Financial Literacy and Self‐Employment

In this paper, we study the relationship between financial literacy and self‐employment. We use established financial literacy questions to measure literacy levels. The analysis shows a highly significant and positive correlation between the index and self‐employment. We address the direction of causality by applying instrumental variable techniques based on information about maternal education. We also exploit information on financial support and family background to account for concerns about the exclusion restriction. The results provide support for a positive effect of financial literacy on the probability of being self‐employed. As financial literacy is acquirable, the findings suggest that entrepreneurial activities might be increased by enhancing financial literacy.     

Using the Family Self‐Sufficiency Program to Help Families with Housing Assistance Improve Earnings,Credit Score,and Debt Levels: A Quasi‐Experimental Analysis

HUD's Family Self‐Sufficiency (FSS) program aims to help housing assistance recipients increase their earnings and build savings to make progress toward economic security. This study examines an asset‐building nonprofit's innovative financial coaching‐based approach to FSS that adds an additional focus on helping clients build assets and financial capability. We use a quasi‐experimental approach to estimate the program's impact on earnings and cash assistance receipt and analyze credit and debt outcomes against a benchmark group. The findings show substantial, significant gains in households' earnings and significant decreases in receipt of some cash benefits. Participants also saw increases in credit score, and success in paying down credit card and derogatory debt. Our results indicate that FSS can be an effective platform for helping participants in subsidized housing make real progress toward economic security and financial health.     

Problem‐Solving Orientations,Financial Self‐Efficacy,and Student‐Loan Repayment Stress

Using data acquired from a four‐time longitudinal survey, we tested a model linking two measures of self‐agency, i.e., problem‐solving orientations and financial self‐efficacy, to student‐loan repayment stress. Of those participants who responded at Wave 4 (N = 855) of a longitudinal study, 396 who had acquired student loans were included in our structural equation model's Mplus analysis. After we controlled for gender, college financial education, ethnicity, and participant annual income, we found that both financial self‐efficacy and negative problem‐solving orientation were related to perceived difficulty. More specifically, those participants with a greater financial self‐efficacy at Wave 4 perceived less difficulty in paying off their loans, while those with a more negative problem‐solving orientation perceived more difficulty in paying off their loans. We also found perceived difficulty to be directly related to the actual difficulty of repaying a loan, and this perceived difficulty was, in turn, associated with loan‐specific stress. We provide implications for financial education.     

Older Self‐Employed Workers and Planning for the Future

This study examined retirement expectations of the older self‐employed utilizing two theories: the normative anticipation of retirement and cumulative advantage theory. Two‐thirds of the older self‐employed had no retirement plans. Multinomial logistic regression showed that those with no retirement plans were more likely to be unmarried, in poorer physical health, with few resources, and more obligations, but they expected to live a long time. Job skills programs and managerial training could improve the financial well‐being of the older self‐employed and enable them to plan for retirement.     

Exchange‐rate Misalignments in Duopoly: The Case of Airbus and Boeing

We examine the effect of exchange‐rate misalignments on competition in the market for large commercial aircraft. This market is a duopoly where players compete in dollar‐denominated prices while one of them, Airbus, incurs a large fraction of its costs in euro. We estimate price elasticities for big aircraft, and construct a simulation model to investigate how companies adjust their prices to deal with the effects of a temporary misalignment and how this affects profit margins and volumes. We conclude that, due to the duopolistic nature of the aircraft market, Airbus will pass only a small part of the exchange‐rate fluctuations on to customers. Moreover, due to features specific to the aircraft industry, such as customer switching costs and learning‐by‐doing, even a temporary departure of the exchange rate from its long‐run equilibrium level may have permanent effects on the industry.     

Rules of Origin and the EU‐Med Partnership: The Case of Textiles

This paper analyses the impact of rules of origin on patterns of trade in the context of the pan‐European system of diagonal cumulation. The paper first highlights the importance of rules of origin in all preferential trading arrangements while arguing that those rules can easily lead to trade suppression and/or trade diversion. We then focus on the introduction of the pan‐European system in 1997 and show evidence to suggest that the introduction of the system materially impacted on trade between the EU, and its CEFTA, EFTA and Baltic states partner countries. The main body of the paper then empirically explores the impact of the lack of cumulation in the textile industry on the countries of the Southern Mediterranean. The results suggest that rules of origin may indeed substantially constrain trade between non‐cumulating countries, possibly by as much as 70–80 per cent in aggregate. While preferential trading agreements thus serve to increase intra‐PTA trade through the liberalisation of trade barriers, they may also be doing so by effectively raising external barriers to trade through the use of constraining rules of origin. To the extent that they do so increases the likelihood of trade diversion and trade suppresion.     

