Budget balances in OECD countries: what makes them change?

Fiscal balances have deteriorated quickly in recent years, bringing back to the foreground the question what factors explain such sharp changes. This paper takes a broad perspective at the issue regarding countries included, the range of potential explanatory variables, and the time-span covered. The empirical analysis shows that changes in budget balances are affected by debt growth, macroeconomic developments and political factors. In particular, we find that the run-up to EMU induced additional consolidation in Europe and that budget balances deteriorate markedly in election years. Asset prices also affect budgets, but the impact remains limited in normal times.      

Why did farmers stop cultivating NERICA upland rice varieties in central Benin?

New Rice for Africa (NERICA) was developed by the Africa Rice Center by crossing high-yielding Asian rice (Oryza sativa L.) with locally adapted African rice (Oryza glaberrima Steud.). Community-based seed production of NERICA varieties was introduced in a village in central Benin in 2006 through seed dissemination projects. It was reported that high-adoption rates of these varieties were mainly due to high demand by development projects for seed dissemination, and to incentives (i.e. selling the rice seed at a higher than local market price to a local extension service) for farmers to grow NERICA varieties. A follow-up survey was undertaken after the seed dissemination projects ended to examine the change in the cultivation of NERICA varieties. About half of the farmers had ceased cultivation of NERICA varieties in 2011. The reasons for abandonment were the combined effects of reduced seed demand and low yields, which were attributed to a lack of access to credit and training on NERICA cultivation practices. The majority of the farmers did not abandon rice cultivation, but grew other high-yielding varieties, including one aromatic variety for which there was market demand. We conclude that to avoid immediate reductions in the adoption of new varieties after projects are terminated and to enhance agricultural sustainability, the varieties should be introduced in conjunction with appropriate group training on their cultivation, and the project should target farmers who do not have off-farm businesses. Furthermore, access to credit should also be enhanced, and the marketability of the varieties should be assessed.     

Time-varying global and local sources of market and currency risks in Russian stock market

In this paper we study international asset pricing models and the pricing of global and local market risks as well as currency risk in the Russian stock market from an international investors' point of view using weekly data from 1999 to 2009. In our empirical specification, we utilize the multivariate GARCH-M framework of De Santis and Gérard (1998). We find currency risk to be priced in the Russian market. The price of currency risk is found to be time-varying and affected for example by the price of oil. Moreover, our results suggest that the Russian market is partially segmented and the local market risk is priced in the market. Our model implies in-sample risk premium for the Russian equity market that is, on average, almost ten times higher than that of the US and that the Russian risk premium is on average caused mostly by the local and currency risk components.     

When Do Employees Leave Their Job for Entrepreneurship?*

Existing firms are argued to be an important source of new entrepreneurs. Yet, relatively little is known about the characteristics of firms that breed new entrepreneurs. We use a large linked employee–employer dataset to trace and characterize the types of firms which generate new entrepreneurs in Finland. We find that such transitions are rare and that smaller firms spawn new entrepreneurs more frequently than larger firms. We also find that firms' R&D intensity and, to a lesser extent, their productivity are negatively related to the probability that employees transit into entrepreneurship. These results are robust to controlling for a number of employee and employer attributes.