The Financial Management of Catastrophic Flood Risks in Emerging-Economy Countries

This article examines the potential of pre- and post-disaster instruments for funding disaster response and recovery and for creating incentives for flood loss mitigation in countries with emerging or transition economies. As a concrete case, we discuss the disaster recovery arrangements following the 1997 flood disaster in Poland. We examine the advantages and limitations of hedging instruments, which are instruments for transferring the risk to investors either through insurance or capital market-based securities. We compare these mechanisms with financing instruments whereby the government sets aside funds prior to a disaster or taps its own funding sources after the event occurs. We show how hedging instruments can be designed to create incentives for the mitigation of damage to public infrastructure using the flood proofing of a water-treatment plant on the hypothetical Topping River as an illustrative example. We conclude that hedging instruments can be an attractive alternative to financing instruments that have been traditionally used in the poorer, emerging-economy countries to fund disaster recovery. Since very poor countries are likely to have difficulty paying the price of protection prior to a disaster, we suggest that international lending institutions consider innovations for subsidizing these payments.     

Flood Risk Acceptability and Economic Value of Evacuation

The economic value of evacuation and its relationship with flood risk acceptability in Japan were studied by applying the contingent valuation method (CVM). Flood risk acceptability here refers to the extent to which people accept the occurrence of floods, in terms of scale and frequency. The economic value of evacuation refers to people's willingness to pay (WTP) for avoiding evacuation inconvenience because of its inconvenience and the potential for certain losses as a result of evacuation. Our main finding was that over half of the people (56%) who actually evacuated in a real flood situation reported inconvenience. The greatest inconveniences were the shortages of information and food. Evacuation inconvenience can be regarded as an important factor causing the low rate of evacuation in Japan. The WTP for avoiding current inconvenience was approximately half of the estimated economic value of evacuation, implying that the current budget for evacuation is too small and should be increased to improve the conditions of evacuation sites. The economic value of evacuation can be taken into consideration in the risk assessment process in order to evaluate the efficiency of risk reduction measures. Flood risk acceptability and home ownership are two major statistically significantly determinants of the WTP. Considering that those who accept flood risk have a lower WTP for flood risk control (ex ante measures) than those who reject it, it is reasonable to think that there may be a tradeoff between the public WTPs for ex ante or ex post measures.     

Informing Ex Ante Event Studies with Macro‐Econometric Evidence on the Structural and Policy Impacts of Terrorism

Economic consequence analysis is one of many inputs to terrorism contingency planning. Computable general equilibrium (CGE) models are being used more frequently in these analyses, in part because of their capacity to accommodate high levels of event‐specific detail. In modeling the potential economic effects of a hypothetical terrorist event, two broad sets of shocks are required: (1) physical impacts on observable variables (e.g., asset damage); (2) behavioral impacts on unobservable variables (e.g., investor uncertainty). Assembling shocks describing the physical impacts of a terrorist incident is relatively straightforward, since estimates are either readily available or plausibly inferred. However, assembling shocks describing behavioral impacts is more difficult. Values for behavioral variables (e.g., required rates of return) are typically inferred or estimated by indirect means. Generally, this has been achieved via reference to extraneous literature or ex ante surveys. This article explores a new method. We elucidate the magnitude of CGE‐relevant structural shifts implicit in econometric evidence on terrorist incidents, with a view to informing future ex ante event assessments. Ex post econometric studies of terrorism by Blomberg et al . yield macro econometric equations that describe the response of observable economic variables (e.g., GDP growth) to terrorist incidents. We use these equations to determine estimates for relevant (unobservable) structural and policy variables impacted by terrorist incidents, using a CGE model of the United States. This allows us to: (i) compare values for these shifts with input assumptions in earlier ex ante CGE studies; and (ii) discuss how future ex ante studies can be informed by our analysis.     

Can governments make credible promises? Insights from infrastructure projects in emerging economies

Despite deregulation and privatization, governments in emerging economies continue to play important roles in private infrastructure projects, thereby exposing private investors to the risk of government reneging. The government's role as deal maker—and deal breaker—in infrastructure investments stems from its role as financier, customer, supplier, competitor, and/or regulator. (The only role governments have shed as a result of recent economic reforms is that of producer.) Based on the literature, I propose three explanations for government reneging: (1) economic uncertainty, which necessitates contract renegotiation; (2) the logic of the “obsolescing bargain,” which makes deals less attractive to governments ex post than they were ex ante; and (3) political change, which puts new leaders in charge with incentives to renege on old promises. I assert that these risks can be contained, respectively, through contract design, investment strategy, and institutional design. Using this framework, I conclude that Enron's strategy in the controversial Dabhol project in India was sensitive to first of the three factors and relatively less mindful of the other two. The policy implication for MNCs is that they should be attentive to all three factors that cause government reneging rather than just one or two.     