An Assessment of Environmentally‐ related Non‐tariff Measures

International trade can affect the environment in different ways. This may justify the introduction of border measures by the importing countries. In addition to various dispositions in the GATT, GATS, TRIPs agreements, as well as in the Agreement on Agriculture, this issue is regulated by the agreements on Technical Barriers to Trade (TBT) and on the application of Sanitary and Phyto‐sanitary standards (SPS). Despite these rules, abuse of environmental arguments for protectionist reasons remains an open issue. In order to disentangle protectionism from dispositions justified on the grounds of true environmental concerns, we systematically review notifications of SPS and TBTs by importing countries at the tariff line level. Trade is considered as being potentially affected when an environmental SPS/TBT is notified on grounds of environmental concerns. Affected trade is defined as imports by countries notifying such barriers. Protectionist use of environmental barriers is likely when only a limited number of countries impose an environmental obstacle on the imports of a given product. Considering data for 2001, we find that 88 per cent of the value of world trade is in products potentially affected by such measures, while 39 per cent of the value of world imports is potentially subject to a protectionist use of such measures. Agriculture, the automobile industry, the pharmaceutical industry and many other sectors are concerned.     

External Debt,Labour Productivity Growth and Convergence: Evidence from Sub‐Saharan Africa

Sub‐Saharan Africa (SSA) has long suffered from lagging productivity and excessive levels of indebtedness. Using both parametric and non‐parametric techniques, this paper examines the impact of external debt on labour productivity growth and convergence across SSA economies over the period 1970–2010. The results indicate the presence of debt‐overhang effects, regardless of model and sample specification. Debt reduction through the Heavily Indebted Poor Countries and Multilateral Debt Relief initiatives enhanced growth but was not successful in offsetting the debt‐overhang effects. Moreover, excessive levels of external debt were responsible for divergence in output per worker over the early 1990s. Although this trend was reversed over the 2000s, reduction in debt through the debt relief initiatives seems to have been insufficient in helping heavily indebted countries in SSA catch up with the labour productivity levels of the best‐performing economies in the region.     

The Politics of Self–Restraint: FDI Subsidies and Japanese Mercantilism

Home governments seek to enhance the international competitiveness of private enterprises not only through export credit, but also through preferential loans for foreign direct investment (FDI). Indeed, contrary to the common image of nation‐states resenting their loss of jurisdiction over the mobile transnational corporation, some governments have become active financiers of multinational investment to serve their industrial policy goals. The uneven use by industrialized states of preferential credit to further MNC expansion challenges the current characterization of home government policy as both homogenous and ineffective for the task of industrial promotion. The world's most active state in FDI finance, Japan, has enjoyed an inordinate degree of freedom to engage in subsidization of MNC investment since no international regime on FDI credit, similar to the OECD arrangement on government export finance, exists. Moreover, Japanese labor has not challenged the legitimacy of state FDI finance. In the absence of international or societal constraints on soft FDI credit, Japanese self‐restraint in FDI subsidization is better explained by the internal budgetary makeup of government financial institutions with a mandate to finance FDI. Treasury bureaucrats concerned with healthy public finances and politicians eager to reward core support groups, have repeatedly competed for control over the budgetary strings on soft FDI finance. This political contest is far from over. This paper, therefore, highlights the political agency behind rules of financial discipline that have so far inhibited Japanese rent‐seeking international economic behavior.     

International Debt Shifting: The Value-Maximizing Mix of Internal and External Debt

Abstract

We study the capital structure of multinationals and expand previous theory by incorporating international debt tax shield effects from both internal and external capital markets. We show that: (i) multinationals’ firm value is maximized if both internal and external debt are used to save tax; (ii) the use of internal and external debt is independent of each other; and (iii) multinationals have a tax advantage over domestic firms, which cannot shift debt across international borders. We test our model using a large panel of German multinationals and find that internal and external debt shifting are of about equal importance.     

