Longitude matters: Time zones and the location of foreign direct investment

Using bilateral foreign direct investment (FDI) data, we find that differences in time zones have a negative and significant effect on the location of FDI. We show that this finding is robust across different specifications, estimation methods and proxies for time zone differences. Time zones also have a negative effect on trade, but this effect is smaller than that on FDI. Finally, the impact of the time zone effect has increased over time, suggesting that it is not likely to vanish with the introduction of new information technologies.     

Property rights for the poor: Effects of land titling

Secure property rights are considered a key determinant of economic development. The evaluation of the causal effects of property rights, however, is a difficult task as their allocation is typically endogenous. To overcome this identification problem, we exploit a natural experiment in the allocation of land titles. In 1981, squatters occupied a piece of land in a poor suburban area of Buenos Aires. In 1984, a law was passed expropriating the former owners' land to entitle the occupants. Some original owners accepted the government compensation, while others disputed the compensation payment in the slow Argentine courts. These different decisions by the former owners generated an exogenous allocation of property rights across squatters. Using data from two surveys performed in 2003 and 2007, we find that entitled families substantially increased housing investment, reduced household size, and enhanced the education of their children relative to the control group. These effects, however, did not take place through improvements in access to credit. Our results suggest that land titling can be an important tool for poverty reduction, albeit not through the shortcut of credit access, but through the slow channel of increased physical and human capital investment, which should help to reduce poverty in future generations.     

DBS systems : Perspectives from a profit seeking company

Considerable work has been reported on the tradeoffs associated with direct broadcast satellite (DBS) systems. These studies have considered total investment costs (space segment plus ground segment), but have not dealt with a number of other business-related parameters which affect system design. This article addresses some of these issues from the viewpoint of a commercial entity in the USA. It considers intial financing, short-term v long-term competitive advantages, system features v cost, effects of partially shifting the investment burden to the consumer, technology improvements, satellite constraints and economies of scale, flexibility, commercial alliances, and regulatory constraints. Examples are given to illustrate the tradeoffs involved and the effects of some of the factors.     

A GIS-based tool for the management of industrial accidents triggered by volcanic ash fallouts

In this last decade, worldwide attention has been focused on the hazards derived from the interaction between extreme natural phenomena and critical infrastructures and/or chemical and process industry (natural–technological hazards or Na-Tech). Due to the recent occurrence of significant events, great attention has also been given to Na-Tech hazards triggered by volcanic eruptions; in particular, the eruption of the Icelandic volcano alarmed the European community due to the ash fallout over the continent, which caused significant problems for the population, road, rail and air traffic and production activities. This study aims at defining a procedure for the representation of the vulnerability of industrial facilities to potential volcanic ash fallouts. Its implementation on a Geographical Information System has also been executed and a semi-automatic procedure for the vulnerability mapping has been constructed.     

Size, spillovers and soft budget constraints

There is much evidence against the so-called “too big to fail” hypothesis in the case of bailouts to subnational governments. We look at a model where districts of different size provide local public goods with positive spillovers. Matching grants of a central government can induce socially-efficient provision, but districts can still exploit the intervening central government by inducing direct financing. We show that the ability and willingness of a district to induce a bailout and district size are negatively correlated. Furthermore, we argue that these policies can be equilibrium strategies.     

Symmetry and duality in Lévy markets

The aim of this paper is to introduce the notion of symmetry in a Lévy market. This notion appears as a particular case of a general known relation between prices of put and call options, of both the European and the American type, which is also reviewed in the paper, and that we call put–call duality. Symmetric Lévy markets have the distinctive feature of producing symmetric smile curves, in the log of strike/futures prices.

Put–call duality is obtained as a consequence of a change of the risk neutral probability measure through Girsanov's theorem, when considering the discounted and reinvested stock price as the numeraire. Symmetry is defined when a certain law before and after the change of measure through Girsanov's theorem coincides. A parameter characterizing the departure from symmetry is introduced, and a necessary and sufficient condition for symmetry to hold is obtained, in terms of the jump measure of the Lévy process, answering a question raised by Carr and Chesney (American put call symmetry, preprint, 1996 Carr, P and Chesney, M. 1996. American put call symmetry. preprint [Google Scholar]). Some empirical evidence is shown, supporting that, in general, markets are not symmetric.     

Elections and the timing of devaluations

This paper presents a rational political budget cycle model where devaluation acts as a tax on consumption due to a cash-in-advance constraint. Competent governments can signal their competency by reducing the rate of devaluation prior to elections. When voters also ignore the degree to which governments are opportunistic, i.e. the extent to which they are willing to distort the economy for electoral gain, an incompetent, opportunistic incumbent can reduce the rate of devaluation in the run-up to an election. The main theoretical implication in either setup, that the rate of devaluation is significantly higher in the months following an election, is consistent with evidence drawn from 26 countries in Latin America.