Negative investment in China: financing constraints and restructuring versus growth

This paper attempts to address a puzzle in China’s investment pattern: despite high aggregate investment and remarkable economic growth, negative net investment is commonly found at the microeconomic level. Using a large firm-level dataset, we test three hypotheses to explain the existence and extent of negative investment in each ownership group: what we term the efficiency (or restructuring) hypothesis, the (lack of) financing hypothesis, and the (slow) growth hypothesis. Our panel data probit estimations shows that negative investment by state-owned firms can be explained mainly by inefficiency: owing to over-investment or mis-investment in the past, these firms have had to restructure and to get rid of obsolete capital in the face of increasing competition and hardening budgets. The financing explanation holds for private firms, which have had to divest in order to raise capital. However, rapid economic growth weighs against both effects in all types of firms, with a larger impact for firms in the private and foreign sectors. A tobit model, estimated to examine the determinants of the amount of negative investment, yields similar conclusions.

Investment and financing constraints in China: does working capital management make a difference?

We use a panel of over 120,000 Chinese firms of different ownership types over the period 2000-2007 to analyze the linkages between investment in fixed and working capital and financing constraints. We find that those firms characterized by high working capital display high sensitivities of investment in working capital to cash flow (WKS) and low sensitivities of investment in fixed capital to cash flow (FKS). We then construct and analyze firm-level FKS and WKS measures and find that, despite severe external financing constraints, those firms with low FKS and high WKS exhibit the highest fixed investment rates. This suggests that good working capital management may help firms to alleviate the effects of financing constraints on fixed investment.

Trade in bilateral oligopoly with endogenous market formation

We study a strategic market game in which traders are endowed with both a good and money and can choose whether to buy or sell the good. We derive conditions under which a non-autarkic equilibrium exists and when the only equilibrium is autarky. Autarky is ‘nice’ (robust to small perturbations in the game) when it is the only equilibrium, and ‘very nice’ (robust to large perturbations) when no gains from trade exist. We characterize economies where autarky is nice but not very nice; that is, when gains from trade exist and yet no trade takes place.

Market Familiarity and the Location of South and North MNEs

We use a systematic empirical analysis of the determinants of South-South (SS) and North-South (NS) foreign direct investment (FDI) as a canvas to explore how multinational enterprises’ (MNEs) location decisions are shaped by better acquaintance with a foreign market resulting from bilateral ties, experience of international expansion, and knowledge of how to deal with poor governance. We find that these various aspects of market familiarity, which can interact together, are important to explain and differentiate the location behaviours of South MNEs (S-MNEs) and North MNEs (N-MNEs) in developing countries.

Incentivising Investment in the UKCS: a Response to Supporting Investment: a Consultation on the North Sea Fiscal Regime

NORTH SEA STUDY OCCASIONAL PAPER No. 111

An Optimised Illustrative Investment Model Of The Economics Of Integrated Returns From CCS Deployment In The UK/UKCS

NORTH SEA STUDY OCCASIONAL PAPER No. 118

On Cobb-Douglas Preferences in Bilateral Oligopoly

Bilateral oligopoly is a simple model of exchange in which a finite set of sellers seek to exchange the goods they are endowed with for money with a finite set of buyers, and no price-taking assumptions are imposed. If trade takes place via a strategic market game bilateral oligopoly can be thought of as two linked proportional-sharing contests: in one the sellers share the aggregate bid from the buyers in proportion to their supply and in the other the buyers share the aggregate supply in proportion to their bids. The analysis can be separated into two ‘partial games’. First, fix the aggregate bid at B; in the first partial game the sellers contest this fixed prize in proportion to their supply and the aggregate supply in the equilibrium of this game is X˜ (B). Next, fix the aggregate supply at X; in the second partial game the buyers contest this fixed prize in proportion to their bids and the aggregate bid in the equilibrium of this game is ˜B (X). The analysis of these two partial games takes into account competition within each side of the market. Equilibrium in bilateral oligopoly must take into account competition between sellers and buyers and requires, for example, ˜B (X˜ (B)) = B. When all traders have Cobb-Douglas preferences ˜ X(B) does not depend on B and ˜B (X) does not depend on X: whilst there is competition within each side of the market there is no strategic interdependence between the sides of the market. The Cobb-Douglas assumption provides a tractable framework in which to explore the features of fully strategic trade but it misses perhaps the most interesting feature of bilateral oligopoly, the implications of which are investigated.

Policy Labels and Investment Decision-making

Much attention in recent years has turned to the potential of behavioural insights to improve the performance of government policy. One behavioural concept of interest is the effect of a cash transfer label on how the transfer is spent. The Winter Fuel Payment (WFP) is a labelled cash transfer to offset the costs of keeping older households warm in the winter. Previous research has shown that households spend a higher proportion of the WFP on energy expenditures due to its label (Beatty et al., 2011). If households interpret the WFP as money for their energy bills, it may reduce their willingness to undertake investments which help achieving the same goal, such as the adoption of renewable energy technologies. In this paper we show that the WFP has distortionary effects on the renewable technology market. Using the sharp eligibility criteria of the WFP in a Regression Discontinuity Design, this analysis finds a reduction in the propensity to install renewable energy technologies of around 2.7 percentage points due to the WFP. This is a considerable number. It implies that 62% of households (whose oldest member turns 60) would have invested in renewable energy but refrain to do so after receiving the WFP. This analysis suggests that the labelling effect spreads to products related to the labelled good. In this case, households use too much energy from sources which generate pollution and too little from relatively cleaner technologies.

