Showing papers by "Tilburg University published in 1999"

Financial Intermediation and Growth: Causality and Causes

Abstract: Legal and accounting reform that strengthens creditor rights, contract enforcement, and accounting practices boosts financial development and accelerates economic growth. Levine, Loayza, and Beck evaluate: Whether the level of development of financial intermediaries exerts a casual influence on economic growth. Whether cross-country differences in legal and accounting systems (such as creditor rights, contract enforcement, and accounting standards) explain differences in the level of financial development. Using both traditional cross-section, instrumental-variable procedures and recent dynamic panel techniques, they find that development of financial intermediaries exerts a large causal impact on growth. The data also show that cross-country differences in legal and accounting systems help determine differences in financial development. Together, these findings suggest that legal and accounting reform that strengthens creditor rights, contract enforcement, and accounting practices boosts financial development and accelerates economic growth. This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to understand the links between the financial system and economic growth. Thorsten Beck may be contacted at tbeck@worldbank.org.

Finance and the Sources of Growth

Abstract: Development of the banking sector exerts a large, causal impact on total factor productivity growth, which in turn causes GDP to grow. Whether banking development has a long-run effect on capital growth or private saving remains to be seen. Beck, Levine, and Loayza evaluate whether the level of development in the banking sector exerts a causal impact on economic growth and its sources- total factor productivity growth, physical capital accumulation, and private saving. They use (1) a pure cross-country instrumental variable estimator to extract the exogenous component of banking development and (2) a new panel technique that controls for country-specific effects and endogeneity. They find that: - Banks do exert a large, causal impact on total factor productivity growth, which feeds through to overall GDP growth. - The long-run links between banking development and both capital growth and private savings are more tenuous. This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to understand the links between the financial system and economic growth.

Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence

Abstract: Differences in interest margins reflect differences in bank characteristics, macroeconomic conditions, existing financial structure and taxation, regulation, and other institutional factors. Using bank data for 80 countries for 1988-95, Demirguc-Kunt and Huizinga show that differences in interest margins and bank profitability reflect various determinants: Bank characteristics. Macroeconomic conditions. Explicit and implicit bank taxes. Regulation of deposit insurance. General financial structure. Several underlying legal and institutional indicators. Controlling for differences in bank activity, leverage, and the macroeconomic environment, they find (among other things) that: Banks in countries with a more competitive banking sector-where banking assets constitute a larger share of GDP-have smaller margins and are less profitable. The bank concentration ratio also affects bank profitability; larger banks tend to have higher margins. Well-capitalized banks have higher net interest margins and are more profitable. This is consistent with the fact that banks with higher capital ratios have a lower cost of funding because of lower prospective bankruptcy costs. Differences in a bank's activity mix affect spread and profitability. Banks with relatively high noninterest-earning assets are less profitable. Also, banks that rely largely on deposits for their funding are less profitable, as deposits require more branching and other expenses. Similarly, variations in overhead and other operating costs are reflected in variations in bank interest margins, as banks pass their operating costs (including the corporate tax burden) on to their depositors and lenders. In developing countries foreign banks have greater margins and profits than domestic banks. In industrial countries, the opposite is true. Macroeconomic factors also explain variation in interest margins. Inflation is associated with higher realized interest margins and greater profitability. Inflation brings higher costs-more transactions and generally more extensive branch networks-and also more income from bank float. Bank income increases more with inflation than bank costs do. There is evidence that the corporate tax burden is fully passed on to bank customers in poor and rich countries alike. Legal and institutional differences matter. Indicators of better contract enforcement, efficiency in the legal system, and lack of corruption are associated with lower realized interest margins and lower profitability. This paper - a product of the Development Research Group - is part of a larger effort in the group to study bank efficiency.

A New Database on Financial Development and Structure

Abstract: This new database of indicators of financial development and structure across countries and over time unites a range of indicators that measure the size, activity, and efficiency of financial intermediaries and markets. Beck, Demirguc-Kunt, and Levine introduce a new database of indicators of financial development and structure across countries and over time. This database is unique in that it unites a variety of indicators that measure the size, activity, and efficiency of financial intermediaries and markets. It improves on previous efforts by presenting data on the public share of commercial banks, by introducing indicators of the size and activity of nonbank financial institutions, and by presenting measures of the size of bond and primary equity markets. The compiled data permit the construction of financial structure indicators to measure whether, for example, a country's banks are larger, more active, and more efficient than its stock markets. These indicators can then be used to investigate the empirical link between the legal, regulatory, and policy environment and indicators of financial structure. They can also be used to analyze the implications of financial structure for economic growth. Beck, Demirguc-Kunt, and Levine describe the sources and construction of, and the intuition behind, different indicators and present descriptive statistics. This paper - a product of Finance, Development Research Group - is part of a broader effort in the group to understand the determinants of financial structure and its importance to economic development. The authors may be contacted at tbeck@worldbank.org, ademirguckunt@worldbank.org, or rlevine@csom.umn.edu.

