Banks, liquidity crises and economic growth

How do the liquidity functions of banks affect investment and growth at different stages ofeconomic development? How do financial fragility and the costs of banking crises evolve with the level of wealth of countries? We analyze these issues using an overlapping generations growth model where agents, who experience idiosyncratic liquidity shocks, can invest in a liquid storage technology or in a partially illiquid Cobb Douglas technology. By pooling liquidity risk, banks play a growth enhancing role in reducing inefficient liquidation of long term projects, but they may face liquidity crises associated with severe output losses. We show that middle income economies may find optimal to be exposed to liquidity crises, while poor and rich economies have more incentives to develop a fully covered banking system. Therefore, middle income economies could experience banking crises in the process of their development and, as they get richer, they eventually converge to a financially safe long run steady state. Finally, the model replicates the empirical fact of higher costs of banking crises for middle income economies.

Hiring and firing costs, adverse selection and long-term unemployment

In this paper, we present a matching model with adverse selection that explains why flows into and out of unemployment are much lower in Europe compared to North America, while employment-to-employment flows are similar in the two continents. In the model,firms use discretion in terms of whom to fire and, thus, low quality workers are more likely to be dismissed than high quality workers. Moreover, as hiring and firing costs increase, firms find it more costly to hire a bad worker and, thus, they prefer to hire out of the pool of employed job seekers rather than out of the pool of the unemployed, who are more likely to turn out to be 'lemons'. We use microdata for Spain and the U.S. and find that the ratio of the job finding probability of the unemployed to the job finding probability of employed job seekers was smaller in Spain than in the U.S. Furthermore, using U.S. data, we find that the discrimination of the unemployed increased over the 1980's in those states that raised firing costs by introducing exceptions to the employment-at-will doctrine.

A-1 Monthly Public Assistance Statistical Report Family Investment Program, April 2008

A-1 - Monthly Public Assistance Statistical Report Family Investment Program

A-1 Monthly Public Assistance Statistical Report Family Investment Program, May 2008

A-1 - Monthly Public Assistance Statistical Report Family Investment Program

A-1 Monthly Public Assistance Statistical Report Family Investment Program, December 2007

A-1 - Monthly Public Assistance Statistical Report Family Investment Program

A-1 Monthly Public Assistance Statistical Report Family Investment Program, October 2007

A-1 - Monthly Public Assistance Statistical Report Family Investment Program

A-1 Monthly Public Assistance Statistical Report Family Investment Program, June 2008

A-1 - Monthly Public Assistance Statistical Report Family Investment Program

Signalling, mating success and paternal investment in sticklebacks (Gasterosteus aculeatus): A theoretical model

I present an optimisation model that links paternal investment, male display and female choice. Although deviced for sticklebacks, it readily applies to other fish with male guarding behaviour. It relies on a few basic assumptions on the ways hatching success depends on paternal investment and clutch size, and male survival on paternal investment and signaling. Paternal investment is here a state-dependent decision, and signal a condition-dependent handicap by which males inform females of how much they are willing to invest. Series of predictions are derived on female and male breeding strategies, including optimal levels of signaling and paternal investment as functions of clutch size, own condition, and residual reproductive value, as well as alternative strategies such as egg kleptoparasitism. Some predictions already have empirical support, for which the present model provides new interpretations. Other might readily be tested, e.g. by simple clutch-size manipulations.

Finance versus costs for teaching hospitals in Spain

In this paper we analyse the observed systematic differences incosts for teaching hospitals (THhenceforth) in Spain. Concernhas been voiced regarding the existence of a bias in thefinancing of TH s has been raised once prospective budgets arein the arena for hospital finance, and claims for adjusting totake into account the legitimate extra costs of teaching onhospital expenditure are well grounded. We focus on theestimation of the impact of teaching status on average cost. Weused a version of a multiproduct hospital cost function takinginto account some relevant factors from which to derive theobserved differences. We assume that the relationship betweenthe explanatory and the dependent variables follows a flexibleform for each of the explanatory variables. We also model theunderlying covariance structure of the data. We assumed twoqualitatively different sources of variation: random effects andserial correlation. Random variation refers to both general levelvariation (through the random intercept) and the variationspecifically related to teaching status. We postulate that theimpact of the random effects is predominant over the impact ofthe serial correlation effects. The model is estimated byrestricted maximum likelihood. Our results show that costs are 9%higher (15% in the case of median costs) in teaching than innon-teaching hospitals. That is, teaching status legitimatelyexplains no more than half of the observed difference in actualcosts. The impact on costs of the teaching factor depends on thenumber of residents, with an increase of 51.11% per resident forhospitals with fewer than 204 residents (third quartile of thenumber of residents) and 41.84% for hospitals with more than 204residents. In addition, the estimated dispersion is higher amongteaching hospitals. As a result, due to the considerable observedheterogeneity, results should be interpreted with caution. From apolicy making point of view, we conclude that since a higherrelative burden for medical training is under public hospitalcommand, an explicit adjustment to the extra costs that theteaching factor imposes on hospital finance is needed, beforehospital competition for inpatient services takes place.

