Investor Psychology and Security Market Under- and Overreactions

Foreign aid provides a windfall of resources to recipient countries and may result in the same rent seeking behavior as documented in the 'curse of natural resources' literature. In this paper the author discusses this effect and documents its magnitude. Using panel data for 108 recipient countries in the period 1960 to 1999, the author found that foreign aid has a negative impact on institutions. In particular, if the foreign aid over Gross Domestic Product (GDP) that a country receives over a period of five years reaches the 75th percentile in the sample, then a 10-point index of democracy is reduced between 0.5 and almost one point, a large effect. For comparison, we also measure the effect of oil rents on political institutions. The author found that aid is a bigger curse than oil.

The Curse of Aid

This paper uses dynamic panel data methods to examine the determinants of non-performing loans (NPLs) in the Greek banking sector, separately for each loan category (consumer loans, business loans and mortgages). The study is motivated by the hypothesis that both macroeconomic and bank-specific variables have an effect on loan quality and that these effects vary between different loan categories. The results show that, for all loan categories, NPLs in the Greek banking system can be explained mainly by macroeconomic variables (GDP, unemployment, interest rates, public debt) and management quality. Differences in the quantitative impact of macroeconomic factors among loan categories are evident, with non-performing mortgages being the least responsive to changes in the macroeconomic conditions.

Macroeconomic and bank-specific determinants of non-performing loans in Greece: A comparative study of mortgage, business and consumer loan portfolios

Business training programs are a popular policy option to try to improve the performance of enterprises around the world. The last few years have seen rapid growth in the number of evaluations of these programs in developing countries. This paper undertakes a critical review of these studies with the goal of synthesizing the emerging lessons and understanding the limitations of the existing research and the areas in which more work is needed. It finds that there is substantial heterogeneity in the length, content, and types of firms participating in the training programs evaluated. Many evaluations suffer from low statistical power, measure impacts only within a year of training, and experience problems with survey attrition and measurement of firm profits and revenues. Over these short time horizons, there are relatively modest impacts of training on survivorship of existing firms, but stronger evidence that training programs help prospective owners launch new businesses more quickly. Most studies find that existing firm owners implement some of the practices taught in training, but the magnitudes of these improvements in practices are often relatively modest. Few studies find significant impacts on profits or sales, although a couple of the studies with more statistical power have done so. Some studies have also found benefits to microfinance organizations of offering training. To date there is little evidence to help guide policymakers as to whether any impacts found come from trained firms competing away sales from other businesses versus through productivity improvements, and little evidence to guide the development of the provision of training at market prices. The paper concludes by summarizing some directions and key questions for future studies.

/pdf/what-are-we-learning-from-business-training-and-3d5rsfx97h.pdf

What are we learning from business training and entrepreneurship evaluations around the developing world

http://people.ku.edu/~asiedu/FDI%20and%20Democracy%20(JIE).pdf

Democracy, foreign direct investment and natural resources

http://tintin.hec.ca/pages/decio.coviello/research_files/BobbaCovielloEL07.pdf

Weak Instruments and Weak Identification in Estimating the Effects of Education on Democracy

We explore which financial constraints matter the most in the choice of becoming an entrepreneur. We consider a randomly assigned welfare program in rural Mexico and show that cash transfers signi cantly increase entry into entrepreneurship. We then exploit the cross-household variation in the timing of these transfers and find that current occupational choices are significantly more responsive to the transfers expected for the future than to those currently received. Guided by a simple occupational choice model, we argue that the program has promoted entrepreneurship by enhancing the willingness to bear risk as opposed to simply relaxing current liquidity constraints.

/pdf/liquidity-risk-and-occupational-choices-2rhv9dds2j.pdf

Liquidity, Risk, and Occupational Choices

The literature on aid effectiveness has focused more on recipient policies than the determinants of aid allocation yet a consistent result is that political allies obtain more aid from donors than non-allies. This paper shows that aid allocated to political allies is ineffective for growth, whereas aid extended to countries that are not allies is highly effective. The result appears to be robust across different specifications and estimation techniques. In particular, new methods are employed to control for endogeneity. The paper suggests that aid allocation should be scrutinized carefully to make aid as effective as possible.

Aid and Growth: Politics Matters

Why would bilateral donors intermediate aid through a multilateral and not extend aid directly? This paper suggests a trade-off: multiple bilateral donors for each recipient may imply coordination and strategic problems but intermediating through a multilateral may dilute individual donor objectives. The paper conducts traditional panel and truly bilateral regressions with bilateral-pair, fixed effects to model aid allocation decisions. The results confirm that politics is important for bilateral donors but also that aid fragmentation and strategic behavior affect aid allocation. Multilaterals solve strategic and coordination problems between donors and, while politics remains significant, there is some evidence for a dilution of this effect.

https://www.econstor.eu/bitstream/10419/51470/1/585535701.pdf

Multilateral Intermediation of Foreign Aid: What is the Trade-Off for Donor Countries?

We design and implement a field experiment that provides students from less advantaged backgrounds with individualized feedback on performance in a mock version of the admission exam used to ration seats in public high schools in Mexico City. The intervention reduces the gap between expected and actual performance and shrinks the variance of individual ability distributions. Guided by a simple model in which Bayesian agents choose school tracks based on their perceived ability distribution, we empirically document the interplay between variance reductions and mean changes of beliefs in shaping curricular choices. The shift in stated preferences over high school tracks enabled by the intervention affects admission outcomes within the assignment mechanism, with students who score higher in the mock test being assigned into more academically-oriented options.

/pdf/learning-about-oneself-the-effects-of-performance-feedback-1f0nresnc3.pdf

Matteo Bobba

Papers

Weak Instruments and Weak Identification in Estimating the Effects of Education on Democracy

Liquidity, Risk, and Occupational Choices

Aid and Growth: Politics Matters

Multilateral Intermediation of Foreign Aid: What is the Trade-Off for Donor Countries?

Learning about Oneself: The Effects of Performance Feedback on School Choice