Fiscal Adjustment and Inflation Targeting in Less Developed Countries

Inflation targeting may not be viable in less developed countries (LDCs) where policymakers rely too heavily on cuts in infrastructure investment to balance the budget. Using a mix of analytical and numerical methods, we demonstrate that the equilibrium ceases to be saddle point stable under active policy when infrastructure cuts account for 30–70% of fiscal adjustment and the return on infrastructure exceeds a comparatively low threshold value. The result is robust to the form of the Taylor rule, the degree of real wage flexibility, the initial level of debt, the choice of a balanced‐budget or debt‐targeting rule, and the q‐elasticity of private investment spending.     

Livelihoods after Land Reform in Zimbabwe: Understanding Processes of Rural Differentiation

This paper explores the consequences of Zimbabwe's land reform for the dynamics of differentiation in Zimbabwe's countryside, reporting on the results from a 10‐year study from Masvingo province. Based on a detailed analysis of livelihoods across 400 households at 16 sites, the paper offers a detailed typology of livelihood strategies, linked to a class‐based analysis of emerging agrarian dynamics. The paper identifies a significant and successful ‘middle farmer’ group, reliant on ‘accumulation from below’ through petty commodity production, existing alongside other worker‐peasants and the semi‐peasantry, whose livelihoods remain vulnerable, with prospects for accumulation currently limited. In addition, there are others who are ‘accumulating from above’, through patronage and corruption. While small in number, this group has significant political and economic influence, and is embedded in powerful alliances that have fundamental impacts on the wider political–economic dynamics. To conclude, the economic, social and political implications of the emerging patterns of differentiation in Zimbabwe's countryside are discussed.     

Using the Life Course Paradigm to Explain Mechanisms That Link Family Disruptions to Compulsive Buying

This research examines compulsive buying as an impulse‐control disorder, a form of maladaptive behavior believed to have its roots in early‐in‐life experiences of family adversities. Unlike previous research that has typically studied only the effects of family divorce on compulsive buying, this study examines the effects of disruptive family events within the broader multitheoretical life course framework. A sample of 327 young adults is used to test the hypothesized relationships derived from the main life course perspectives. The results show alternate paths leading to compulsive buying, beyond those uncovered in previous studies. By offering a broader overarching framework, the article shows how previous efforts to study compulsive buying can be improved, pointing to the value of the multitheoretical life course approach in understanding consumption phenomena .     

THE ASSOCIATION BETWEEN THE USE OF SOPHISTICATED CAPITAL BUDGETING PRACTICES AND CORPORATE PERFORMANCE

Since the early 1950s, the academic community has tried lo convince corporate managers that there are sophisticated techniques that can improve the capital budgeting decision-making process. Over the years, many studies have documented a trend toward increasing business use of such sophisticated capital budgeting techniques. However, there is no clear evidence whether better performing companies are more likely to employ sophisticated capital budgeting processes than are lower performing companies. This study is an attempt to measure the relationship between capital budgeting sophistication and business performance. It advances upon earlier studies by utilizing a more comprehensive capital budgeting sophistication metric, incorporating industry-adjusted independent variables (firm size, risk, capital intensity, and degree of focus), and by focusing on United States corporations. The results are similar with those of earlier studies; there is no discernible relationship between capital budgeting sophistication and corporate performance.     

Banks as Tax Planning Intermediaries

We provide the first large‐scale empirical evidence of banks functioning as tax planning intermediaries. We posit that some banks specialize in assisting corporate clients with tax planning. In this role, banks make use of their centrality in financial relationships; access to private information; and ability to structure, execute, and participate in tax planning transactions for clients. We measure bank‐client relationships using loan contracts and measure client tax planning using either the cash effective tax rate or the unrecognized tax benefit balance. Using a difference‐in‐differences design, we find that firms experience meaningful tax reductions when they begin a relationship with a bank whose existing clients engage in above‐median tax planning. The effects of pairing with such tax intermediary banks are concentrated in relationships with larger or longer maturity loans, clients with foreign income or greater credit risk, and when the bank is an industry specialist or has above‐median investment banking activities. Finally, we find that potential clients are more likely to choose tax intermediary banks than nontax intermediary banks, suggesting that tax intermediary banks benefit by attracting new business. Collectively, our results suggest that some banks act as tax planning intermediaries, a role beyond the traditional one of financial intermediary.