Does asymmetric information promote talented people?

The existing literature regarding issues of imperfect capital markets in connection with intergenerational mobility recognizes that imperfections in the capital markets represent a barrier to intergenerational mobility. This paper argues against this general thought. Contrary to this opinion, our model shows that when banks do not know the ability of the borrower, they respond to this asymmetry of information by devoting higher loan to talented borrowers. A force that helps poor and talented individuals to become educated and to catch up with the rich ones

Endogenous governance transparency and product market competition.

This paper endogenizes both the choice of governance transparency at the firrm level and the portfolio decisions of investors. ln the model, managers raise money in financial markets that are subject to imperfections arising from the non-observability of output for financiers. Investors, on the other hand, observe a signal correlated with returns. Formal contracting are needed to prevent expropriation of the investor`s wealth by the manager. The contract endogenously determines the nature and formation of the cost and benefits of voluntary disclosure. Managers optimally decide on the quality of the signal —used here as the measure of governance transparency- trading off the possibility of expropriating profits against the opportunity to raise more capital. We show that one important driving force behind governance transparency is product market competition: tougher competition translates into lower frictions on the capital market, since investors have better possibilities for portfolio diversification. Managers react to this loss of bargaining power by increasing transparency. Furthermore, firms characterized by low corporate profits or firms where investor protection is strong at the country level will be more likely to avoid voluntary disclosure regimes.Corporate governance; Voluntary disclosure; Portfolio choice; Incentives; Product market competition;

Does asymmetric information promote talented people?.

The existing literature regarding issues of imperfect capital markets in connection with intergenerational mobility recognizes that imperfections in the capital markets represent a barrier to intergenerational mobility. This paper argues against this general thought. Contrary to this opinion, our model shows that when banks do not know the ability of the borrower, they respond to this asymmetry of information by devoting higher loan to talented borrowers. A force that helps poor and talented individuals to become educated and to catch up with the rich ones.

On Capital Market Imperfections as a Source of Low TFP and Economic Rents

We propose a theory in which capital market imperfections are at the origin of cross-country TFP differences. In our theory entrepreneurs have private information about the multifactor productivity of their technology. We study how the contracting environment, as described by the ability to enforce contracts, affects the provision of incentives and resource allocation to and across entrepreneurs. Our theory implies that countries with a low ability to enforce contracts use inefficient technologies in equilibrium and are characterized by differences in productivity across industries. These implications of our theory are supported by the empirical evidence. Our theory also suggests that entrepreneurs have a vested interest in maintaining a status quo with low enforcement since it allows them to extract rents from the factor services they hire.Capital market imperfections; Total factor productivity, Relative price distortions; Taxation.

On Finance as a Theory of TFP, Cross-Industry Productivity Differences, and Economic Rents.

We develop a theory of capital-market imperfections to study how the ability to enforce contracts affects resource allocation across entrepreneurs of different productivities, and across industries with different needs for external financing. The theory implies that countries with a poor ability to enforce contracts are characterized by the use of inefficient technologies, low aggregate TFP, low development of financial markets, large differences in labor productivity across industries, and large employment shares in industries with low productivity. These implications of our theory are supported by the empirical evidence. The theory also suggests that entrepreneurs have a vested interest in maintaining a status quo with low enforcement since it allows them to extract rents from the factor services they hire.Macroeconmics, Capital Market Imperfections, Total-factor Productivity, Relative Prices, Sectorial Allocation, Limited Enforcement

On Capital Market Imperfections as an Origin of Low TFP and Economic Rents

We propose a theory where capital market imperfections are at the origin of cross-country TFP differences. In our theory entrepreneurs have private information about the multifactor productivity of their technology. We study how the contracting environment, as described by the ability to enforce contracts, affects the provision of incentives and, thus, resource allocation to and across entrepreneurs. We assume that countries differ in the ability to enforce contracts and show that, in the presence of assymmetric information, countries with low enforcement use inefficient technologies in equilibrium and are characterized by differences in productivity across industries. Our theory also suggests that entrepreneurs have a vested interest in maintaining a status quo with low enforcement since it allows them to extract rents from the factor services they hire.Capital Market Imperfections, Total Factor Productivity, Relative Price Distortions, Taxation

Quality and quantity of education in the process of development.

We develop a theory of human capital investment to study through which channels students react to school quality when deciding about their investment in higher education (secondary and above) and how educational quality affects the growth process of an economy. In a dynamic general equilibrium closed economy. higher education requires an extra investment of private resources. whereas primary education is mandatory. The theory states that human capital accumulation raises with quality through two main effects: larger quality increases the number ofpeople with higher education (extensive channel). and it increases the volume of investment in higher schooling per individual (intensive channel). That is. even with perfect capital markets. relatively low quality could discourage opportunities to pursue education beyond primary school. since low quality decreases the returns from higher education. As a result, agents could get stuck at primary levels. The intensive channel establishes that once individuals decide to participate in higher schooling. the larger the quality of educational system. the larger the investment made by each agent. Educational quality may allow for different steps of development and that depending on quality the economy may follow different paths, Using cross-country data, empirical evidence shows that the proposed channels seem to be quantitatively important and that the effect of quality and quantity of education on growth depends on the stage of development.Quality of education; Human capital composition; Economic growth;

The Role of Educational Quality and Quantity in the Process of Economic Development

We develop a theory of human capital investment to study the channels through which students react to school quality when deciding on investments in secondary education and above, and to study how educational quality affects economic growth. In a dynamic general equilibrium closed economy, primary education is mandatory but there is an opportunity to continue on in education, which is a private choice. High-quality education increases the returns to schooling, and hence the incentives to accumulate human capital. This is caused by two main effects: higher quality makes higher education accessible to more people (extensive channel), and once individuals decide to participate in higher education, higher quality increases the volume of investment made per individual (intensive channel). Furthermore, educational quality plays a central role in explaining the composition of human capital and the long-run level of income. Cross-country data evidence shows that the proposed channels are quantitatively important and that the effect of the quality and quantity of education on growth depends on the stage of development.Quality of education, human capital composition, economic growth

Teaching styles and achievement: student and teacher perspectives

We analyze the relationship of the teaching style with student achievement. As a novelty, we explore whether the e˙ect of the teaching style di˙ers when class work is reported by teachers or students. We find that who reports the practices matters. Teamwork and student discussions -modern practices- are strongly related to better achievement, and individual work and rote learning -traditional practices- are detri-mental. But these e˙ects are significant only using students’ reports. Heterogeneous e˙ects of teaching practices arise by subject or gender, but mostly using students’ reports, suggesting di˙erences in the perception of teaching styles. Only results by socioeconomic status are robust to who reports practices: students from low socioe-conomic background lose from traditional teaching and gain from modern teaching.Universidad de Málaga. Campus de Excelencia Internacional Andalucía Tech

Extravagant’ English Books at the Library of El Escorial and the Jesuit Agency

Producción CientíficaThis essay identifies a small collection of English books in the LIbrary of the Royal Monastery of El Escorial, their origin and the reasons for the mixed nature of the collection. Its interest lies in the combination of Catholic and Protestant volumes, in a period in which the Inquisition controlled the importation of unorthodox material. The agency of English Jesuits is found to be essential for how this collection was put together.Agencia Española de Investigación (grant FFI2015-66847-P