Culture specific and cross-culturally generalizable implicit leadership theories: Are attributes of charismatic/transformational leadership universally endorsed?

Abstract: This study focuses on culturally endorsed implicit theories of leadership (CLTs). Although cross-cultural research emphasizes that different cultural groups likely have different conceptions of what leadership should entail, a controversial position is argued here: namely that attributes associated with charismatic/transformational leadership will be universally endorsed as contributing to outstanding leadership. This hypothesis was tested in 62 cultures as part of the Global Leadership and Organizational Behavior Effectiveness (GLOBE) Research Program. Universally endorsed leader attributes, as well as attributes that are universally seen as impediments to outstanding leadership and culturally contingent attributes are presented here. The results support the hypothesis that specific aspects of charismatic/transformational leadership are strongly and universally endorsed across cultures.

A meta-analysis of satisfaction in marketing channel relationships

Abstract: The authors advance a conceptual model of channel member satisfaction that distinguishes between economic and noneconomic satisfaction. The resulting model then is tested using meta-analysis. Meta-...

Low maternal free thyroxine concentrations during early pregnancy are associated with impaired psychomotor development in infancy

Abstract: BACKGROUND Maternal thyroid function during early pregnancy is an important determinant of early fetal brain development because the fetal thyroid is unable to produce any T4 before 12–14 weeks' gestation. Overt maternal hypothyroidism as seen in severe iodine-deficient areas is associated with severely impaired neurological development of the offspring. At present, it is not known whether low free T4 (fT4) levels during pregnancy in healthy women from iodine sufficient areas may affect fetal neurodevelopment. METHODS Neurodevelopment was assessed at 10 months of age in a cohort of 220 healthy children, born after uncomplicated pregnancies and deliveries, using the Bayley Scales of Infant Development. Maternal TSH, fT4 and TPO antibody status were assessed at 12 and 32 weeks' gestation. Maternal gestational fT4 concentration was defined as an independent parameter for child development. RESULTS Children of women with fT4 levels below the 5th (<9.8 pmol/l, n = 11) and 10th (<10.4 pmol/l, n = 22) percentiles at 12 weeks' gestation had significantly lower scores on the Bayley Psychomotor Developmental Index (PDI) scale at 10 months of age, compared to children of mothers with higher fT4 values (t test, mean difference: 14.1, 95% confidence interval (CI): 5.9–22 and 7.4, 95% CI: 1.1–13.9, respectively). At 32 weeks' gestation, no significant differences were found. In the group of women with the lowest 10th percentile fT4 concentrations at 12 weeks' gestation, a positive correlation was found between the mothers' fT4 concentration and children's PDI scores (linear regression, R: 0.46, P = 0.03). After correction for confounding variables, a fT4 concentration below the 10th percentile at 12 weeks' gestation was a significant risk factor for impaired psychomotor development (RR): 5.8, 95% CI: 1.3–12.6). CONCLUSIONS Low maternal plasma fT4 concentrations during early pregnancy may be an important risk factor for impaired infant development.

Anticipated regret, expected feedback and behavioral decision making

Abstract: This paper addresses the effects of the anticipation of regret on decision making under uncertainty. Regret is a negative, cognitively based emotion that we experience when realizing or imagining that our present situation would have been better, had we decided differently. The experience of post-decisional regret is for a large part conditional on the knowledge of the outcomes of the rejected alternatives. A series of studies is reviewed in which it is shown that whether or not decision makers expect post-decisional feedback on rejected alternatives has a profound influence on the decisions they make. These studies, focusing on choice between gambles, consumer decision making and interpersonal decision making, also show that anticipated regret can promote risk-averse as well as risk-seeking choices. This review of empirical studies is followed by a discussion of the conditions under which we can expect the anticipation of regret to take place. Copyright © 1999 John Wiley & Sons, Ltd.