Bilateral oligopoly and quantity competition

Bilateral oligopoly is a strategic market game with two commodities, allowing strategic behavior on both sides of the market. When the number of buyers is large, such a game approximates a game of quantity competition played by sellers. We present examples which show that this is not typically a Cournot game. Rather, we introduce an alternative game of quantity competition (the market share game) and, appealing to results in the literature on contests, show that this yields the same equilibria as the many-buyer limit of bilateral oligopoly, under standard assumptions on costs and preferences. We also show that the market share and Cournot games have the same equilibria if and only if the price elasticity of the latter is one. These results lead to necessary and sufficient conditions for the Cournot game to be a good approximation to bilateral oligopoly with many buyers and to an ordering of total output when they are not satisfied.

A two-sector growth model with institutional saving and investment

This paper develops a two-sector growth model in which institutional investors play a significant role. A necessary and sufficient condition is established under which these investors own the entire capital stock in the long run. The dependence of the long-run growth rate on the behaviour of such investors, and the effects of a productivity increase are analysed.

Bilateral symmetry of radial pulse in high-level tennis players: implications for the validity of central aortic pulse wave analysis.

BACKGROUND: Reconstruction of the central aortic pressure wave from the noninvasive recording of the radial pulse with applanation tonometry has become a standard tool in the field of hypertension. It is not presently known whether recording the radial pulse on the dominant or the nondominant side has any effect on such reconstruction. METHOD: We carried out radial applanation tonometry on both forearms in young, healthy, male volunteers, who were either sedentary (n = 11) or high-level tennis players (n = 10). The purpose of including tennis players was to investigate individuals with extreme asymmetry between the dominant and nondominant upper limb. RESULTS: In the sedentary individuals, forearm circumference and handgrip strength were slightly larger on the dominant (mean +/- SD respectively 27.9 +/- 1.5 cm and 53.8 +/- 10 kg) than on nondominant side (27.3 +/- 1.6 cm, P < 0.001 vs. dominant, and 52.1 +/- 11 kg, P = NS). In the tennis players, differences between sides were more conspicuous (forearm circumference: dominant 28.0 +/- 1.7 cm nondominant 26.4 +/- 1.5 cm, P < 0.001; handgrip strength 61.4 +/- 10.8 vs. 53.4 +/- 9.7 kg, P < 0.001). We found that in both sedentary individuals and tennis players, the radial pulse had identical shape on both sides and, consequently, the reconstructed central aortic pressure waveforms, as well as derived indices of central pulsatility, were not dependent on the side where applanation tonometry was carried out. CONCLUSION: Evidence from individuals with maximal asymmetry of dominant vs. nondominant upper limb indicates that laterality of measurement is not a methodological issue for central pulse wave analysis carried out with radial applanation tonometry.

Inter-regional redistribution through infrastructure investment: tactical or programmatic?

In this paper we analyze the effects of both tactical and programmatic politics on the inter-regional allocation of infrastructure investment. We use a panel of data for the Spanish electoral districts during the period 1964-2004 to estimate an equation where investment depends both on economic and political variables. The results show that tactical politics do matter since, after controlling for economic traits, the districts with more ‘Political power’ still receive more investment. These districts are those where the incumbents’ Vote margin of victory/ defeat in the past election is low, where the Marginal seat price is low, where there is Partisan alignment between the executives at the central and regional layers of government, and where there are Pivotal regional parties which are influential in the formation of the central executive. However, the results also show that programmatic politics matter, since inter-regional redistribution (measured as the elasticity of investment to per capita income) is shown to increase with the arrival of the Democracy and EU Funds, with Left governments, and to decrease the higher is the correlation between a measure of ‘Political power’ and per capita income.

Assessing the quality of alternative energy sources: Energy Return On the Investment (EROI), the metabolic pattern of societies and energy statistics

This paper presents an initial challenge to tackle the every so "tricky" points encountered when dealing with energy accounting, and thereafter illustrates how such a system of accounting can be used when assessing for the metabolic changes in societies. The paper is divided in four main sections. The first three, present a general discussion on the main issues encountered when conducting energy analyses. The last section, subsequently, combines this heuristic approach to the actual formalization of it, in quantitative terms, for the analysis of possible energy scenarios. Section one covers the broader issue of how to account for the relevant categories used when accounting for Joules of energy; emphasizing on the clear distinction between Primary Energy Sources (PES) (which are the physical exploited entities that are used to derive useable energy forms (energy carriers)) and Energy Carriers (EC) (the actual useful energy that is transmitted for the appropriate end uses within a society). Section two sheds light on the concept of Energy Return on Investment (EROI). Here, it is emphasized that, there must already be a certain amount of energy carriers available to be able to extract/exploit Primary Energy Sources to thereafter generate a net supply of energy carriers. It is pointed out that this current trend of intense energy supply has only been possible to the great use and dependence on fossil energy. Section three follows up on the discussion of EROI, indicating that a single numeric indicator such as an output/input ratio is not sufficient in assessing for the performance of energetic systems. Rather an integrated approach that incorporates (i) how big the net supply of Joules of EC can be, given an amount of extracted PES (the external constraints); (ii) how much EC needs to be invested to extract an amount of PES; and (iii) the power level that it takes for both processes to succeed, is underlined. Section four, ultimately, puts the theoretical concepts at play, assessing for how the metabolic performances of societies can be accounted for within this analytical framework.