Corporate Finance

The rate of increase of longevity has varied considerably across U.S. states since 1991. This paper examines the effect of the quality of medical care, behavioral risk factors (obesity, smoking, and AIDS incidence), and other variables (education, income, and health insurance coverage) on life expectancy and medical expenditure using longitudinal state-level data. We examine the effects of three different measures of the quality of medical care.

What are the respective roles of the public and private sectors in drug development?

This paper proposes an accounting for revenues as an alternative to the proposals currently begin aired by the FASB and IASB. Existing revenue recognition rules are vague, resulting in messy application, so the Boards are seeking a remedy. However, their proposals replace the traditional criteria — revenue is recognized when it is both "realized or realizable" and "earned" — with similarly vague notions that require both the identification of a "performance obligation" and the "satisfaction" of a performance obligation.

We propose an origination-and-contingent-distribution model of banking, in which liquidity demand by short-term investors (banks) can be met with cash reserves (inside liquidity) or sales of assets (outside liquidity) to long-term investors (hedge funds and pension funds). Outside liquidity is a more efficient source, but asymmetric information about asset quality can introduce a friction in the form of excessively early asset trading in anticipation of a liquidity shock, excessively high cash reserves, and too little origination of assets by banks.

Combinatorial auctions (CAs) are multi-unit auction mechanisms in which bidders can bid on combinations of items or packages. CAs have received considerable attention from academia, and their practical use has increased significantly over recent years especially in procurement projects. Units in procurement projects often exhibit cost synergies, and using a CA can be particularly advantageous to the auctioneer because it enables bidders to express their cost synergies in the bidding process.

In this chapter, I describe the coordinates of the global application of public-private partnerships (PPP) and identify central commonalities of sector collaboration for both infrastructure development and urban redevelopment/regeneration projects. The comparison across these two types of "hard" asset-based initiatives will, I hope, highlight the central issues of implementation and underscore the need for policymakers to address the nature of risk sharing, which I believe is central to the PPP strategy at the project level.

In this chapter, Kenneth Ayotte and Patrick Bolton model the role that mandatory standardization plays in reducing the costs of financial contracting and improving liquidity. In particular, they identify opportunities for financial contractors to appropriate value from unknowing third parties and show that rules that standardize contracts can serve as a commitment device against such demand-dampening pitfalls facing these other parties. Mandatory standardization thereby can improve the liquidity of secondary markets from loan contracts.

We analyze contagious sovereign debt crises in financially integrated economies. Under financial integration banks optimally diversify their holdings of sovereign debt in an effort to minimize the costs with respect to an individual country"s sovereign debt default. While diversification generates risk diversification benefits ex ante, it also generates contagion ex post. We show that financial integration without fiscal integration results in an inefficient equilibrium supply of government debt.