Islamic finance and market segmentation: Implications for the cost of capital

This paper considers the impact of full Islamic shari’ya compliance on developing stock exchanges in their effective provision of development capital. Evidence from a unique study focussing on the Sudan telecommunications company and its listings on the Khartoum as well as Arabian Gulf stock exchanges reveals that costs of capital are considerably higher in the former than latter markets. While there are firm governance benefits arising from Islamic finance monitoring costs are substantial and the banking system is better placed to administer financing arrangements. Larger firms are better placed to circumvent this segmentation through cross-listing on regional exchanges.     

Taxation and the stock market valuation of capital gains and dividends: Theory and emphirical results

Dividends seem to be more heavily taxed than capital gains. Why then do corporations pay dividends rather than repurchasing shares or retaining earnings? Either corporations are not acting in the interests of shareholders, or else shareholders desire dividends sufficiently for nontax reasons to offset the tax effect.In this paper, we measure the relative valuation of dividends and capital gains in the stock market, using a variant of the capital asset pricing model. We find that dividends are not valued differently systematically from capital gains. This finding is consistent with share price maximization by firms but inconsistent with the fact that most shareholderspay a heavier tax on dividends.We also show that the relative value of dividends provides an indirect measure of a marginal Tobin's q. The measured value of dividends relative to capital gains tends to be higher during prosperous periods, as is consistent with this interpretation. We hope that this time series on a marginal Tobin's q will prove to be useful in forecasting the rate of investment.     

Expectational coordination in simple economic contexts

We consider an economic model that features (1) a continuum of agents and (2) an aggregate state of the world over which agents have an infinitesimal influence. We first review the connections between the ??eductive?? viewpoint on expectational stability and standard game-theoretical rationalizability concepts. The ??eductive?? reasoning selects different plausible beliefs that are a priori, and possibly a posteriori, ??diverse??. Such beliefs are associated with the sets of ??Cobweb tatonnement?? outcomes, ??Rationalizable States?? and ??Point-Rationalizable States?? (the latter two being shown to be convex). In the case where our model displays strategic complementarities, unsurprisingly, all our ??eductive?? criteria support similar conclusions, particularly when the equilibrium is unique. With strategic substitutabilities, the success of expectational coordination, in the case where a unique equilibrium does exists, relates with the absence of cycles of order 2 of the ??Cobweb?? mapping: in this case, full expectational coordination would be achieved. However, when cycles of order 2 do exist, our different criteria predict larger sets of outcomes, although all tied with cycles. Under differentiability assumptions, the Poincaré?CHopf method leads to other global stability results. At the local level, the different criteria under scrutiny can be adapted. They lead to the same expectational stability conclusions, only when there are local strategic complementarities or strategic substitutabilities. However, for the local stability analysis, it is demonstrated that the stochastic character of expectations can most often be forgotten.     

Tax structures in developing countries: Many puzzles and a possible explanation

Tax policies seen in developing countries are puzzling on many dimensions, given the sharp contrast between these policies and both those seen in developed countries and those forecast in the optimal tax literature. In this paper, we explore how forecasted policies change if firms can successfully evade taxes by conducting all business in cash, thereby avoiding any use of the financial sector. The forecasted policies are now much closer to those observed.     

The Low‐Pay No‐Pay Cycle: Are There Systematic Differences across Demographic Groups?

We investigate transitions between unemployment, low‐paid employment and higher‐paid employment using dynamic panel data methods applied to household panel data. We find state dependence in both unemployment and low‐paid employment and evidence of a low‐pay no‐pay cycle. However, we also find significant differences in effects across population subgroups. Typically, the young and better‐educated face lower penalties from unemployment and low‐paid employment. Further, low‐paid employment is preferable to unemployment for women regardless of their demographic characteristics, but for men who have only completed secondary schooling, low‐paid employment actually decreases the chances of entering higher‐paid employment by more than does unemployment.     

Why Any Seatbelt Mandate is an Infinitely Iterated Prisoner’s Dilemma: A Health Economics Perspective

Abstract

Among the most controversial of public health measures are those that restrict people’s freedom of choice presumably for the purpose of protecting their own health and safety. Mandatory use of automobile seatbelts can inspire allusions to the “tyranny of health” and the ‘health police.” This study revisits state seatbelt legislation, which is in force in all but one state of the USA. In modeling seatbelt mandates as indefinitely repeated Prisoner’s Dilemma (PD) games, the study qualifies and overcomes the limitations of conventional interest group and expressive voting theories. It indicates why and how utility-maximizing players, particularly carmakers, insurance companies, consumer advocates and regulators, may choose to cooperate, even in instances where mutual defection would bring each of them higher payoffs. The study suggests why state seatbelt mandates endure, despite ongoing concerns that they undermine individual autonomy or that their social costs outweigh the benefits of law-enforcement. The evolution and mediating effects of reputation and reciprocity in otherwise highly contestable healthcare decisions are consequently explored. Finally, the study identifies the implications of indefinitely repeated games on the continuing nature of strategic relationships and for mitigating conflict over traffic safety regulation, regardless of time and place.