Law and credit constraints in transition economies1

Using a survey of over 4,000 firms in 21 transition economies, this paper investigates how legal extensiveness (law on the books) and legal effectiveness (law in practice) affect availability of bank finance. Our findings suggest that both law on the books and law in practice are important, but that they impact firms of different sizes differently. Small firms appear to be the most credit constrained in countries with weak creditor rights and with weak contract enforcement, while large firms are the most credit constrained in countries with weak courts and unclear and inconsistent laws pertaining to firms’ business operations.     

Principles of controlling traffic noise : Solving a multi-objective decision problem

The main objectives for a government to control traffic noise are such as economic efficiency, a reasonable welfare distribution and acceptable noise standards. The instruments available for arriving at these objectives are traffic control, emission regulation and environment protection. This paper analyzes how to make trade-offs between such objectives and how to choose a combination of noise control instruments. Special attention is then made to one welfare distribution objective, namely the ‘polluters-pay-principle’. That principle demands using the vehicle tax to finance investments to protect environment. And in order to stimulate the development of less noisy vehicles such a tax has to be progressively increased for noisy cars. The analysis is demonstrated on the situation of Sweden where a differentiation of norms as well as of vehicle taxes is proposed.     

Measurement invariance: Review of practice and implications

A review of efforts to assess the invariance of measurement instruments across different respondent groups using confirmatory factor analysis (CFA) is provided for the years since the Vandenberg and Lance [Vandenberg, R. J., & Lance, C. E. (2000). A review and synthesis of the measurement invariance literature: Suggestions, practices, and recommendations for organizational research. Organizational Research Methods, 3, 4–69.] review. Investigators are more frequently reporting tests of scalar invariance and tests for differences in latent factor means and partial invariance. Efforts have been made to assess, the impact of the choice of a referent indicator in multi-group studies, the appropriateness of forming partials as indicators of a latent construct, the degree of convergence of item response theory and CFA analyses of measurement differences across groups, and the implications of findings of invariance. In this context, a demonstration of the impact of partial invariance on estimated group differences in reliability and means is provided and discussed.     

Contribution of financial market segments at different stages of development: Transition,cohesion and mature economies compared

What is the impact of financial sector segments at different stages of development? We apply a production function approach to investigate the impact of the credit, bond and stock segments in nine EU-accession countries over early years of transition (1996–2000) and compare these to mature market economies and to countries at intermediate stage. We find that the transfer mechanisms differ over the development cycle (from bond markets to educational attainment to labor participation) and that financial market segments with links to the public sector (but not stock markets) contributed to stability and growth in transition economies.     

Composition of trade flows and the effectiveness of fiscal devaluation

We empirically explore whether the magnitude of the effects of fiscal devaluation, which consists of reducing the employers’ social security contribution rate and increasing the value‐added tax rate, depends on the composition of trade flows. Our sample comprises data on bilateral balances of trade between 28 European Union (EU) Member States and their main EU trade partners over the 2000–14 period. We use robust ordinary least squares regressions, controlling for the country‐pair and time fixed effects, to test whether there are differences in the sizes of relationships between these taxation forms and bilateral trade balances for different types of goods, by distinguishing between: (i) consumer, intermediate and capital goods; and (ii) labour and capital‐intensive goods. Our results show that the overall effectiveness of fiscal devaluation depends on the composition of trade flows. Value‐added tax is more strongly (positively) associated with (bilateral) balances of trade in consumer goods, compared to balances of trade in capital and intermediate goods. The employers’ contribution rate, in contrast, is more tightly (negatively) related to balances of trade in capital goods. The latter finding also holds true for trade balances of labour‐intensive goods compared to balances of capital‐intensive goods.     

