Fiscal Federalism and Foreign Transfers: Does Inter-Jurisdictional Competition Increase Foreign Aid Effectiveness?

This paper empirically studies the impact of decentralization and inter-jurisdictional competition on foreign aid effectiveness. For this purpose we examine a commonly used empirical growth model, considering different measures of fiscal decentralization. Our panel estimations reveal that expenditure decentralization and inter-jurisdictional competition - reflected by the degree of tax revenue decentralization - negatively impact aid effectiveness. We therefore conclude that donor countries should carefully consider how both anti-poverty instruments - foreign assistance and decentralization - work together

Should Subsidies to Urban Passenger Transport be Increased? A Spatial CGE Analysis for a German Metropolitan Area

In many countries passenger transport is significantly subsidized in a variety of ways for various reasons. The objective of this paper is to examine efficiency, distributional, environmental (CO2 emissions) and spatial effects of increasing different kinds of passenger transport subsidies discriminating between household types, travel purposes and travel modes. The effects are calculated by applying a numerical spatial general equilibrium approach calibrated to an average German metropolitan area. In extension to most studies focusing on only one kind of subsidy, we compare the effects of different transport subsidies within the same unified framework that allows to account for two features not yet considered simultaneously in studies on transport subsidies: endogenous labor supply and location decisions. Furthermore, congestion, travel mode choice, travel related CO2 emissions and institutional details regarding the tax system in Germany are taken into account. The results suggest that optimal subsidy levels are either small or even zero. While subsidizing public transport is welfare enhancing, subsidies to urban road traffic reduce aggregate urban welfare. Concerning the latter it is shown that making investments in urban road infrastructure capacity or reducing gasoline taxes may even be harmful to residents using predominantly automobile. In contrast, pure commuting subsidies hardly affect aggregate urban welfare, but distributional effects are substantial. All policies cause suburbanization of city residents and (except for subsidizing public transport) contribute to urban sprawl by raising the spatial imbalance of residences and jobs but the effect is relatively small. In addition, the policies induce a very differentiated pattern regarding distributional effects, benefits of landowners and environmental effects

Export and Benefits of Hedging in Emerging Economies

We study the impact of exchange rate risk upon export production within an emerging economy lacking in currency forward markets. However there exists a financial asset whose price is correlated with the relevant foreign currency. We present conditions under which export production is stimulated when the hedging device becomes more effective. In any case the exporting firm benefits from imperfectly hedging exchange rate risk

Symmetric and asymmetric action integration during cooperative object manipulation in virtual environments

Cooperation between multiple users in a virtual environment (VE) can take place at one of three levels. These are defined as where users can perceive each other (Level 1), individually change the scene (Level 2), or simultaneously act on and manipulate the same object (Level 3). Despite representing the highest level of cooperation, multi-user object manipulation has rarely been studied. This paper describes a behavioral experiment in which the piano movers' problem (maneuvering a large object through a restricted space) was used to investigate object manipulation by pairs of participants in a VE. Participants' interactions with the object were integrated together either symmetrically or asymmetrically. The former only allowed the common component of participants' actions to take place, but the latter used the mean. Symmetric action integration was superior for sections of the task when both participants had to perform similar actions, but if participants had to move in different ways (e.g., one maneuvering themselves through a narrow opening while the other traveled down a wide corridor) then asymmetric integration was superior. With both forms of integration, the extent to which participants coordinated their actions was poor and this led to a substantial cooperation overhead (the reduction in performance caused by having to cooperate with another person)

Prospect Theory and Hedging Risks

The prospect theory is one of the most popular decision-making theories. It is based on the S-shaped utility function, unlike the von Neumann and Morgenstern (NM) theory, which is based on the concave utility function. The S-shape brings in mathematical challenges: simple extensions and generalizations of NM theory into the prospect theory cannot be frequently achieved. For example, the nature of monotonicity of the indifference curve depends on the underlying mean. Price hedging decisions also become more complex within the prospect theory. We discuss these topics in detail and offer a general result concerning the sign of a covariance from which we then infer desired properties of the indifference curve and also justify hedging decisions within the prospect theory. We illustrate our general considerations with a thoroughly worked out example

Lichens facilitate seedling recruitment in alpine heath

Abstract Questions How do mat thickness, physical structure and allelopathic properties of terricolous mat-forming lichens affect recruitment of vascular plants in dwarf-shrub and lichen heath vegetation?. Location The mountains of Dovrefjell, central Norway. Methods In autumn, seeds of ten vascular plant species were collected and sown in a common garden experiment with mats of six lichen species and bare-soil controls as experimental treatments. We recorded growing season soil temperature and moisture, and seedling recruitment and growth after one year. The effect of lichen secondary compounds on germination was tested in a growth chamber experiment and compared to the lichen-plant interactions detected under field conditions. Results The lichen mats buffered extreme soil temperatures and soil drying in dry weather, with soils below the thickest mats (Cladonia stellaris and C. rangiferina) experiencing the lowest temperature fluctuations. Seedling recruitment and seedling growth in the field and seed germination in the lab were species-specific. Seedling recruitment rates were overall higher within lichen mats than on bare soil, but the c. 6.5 cm thick mats of C. stellaris reduced recruitment of many species. The lab experiment suggested no overall strong effect of lichen allelopathy on seed germination, and effects on seed germination were only moderately correlated with the lichen-plant interactions observed for seedling recruitment in the field. Conclusions In harsh environments like alpine dwarf-shrub and lichen heaths, the presence of lichens and the resulting amelioration of the microclimate seems more important for vascular plant recruitment than are allelopathic effects often reported in lab experiments. We might therefore expect most terricolous lichens, depending on the plant species in focus, to facilitate rather than hamper the early stages of plant recruitment into lichen-dominated arctic-alpine heath vegetation. This article is protected by copyright. All rights reserved.Peer reviewe

The Firm Under Uncertainty: Capital Structure and Background Risk

This paper examines the interplay between the real and financial decisions of the competitive firm under output price uncertainty. The firm faces additional sources of uncertainty that are aggregated into a background risk. We show that the firm always chooses its optimal debt-equity ratio to minimize the weighted average cost of capital, irrespective of the risk attitude of the firm and the incidence of the underlying uncertainty. We further show that the firm's optimal input mix depends on its optimal debt-equity ratio, thereby rendering the interdependence of the real and financial decisions of the firm. When the background risk is either additive or multiplicative, we provide reasonable restrictions on the firm's preferences so as to ensure that the firm's optimal output is adversely affected upon the introduction of the background risk