The link between foreign aid, public investment and economic growth

Länsimaat ovat rahoittaneet kehitysyhteistyöhankkeita jo lähes kuuden vuosikymmenen ajan, mutta kehitysavun tehokkuudesta ei olla edelleenkään päästy yksimielisyyteen. Yksi avunantajamaiden tapa vaikuttaa kehitysavun tehokkuuteen, eli avun vaikutukseen vastaanottajamaan taloudellisen kasvun kiihdyttäjänä, on sitoa ne julkisen sektorin infrastruktuurihankkeisiin. Joissain tapauksissa tämä vaikuttaa avun vastaanottajan käytökseen ja asenteisiin kehitysapua kohtaan. Tutkielmassa käsitellään kehitysavun tehokkuutta tilanteessa, jossa se on sidottu julkisen sektorin investointeihin kehitysmaassa. Tutkimus pohjaa Kalaitzidakisin ja Kalyvitisin (2008) malliin, jossa osa kehitysmaan julkisen talouden investoinneista rahoitetaan kehitysavulla. Seuraavaksi tarkastellaan ylijäämää tavoittelevan käyttäytymisen (rent- seeking) vaikutusta kehitysavun tehokkuuteen pohjaten Economidesin, Kalyvitisin ja Philippopoulosin (2008) malliin. Tutkielmassa referoidaan lisäksi tutkimuskysymystä sivuavia empiirisiä tutkimuksia, esitellään aluksi tavallisimmat kehitysyhteistyön muodot, sekä esitellään talousteoreettisia näkökulmia kehitysyhteistyön tehokkuuden määrittelylle. Tutkielma perustuu puhtaasti teoreettisiin malleihin ja niissä sovelletut menetelmät ovat matemaattisia. Tutkielmassa käsitellään ensin tapaus, jossa kehitysyhteistyöllä rahoitetaan julkisen sektorin investointihankkeita. Jossain tapauksissa kehitysavun kasvu lasku siirtää vastaanottajamaan kulutusta julkisista investoinneista kulutukseen, jolloin kehitysyhteistyövaroin osittain rahoitettujen hankkeiden koko pienenee, ja suhteellinen tehokkuus laskee. Seuraavaksi tarkastellaan tilannetta, jossa kehitysyhteistyövaroista vain osa päätyy hankkeen rahoittamiseen, ja todetaan, että kehitysavun tehokkuus ja vaikutus maan kansantulon kasvuun vähenee talouden toimijoiden ylijäämää tavoittelevan käyttäytymisen (mukaan lukien korruptio) myötä entisestään. Tämän tutkimuksen perusteella voidaan todeta, että kehitysapu vaikuttaa kehittyvän maan talouden kasvuun tapauksessa, jossa julkisia infrastruktuurihankkeita rahoitetaan osittain maan omin verovaroin ja osittain kehitysyhteistyövaroin. Ylijäämää tavoitteleva käyttäytyminen vaikuttaa kehitysavun tehokkuuteen negatiivistesti vähentäen kehitysavun positiivisia kasvuvaikutuksia.

Stock Option Compensation in Finland: An Analysis of Economic Determinants, Contracting Frequency, and Design

This paper addresses several questions in the compensation literature by examining stock option compensation practices of Finnish firms. First, the results indicate that principal-agent theory succeeds quite well in predicting the use of stock options. Proxies for monitoring costs, growth opportunities, ownership structure, and risk are found to determine the use of incentives consistent with theory. Furthermore, the paper examines whether determinants of stock options targeted to top management differ from determinants of broad-based stock option plans. Some evidence is found that factors driving these two types of incentives differ. Second, the results reveal that systematic risk significantly increases the likelihood that firms adopt stock option plans, whereas total firm risk and unsystematic risk do not seem to affect this decision. Third, the results show that growth opportunities are related to time-dimensional contracting frequency, consistent with the argument that incentive levels deviate more rapidly from optimum in firms with high growth opportunities. Finally, the results suggest that vesting schedules are decreasing in financial leverage, and that contract maturity is decreasing in firm focus. In addition, both vesting schedules and contract maturity tend to be longer in firms involving state ownership.