Benefit Analysis for Natural Hazards

The objective of this paper is to develop the ex ante perspective for benefit analysis with natural hazards. It defines an ex ante evaluation of the economic benefits that arise from policies designed to reduce either the risk of or the detrimental effects associated with a natural hazard. In the process the paper compares the ex ante and ex post perspectives and discusses the prospects for implementing the framework by measuring the valuation concepts that are developed.     

港口主导下煤炭供应链的下游经销商融资决策研究

作为资金密集型与大资本运营行业,煤炭贸易企业要在激烈的市场竞争中求得生存和发展就需要大量的资金准时投入,而随着国家对煤炭行业的新一轮宏观政策,煤炭贸易企业靠传统的银行融资就显得比较困难,这在近年来导致了较多的下游煤炭经销商不得不改行甚至破产。基于此,我国迫切需要提供下游煤炭经销商的融资决策理论与方法。本文表明当下游煤炭经销商面临资金不足并需要借贷时,它们可以利用基于供应链金融的应收账款质押和民间借贷两种不同方式进行融资。在这两种融资模式下,本文以煤炭经销商的收益为目标函数,以贷款方的审核时间、放贷率、贷款利率等为决策变量,提供了下游煤炭经销商的融资模式选择以及相关的最优融资额,从而能够确定它们的煤炭最优订货量。本文的研究结果为下游煤炭经销商的融资决策提供了有用的理论方法,对开拓煤炭港口企业的融资理念与推动煤炭港口整体的经济发展有着重要的应用价值。     

Sovereign Cat Bonds and Infrastructure Project Financing

We examine the opportunities for using catastrophe‐linked securities (or equivalent forms of nondebt contingent capital) to reduce the total costs of funding infrastructure projects in emerging economies. Our objective is to elaborate on methods to reduce the necessity for unanticipated (emergency) project funding immediately after a natural disaster. We also place the existing explanations of sovereign‐level contingent capital into a catastrophic risk management framework. In doing so, we address the following questions. (1) Why might catastrophe‐linked securities be useful to a sovereign nation, over and above their usefulness for insurers and reinsurers? (2) Why are such financial instruments ideally suited for protecting infrastructure projects in emerging economies, under third‐party sponsorship, from low‐probability, high‐consequence events that occur as a result of natural disasters? (3) How can the willingness to pay of a sovereign government in an emerging economy (or its external project sponsor), who values timely completion of infrastructure projects, for such instruments be calculated? To supplement our treatment of these questions, we use a multilayer spreadsheet‐based model (in Microsoft Excel format) to calculate the overall cost reductions possible through the judicious use of catastrophe‐based financial tools. We also report on numerical comparative statics on the value of contingent‐capital financing to avoid project disruption based on varying costs of capital, probability and consequences of disasters, the feasibility of strategies for mid‐stage project abandonment, and the timing of capital commitments to the infrastructure investment. We use these results to identify high‐priority applications of catastrophe‐linked securities so that maximal protection can be realized if the total number of catastrophe instruments is initially limited. The article concludes with potential extensions to our model and opportunities for future research.     

出口供应安全及基础设施影响下的天然气进出口博弈

鉴于出口国时常出现天然气出口供应安全问题,进口国因基础设施滞后引发的天然气供需矛盾,考虑出口供应安全、基础设施与需求量三者之间的相互影响,文章构建了进出口两国之间的动态博弈模型。运用最优控制等理论,求得了双方的均衡策略及效用。结果表明,天然气出口价格越高,使得进口国的天然气销售价格越高及其对基础设施投入越少;出口国为保障出口供应安全付出的努力与天然气出口价格之间呈倒“U”型关系;与天然气寡头竞争市场相比,出口垄断市场的天然气出口价格、出口供应安全、基础设施存量以及出口国效用更高,进口国效用更低;在寡头竞争市场,与合作方式相比,两国在议价下的天然气出口价格、出口供应安全、基础设施存量以及出口国效用更高,进口国效用更低。     

Information Acquisition and Efficient Mechanism Design

We consider a general mechanism design setting where each agent can acquire (covert) information before participating in the mechanism. The central question is whether a mechanism exists that provides the efficient incentives for information acquisition ex‐ante and implements the efficient allocation conditional on the private information ex‐post. It is shown that in every private value environment the Vickrey‐Clark‐Groves mechanism guarantees both ex‐ante as well as ex‐post efficiency. In contrast, with common values, ex‐ante and ex‐post efficiency cannot be reconciled in general. Sufficient conditions in terms of sub‐ and supermodularity are provided when (all) ex‐post efficient mechanisms lead to private under‐ or over‐acquisition of information.     

