Creditor Protection and Credit Response to Shocks

This article studies the relationship between creditor protectionand credit responses to macroeconomic shocks. Using a data seton legal determinants of finance in a panel of data on aggregatecredit growth for 79 countries during 1990–2004, it isshown that credit is more responsive to external shocks in countrieswith weak legal creditor protection and weak enforcement. Theresults are statistically and economically significant and robustto alternative measures of creditor protection, to the inclusionof variables that reflect different stages of economic development,to the restriction of the sample to only developing economies,to the controls for systemic crises, to alternative shock measures,and to vector autoregressive specifications.     

The effects of integrated manufacturing on job characteristics

From a sample of 203 Spanish plants in all manufacturing sectors empirical results show that integrated manufacturing (IM) has a positive effect on job variety, job autonomy and job interdependence for production workers. It is also found that IM is associated with greater job complexity, this effect being mainly mediated by the three abovementioned job characteristics.     

Rates of return to public agricultural research in 48 US states

The internal rate of return to public investment in agricultural R&D is estimated for each of the continental US states. Theoretically, our contribution provides a way of obtaining the returns to a local public good using Rothbart’s concept of virtual prices. Empirically, a stochastic cost function that includes own knowledge capital stock as well as spillover capital stock variables is estimated. Stochastic spatial dependency among states generated by knowledge spillovers is used to define the ‘appropriate’ jurisdictions. We estimate an average own-state rate of 17% and a social rate of 29% that compare well to the 9 and 12% average returns of the S&P500 and NASDAQ composite indexes during the same period.     

Leader Survival and Cabinet Change

Political leaders face both internal and external threats to their tenure as leaders. To retain office leaders need mass support, for instance to win elections. However, they also need to deal with potential internal party rivals. Using a game theoretic model, we examine how the incentives created by these competing pressures affect the retention of ministers across different political systems. Since non‐democratic leaders face relatively little threat from the masses, their concern is to reduce internal party risk. Therefore, they remove high performing ministers and retain mediocre and poor performers. As it becomes easier for the masses to replace the party in power, leaders must tradeoff internal and external threats. Retaining competent leaders improves party performance but generates an internal party rival.     

Paying for the hydrological services of Mexico's forests: Analysis, negotiations and results

Mexico faces both high deforestation and severe water scarcity. The Payment for Hydrological Environmental Services (PSAH) Program was designed to complement other policy responses to the crisis at the interface of these problems. Through the PSAH, the Mexican federal government pays participating forest owners for the benefits of watershed protection and aquifer recharge in areas where commercial forestry is not currently competitive. Funding comes from fees charged to water users, from which nearly US$18 million are earmarked for payments of environmental services. Applicants are selected according to several criteria that include indicators of the value of water scarcity in the region. This paper describes the process of policy design of the PSAH, the main actors involved in the program, its operating rules, and provides a preliminary evaluation. One of the main findings is that many of the program's payments have been in areas with low deforestation risk. Selection criteria need to be modified to better target the areas where benefits to water users are highest and behavior modification has the least cost, otherwise the program main gains will be distributive, but without bringing a Pareto improvement in overall welfare.     

Socio-economic impact of a nuclear power plant: Almaraz (Spain)

An analysis is made of the socio-economic impact in a region in which a nuclear plant is decommissioned. The average age of nuclear power plants around the world is high, so that many are close to the end of their useful life. The issue of this impact will be important in a few years for various reasons, especially because those plants tend to be drivers of the economic activity in the areas in which they are located. The focus of this communication is on these socio-economic effects. Methodologically, socio-economic analysis uses a linear Social Accounting Matrix model that improves traditional Input–Output approaches by covering the induced effects generated from the receptors of income out to other sectors of the economy. The procedure is applied to an empirical analysis of the Almaraz Nuclear Power Plant in Spain. This was purposely chosen as sharing many of the general characteristics of nuclear plants around the world. If the plant is closed down, our results suggest that there will be a clear negative impact in terms of employment and added value generation.     

Voting by committees under constraints

We consider social choice problems where a society must choose a subset from a set of objects. Specifically, we characterize the families of strategy-proof voting procedures when not all possible subsets of objects are feasible, and voters’ preferences are separable or additively representable.     

Financial distress,bank debt restructurings,and layoffs

We develop a model of a financially distressed firm to analyze the implications of a bank debt restructuring when the operational characteristics of the firm's project for the post-distress period are endogenously determined as part of the workout. We establish a formal link between the debt restructuring and operational actions such as employee layoffs, and show how these actions are affected by the firm's capital structure, the ordering of absolute priorities, and the allocation of control rights and residual claims after reorganization. Finally, we discuss the implications of our analysis for the design of reorganization law.     

Coalition Stability in Public Goods Provision: Testing an Optimal Allocation Rule

We test the canonical model of international environmental agreements (IEAs) in a laboratory setting with asymmetric agents. IEA participation represents coalition formation and public good provision where there are gains to cooperation, but an incentive to free-ride. We test four competing methods of dividing the coalition’s worth: a recently proposed optimal rule which accounts for subjects’ payoffs as a single free-rider, the Shapley value, the Nash bargaining solution, and an equal split. Each treatment generates the theoretically predicted coalition size more often than not. The shares of the potential gains to cooperation achieved by each rule are: 51, 36, 40 and 13%, respectively. These results highlight the importance of using an optimal rule to improve IEAs, and more broadly for voluntary public good provision.     

Remittances and labour allocation decisions at communities of origin: the case of rural Mexico

From a theoretical perspective, the effect that remittances have on the labour decisions of those that receive them is ambiguous; the empirical evidence reported in the literature is mixed and shows, unsurprisingly, that the net effect of remittances on labour supply is context-dependent. We contribute to this literature by using a detailed data set for rural Mexico that allows us to understand how remittances reshape rural livelihoods by modifying labour allocation decisions. Following previous evidence, we analyse female and male responses separately. Our results show that the income effect of remittances dominates male labour allocation decisions: the probability of participating in the labour market and the total number of hours worked decrease with remittances. We find no effect for female labour allocation decisions. The effects are not uniform across the different productive activities and remittances seem to be contributing to a trend in which Mexican rural inhabitants increasingly move away from agriculture- or nature-based activities. This reinforces the direct effect that emigration has in terms of a reduction in total supply of local labour.