Impact of private forest ownership on deforestation and poverty

We analyzed the impact of private forest ownership on deforestation and poverty. Using multivariate cross-section models, we identified a statistically significant negative correlation between private forest ownership and deforestation and a statistically significant negative correlation between private forest ownership and poverty. Our study presents the importance of privatization in the forest sector and stimulation of private forestry to combat deforestation and poverty.     

Forecasting cryptocurrencies under model and parameter instability

This paper studies the predictability of cryptocurrency time series. We compare several alternative univariate and multivariate models for point and density forecasting of four of the most capitalized series: Bitcoin, Litecoin, Ripple and Ethereum. We apply a set of crypto-predictors and rely on dynamic model averaging to combine a large set of univariate dynamic linear models and several multivariate vector autoregressive models with different forms of time variation. We find statistically significant improvements in point forecasting when using combinations of univariate models, and in density forecasting when relying on the selection of multivariate models. Both schemes deliver sizable directional predictability.     

Corruption clubs: endogenous thresholds in corruption and development

The relationship between corruption and economic development is characterised by three stylised facts: (i) a strong negative correlation between corruption and development (ii) countries can remain trapped in high corruption-low development or low corruption-high development equilibria (iii) amongst intermediate levels of development corruption levels are more variable, some countries have high corruption and others low corruption. This paper argues that existing models are consistent with the first two only and demonstrates how these models might be extended to capture all three. The paper searches for the location of corruption clubs within the data and provides some explanation of their cause.     

Corruption and the ownership composition of the multinational firm at the time of entry: Evidence from Turkey

This paper presents an empirical assessment of the relationship between corruption and the ownership structure of foreign direct investment receipts by Turkey. Two forms of ownership structures are considered: joint venture and wholly owned subsidiary. The results indicate a strong negative impact of corruption on joint ventures, particularly for the ones originating from developed countries. As the degree of dissimilarity between corruption levels in the source country and Turkey diverges, the share of foreign ownership declines. This lends support to the transaction cost approach which emphasizes the expected increase in costs of sharing ownership in corrupt environments.     

Is privatization related to corruption? An empirical analysis of European countries

This study analyses the relationship between privatization and corruption in Europe over the period 1995 to 2013, taking into account the problems surrounding the issue of causality. There have been researches into the role of privatization in reducing corruption, but decisions about privatization itself are made by politicians, and so corruption could also affect decision making about privatizations. The empirical findings suggest that perceived corruption decreases as the number of privatization transactions increases, but the effect is contrary when privatizations are a more important in terms of annual revenues. Furthermore, our results indicate that overall, privatizations carried out since the early 1980s have not been effective in reducing corruption in Europe. Indeed, privatizations reforms are more carried out in the less corrupt countries.     

The effect of corruption on environmental performance: Does spatial dependence play a role?

Different from previous studies that mainly focused on conventional estimation techniques, this paper explores the role of spatial dependence in the effect of corruption on environmental performance by using a spatial panel data model. Our results show that the direct effects, indirect effects and total effects of corruption on environmental performance are negative and highly significant, implying that corruption is detrimental to environmental performance. More importantly, we find that there is a significant spatial spillover effect between corruption and environmental performance, namely being surrounded by highly corrupt countries has a negative impact on the local country’s environmental performance. Our results also suggest that a larger population density will worsen the environment, while urbanization has a significant positive impact. These results provide some important implications for policymakers seeking to improve their environmental performance.     

Privatization, Competition, and Budget Constraints: Disciplining Enterprises in Russia

We investigate whether privatization, competitive forces, and the hardening of budget constraints played efficiency-enhancing roles in Russia in the immediate post-privatization period. We find evidence of a positive impact of privatization on labor productivity: a 10% point increase in private share ownership raises real sales per employee by 3–5%. The evidence on product market competition is weaker, depending on model specification. Soft budget constraints are usually found to reduce restructuring but the effect is small and insignificant. We find that in terms of their impacts on productivity, privatization and subsidy reduction are substitutes; privatization and competition (measured as the geographic scope of markets) are complements; and that competition and subsidy reduction are independent. This revised version was published online in August 2006 with corrections to the Cover Date.     

PARTIAL PRIVATIZATION, TECHNOLOGY SPILLOVERS, AND FOREIGN OWNERSHIP RESTRICTION

Using a mixed oligopoly model with foreign ownership, this paper examines the interaction between two market-opening policies: the relaxation of foreign ownership restriction and the privatization of domestic public firms. It particularly focuses on technology spillovers, which could be one of the most prominent motivations for introducing foreign investment into a domestic market. The first result demonstrates that the optimal level of privatization is affected by technology spillovers from foreign investment and is negatively related with the magnitude of technology spillovers. The second result shows that the optimal level of privatization is lower when foreign ownership restriction is abolished than that when foreign ownership is not fully allowed. The third result indicates that the government relaxes regulations on foreign ownership of domestic firms only if the magnitude of technology spillovers is significant.     

Forecasting expected shortfall: Should we use a multivariate model for stock market factors?

