Default and Recovery Risk Dependencies in a Simple Credit Risk Model

This paper provides evidence for the relationship between credit quality, recovery rate, and correlation. The paper finds that rating grade, rating shift, and macroeconomic factors provide a highly significant explanation for default risk and recovery risk of US bond issues. The empirical data suggest that default and recovery processes are highly correlated. Therefore, a joint approach is required for estimating time‐varying default probabilities and recovery rates that are conditional on default. This paper develops and applies such a model.     

Different but Similar: Geothermal Energy and the Role of Politics in Germany, Iceland and the United States

This article looks into the role of the state in geothermal energy development. Based on the findings in three countries studied, it demonstrates that the demand for political intervention is strongly tied to the state of the technological and industry development. While government’s most important role in the early stages is R&D-support and regulatory guidelines, the relevance of market-based instruments and network support kicks in later. Between these two phases is a period where both ‘toolkits’ of political intervention (direct investment and indirect support efforts) have to be provided by state actors. Furthermore, the project timeline has to be kept in mind. Supporting project economics alone is not sufficient if project-internal barriers exist that cannot be overcome without specific support. The installation of an insurance scheme for dry wells in Germany and a similar mechanism in Iceland can be regarded as outstanding examples of this. However, it is important to note that geothermal energy generally will not be developed without strong public support in all development phases. The common cross-case barriers alone are sufficient for project developers and investors to be cautious about entering the industry. But if governments engage with the right instruments at the right time, there is reason to say that geothermal energy can provide a contribution to the energy turn towards renewable energies in many parts of the world, even apart from high-enthalpy regions.     

Bias from Farmer Self‐Selection in Genetically Modified Crop Productivity Estimates: Evidence from Indian Data

In the continuing debate over the impact of genetically modified (GM) crops on farmers of developing countries, it is important to accurately measure magnitudes such as farm‐level yield gains from GM crop adoption. Yet most farm‐level studies in the literature do not control for farmer self‐selection, a potentially important source of bias in such estimates. We use farm‐level panel data from Indian cotton farmers to investigate the yield effect of GM insect‐resistant cotton. We explicitly take into account the fact that the choice of crop variety is an endogenous variable which might lead to bias from self‐selection. A production function is estimated using a fixed‐effects model to control for selection bias. Our results show that efficient farmers adopt Bacillus thuringiensis (Bt) cotton at a higher rate than their less efficient peers. This suggests that cross‐sectional estimates of the yield effect of Bt cotton, which do not control for self‐selection effects, are likely to be biased upwards. However, after controlling for selection bias, we still find that there is a significant positive yield effect from adoption of Bt cotton that more than offsets the additional cost of Bt seed.     

Fiscal implications of climate change

Climate change is an externality problem—so the challenges that arise in limiting it and dealing with the effects that remain are largely fiscal. The structure of the problem, however, and the uncertainty which surrounds it, make the design of proper policy responses particularly complex. This paper provides a primer on the fiscal implications of climate change, the aim being to provide a (reasonably) quick and comprehensive overview of the main analytical issues and lessons learned.     

The Coal Crisis in Appalachia: Agrarian Transformation,Commodity Frontiers and the Geographies of Capital

Capital's commodity frontiers strategy has at once woven together regional differences within an expanding world‐system and remade the productive and reproductive activities of humans and the rest of nature. The development of successive commodity frontiers gave way to long waves of economic expansion that have been pivotal to accelerating accumulation and transcending capital's recurrent crises. In short, commodity frontiers are constitutive of world‐ecological moments premised on booms and crises of accumulation. In this paper, I examine the coal commodity frontier in Appalachia, to illustrate the region's history as one of succeeding frontiers in and out of the region over the long twentieth century of American capitalism. I argue that the origin of Appalachia's coal frontier was decisively made through the nineteenth‐century agricultural revolution expressed outside of the region. Appalachia's full‐fledged development was an outcome of capital's under‐reproduction strategies. The crisis of the region's frontier turned on a lack of surplus from under‐reproduction strategies, competing coal basins, economic diversification and competing energy sources. I find that the commodity frontier concept not only illuminates regional political economies and ecologies of difference, but also explains the production of nature of historical capitalism.