When the difference makes a difference – the regional embeddedness of entrepreneurship

Abstract

Regional determinants of new firm formation are of interest to researchers and policymakers. In the analysis of new firm formation, most studies use econometric approaches that mask intra-unit variations, not recognizing counterbalancing and dilution effects as a result. Recent advances in spatial statistics such as Geographically Weighted Regression (GWR) take local variations into account. However, these approaches operate only on a bivariate level, making it impossible to detect the homogenous parts of the area under examination with regard to a number of relationships between new firm formation and its determinants. Based on a sample of 412 German regions, we apply GWR and subsequent graph-partitioning clustering to identify multi-relationally homogeneous sub-areas. Being that the results suggest a four-cluster solution, ‘one size fits all’ policies and premature unit zoning can be called into question.     

The delivery option in credit default swaps

Under standard assumptions the reduced-form credit risk model is not capable of accurately pricing the two fundamental credit risk instruments – bonds and credit default swaps (CDS) – simultaneously. Using a data set of euro-denominated corporate bonds and CDS our paper quantifies this mispricing by calibrating such a model to bond data, and subsequently using it to price CDS, resulting in model CDS spreads up to 50% lower on average than observed in the market. An extended model is presented which includes the delivery option implicit in CDS contracts emerging since a basket of bonds is deliverable in default. By using a constant recovery rate standard models assume equal recoveries for all bonds and hence zero value for the delivery option. Contradicting this common assumption, case studies of Chapter 11 filings presented in the paper show that corporate bonds do not necessarily trade at equal levels following default. Our extension models the implied expected recovery rate of the cheapest-to-deliver bond and, applied to data, largely eliminates the mispricing. Calibrated recovery values lie between 8% and 47% for different obligors, exhibiting strong variation among rating classes and industries. A cross-sectional analysis reveals that the implied recovery parameter depends on proxies for the delivery option, primarily the number of available bonds and bond pricing errors. No evidence is found for a direct influence of the bid-ask spread, notional amount, coupon, or rating used as proxies for bond market liquidity.     

The modern impact of precolonial centralization in Africa

We empirically assess the possibility, stressed by African scholars, that stronger precolonial political institutions allowed colonial and postcolonial African governments to better implement modernization programs in rural areas. Using anthropological data, we document a strong positive association between the provision of public goods such as education, health, and infrastructure in African countries and the centralization of their ethnic groups’ precolonial institutions. We develop an empirical test to distinguish among alternative explanations for this finding. The evidence supports the view that precolonial centralization improved public goods provision by increasing the accountability of local chiefs. Our results stress the importance for developing countries to create mechanisms to monitor local administrators of public projects. These mechanisms should be consistent with these countries’ preexisting and informal arrangements.     

National and international policies for tropical rain forest conservation—A quantitative analysis for Cameroon

This paper provides a numerical general equilibrium assessment of policies to reduce tropical deforestation in Cameroon. Market failure—mainly in the form of national and international externalities—and policy failures—such as highly distorted product markets—are identified as major sources of overexploitation. The ecological effects of deforestation control are shown to depend crucially upon its impact on land use patterns whereas its efficiency effects hinge on the manner in which a specified set-aside target is achieved. If the international community wants to ensure a higher level of protection of these forests, and to do so within a market-based system, the provision of conditional financial resources is neceassary.     

Subjective well-being and the family: Results from an ordered probit model with multiple random effects

The previous literature on the determinants of individual well-being has failed to fully account for the interdependencies in well-being at the family level. This paper develops an ordered probit model with multiple random effects that allows to identify the intra-family correlation in well-being. The parameters of the model can be estimated with panel data using Maximum Marginal Likelihood. The approach is illustrated in an application using data for the period 1984–1997 from the German Socio-Economic Panel in which both inter-generational and intra-marriage correlations in well-being are estimated.First version received: May 2003/Final version received: August 2004I would like to thank Andrew Clark, Daniel S. Hamermesh, seminar participants at Tilburg University, and three anonymous referees for helpful comments.     

Educational choice, endogenous inequality and economic development

This paper investigates the mechanics through which wealth may, in the long run, trickle down from the rich to the poor. In the presence of indivisibilities in investment of human capital and impossibility of borrowing money, investment in education is financed through an intergenerational transfer. In an OLG model where aggregate production requires capital and both skilled and unskilled labor, it is shown that the long run equilibrium outcome depends on the values of few key parameters. A complete characterization of the steady state is provided. Under some configurations of the parameter values a unique invariant equilibrium exists where inequality vanishes asymptotically. Under others, multiple equilibria exist and the equilibrium outcome crucially depends on the initial conditions of the system. These equilibria are characterized by a negative relationship between inequality and economic development.     

