Choices between different off-farm employment sub-categories: An empirical analysis for Jiangxi Province, China

This paper analyzes the relative importance of four sub-categories of off-farm employment, and the factors driving participation of individuals in these sub-categories for three villages in Jiangxi Province. We find that migration is the most important type of off-farm employment, while agricultural wage employment is a minor activity. Migrant remittances are smaller than household incomes earned from self-employment and local non-farm employment. The results of a multinomial probit analysis explaining off-farm participation decisions show that presence of young children in a household restrains participation in migration, while the presence of elderly persons and a higher level of education stimulate migration. Local wage employment and self-employment are not affected by these factors. The gender bias in access to off-farm employment is largest for agricultural employment and local non-agricultural employment. Land scarcity stimulates participation in migration and local non-agricultural employment, while possibilities to rent land out to other farmers stimulate only migration. The paper ends with policy suggestions for promoting off-farm employment within the own region and for altering the criteria for land distribution to rural households.     

Determinants of small firm debt ratios: An analysis of retail panel data

In this paper, the relevance of some debt ratio determinants from the recent theory of finance is empirically investigated in a small business sector. The data used in this study consist of average financial data of 27 shoptypes in 20 different years, covering a period of 24 years. The panel character of the data facilitates the use of analytical techniques aimed at reducing or avoiding the biasing effect of omitted variables on the outcomes. The main conclusion is, that the theoretical determinants appear indeed to be relevant for the small business sector investigated here, but the influences encountered in the analyses are far less straightforward than the hypothesized effects in the theory. Influences on total debt are frequently found to be the net effects of opposite influences on long and short term debt and some variables show large time and industry specific effects. Further, distinct patterns in the time specific effects were found.     

Value creation and pricing in buyouts: Empirical evidence from Europe and North America

Using a unique proprietary data set of 1980 realized and unrealized buyouts completed between 1986 and 2010, we examine entry and exit pricing in buyouts and its influence on private equity (PE) sponsors' returns. We find that besides leverage and operational improvements, EBITDA multiple expansion (i.e. the difference between entry and exit pricing) is a fundamental factor in explaining equity returns and the result of skill rather than pure luck. We also provide evidence that more experienced PE sponsors use more debt to finance a PE transaction and debt is positively related to entry buyout pricing. However, for a transaction with a given leverage level, more experienced PE sponsors are able to negotiate lower prices. In addition, our results show that deals conducted by first time funds which are realized in a later stage of a fund's life cycle are associated with lower exit prices which can be explained by the increased exit pressure for the PE sponsor.     

Budget allocation for permanent and contingent capacity under stochastic demand

We develop a model of budget allocation for permanent and contingent workforce under stochastic demand. The level of permanent capacity is determined at the beginning of the horizon and is kept constant throughout, whereas the number of temporary workers to be hired must be decided in each period. Compared to existing budgeting models, this paper explicitly considers a budget constraint. Under the assumption of a restricted budget, the objective is to minimize capacity shortages. When over-expenditures are allowed, both budget deviations and shortage costs are to be minimized. The capacity shortage cost function is assumed to be either linear or quadratic with the amount of shortage, which corresponds to different market structures or different types of services. We thus examine four variants of the problem that we model and solve either approximately or to optimality when possible. A comprehensive experimental design is designed to analyze the behavior of our models when several levels of demand variability and parameter values are considered. The parameters consist of the initial budget level, the unit cost of temporary workers and the budget deviation penalty/reward rates. Varying these parameters produce several trade-offs between permanent and temporary workforce levels, and between capacity shortages and budget deviations. Numerical results also show that the quadratic cost function leads to smooth and moderate capacity shortages over the time periods, whereas all shortages are either avoided or accepted when the cost function is linear.     

Rural to urban land conversion in China — How large is the over-conversion and what are its welfare implications?

The current system of converting farmland to urban land use in China can be characterized as a hybrid system that combines government controls with market-based transfers. In this paper we argue that this hybrid governance structure causes an over-conversion of farmland from the rural to the urban sector, as compared to a competitive market situation, and a welfare reallocation that discriminates against farmland owners. We develop a partial equilibrium model that can be used to examine the impact of the current hybrid governance structure on the over-conversion of farmland and to analyze the welfare changes for different groups of actors and the resulting net social welfare loss. Using a dataset with detailed information on farmland acquisitions and urban land transactions in Yingtan City in Jiangxi Province, we illustrate how this framework can be applied. Our results indicate an over-conversion of 33.5% of the total converted farmland in this city between 1999 and 2003. The welfare of farmland owners affected by the conversion decreased by 1.38 billion RMB, while the net social welfare loss equaled more than 270 million RMB during the same period. The local government obtained 380 million RMB of revenues by re-selling farmland as urban land through competitive conveyance mechanisms between 2002 and 2005, while the manufacturing sector gained an estimated 280 million RMB from buying land use rights at relatively low prices. We conclude that the current policy of increasing urban land conveyance through competitive mechanisms does not address two major underlying causes of over-conversion, and that protection of farmland would be better served by replacing the current hybrid rural to urban land market structure by a competitive land market.     

