Redistribution and Subsidies for Higher Education

The financing of higher education through public spending imposes a transfer of resources from taxpayers to university students and their parents. We provide an explanation for this phenomenon. Those who attend institutions of higher education will earn more income in the future and will pay more taxes. People whose children do not receive higher education, however, should agree to help pay the cost of such education, providing that taxes are sufficiently high to ensure an adequate redistribution in favor of their own children at some time in the future.
JEL classification : D 71; H 21; H 52     

Export Credit Guarantees, Moral Hazard and Exports Quality

We analyse the role played by export credit guarantees (ECGs) in encouraging exports to developing countries. The existence of moral hazard on the side of the firm is introduced. We show that the inability of the exporter's government to verify the actual quality of the product will limit its ability to encourage trade through ECGs, once the coverage provided goes beyond a certain threshold. This result provides a rationale behind the limited coverage on ECGs.     

Factors Affecting Capacity Utilisation in English Channel Fisheries

The harvesting capacity of the European fishing fleet far exceeds the reproductive potential of the resource base. As a result, most European Union fisheries are both biologically and economically over‐exploited. A series of fleet‐reduction policies have been introduced in order to bring the harvesting capacity in line with target output levels. However, the existence of unutilised capacity may reduce the effectiveness of these schemes as the remaining vessels may increase their individual capacity utilisation (CU), thus offsetting the effects of fleet reduction. In this paper, the effects of stock abundance, output prices, fuel prices and fleet size on the rate of capacity utilisation are examined for a range of UK fleet segments operating in the English Channel. Estimates of CU are derived using data envelopment analysis. Results indicate that the average beam trawl vessel, using existing physical inputs, could potentially increase its revenue by a further 50%, assuming current fish stock levels and unrestricted access to resources. The average gill net vessel could similarly increase its output by 43%, scallop dredge by 28% and otter trawl by 14%. The results suggest that changes in stock abundance are the main factor affecting CU, with no significant trends being observed for the economic variables.     

A contango‐constrained model for storable commodity prices

This article presents a model of commodity price dynamics under the risk‐neutral measure where the spot price switches between two distinct stochastic processes depending on whether or not inventory is being held. Specifically, the drift of the spot price is equal to the cost of carry when the stock is positive. Conversely, whenever the drift of the spot price is less than the cost of carry, no inventory is being held. The properties of the spot price and the forward curves implied by this model are illustrated and analyzed with the use of numerical examples. A comparison with the single‐factor model by E. S. Schwartz (1997) is also provided. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:1025–1044, 2005     

Under- versus overconfidence: an experiment on how others perceive a biased self-assessment

This paper reports findings of a laboratory experiment, which explores how reported self-assessment regarding the own relative performance is perceived by others. In particular, I investigate whether overconfident or underconfident subjects are considered as more likeable, and who of the two is expected to win in a tournament, thereby controlling for performance. Underconfidence beats overconfidence in both respects. Underconfident subjects are rewarded significantly more often than overconfident subjects, and are significantly more often expected to win. Subjects being less convinced of their performance are taken as more congenial and are expected to be more ambitious to improve, whereas overconfident subjects are rather expected to rest on their high beliefs. While subjects do not anticipate the stronger performance signal of underconfidence, they anticipate its higher sympathy value. The comparison to a non-strategic setting shows that men strategically deflate their self-assessment to be rewarded by others. Women, in contrast, either do not deflate their self-assessment or do so even in non-strategic situations, a behavior that might be driven by non-monetary image concerns of women.     

Decision support system to design feasible high-frequency Motorways of the Sea: A new perspective for public commitment

ABSTRACT

The implementation of Motorways of the Sea (MoS) within the framework of European Union aid programs experiences a period of relative stagnation. This article analyzes the suitability of current short-term nonrepayable subsidy policy and develops a decision support system (DSS) that allows a medium- and long-term feasibility analysis of MoS proposals. One significant conclusion drawn from the application of the proposed DSS to a prototypical high-frequency MoS provides that the period of initial losses prior to achievement of both modal shift and accounting profits might last 10 years. Moreover, the entire duration of the period that includes prior objectives as well as the recovering of initial losses might reach 25 years. Therefore, existing schemes of public–private collaboration should be redefined. To this end, the proposed DSS also contributes to envisioning a spectrum of possibilities for private–public collaborations schemes, as opposed to public–private dichotomy of partnerships.     

The repatriation incentive of the foreign dividend exemption system

Due to the high taxation of domestic corporate income, Japanese multinational enterprises have avoided to repatriate foreign profits to Japan for quite some time. As a consequence, the Japanese government introduced a new taxation system in 2009 – the so called dividend exemption system – which was aimed at reducing the effective tax burden of foreign dividends of Japanese multinational companies in order to increase tax revenue and stimulate economic growth. Applying a theoretical framework which allows comparing the repatriation incentive of the old and new Japanese tax systems, we find that in the long-run the tax regime change fails to incentivize foreign subsidiaries to repatriate foreign profits. Especially subsidiaries with high leverage located in countries with low corporate taxes and low dividend taxes might reinvest rather than distribute their earnings in the dividend exemption method.     

Securitization and financial solvency: empirical evidence from Portugal

This paper analyses the effect of securitization issues on the solvency of Portuguese financial institutions. For this purpose, we use an unbalanced panel model estimated using GMM methods and find that securitization has a slightly positive impact on the soundness of the issuing entity. We study 35 financial entities and 60 traditional securitizations issued by 9 originators between 2001 and 2013. The analysis reveals that the financial entities’ soundness improved slightly, showing that securitization enhanced the quality of the originators’ portfolios and increased the regulatory capital requirements. We also found that efficiency and profitability improve the risk-adjusted ROAA and that efficiency increases regulatory capital requirements. The robustness analysis confirms the positive effect of securitization on solvency, where both credit quality and liquidity are shown to be significant variables.     

A decent proposal

In this paper we explore the notion that players are decent in the sense that their choices are bounded by certain unwritten social rules. We apply this idea to problems of Bankruptcy and Implementation.JEL Classification: D78, D63The authors wish to express their gratitude for comments and suggestions to N. Baigent, S. Baliga, V. Bashkar, C. Beviá, S. Chattopadhayay, G. Charness, M. Maschler, C. Matutes, P. McAfee, I. Ortuño-Ortín, A. Rangel, J. Roemer, J. Schummer, T. Sjöström, W. Thomson, the participants in seminars in Hakone (Japan), Harvard, Queens University, Rochester, Studienzentrum at Gergenzee (Switzerland), two anonymous referees and an associate editor. The usual caveat applies. This research has been partially supported by grants BEC2002-02194, BEC2001-0535, and GV 01-371. This paper is dedicated to Bob Aumann, from whom we have learned so much.     

HETEROGENEITY IN A CURRENCY UNION WITH SOCIAL MARKET OBJECTIVES

In this paper, we explore whether heterogeneity among union members could threaten the stability of the European Monetary Union. The types of heterogeneity we consider are (1) asymmetries in the transmission of monetary and fiscal policies, and (2) differences in national preferences for price stability, output growth, and income redistribution. Our results show that the costs of membership can be significant for countries whose transmissions, structure, or preferences deviate from those underlying the common monetary policy. In part, these costs arise because monetary policy imposed by an independent central bank automatically constrains the use of fiscal policy by national governments.