Cognitive Functioning in Alcohol and Other Substance Use Disorders in Young Adulthood : A Genetic Epidemiological Study

Alcohol and other substance use disorders (SUDs) result in great costs and suffering for individuals and families and constitute a notable public health burden. A multitude of factors, ranging from biological to societal, are associated with elevated risk of SUDs, but at the level of individuals, one of the best predictors is a family history of SUDs. Genetically informative twin and family studies have consistently indicated this familial risk to be mainly genetic. In addition, behavioral and temperamental factors such as early initiation of substance use and aggressiveness are associated with the development of SUDs. These familial, behavioral and temperamental risk factors often co-occur, but their relative importance is not well known. People with SUDs have also been found to differ from healthy controls in various domains of cognitive functioning, with poorer verbal ability being among the most consistent findings. However, representative population-based samples have rarely been used in neuropsychological studies of SUDs. In addition, both SUDs and cognitive abilities are influenced by genetic factors, but whether the co-variation of these traits might be partly explained by overlapping genetic influences has not been studied. Problematic substance use also often co-occurs with low educational level, but it is not known whether these outcomes share part of their underlying genetic influences. In addition, educational level may moderate the genetic etiology of alcohol problems, but gene-environment interactions between these phenomena have also not been widely studied. The incidence of SUDs peaks in young adulthood rendering epidemiological studies in this age group informative. This thesis investigated cognitive functioning and other correlates of SUDs in young adulthood in two representative population-based samples of young Finnish adults, one of which consisted of monozygotic and dizygotic twin pairs enabling genetically informative analyses. Using data from the population-based Mental Health in Early Adulthood in Finland (MEAF) study (n=605), the lifetime prevalence of DSM-IV any substance dependence or abuse among persons aged 21—35 years was found to be approximately 14%, with a majority of the diagnoses being alcohol use disorders. Several correlates representing the domains of behavioral and affective factors, parental factors, early initiation of substance use, and educational factors were individually associated with SUDs. The associations between behavioral and affective factors (attention or behavior problems at school, aggression, anxiousness) and SUDs were found to be largely independent of factors from other domains, whereas daily smoking and low education were still associated with SUDs after adjustment for behavioral and affective factors. Using a wide array of neuropsychological tests in the MEAF sample and in a subsample (n=602) of the population-based FinnTwin16 (FT16) study, consistent evidence of poorer verbal cognitive ability related to SUDs was found. In addition, participants with SUDs performed worse than those without disorders in a task assessing psychomotor processing speed in the MEAF sample, whereas no evidence of more specific cognitive deficits was found in either sample. Biometrical structural equation models of the twin data suggested that both alcohol problems and verbal ability had moderate heritabilities (0.54—0.72), and that their covariation could be explained by correlated genetic influences (genetic correlations -0.20 to -0.31). The relationship between educational level and alcohol problems, studied in the full epidemiological FT16 sample (n=4,858), was found to reflect both genetic correlation and gene-environment interaction. The co-occurrence of low education and alcohol problems was influenced by overlapping genetic factors. In addition, higher educational level was associated with increased relative importance of genetic influences on alcohol problems, whereas environmental influences played a more important role in young adults with lower education. In conclusion, SUDs, especially alcohol abuse and dependence, are common among young Finnish adults. Behavioral and affective factors are robustly related to SUDs independently of many other factors, and compared to healthy peers, young adults who have had SUDs during their life exhibit significantly poorer verbal cognitive ability, and possibly less efficient psychomotor processing. Genetic differences between individuals explain a notable proportion of individual differences in risk of alcohol dependence, verbal ability, and educational level, and the co-occurrence of alcohol problems with poorer verbal cognition and low education is influenced by shared genetic backgrounds. Finally, various environmental factors related to educational level in young adulthood moderate the relative importance of genetic factors influencing the risk of alcohol problems, possibly reflecting differences in social control mechanisms related to educational level.

Appropriate Institutions and Economic Growth - one size fits no-one

Modern-day economics is increasingly biased towards believing that institutions matter for growth, an argument that has been further enforced by the recent economic crisis. There is also a wide consensus on what these growth-promoting institutions should look like, and countries are periodically ranked depending on how their institutional structure compares with the best-practice institutions, mostly in place in the developing world. In this paper, it is argued that ”non-desirable” or “second-best” institutions can be beneficial for fostering investment and thus providing a starting point for sustained growth, and that what matters is the appropriateness of institutions to the economy’s distance to the frontier or current phase of development. Anecdotal evidence from Japan and South-Korea is used as a motivation for studying the subject and a model is presented to describe this phenomenon. In the model, the rigidity or non-rigidity of the institutions is described by entrepreneurial selection. It is assumed that entrepreneurs are the ones taking part in the imitation and innovation of technologies, and that decisions on whether or not their projects are refinanced comes from capitalists. The capitalists in turn have no entrepreneurial skills and act merely as financers of projects. The model has two periods, and two kinds of entrepreneurs: those with high skills and those with low skills. The society’s choice of whether an imitation or innovation – based strategy is chosen is modeled as the trade-off between refinancing a low-skill entrepreneur or investing in the selection of the entrepreneurs resulting in a larger fraction of high-skill entrepreneurs with the ability to innovate but less total investment. Finally, a real-world example from India is presented as an initial attempt to test the theory. The data from the example is not included in this paper. It is noted that the model may be lacking explanatory power due to difficulties in testing the predictions, but that this should not be seen as a reason to disregard the theory – the solution might lie in developing better tools, not better just better theories. The conclusion presented is that institutions do matter. There is no one-size-fits-all-solution when it comes to institutional arrangements in different countries, and developing countries should be given space to develop their own institutional structures that cater to their specific needs.

