The Bolivian Social Investment Fund: An Analysis of Baseline Data for Impact Evaluation

The Bolivian Social Investment Fund (SIF) is a financial institutionthat promotes sustainable investments in the social sectors,principally in the areas of health, education, and sanitation.This article shows how to use preintervention data collectedfor evaluating the SIF to improve the targeting of a program,to test the quality of the evaluation design, and to definecorrective measures if necessary. It finds that among SIF interventionsthe benefits in education are distributed relatively equallyover the population, while the investments in health and sanitationfavor better-off communities. The article contributes to the methods used to evaluate socialinvestment funds and similar programs. It compares two typesof evaluation designs to assess social investment fund interventionsin the education sector. The authors demonstrate that a simplematched-comparison design introduces a bias in the estimateof the program effect, whereas an experimental design basedon random assignment does not. With preintervention data, theanalyst can select a quasi or indirect experiment, where thechoice of the indirect experiment coincides with the selectionof valid instrumental variables. The availability of preinterventiondata makes it possible to compare the two types of evaluationdesigns as well as to test the validity of the instruments andto determine the loss of efficiency due to the use of quasi-experimentaltechniques instead of random treatment assignment.     

Convergence and divergence in consumer behavior: implications for international retailing

Converging technology and disappearing income differences across countries will not lead to homogenization of consumer behavior. Rather, consumer behavior will become more heterogeneous because of cultural differences. As consumer incomes converge across countries, the manifestation of value differences will become stronger. This phenomenon makes it increasingly important to understand values of national cultures and their impact on consumer behavior. Retailing strategies for one country cannot be extended to other countries without adaptation. Hofstede’s model of national culture is applied to understand differences in consumer behavior across countries. Examples are provided of consumption differences, their relationships with culture discussed, and selected implications for international retailing management detailed.     

Pairs Trading: Performance of a Relative-Value Arbitrage Rule

We test a Wall Street investment strategy, "pairs trading,"with daily data over 1962–2002. Stocks are matched intopairs with minimum distance between normalized historical prices.A simple trading rule yields average annualized excess returnsof up to 11% for self-financing portfolios of pairs. The profitstypically exceed conservative transaction-cost estimates. Bootstrapresults suggest that the "pairs" effect differs from previouslydocumented reversal profits. Robustness of the excess returnsindicates that pairs trading profits from temporary mispricingof close substitutes. We link the profitability to the presenceof a common factor in the returns, different from conventionalrisk measures.     

Daily Bundesbank and Federal Reserve Interventions

This paper reports on the results of an empirical investigation into the objectives of daily foreign exchange market intervention by the Deutsche Bundesbank and the Federal Reserve System in the U.S. dollar-Deutsche Mark market. Tobit analysis is implemented to estimate the intervention reaction functions consistently. It is found that an increase in the conditional variance in daily exchange rate returns derived from a GARCH model estimated in the paper, led the Bundesbank and the Federal Reserve to increase the volume of intervention, both in case of dollar-sales and purchases on account of their leaning against the wind policy.We are grateful to the Deutsche Bundesbank, Hauptabteilung Ausland for kindly providing, on a confidential base, the daily data on the official interventions of the Bundesbank and the Federal Reserve, the latter only to the extent that they affected the net foreign position of the Bundesbank. Also, we want to thank Theo Nijman and two anonymous referees for helpful comments on an earlier draft of this paper. Opinions and errors are our own responsibility.     

On levies to reduce the nitrogen surplus: The case of Dutch pig farms

Pig farms in the Netherlands pay a zero or low price for using the environment. As a consequence, the environment is overused. The Dutch government wants to reduce the emissions of nitrogen and phosphorus. Possible instruments are regulation and levies. In this study a levy on feed and a levy on the nitrogen surplus are investigated, by incorporating a bad output in the production model. The model is estimated using panel data of Dutch pig farms over the period 1975–1989. Levies on nitrogen turn out to be more cost-effective than levies on feed.     

Equity Market Liberalization in Emerging Markets

Equity market liberalizations, if effective, lead to important changes in both the financial and real sectors as the economy becomes integrated into world capital markets. The study of market integration is complicated because one can liberalize in many ways and many countries have taken different routes. To study the effectiveness of particular liberalization policies, the sequencing of liberalizations, and the impact on the real economy, systematic methods must be developed to date the liberalization of emerging equity markets. We provide a synthesis of the current methods and show the impact of liberalization on the real sector.     

The Validity of Laboratory Research in Social and Behavioral Science

The validity of artificial situations is often questioned, and particularly so the possibility of transfer of findings to the real world. Such questions, or doubts, may stem from a rigid distinction between real and artificial situations or from too strict a notion of representation. This article will argue that `the real world' does not provide unambiguous criteria for representation and that, moreover, many experiments and simulation games do not have to represent `the real world' in any direct way. Both issues are usually treated under the heading of external validity, which means compliance to conventions that dominated thinking about validity over decades. These conventions need to be reconsidered. Quality standards for research must not be rigid, nor should be applied in a way that ignores the characteristics of a particular research project. Fixed notions about validity may prevent a researcher from adapting validation procedures to the circumstances at hand. The article takes issue with a conception of external validity as surface resemblance between artificial and real situations, advocates an active, non-routine approach to validity questions, and encourages individual researchers to develop a line of reasoning on these questions instead of adhering to standards that may not suit their particular research.