Aid and Public Finance: A Missing Link?

The present consensus in the literature is that foreign aid does not have the desired positive effects on economic development. This is due in great part to poorly performing public institutions in recipient countries. In order to understand better the causes of this undesirable phenomenon, we examine the relationship between multilateral foreign aid flows and recipient countries’ public finance systems. We construct a new indicator to assess the quality of public finance, the Public Finance Institutions Quality (PFIQ) Index. For our panel of 86 countries, we find that multilateral aid flows have a negative impact on recipient country PFIQ score, whereas exogenous improvements in public finance seem to attract more aid. These results provide insight into the “black box” of governance: failure to turn aid receipts into desired results seems partly attributable to multilateral aid, in its present form, not being suited to improving a country’s public finance institutions. However, international donor organisations do seem to reward exogenous improvements in quality and reliability of public finance systems.     

Rationality,REMM, and Individual Value Creation

This article evaluates alternative models for explaining human behavior. In particular, it compares the resourceful, evaluative, maximizing model (REMM) with the economic (or money maximizing) model of human behavior. The theoretical framework is developed to enhance our understanding of “individual value creation” and to seek an economically rational explanation to: Why Warren Buffett is giving his money away to charity? The article develops a framework of biological, material, and immaterial sources of value. The article additionally extends the existing REMM and finds several economically rational reasons for him to give away his money including the present value of help and goodwill, gained control, and lowered transaction costs.     

What comes next after recession? – Airline industry scenarios and potential end games

While airline managers learned lessons from the 2001/2003 “double dip” economic crisis, the post 2008 downturn has been more extreme. Airlines reacted quickly in 2008 and adjusted capacities and cost levels but recovery in profits has been slow for many airlines. The dynamics of the downturn has enlarged the gap between successful and less successful business models, and fostered shakeouts of the latter. Furthermore, the occurrence of new business models has accelerated. In 2001, it was the European continental low cost model; this time, we may see new attempts to change the rules of the game in international long-haul traffic. Long-term non-cyclical trends such as deregulation or consolidation will also shape potential end game scenarios, We briefly examine the differences between the last (2001/03) and the recent (2008/09) aviation crises, and evaluate the impact on different types of carriers.     

Risk and Nitrogen Application Levels

Stochastic weather and soil conditions are the suggested reasons why farmers tend to apply more than the recommended levels of nitrogen. This study found that uncertainty plays a role in the application decision of farmers but not in the manner typically assumed. Using a time series of field trials of corn yield to nitrogen for the same site, nitrogen was found to be a risk‐increasing input suggesting that uncertainty should decrease, rather than increase, a risk‐averse farmer's rate of nitrogen application. Similarly, viewing risk as a profit shortfall, in which fertilizer acts in the role of insurance, was also not supported with the empirical results. Instead, the key role of uncertainty is its impact on expected profits. Increasing application rates leads to lower returns in most years but the increase in profits generated under favorable growing conditions results in greater expected profits with a high application strategy. Les conditions météorologiques et pédologiques aléatoires seraient les raisons pour lesquelles les agriculteurs tendent à appliquer des doses d'azote supérieures aux doses recommandées. Selon la présente étude, l'incertitude joue un rôle dans les décisions d'application des agriculteurs, mais d'une façon différente de celle généralement supposée. À l'aide d'une série chronologique d'essais en champ mesurant le rendement du maïs en fonction de l'azote dans le même site, nous avons trouvé que l'azote était un intrant qui augmentait les risques, ce qui laisse supposer que l'incertitude devrait faire diminuer, plutôt que de faire augmenter, la dose d'application d'azote dans le cas d'un producteur qui craint les risques. De même, considérer le risque de baisse des profits où l'engrais assume le rôle d'assurance n'a pas été appuyé par les résultats empiriques. Le rôle clé de l'incertitude est son impact sur les profits prévus. L'augmentation des doses d'application entraîne une diminution des rendements la plupart des années, mais l'augmentation des profits générés dans des conditions de croissance favorables entraîne des profits prévus plus élevés grâce à une meilleure stratégie d'application.     

Valuation portfolio in non-life insurance

The purpose of this paper is the construction of the Valuation Portfolio (VaPo) for a non-life insurance company. The VaPo represents the obligations of the insurer for the whole period of his insurance contracts. These obligations are not simply measured by a one-dimensional figure (as standard for reserves in practice), but are expressed as a portfolio of financial instruments. Hence, the actuarial reserves become multidimensional. The financial instruments in the VaPo are a properly chosen basis to represent the future cashflows resulting from the insurance contracts.

In this setup, financial and technical risks are clearly separated. The financial fluctuations derive from the basis elements, the technical fluctuations are covered by an increased number of basis elements (VaPo protected against technical risks). We show how this protection can be calculated in the case of a non-life insurance company.     

On the Importance of National Culture for the Design of Information Systems

In this contribution a literature review is conducted to illustrate how national culture influences phases of the design of information systems. For this purpose, we review the literature in order to identify reliable and commonly approved findings as well as still open remaining questions. Fundamentally, our literature review is a comprehensive framework that sets typical dimensions of system design as well as main types of cultural research in relation to each other. The existing research results in the area of national culture are classified along the levels of system design and attributed to typical phases of the design of information systems. It thus becomes apparent that in the domain of culture and information system design it is often only the design subject or the design object that is addressed. Contributions that connect both levels rarely exist. In our review, only a limited number of publications could be identified that covered concrete phases of the development providing system design, implementation, as well as verification and validation. From a theoretical perspective, there is an obvious dominance of Hofstede??s cultural dimensions that well address single topics of the design, such as user interface and inter cultural problems in development teams. Other domains, however (e.g., technology and architecture), are inadequately explained. Further, a predominantly phenomenological focus becomes obvious. The observed cultural phenomena and the connected interpretations are usable in a limited way for concrete development initiatives. The contribution ends with the vision of a theory for the culturally sensitive design of socio-technical information systems that absorbs current scientific knowledge and unites it in a structured approach.     

Revenue Sharing and Competitive Balance in a Dynamic Contest Model

This paper presents a dynamic model of talent investments in a team sports league with an infinite time horizon. We show that the clubs’ investment decisions and the effects of revenue sharing on competitive balance depend on the following three factors: (i) the cost function of talent investments, (ii) the clubs’ market sizes, and (iii) the initial endowments of talent stock. We analyze how these factors interact in the transition to the steady state as well as in the steady state itself.