HOUSING POLICY IN DEVELOPING ECONOMIES: Evaluating the Macroeconomic Impacts*

This paper presents a view of the role of the housing sector in developing countries which emphasizes the potentially high macroeconomic costs of inappropriate housing policies. Traditional public finance perspectives on the role of the housing sector in the economy focus on efficiency and equity implications of the rather modest levels of government spending in the sector. This paper points out that this traditional approach is misleading in that it is less government's spending in the sector than its role in defining regulatory frameworks, pricing policies, and policies affecting the financial sector that comprise the major instruments for influencing the performance of the housing sector and, in turn, the way its performance affects the macroeconomy. The paper also presents a simplified framework for analyzing how housing policies influence the housing sector and the macroeconomy. Simple applications of the framework suggest that the macroeconomic implications of housing policy choices can be of major importance. This is emphasized by two case studies, of policies in Argentina and Poland, where recent housing policies appear to have had major impacts on levels of investment, price and wage levels, and savings rates.     

There is no smoke without a fire: The effect of government interventions in less advanced economies

The lack of liquidity in the interbank market during the crisis of 2007–2011 led governments to impose different policies to rescue their countries’ banking sectors. While in advanced countries interventions in the banking sector were mostly related to a lack of liquidity and significant asymmetric information regarding counterparty risk, in many less advanced countries they had a precautionary motive. In our article, we investigate the effectiveness of policy interventions on healthy banking markets, with possible negative spill-over effects from other countries. To this extent, we use an event study methodology to test the effect of liquidity and financial sector policy announcements on interbank spread changes in six Central and Eastern European (CEE) countries over the period between 2007 and 2011. We find that standard liquidity interventions did not provide effective stabilization. In fact, our evidence suggests that the spread widened after their announcement, probably as a result of the negative signal and consequently increased risk aversion of banks. In such situations, regulators should consider policy instruments that aim to decrease uncertainty in the market.     

Making the case for investment in fundraising

Fundraisers frequently find that trustees are reluctant to commit funds to investment in fundraising initiatives, whether this is developing existing fundraising work or investment in new areas. On the other hand, trustees often report that the plans put forward by fundraisers are too vague and do not present the case well enough. Commonly, there is more work to be done on both sides. First, this paper focuses on some of the financial plans that should be developed as part of the case for investment, as this is often the weakest area. The paper then demonstrates how this assists in appraising the risk profile of new initiatives and finally looks at the policy framework needed for decisions to be made. Copyright © 2004 Henry Stewart Publications     

Quantitative evaluation of contingent capital and its applications

A new type of bank regulatory capital, known as contingent capital, has emerged in tandem with discussions on the BASEL III regulatory framework but there is a lack of consensus on a standard valuation approach among those proposed so far. We think that the practical solution is to be able to price these instruments seamlessly and consistently with other existing derivatives. We propose a novel and practical ⿿convertible bond approach⿿ which is theoretically consistent with existing frameworks such as Black⿿Scholes and is conceptually and technically similar to the pricing models already being used in practice for convertible bonds and hybrid securities. Such a model is reasonable as all of these asset classes are hybrid equity-credit instruments and share many characteristics. Also, contingent capital through its unique mechanisms such as principal loss absorption, presents interesting risk scenarios which may not be readily apparent or may appear counterintuitive. Contingent capital may thus, at first sight, appear to carry obscure risks but, we show that by taking a careful quantitative approach, we can understand the characteristics of such instruments in a concise manner. Further, for discussing the pricing in terms of characteristics of the issuer, one in turn, needs a concise framework to describe those characteristics in terms of Common Equity Tier 1 (CET1) ratio risk. Our framework describes CET1 ratio risk via three intuitive issuer parameters: target, volatility, and resilience. In spite of the exotic risks, an investment decision in contingent capital can be justified if a sufficient return is expected in compensation. In this paper, we present a valuation method based on hurdle Sharpe ratios that has direct implications for investment decision making in the context of expansion of investor's efficient frontier. We also demonstrate the usefulness of our framework as a daily pricing tool for market participants using empirical market data.We appreciate helpful comments from an anonymous referee and the editors of North American Journal of Economics and Finance. The view expressed are those of the authors and do not necessarily reflect views and policies of Nomura Securities.     