Modeling Asset Premiums and the Riskfree Rate in General Equilibrium CCAPM

We elaborate on the consumption capital asset pricing model (CCAPM) to reveal a set of underlying forces that determine asset returns. We use generalized preferences, allow for labor-leisure choice, a broad asset portfolio, and holding international claims. A calibration of the model with US data learns that excess stock and bond returns can be replicated. At the same time, however, the riskfree interest rate generally appears to be mispriced, consistent with Weil (1989). Additional results show that in general two optimal values of the intertemporal substitution parameter correspond with a specified coefficient of risk aversion. Tests that assess the dynamic properties of the model yield mixed results, but are most favorable when home bias is allowed.     

The decomposition of US and Euro area stock and bond returns and their sensitivity to economic state variables

This paper decomposes US and Euro area excess stock and bond return innovations into news factors using the Campbell–Schiller methodology. The results indicate that stock return volatility is mostly due to volatility of future excess return news. Inflation news plays a minor role although it is significantly correlated with excess return innovations. For the bond market too, it is future return news—not inflation news—that moves bond returns most. For finite investment horizons, however, asset market movements give a differential importance to the various news components. Results are comparable for the US and the Euro area, but differ in terms of magnitudes. In addition, sensitivities (‘betas’) to a set of state variables are estimated, yielding high interest rate betas and low money growth betas. Generally, inflation, unemployment and leading indicator betas are significant. Asset market exposures to oil and exchange rate changes are more significant for the Euro area than in the US.     

Spatial Linkages in Returns and Volatilities among U.S. Regional Housing Markets

This article investigates spatial linkages in returns, idiosyncratic risks and volatilities across 19 U.S. regional housing markets. Using Case & Shiller housing price indices from 1995 through 2009, we find that interconnections across markets can be “wider” and “stronger” than would normally be expected. They are “wider” because, in addition to geographic closeness, economic proximity is also an important source of influence; they are “stronger” because of the significant contagion effects during the 2007–2009 subprime and financial crises. The increased comovement and interdependence, especially among more geographically diverse regions with similar economic conditions, may help explain the failure of geographic portfolio diversification strategies.     

Complexity in the telecommunications industry: When integrating infrastructure and services backfires

The emergence of pure Internet-based service providers has put many integrated telecommunications firms - industry incumbents that provide services on their own infrastructure - under massive pressure. While various pure service providers enjoy high performance, the products offered by the incumbents often cannot compete on either price or user experience. Conventional wisdom, however, might suggest the opposite: that coordinating both infrastructure and services might allow the incumbents to reap synergy effects and create superior products. To address this issue, this paper applies a complex systems perspective to the telecommunications industry. It conceptualizes telecommunications firms to be searching for good configurations of interdependent service and infrastructure activities that need to fit together to achieve high-performing product systems. Using a simulation model, the paper shows that integrated operators can indeed take advantage of the interdependencies between the infrastructure and the service domain, resulting in superior product performance. Integrating infrastructure and services, however, can backfire: because learning about both domains and their interdependence requires more time, performance in the short run will be lower than that of pure service providers that can focus on adapting their service-related activities to an infrastructure that is beyond their control. The paper characterizes the conditions under which these effects can arise and concludes with implications for management and policy.     

Asking and answering yes/no-questions in survey interviews: a conversational approach

The authors discuss the process of asking and answering yes/no-questions in personal survey interviews from a conversational perspective. They examine the process with regard to yes/no-questions as given in the questionnaire and with regard to the yes/no-questions that interviewers may pose in the subsequent stages of a sequence, when they are probing on the respondent's initial answer or are trying to solve other problems. Hypotheses are derived from the co-operation principle and the politeness principle of conversation, and then empirically evaluated for survey interview settings. In the relatively informal stages of the answering process (subsequences) the conversations appear to go quite well according to the conversation rules, but in the beginning formal stage to a much lesser degree. In particular it has been observed that interviewers strongly prefer to ask one-sided positive yes/no-questions in the subsequences, and, secondly, that respondents usually give agreeing answers to these yes/no-questions. It is argued that this “normal” conversation strategy may seriously affect the validity of the information obtained, and, more generally, that the practical demands from the conversation rules on the interviewer's behaviour set limits on the researcher's abstract demands on that behaviour.