Mexican cities along the US-Mexico border, especially Cd. Juarez, became notorious due to high femicide rates supposedly associated with maquiladora industries and the NAFTA. Nonetheless, statistical evaluation of data from 1990 to 2012 shows that their rates are consistent with other Mexican cities’ rates and tend to fall with increased employment opportunities in maquiladoras. Femicide rates in Cd. Juarez are in most years like rates in Cd. Chihuahua and Ensenada and, as a share of overall homicide rates, are lower than in most cities evaluated. These results challenge conventional wisdom and most of the literature on the subject.
How does the mother’s labour supply affect the household’s demand for childcare? And thus are formal and informal childcare substitutable? In this paper, we address these two questions using micro-data for 14 European countries observed over the period between 2010 and 2017. Relying on a Control Function Approach to account for the endogeneity between childcare and the mothers’ labour supply, we identify different factors affecting the demand for formal and informal childcare. The results show that the mother’s labour supply is a key element in understanding the demand for childcare and suggest that the more the mother participates in the labour market, the higher the household’s demand for childcare services. Moreover, our results support the substitutability hypothesis between formal and informal childcare. Policymakers aiming to promote mothers’ employment should increase the availability of formal childcare services, as this will increase labour supply by mothers and reduce the use of informal care arrangements.
In this paper, we provide a better understanding of what drives sovereign wealth funds (SWFs) to improve their governance. Using the most recent SWF governance scoreboard from Maire et al. (2021), we estimate a fractional response model to determine whether SWF governance disclosure norms are driven by the search for internal or external legitimacy. Overall, we find that SWFs have better governance when they originate from democratic countries with high-quality, national governance. Our results also show that SWFs tend to have better governance quality when they need to acquire external legitimacy vis-à-vis the target company and its government. In particular, we find that SWFs have an incentive to improve their governance when they are sufficiently internationalized, when the amount of foreign assets invested abroad is sufficiently large or when the amount of shares acquired in developed countries is significant. These findings demonstrate how SWFs may proactively build legitimacy in host countries when they need to adapt their foreign entry strategies. Our results have important implications for understanding the determinants of SWF governance in general.
This paper highlights the procyclical and unstable behaviour of mutual funds, characterized by a varying sensitivity on common asset pricing factors. It proposes a novel factor model that allows for regime changes associated with macroeconomic and financial state variables. Estimated on a panel covering 825 US equity mutual funds over a period of 30 years, it appears that the yield curve, the dividend yield, short term interest rates and the industrial production coincide with regimes switches in the Fama–French factors. Furthermore, the estimated regimes coincide with financial crises and economic downturns, thus confirming the procyclical behaviour of mutual funds' returns. These findings, coupled with the emerging systemic role of mutual funds, promote the consideration for a specific macroprudential regulatory framework targeted at the mutual fund industry.
The sustainability of resource use and the management of public finances are both long-run issues that are linked to each other through savings decisions. To study them conjointly, this paper introduces a public debt stabilization constraint in an overlapping generation model in which nonrenewable resources constitute a necessary input in the production function and belong to agents. It shows that stabilization of public debt at a high level (as share of capital) may prevent the existence of a sustainable development path, that is, a path on which per capita consumption is not decreasing. Public debt thus appears as a threat to sustainable development. It also shows that higher public debt-to-capital ratios (and public expenditures-to-capital ones) are associated with lower growth. Two transmission channels are identified. As usual, public debt crowds out capital accumulation. In addition, public debt tends to increase resource use which reduces the rate of growth. We also provide a numerical analysis of the dynamics that shows that the economy is characterized by saddle path stability. Finally, we show that the public debt-to-capital ratio may be calibrated to implement the social planner optimal allocation according to which the growth rate is increasing in the degree of patience.
The impact of US allocation of family planning aid on other donors is studied in order to gain new insights into donor interactions. Within this context, the dominant player in the sector is the United States, whose policies on family planning undergo changes influenced by domestic debates surrounding abortion. By utilizing the Mexico City Policy and considering exposure to this particular policy as an instrumental factor, it has been observed that other donors do not immediately react to policy changes made by the United States, either contemporaneously or within one year. However, a noticeable shift occurs after a two-year period, indicating that these donors eventually align their allocation strategies with those of the United States. Further analysis of this phenomenon reveals varying patterns among different types of donors. While smaller donors exhibit a clear intention to compensate for US policy changes, larger donors display a mix of competitive tendencies and herding behavior, thereby reinforcing the impact of the Mexico City Policy after the two-year time frame.