Anticipated regret, expected feedback and behavioral decision-making

Abstract: This paper addresses the effects of the anticipation of regret on decision making under uncertainty. Regret is a negative, cognitively based emotion that we experience when realizing or imagining that our present situation would have been better, had we decided differently. The experience of post-decisional regret is for a large part conditional on the knowledge of the outcomes of the rejected alternatives. A series of studies is reviewed in which it is shown that whether or not decision makers expect post-decisional feedback on rejected alternatives has a profound influence on the decisions they make. These studies, focusing on choice between gambles, consumer decision making and interpersonal decision making, also show that anticipated regret can promote risk-averse as well as risk-seeking choices. This review of empirical studies is followed by a discussion of the conditions under which we can expect the anticipation of regret to take place. Copyright © 1999 John Wiley & Sons, Ltd.

The Real Worlds of Welfare Capitalism

Abstract: The Real Worlds of Welfare Capitalism traces how individuals fare over time in each of the three principal types of welfare state. Through a unique analysis of panel data from Germany, the Netherlands and the US, tracking individuals' socio-economic fate over fully ten years, Goodin, Headey, Muffels and Dirven explore issues of economic growth and efficiency, of poverty and inequality, of social integration and social autonomy. It is common to talk of the inevitability of tradeoffs between these goals. However, in this book the authors contend that the social democratic welfare regime, represented here by the Netherlands, equals or exceeds the performance of the corporatist German regime and the liberal US regime across all these social and economic objectives. They thus argue that, whatever one's priorities, the social democratic welfare regime is uniquely well-suited to realizing them.

New tools and new tests in comparative political economy - the database of political institutions

Abstract: This paper introduces a large new cross-country database on political institutions: the Database on Political Institutions (DPI). The authors summarize key variables (many of them new), compare this data set with others, and explore the range of issues for which the data should prove invaluable. Among the novel variables they introduce: 1) Several measures of tenure, stability, and checks and balances. 2) Identification of parties with the government coalition or the opposition. 3) Fragmentation of opposition and government parties in legislatures. The authors illustrate the application of DPI variables to several problems in political economy. Stepan and Skach, for example, find that democracy is more likely to survive under parliamentary governments than presidential systems. But this result is not robust to the use of different variables from the DPI, which raises puzzles for future research. Similarly, Roubini and Sachs, find that divided governments in the OECD run higher budget deficits after fiscal shocks. Replication of their work using DPI indicators of divided government indicates otherwise, again suggesting issues for future research. Among questions in political science and economics, that this database may illuminate: the determinants of democratic consolidation, the political conditions for economic reform, the political and institutional roots of corruption, and the elements of appropriate and institutionally sensitive design of economic policy.

Non-conscious recognition of affect in the absence of striate cortex

Abstract: Functional neuroimaging experiments have shown that recognition of emotional expressions does not depend on awareness of visual stimuli and that unseen fear stimuli can activate the amygdala via a colliculopulvinar pathway. Perception of emotional expressions in the absence of awareness in normal subjects has some similarities with the unconscious recognition of visual stimuli which is well documented in patients with striate cortex lesions (blindsight). Presumably in these patients residual vision engages alternative extra-striate routes such as the superior colliculus and pulvinar. Against this background, we conjectured that a blindsight subject (GY) might recognize facial expressions presented in his blind field. The present study now provides direct evidence for this claim.

Representing text chunks

Abstract: Dividing sentences in chunks of words is a useful preprocessing step for parsing, information extraction and information retrieval. (Ramshaw and Marcus, 1995) have introduced a "convenient" data representation for chunking by converting it to a tagging task. In this paper we will examine seven different data representations for the problem of recognizing noun phrase chunks. We will show that the the data representation choice has a minor influence on chunking performance. However, equipped with the most suitable data representation, our memory-based learning chunker was able to improve the best published chunking results for a standard data set.

Temporal factors in mental work: Effects of interrupted activities

Abstract: Although interruptions are daily occurring events for most working people, little research has been done on the impacts of interruptions on workers and their performance. This study examines the e Vects of interruptions on task performance and its regulation, as well as on workers’ psychological and psychophysiological state. Two parallel experiments were carried out in the Netherlands and in Russia, using a common conceptual framework and overlapping designs. Employees with relevant work experience carried out realistic text editing tasks in a simulated o Yce environment, while the frequency and complexity of interruptions were experimentally manipulated. It was hypothesized that interruptions: (i) would cause a deterioration of performance; (ii) evoke strategies to partially compensate for this deterioration; (iii) aVect subjects’ emotions and well-being negatively; and (iv) raise the level of eVort and activation. It was also hypothesized that greater frequency and complexity of interruptions would enhance the expected e Vects. The hypotheses are only partially cone rmed. The results show that, contrary to what was expected, interruptions cause people to perform the main task faster while maintaining the level of quality. Participants develop strategies enabling them to deal e Vectively with the interruptions, while actually over-compensating the potential performance decline. Interruptions do have a negative impact on emotion and well-being, and lead to an increase of e Vort expenditure, although not to an increase in activation. Thus the improved performance is achieved at the expense of higher psychological costs. Greater complexity evoked more favourable responses among the Dutch participants and more unfavourable ones among the Russian participants. These diVerences are interpreted in terms of the participants’ professional background. The research demonstrates that the e Vects of interruptions reach beyond the execution of additional tasks and the change of work strategies. Interruptions appear to have an after-e Vect, ine uencing the workers’ subsequent readiness to perform. Detailed analysis of the activity in the interruption interval, focusing on

