Does microcredit increase borrowers’ savings? A fuzzy regression discontinuity design approach

Microcredit has expanded rapidly in recent years but its effect at the household level is still controversial. This paper uses a unique data-set collected from 69 villages in Bangladesh to estimate the effect of participation in microcredit programs on household savings. A regression discontinuity design (RDD) is used to identify the credit effect. To justify the validity of RDD, we test the discontinuities in the conditional density of the forcing variable (in our case, household land), as suggested by McCrary. We do not find any substantial evidence of manipulation of forcing variable at the threshold to invalidate the RDD. Our results show that access to credit increases savings of the borrowers.     

Does the one-child policy improve children's human capital in urban China? A regression discontinuity design

This paper is the first to examine the causal relationship between China's One-Child Policy (OCP) and the long-term accumulation of human capital by a regression discontinuity design. Based on the 2005 China Inter-census Survey data, we observe a strong policy shock upon the probability of being a single child among people born around the starting point of OCP, which in turn significantly increases their educational attainment in adulthood. The results strongly suggest that there exists a quantity-quality trade-off as renewed by Becker, and the trade-off is more pronounced in the economically less developed regions and among families with the same-sex children. The results shed light on the re-understanding of China's family planning initiative as well as the application of regression discontinuity designs.     

Does entry improve welfare? A general equilibrium approach to competition policy

We consider a simple general equilibrium model with imperfect competition. Firms are price takers in the input market and compete à la Cournot in some or all of the product markets and their technologies display constant returns to scale. We show that an increase in the number of firms in a given sector does not always improve welfare. We also provide a characterization in terms of mark-up rates of the sectors for which entry is welfare enhancing. Our results challenge the common idea that mergers with no cost synergy are not desirable for consumers.     

Is aid for trade effective? A panel quantile regression approach

This paper investigates whether Aid for Trade (AfT) leads to greater exports in recipient countries. Using panel quantile regression and two strategies to address endogeneity (AfT lagged by two periods and dynamic OLS), our results suggest that total AfT disbursements promote the export of goods and services mainly for the lower quantiles (0.1, 0.25, 0.50) of the conditional distribution of exports. Hence, countries that export less in volume are those benefitting most from AfT. This effect is mainly driven by the impact on exports of goods rather than on that of services. We also investigate which types of AfT are effective when endogeneity is controlled for. The main results show that whereas aid to improve trade policy and regulation is associated with higher exports for all quantiles, aid used to build infrastructure is found to affect exports at only the lowest tails of the distribution (0.10–0.35) and aid to build productive capacity is generally more effective for the lower quantiles of the export distribution (0.10–0.50). In contrast, aid disbursed for general budget support (an untargeted type of aid) is not associated with greater export levels. This finding holds irrespective of the quantile.     

Impact of microcredit on borrowers’ expenditures: a fuzzy regression discontinuity design approach

This article uses the data from 69 villages in Bangladesh to estimate the effect of participation in microcredit programmes on household expenditures. A regression discontinuity design (RDD) is used to identify the credit effect. Our results show heterogeneous treatment effect on different types of expenditures. We show that access to credit reduces per capita expenditure on durable goods such as kitchen equipment, furniture, repair and maintenance of house and increases the expenditure on per school-going child. We also show insignificant impact of access to credit on non-durable goods and health care, recreation and gifts. Interestingly, our results indicate a positive impact of microcredit on village-level expenditures.     

Does job design make workers happy?

Using linked employer-employee data for Finland we examine associations between job design, employee well-being and job-related stress. Three key findings stand out. First, in accordance with the theory of Karasek and Karasek and Theorell, job control and supervisory support are positively correlated with employee well-being and negatively correlated with job-related stress. Second, as predicted by theory, job demands are positively correlated with job-related stress. Third, there is no association between job demands and employee well-being and, contrary to expectations, neither job control nor supervisory support alleviate the negative relationship between job demands and job-related stress. Our results confirm the importance of job design for employee well-being.     

Does tourism influence economic growth? A dynamic panel data approach

On average, tourism-specialized countries grow more than others. This is not consistent with the core of modern economic growth theory that suggests that economic growth is linked to sectors with high-tech intensity and large scale. In this article, we use appropriate panel data methods to study the relationship between tourism and economic growth. In general, we show that tourism is a positive determinant of economic growth both in a broad sample of countries and in a sample of poor countries. However, contrary to previous contributions, tourism is not more relevant in small countries than in a general sample.     

Does board gender diversity influence firm profitability? A control function approach

We investigate the relation between board gender diversity and firm profitability using the control function (CF) approach recently suggested by Wooldridge (2015). The CF method takes account of the problem of endogenous explanatory variables that have potential to bias the results. Using a sample of firms that made up the S&P 500 over the period 2004–2015, we find that the presence of women on corporate boards (measured either by the percentage of female directors on corporate boards or the Blau index of heterogeneity) has a positive and significant (at the 1% level) effect on firm profitability (measured by the return on assets). We compare our results to more traditional approaches (such as pooled OLS or the fixed-effects model). Through this study, we shed light on the effect of women on corporate boards on firm performance, as it is still a controversial issue (Post and Byron, 2015).     

