THE BUILD-UP AND DURATION OF SUBSIDY-INDUCED EMPLOYMENT EVIDENCE FROM U.K. REGIONAL POLICY*

ABSTRACT. The paper takes microlevel data on U.K. regional policy instruments and other financial assistance payments to industry to examine the time profile of assisted employment up to five years after the date of assistance. The theoretical analysis indicates factors bearing on the employment effect of industrial assistance and highlights the possibly key role played by the firm's access to private funds. The results from the regression analysis indicate that both the build-up and duration of subsidy-induced jobs vary between assistance form and firm, and that assistance is generally ineffective in large firms. Elsewhere, assisted jobs accumulate over a period of three years, but then are lost to policy at high rates.     

SUBSIDIES,ADDITIONALITY AND FINANCIAL CONSTRAINTS: A COMRIENT ON WREN*

ABSTRACT. This paper comprises a detailed investigation of the properties of the analytical model introduced in Wren (1994) to evaluate the effect of industrial subsidies on firm employment. We deal specifically with the link between additionality and whether the firm is finance constrained, adding a more flexible formulation for the financial constraint than the two given in Wren. We use the model to question Wren's view that additionality will be greatest in financially constrained firms. We argue that financial constraints potentially restrict leverage and therefore in important, relevant circumstances, limit the effectiveness of subsidies.     

Picking 'winners' in space: Impact of spatial targeting on firm performance in China

This paper examines the spatial patterns of China's industrial encouragement policy and its distributional impact on firm productivity. To this end, I develop separate proxies to measure three popular policy instruments (subsidies, tax holidays, and preferential access to loans). I first show that China's industrial support policies tend to exhibit a prominent spatial feature of targeting firms located in lagging cities with lower density. Taking into account potential endogeneity of industrial policy, unobserved heterogeneity and firm dynamics, quantile regression techniques show that more intense industrial support leads to: (a) a reduction in the productivity of lower-performing firms, especially in denser cities; and (b) a small productivity gain for better performing firms but only in denser cities. Counterfactual analysis further reveals that pursuing an alternative, space-neutral industrial encouragement policy would increase average productivity by 14–16%, in aggregate, but also contribute to significantly higher regional inequality.     

Distinguishing Development Incentives from Developer Give-Aways: A Critical Guide for Development Practitioners and Citizens

The vast majority of communities offer financial incentives to private businesses and, among these, tax incentives remain the most widely used. Tax and other financial subsidies used to attract firms account for the bulk of public resources spent on economic development. Yet the interests of city residents—especially those marginalized in city politics—generally are not a key consideration in the fashioning of incentives. Using a hypothetical abatement proposal, this article highlights nine key questions that must be addressed to understand the potential benefits to the community of tax incentive programs. This exercise demonstrates how proponents of incentive deals typically overvalue benefits. By asking the right questions and conducting their own analysis, citizens can arrive at a more realistic estimate of net benefits.     

SMALL BUSINESS VIABILITY IN THE URBAN GHETTO*

ABSTRACT Within the minority communities of large SMSAs, neither the black-owned business nor the small nonminority enterprises are flourishing. Facing limited access to financial capital as well as constrained markets, the ghetto firms that do persist are typically quite small in terms of sales and employment. Among black establishments, the least educated entrepreneurs are the ones who are most likely to remain in business. Unless greater financial capital is forthcoming and better educated owners are induced to remain in business, the business community that is located in minority neighborhoods of large urban areas may be destined to stagnate.     

The Effects of Regional Capital Subsidies on Productivity Growth: A Case Study of the Greek Food and Beverage Manufacturing Industry*

Abstract. Capital subsidies form a major instrument of industrial and regional policy for economically developed countries all over the world, including many European Union and Organisation for Economic Cooperation and Development countries. Research findings have challenged the effectiveness of capital subsidies in assisting productivity growth. This paper treats capital subsidies as a new input and estimates a stochastic production frontier that is not bound by the restrictions imposed by approaches used in previous research works. It is shown that capital subsidies affect total factor productivity growth through technical change and not through scale efficiency, while the disadvantaged location of firms affects technical efficiency.     

The Spatial Evolution of the Polish Biotech Industry: A Path-Dependent Process?

In Poland, similarly to other Central and Eastern European countries, the development of the biotech industry dates back to the late 1980s, when the first private companies were established. The political and economic transformation of 1989 enabled mass development of private enterprises, but over the course of 20 years of development, only a couple of dozens biotech firms have emerged in Poland. The spatial evolution of the industry shows a strong concentration in Poland's six largest urban centres, which are characterized by the best scientific base, access to financial capital, and a well-developed local entrepreneurial culture. Given that all biotech clusters are also important centres of the pharmaceutical industry, despite the fact that there are no strong direct relationships between Poland's biotech and pharmaceutical companies, the authors of this paper put forward the thesis that the institutional environment of the pharmaceutical sector also affects the development of the biotech industry.     