Capital Controls Re‐examined: The Case for ‘Smart’ Controls

The global financial crisis which began in east Asia in 1997 is not over, neither is the inquest into its implications for adjustment policy. In the wake of this crisis, we focus here on the role of capital controls, which formed a much publicised part of the crisis‐coping strategy in one country (Malaysia) and, less openly, were also deployed by other crisis‐afflicted countries. Evaluation so far has examined different target variables with different estimation methods, generally concentrating on efficiency and stability indicators and ignoring equity measures; it has also typically treated ‘control’ as a one‐zero dummy variable, ignoring the ‘quality’ of intervention and in particular the extent to which efficiency gains are obtained in exchange for controls. Partly because of these limitations, the literature has reached no consensus on the impact of controls; however, it is moving over towards acknowledging that the quality and type of controls is important, as well as their intensity. We propose an approach in which the government plays off short‐term political security against long‐term economic gain; the more insecure its political footing, the greater the weight it gives to political survival, which is likely to increase the probability of controls being imposed. The modelling of this approach generates a governmental ‘policy reaction function’ and an impact function for controls, which are estimated by simultaneous panel‐data methods across a sample of thirty developing and transitional countries between 1980–2003, using, for the period since 1996, the ‘new’ IMF dataset which differentiates between controls by type. We find that controls appear to cause increases in income equality, and are significantly associated with political insecurity and relatively low levels of openness to trade. They do not, in our analysis, materially influence the level of whole‐economy productivity or GDP across the sample of countries examined, although they do influence productivity in particular sectors. But the dispersion around this central finding is wide: the tendency for controls to depress productivity by encouraging rent‐seeking sometimes is, and sometimes is not, counteracted by purposive government policy actions to maintain competitiveness. Whether or not this happens is vital, on both efficiency and equity grounds. We make the case for ‘smart’ capital controls – controls which are time‐limited and contain an inbuilt incentive to increased productivity.     

Debt Sustainability Analyses for Italy,Spain and Portugal: Assessment and Recommendations

Despite the broad upswing in the euro area, it cannot be precluded that high public debts in some countries could spiral out of control if interest rates increase again. To analyse the relevance of this danger, a debt sustainability analysis is carried out using a narrow range of relatively realistic assumptions through 2022. While public debts will remain high for an extended period, reasonable fiscal primary surpluses will be sufficient to stabilise debt ratios, even if a moderate recession occurs.     

The Empirical Assessment of Corporate Ethics: A Case Study

Empirical analyses of the ethics of corporations with the aim to improve the state of corporate ethics are rare. This paper develops an integrated, normative model of corporate ethics by conceptualizing the ethical quality of organizations and by relating this contextual quality to various expressions of immoral behavior. This so-called Ethics Qualities Model for organizations, which contains 21 ethical qualities, allows one to assess the ethical content of institutional groups of individuals. A proper conceptualization is highly relevant both for the empirical corroboration of business ethics theories and for managerial purposes, such as judging individual and group performance or informing external stakeholders. The empirical applicability of the model is illustrated by an explorative case study of a large, globally operating financial institution. This case-study demonstrates that the corporate ethical qualities differ with respect to their perceived optimality as well as to their estimated impact on (un)ethical conduct. The various results provide managers with many clues to understand their organization and to take effective measures to improve the ethical content of their organization.     

Infrastructure Development and Regulatory Reform in Sub‐Saharan Africa: The Case of Air Transport

This paper analyses the main policy issues raised by regulatory reform in air transport in sub‐Saharan Africa. Its basic premise is that improving ait infrastructure is of paramount importance for the region as it tries to integrate more thoroughly into the world economy. On the basis of the experience of OECD countries with privatisation, liberalisation, and regulatory design, the author analyses progress being made in sub‐Saharan Africa and identifies three important case studies: the restructuring of the regional airline of Francophone Western Africa, the sell‐off of the state‐owned airline of Kenya, and the overall reform process in South Africa, by far the largest market in the sub‐continent. The analysis highlights the importance of regional dynamics in the upgrading of the air transport industry in developing and emerging areas. Sub‐Saharan Africa has made smaller progress in this respect than, for instance, Central America. As the start of the Millennium Round and the first WTO air transport review approach, these issues will gain policy priority for all countries, and may become powerful bargaining tools for non‐OECD countries to press for more open access into OECD markets for the South's traditional exports.     

Using the Right Yardstick: Assessing Financial Literacy Measures by Way of Financial Well‐Being

Despite the proliferation of academic studies examining financial literacy and financial outcomes, no consistent definition or empirically validated measures of financial literacy exist. While a handful of questions have become the standard measures of financial literacy in previous research, little work has been done examining whether responses to these questions accurately capture underlying financial capability, or whether they causally relate to subsequent financial well‐being. Taking advantage of longitudinal data from the Health and Retirement Study we examine whether some of the questions previously used as measures of financial literacy are consistent measures of financial knowledge and effective predictors of future changes in wealth. We find that respondents frequently do not consistently answer questions across survey waves and that the context in which a question is asked affects the likelihood of correctly responding. Moreover, our regression analyses suggest that correctly answering these questions, consistently or not, has little significant relationship to changes in wealth over time, and is often related to a decrease in future wealth. Our findings should give pause to researchers using the financial literacy questions examined here, particularly from cross‐sectional data.     

