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Does Financing Spur Small Business Productivity?

December 19, 2014 Comments off

Does Financing Spur Small Business Productivity?
Source: Cato Institute

cess to adequate financing is an important issue for firms, particularly younger and smaller ones. Given the role these firms play in the process of creative destruction, alleviating financial constraints for start-ups and small businesses is an important concern around the world. More recently, the financial crisis of 2008 demonstrated the critical role of bank financing, at both the firm and economy wide levels. While prior studies have examined how financing affects entrepreneurial firm starts and closures (e.g., Black and Strahan, 2002; Kerr and Nanda, 2009), no study has directly analyzed the link between bank financing and firm productivity, particularly for smaller firms where access to financing is critical. This is important given that most start-ups appear to rely on bankdebt financing (Robb and Robinson, 2013).

Determining the relation between bank financing and firm productivity is difficult because of the possibility of reverse causality. A positive correlation between bank financing and productivity might mean that more productive firms seek additional bank financing, or that increased access to bank financing enhances productivity. Yet another possibility is that unobserved factors affect both access to financing and productivity.

Our research addresses reverse causality by exploiting an exogenous shift in firms’ access to bank financing due to deregulation of interstate bank branching. During the 1990s, states began allowing out-of-state banks to set up and acquire local branches. This increased interstate banking and thus allowed greater access to financing for firms. Consistent with prior literature, we show that deregulations were not driven by prior productivity of firms. The key question is whether this increased access to cheaper financing is dissipated by firms taking on unproductive or less productive pet projects or whether it increases firms’ ability to undertake additional productive projects.

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Federal Spending by the Numbers, 2014: Government Spending Trends in Graphics, Tables, and Key Points (Including 51 Examples of Government Waste)

December 19, 2014 Comments off

Federal Spending by the Numbers, 2014: Government Spending Trends in Graphics, Tables, and Key Points (Including 51 Examples of Government Waste)
Source: Heritage Foundation

In 2014, federal spending reached $3.5 trillion and the deficit was $486 billion. Compared with trillion-dollar deficits following the Great Recession, this presents a small and temporary improvement in the nation’s fiscal situation. However, this minor improvement does not mean that government can stop cutting back on spending. As the figures and graphics in this report show, that would be the wrong conclusion to draw.

The national debt will still reach nearly $18 trillion this year and it already exceeds 100 percent of gross domestic product (GDP). Publicly held debt (that is, debt borrowed in credit markets, excluding Social Security’s trust fund), is alarmingly high at three-quarters of GDP. Without further spending reforms, rising debt threatens to impede growth, harm Americans’ economic opportunities, and even threaten the nation’s security.

Deficits fell in 2014 because President Obama and Congress raised taxes on all working Americans, the economy saw some improvement which helped to bring in more revenue, extended unemployment benefits were allowed to expire, and spending cuts from sequestration and spending caps under the Budget Control Act of 2011 took effect.

Congress should not take this short-term and modest deficit improvement as a signal to grow complacent about reining in exploding spending. Existing spending cuts and tax increases will not prevent deficits from rising next year, and before the end of the decade exceeding $1 trillion again. Driving this is federal spending, which is projected to grow by 66 percent by 2024.

The Cost Savings Potential of Biosimilar Drugs in the United States

December 16, 2014 Comments off

The Cost Savings Potential of Biosimilar Drugs in the United States
Source: RAND Corporation

The U.S. Food and Drug Administration (FDA) is expected to release final regulations outlining lower-cost approval pathway requirements for so-called biosimilar drugs. The introduction of biosimilars is expected to reduce prices, albeit to a lesser degree than small-molecule generics. This Perspective combines prior research and recent data to estimate cost savings in the U.S. market. We predict that biosimilars will lead to a $44.2 billion reduction in direct spending on biologic drugs from 2014 to 2024, or about 4 percent of total biologic spending over the same period, with a range of $13 billion to $66 billion. While our estimate uses recent data and transparent assumptions, we caution that actual savings will hinge on the specifics of the final FDA regulations and on the level of competition.

Narrow Networks, Access to Hospitals and Premiums: An Analysis of Marketplace Products in Six Cities

December 16, 2014 Comments off

Narrow Networks, Access to Hospitals and Premiums: An Analysis of Marketplace Products in Six Cities
Source: Urban Institute

This report examines which hospitals are included within marketplace plans in six cities (Denver; New York City (Manhattan); Portland, Ore.; Providence; Baltimore; and Richmond, Va.). The report finds that nearly all insurers offering plans through the insurance Marketplaces in six cities include many highly ranked hospitals within their provider networks. The report also concludes that every hospital in the cities studied is included in at least one Marketplace plan network. The authors also looked at how the size of a plan’s provider network affected the cost of premiums. The report shows that the size of a plan’s network is not necessarily tied to premiums. The authors note that although narrowing networks (i.e., limiting the amount of providers covered under a specific plan) generally led to more-competitive, lower-cost premiums, some plans with broader networks had low premiums and some plans with narrow networks had high premiums.

Measuring Mortgage Credit Accessibility

December 16, 2014 Comments off

Measuring Mortgage Credit Accessibility
Source: Urban Institute

This paper provides a method of measuring credit accessibility that addresses several shortcomings of traditional methods. Credit accessibility is measured by calculating the demand-to-origination progression rate for low-credit-profile consumers. Using this improved measure, we explore several issues critical to credit accessibility including differences among demographic groups, changes over time and credit cycles, and the impact of government support for the single-family owner-occupied mortgage market.

An Assessment of the Present and Future Labor Market in the Kurdistan Region — Iraq

December 15, 2014 Comments off

An Assessment of the Present and Future Labor Market in the Kurdistan Region — Iraq
Source: RAND Corporation

The study addresses the question of how the Kurdistan Regional Government can improve the private-sector labor market in the Kurdistan Region — Iraq (KRI). Doing so will involve creating mechanisms by which job-seekers can develop the right skills and find employers who will hire them, employers can find the employees they need, and the government can create an enabling environment in which the best matches between job-seekers and employers can be made. The study estimates the likely number and education levels of new job-seekers through 2020. It conducts an original, scientific survey to learn about employer perceptions of skill gaps in the KRI. Then, it investigates sectoral employment growth in comparison economies to identify promising growth sectors. Finally, it outlines policy steps for the government to take to improve the functioning of the private-sector labor market.

Managing the Cyber Security Threat

December 12, 2014 Comments off

Managing the Cyber Security Threat (PDF)
Source: Hoover Institution

Cyber insecurity is now well established as a serious, unconventional threat. It is a far more serious threat to the United States than to any other state because the US economy and critical infrastructure are both more valuable and more dependent on cyber systems than those of any other state. The US government and US companies are spending billions of dollars each year to protect their information systems and operations, whether intelligence, military, or commercial, and the level of spending is growing faster than any other area of national security activity.

The cyber-security policies adopted thus far reflect a unilateralist, combative mentality, aimed at finding ways to protect the United States from cyber attack and to develop forms of cyber attack to deter or retaliate when appropriate. Congress has created a Cyber Command to lead the military dimension of this effort, which supplements a massive intelligence program at the National Security Agency, Homeland Security, and other agencies, in addition to huge increases in private spending.

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