Is univariate or multivariate modeling more effective when forecasting the market risk of stock portfolios? We examine this question in the context of forecasting the one-week-ahead expected shortfall of a stock portfolio based on its exposure to the Fama–French and momentum factors. Applying extensive tests and comparisons, we find that in most cases there are no statistically significant differences between the forecasting accuracy of the two approaches. This result suggests that univariate models, which are more parsimonious and simpler to implement than multivariate factor-based models, can be used to forecast the downside risk of equity portfolios without losses in precision.     

Corruption, Growth, and Income Distribution: Are there Regional Differences?

This paper uses panel data from 61 countries at different stages of economic development over a 20-year period to investigate regional differences in the effect of corruption on economic growth and income distribution. Using two measures of corruption, we find that there are statistically significant regional differences in the growth and distributional impacts of corruption. The largest growth impact of corruption is found in African countries while OECD and Asian countries have the lowest growth impact. On the other hand, the largest distributional impact of corruption in found in Latin America. A 10% decrease in corruption increases the growth rate of income by about 1.7% in OECD and Asian countries, 2.6% in Latin American countries, and by 2.8% in African countries. A one standard deviation decrease in corruption decreases the gini coefficient of income distribution (0–1 scale) by 0.05 points, 0.14 points, 0.25 points, and 0.33 points in OECD, Asian, African, and Latin American countries, respectively. The results are robust to various specifications, measurement of corruption, measures of investment, as well as the conditioning variables. The results have interesting policy implications for economic growth, especially in low income countries with high rates of corruption.     

Privatization and economic performance: evidence from Chinese provinces

Based upon an aggregate production function, this paper develops a growth model to test the hypothesis that the further the ownership moves into private hands, the greater are efficiency gains and the more rapid is economic growth. Using provincial data in the period 1985–1997, the paper finds that the hypothesis cannot be rejected in China. That is to say, provinces with greater progress in privatization witnessed greater gains in marginal productivity of capital and more rapid economic growth. To test the robustness of the finding, the study classifies forms of ownership into different categories that represent variant degree of the privatization process. The finding suggests that China should pursue the ownership reform in the direction of privatization to maintain growth momentum.     

Corruption control,shadow economy and income inequality: Evidence from Asia

Developing countries often suffer from high corruption, high income inequality and poor institutional arrangements that give rise to large shadow economies. Earlier evidence shows that shadow economies moderate the negative effects of corruption on income inequality in highly unequal South American countries. For Asia, we show that the persistence of shadow economies raises inequality even if corruption control is strong. Supported by static and dynamic panel data analyses of 21 countries in Asia between 1995 and 2015, we show that in order to combat rising inequality, corruption control must be complemented by the ability to translate secondary and tertiary school enrolment into industrial and, more importantly, service sector jobs. Countries with low corruption but high inequality can reduce inequality by committing to higher public consumption expenditures. Further, combining greater trade openness with low corruption lowers inequality, except for countries in South Asia.     

Dynamic functional time-series forecasts of foreign exchange implied volatility surfaces

This paper presents static and dynamic versions of univariate, multivariate, and multilevel functional time-series methods to forecast implied volatility surfaces in foreign exchange markets. We find that dynamic functional principal component analysis generally improves out-of-sample forecast accuracy. Specifically, the dynamic univariate functional time-series method shows the greatest improvement. Our models lead to multiple instances of statistically significant improvements in forecast accuracy for daily EUR–USD, EUR–GBP, and EUR–JPY implied volatility surfaces across various maturities, when benchmarked against established methods. A stylised trading strategy is also employed to demonstrate the potential economic benefits of our proposed approach.     

Voice,exit and local capture in public provision of private goods

We developed a simple model on publicly provided private goods, such as health or education that highlights a vicious cycle faced by many developing countries. When public services are not of high quality due to mismanagement or corruption, the wealthy may switch to private alternatives. Their exit weakens the influence of citizen voice over politicians, since that leaves the poor as the only constituent with a stake in good governance. As the civic control over local governments weakens, government’s concern for social welfare declines even further, leading to more corruption and more corrosion in the quality of public services. Our model shows that establishing institutions (such as local taxation) that spread the costs and benefits of governance across the whole society is crucial for the success of local governments. Empirical results from the Philippines support this hypothesis.     

Trust and corruption: The influence of positive and negative social capital on the economic development in the European Union

Why are the Scandinavian countries in the European Union significantly richer than Southern/Eastern European countries? We try to answer this question from an empirical social capital perspective. In particular, we are interested in the interplay of social trust as a positive and corruption as a negative manifestation of social capital. The opportunities to provide answers by multivariate modelling are, however, limited by several problems related to small sample size and low degrees of freedom. Regarding these problems, we test the interrelating influences between positive and negative social capital by applying a path model that accounts for Granger-like causal effects. Our empirical results, referring to a sample of up to 25 EU countries, show that corruption might harm poor European countries but is not able to affect social trust. However, corruption in itself means that resources end up in the wrong places and not in socioeconomically optimal investments. There is, therefore, a direct damaging effect of corruption on wealth. This implies that economic actors have to invest higher transaction and control costs which will bind resources to non-productive purposes and thus destroy economic wealth. Most remarkable is that the augmentation of positive social capital could work as an effective counterforce to corruption, even if it does not compensate for the economic loss caused by corruption. Thus, adding the social capital perspective may contribute to understanding present day variation in the wealth of European nations by the damaging effect of corrupt activities and/or the positive force of social trust.     

