Optimum pricing of mutual guarantees for credit

The main finding of this paper is that under financial market impediments and asymmetric information, a mutually guaranteed and correctly schemed and priced insurance credit contract should have an abnormal actuarial profit. Such a contract improves welfare by simultaneously eliminating underinvestment (UI) and overinvestment (OI) and by reducing the probability of the insurer’s ruin. This solution is relevant for mutual credit insurance agencies and international or governmental agencies interested in increasing the value creation of small and medium enterprises that suffer from limited access to equity and debt markets.     

The performance of the Slovenian hotel industry: evaluation post‐privatisation

This study analyses the technical efficiency of Slovenian hotels using the data envelopment analysis method. Multiple inputs and outputs are included in the analysis, ranging over the period 2005–2007. The results reveal an increase in efficiency over the period analysed. The results also confirm that factors such as the hotel's year in business, star rating and size are positively related to efficiency variations between hotels. Copyright © 2010 John Wiley & Sons, Ltd.     

The current account and the optimal government debt

In this paper we analyze the optimal response of the current account and the government debt to real disturbances, permanent and temporary. Lumpsum taxes are not feasible and the government income is raised according to the Ramsey rule for optimum taxation. We show that permanent disturbances have no effects on either the private or the government current account if initially there are no deficits. Starting off from the same initial situation both the private sector and the government develop a deficit on current account in response to a temporary disturbance.     

Welfare Leakage and Immigration Policy

This paper analyzes the interaction between the welfare stateand immigration policy. We establish a negative relationshipbetween the number of dependents and the extent of the welfarestate due to the leakage of benefits. We also explain the determinationof immigration policy as the outcome of a lobbying game betweendomestic interest groups and the government. Our results indicatethat there is evidence for welfare leakage and for lobbyingas a determinant of immigration policy. In our baseline specification,a 10 percentage points increase in the share of dependents leadsto a 7–10 percentage point decrease in the labor tax rate.Furthermore, an increase by 10 percentage points in union densityleads to a decrease of one percentage point in the share ofimmigrants in the population. In the context of EU enlargementand the ensuing migration flows, our model predicts a reductionin the size of the welfare state in the old member countries.(JEL H5, J1, J61)     

Distress Anomaly and Shareholder Risk: International Evidence

Financially distressed stocks in the United States earn puzzlingly low returns giving rise to the distress risk anomaly. We provide evidence that the anomaly exists in developed countries, but not in emerging ones. Using cross‐country analyses, we explore several potential drivers of returns to distressed stocks. The distress anomaly is stronger in countries with stronger takeover legislation, lower barriers to arbitrage, and higher information transparency. In contrast, shareholder bargaining power and expected stock return skewness in a country do not affect the anomaly. These findings suggest that various aspects of shareholders’ risk play an important role in shaping distressed stocks returns.     

An Information-Based Model of Foreign Direct Investment: The Gains from Trade Revisited

Foreign direct investment (FDI) is observed to be a predominant form of capital flows to emerging economies, especially when they are liquidity-constrained internationally during a global financial crisis. The financial aspects of FDI are the focus of this paper. We analyze the problem of channelling domestic savings into productive investment in the presence of asymmetric information between the managing owners of firms and other portfolio stakeholders. We explore the role played by FDI in reviving equity-financed capital investment for economies plagued by such information problems. In the presence of information asymmetry, the paper identifies, however, how FDI gives rise to foreign overinvestment as well as domestic undersaving. The gains from trade argument (applied to intertemporal trade) is re-examined in this case of informational-asymmetry-driven FDI. We show that the gains could be sizable when the domestic credit market is either under-developed or failing as a result of a financial crisis. But with a well-functioning domestic credit market, the gains turn into losses. Surprisingly, capital may flow into the country even when the autarkic marginal productivity of capital in the domestic economy falls short of the world rate of interest. In such a situation, capital should have efficiently flown out rather than in, and FDI is a social loss-generating phenomenon.     

The cost efficiency of Australian airports post privatisation: A Bayesian methodology

This paper reports on the cost efficiency of Australian airports using a Bayesian panel stochastic frontier model. With data from 2002 to 2007, the paper focuses mainly on the post privatisation period of Australian airports. The results show that the cost efficiency of Australian airports has increased over time to reach a high value of 90.08% in 2007. The paper discusses the potential impact of factors such as privatisation, price cap regulations and capital investments on the current efficiency level of Australian airports.     

Performance of French destinations: Tourism attraction perspectives

In this paper, we assess and compare the performance of French tourism destinations, using the Data Envelopment Analysis (DEA) two-stage procedure, where in the first stage the efficiency score are calculated, and then followed in the second stage by a bootstrapped truncated regression model. In the context of France such analysis takes an additional importance, especially as the country is expected to face a decrease in its tourism competitiveness. A discussion in terms of D-attraction and E-attraction is also proposed and policy recommendations are derived.