The political economy of regional integration projects at borders where poor and rich meet: The role of cross-border shopping and community sorting

At borders between poor and rich countries, huge service price differentials could be exploited to mutual benefit, offering better-paid job opportunities to the poor as well as better shopping opportunities to the rich. However, cross-border shopping is often limited by the substantial transaction costs of crossing the border. Moreover, countries and regions frequently fail to cut these transaction costs even when they have the opportunity to do so. We provide a politico-economic analysis of cross-border integration projects. More specifically, we show how the political outcome depends on (i) intra-country mobility, (ii) decision making and housing ownership regimes, and (iii) federal grants and international border regulations. Our analysis builds on two key characteristics in which individuals differ: interregional mobility and intercultural ability.     

Evaluating the prospective effects of alternative regulatory policies on the investment behaviour and environmental performance of a newly liberalised electricity industry in Taiwan

The research explores the potential effects of alternative regulatory policies for electricity market liberalisation on the investment behaviour and environmental performance of the electricity industry in Taiwan. The results provide insights into how the electricity market might evolve under the proposed reform scheme and other possible scenarios. This paper begins by reviewing the characteristics of the industry and how it has developed so far, and follows by studying the planned liberalisation agenda and the main purposes of the regulatory policies. Whether the liberalised electricity market will develop in a desirable direction is investigated by analysing investors’ aspirations for the market and their possible reactions to regulatory policies. The paper focuses on the investment decisions of the generation sector and concludes with assessments of the implications for security of supply, fuel diversity, electricity price and the environment.     

Some Comments on Tax Competition and Its Potential Effects on Tax Rates and Revenues

Corporate taxation is seen as the price of investing in a country, that is, the price either for the right to do business within the jurisdiction or for the supply of public goods. If consumption of that right or those public goods is mobile between jurisdictions and price competition ensues which will force prices together. Also, in the case of high tax regimes, a fall in the tax burden would be anticipated. In other words, countries will spontaneously harmonize their tax systems or face the loss of intemational investment and the disadvantages they bring.     

The impact of Universal Service Obligations and International Cross-subsidies on the dispersion of telephone services in developing countries

This paper re-evaluates the telecommunication policies often applied to create regional dispersion of services in developing countries. We observe that failure to consider the complexities of the regional telecommunication systems in creating policies and investment strategies has increased the telecom gap between urban and rural regions worldwide. In particular, the teledensities of rural telecommunications in developing countries have remained very low in spite of support through universal service obligation fees and cross-subsidization from international services. As traditional methods for economic analysis and modeling have failed to identify mechanisms that improve telephone dispersion in these countries, we use a system dynamics modeling approach to deal with complexities of the situation in order to evaluate how Universal Service Obligations (USOs) and International Cross-Subsidy (ICS) policies affect telephone densities. We demonstrate that these policies may be counterproductive due to the structure of the telecom system itself. We also show that, when market-clearing pricing is combined with USOs once the urban telephone density reaches a minimum threshold, the dispersion of rural telecommunications can be considerably improved.     

Why and How Do Employees Break and Bend Confidential Information Protection Rules?

Organizations cannot function effectively if their employees do not follow organizational rules and policies. In this paper, we explore why and how employees in two high‐tech organizations often broke or bent rules designed to protect their employers' confidential information (CI). The CI protection rules sometimes imposed requirements that disrupted employees' work, forcing employees to choose between CI rule compliance and doing their work effectively and efficiently. Employees in these situations often broke the rules or bent them in ways that enabled employees to meet some of the rules' requirements, while also satisfying other expectations that they faced. We discuss implications of our findings for practice and for future organizational scholarship on rule following.     