An analysis of the Stability and Growth Pact.

Abstract: We use a stylised model to analyse the Stability and Growth Pact for countries that have formed the European Monetary Union (EMU). In our model, shortsighted governments fail to internalise the consequences of their debt policies for the common inflation rate fully. Therefore, while governments have no incentive to sign a stability pact in the absence of a monetary union, they do so with monetary union to restrain this externality. With uncertainty, a monetary union combined with an appropriately designed pact will be strictly preferred to autonomy. With differences in initial conditions, conflicts of interest arise. We study the Nash bargaining solution.

Green Tax Reforms and the Double Dividend: an Updated Reader's Guide

Abstract: This paper draws on the literature on the double dividend to explore whether an environmental tax reform yields not only a cleaner environment but also non-environmental benefits In doing so, it investigates how environmental tax reforms impact welfare, the distribution of income, and employment Also the political economy of environmental taxation is discussed

Representing Text Chunks

Abstract: Dividing sentences in chunks of words is a useful preprocessing step for parsing, information extraction and information retrieval. (Ramshaw and Marcus, 1995) have introduced a "convenient" data representation for chunking by converting it to a tagging task. In this paper we will examine seven different data representations for the problem of recognizing noun phrase chunks. We will show that the the data representation choice has a minor influence on chunking performance. However, equipped with the most suitable data representation, our memory-based learning chunker was able to improve the best published chunking results for a standard data set.

Inventory Control in Hybrid Systems with Remanufacturing

Abstract: This paper is on production planning and inventory control in systems where manufacturing and remanufacturing operations occur simultaneously. Typical for these hybrid systems is, that both the output of the manufacturing process and the output of the remanufacturing process can be used to fulfill customer demands. Here, we consider a relatively simple hybrid system, related to a single component durable product. For this system, we present a methodology to analyse a PUSH control strategy (in which all returned products are remanufactured as early as possible) and a PULL control strategy (in which all returned products are remanufactured as late as is convenient). The main contributions of this paper are (i) to compare traditional systems without remanufacturing to PUSH and to PULL controlled systems with remanufacturing, and (ii) to derive managerial insights into the inventory related effects of remanufacturing.

Comparing Service Delivery to What Might Have Been: Behavioral Responses to Regret and Disappointment

Abstract: The effects of the specific emotions disappointment and regret on customers’ behavioral responses to failed service encounters were examined. Study 1, using a vignette methodology, showed that regr...

Sample-path solution of stochastic variational inequalities

Abstract: Sample-path optimization is a simulation-based method for solving optimization problems that arise in the study of complex stochastic systems. In this paper we broaden its applicability to include the solution of stochastic variational inequalities. This formulation can model equilibrium phenomena in physics, economics, and operations research. We describe the method, provide general conditions for convergence, and present numerical results of an application of the method to a stochastic economic equilibrium model of the European natural gas market. We also point out some current limitations of the method and indicate areas in which research might help to remove those limitations.

Forgetting Exceptions is Harmful in Language Learning

Abstract: We show that in language learning, contrary to received wisdom, keeping exceptional training instances in memory can be beneficial for generalization accuracy. We investigate this phenomenon empirically on a selection of benchmark natural language processing tasks: grapheme-to-phoneme conversion, part-of-speech tagging, prepositional-phrase attachment, and base noun phrase chunking. In a first series of experiments we combine memory-based learning with training set editing techniques, in which instances are edited based on their typicality and class prediction strength. Results show that editing exceptional instances (with low typicality or low class prediction strength) tends to harm generalization accuracy. In a second series of experiments we compare memory-based learning and decision-tree learning methods on the same selection of tasks, and find that decision-tree learning often performs worse than memory-based learning. Moreover, the decrease in performance can be linked to the degree of abstraction from exceptions (i.e., pruning or eagerness). We provide explanations for both results in terms of the properties of the natural language processing tasks and the learning algorithms.