ON THE IMPACT OF FUNDAMENTALS,LIQUIDITY, AND COORDINATION ON MARKET STABILITY*

We develop a coordination game to model interactions between fundamentals and liquidity during unstable periods in financial markets. We then propose a flexible econometric framework for estimation of the model and analysis of its quantitative implications. The specific empirical application is carry trades in the yen–dollar market, including the turmoil of 1998. We find a generally very deep market, with low information disparities among agents. We observe occasional episodes of market fragility or turmoil with up by the escalator, down by the elevator patterns in prices. The key role of strategic behavior in the econometric model is also confirmed.     

Does Social Capital Affect Entrepreneurial Intentions?

Nowadays, the scientific community assigns both social context and entrepreneurs’ behavior as a central role in the growth and development of the world economy. However, the relationships between these two factors have not been sufficiently studied in business and economics. Therefore, in this paper, the specific influence of the new socioeconomic factor of social capital on the formation of entrepreneurial intentions will be analyzed. To test the theoretical hypotheses, an empirical study will be carried out using the Partial Least Squares (PLS) technique with data from a sample of young undergraduate students in the last year of their degree. This population has been selected because these individuals, according to different studies, show a higher propensity towards firm creation. A previous version of this paper was presented to the 61st International Atlantic Economic Conference held in Berlin (15–19, March 2006).     

Analysis of wage differences between native and immigrant workers in Spain

This paper analyses the nature of wage differences between native and immigrant workers in Spain. By estimating separated wage equations for the sub samples of both native and non-native workers and applying the Oaxaca–Blinder method, we observe that the relative unexplained (or discriminatory) component of the wage difference has a decreasing behaviour along the most part of the wage distribution, even becoming negative at the end. So, in this paper we detect the existence of a remarkable wage difference against the group of immigrants with the lowest wages which is not explained by the differences in the productive features of both native and non-native workers. This paper has been funded by the project SEJ2004-04065/ECON. Previous versions of this article have greatly improved thanks to the comments of two anonymous referees and the Managing Editor.     

Weakening political connections by means of regulatory reform: Evidence from contracting out water services in Spain

One area of public policy where rent-seeking and favoritism is relatively common is the contracting out of public services. Private firms can improve their chances of obtaining contracts by bribing politicians or public servants and funding political parties. In the same vein, firms can gain access to policymakers by hiring influential former politicians—a practice commonly referred to as revolving-doors. In this paper, we use information from 922 privatizations of water services in Spanish municipalities between 1984 and 2016 and multinomial logistic regression techniques to study the association between specific firms securing contracts and the political parties ruling the municipalities. We find robust statistical evidence of an association between the Popular Party (Partido Popular or PP) and the firm Aqualia, part of the large Spanish holding company Fomento de Construcciones y Contratas (FCC), which is known to have funded the Popular Party. Furthermore, former PP politicians have been appointed to top positions in the FCC Board of Directors. However, this relationship weakened after the institutional reform of 2007 on public procurement and financing of political parties, which is empirically evaluated in this paper.     

Democracy, Participation, and Economic Development: An Introduction

This introduction to a special issue of the Review of Development Economics provides a contextual setting to a collection of articles that originated in a conference on "Democracy, Participation, and Development" that was sponsored by the Program in Economic Policy Management (PEPM) at Columbia University in April 1999.     

Opening the box: Comparing EU and US scientific output by scientific field

Recent reports suggest that, during the 1990s, the EU15 overcame the US in scientific output. This paper provides a comprehensive comparative analysis of the evolution of the EU15 and US scientific output and impact throughout the 1990s, looking at publications and impact trends by scientific field. Results show that changes in scientific production for the two blocks are driven by particular scientific fields which grew or declined at a fast rate during the decade. Throughout this period, the EU15 had eight fields of science, corresponding to a 13% of the total papers published, growing at a rate faster than 10% in relation to world average, while the US had only four fast growing fields, representing 6% of its total output. The situation was exactly reversed for the decline, with the US having more than doubled the number of scientific fields when compared to the EU15 declining at a rate faster than 10%. Despite this recent trend, the US maintains a distant leadership in impact across all scientific fields. A detailed analysis of the EU15 countries shows some convergence in terms of outputs and impact, but considerable differences among countries remain. These reflect the evolution, not only of their science, technology and higher education systems, but also their integration in the international science system.     

Francisco Pereira de Moura, (1925–1998)

A bstract . The Portuguese economist Francisco Pereira de Moura passed away on April 4, 199B. During the late 1960s and well on into the 1970s, Moura gained international fame when he stood with the students against the repressive fascist regime in Portugal. After the fall of the dictatorship on April 25, 1974, he returned to Portugal's celebrated Superior Institute of Economic and Financial Sciences (ISEG) to carry on the work of curriculum reform. In the essay that follows he is remembered by one of his most distinguished students who now serves as a Professor of Economics at the ISEG.     

Are covered bonds a substitute for mortgage-backed securities?

Given the problems in the mortgage-backed securities (MBS) market during the financial crisis, some suggest that covered bonds (CB) might be a substitute for MBS. This could lead to a number of policy alternatives in countries where regulation and business have been mainly leaning to one of these types of securities. Examining the use of CB and MBS in the U.S. and Europe, we find that the two often seem to be used for different purposes. Banks are more likely to use CB when they have liquidity needs while MBS are associated with risk management and agency problems. Introducing MBS to markets where only CB are common or CB to markets where only MBS are common could have large effects.     

Excessive entry and the integer constraint with many firms: a note

This paper studies the excessive entry bias in a market with many firms. We show that the integer constraint may be relevant regardless of the number of firms. A more sensible interpretation of one of the assumptions proposed by Mankiw and Whinston (RAND J Econ 17(1):48–58, 1986) plays a major role in the importance of the integer constraint. Consequently, we reach different policy conclusions.     

Explaining nation-wide differences in entrepreneurial activity: a legitimacy perspective

The present study applies the lens of Institutional Theory to analyze the impact of a country’s entrepreneurial legitimacy on its entrepreneurial activity as well as on entrepreneurs’ access to financing. By creating a structural equation model of entrepreneurship in innovation-driven countries, the authors show that countries with greater entrepreneurial legitimacy have more entrepreneurial activity. The model was tested over a 5-year period, from 2009 to 2013. Results suggest that innovation-driven countries with more entrepreneurial legitimacy obtain greater rates of entrepreneurial activity. Further distinguishing among legitimacy types, cognitive legitimacy is shown to exert a stronger influence than regulative or normative legitimacy. The model also confirms a positive relationship between a country’s entrepreneurial legitimacy and access to financing. This occurs principally through regulative legitimacy. This study enlarges our knowledge of the existing differences in entrepreneurial activity among countries. It contributes to the literature on the country-level determinants of entrepreneurship, such as institutional conditions or financial access.