Are debt repayment incentives undermined by foreign aid?

This paper investigates the effects of inflows of foreign aid on the debt repayment behavior of developing countries. The paper first delineates the overall incentives to committing to timely debt repayment in a war of attrition-type model. A set of panel estimates including 93 developing countries shows that foreign aid is strongly negatively associated with repayment incentives. The findings pertain to both total debt service and service on publically guaranteed debt. A set of conditional estimates suggest that the main findings generalize to the majority of developing countries.     

Wertorientierte Steuerung von Lebensversicherungsunternehmen mittels stochastischer Prozesse

In this paper we present the concept for value based management of life insurance companies using stochastic process methods. The stochastic processes are used for modelling the random parameters determining the value. Stochastic processes in discrete and continuous time as well as with discrete and continuous state space are considered. As shown in the article this results in distribution functions for the corporate value which lie approximately or even exactly in the class of normal distribution functions.     

Welfare‐ranking ad valorem and specific tariffs under monopolistic competition

Abstract.  Actual trade and tariff policy prefers ad valorem tariffs to specific tariffs. Yet in this paper we show that, in a setting of monopolistic competition, realizing a given restriction on imports via a specific tariff would generate more consumer utility than obtaining the same restriction via an ad valorem tariff. JEL classification: F12     

Non-stationary Interest Rate Differentials and the Role of Monetary Policy

Abstract

The present work deals with a frequently detected failure of the uncovered interest rate parity (UIP) – the absence of bivariate cointegration between domestic and foreign interest rates. We explain the non-stationarity of the interest differential via central bank reactions to exchange rate variations. Thereby, the exchange rate in levels introduces an additional stochastic trend into the system. Trivariate cointegration between the interest rates and the exchange rate accounts for the missing stationarity property of the interest differential. We apply the concept to the case of Turkey and Europe, where we can validate the theoretical considerations by multivariate time series techniques.     

Bayesian Variable Selection in Spatial Autoregressive Models

This paper compares the performance of Bayesian variable selection approaches for spatial autoregressive models. It presents two alternative approaches that can be implemented using Gibbs sampling methods in a straightforward way and which allow one to deal with the problem of model uncertainty in spatial autoregressive models in a flexible and computationally efficient way. A simulation study shows that the variable selection approaches tend to outperform existing Bayesian model averaging techniques in terms of both in-sample predictive performance and computational efficiency. The alternative approaches are compared in an empirical application using data on economic growth for European NUTS-2 regions.     

Financial integration in autocracies: Greasing the wheel or more to steal?

This paper analyzes the influence of financial integration on institutional quality. We construct a dynamic political-economic model of an autocracy in which a ruling elite uses its political power to expropriate the general population. Although financial integration reduces capital costs for entrepreneurs and thereby raises gross incomes in the private sector, the elite may counteract this effect by increasing the rate of expropriation. Since de facto political power is linked to economic resources, financial integration also has long run consequences for the distribution of power and for the rise of an entrepreneurial class.     

Inefficient entry order in preemption games

In a preemption game, players decide when to take an irreversible action. Delaying the action exogenously increases payoffs, but there is an early mover advantage. Riordan (1992) shows that in a preemption game with two asymmetric players, players act in decreasing order of efficiency. This provides a microfoundation to the assumption that entry in a market occurs in the order of profitability, commonly used in the empirical analysis of market entry. We provide a counterexample showing that with more than two players this intuitive result can be reversed. We present a preemption game of entry into a new market. The potential entrants are three asymmetric firms: one “efficient” firm with high post-entry profits, and two “inefficient firms”. We show that the set of parameters such that the equilibrium entry order does not reflect the efficiency ranking is nonempty, and analyse which changes in post-entry profits preserve this entry order.     

Procedure for the Implementation of the Precautionary Principle in Biosafety Commissions

In order to fulfil their responsibilities under the precautionary principle, biosafety commissions should lay down guidelines concerning the understanding and application of this principle and work towards an operational procedure. With this contribution, we propose a step‐wise procedure that aims to establish the understanding of the precautionary principle within biosafety commissions and to provide a methodological approach for the application of this principle to specific cases in the course of risk assessment. This approach is based on systematically investigating the consensus view within a group of 15 biosafety experts with the help of sets of checklists. For step 1, we propose a checklist of 13 criteria aimed at defining the understanding of the precautionary principle. For step 2, we propose 4 criteria for the decision on whether or not to use the precautionary principle. For step 3, 11 criteria for the use of the precautionary principle are presented. In step 4, additional criteria for specific applications could be included. In step 5, possible recommendations to decision‐making authorities are proposed.     

Necessity and Opportunity Entrepreneurs and Their Duration in Self-employment: Evidence from German Micro Data

Using data from the German Socio-Economic Panel Study (GSOEP), we analyze whether necessity entrepreneurs differ from opportunity entrepreneurs in terms of self-employment duration. Using univariate statistics, we find that opportunity entrepreneurs remain in self-employment longer than necessity entrepreneurs. However, after controlling for the entrepreneurs’ education in the professional area where they start their venture, this effect is no longer significant. We therefore conclude that the difference observed is not an original effect but rather is due to selection. We then go on to discuss the implications of our findings for entrepreneurship-policy making, and give suggestions to improve governmental start-up programs.