Formulating Trade Policy in a Small Hydrocarbon‐dependent Economy: The Case of Trinidad and Tobago

We examine the status of Trinidad and Tobago's trade policy regime based mainly on the WTO's Trade Policy Review 2005 and to a lesser extent the Review of 1998. The paper highlights the areas identified by the WTO that the country needs to address to ensure compliance with the rules, disciplines and commitments made under the Multilateral Trade Agreements and the existence of a trade regime characterised by little or no distortions. It undertakes this discussion against the background of Trinidad and Tobago's role as a founding member of CARICOM and the increasing influence of this body in determining its trade policies in particular and economic policies in general. The study highlights the progress made by Trinidad and Tobago in establishing an outward‐oriented trade regime since embracing reforms in the mid‐1980s. However, the need for much deeper reforms is stressed if the country is to realise its ambitious objective of becoming the manufacturing base and the commercial, trans‐shipment and financial hub of the western hemisphere. Further, it points to the inextricable link between the country's economic fortunes and international petroleum prices, and increasing over‐reliance on the hydrocarbons sector. Consequently, it stresses the need for getting its diversification strategy ‘right’ if it is to minimise the fallout effects associated with the bust that inevitably follows a petroleum boom.     

The Ethical and Economic Case Against Sweatshop Labor: A Critical Assessment

During the last decade, scholarly criticism of sweatshops has grown increasingly sophisticated. This article reviews the new moral and economic foundations of these criticisms and argues that they are flawed. It seeks to advance the debate over sweatshops by noting the extent to which the case for sweatshops does, and does not, depend on the existence of competitive markets. It attempts to more carefully distinguish between different ways in which various parties might seek to modify sweatshop behavior, and to point out that there is more room for consensus regarding some of these methods than has previously been recognized. It addresses the question of when sweatshops are justified in violating local labor laws. And it assesses the relevance of recent literature on coercion and exploitation as it applies to sweatshop labor. It concludes with a list of challenges that critics of sweatshops must meet to productively advance the debate.     

A Next Step in Debt Enforcement: the Merger of Debt Help and Debt Collection

Since the 1990s, each Member State of the European Union designed a policy that infused the liberal American fresh start policy into its own social institutions and legal culture. Especially in countries with a civil law tradition, the legal position of the consumer has improved. The paradigm of lifelong liability of debts has been replaced by a form of limited liability. Discharge of debts has established itself as a firm legal principle in all European jurisdictions. In most European countries, the new approach consists of a combination of legal and extrajudicial instruments. Under the umbrella of the courts, social workers, trustees, and administrators perform a broad range of activities in monitoring and helping debtors. The so-called new-chance approach has dramatically changed the playing field amongst debtors and creditors. The new legal equilibrium worked rather well in most European countries in the 1990s and 2000s. However, the systems are obviously far from perfect as almost all European governments are still fine-tuning their laws. Recently, two innovations have appeared on the European stage: Some Nordic countries have opted for a centralized state-controlled enforcement system, while in the UK, commercial debt management plans were developed, mainly by commercial suppliers. In 2005, the US Bankruptcy Code was changed in favour of the creditors. The 2008 credit crunch and its aftermath present a window of opportunity for the next step in the modernization of debt enforcement policy. I will suggest a merger of the fields of debt relief and debt collection, with a pivotal role for independent trustees.     

The future impact of Trans‐Pacific Partnership’s rule‐making achievements: The case study of e‐commerce

While policymakers and scholars often emphasise the significance of the rule‐making aspect when they discuss the benefits of negotiating free trade agreements (FTAs), we know little about the ways in which rules are actually made. We need impartial assessment of the status of rule‐making to draw any concrete policy implications. Moreover, “how international economic rules develop” in terms of enforceability has been a neglected but important research question for students of international economics and laws. International economic rules evolve through a series of FTAs that are signed by a different set of countries. By using the case study of e‐commerce chapters, this paper will specifically examine: (1) how earlier FTAs paved the way to the Trans‐Pacific Partnership (TPP) e‐commerce negotiations; (2) whether rule‐making achievements of TPP are substantial compared against earlier FTAs; and (3) whether rule‐making achievements of TPP, if any, are likely to have some impact on post‐TPP FTAs.