Exploring the effect of environmental orientation on financial decisions of businesses at the bottom of the pyramid: Evidence from the microlending context

Existing research has accumulated substantial evidence on the effect that an environmental orientation has on businesses' economic performance. Yet this research does not cover small businesses from bottom‐of‐the‐pyramid (BOP) markets. In fact, despite increasing interest in research on BOP markets, the effect of environmental orientation on the financial decision‐making of small businesses from BOP markets has gone largely unexplored. Using a large multicountry data set from a microlending platform, we investigate how the environmental orientation of BOP businesses impacts their financial decisions related to microlending, which ultimately shapes their economic performance. The results indicate that an environmental orientation necessitates BOP businesses to request a higher level of financial capital and ask for longer time to pay it back. Surprisingly, environmental orientation increases the odds of BOP businesses paying back the borrowed capital. These results show that environmental orientation gives rise to both challenges and opportunities for sustainable development in BOP markets.     

The Russian option: Finite horizon

We show that the optimal stopping boundary for the Russian option with finite horizon can be characterized as the unique solution of a nonlinear integral equation arising from the early exercise premium representation (an explicit formula for the arbitrage-free price in terms of the optimal stopping boundary having a clear economic interpretation). The results obtained stand in a complete parallel with the best known results on the American put option with finite horizon. The key argument in the proof relies upon a local time-space formula.Received: March 2004, Mathematics Subject Classification (2000): 91B28, 35R35, 45G10, 60G40, 60J60JEL Classification: G13Goran Peskir: Centre for Analytical Finance (funded by the Danish Social Science Research Council) and Network in Mathematical Physics and Stochastics (funded by the Danish National Research Foundation).The first draft of the present paper has been completed in September 2002. I am indebted to Albert Shiryaev for useful comments.     

Book briefs

World food marketing systems, Butterworth & Co, London, 1986.

Faces of hunger. An essay on poverty, justice and development, Studies in applied philosophy, Allen & Unwin, London, 1986. xiii + 178, distributed in South Africa by MacMillan South Africa, Braamfontein.

Decentralization and development — Policy implementation in developing countries, Sage Publications, London, 1983, 319 pp

Soviet interests in the Third World, Sage Publications, London, 1985, xi + 329 pp

No shortcuts to progress — African development management in perspective, Heinemann Educational Books Ltd, London, 1983, xv + 223 pp.

Strategies for African Development, University of California Press, London, 1986, xii + 603 pp.

Labour and poverty In Kenya 1900‐1980, Clarendon Press, Oxford, 1986, xii + 296, £20,00     

Analysing the correlation between social network analysis measures and performance of students in social network-based engineering education

Social network-based engineering education (SNEE) is designed and implemented as a model of Education 3.0 paradigm. SNEE represents a new learning methodology, which is based on the concept of social networks and represents an extended model of project-led education. The concept of social networks was applied in the real-life experiment, considering two different dimensions: (1) to organize the education process as a social network-based process; and (2) to analyze the students’ interactions in the context of evaluation of the students learning performance. The objective of this paper is to present a new model for students evaluation based on their behavior during the course and its validation in comparison with the traditional model of students’ evaluation. The validation of the new evaluation model is made through an analysis of the correlation between social network analysis measures (degree centrality, closeness centrality, betweenness centrality, eigenvector centrality, and average tie strength) and the grades obtained by students (grades for quality of work, grades for volume of work, grades for diversity of work, and final grades) in a social network-based engineering education. The main finding is that the obtained correlation results can be used to make the process of the students’ performance evaluation based on students interactions (behavior) analysis, to make the evaluation partially automatic, increasing the objectivity and productivity of teachers and allowing a more scalable process of evaluation. The results also contribute to the behavioural theory of learning performance evaluation. More specific findings related to the correlation analysis are: (1) the more different interactions a student had (degree centrality) and the more frequently the student was between the interaction paths of other students (betweenness centrality), the better was the quality of the work; (2) all five social network measures had a positive and strong correlation with the grade for volume of work and with the final grades; and (3) a student with high average tie strength had a higher grade for diversity of work than those with low ties.