Nonlinear mixture autoregressive model: economic applications

The aim of this dissertation is to model economic variables by a mixture autoregressive (MAR) model. The MAR model is a generalization of linear autoregressive (AR) model. The MAR -model consists of K linear autoregressive components. At any given point of time one of these autoregressive components is randomly selected to generate a new observation for the time series. The mixture probability can be constant over time or a direct function of a some observable variable. Many economic time series contain properties which cannot be described by linear and stationary time series models. A nonlinear autoregressive model such as MAR model can a plausible alternative in the case of these time series. In this dissertation the MAR model is used to model stock market bubbles and a relationship between inflation and the interest rate. In the case of the inflation rate we arrived at the MAR model where inflation process is less mean reverting in the case of high inflation than in the case of normal inflation. The interest rate move one-for-one with expected inflation. We use the data from the Livingston survey as a proxy for inflation expectations. We have found that survey inflation expectations are not perfectly rational. According to our results information stickiness play an important role in the expectation formation. We also found that survey participants have a tendency to underestimate inflation. A MAR model has also used to model stock market bubbles and crashes. This model has two regimes: the bubble regime and the error correction regime. In the error correction regime price depends on a fundamental factor, the price-dividend ratio, and in the bubble regime, price is independent of fundamentals. In this model a stock market crash is usually caused by a regime switch from a bubble regime to an error-correction regime. According to our empirical results bubbles are related to a low inflation. Our model also imply that bubbles have influences investment return distribution in both short and long run.

Arrested Drunk Drivers : Trends, social background, recidivism and mortality

The aim of this study was to examine the trends, incidence and recidivism of drunken driving during a 20-year period (1988 - 2007) using the data on all suspected drunken driving in this period. Furthermore, the association between social background and drunken driving, and the mortality of drunk drivers were studied by using administrative register data provided by Statistics Finland. The study was completely register-based. In 1989 - 1991, every year 30,000 drivers were suspected of drunken driving, but the number fell to less than 20,000 by 1994, during the economic recession. The changes in the arrest incidence of the youngest age groups were especially pronounced, most of all in the age group of 18 - 19-year olds. Even though the incidence among youth decreased dramatically, their incidence rate was still twice that of the general population aged 15 - 84 years. Drunken driving was associated with a poor social background among youth and working-aged men and women. For example, a low level of education, unemployment, divorce, and parental factors in youth were associated with a higher risk of being arrested for drunken driving. While a low income was related to more drunken driving among working-aged people, the effect among young persons was the opposite. Every third drunk driver got rearrested during a 15-year period, whereas the estimated rearrest rate was 44%. Findings of drugs only or in combination with alcohol increased the risk of rearrest. The highest rearrest rates were seen among drivers who were under the influence of amphetamines or cannabis. Also male gender, young age, high blood alcohol concentration, and arrest during weekdays and in the daytime predicted rearrest. When compared to the general population, arrested drunk drivers had significant excess mortality. The greatest relative differences were seen in alcohol-related causes of death (including alcohol diseases and alcohol poisoning), accidents, suicides and violence. Also mortality due to other than alcohol-related diseases was elevated among drunk drivers. Drunken driving was associated with multiple factors linked to traffic safety, health and social problems. Social marginalization may expose a person to harmful use of alcohol and drunken driving, and the associations are seen already among the youth. Recidivism is common among drunk drivers, and driving under the influence of illicit and/or medicinal drugs is likely to indicate worse substance abuse problems, judging from the high rearrest rates. High alcohol-related mortality in this population shows that drunken driving is clearly an indicator of alcohol abuse. More effective measures of preventing alcohol-related harms are needed, than merely preventing convicted drunk drivers from driving again.

Credit Default Swaps and Insurance: Against the Potts Opinion

Little attention has been given to the possibility that CDS transactions might be construed as insurance contracts in English law. This article challenges the widespread “Potts opinion”, which states that CDSs are not insurance, because they do not require the protection buyer to sustain a loss or to have an insurable interest in the subject matter. CDSs often do provide protection against loss that the buyer is exposed to; loss indemnity is not a necessary characterisation of an insurance contract; insurable interest does not form part of the definition of insurance, but is an additional requirement of valid insurance; and what matters is the substance not the form of the contract. The situation in the US and Australia is also briefly considered.

Bridging East and West : The Establishment of the International Institute for Applied Systems Analysis (IIASA) in the United States Foreign Policy of Bridge Building, 1964-1972.

