Does foreign bank entry contribute to financial development? Examining the role of income thresholds

This article examines the relationship between foreign bank entry and financial development in a panel framework covering 57 emerging market and developing economies (EMDEs) between 1995 and 2009. Using various measures of financial sector deepening, the article also explores the degree to which the relationship between foreign bank entry and financial sector depth varies by different income thresholds of the EMDEs. The empirical findings suggest that while foreign banks have a direct positive impact in furthering financial depth, the marginal effects of foreign bank entry diminish over time with greater levels of economic development. In other words, the impact of foreign bank entry tends to diminish as the per capita income of the country rises.     

Foreign Direct Investment and Institutional Environment in Transition Economies

We analysed the relation between foreign direct investment and the quality of the institutional environment in transition economies. The analysis confirmed a significant impact of various institutional aspects on the inflow of foreign capital. To isolate the importance of the institutional environment from the impact of other factors, a panel data analysis was performed using the data of 24 transition economies in the period 1995–2002. The results showed that in the observed period the quality of the institutional environment significantly influenced the level of foreign direct investment in transition economies. Other variables that proved to have a statistically significant influence were budget deficit, insider privatization, and labour cost per hour.     

The relationship between foreign direct investment and economic growth: evidence from transition countries

This paper examines the importance of foreign direct investment on economic growth. Using a panel data set for 27 transition economies over the period 1991–2004 as well as the methodology of panel cointegration and causality tests, the empirical findings show that foreign direct investment does exhibit a significant relationship with economic growth, at least for those transition countries that are characterized by high levels of income and have implemented successful privatization programs.     

FOREIGN INVESTMENT AND TRADE DEPENDENCE

This article explores the relationship between foreign capital investment and trade dependence in less developed economies. Dependency and world system theorists have argued that foreign investment from the advanced capitalist states promotes export and import dependent forms of development. Using cross-national data for 65 less developed nations between 1960 and 1977, the analysis supports this general claim. Total direct foreign investment has a significant positive impact on the measures of export, import and total trade dependence. However, when the total foreign investment measure is disaggregated by sectoral destination (agriculture, manufacturing, petroleum/extraction) only investment in petroleum/extraction has the expected effect on trade dependence. This finding suggests that a large part of the effect of foreign investment may be due to the structuring influence of investment in mineral/extractive forms of production.     

国际收支结构变动的理论和实践及其对中国的政策含义

国际收支平衡问题主要是围绕经常项目的平衡来展开。经常项目里主要有贸易项和投资收入项。根据国际收支克劳瑟模型理论,一国在发展过程中要经历不同阶段,随着一国国民收入水平的变化,这个国家的国际收支将发生一系列的变化。美国和亚洲国家国际收支情况的演变过程,基本符合克劳瑟模型理论,但中国是一个例外。东南亚金融危机后,中国成为世界上最重要的资本输出国,却以投资收入逆差为代价。这不仅造成巨大的福利损失,还导致了一系列的发展难题。中国应考虑是否还要继续充当资本输出国和继续积累外汇储备。     

Economic,Social, and Cultural Contexts for Market and Product Diversification of the Lithuanian Tourism Sector

Lithuania has shown a 7% or greater increase in gross domestic product since joining the European Union, an increasing employment rate, and in part because of the greater incorporation of older people, especially females, a numerical increase in the employed; yet its population is declining because of both a low birth rate and migration. Both domestic and inbound tourism are rising. Yet because of the greater population in the Vilnius–Kaunas corridor, and because many people have left other counties to work there, tourist income in less developed parts of the country would help correct income disparities and foster sustainable regional development. While tourism attracts limited foreign direct investment, tourist infrastructure (boutique hotels, upgraded houses in the countryside, local restaurants, culture and language tourism) would be a good investment for smaller investors if strategically placed alongside a designated publicity campaign, in tandem with other eastern Baltic states or sponsored by EC delegations outside the EU, to attract small investors (including Lithuanians resident abroad) to the less developed regions of the country.      

FINANCIAL CRISES,OUTPUT LOSSES,AND THE ROLE OF STRUCTURAL REFORMS

Financial crises take a heavy toll on output growth. We assess the role of structural reforms in reducing the output losses resulting from financial crises across advanced economies, emerging and developing economies, and low‐income developing economies. We also revisit the role of macroeconomic policies in this context. The impact of crises on output growth differs between types of crises and economies, thus warranting sample splits along these lines. Some but not all reforms and policies help to reduce the output losses of crises in the medium term, highlighting the need not to overgeneralize the effectiveness of reforms and policies. Further research is warranted to further explore the heterogeneity in the impact of financial crises on output growth and to better understand when and how specific structural reforms and macroeconomic policies can mitigate the output costs of financial crises. (JEL E32, E44, E63, G28, O47)     

Social Impact Investing in Germany: Current Impediments from Investors’ and Social Entrepreneurs’ Perspectives