中小企业财务结构与债务融资——基于浙江的实证研究

本文以浙江省中小企业为研究对象,主要讨论三方面内容:(1)全面分析中小企业财务结构与融资特征,并与大企业作比较,得出部分中小企业在偿债能力、营运能力和盈利能力等方面均不逊色于大企业;(2)从微观角度,对中小企业主要债务融资作实证分析,识别影响中小企业债务融资的显著因素。同时根据回归结果证实中小企业主要债务融资的成本比较优势依次为:银行贷款、商业信用和非正规融资;(3)利用Kruskal-Wallis非参数检验方法判定行业因素对中小企业债务融资具有显著差异,而宏观经济周期变化对其影响却不显著。本文结论的另一重要性在于,填补主流文献仅从金融机构或政府金融体制建设等方面寻求破解中小企业融资难的答案,从企业自身经营和财务管理角度解释中小企业融资难的原因。     

‘Test Driving’ a Financing Instrument for Climate Adaptation: Analyzing Institutional Dilemmas using Simulation Gaming

Urban physical public infrastructure is a frontline defense mechanism to manage and mitigate climate-related impacts. Market instruments are often cited as possible means to spread risk and reduce financial burdens on the public sector. The authors argue that existing research tends to focus on the technical issues of instruments and neglects considering institutional dynamics that may enable or constrain local market-based financing mechanisms. In this article, three core dilemmas (values uncertainty, planning horizon, and indirect benefits) are used to analyze the responses of practitioners to a possible financing instrument. The findings indicate that the practitioner’s responses to tax increment financing were largely shaped by the adaptation dilemmas and not the characteristics of the instrument per se. By mapping the dilemmas onto whether they would recommend it, participants imposed a financial barrier on climate adaptation investments. The authors conclude that a key imperative in the design of policy instruments is to pay attention to the congruency of informal institutions at the ‘street level’ in order to be in-step with the current sociopolitical conditions. The findings also point to four key attributes that a local market-based instrument would need to be aligned and responsive to the Dutch planning and development context.     

AN ANALYSIS OF SHAREHOLDER AGREEMENTS

Shareholder agreements govern the relations among shareholders in privately held firms, such as joint ventures and venture capital‐backed companies. We provide an economic explanation for key clauses in such agreements—namely, put and call options, tag‐along and drag‐along rights, demand and piggy‐back rights, and catch‐up clauses. In a dynamic moral hazard setting, we show that these clauses can ensure that the contract parties make efficient ex ante investments in the firm. They do so by constraining renegotiation. In the absence of the clauses, ex ante investment would be distorted by unconstrained renegotiation aimed at (i) precluding value‐destroying ex post transfers, (ii) inducing value‐increasing ex post investments, or (iii) precluding hold‐out on value‐increasing sales to a trade buyer or the IPO market. (JEL: G34)     

债权治理机制、企业特征与成长性——来自中国中小上市公司的经验证据

本文以中国中小上市公司2002～2005年的经验数据为样本,采用结构方程模型探讨了债权治理机制的4个主要维度:偿债能力、债务融资程度、资产期限、债务期限,并对债权治理机制、企业特征因素与企业成长性的关系进行了理论和实证分析.结果显示,中小企业债权综合治理机制对企业成长并没有产生应有的促进效用,其中偿债能力与企业成长性负相关;资产期限结构的影响作用不显著;债务融资和债务期限结构对企业成长有促进作用;企业特征的异质性显著影响债权治理水平和企业成长性.     

Temptation and Self‐Control

We study a two‐period model where ex ante inferior choice may tempt the decision‐maker in the second period. Individuals have preferences over sets of alternatives that represent second period choices. Our axioms yield a representation that identifies the individual's commitment ranking, temptation ranking, and cost of self‐control. An agent has a preference for commitment if she strictly prefers a subset of alternatives to the set itself. An agent has self‐control if she resists temptation and chooses an option with higher ex ante utility. We introduce comparative measures of preference for commitment and self‐control and relate them to our representations.     

THE JOINT DESIGN OF UNEMPLOYMENT INSURANCE AND EMPLOYMENT PROTECTION: A FIRST PASS

Unemployment insurance and employment protection are typically discussed and studied in isolation. In this paper, we argue that they are tightly linked, and we focus on their joint optimal design in a simple model, with risk‐averse workers, risk‐neutral firms, and random shocks to productivity. We show that, in the “first best,”unemployment insurance comes with employment protection—in the form of layoff taxes; indeed, optimality requires that layoff taxes be equal to unemployment benefits. We then explore the implications of four broad categories of deviations from first best: limits on insurance, limits on layoff taxes, ex post wage bargaining, and ex ante heterogeneity of firms or workers. We show how the design must be modified in each case. Finally, we draw out the implications of our analysis for current policy debates and reform proposals, from the financing of unemployment insurance, to the respective roles of severance payments and unemployment benefits.     

