Do Binary Collateral Outcome Variables Proxy Collateral Levels? The Case of Collateral from Start-ups and Existing SMEs

This paper is designed to test whether the factors which affect the decision to collateralise business loans affect the level of collateralisation in the same manner. If the level of collateralisation does matter, the provision of collateral becomes more than a goodwill gesture to placate banks and more a device to ameliorate the risk of lending. We use a thitherto unseen dataset from a U.K. retail bank comprising 4,618 transfers and start-ups (TS group) who applied for business loans and overdrafts between January 1998 and January 2000. The control sample comprised 9,596 existing businesses from the same period. Our unique dataset permits an analysis of this kind for the first time because it contains a continuous variable for collateral unlike previous studies. Existing businesses exhibit a higher frequency (binary outcome) and level (tobit outcome) of collateral than the businesses who are start-ups or have transferred from another bank only when distortions within the data are not controlled for. These distortions negate the value of binary collateral variables. Factors such as business type and loan purpose are useful at explaining the likelihood of a borrower having his loan collateralised and the level of collateralisation for borrowers who provided collateral or not.     

New Ventures and their Credit Terms

Using UK bank data for 466 new venture loan applications, we explore the determinants of interest margin, the sanctioning decision and the amount borrowed when these factors are considered simultaneously. Collateral levels greatly influence the size of credits to new ventures, a finding consistent with existing work on firm foundation rates and assets (Black et al., Economic Journal 106, 60–75, 1996; de Meza and Webb, The Economic Journal 109, 153–163, 1999; Evans and Jovanovic, Journal of Political Economy 97(4), 808–827, 1989; Holtz-Eakin et al., 1994). Consistent with the RAND Journal of Economics 25, 334–347, Diversionary Models of debt, firms with larger credits enjoy discounted interest margins even when we have controlled for firm size.     

Valuing the Benefits of Coastal Water Quality Improvements Using Contingent and Real Behaviour

Recent moves in the European Union have beenmade towards a toughening of legislation onbathing water quality. This has focussedpolicy-makers thoughts on the welfare benefitsresulting from such improvements, especiallygiven their cost. Our paper uses a combinedstated and revealed preference approach tovalue coastal water quality improvements,focussing on an area of Scotland which hasconsistently failed to meet standards under theBathing Waters Directive. We combine data onreal behaviour with data on contingentbehaviour using a random effects negativebinomial panel model. This allows us to predictboth the change in participation (trips) shouldwater quality be improved, and the welfareincrease per trip. Our model includes allowancefor the existence of substitute sites, and forchanges in recreational behaviour during abeach visit.     

Co-ordinated environmental regulation: controlling non-point nitrate pollution while maintaining river flows

Environmental policy often addresses multiple targets, yet much economic analysis of pollution control is based on a single-target objective. In this paper, we present an analysis of policies to control non-point source nitrate pollution in the presence of minimum river flow restrictions. A non-linear bio-physical economic optimisation model of an intensively cultivated Scottish agricultural catchment was constructed. The presence of minimum river flow controls in the catchment was found to reduce nitrogen pollution. However, by themselves, river flow controls were found not to be a cost effective means to reduce non-point pollution. We quantify the improved social welfare from coordinating the environmental regulation of river flows and pollution, and determine the conditions under which such coordination is beneficial. The paper also investigates whether the benefits of such coordination can be sustained under wetter (winter) weather conditions implied by current climate change predictions.     

Short selling in initial public offerings

Short sale constraints in the aftermarket of initial public offerings (IPOs) are often used to explain short-term underpricing that is subsequently reversed. This paper shows that short selling is integral to aftermarket trading and is higher in IPOs with greater underpricing. Perceived restrictions on borrowing shares are not systematically circumvented by “naked” short selling. Short sellers, on average, do not appear to earn abnormal profits in the near term and our findings are not driven by market makers. Short selling in IPOs is not as constrained as suggested by the literature, implying that other factors may be responsible for underpricing.     