The dissertation examines the foreign policies of the United States through the prism of science and technology. In the focal point of scrutiny is the policy establishing the International Institute for Applied Systems Analysis (IIASA) and the development of the multilateral part of bridge building in American foreign policy during the 1960s and early 1970s. After a long and arduous negotiation process, the institute was finally established by twelve national member organizations from the following countries: Bulgaria, Canada, Czechoslovakia, Federal Republic of Germany (FRG), France, German Democratic Republic (GDR), Great Britain, Italy, Japan, Poland, Soviet Union and United States; a few years later Sweden, Finland and the Netherlands also joined. It is said that the goal of the institute was to bring together researchers from East and West to solve pertinent problems caused by the modernization process experienced in industrialized world. It originates from President Lyndon B. Johnson s bridge building policies that were launched in 1964, and was set in a well-contested and crowded domain of other international organizations of environmental and social planning. Since the distinct need for yet another organization was not evident, the process of negotiations in this multinational environment enlightens the foreign policy ambitions of the United States on the road to the Cold War détente. The study places this project within its political era, and juxtaposes it with other international organizations, especially that of the OECD, ECE and NATO. Conventionally, Lyndon Johnson s bridge building policies have been seen as a means to normalize its international relations bilaterally with different East European countries, and the multilateral dimension of the policy has been ignored. This is why IIASA s establishment process in this multilateral environment brings forth new information on US foreign policy goals, the means to achieve these goals, as well as its relations to other advanced industrialized societies before the time of détente, during the 1960s and early 1970s. Furthermore, the substance of the institute applied systems analysis illuminates the differences between European and American methodological thinking in social planning. Systems analysis is closely associated with (American) science and technology policies of the 1960s, especially in its military administrative applications, thus analysis within the foreign policy environment of the United States proved particularly fruitful. In the 1960s the institutional structures of European continent with faltering, and the growing tendencies of integration were in flux. One example of this was the long, drawn-out process of British membership in the EEC, another is de Gaulle s withdrawal from NATO s military-political cooperation. On the other hand, however, economic cooperation in Europe between East and West, and especially with the Soviet Union was expanding rapidly. This American initiative to form a new institutional actor has to be seen in that structural context, showing that bridge building was needed not only to the East, but also to the West. The narrative amounts to an analysis of how the United States managed both cooperation and conflict in its hegemonic aspirations in the emerging modern world, and how it used its special relationship with the United Kingdom to achieve its goals. The research is based on the archives of the United States, Great Britain, Sweden, Finland, and IIASA. The primary sources have been complemented with both contemporary and present day research literature, periodicals, and interviews.

Substance misuse problems during pregnancy with special emphasis on buprenorphine

Maternal drug abuse during pregnancy endangers the future health and wellbeing of the infant and growing child. On the other hand, via maternal abstinence, these problems would never occur; so the problems would be totally preventable. Buprenorphine is widely used in opioid maintenance treatment as a substitute medication. In Finland, during 2000 s buprenorphine misuse has steadily increased. In 2009 almost one third of clientele of substance treatment units were in treatment because of buprenorphine dependence. At Helsinki Women s Clinic the first child with prenatal buprenorphine exposure was born in 2001. During 1992-2001 in the three capital area maternity hospitals (Women s clinic, Maternity hospital, Jorvi hospital) 524 women were followed at special antenatal clinics due to substance abuse problems. Three control women were drawn from birth register to each case woman and matched for parity and same place and date of the index birth. According to register data mortality rate was 38-fold higher among cases than controls within 6-15 years after index birth. Especially, the risk for violent or accidental death was increased. The women with substance misuse problems had also elevated risk for viral hepatitis and psychiatric morbidity. They were more often reimbursed for psychopharmaceuticals. Disability pensions and rehabilitation allowances were more often granted to cases than controls. In total 626 children were born from these pregnancies. According to register data 38% of these children were placed in out-of-home care as part of child protection services by the age of two years, and half of them by the age of 12 years, the median follow-up time was 5.8 years. The risk for out-of-home care was associated with factors identifiable during the pre- and perinatal period. In 2002-2005 67 pregnant women with buprenorphine dependence were followed up at the Helsinki University Hospital, Department of Obstetrics and Gynecology. Their pregnancies were uneventful. The prematurity rate was similar and there were no more major anomalies compared to the national statistics. The neonates were lighter compared to the national statistics. They were also born in good condition, with no perinatal hypoxia as defined by standard clinical parameters or certain biochemical markers in the cord blood: erythropoietin, S100 and cardiac troponin-t. Almost 80% of newborns developed neonatal abstinence syndrome (NAS) and two third of them needed morphine medication for it. Maternal smoking over ten cigarettes per day aggravated and benzodiazepine use attenuated NAS. An infant s highest urinary norbuprenorphine concentration during their first 3 days of life correlated with the duration of morphine treatment. The average length of infant s hospital stay was 25 days.

Economic evaluation of forest policy programs.

XVIII IUFRO World Congress, Ljubljana 1986.