Trade intensity,country size and corruption

Abstract. Several authors claim to provide evidence that governmental corruption is less severe in countries where trade intensity is higher or populations are smaller. We argue that theory is highly ambiguous on these questions, and demonstrate that empirical links between corruption and trade intensity – or country size, strongly related to trade intensity – are sensitive to sample selection bias. Most available corruption indicators provide ratings only for those countries in which multinational investors have the greatest interest: these tend to include almost all large nations, but among small nations only those that are well-governed. We find that the relationship between corruption and trade intensity disappears, using newer corruption indicators with substantially increased country coverage. Similarly, the relationship between corruption and country size weakens or disappears using samples less subject to selection bias. Received: July 2001 / accepted: April 2002 We thank Anand Swamy and two anonymous referees for helpful comments and suggestions, Paul Schorosch for able research assistance, and Ray Fisman, Roberta Gatti, Aart Kraay, and Shang-jin Wei for kindly providing data. The conclusions of this paper are not intended to represent the views of the World Bank, its Executive Directors, or the countries they represent.     

Ownership Concentration,Institutional Development and Firm Performance in Central and Eastern Europe

This paper analyzes the relationship of ownership concentration and firm performance in the context of different institutional environments in 28 Central and Eastern European transition economies. We focus on private, non‐listed firms that have been largely neglected by the extant literature. Using the BEEPS data for the period from 2002 to 2009 we find an inverted u‐shaped relation of ownership concentration and firm performance for those firms that operate in non‐EU‐member countries as well as those firms that are situated in less developed institutional systems. We interpret these findings as evidence for a classic agency problem in the lower part of the ownership concentration distribution that is dominated by a ‘private benefits of control’ problem with rising ownership concentration. Copyright © 2015 John Wiley & Sons, Ltd.     

THE THEORY OF STATE-OWNED ENTERPRISES IN MARKET ECONOMIES

Abstract. Four topics are covered: the circumstances under which state-owned enterprises (SOEs) are more effective than private firms; the different approaches to modelling public and private firms; the performance of SOEs; and strategies including privatization to limit their more damaging effects. It is argued that ideological or development motives are important in their genesis, but that if efficiency and innovation are key considerations the normative case for their existence is more doubtful. Various types of SOE model are identified, deriving from the variety of circumstances in which they operate, and the theoretical perspective of the modeller. These include the property rights school, the public choice tradition, neoclassical, behavioural and budget maximizing approaches. All models assume the existence of monitoring problems, created by informational asymmetry. The consequences can include high non-pecuniary benefits for managers, a concentration on monitored activities, and lower innovation levels and efficiency than private firms. Curiously this is not necessarily reflected in higher prices or costs. Possible remedial strategies include a change of ownership, a change of objectives, the introduction of incentive-compatible payment schemes, improved performance indicators and privatization.     

“Ministering to the Social Needs of the People”: Samuel Jones,Strong Mayor Government,and Municipal Ownership, 1897–1904

Debates in the Progressive era between supporters of the franchise system and supporters of municipal ownership provide an example of conflicting views of appropriate models of state development. The former wanted to continue the public‐private partnerships that characterized much of 19^th‐century state building, while the latter maintained that this system inevitably led to corruption and exacerbated inequality, calling for a new system of publicly run programs. Mayor Samuel Jones of Toledo worked to expand municipally owned utilities and transportation. Jones argued that granting franchises for the provision of public services enabled private companies to accrue profits that belonged to the people. He actively promoted an alternative model based on his faith in the potential of government, through a program of public ownership, to exemplify a sense of community, brotherhood, and love. Yet obstruction by the city council and lack of mayoral power blocked his efforts. As a result, he attempted to secure a “strong mayor” charter that would enable him to enact his program. The voters, however, rejected the plan, fearing centralization of power and loss of popular accountability. This outcome highlights the importance of the relationship between electoral structures and functional expansion in American political development.     

Growth, public investment and corruption with failing institutions

Corruption is thought to prevent poor countries from catching up with richer ones. We analyze one channel through which corruption hampers growth: public investment can be distorted in favor of specific types of spending for which rent-seeking is easier and better concealed. To study this distortion, we propose a dynamic model where households vote for the composition of public spending, subject to an incentive constraint reflecting individuals’ choice between productive activity and rent-seeking. In equilibrium, the structure of public investment is determined by the predatory technology and the distribution of political power. Among different regimes, the model shows a possible scenario of distortion without corruption in which there is no effective corruption but the possibility of corruption still distorts the allocation of public investment. We test the implications of the model on a set of countries using a two-stage least squares estimation. We find that developing countries with high predatory technology invest more in housing and physical capital in comparison with health and education. The reverse is true for developed countries.