R&;D and Exporting: A Comparison of British and Irish Firms

This paper investigates the two-way relationship between R&D and export activity. In particular, we concern ourselves with the question whether R&D stimulates exports and, perhaps more importantly, whether export activity leads to increasing innovative activity in terms of R&D (learning-by-exporting). We use two unique firm level databases for Great Britain and the Republic of Ireland and compare the results for these two countries. We find that previous exporting experience enhances the innovative capability of Irish firms. Conversely, no strong learning-by-exporting effects are found for British firms. Arguably part of the differences between Ireland and Britain are attributable to different, cross-country exporting patterns where Irish firms have a greater interface with OECD markets. JEL no.  F14, F23     

Community economic development in a context of globalization and metropolization: a comparison of four North American cities

In this article, we highlight the links, few as they are, between metropolitan development institutions and community economic development (CED) organizations in a context of global economy where urban agglomerations compete for investments, while some groups of people are marginalized and some neighbourhoods are declining. First, we begin with a theoretical consideration of globalization, metropolization and community economic development. Second, we examine the relation between institutions responsible for metropolitan development and CED organizations in two Canadian agglomerations, Toronto and Montreal, and two American ones, Boston and Pittsburgh. Third, we suggest some explanations for the weak linkages between CED organizations and metropolitan institutions by raising questions about the identity, the resources and the political aspect of CED organizations, and about the vision of metropolitan actors. L'article met en avant les liens, aussi rares soient‐ils, entre institutions d'aménagement métropolitain et organisations de développement économique communautaire (DEC) dans le contexte d'une économie mondialisée où les agglomérations urbaines rivalisent dans leur quête d'investissements, tandis que certains groupes sont marginalisés et des quartiers déclinent. Ce travail commence par une étude théorique de la mondialisation, de la métropolisation et du développement économique communautaire. Il examine ensuite la relation entre institutions chargées de l'aménagement métropolitain et organisations de DEC dans deux agglomérations canadiennes, Toronto et Montréal, et américaines, Boston et Pittsburgh. Enfin, il tente d'expliquer les liens ténus entre les deux types d'organismes au travers de plusieurs questions sur l'identité, les ressources et l'aspect politique des organisations de CED, ainsi que sur la vision des acteurs métropolitains.     

Do increases in energy efficiency improve environmental quality and sustainability?

Governments world-wide increasingly see energy efficiency as an important aspect of sustainability. However, there is a debate in the literature as to whether the impact of improved energy efficiency on reducing energy use might be partially, or more than wholly, offset through “rebound” and “backfire” effects. This paper clarifies the theoretical conditions under which such effects would occur and explores their likely significance using a computable general equilibrium (CGE) model of the Scottish economy. We find that for Scotland a general improvement in energy efficiency in the production sectors of the economy initially produces rebound effects that eventually grow into backfire. Energy use ultimately increases in response to an efficiency gain and the ratio of GDP to CO₂ emissions falls. The economic factors underpinning rebound effects are straightforward: energy efficiency improvements result in an effective cut in energy prices, which produces output, substitution, competitiveness and income effects that stimulate energy demands. However, the presence of strong rebound or even backfire does not mean that efficiency-enhancing policies are irrelevant: rather it suggests that such policies operating alone are insufficient to generate environmental improvements. The implication is that a co-ordinated portfolio of energy policies is required.     

Spatial Heterogeneity of Willingness to Pay for Forest Management

The paper investigates the spatial heterogeneity of public’s preferences for the implementation of a new country-wide forest management and protection program in Poland. Spatial econometric methods and high resolution geographical information system data related to forest characteristics are used to explain the variation in individual-specific willingness to pay (WTP) values, derived from a discrete choice experiment study. We find that respondents’ WTP is higher the closer they live to their nearest forest, and the scarcer forests are in the area where they live. Interestingly, the higher the ecological value of forests in respondents’ area, the more people prefer extending areas of national forest protection. We also investigate spatial patterns in individual-specific WTP scores and in latent class membership probabilities, finding that preferences are indeed spatially clustered. We argue that this clustering should be taken into account in forest management and policy-making.