Do all institutions benefit from leadership training? Challenging tradition through systems inquiry

There is a fascination in the business community with leadership. There is an endless stream of training and development programs on how to become effective leaders to the extent that leadership training is now a big business. But the fascination is not restricted to the business community. People are enthralled by the idea of leadership, search for more information on it, and truly believe that by becoming a leader, they can reach a more desirable future. The purpose of this article is to demonstrate that all organizations do not benefit universally from their investment in employees' leadership training. After reviewing the leadership literature and systems concepts, it is recommended that the redesign of an organization in a social systemic framework will lead to optimization of benefit from leadership training.     

The Social Costs of Innovation Policy

Innovation policy is designed to produce social benefits by solving a market failure problem associated with private investment in new knowledge. Yet the social costs of these policy interventions are routinely ignored. We use the Djankov et al. (2003) institutional possibility frontier model to analyse the trade‐offs between the social costs of disorder and those of dictatorship that particular innovation policies impose. We show how different innovation policies impose different types of social costs. We conclude that the case for public support for innovation policies is often both distorted and overstated because of failure to account for social costs.     

MEASURING PROTECTION: MISSION IMPOSSIBLE?

Abstract.  There seems to be some confusion between 'openness' and 'protection' measures in the international trade literature. The aim of this paper is to bring together the state of the art in quantifying trade policy measures and, for this reason, we focus on the extent of the protection granted by policies rather than on the degree of openness of the economy. Given the considerable amount of literature that deals with these issues, we will limit our review as follows. On the one hand, we focus on trade policies implemented at the border and therefore do not consider all the other possible public interventions influencing trade flows. On the other hand, we only take into account indexes that explicitly adopt a metric expressed in a 'scalar aggregate' (tariff- and quota-equivalent measures, or an index in a closed interval). We distinguish between indexes that aggregate across products (same barrier for more products) and indexes that aggregate across instruments (more barriers for the same product). Finally, in order to classify the large number of indexes covered in our review, we propose a typology based on three categories: incidence, outcome and equivalence.     

The price responsiveness of housing supply in OECD countries

The responsiveness of housing supply to changes in prices bears important implications for the evolution of housing prices and the speed of adjustment of housing markets. Based on a stock-flow model of the housing market estimated within an error correction framework, this paper estimates the long-run price elasticity of new housing supply in 21 OECD countries. Estimates suggest that the responsiveness of housing supply to price changes varies substantially across countries. It is relatively more flexible in North America and some Nordic countries, while it is more rigid in continental European countries and in the United Kingdom. The responsiveness of housing supply depends not only on national geographical and urban characteristics but also on policies, such as land use and planning regulations.     

Supporting the free and competitive market in China and India: Differences and evolution over time

This paper analyzes the support to market competition by Indian and Chinese citizens. In particular, I study the individual preferences with respect to some characteristics of a free and competitive market. The paper aims at establishing whether preferences in these countries are different and their evolution over the time. This is an important issue, as the economic literature shows that people's preferences and policies tend to go hand in hand. This means that the analysis of today's preferences and their evolution over time can be useful to forecast tomorrow's policies. The main findings of this paper are that Indians and Chinese are different in supporting competition. The Chinese express preferences that are more in line with a free and competitive market than Indians do. The detected time path reveals that this support has been decreasing over time during the last two decades. The two populations appear to be in favour of a capitalistic, but strictly regulated market. This can mean that the future economic policies of these Asian giants will tend to this direction. Apparently there are no risks for some form of capitalism, but it is likely the two countries will not adopt completely free and competitive market institutions.     

Innovation policy analysis and learning: Comparing Ireland and Taiwan

Taiwan and Ireland are regarded as being similar in their geographic positions and economic performances. Both countries moved from being agricultural economies to become major regional players, and are often pointed to as examples of positive national development and innovation. The main purpose of this article is to compare the two island countries’ innovation policies in a national context. The taxonomy of innovation policy proposed by Rothwell and Zegveld [1981, Industrial innovation and public policy. London: Frances Printer Ltd.] was adopted as the analysis framework for this study. The comparison shows that Taiwan's government employs more top-down policy instruments such as providing government research funding and resources to target industries. The Irish government successfully creates an innovation-friendly environment to attract foreign direct investment (FDI) to facilitate research and development at the firm level. Finally, this article provides policy implications and recommendations based on what was learned from the comparison of the two countries.     