Equity in Social Risk: Some Empirical Observations

In societal risk analysis the equity of the distribution of risks is often an important consideration owing to the special nature of health risks. We empirically validate some assumptions about equity that have been discussed in the decision analytic literature. Our results show that the way fatalities are distributed throughout a society is considered along with the number of fatalities in evaluating alternative policies involving mortality risks. The concepts of ex ante equity and ex post equity are both shown to be important in judgments of fairness. We next present a decision model based on multiattribute preference theory incorporating the number of fatalities, as well as ex ante equity and ex post equity. When ex ante equity and ex post equity are positively weighted in this fair-risk model , options with more equal risk distributions are ranked higher. Next we empirically show that the distribution of benefits has an impact on judgments of fairness. The fair-risk model does not include information on the benefits distribution, so it would apply when benefits are distributed equally or when the decision maker wishes to not include benefits in the model. We briefly discuss how the notion of proportional equity can incorporate benefits into judgments of the fairness of risk distributions. We then include benefits in a more general model in which fair risk-benefit combinations are those that are exchange equitable. A key implication of this envy-free risk–benefit model is that an unequal distribution of risks may be preferred if it is accompanied by a compensatory differential in benefits consistent with peoples' preference tradeoffs between received benefits and assumed risks. Finally, we discuss how perceived deservedness may influence judgments about equity. We conclude with a discussion of the implications of research on alternative notions of equity for policy makers dealing with social risks.     

直接融资结构对经济增长的非线性影响

伴随着中国经济的高速发展,实体经济结构与金融结构难以匹配的问题日益严重,大量中小企业日益增长的融资需求无法得到满足。股权融资与债券融资结构优化问题成为企业融资决策的普遍难题。本文致力于研究直接融资结构即股权融资和债券融资的比例对于中国经济增长的影响。首先,本文通过内生增长理论模型研究了直接融资结构与经济增长之间的动态关系。然后,基于2002-2019年间中国的相关数据,对技术创新变量进行中介效应检验,验证直接融资结构对于经济增长的作用路径。研究发现：直接融资结构对中国经济增长的影响呈现非线性效应;直接融资结构是通过促进技术创新来进一步促进经济增长;目前,中国仍处于需要提高股权融资占比来促进经济快速增长的阶段。     

Redistribution Through Education and Other Mechanisms Under Capital‐Market Imperfections and Uncertainty: A Welfare Effect Analysis

Abstract. This paper considers a two‐period model of endogenous human capital formation under the credits‐market imperfection and uncertainty assumptions. We compare in the first part of the paper ex‐ante and ex‐post general‐equilibrium effects of the education subsidy policy to those of the negative income tax and the unskilled wage subsidy regimes. We show that the education subsidy policy raises an efficiency‐inequality trade‐off issue, and therefore it is optimal unless the degree of inequality aversion is relatively high and financing the subsidy is not too distorsive. Public loans are generally claimed to provide a solution for such issue. We explore the implications of implementing the public loan under several schemes in the second part of the paper. We show that combining between a pure public loan and education subsidies provides higher levels of welfare than these two policies taken separately provided that the inequality aversion degree is high. For low degrees of inequality aversion, the pure public loan is the optimal policy.     

基础项目融资风险的分担比例研究

基础项目融资风险分配是否合理直接决定着基础项目融资能否成功,针对政府和项目主办方共同承担的风险,本文分别研究了影响项目成本和影响项目收益的风险分担比例模型.     

Flood Catastrophe Model for Designing Optimal Flood Insurance Program: Estimating Location‐Specific Premiums in the Netherlands

As flood risks grow worldwide, a well‐designed insurance program engaging various stakeholders becomes a vital instrument in flood risk management. The main challenge concerns the applicability of standard approaches for calculating insurance premiums of rare catastrophic losses. This article focuses on the design of a flood‐loss‐sharing program involving private insurance based on location‐specific exposures. The analysis is guided by a developed integrated catastrophe risk management (ICRM) model consisting of a GIS‐based flood model and a stochastic optimization procedure with respect to location‐specific risk exposures. To achieve the stability and robustness of the program towards floods with various recurrences, the ICRM uses stochastic optimization procedure, which relies on quantile‐related risk functions of a systemic insolvency involving overpayments and underpayments of the stakeholders. Two alternative ways of calculating insurance premiums are compared: the robust derived with the ICRM and the traditional average annual loss approach. The applicability of the proposed model is illustrated in a case study of a Rotterdam area outside the main flood protection system in the Netherlands. Our numerical experiments demonstrate essential advantages of the robust premiums, namely, that they: (1) guarantee the program's solvency under all relevant flood scenarios rather than one average event; (2) establish a tradeoff between the security of the program and the welfare of locations; and (3) decrease the need for other risk transfer and risk reduction measures.