a large number of firm level studies on the effects of r d tax credits and investigates the factors that may explain differences in the estimated effects that are reported in the literature the main result of the mra analysis is indeed that sectors matter specifically the additionality effect of r d tax credits is on average stronger for smes firms in the service sectors and firms in low tech sectors in countries with an incremental scheme the paper proposes a simple framework to investigate why the innovation and economic effects of r d tax credits vary across sectors and points out new directions and hypotheses for future research

assessing the effect of public subsidies on firm r d investment a survey this survey examines the empirical literature on the relationship between public r d subsidies and private r d investment over the past five decades the survey reveals a considerable heterogeneity of empirical results that cannot be explained fully by methodological issues we aim to provide further explanations of the possible causes of that heterogeneity in particular we emphasise a set of issues that in our view are critical to understanding the potential effect of public r d subsidies on private r d spending special attention is paid to the dynamic aspects and composition of firm r d the constraints faced by the firm such as financial constraints and the amount and source of public subsidies none of these issues have been investigated in depth we formulate a set of research assumptions to guide future empirical research in this field

an economic analysis of bankruptcy statutes personal bankruptcy statutes are analyzed as social insurance agreements the risk sharing and incentive effects resulting from changes in bankruptcy laws are studied it is shown that increasing the leniency of bankruptcy statutes may have unambiguous short term benefits to potential bankrupts but may be detrimental in the long run

impact of state exemption laws on small business bankruptcy decision 1 introductionsmall businesses are a primary source of employment in the u s economy employing over half of the private sector workforce small businesses are responsible for about two thirds of all net new jobs created according to the 2002 small business economic indicators sbei 1 over 99 7 of the 5 7 million firms in the united states are classified as small to medium sized businesses hence small businesses are a substantial contributor to economic growth in the united states small business owners enjoy more flexibility and freedom to capitalize on profitable opportunities than their larger business competitors hence they challenge the larger firms to be more efficient which is ultimately beneficial to consumers unfortunately small and medium sized businesses have a very low survival rate sbei 2002 in 2002 on the heels of the 2001 recession there were 550 100 small business births and 584 500 small business terminations both academics and public policy analysts have become increasingly concerned about the success of small businesses recently there has been a surge in small business research particularly surrounding small business credit supply and demand not surprisingly much of the literature has been focused on changes in lending technologies relationship2 versus scored3 information processing technologies soft versus hard 4 loan size considerations 5 and loan type considerations6 as they relate to small business supply and demand however very few have actually examined why small and medium sized businesses have very low survival rates some studies have analyzed the sensitivities of small business administration sba guaranteed loans to macroeconomic changes industry risks maturity structures 3 7 and 15 year maturities as well as lender and debt characteristics e g glennon and nigro 2001 2002 dunsky and pennington cross 2003 meanwhile agarwal chomsisengphet and liu 2003 empirically assessed the significant importance of owner and firm characteristics in determining the risk of small business default while controlling for the macroeconomic and industry risks with bankruptcy filings continuing to rise significantly in recent years many policy makers are turning their attention to bankruptcy laws specifically congress is considering reforming personal bankruptcy laws that if passed will significantly impact the demand for and supply of both consumer credit and small business funding white 2001 concludes that this bankruptcy reform could potentially reduce small business ownership but increase the supply of small business credit and in turn affect the growth of the u s economy small business owners have an incentive to file for personal bankruptcy when their indebtedness exceeds the value of their assets because both their personal and business debts can be discharged 7 though the bankruptcy exemption law is primarily designed for consumers the personal bankruptcy exemption law is a de facto bankruptcy procedure for small business owners because the debt of a noncorporate firm is the personal liability of the entrepreneur owner fan and white 2003 hence investigating the potential impact of the exemption law on small business bankruptcy decisions may provide some insight into how the bankruptcy laws should be reformed further fan and white 2003 argue that while the expected return to creditors should be lower in states with higher exemption level upon small business shutdown it is not entirely clear whether lenders will actually shut down a financially troubled small business while they empirically find that small businesses in high exemption states are more likely to be shut down this positive relationship is statistically insignificant the authors conclude that additional research will be needed to determine if a significant relationship exists p

participation in the afdc program and the stigma of welfare receipt estimation of a choice theoretic model one of the important issues in policy discussions of the present welfare system and of welfare reform alternatives concerns the degree to which low income families eligible for welfare will in fact participate in the major program in the current system aid to families with dependent children afdc participation rates have risen over time particularly in the late 1960 s but have never been 100 percent explaining such changes in participation rates is an important subject of investigation because a participation rates lead directly to caseload sizes and thus to the possibility of a welfare explosion and b the estimates of the effect of welfare program tax rates and guarantees 10 are strictly applicable only to participants and not to non participants the most likely explanation for this seemingly irrational phenomenon of families rejecting an increase in disposable income lies in the stigma of welfare receipt for many families consider welfare participation to be demeaning socially undesirable and or destructive of self respect and feelings of self worth however although there has been considerable discussion of the nature of stigma 13 particularly in the sociological literature 11 there is a need to establish a firm theoretical base for the phenomenon and to formally investigate its properties in this paper a model of welfare participation is developed which incorporates stigma and thus establishes such a theoretical base and estimates of the parameters of the model are obtained there are two key characteristics of the model first participation in a welfare program is introduced into the utility function under the assumption that stigma represents a distaste for welfare the desire to participate is thus formulated within a traditional consumer