In 2020, Berlin introduced a rigorous rent-control policy responding to soaring prices by capping rents: the Mietendeckel (rent freeze). The German Constitutional Court revoked the policy only one year later. Although successful in lowering rents during its duration, the consequences for Berlin’s rental market and close-by markets are per se not clear. This article evaluates the short-term causal supply-side effects in terms of prices, quantities, and landlords’ strategic behavior. We develop a theoretical framework capturing the key features of first-generation rent control policies and Berlin-specific aspects. Using a rich pool of detailed rent advertisements, predictions are tested, and further empirical causal inference techniques are applied for comparing price trajectories of dwellings inside and outside the policy’s scope. Mechanically, advertised rents drop significantly upon the policy’s enactment. A substantial rent gap along Berlin’s administrative border emerges, and rapidly growing rents in Berlin’s (unregulated) adjacent municipalities are observed. Landlords started adopting a hedging strategy insuring themselves against the risk of contractually long-term fixed low rents following a potentially unconstitutional law. Whereas this hedge was beneficial for landlords, the risk was completely borne by tenants. Moreover, the number of available properties for rent dropped significantly, a share of which appears to be permanently lost for the rental sector. This hampers a successful housing search for first-time renters and people moving within the city. Overall, negative consequences for renters appear to outweigh positive ones.
This paper was accepted by Victoria Ivashina, finance.
Funding: This research benefits from funding by the FNR Luxembourg National Research Fund [CORE Grant 3886] (ASSESS) and the OeNB Anniversary Fund [Grant 18767] (LocHouse). M. Fongoni further thanks the Department of Economics at the University of Strathclyde for support and acknowledges funding from the French government under the “France 2030” investment plan managed by the French National Research Agency [Reference ANR-17-EURE-0020] and from the Excellence Initiative of Aix-Marseille University - A*MIDEX.
Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4775.
Under triopoly and Cournot competition, we study an infinite horizon Markov perfect equilibrium merger game in which in each period one of the firms (“the Buyer”) selects a bid price and then the two sellers accept or reject this offer with some probability. The possibility of a “war of attrition” equilibrium in which the seller who outlasts the other is then able to sell in the following period at a greater price, is a distinct feature of the model. Delayed monopolization is all the more likely when the discount factor is small and the ratio duopoly/ triopoly profits is important. Two other equilibria are shown to be possible: an unmerged and an immediate monopolization equilibrium. Each equilibrium is shown to correspond to a different set of parameter values. The two special cases of linear and constant price elastic demand functions are fully characterized.
In this paper, we investigate the determinants of equity shares purchased by Sovereign Wealth Funds (SWFs). Based on the literature of cross-border acquisitions and entry mode choice theory, we shed light on the real drivers of these state-owned funds when they buy small or large stakes in cross-border target firms. Using an original dataset of SWF acquisitions over the period 2000–2015, a Two-Part Fractional Regression Model is estimated to account for both the fractional nature of the dependent variable as well as the separation between the decision to invest and that concerning the share of equity invested. We find that the decision to invest and the decision on the share of equity to be acquired are two distinct processes. We also find that SWFs take the investment decision in cross-border target firms by trying to reduce transaction costs and information asymmetry according to the cross-border acquisition theory, and also by taking the legal and institutional environment of the host country into consideration. However, the fact that they do not hesitate to take large shares or to acquire targeted firms that are considered to be strategic and located in politically unstable countries suggests that their motives may go beyond financial consideration.
We provide a unified framework with demand for housing over the life cycle and financial frictions to analyze the existence and macroeconomic effects of rational housing bubbles. We distinguish a housing price bubble, defined as the difference between the housing market price and its fundamental value, from a housing demand bubble, which corresponds to a situation where a pure speculative housing demand exists. In an overlapping generation exchange economy, we show that no housing price bubble occurs. However, a housing demand bubble may occur, generating a boom in housing prices and a drop in the interest rate, when households face a binding borrowing constraint. The multiplicity of steady states and endogenous fluctuations can occur when credit market imperfections are moderate. These fluctuations involve transitions between equilibria with and without a housing demand bubble that generate large fluctuations in housing prices consistent with observed patterns. We finally extend the basic framework to a production economy and we show that a housing demand bubble increases housing prices, which can still be characterized by large fluctuations.