Do consumers act in a sustainable way using their refrigerator? The influence of consumer real life behaviour on the energy consumption of cooling appliances

Over recent decades, energy savings and resource conservation have become increasingly important issues for debate, and this includes the residential sector. Since the introduction of the European Energy Label, the energy consumption of appliances has decreased drastically. Additionally, a number of guidelines have been published to assist the consumer in adopting more energy‐saving behaviours. Refrigerators and freezers in particular are covered by these recommendations because they are large energy consumers in domestic households. In order to understand the influence of consumers' real life circumstances and their behaviour in relation to the energy consumption of refrigerators, a web‐based survey was carried out. A total of 1011 participants in four European countries completed a questionnaire to allow the researchers to gain information about refrigerator characteristics and consumer behaviour in relation to refrigerator use. As well as demographic and socio‐economic characteristics of the participants, data were collected on refrigerator configuration and specification, ambient conditions (ambient temperature, position near any heat sources), and consumer behaviours such as shopping frequency, loading of the refrigerator, door opening and food consumption. The study has shown that recommendations on energy efficient usage are not always observed. A major finding of the present study is that for 25% of refrigerators, correct operation is not ensured as these appliances are operated outside the temperature ranges specified according to their climatic classes. This suggests a lack of consumer information on this topic. Consequently, guidelines and recommendations will have to be revised and their dissemination to be improved in order to ensure the sustainable and safe use of domestic refrigerators.     

Manual dishwashing habits: an empirical analysis of UK consumers

This study presents an overview of the washing up behaviour of consumers in the UK. Peoples' individual attitudes were observed as were the amount of water and energy used, the time taken and the cleaning performance. Additionally, manual dishwashing was compared with the use of automatic dishwashers. Participants were recruited to represent all geographic regions of the UK as well as forming a representative cross‐section of the population. Each of the 150 participants washed a full load of soiled tableware based on the standard EN 50242 ‘Electric Dishwashers for Household Use – Methods for Measuring the Performance’. For comparison, the best selling dishwasher in the UK in 2007 was tested under the same conditions as those in the consumer trial. Additionally, consumers who owned a full‐size dishwasher were asked to load it to the point when they decided that the dishwasher was full. The study shows that these consumers, on average, used 49 l of water and 1.7 kWh of energy, whereas the dishwasher used 13 l of water and 1.3 kWh of energy on average for the same amount of dishes under the conditions tested. Statistical analysis showed that these differences are significant. The dishes washed by hand were found to be slightly less clean than dishes washed in a dishwasher. For washing a full dishwasher load by hand, the participants needed, on average, 60 min, while they only took 9 min on average to load and unload the same amount of dishes in a dishwasher. The average participants were able to fill almost the full load into the dishwasher (96% of the items as used in a test following EN 50242).     

Effects of socio‐demographic factors on laundry behaviours in Europe and their implications on sustainability

The continuing rise of greenhouse gas (GHG) emissions is leading to catastrophic damage in many parts of the world over the coming decades unless GHG emissions can be controlled quickly. The objective of reducing GHG emissions can only be accomplished when all the sectors contributing to GHG emission act responsibly. The contribution of the household to GHG emission was 19.6% in the European Union (EU) in 2013. The energy consumption for laundry washing in the EU, estimated at 24.2 TWh/year, is a substantial share of household energy use. As the use phase of the washing machine is the dominant stage where the environmental impact occurs, this paper addresses some of the EU consumers’ washing and drying behaviour in the laundry process. Information on consumers’ behaviour regarding the laundry process was collected by a semi‐representative survey in eleven EU countries in 2015, including more than 5,000 participants. The main outcome of the study is that consumers’ behaviour regarding the laundry process differs substantially between the EU countries. Moreover, socio‐demographic characteristics of households affect the overall sustainability profile of the laundry process.     

Income Shocks,Inequality, and Democracy*

In this paper, motivated by contradictory evidence on the effect of income on democracy, we investigate the hypothesis that it is income shocks – major income fluctuations relative to the trend – rather than marginal year‐on‐year variation in income levels that lead to non‐trivial changes in the quality of political institutions. Empirical results provide support for this hypothesis, and show how income inequality plays a crucial role in the effects of economic shocks on democracy. In particular, negative income shocks reveal a positive effect on democracy in countries with high inequality, and vice versa.