Systemic crises and growth

In this paper, we document the fact that countries that have experienced occasional financial crises have on average grown faster than countries with stable financial conditions. We measure the incidence of crisis with the skewness of credit growth, and find that it has a robust negative effect on GDP growth. This link coexists with the negative link between variance and growth typically found in the literature. To explain the link between crises and growth we present a model where weak institutions lead to severe financial constraints and low growth. Financial liberalization policies that facilitaterisk-taking increase leverage and investment. This leads to higher growth, but also toa greater incidence of crises. Conditions are established under which the costs of crises are outweighed by the benefits of higher growth.

Health investment complementarities under competing risks

Applying the competing--risks model to multi--cause mortality,this paper provides a theoretical and empirical investigation of the positive complementarities that occur between disease--specific policy interventions. We argue that since an individual cannot die twice, competing risks imply that individuals will not waste resources on causes that are not the most immediate, but will make health investments so as to equalize cause--specific mortality. However, equal mortality risk from a variety of diseases does not imply that disease--specific public health interventions are a waste. Rather, a cause--specific intervention produces spillovers to other disease risks, so that the overall reduction in mortality will generally be larger than the direct effect measured on the targeted disease. The assumption that mortality from non--targeted diseases remains the same after a cause--specific intervention under--estimates the true effect of such programs, since the background mortality is also altered as a result of intervention. Analyzing data from one of the most important public health programs ever introduced, the Expanded Program on Immunization (EPI) of the United Nations, we find evidence for the existence of such complementarities, involving causes that are not biomedically, but behaviorally, linked.

A-1 Monthly Public Assistance Statistical Report Family Investment Program, July 2008

A-1 - Monthly Public Assistance Statistical Report Family Investment Program

2009-2013 Iowa Transportation Improvement Program

The Iowa Transportation Improvement Program (Program) is published to inform Iowans of planned investments in our state's transportation system. The Iowa Transportation Commission (Commission) and Iowa Department of Transportation (Iowa DOT) are committed to programming those investments in a fiscally responsible manner. Iowa's transportation system is multi-modal; therefore, the Program encompasses investments in aviation, transit, railroads, trails, and highways. A major component of the Program is the highway section. The FY2009-2013 highway section is financially balanced and was developed to achieve several objectives. The Commission's primary highway investment objective is the safety, maintenance and preservation of Iowa's existing highway system. The Commission has allocated an annual average of $321 million to achieve this objective. This includes $185 million in 2009 and $170 million annually in years 2010-2013 for preserving the interstate system. It includes $114 million in 2009, $100 million in 2010 and $90 million annually in years 2011-2013 for non-interstate pavement preservation. It includes $38 million annually in 2009 and 2010, and $35 million annually in years 2011-2013 for non-interstate bridges. In addition, $15 million annually is allocated for safety projects. However, due to increasing construction costs, flattened revenues and overall highway systems needs, the Commission acknowledges that insufficient funds are being invested in the maintenance and preservation of the existing highway system. Another objective involves investing in projects that have received funding from the federal transportation act and/or subsequent federal transportation appropriation acts. In particular, funding is being used where it will complete a project, corridor or useable segment of a larger project. As an investment goal, the Commission also wishes to advance highway projects that address the state's highway capacity and economic development needs. Projects that address these needs and were included for completion in the previous program have been advanced into this year's Program to maintain their scheduled completion. This program also includes a small number of other projects that generally either represent a final phase of a partially programmed project or an additional segment of a partially completed corridor. The TIME-21 bill, Senate File 2420, signed by Governor Chet Culver on April 22, provides additional funding to cities, counties and the Iowa DOT for road improvements. This will result in additional revenue to the Primary Road Fund beginning in the second half of FY2009 and gradually increase over time. The additional funding will be included in future highway programming objectives and proposals and is not reflected in this highway program. The Iowa DOT and Commission appreciate the public's involvement in the state's transportation planning process. Comments received personally, by letter, or through participation in the Commission's regular meetings or public input meetings held around the state each year are invaluable in providing guidance for the future of Iowa's transportation system. It should be noted that this document is a planning guide. It does not represent a binding commitment or obligation of the Commission or Iowa DOT, and is subject to change. You are invited to visit the Iowa DOT's Web site at iowadot.gov for additional and regular updates about the department's programs and activities.

Pitfalls in the modeling of forward-looking price setting and investment decisions

The present paper makes progress in explaining the role of capital for inflation and output dynamics. We followWoodford (2003, Ch. 5) in assuming Calvo pricing combined with a convex capital adjustment cost at the firm level. Our main result is that capital accumulation affects inflation dynamics primarily through its impact on the marginal cost. This mechanism is much simpler than the one implied by the analysis in Woodford's text. The reason is that his analysis suffers from a conceptual mistake, as we show. The latter obscures the economic mechanism through which capital affects inflation and output dynamics in the Calvo model, as discussed in Woodford (2004).