Creating incentives for private infrastructure companies to become more efficient

The privatization of infrastructure companies is expected to bring about gains for customers by increasing the efficiency of the privatized company. Because many infrastructure industries are not competitive, attention has focused on the development of regulatory regimes that replicate the operation of competitive markets and so lead to efficiency gains. Less attention, however, has been paid to other institutional factors that encourage firms to operate efficiently. The authors study three institutional factors that can, in general, encourage efficiency: the threat of bankruptcy; internal controls brought about by executive remuneration schemes and the ability of shareholders to remove underperforming management; and external disciplines brought about by the operation of the market for corporate control and the threat of hostile takeover. Applying these three aspects of corporate governance to monopolistic infrastructure firms is not simple. Infrastructure regulation may allow privatized firms to avoid financial problems by raising prices, for example, thus sheltering them from the threat of bankruptcy. And shareholder control may be hindered by restrictions on the proportion of the shares that can be owned by any one shareholder. The authors offer examples of the ways in which different regulatory, institutional, and governance systems work in different countries, especially in relation to infrastructure companies; and provide a checklist of options that should be considered when designing the involvement of the private sector in infrastructure position.Payment Systems&Infrastructure,International Terrorism&Counterterrorism,Microfinance,Small and Medium Size Enterprises,Small Scale Enterprise,Private Participation in Infrastructure,Small Scale Enterprise,Microfinance,Economic Theory&Research,International Terrorism&Counterterrorism

Dynamics of structural defects and plasticity: models and numerical implementation for dynamical problems

We report the plasticity model with explicit description of kinetics of the material defects (dislocations, grain boundaries). This method becomes especially effective for computation of the dynamical deformation of materials at high strain rates because it allows for a simple accounting of the strain rate effects. The equation system is written out and discussed; its implementation is demonstrated for the problem of the plastic flow localization

The Effects at Home of Initiating Production Abroad: Evidence from Matched French Firms

Based on matching techniques in combination with a difference-in-difference estimator, this paper estimates the effects at home of initiating production abroad through the establishment of a foreign production affiliate. The analysis covers manufacturing and service firms active in France during the period 1987-1999. We show that the motivation to start producing abroad is an important determinant of its impact at home. Market-seeking FDI in manufacturing is associated with significant scale effects, resulting in job creation. By contrast, factor-seeking FDI in manufacturing has no significant effect on employment. FDI in the services sector is associated with significant positive employment effects, which may reflect the possibility that FDI in this sector is predominantly motivated by market access.FDI, multinationals, propensity score matching, services, delocalisation

Regulatory structure and risk and infrastructure firms : an international comparison

Evidence about how choice of regulatory regimes affects the level of shareholder risk for the regulated company has traditionally focused on studies in the United Kingdom and the United States. Broad comparisons of price-cap based regimes (as practiced in the UK) with rate-of-return regulation (as practiced in the US) show price-cap based regimes to be associated with higher levels of shareholder risk (as measured by the beta value) than rate-of-return regulation is. But so few countries were compared that it was suspected that other factors could be at work. The authors broaden the investigation by studying more countries (including regulated utilities in Canada, Europe,, and Latin America), doing a sectoral comparison to control for some risks related to factors other than the regulatory regime, and use narrower classifications for the regulatory regime. They also look at such recent evidence as the move from relatively pure price caps in the UK electricity sector to a mixed-revenue/price-cap based system. The authors find results aligned with earlier research, namely that investors bear the greatest nondiversifiable risk with price caps and the least nondiversifiable risk with rate-of-return regulation.Environmental Economics&Policies,Economic Theory&Research,Banks&Banking Reform,Payment Systems&Infrastructure,International Terrorism&Counterterrorism,Environmental Economics&Policies,Economic Theory&Research,Banks&Banking Reform,Insurance&Risk Mitigation,Financial Intermediation

Two-step estimation in linear regressions with adaptive learning

Weak consistency and asymptotic normality of the ordinary least-squares estimator in a linear regression with adaptive learning is derived when the crucial, so-called, `gain' parameter is estimated in a first step by nonlinear least squares from an auxiliary model. The singular limiting distribution of the two-step estimator is normal and in general affected by the sampling uncertainty from the first step. However, this `generated-regressor' issue disappears for certain parameter combinations

Designing Scholarships To Improve College Success: Final Report On the Performance-Based Scholarship Demonstration

Performance-based scholarships have two main goals: to give students more money for college and to provide incentives for academic progress. They are designed to reduce the financial burden on low-income students and help them progress academically by offering financial aid contingent upon meeting pre-specified academic benchmarks. The scholarships are intended to cover a modest amount of students' educational costs during the semesters they are offered -- generally between 15 and 25 percent of students' unmet financial need, the difference between students' calculated financial need to attend college and the financial aid they are awarded. The money is paid directly to students, on top of their existing federal and state need-based financial aid, and the students themselves decide how best to use the funds. MDRC launched the Performance-Based Scholarship Demonstration in 2008 to evaluate the effectiveness of these scholarships for as broad a range of low-income students as possible, in a variety of settings, and with varying incentive structures. As such, the evaluation includes more than 12,000 students in institutions across six states to test different performance-based scholarship designs. These results show that even relatively moderate investments in low-income students' education can have modest but long-lasting impacts on their academic outcomes. These findings may be especially relevant to states, institutions, and private scholarship providers seeking purposeful and efficient ways to give low-income students additional financial aid that can also help them succeed academically

Weighted voting on the IMF Managing Director

Executive Directors of the International Monetary Fund elect the Fund’s Managing Director from a shortlist of three candidates; financial quotas of IMF members define the respective numbers of votes. The implied a priori distribution of success (preference satisfaction) is compared across different electoral procedures. The USA’s Executive Director can expect to come closer to its top preference under plurality rule than for pairwise majority comparisons or plurality with a runoff; opposite applies to everybody else. Differences of US success between voting rules dominate the within-rule differences between most other Directors, and much of the latest reform of quotas

Least squares estimation in nonlinear cohort panels with learning from experience

We discuss techniques of estimation and inference for nonlinear cohort panels with learning from experience, showing, inter alia, the consistency and asymptotic normality of the nonlinear least squares estimator employed in the seminal paper by Malmendier and Nagel (2016). Potential pitfalls for hypothesis testing are identified and solutions proposed. Monte Carlo simulations verify the properties of the estimator and corresponding test statistics in finite samples, while an application to a panel of survey expectations demonstrates the usefulness of the theory developed