Political Decoupling: Private Implementation of Public Policy

Where policy goals can be achieved through regulation of private firms, private provision of public services allows governments to separate public policies from their political costs by shifting those costs to the private sector. Over the past three decades, financial decoupling has emerged as a regulatory strategy for promoting conservation, especially in the energy sector. Decoupling refers to the separation of a firm’s revenues from the volume of its product consumed, which allows companies to pursue resource efficiency free from financial risk. Similarly, when private firms provide public services, they separate public policies from their political costs. This political decoupling allows governments to pursue controversial policies while avoiding their attendant political risks. Applied to environmental policy, this theory implies that potentially unpopular conservation policies are more likely to be adopted and succeed when implemented through private firms. As an initial test of the theory, we analyze California water utilities and their responses to that state’s drought from 2015–2017. Analysis shows that, compared with those served by local government utilities, private utilities adopted more aggressive conservation measures, were more likely to meet state conservation standards, and conserved more water.     

THE POLITICAL ECONOMY OF WORKER PENSION FUNDS

Increasing concentration of economic power within the corporate sector, as well as the extent of corporate control by a few financial institutions such as commercial banks, have been subjects of intense scrutiny and debate in recent years. However, the role of private and public worker retirement trusts in providing power for institutional investors has not been adequately addressed. Pension fund assets, which were relatively inconsequential prior to 1960, and their investment in and share of total corporate equities minor, have grown to over $l410 billion by the end of 1977. In their analysis of and interest in public and private pension trusts, scholars, employers and even employees have tended to emphasize narrow economic issues such as investment performance. It is the central argument of this article that workers’ funds have become a major source of capital in the American economy, and as such have been used to help create and/or sustain practices that adversely impinge on workers themselves. It is argued that pension assets have contributed to: 1) the increasing power of financial institutions; 2) growth of corporate profits that only minimally benefit some pension plan participants; 3)capital shortages for 'socially useful’ investments; and 4)support of corporate enterprises that refuse basic worker demands including unionization itself. The study further suggests that the rapidly growing pension assets have the potential to serve‘the public interest’ as well as the needs of workers. Threat of withdrawal of funds from selected money managers and corporations, and utilization of share–holder voting rights to influence corporate policies can be potent weapons for organized labor. Since this is an exploratory analysis, the aim of the article is to gather, present and clarify basic information on worker pension trusts and to propose alternative avenues for future research in this critical area.     

Policy feedback via economic behavior: A model and experimental analysis of consumption behavior

This article examines policy feedback via economic behavior in the mass public, with a focus on consumption behavior. Do public policies affect the consumption behavior of mass publics and subsequent policymaking processes and outcomes? If so, how? I introduce a policy feedback model of consumption behavior in the mass public. Within this model, I advance a theoretical argument on the consequences of targeted cash assistance policies (TCAPs) for consumer spending behavior and government provision of basic utilities in developing countries. Using a randomized field experiment in Mexico and pre–post analysis, I find that TCAPs boost consumer spending on private access to basic utilities in the short term and reduce government provision of basic utilities in the medium term. The study pushes policy feedback theorists to think beyond the arena of mass politics, and the findings have important implications for social policy and human development in developing countries.     