The paper provides empirical evidence on impediments of the emerging social impact investment field in Germany. The study is based on 19 in-depth interviews with social impact investing funds, investment advisors, and social entrepreneurs as investees. It takes an explorative approach because of the nascent stage of research on the subject. By systematically relating the perspectives of the actors involved, the study gives a broad empirical picture on the major challenges for social impact investing in Germany. Results reveal nine critical problem areas we have arranged along three dimensions: financial returns, social returns, and relationships and infrastructure. They comprise investors’ and social entrepreneurs’ practices, institutional settings which are still heavily influenced by peculiarities of the German welfare systems, as well as undeveloped framework conditions in the social investment market. By interpreting the results through a lens of conflicting institutional logics, we further contribute to this research stream by showcasing social impact investing as a core area of friction between the logics of the market and civil society.     

Trade openness and income inequality: New empirical evidence

We examine how trade openness influences income inequality within countries. The sample includes 139 countries over the period 1970–2014. We employ predicted openness as instrument to deal with the endogeneity of trade openness. The effect of trade openness on income inequality differs across countries. Trade openness tends to disproportionately benefit the relative income shares of the very poor, but not necessarily all poor, in emerging and developing economies. In most advanced economies, trade openness increased income inequality, an effect that is driven by outliers. Our results suggest a strong effect of trade openness on inequality in China and transition countries.     

EXCHANGE RATE SYSTEMS AND INVESTOR PREFERENCES

This paper investigates whether or not floating exchange rates add an undesirable level of risk to international investment positions. For investors holding currencies, we find that fixed exchange rates are preferred to floating exchange rates, which supports the often-argued case that floating exchange rates do excessively increase the riskiness of investment. However, in the more realistic case of investors holding foreign securities, we find that floating exchange rates are preferred to fixed exchange rates; that is, we find that floating exchange rates have not added an undesirable level of risk to international investment positions.     

Trade Balance and Income Shocks: Experience of Transition Economies

This paper investigates the major sources of changes in the trade balance of four Central European and three Baltic transition economies with an emphasis on the difference between permanent and transitory disturbances to income. In all seven countries the findings support the hypothesis that transitory disturbances to income are the main determinants of changes in the trade balance. These results seem to be fairly consistent with inter-temporal models of trade balance, which view transitory shocks to income as the main source of variations in the trade balance. These results do not seem to support the view that productivity shocks alone generate most of the variation in the trade balance.      

FROM HONEYMOON TO DIVORCE: INSTITUTION QUALITY AND FOREIGN INVESTORS' OWNERSHIP CONSOLIDATION IN CHINA

In China, joint ventures (JVs) between foreign investors and Chinese local firms were the most popular form of foreign affiliates before 2001. Over time, with policy space to operate as foreign wholly owned (WOs), many foreign investors in JVs chose to consolidate ownership and turned JVs into their WOs. Here, we examine how institution quality affects foreign investors' JV‐to‐WO ownership consolidation odds. For each province‐year, we construct an institution quality index from the business and judicial quality indicators, and further compute a relative quality index to highlight provincial variations. Using more than 43,000 JVs operating in China's 30 provinces over 1998–2007, we find that increases in institution quality decrease the odds of foreign investors to divorce their Chinese local partners. The odds for foreign investors in JVs to consolidate ownerships are significantly higher if they operate in provinces with relatively weaker institution quality. The odds of foreign investors' JV‐to‐WO decision vary with JVs' local firms being state‐owned enterprises (SOEs) and non‐SOEs, with foreign investors' origins from Hong Kong, Macao, and Taiwan (HMT) and other regions (Foreign), and with foreign investors' initial equity positions. Our results are not driven by foreign direct investment policy shocks, and are robust to alternative measures of institution quality. (JEL F23, L23)     

Social Impact Investment Behavior in the Nonprofit Sector: First Insights from an Online Survey Experiment

This study investigates the social impact investment behavior of private investors in a nonprofit setting. In particular, the influences of three effects—financial return, social impact, and age—on social impact investment behavior are tested in an online survey experiment. The study sample includes bank clients (N = 145) from Germany’s first and largest bank exclusively focused on social and ecological investments. The results with regard to the financial return effects are in line with for-profit research that social impact investors are willing to accept 1% lower financial returns. In addition, younger philanthropists are more likely to contribute part of their money to social impact investments. Further findings reveal that the perceived innovativeness of the project has a consistently positive effect on social impact investment behavior. People with certain profile characteristics (e.g., entrepreneurial spirits) also are more likely to participate in social impact investments.     

