Comparing Financial Transparency between For-profit and Nonprofit Suppliers of Public Goods: Evidence from Microfinance
Journal of International Financial Markets, Institutions and Money,
Previous research finds market financing is favored over relationship financing in environments of better governance, since the transaction costs to investors of vetting asymmetric information are thereby reduced. For industries supplying public goods, for-profits rely on market financing, while nonprofits rely on relationships with donors. This suggests that for-profits will be more inclined than nonprofits to improve financial transparency. We examine the impact of for-profit versus nonprofit status on the financial transparency of firms engaged with supplying public goods. There are relatively few industries that have large number of both for-profit and nonprofit firms across countries. However, the microfinance industry provides the opportunity of a large number of both for-profit and nonprofit firms in relatively equal numbers, across a wide array of countries. Consistent with our prediction, we find that financial transparency is positively associated with a for-profit status. Results will be of broad interest both to scholars interested in the roles of transparency and transaction costs on market versus relational financing; as well as to policy makers interested in the impact of for-profit on the supply of public goods, and on the microfinance industry in particular.
The Impact of Innovation and Innovation Subsidies on Economic Development in German Regions
Public innovation subsidies in a regional environment are expected to unfold a positive economic impact over time. The focus of this paper is on an assessment of the long-run impact of innovation and innovation subsidies in German regions. This is scrutinized by an estimation approach combining panel model and time-series characteristics and using regional data for the years 1980–2014. The results show that innovation and innovation subsidies in the long run have a positive impact on the economic development of regions in Germany. This supports a long-term strategy for regional and innovation policy.
The Diablo 3 Economy: An Agent Based Approach
Designers of MMOs such as Diablo 3 face economic problems much like policy makers in the real world, e.g. inflation and distributional issues. Solving economic problems through regular updates (patches) became as important to those games as traditional gameplay issues. In this paper we provide an agent framework inspired by the economic features of Diablo 3 and analyze the effect of monetary policy in the game. Our model reproduces a number of features known from the Diablo 3 economy such as a heterogeneous price development, driven almost exclusively by goods of high quality, a highly unequal wealth distribution and strongly decreasing economic mobility. The basic framework presented in this paper is meant as a stepping stone to further research, where our evidence is used to deepen our understanding of the real-world counterparts of such problems. The advantage of our model is that it combines simplicity that is inherent to model economies with a similarly simple observable counterpart (namely the game environment where real agents interact). By matching the dynamics of the game economy we can thus easily verify that our behavioral assumptions are good approximations to reality.
Switching to Exchange Rate Flexibility? The Case of Central and Eastern European Inflation Targeters
FIW Working Paper,
This paper analyzes changes in the monetary policy in the Czech Republic, Hungary, and Poland following the policy shift from exchange rate targeting to inflation targeting around the turn of the millennium. Applying a Markovswitching dynamic stochastic general equilibrium model, switches in the policy parameters and the volatilities of shocks hitting the economies are estimated and quantified. Results indicate the presence of regimes of weak and strong responses of the central banks to exchange rate movements as well as periods of high and low volatility. Whereas all three economies switched to a less volatile regime over time, findings on changes in the policy parameters reveal a lower reaction to exchange rate movements in the Czech Republic and Poland, but an increased attention to it in Hungary. Simulations for the Czech Republic and Poland also suggest their respective central banks, rather than a sound macroeconomic environment, being accountable for reducing volatility in variables like inflation and output. In Hungary, their favorable developments can be attributed to a larger extent to the reduction in the size of external disturbances.
Ceremonial Encapsulation and the Diffusion of Renewable Energy Technology in Germany
Journal of Economic Issues,
This inquiry employs ideas advanced by institutionalist thinker Paul Dale Bush to shed light on technology diffusion in Germany’s electrical generation and distribution industry. Research findings suggest that what Bush labeled as ceremonial dominance affects outcomes in technology selection. Evidence suggests that fossil fuel and nuclear technologies have remained favored by power producers despite the externalized environmental costs to society associated with their implementations. Advances in government policy have indeed created a framework that favorably accommodates renewable energy technologies. However, what Bush labeled ceremonial dominance is shown to persist and to contribute to ceremonial encapsulation. Consequently, renewable energy technologies have diffused only to the point that the powers behind the industry remain in dominant positions. Although there is measurable, incremental technological change in the electrical power industry, in light of the urgency of climate change problems, technologies supporting the electrical power system need to be selected more judiciously.
International Side-payments to Improve Global Public Good Provision when Transfers are Refinanced through a Tax on Local and Global Externalities
International Economic Journal,
This paper discusses a tax-transfer scheme that aims to address the under-provision problem associated with the private supply of international public goods and to bring about Pareto optimal allocations internationally. In particular, we consider the example of the global public good ‘climate stabilization’, both in an analytical and a numerical simulation model. The proposed scheme levies Pigouvian taxes globally, while international side-payments are employed in order to provide incentives to individual countries for not taking a free-ride from the international Pigouvian tax scheme. The side-payments, in turn, are financed via environmental taxes. As a distinctive feature, we take into account ancillary benefits that may be associated with local public characteristics of climate policy. We determine the positive impact that ancillary effects may exert on the scope for financing side-payments via environmental taxation. A particular attractive feature of ancillary benefits is that they arise shortly after the implementation of climate policies and therefore yield an almost immediate payback of investments in abatement efforts. Especially in times of high public debt levels, long periods of amortization would tend to reduce political support for investments in climate policy.
Impact of Personal Economic Environment and Personality Factors on Individual Financial Decision Making
Frontiers in Decision Neuroscience,
This study on healthy young male students aimed to enlighten the associations between an individual’s financial decision making and surrogate makers for environmental factors covering long-term financial socialization, the current financial security/responsibility, and the personal affinity to financial affairs as represented by parental income, funding situation, and field of study. A group of 150 male young healthy students underwent two versions of the Holt and Laury (2002) lottery paradigm (matrix and random sequential version). Their financial decision was mainly driven by the factor “source of funding”: students with strict performance control (grants, scholarships) had much higher rates of relative risk aversion (RRA) than subjects with support from family (ΔRRA = 0.22; p = 0.018). Personality scores only modestly affected the outcome. In an ANOVA, however, also the intelligence quotient significantly and relevantly contributed to the explanation of variance; the effects of parental income and the personality factors “agreeableness” and “openness” showed moderate to modest – but significant – effects. These findings suggest that environmental factors more than personality factors affect risk aversion.