Does contact improve attitudes towards migrants in China?

Over the past three decades, China has experienced significant internal migration. However, migrants are often socially segregated and discriminated against in their destination cities in China. This paper uses a large representative survey to investigate whether interpersonal contact between urban locals and migrants improves urban locals’ attitudes towards migrants. The novel part of this paper is to examine the effect of different contact experiences on multiple dimensions of attitudes. The results show distinct patterns between the effects of non‐intimate and intimate contact experiences. All the OLS results, IV results and IV results together with Lewbel's ( 2012 ) heteroscedasticity identification approach suggest that non‐intimate contact experience only significantly improves willingness to engage in non‐intimate interactions, and the magnitude of the effect reduces as the intimacy level of the intended interaction increases. On the contrary, intimate contact experience significantly improves willingness to engage in both non‐intimate and intimate interactions.     

Does VIX or volume improve GARCH volatility forecasts?

This article considers whether the inclusion of two additional variables can improve volatility forecasts over a standard GARCH-based model. We consider three alternative ways of incorporating the volatility index (VIX) and trading volume as exogenous variables within a selection of GARCH models. We are particularly interested in whether these variables have additional incremental forecast power over and above the baseline GARCH specification. Our results suggest that both the VIX and volume do provide some additional forecast power, and this is generally improved when considering both of these series jointly in the model. However, while the results may be statistically significant the gain is marginal and the coefficient values small. Moreover, in a horse race exercise VIX does not outperform the GARCH approach. In answering the question of whether VIX produces better forecasts than the GARCH model, then the answer is no, but the informational content of VIX cannot be ignored and should be incorporated into forecast regressions.     

How does issuing contingent convertible bonds improve bank's solvency? A Value-at-Risk and Expected Shortfall approach

This paper examines how issuing an innovative financial instrument called contingent convertible bond (CoCo) may enhance bank's solvency in comparison to issuing a conventional bond. CoCos convert automatically into common equity or have a principal write-down when bank's regulatory capital fails to meet a predetermined level. They have been invented and put into legislation with an objective to absorb losses thus preventing institutions from bankruptcy. From the standpoint of an issuer CoCos bring about two counter effects regarding his solvency: on one hand they recapitalize a bank approaching insolvency on the other hand CoCos pay much higher coupon comparing to conventional bonds. In our model a bank has two funding alternatives: either to issue CoCos or conventional bonds. We measure issuer's default risk using the concept of Value-at-Risk (VaR) and Expected Shortfall (ES). We conclude that CoCos have the potential to strengthen the resilience of the issuer on the condition that the probability of conversion triggering is higher than the VaR's significance level. Our findings can be helpful to the policymakers and banks to better understand the impact of CoCos on issuer's solvency.     

Made for the job or by the job? A lab-in-the-field experiment with firefighters

A large body of evidence supports a negative association between risk aversion of workers and the level of risk they face in their occupations. This relationship could be explained by the self-selection of workers into jobs according to their risk preferences or by the effect on risk attitudes of occupations in which people face or witness dangerous situations. We use incentivized experiments to measure risk preferences among three different groups: experienced firefighters, novice firefighters, and students. We find that experienced firefighters are less risk-averse than novice firefighters, and these in turn are less risk-averse than students. The effects remain significant even after controlling for other relevant differences between these groups. Our findings suggest that the observed relationship between risk aversion and high-risk occupations is not only a result of self-selection but also of people’s preferences being shaped by their work lives.     

The chosen fortunate in the urbanization process in China? Evidence from a geographic regression discontinuity study

After decades of delayed urbanization, since 1998, China has implemented the “county‐to‐district” policy to promote urbanization and stimulate regional economic development. This policy was designed to expand the urban area of large cities by merging counties (rural areas) with nearby cities (urban areas). Intuitively, these regions are the “chosen fortunate” since they are the privileged beneficiaries of this policy experiment. However, at the time of writing (2018), recent studies have been inconsistent regarding this issue, and several studies have revealed that this policy has impeded regional growth. Therefore, the true effect of this policy must be carefully examined. Using grid‐level nighttime light data and a border‐based regression discontinuity design framework, we find that the average effect of the “county‐to‐district” policy on nighttime light growth is significant and positive, and this result also coincides with the increase of entry and decrease of exit of manufacturing enterprises, and the increase of the county‐level manufacturing employment. However, the policy effect on nighttime light turns to be negative in the long run, implying that short‐term economic growth may outweigh the long‐term economic growth potential. A further investigation of the underlying mechanism indicates that industrial enterprises in the experimental policy area do not perform better in terms of total factor productivity (TFP) and profit margin than their counterparts. Moreover, this policy aggravates the polarization between central and border areas.     

