Socio-demographics,political attitudes and informal sector employment: A cross-country analysis

In this paper, we empirically investigate the relationship between informal sector employment and micro-level socio-demographic characteristics, political acts and attitudes, and individual norms. Using self-reported individual micro-level data from the World Values Survey for seven developing countries (China, Ecuador, Egypt, Mexico, Peru, South Africa and Yemen), our cross-country regressions and principal component analysis reveal that socio-demographic characteristics of individuals are strong predictors of their informal sector employment. Our estimations further document that individual preferences for an economically strong, interventionist and egalitarian state and confidence in state and political institutions are positively and significantly correlated with informal sector employment, whereas variables associated with confidence in free market institutions and support for competition are negatively and significantly correlated with informal sector employment. We also show that individuals who participate either actively or inactively in peaceful and lawful political processes are significantly less likely to work in the informal sector. Finally, we document that individual norms, such as religiosity and tax morale, are negatively correlated with informal sector employment. Throughout our analysis, instead of having to rely on ad-hoc informality categorizations of third parties, we base our measurement of informal sector employment directly on the self-evaluation of individuals, who have the best information on the degree of their informality.     

The power of positivity? The influence of positive psychological capital language on crowdfunding performance

We extend the entrepreneurship literature to include positive psychological capital — an individual or organization's level of psychological resources consisting of hope, optimism, resilience, and confidence — as a salient signal in crowdfunding. We draw from the costless signaling literature to argue that positive psychological capital language usage enhances crowdfunding performance. We examine 1726 crowdfunding campaigns from Kickstarter, finding that entrepreneurs conveying positive psychological capital experience superior fundraising performance. Human capital moderates this relationship while social capital does not, suggesting that costly signals may, at times, enhance the influence of costless signals. Post hoc analyses suggest findings generalize across crowdfunding types, but not to IPOs.     

Inequality and entrepreneurial thresholds

We explore the relationship between inequality and entrepreneurial activity. Drawing on cross-sectional data from a largescale survey of the economic conditions of individuals across India, we develop a number of dimensions of inequality to explore empirically how inequality interacts with entrepreneurship, operationalized as self-employment or as employing other people. We find compelling evidence that there are thresholds to becoming self-employed, and even more so to assembling the combinations of resources and personal attributes required to become an employer. Greater inequality leaves more people unable to make the transition to self-employment, leaving casual laboring as the occupation of necessity. At the same time, inequality increases the number of employers in a society, by concentrating resources - particularly land and finance - enough for significant numbers of people to be able to cross this higher threshold. Lastly, greater differentiation into social or religious groups curtails the ability to cross either entrepreneurial threshold, presumably by limiting the extent and benefits of social networks of value for entrepreneurship.     

Investor behaviour and reaching for yield: Evidence from the sterling corporate bond market

We provide evidence on how corporate bond investors react to a change in yields, and how this behaviour differs in times of market‐wide stress. We also investigate ‘reaching for yield’ across investor types, as well as providing insights into the structure of the corporate bond market. Using proprietary sterling corporate bond transaction data, we show that insurance companies, hedge funds and asset managers are typically net buyers when corporate bond yields rise. Dealer banks clear the market by being net sellers. However, we find evidence for this behaviour reversing in times of stress for some investors. During the 2013 ‘taper tantrum’, asset managers were net sellers of corporate bonds in response to a sharp rise in yields, potentially amplifying price changes. At the same time, dealer banks were net buyers. Finally, we provide evidence that insurers, hedge funds and asset managers tilt their portfolios towards higher risk bonds, consistent with ‘reaching for yield’ behaviour.     