estimating the benefits of targeted r d subsidies we study the expected welfare effects of targeted r d subsi dies using project level data from finland we model the application and r d investment decisions of firms and the subsidy granting decision of the public agency in charge of the program our model and institutional environment allow us to identify different benefits and costs of the r d subsidy program we find that expected effects of subsidies are very het erogeneous and estimated application costs low on average the social rate of return on targeted subsidies is 30 to 50 but spillover effects of subsidies are smaller than effects on firm profits

demand side vs supply side technology policies hidden treatment and new empirical evidence on the policy mix this paper provides new empirical evidence about the impact of various technological policies upon firms innovative behaviour we take into consideration the role of policies for innovative activities and we focus on their interaction while supply side policies such as r d subsidies and tax credits have been both extensively discussed in the literature and empirically investigated the analysis of innovative public procurement is a growing trend in the literature which still lacks robust empirical evidence in this paper we replicate the existing results on supply side policies surmise fresh empirical evidence on the outcome of innovative public procurement and address the issue of possible interaction among the various tools when controlling for the interaction with other policies supply side subsidies cease to be as effective as reported in previous studies and innovative public procurement seems to be more effective than other tools the preliminary evidence suggests that technology policies exert the highest impact when different policies interact

how unsecured credit policies influence mortgage and unsecured loan defaults before the global financial crisis the proportion of households defaulting on the mortgage while remaining current on the unsecured loan was almost the same as the proportion of households current on the mortgage but defaulting on the unsecured loan after the crisis the former ratio became higher than the latter by using a heterogeneous agent model with the mortgage and the unsecured loan i examine how the order of defaults changed before and after the crisis i then analyze the impacts of unsecured credit policies on households mortgage and unsecured loan defaults my quantitative exercise shows that both default rates can decrease as the cost for unsecured loan defaults increases

investors facing opportunistic governments is it really good to know the market before investing when a government cannot commit to future policies investors face the risk of opportunistic behavior in addition to uncertain market conditions we show that although reducing market uncertainty is sometimes essential for investment it may aggravate problems of opportunism the better informed the investor is before investing the more information the government can infer from observing that investment takes place in turn enabling more efficient rent extraction this signaling effect can dominate if the investor receives too accurate information before investing the only equilibrium is the one in which no investment occurs jel classification d82 l51

changes in the distribution of house prices over time structural characteristics neighborhood or coefficients quantile hedonic house price function estimates imply that appreciation rates were higher between 1995 and 2005 for high priced homes in chicago decompositions of temporal changes in the house price distribution suggest that the types of homes sold and their location do not account for the change in the price distribution rather higher appreciation rates for high priced homes are explained by differences in the quantile regression coefficients over time

the effectiveness of r d subsidies a meta regression analysis of the evaluation literature widespread and increasing public subsidy for research and development r d has given rise to a large and growing number of evaluation studies while economic theory identifies market failures that justify public support theory also suggests reasons why returns might be disappointing similarly the empirical literature investigated 52 micro level studies published since 2000 on either input or output r d reports a wide range of findings the lack of conclusiveness both of theory and of the evaluation literature motivate this meta regression analysis mra this study contributes to policy debate by identifying a representative subsidy effect after controlling for publication selection bias and for a wide range of sample and study heterogeneities mra findings reject crowding out of private investment by public subsidy but reveal no evidence of substantial additionality in addition among the research practices explaining the heterogeneous effects reported in this literature those related to the treatment of unobservable firm heterogeneity are particularly important

the strategic use of innovation to influence regulatory standards this paper investigates the welfare consequences of strategic behavior by firms to affect the amount of environmental regulation they face environmental regulation often attempts to force an industry to develop cleaner technology but the regulator may have no means to commit to a specific standard this lack of regulatory commitment induces firms to choose innovation strategically it is well known that firms have incentives to suppress innovation to induce the regulator to ratchet down the standard and this strategic behavior lowers welfare this paper explores a countervailing incentive in oligopoly settings firms have heightened incentives to innovate so as to increase regulation and raise rivals costs in equilibrium the incentive to raise rivals cost can mitigate the welfare loss arising from no regulatory commitment also a regulator who is unable to commit ex ante to the stringency of a regulatory standard can induce more clean technology than a regulator with a commitment mechanism

estimation with response error and nonresponse error in survey data originates from failure to contact the sample and from false answers to verifiable questions these errors may be systematic and associated with uncooperative or unreliable respondents zabel modeled attrition in the survey of income and program participation and found systematic demographic and design effects bollinger and david modeled response error and identified correlations to income per capita in this analysis we link missing interviews in a panel and response error through a trivariate probit analysis robustness of the correlation between attrition and response error is examined by comparing variants of the model the joint model of response error and attrition becomes the first stage of a pseudolikelihood estimate of a model of food stamp participation the model is significantly different from naive probit on the survey data