Government expenditure,external and domestic public debt,and economic growth

This paper analyzes the relationship between government expenditure, tax on returns to assets, public debt, and growth in an endogenous growth model. Public debt is composed of two components, domestic debt and external debt. We show conditions for existence, uniqueness, and multiplicity of the steady states. More precisely, existence of steady state requires a sufficiently high productivity and a sufficiently low tax on returns to assets. We also provide the effects of an increase in the tax rate on returns to assets on the steady state. In particular, the relation between public spending and the tax rate has a bell shape. Domestic debt unambiguously increases with tax whereas external debt displays an inverted U‐shaped curve. A high tax rate leads to a reallocation of public debt in favor of domestic debt (to the detriment of external debt). The effect of taxation on consumption (and production) also displays a nonlinear pattern when the output elasticity of capital is lower than unity (the effect is monotonously increasing if this elasticity is unity). We also derive the conditions under which a tax increase can boost or reduce the balanced growth rate.     

Equal opportunity and poverty reduction: How should aid be allocated?

This paper analyzes a model of aid allocation equalizing the opportunity between recipient countries to reach a common poverty reduction goal. We propose a fair and efficient aid allocation based on a multicriteria principle. The model considers structural handicaps in recipient countries in terms of lack of human capital and economic vulnerability, their initial poverty, and the natural gap between the growth rate required to reach a development goal and the observed one. We show that our proposed aid allocation favors poor and vulnerable countries with our multicriteria principle. It substantially differs from the observed allocation. Analyses also shed light on the impact of the donors' aversion to the low natural growth gap in recipient countries on the optimal aid allocation and the marginal efficiency of aid.     

Modeling farmers’ decisions on tea varieties in Vietnam: a multinomial logit analysis

This article analyzes households’ choice on tea varieties in Vietnam by using a multinomial logit model. The modeling takes into account the issue of unobserved individual heterogeneity and the endogeneity of some explanatory variables (use of chemical and organic fertilizers). The results show that important factors influencing the decision to adopt one type of tea varieties include income, age, household size, farming contract, and use of organic fertilizers, but also membership of professional associations such as the Tea Association and the Farmers Union.     

Nonlinearities and heterogeneity in environmental quality: An empirical analysis of deforestation

We use a panel data set of 59 developing countries over the 1972–1994 period to study the deforestation process. Relying on both parametric and semiparametric models, we examine nonlinearities and heterogeneity in the deforestation process. We first study the existence of an Environmental Kuznets Curve (EKC) and then analyze determinants of deforestation. Our data sample provides no evidence of an EKC. We also find that political institution failures may worsen the deforestation process in developing countries.     

Distribution Dynamics of CO<Subscript>2</Subscript> Emissions

This paper uses nonparametric methods to examine the convergence in CO₂ emissions per capita on a sample of 100 countries for the period 1966–1996. Industrial countries show a convergence pattern. However, there is little evidence of convergence for the whole sample.     

Vintage capital and the diffusion of clean technologies

We develop a general equilibrium vintage capital model with energy‐saving technological progress and an explicit energy sector to study the impact of investment subsidies on equilibrium investment and output. Energy and capital are assumed to be complementary in the production process. New machines are less energy‐consuming and scrapping is endogenous. Two polar market structures are considered for the energy market: free entry and natural monopoly. First, it is shown that investment subsidies may induce a larger equilibrium investment into cleaner technologies either under free entry or natural monopoly. However, in the latter case, this happens if and only if the average cost is decreasing fast enough. Second, larger diffusion rates do not necessarily mean lower energy consumption at equilibrium, which may explain certain empirical observations.     

A Primer on the Financial Policies of Chinese Firms: A Multi‐country Comparison

Chinese companies have grown rapidly over the past few decades, and become increasingly global in the process. In the past five years, the aggregate market capitalization of public companies in China increased more than ten‐fold and their revenue from outside China grew 60%. Nevertheless, Chinese companies have financial policies that are notably different from those of their global counterparts in North America and Europe, and that difference could end up limiting their future profitability and growth. In this report, J.P. Morgan's Corporate Finance Advisory team compares the capital structures of large Chinese companies to those of the largest companies in the U.S., the U.K. and Germany. Among the most important findings, Chinese companies have materially more leverage, much greater reliance on bank loans than bonds, and maturities that are almost 80% shorter than those of typical U.S. companies. To bring their balance sheets in line with those of their global peers, Chinese companies are likely to have to raise over 5 trillion yuan (over $750 billion) in equity while also issuing roughly the same amount in bonds. At the same time, in order to attract that capital on economic terms, they will likely need to find ways to increase the profitability of their businesses, whose return on equity is well below international standards. As the authors point out in closing, making such significant changes in financial and operating policies could be challenging for all stakeholders, and cause some potential dislocation in the short run. But however disruptive, such changes are most likely to ensure the ability of Chinese companies to create the most value in the long run.     

Testing convergence of European regions: A semiparametric approach

We provide a reappraisal of income convergence across European regions over the last two decades by using a semiparametric partially linear model to approximate the relationship between the average growth rate of GDP per capita and the initial GDP per capita. Estimation results point out both country heterogeneity and non-linearity in the convergence process. The findings suggest that low income regions, in particular those from new adhesion countries, diverge while medium income regions converge and that there is no evidence of convergence for high income regions.     

Monitoring Compliance with IFRS: Some Insights from the French Regulatory System

European Union Regulation 1606/2002 is aimed at improving the quality of financial reporting and developing a single capital market in Europe. Nevertheless, these goals cannot necessarily be achieved solely by making a requirement for EU companies to use International Financial Reporting Standards (IFRS), and the EU has sought to create a mechanism to oversee the appropriate application of these standards. In this paper, we describe and comment on the methods used by the French stock exchange regulator, the Autorité des Marchés Financiers (AMF), for monitoring compliance with the national reporting rules as this bears upon the issue of enforcement of IFRS in Europe as from 2005. The AMF has been chosen in our study because of its extensive experience with the review of financial statements of listed companies. Our paper draws on qualitative interviews with people involved directly in scrutinizing financial information at the AMF as well as on the experience gained from attachment to the AMF's Accounting Division. While there is recent research that addresses the issues on enforcement of accounting standards, there is still a lack of studies which discuss the relevance and effectiveness of the methods used to monitor compliance with accounting standards. Our paper may be of interest to different groups of participants including regulatory oversight bodies, auditors, producers and users of financial information in the capital markets.