The Perverse Effect of Debt Tax Benefits on Firm Investment Decisions

In this paper we question the idea that the deduction of debt interest is always an effective policy instrument to spur firm investment. We analyse the investment decision in presence of a borrowing constraint on the amount of debt that the firm can raise. We show that if the debt interest rate is decreasing in the firm's capital accumulation and another financial resource more expensive than debt is available (at least for levels of debt lower than the upper bound), then the deduction of the debt interest from taxes on capital income may reduce firm investment. This theoretical result is relevant for economic policy decisions when financial intermediaries are not willing to finance beyond a certain threshold but firms have access to other sources of finance.     

A spatial analysis of R&D: the role of industry proximity

This paper employs individual firm data in order to check the existence of industry-spatial effects alongside other microeconomic determinants of R&D investment. Spatial proximity is defined by a measure of firms’ industry distance based on trade intensity between sectors. The spatial model specified here refers to the combined spatial-autoregressive model with autoregressive disturbances. In modelling the outcome for each location as dependent on a weighted average of the outcomes of other locations, outcomes are determined simultaneously. The results of the spatial estimation suggest that in their R&D decision firms benefit from spillovers originating from neighbouring industries.     

Gender and climate change: Do female parliamentarians make difference?

This paper investigates whether female political representation in national parliaments influences climate change policy outcomes. Based on data from a large sample of countries, we demonstrate that female representation leads countries to adopt more stringent climate change policies. We exploit a combination of full and partial identification approaches to suggest that this relationship is likely to be causal. Moreover, we show that through its effect on the stringency of climate change policies, the representation of females in parliament results in lower carbon dioxide emissions. Female political representation may be an underutilized tool for addressing climate change.     

The end of the flat tax experiment in Slovakia: An evaluation using behavioural microsimulation in a dynamic macroeconomic framework

The paper introduces a new way of linking microsimulation models with dynamic general equilibrium frameworks to obtain an evaluation of the impact of detailed tax and benefit measures on the aggregate economy. In the approach presented in this paper, income heterogeneity interacts with the macro-economy via aggregated individual labour supply decisions which influence, and are influenced by, the dynamic evolution of the real wage rate. The method involves a reduced-form representation of the information flow between the macroeconomic and microeconomic blocks. The practical usefulness of the approach is demonstrated by evaluating actual and hypothetical tax reforms that involve abandoning the flat tax system in Slovakia. A hypothetical move to a highly progressive tax structure is shown to generate some employment gains but is associated with a drop in aggregate income and tax revenue.     

Auction theory adaptations for real life applications

We develop extensions to auction theory results that are useful in real life scenarios.1. Since valuations are generally positive we first develop approximations using the log-normal distribution. This would be useful for many finance related auction settings since asset prices are usually non-negative.2. We formulate a positive symmetric discrete distribution, which is likely to be followed by the total number of auction participants, and incorporate this into auction theory results.3. We develop extensions when the valuations of the bidders are interdependent and incorporate all the results developed into a final combined realistic setting.4. Our methods can be a practical tool for bidders and auction sellers to maximize their profits. The models developed here could be potentially useful for inventory estimation and for wholesale procurement of financial instruments and also non-financial commodities.All the propositions are new results and they refer to existing results which are stated as Lemmas.     

深化增值税改革的市场反应及影响因素

运用事件研究法和多元回归法考察 “深化增值税改革”（2018年3月28日国务院常务会议）的市场反应及其影响因素。结果表明：尽管中美“贸易战”对股市产生了较大的负面影响,但投资者仍将“深化增值税改革”视为利好消息,且试点行业的市场反应都显著为正。从市场反应影响因素来看,研发支出越多、融资约束越强的公司市场反应更好。此外,进一步细分公司特征发现,高税收敏感度和高产品市场竞争程度的公司市场反应更加积极,存在超额雇佣且研发支出较高以及不存在超额雇佣但融资约束较高的公司市场反应也更加积极。     

Going Multinational: What are the Effects on Home‐Market Performance?

Abstract. This paper compares the home‐market performance of German multinational enterprises (MNEs) and national firms, both before and after switching from national to multinational activities. Regarding the former case, our results show that future multinationals outperform domestic firms. When assessing the ex post performance of multinationals, selectivity issues must be taken into account. Applying an endogenous treatment model, it turns out that after switching, both productivity and wage growth are higher at newly founded MNEs. While capital intensities increase compared with those of national firms, employment growth rates are negatively related to switching, suggesting that home and foreign employment are substitutes.     

Second time lucky? Withdrawn IPOs that return to the market

We investigate issuers withdrawing an IPO (after security regulation filings) that return later for a successful offering. Venture capital backing and reputation of the lead underwriter are key factors in predicting successful return. The possibility of returning has a significant impact on the decision to withdraw and the pricing of offerings that succeed. Our sample of returning IPOs also provides a unique setting to investigate underwriter switching after a withdrawal but before a successful IPO. We find that switching occurs in response to poor bank performance and when switching firms “graduate” to banks that have high industry market shares.     

Elastic demand, sunk costs and the Kreps–Scheinkman extension of the Cournot model

Summary. The paper shows that, with any rationing mechanism between the efficient and proportional extremes, the Kreps-Scheinkman two-stage quantity-price game reduces to the Cournot model if demand is uniformly elastic and if all costs are sunk at the first stage, thus providing positive results to set against existing negative statements. Received: May 24, 1995; revised version: March 6, 1997     

Are voters rational?

We test whether a voter's decision to cast a vote depends on its probability of affecting the election outcome. Using exogenous variation arising at population cutoffs determining council sizes in Finnish municipal elections, we show that larger council size increases both pivotal probabilities and turnout. These effects are statistically significant, fairly large and robust. Finally, we use a novel instrumental variables design to show that the jumps in the pivotal probabilities are the likely candidate for explaining the increase in turnout, rather than the other observed simultaneous jumps at the council size cutoffs. Moreover, our results indicate that turnout responds only to within-party pivotal probabilities, perhaps because they are more salient to the voters than the between-party ones.