Farm size and productivity growth in the United States Corn Belt

In recent decades, agricultural production in the U.S. has continued to shift to large-scale operations, raising concerns about the economic viability of small and midsized farms. To understand whether economies of size provided an incentive for the consolidation of production, the study estimates the total factor productivity (TFP) of five size classes of grain-producing farms in the U.S. Heartland (Corn Belt) region. Using quinquennial Agricultural Census data from 1982 to 2012 the study also compares TFP growth rates across farm sizes to gain insight into whether observed productivity differences are likely to persist. The finding of a strong positive relationship between farm size and TFP suggests that consolidation of production has contributed to recent aggregate productivity growth in the crop sector. The study estimates the extent to which sectoral productivity growth can be attributed to structural change versus other factors including technological change. The study also explores some tradeoffs associated with policies that raise the productivity of small versus large farms.     

Cultural Baggage: Do Immigrants Import Corruption?

Do immigrants undermine culture in a way that destroys productivity in destination countries? Some scholars have argued that because immigrants come from countries with dysfunctional social capital—norms and institutions—they will import it and pollute the social capital in destination countries. One potential channel through which this could occur is corruption. We examine stocks and flows of immigrants over a 20‐year time period to see if corruption increased in destination countries. We generally find that immigration is not associated with increases in corruption. Additionally, we find that immigration tends to decrease corruption in destination countries with low levels of corruption or high levels of economic freedom.     

Panel LM unit root tests with level and trend shifts

This paper considers a Lagrange multiplier (LM) based panel unit root test that allows for heterogeneous structural breaks in both the intercepts and slopes of a series. We note that many popular time series variables are likely to exhibit changing means and/or trends over time. Given that the usual tests will depend on the nuisance parameters indicating the locations of the trend breaks, we adopt a transformation procedure that makes our new panel unit root tests invariant to the nuisance parameters. To illustrate the importance of the power gain provided by our test, we examine the convergence hypothesis using relative ratios of per capita health care expenditures in 20 OECD countries. Our results provide evidence that the convergence hypothesis is supported.     

EMPIRICAL PERFORMANCE OF GARCH MODELS WITH HEAVY‐TAILED INNOVATIONS

We introduce a new type of heavy‐tailed distribution, the normal reciprocal inverse Gaussian distribution (NRIG), to the GARCH and Glosten‐Jagannathan‐Runkle (1993) GARCH models, and compare its empirical performance with two other popular types of heavy‐tailed distribution, the Student's t distribution and the normal inverse Gaussian distribution (NIG), using a variety of asset return series. Our results illustrate that there is no overwhelmingly dominant distribution in fitting the data under the GARCH framework, although the NRIG distribution performs slightly better than the other two types of distribution. For market indexes series, it is important to introduce both GJR‐terms and the NRIG distribution to improve the models’ performance, but it is ambiguous for individual stock prices series. Our results also show the GJR‐GARCH NRIG model has practical advantages in quantitative risk management. Finally, the convergence of numerical solutions in maximum‐likelihood estimation of GARCH and GJR‐GARCH models with the three types of heavy‐tailed distribution is investigated.     

Non-rating revenue and conflicts of interest

Rating agencies produce ratings used by investors, but obtain most of their revenue from issuers, leading to a conflict of interest. We employ a unique data set on the use of non-rating services, and the associated payments, in India, to test if this conflict affects ratings quality. Agencies rate issuers that pay them for non-rating services higher (than agencies not hired for such services). Such issuers also have higher default rates. Both effects are increasing in the amount paid. These results suggest that issuers which hire agencies for non-rating services receive higher ratings despite having higher default risk.     

Impact of modern communication infrastructure on productivity,production structure and factor demands of US industries: Impact revisited

This study investigates the contribution of modern communication infrastructure characterized by high speed broadband access network on the productivity growth, production structure and factor demands for US industries and for the aggregate economy. To evaluate such contribution, we modify the traditional cost function by incorporating communication infrastructure as input in production process in conjunction with other public infrastructures. The network externality and spillover effect of broadband access technology are captured by introducing broadband penetration rate as a shift factor in industry level production function. Empirical results show that the increased use of modern communications infrastructure increases the productivity of all industries with wide variations across industries. Estimated impacts on input demands show that increase in use of communications infrastructure service saves labor and materials and increase the demand for private capital. Finally, aggregate social rate of return on such investment has been estimated for policy implications.