Barriers to investment in the informal venture capital sector

Much of the government intervention into the market ‘gap’ for start-up and early-stage equity finance in the UK is based on the belief that the problem is on the supply side. Based on an analysis of the informal venture capital market this paper argues that there is no shortage of finance available. A survey of business angels reveals that many are willing to allocate a higher proportion of their investment portfolio to investments in unquoted companies, with recent tax incentives having a positive effect on their willingness to invest. Over 90% are currently looking to make more investments. However, there are constraints on their ability to invest: they do not see enough deals that meet their investment criteria, the majority of the investment proposals that they receive are of poor quality, and they are often unable to negotiate acceptable investment terms and conditions with entrepreneurs. The implication is that there is a need for further interventions by policy-makers to remove these barriers so that more small firms can take advantage of the substantial pool of angel finance that is available.     

住房政策的局限性:政策的初衷与实施效果的背离

在房价上涨过快的背景下,基于舆论的压力,政府常常会出台一些旨在稳定房价、解决住房短缺问题的政策,然而有些政策的实施效果却常常背离政策的初衷.回顾了美国40年代实施的房租管制,并分析了中国正在实施的提高税收和经济适用房政策,发现这些政策的实施效果大都适得其反,不仅没有达到预期的目标,反而使得住房问题恶化.     

Information technology--the driver of change

Information technology (IT) is driving change throughout organizations--change in what we do, how we do it, with whom we do it, and the tools we use to get it done. The massive investment in IT is leading organizations to make fundamental changes in the way they run their businesses and ultimately the way they think about their businesses.     

The price of labour and understanding the causes of poverty

This paper provides a review of how questions in labour economics link to the central concerns of development economics in understanding the mechanisms that both create, and perpetuate, poverty in some countries and not others and in some areas within countries. The paper frames this link by asking what determines first the price of labour, then the nature of employment open to labour and finally discusses the links from the price of labour to incomes through the assets owned by the poor. The advent of micro data in developing countries has transformed our knowledge of what needs to be explained. While the price of labour clearly depends on education the links between incomes and education are much weaker than is frequently supposed. The finding from micro data that conditioning on a wide range of observable characteristics of human capital still leaves most of the variation in earnings to be explained suggests the importance of understanding what these other factors might be and how they may interact with human capital. One possibility is that markets are segmented so that individuals with the same skills earn different amounts depending on the sector in which they work. Another possible explanation is that the unobserved characteristics of workers are more important than the observed and that processes of matching and search lead to the outcomes we observe in labour markets. It is argued that these explanations are not mutually exclusive and that different processes may operate across labour markets both within and across countries. The review concludes by outlining outstanding research issues in labour economics where new models and data may well provide insights into explaining the extraordinarily diverse range of outcomes we observe for the price of labour in poor countries.     

HOUSING INFORMALITY IN THE GLOBAL SOUTH: Insights from a Policy Comparison between Accra and Buenos Aires

Informal settlement growth in various countries has led to distinctive actions that enhance low-income populations’ accessibility to adequate, safe and affordable housing and basic services. This trend indicates the need for comparative studies between countries and cities to understand the factors that lead to policy learning opportunities. We conducted an experimental comparison between Accra, Ghana, and Buenos Aires, Argentina, to understand, first, how policies on informal settlements have been formed, and secondly, what inquiries should be made to address housing informality in the global South. A comparison shows that these cities/countries have shared moments of neoliberalization and that their poor residents have experienced similar struggles regarding housing availability and the pursuit of extensive governmental interventions. Therefore, their experiences are worth examining. Our comparison indicates that first, Buenos Aires/Argentina has adopted more inclusive policies regarding informal dwellers than Accra/Ghana, and secondly, that diversifying housing solutions are an inevitable dynamic in cities/countries experiencing a surge in housing pressure across classes, races and geographies. In this article we articulate how the governments of these countries have dealt with these challenges and conceptualize the coproduction needs of housing informality in developing countries. We encourage policymakers facing informality in the South to respond to the questions we raise about facilitating policy learning.