Alessandra Guariglia

Foreign Direct Investment, Inequality, and Growth

This paper examines the interactions between Foreign Direct Investment (FDI), inequality, and growth, both from an empirical and a theoretical point of view. Using a panel of 119 developing countries, we observe that FDI promotes both inequality and growth, and tends to reduce the share of agriculture to GDP in the recipient country. We than set up a growth model of a dual economy in which the traditional (agricultural) sector uses a diminishing returns technology, while FDI is the engine of growth in the modern (industrial) sector. The main predictions of the model are consistent with the stylized facts observed in the data.

The Effects of Financial Constraints on Inventory Investment: Evidence from a Panel of UK Firms

The objective of this paper is to analyze the linkage between internal finance and inventory investment using a large panel of U.K. manufacturing firms from 1968 to 1991. Firms are classified into two groups: those more and those less likely to face financial constraints. The estimates of several equations for inventory growth augmented with the coverage ratio indicate a significant effect of the latter on inventory investment for the former group during periods of recession and tight monetary policy. This effect is particularly strong for work-in-process and raw material inventories that are characterized by low adjustment costs. Copyright 1999 by The London School of Economics and Political Science

The more the better? Foreign ownership and corporate performance in China

We examine the relationship between the degree of foreign ownership and performance of recipient firms, using a panel of 21,582 Chinese firms over the period 2000–2005. We find that joint-ventures perform better than wholly foreign-owned and purely domestic firms. Although productivity and profitability initially rise with foreign ownership, they start declining once it reaches a certain point. This suggests that some domestic ownership is necessary to ensure optimal performance. We referred these findings to a model of a joint-venture, where strategic interactions between a foreign and a domestic owners inputs may lead to an inverted U-shaped ownership–performance relationship.

Internal financial constraints and firm productivity in China: Do liquidity and export behavior make a difference?

Financial factors have been found highly important in influencing firms’ real activities and in promoting aggregate growth. Yet, the linkage between finance and firm-level productivity has been overlooked in the literature. We fill this gap using a panel of 130,840 Chinese manufacturing firms over the period 2001–2007 to estimate a TFP model augmented with cash flow. We find that, especially for illiquid foreign and private firms, productivity is strongly constrained by the availability of internal finance. Furthermore, contrary to private firms, foreign non-exporters display higher dependence of productivity on cash flow than exporters.

Does the investment opportunities bias affect the investment–cash flow sensitivities of unlisted SMEs?

Using a panel of 5999 Belgian small- and medium-sized enterprises (SMEs) over the period 2002–2008, we employ a Bayesian approach to derive firm-varying investment–cash flow sensitivities (ICFS) from reduced-form investment equations which include different measures of investment opportunities suitable for unlisted firms. We find that all our models yield similar ICFS, which are significantly related to a wide set of proxies for financing constraints and orthogonal to our measures of investment opportunities. These findings suggest that the ICFS of SMEs do not simply reflect investment opportunities. The investment opportunities bias may therefore have been overstated in previous literature.

Does China overinvest? Evidence from a panel of Chinese firms

This paper uses a dataset of more than 100,000 firms over the period of 2000–2007 to assess whether and why Chinese firms overinvest. We find that corporate investment is more efficient in the non-state sector. Within all ownership categories, we uncover evidence indicating a degree of overinvestment among firms that invest more than their industry median or more than their predicted optimal investment. The free cash flow hypothesis provides a good explanation for China’s overinvestment in the non-state sectors, whereas in the state sector, overinvestment is attributable to the poor screening and monitoring of enterprises by banks.

Do Social Capital Building Strategies Influence the Financing Behavior of Chinese Private Small and Medium‐Sized Enterprises?

Using data from 65,485 Chinese private small and medium–sized enterprises over the period 2000–2006, we examine the extent to which firms can improve access to debt by adopting strategies aimed at building social capital, namely entertaining and gift giving to others in their social network, and obtaining political affiliation. We find that although entertainment and gift–giving expenditure leads to higher levels of total and short–term debt, it does not enable firms to obtain greater long–term debt. In contrast, we demonstrate that obtaining political affiliation allows firms greater access to long–term debt.

Wage Arrears Uncertainty and Precautionary Saving in Russia

Wage arrears are widespread in Russia, and are one of the main causes of uncertainty in the labour market. In this paper, we use the Russian Longitudinal Monitoring Survey over the period 1994-98 to construct a new and improved measure of household income risk, based on the uncertainty due to wage arrears. We then use this measure of uncertainty to test the precautionary saving hypothesis, according to which households save to self-insure against risk. We find significant evidence of additional saving by those households whose head is more likely to suffer from wage arrears one year hence. This suggests the existence of a strong precautionary saving motive. Copyright (c) The European Bank for Reconstruction and Development, 2003..

External finance and trade credit extension in China: does political affiliation make a difference?

Using a dataset of 65,706 Chinese firms over the period 2000–2007, we show that politically affiliated firms benefit from easier access to short-term external finance and extend more trade credit than their non-affiliated counterparts. Furthermore, we observe that the sensitivity of trade credit extension to short-term liabilities, which is largest for private firms producing differentiated goods, decreases with the degree of political affiliation. This suggests that gaining political affiliation contributes not only to alleviating individual firms’ financing constraints, but also to reducing the overall level of constraints in the economy through the additional trade credit being made available.

The Dynamics of Moonlighting: What is Happening in the Russian Informal Economy?

This paper uses rounds 5 to 8 of the Russian Longitudinal Monitoring Survey (RLMS) to analyse the dynamics of moonlighting of working-age population. We find that moonlighting is transitory, and is generally associated with career shifts. Those respondents who expressed a desire to switch jobs in the past are in fact more likely to moonlight in the present, and to effectively switch jobs in the future. The career shifts tend to be towards self-employed activities. These results imply that the Russian secondary labour market, as part of the informal economy, can provide long-term benefits for the economy as an effective incubator for setting up new self-employed businesses.