The returns from rent-seeking: campaign contributions, firm subsidies and the Byrd Amendment

Abstract .  This is the first empirical study to examine Congressional support of a new law that distributes antidumping duties to protected firms. Because the law produces a transparent measure of how much each firm was rewarded for its efforts to secure the bill's passage, it provides researchers with a unique opportunity to study the link between the expected financial returns to firms, campaign contributions, and Congressional behaviour. Our results indicate that campaign contributions from beneficiaries increased the likelihood that lawmakers would sponsor the law, while contributions from the law's beneficiaries increased with the rewards they expected to receive.     

Terms of trade risk with partial labor mobility

We examine the welfare consequences of terms-of-trade risk in a small open economy in which it is costly for workers to move between sectors. Relocation costs lead to partial labor mobility, sectoral wage gaps and income risk exceeding that of an economy in which relocation is costless. Using observed wage differentials and standard values for volatility and preferences, we find that the welfare cost of partial labor mobility alone is unlikely to be very large, even in the absence of self-insurance arrangements. In addition, modest consumption substitution elasticities significantly reduce these welfare costs.     

Do alliances promote knowledge flows?

We explore the role of interfirm alliances as a mechanism for sharing technological knowledge. We argue that knowledge flows between alliance partners will be greater than flows between pairs of nonallied firms, and less than flows between units within single firms. Using patent citations as a proxy for knowledge flows, we find results that are consistent with these expectations. We then explore how firm characteristics affect knowledge flows within alliances and find positive effects due to technological, geographic, and business similarities between partners. We use alliance data from MERIT, patent data from the USPTO, and firm data from Compustat.     

INCENTIVE CONTRACTS AND TOTAL FACTOR PRODUCTIVITY*

We propose a transactions cost theory of total factor productivity (TFP). In a world with asymmetric information and transactions costs, productivity must be induced by incentive schemes. Labor contracts trade off marginal benefits and costs of effort. The latter include, in addition to the workers' marginal disutility of effort, organizational costs and rents. As the economy grows, contracts change endogenously, inducing higher effort and productivity. Transactions costs are also affected by societal characteristics that determine the power of incentives. Differences in these characteristics may explain cross‐economy productivity differences. Numerical experiments demonstrate the model's consistency with time‐series and cross‐country observations.     

Some implications for monetary policy of uncertain exchange rate pass-through

The paper uses MULTIMOD to examine the implications of uncertain exchange rate pass‐through for the conduct of monetary policy. From the policymaker's perspective, uncertainty about exchange rate pass‐through implies uncertainty about policy multipliers and the impact of state variables on stabilization objectives. When faced with uncertainty about the strength of exchange rate pass‐through, policymakers will make less costly errors by overestimating the strength of pass‐through rather than underestimating it. The analysis suggests that pass‐through uncertainty of the magnitude considered does not result in efficient policy response coefficients that are smaller than those under certainty.     

Capitalizing on Catastrophe: Short Selling Insurance Stocks Around Hurricanes Katrina and Rita

We develop several hypotheses regarding short‐selling activity around Hurricanes Katrina and Rita. We find that abnormal short selling does not increase until 2 trading days after the landfall of Katrina and that short‐selling activity is much more significant around Rita. We find a substantial increase in short‐selling activity in the trading days prior to the landfall of Rita and relatively less short‐selling activity in the trading days after landfall. There is little evidence that suggests that traders short insurance stocks with more potential exposure in the Gulf region than other insurance stocks in the days before landfall.     

Forecasting bond yields in the Brazilian fixed income market

This paper studies the predictive ability of a variety of models in forecasting the yield curve for the Brazilian fixed income market. We compare affine term structure models with a variation of the Nelson–Siegel exponential framework developed by Diebold and Li [Diebold, F., & Li, C. (2006). Forecasting the Term Structure of Government Yields. Journal of Econometrics, 130, 337–364]. Empirical results suggest that forecasts made with the latter methodology are superior, and appear to be more accurate at long horizons than other different benchmark forecasts. These results are important for policy-makers, as well as for portfolio and risk managers. Further research could study the predictive ability of such models in other emerging markets.     

Effects of farm credit access on agricultural commercialization in Ghana: Empirical evidence from the northern Savannah ecological zone

The purpose of this paper is to investigate how farmers' access to credit affects agricultural commercialization in the northern Savannah ecological zone of Ghana. The study uses data from the Ghana Feed the Future baseline survey involving a total sample of 2,962 farm households. The study employs endogenous switching regression for ordered outcomes to account for endogeneity and self‐selection bias in the decision to access credit. The results from the estimations revealed that education, age, nonfarm business equipment, multiple crop production, and group membership are the variables influencing farmers' access to credit. Agricultural commercialization is determined by gender, age, marital status, household size, farm size, nonfarm business equipment, means of transport, group membership, assets index, multiple crop production, and location. In terms of causal effect, the results show that credit access stimulates higher commercialization. Thus policies that enhance farmers' access to credit are more likely to be successful in getting them to commercialize.