A THEORETICAL FRAMEWORK FOR SMALL BUSINESS POLICY

A number of public policy issues have been discussed in this article, the most important of which are: 1. Small business would not need special consideration if our economy were basically a competitive one. 2. A large and growing segment of our economy has sufficient market and political power to make our economy basically non-competitive. 3. Small firms tend to provide price competition, to lead in the development of new products and processes, and to generate new innovations and new employment. 4. Government policy tends to create artificial economies of scale, giving an unwarranted advantage to the very large firm. As a first approximation, a policy of government neutrality on firms of varying size is needed. But, because of discriminations which already exist which favor large firms over small firms, special small business programs may be necessary to provide an equitable policy base. Unfortunately, programs designed to benefit all business, like the investment tax credit, tend to primarily benefit larger firms (Berney, 1979). This is the case for two reasons. First, there is a basic difference in production relationships: large firms tend to be more capital intensive and small firms more labor intensive. Second, the more complex a rule or regulation, the more costly it is for small business to use it. Consequently, even the employment tax credit, which should benefit the small firm is not used by them. Instead, it tends more to benefit the larger firm. Neutrality, as a governmental policy, would appear to demand different treatment for firms of varying size. As an example, the “regulatory flexibility” concept applies different standards to different sized firms so that the burden of regulation is more equitably distributed. The concept of encouraging or requiring financial institutions and other lenders to establish “dual prime rates” is a further example. Since small firms appear to have much higher debt to equity ratios and rely more heavily on shorter-term bank credit, they are more heavily burdened by a tight money policy which forces increases of interest rates. Thus, dual prime rates help to spread the burden of rising interest costs more equally. As many people prefer to work for themselves, equalizing the burden of government policy could only serve to increase the basic growth rate for small business, thus providing an easier start for entrepreneurs and would encourage a more rapid rate of economic growth. None of these discussions, however, argues that small business should be protected from failure. The more efficient firms will succeed and prosper, and the least efficient will not. Many currently successful entrepreneurs learn how to improve their production processes or managerial skills from their failures. What is being recommended as a first step is that government should concentrate on equalizing burdens and benefits in order to achieve true neutrality. If private economies of scale do indeed exist, new firms must grow to survive; what the government should not create are artificial economies of scale with public policy. A strong argument for further action can also be made: it appears that significant external benefits are produced by an economic system with a dynamic small business sector. Since these benefits go to society as a whole rather than entrepreneurs alone in the form of increased profits, a freely operating market without government assistance does not generate as many new small businesses as would be optimal for our society. To internalize the benefits that come from small business, governmental programs need to be devised to increase the rate of return on new, innovative small businesses. Should this happen, we could then anticipate increased rapid rates of innovation and technological change, more rapid rates of employment growth, expanded price competition in all sectors of the economy, and improved export capabilities, in short, true flexibility in our capitalistic system.     

Regional Financial Arrangements in the Global Financial Safety Net: The Arab Monetary Fund and the Eurasian Fund for Stabilization and Development

The so‐called global financial safety net provides backstop insurance during financial crises. The three elements of the global safety net — the IMF, regional financial arrangements (RFAs) and bilateral swap agreements — underwent substantial changes after the global financial crisis. How have these changes influenced their use? What role do RFAs have in the safety net? This contribution addresses these questions by examining the timeliness, volume and policy conditionality of liquidity provision of each of the three elements, using a data set of 50 RFA member countries from the period 1976–2015. The article presents case studies of the Arab Monetary Fund (AMF) and the Eurasian Fund for Stabilization and Development (EFSD) to create a deeper institutional understanding of the governance mechanisms of regional funds. The authors find that today's global financial safety net produces inequalities in emergency liquidity provision. In terms of volume, RFAs improve the safety net only for small member countries — about one‐third of the countries in the sample can access sufficient liquidity regionally. The experiences of AMF and EFSD demonstrate that intra‐regional asymmetries of RFAs play a contradictory role: while the participation of large economies leverages liquidity provision, it simultaneously creates difficulties for the governance of the regional body.     

A Hostile Takeover of Nature? Placing Value in Conservation Finance

Conservation finance is a nascent field that claims to “deliver maximum conservation impacts, while, at the same time, generating returns for investors” (Credit Suisse/WWF). While geographers have questioned the ability of conservation finance to play a significant role in international biodiversity conservation, an emerging cohort of boutique private equity firms are actively generating returns on North American conservation projects. This raises the question: how are these firms generating profits, and in turn, returns for their shareholders? Drawing from a Marxian understanding of finance as redistributive, I argue that these firms are generating profits through a process similar to a corporate hostile takeover. Using the examples of ranchland and timberland investment in the United States, I show that (1) the materialities and historical geographies of these landscapes play a crucial role their monetization, and (2) shareholder returns are generated through a combination of traditional real estate sales and revaluations, public monies, and commodity production.     

1952～1954年湖北省农村私人借贷的历史考察

私人借贷在全国解放前一直是农村金融体系的重要组成部分.解放以后,从1952～1954年湖北省的调查材料来看,由于经济落后、家庭经济弱小、缺乏完善的社会保障和现代金融体系等原因,农村的私人借贷虽受到抑制但仍有一定的发展,与解放以前相比,这一时期的私人借贷形式较为简化,利率较低,功能上也以互助互济为主.国家银行业务在农村的延伸和农村信用社等现代金融组织的发展在一定程度上压缩了私人借贷的空间,但并不能完全替代私人借贷.     