Does FDI improve economic development in North African countries?

This article examines the relationship between FDI inflows and welfare improvement in North African countries. Using net per capita FDI inflows and the United Nations Development Program’s Human Development Index as the principal variables, our analyses confirm the positive and strongly significant relationship between net FDI inflows and welfare improvement in North Africa, although we do find significant differences among the countries in the region. This relationship holds even after we control for government size, country indebtedness, macroeconomic instability, infrastructural development, institutional quality, political risk, openness to trade, education and financial market development. Hence, at the aggregate level, FDI contributes to economic growth in North Africa, in turn generating additional revenues for governments and populations in the region through fiscal policies and jobs creation. We also found that FDI received by countries in the region are mainly concentrated in very few industries (particularly extractive petroleum, services and tourism, construction and utilities); relatively fewer of these investments are directed towards the nonextractive primary industries, which are pro-poor sectors and highly labour intensive, or the manufacturing sector, with a high potential for spillover effects in the economy. This lack of diversification of FDI received in the region’s economies in part explains the differences observed in the link between FDI and welfare in these countries. It is therefore essential for governments in the region to continue investing in social infrastructures while improving the quality of their institutions and their governance; doing so will probably help avoid the type of unrest we have witnessed recently.     

Does privatization improve the environment? Revisiting the monopoly case

This note shows that the argument of Beladi and Chao (2006) [Beladi, H., Chao, C., 2006. Does privatization improve the environment? Economics Letters 93, 343-347] that privatization can harm the environment by inducing lower pollution tax is incorrect. It then modifies the model to restore their claim.     

A smooth coefficient quantile regression approach to the social capital–economic growth nexus

This analysis assesses the role of social capital in generating heterogeneity in growth processes across U.S. counties by estimating growth regressions, using the novel semiparametric smooth coefficient quantile regression method in which parameters are unspecified functions of a measure of social capital. The results indicate substantial differences across the quantiles of economic growth in the profile shapes of the coefficient estimates over the level of social capital. Moreover, the coefficient function estimates are highly nonlinear over the level of social capital, providing evidence that the growth process that links initial income, education attainment, ethnic diversity, inequality, population density, and government activity to growth varies with social capital in a nonlinear way.     

Does the new digital infrastructure improve total factor productivity?

Improving total factor productivity (TFP) is essential to achieving high-quality and sustainable economic development. The existing literature mainly focuses on the impact of traditional infrastructure on TFP but generally ignores the role of new digital infrastructure in TFP and does not test impact mechanisms and whether there is heterogeneity in effects. Using panel data of 30 regions in China from 2006 to 2017, this paper analyzes the impact of new digital infrastructure on TFP and its mechanisms. The results are as follows: (1) New digital infrastructure can significantly improve regional TFP. After the robustness test, the results still support the findings. (2) New digital infrastructure can promote technological innovation, optimize factor allocation, and achieve economies of scale, thus improving TFP. (3) Further analysis shows that the positive effect of new digital infrastructure on TFP shows significant heterogeneity. In regions with high economic development levels, high research and development ( R&D) levels, and high traditional infrastructure development levels, the positive effect of new digital infrastructure on TFP is more obvious. These findings not only enrich the literature on digital infrastructure and economic growth but also serve as a reference for governmental departments as they optimize their strategy for developing digital infrastructure and realizing sustainable economic development.     

Does COBRA reduce the probability that job separators return to work?

This study examines a decade of individual-level US employment and insurance information to investigate whether federally mandated Consolidated Omnibus Reconciliation Act (COBRA) regulation affects post-separation employment activity. The empirical approach addresses the possibility that COBRA enrollment is endogenous with respect to post-separation employment outcomes. The main finding is that, although COBRA enrollees are 5 percentage points less likely to become re-employed, this relationship is not causal. Rather, individuals with lower probabilities of becoming re-employed tend to enroll in COBRA. The reason appears to be because, when compared to subjects who voluntarily leave for other jobs, subjects who separate for other reasons not only are less likely to become re-employed, but they also are approximately 23% more likely to enroll in COBRA.     

Does accrual accounting improve municipalities’ efficiency? Evidence from Germany

The stressed financial situation in the public sector and the continuous aspiration for austerity in western governments and public bodies is omnipresent. As one core element in the New Public Management shift, Germany, like many other countries, has experienced significant reforms in public sector accounting and reporting in the last decade. We analyse the effect of new accounting and budgeting regimes. We therefore analyse the cost efficiency of German local governments in the state of North Rhine-Westphalia over 3 years using a stochastic frontier approach. This study presents evidence for increased efficiency amongst municipalities due to the adoption of accrual accounting.