Guilds in the transition to modernity: The cases of Germany,United Kingdom,and the Netherlands

One important aspect of the transition to modernity is the survival of elements of the Old Regime beyond the French Revolution. It has been claimed that this can explain why in the late nineteenth and early twentieth centuries some Western countries adopted national corporatist structures while others transformed into liberal market economies. One of those elements is the persistence or absence of guild traditions. This is usually analyzed in a national context. This article aims to contribute to the debate by investigating the development of separate trades in Germany, the United Kingdom, and The Netherlands throughout the nineteenth century. We distinguish six scenarios of what might have happened to crafts and investigate how the prevalence of each of these scenarios in the three countries had an impact on the emerging national political economies. By focusing on trades, rather than on the national political economy, our analysis demonstrates that in each country the formation of national political economies and citizenship rights was not the result of a national pattern of guild survival. Rather, the pattern that emerged by the end of the nineteenth century was determined by the balance between old and new industries, and that between national and regional or local government.     

The Impact of Temporary Migration on Source Countries

We quantify the home country effects of different types of temporary and permanent migration patterns using a global integrated model for three developing countries. Our results suggest that migration (whether permanent or temporary) is beneficial for income as well as for poverty reduction in the home countries as it raises remittances, labor productivity, trade, and foreign direct investment and it provides incentives for human capital accumulation. These channels offset the negative impact of “brain drain.” In the simulations, temporary migration programs yield better outcomes than permanent migration due to the productivity gains induced in the home countries by returning migrants.     

Economic Freedom and Economic Growth in South East Europe

Economic freedom, understood as absence of barriers for business entry, business operations and business exit, is a source of economic development. Its impact is indirect: through institutions framework creation and environment that encourages economic development. Primarily, economic freedoms are a reflection of institutional arrangement, which makes business operations and the realization of business ideas easier for entrepreneurs and managers, who are two extremely important groups for economic development. The aim of the paper is to present empirical analysis of interrelation between economic freedom and economic development, expressed through several indicators, such as gross domestic product, income per capita, foreign direct investment per capita.     

Decisive FDI obstacles as an explanatory reason for limited FDI inflows in an EMU member state: The case of Greece

A questionnaire survey covering MNCs that had invested in Greece during the period 1995–2003 is carried out in order to determine the barriers of inward FDI in Greece through a phase of increased expectations on foreign investment from hosting the 2004 Olympiad. The underlying assumption made is that the views of the local managers reflect the views of the mother company when deciding to invest. Although the findings represent the time that the investment took place, the influence of the conditions shaping the economic environment at the time the survey was carried out is also discussed. The findings indicate that the primary barriers to foreign investors are bureaucracy, taxation, corruption, and the labor market structure and support those of previous quantitative studies, leading to the conclusion that there is no progress made regarding these factors, in order to enhance FDI attractiveness. It becomes crucial for Greece to modernize and upgrade state mechanisms, through a more effective organization and administrative policies.     

Connected for Development? Theory and evidence about the impact of Internet technologies on poverty alleviation

Based on the assumption that increased access to internet services boosts economic growth and improves the well‐being of the poor, governments in both developed and emerging regions are heavily investing in internet connectivity projects. This article reviews the existing evidence as to the impact of internet technologies on various development dimensions, and articulates the empirical evidence into an analytical framework that seeks to identify the micro‐linkages between internet adoption and poverty alleviation. The review suggests that the development pay‐offs of internet technologies are ambiguous due to two interrelated effects. First, because effective appropriation requires a range of skills as well as complementary investment in human capital and organizational changes. This tends to favour well‐educated workers and firms with more innovative capacity and access to finance. Second, because the positive effects of internet dissemination on market co‐ordination and political institutions grow exponentially with adoption levels. As a result, while the evidence indicates that advanced economies are reaping significant benefits from internet investments, the returns for less advanced economies, and in particular for the fight against poverty in these regions, remain uncertain.     

Who Gets What? Gender Differences in “Spendable” Income

SUMMARY

Feminist policy makers need accurate measures of inequality in the economic well-being of men and women. In this paper, we explain why the wage gap by gender gives a misleading measure of women's relative economic well-being in the United States, emphasizing the effects of income pooling within households. We construct a household-level index of women's “spendable” income relative to men's that builds on Randy Albelda's (1988) “PAR index.” We improve on the PAR index in three ways. First, we account for economies of scale associated with additional household members. Second, we utilize the Current Population Survey to capture the impact of government taxes and transfers, providing an indicator of “spendable,” rather than “money,” income. Finally, as a step toward redefining the concept of “spendable” income, we deduct a lower-bound estimate of child care costs.     

Tax Uncertainty and Investment: A Cross-Country Empirical Examination

An empirical examination of uncertain tax policy is crucial to a full understanding of the interplay between taxes and investment, especially given the ambiguities in the limited theoretical literature. This article empirically investigates the impact on investment of volatility in effective tax rates on capital income in a cross-section of the 15 countries of the European Union, the United States, and Japan. Panel regression results suggest that the volatility of effective tax rates on capital income has a significant negative impact on investment per worker, with elasticities ranging from −0.012 to −0.029.