The European union's support for new technology‐based firms: An assessment of the first three years of the European seed capital fund scheme

In 1988, the European Commission launched a pilot programme, the European Seed Capital Fund Scheme, designed to create 24 new seed capital funds in the 12 member states and to increase the availability of equity finance to innovative start‐up and early‐stage enterprises. The findings of a pan‐European assessment carried out in the spring of 1992 on 21 of the 22 supported funds and 40 of their investee companies are presented. The actions of the funds have allowed additional resources to be directed to young technology‐based firms. However, the research findings also suggest that the majority of supported funds are under‐capitalized which will result in major problems of financial viability in the medium term. The research also questions the sufficiency of supply side policies alone to address issues of regional ‘equity gaps’ particularly related to the support for NTBFs within Europe.     

The End of the Beginning?: Welsh Regional Policy and Objective One

'West Wales and the Valleys' now qualify for EU Objective One status, entitled to draw down up to 1.3 billion in EU funds, matched from public and private sources between 2000 and 2006. However, there are many issues raised by the process of organizing the subsequent programme. There are questions over policy focus in the economically diverse Objective One areas, how governance of these policies will work, and the wider implications of Objective One in financial and political terms. There is also debate over previous regional policy initiatives in a Wales that for many years had access to a relatively large share of the UK's regional policy budget and EU funds, yet still faced falling GDP per head as a proportion of the UK average, west Wales and the Valleys' very Objective One status relying on GDP per capita under 75% of the EU average.     

NORWEGIAN SUBSIDIZED THEATRES – FAILURE OR FUTURE?

During the period 1972–1999, the number of Norwegian subsidized theatres was more than doubled, while attendance was largely unchanged. Mainly due to new institutions established during this period, the number of performances increased by about 45%. With about the same total attendance, this means that the attendance per performance decreased by about the same percentage. The number of employees (not counting engaged persons) increased by about 60%. All in all this led to an almost trebling of both costs and public support in real terms. This study deals with possible explanations of this distressing development. Contrary to what is commonly assumed, the new theatres, with cost‐disadvantages of small scale, are only part of the explanation. We provide two main explanations: the crowding out of the subsidized theatres by AV‐media and other performing art institutions, like private theatres and independent performing arts groups, and by other entertainment institutions. In addition, costs have increased substantially due to slow adjustment to reduction in demand, costly arrangements to counter the crowding out effects, and institutional sclerosis. The latter seems to be due to various cost‐increasing arrangements commonly found in public institutions with soft budget constraints, as well as in private monopolies and private firms sheltered by regulations of various kinds.     

Evolution of Innovation Policy in Emilia-Romagna and Valencia: Similar Reality,Similar Results?

This paper examines the evolution of regional innovation policy in Emilia-Romagna and Valencia, two regions with similar economic features that implemented close innovation policies in the 1970s and 1980s. We investigate whether their similarities have led to parallel targets, policy tools and governance developments. We show that innovation policy in both regions suffered from the effects of privatization, budget constraints and changes to manufacturing during the 1990s and we highlight the consequences. Although Emilia-Romagna experienced deeper changes to its innovation policy, privatizations and/or the replacement of public funds promoted commercial approaches and induced market failures in both regions. The worst effects of these policies were the implementation of less-risky innovation projects, the shift towards extra-regional projects and markets, and the favouring of large firms.     

The Political Economy of State Subsidies in Europe

In this article, I examine the reasons behind public aid to industry in 12 European countries during the period 199–93. 1 build a model based on societal demands for producer subsidies and the wiliingness and constraints of national governments to provide them. The main contribution of this study is the attention to the institutional context within which demand for and supply of public policy takes place. Institutions not only help shape actor preferences to extract "rents" but also fundamentally condition the level and distribution of subsidies.     

First Mayan Women's Congress

In October 1997, over 200 participants attended the First Mayan Women's Congress in Mexico and called for financial assistance, capacity building, and training to help Mayan women escape poverty. The Congress was initiated by the UN Development Fund for Women in collaboration with the Small Grants Program of the UN Development Program. Traditionally, Mayan women and men have played distinct roles in society, and efforts are underway to increase gender sensitivity and achieve a new balance of power. Mayan women attending the Congress reported that they face daily challenges in gaining their husbands' approval for participation in income-generating activities outside of the home. Eventually, however, some husbands also start working in these enterprises and are learning to assume their share of domestic responsibilities. Mayan women have been forced to reevaluation their role in society by a prevailing agricultural and environmental crisis as well as a high unemployment rate. Crafts that were once produced only for household consumption are now considered for export. Because the women need funds to initiate income-generating activities, the Conference linked women's groups with development practitioners, policy-makers, and donors. The women requested financial aid for more than 30 specific projects, and Congress participants agreed to pursue innovate strategies to support the enterprises with funds, training, and technical assistance. The Congress also encouraged environmental nongovernmental organizations to include Mayan women in mainstream development activities. This successful Congress will be duplicated in other Mexican states.