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Editor’s Choice : Mathematics & Science Education and Income: An Empirical Study in Japan
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Abstract: Since the second half of the 1990s, the decline in academic standards in mathematics and science among undergraduate students in Japan has been noted. Despite this, problems in science education have become increasingly severe, and their impact is having a mounting effect on Japan’s economy. This paper studies the return to a university education in Japan by taking into account the relative ranking of the universities. We present an empirical analysis of how annual income differs depending on whether a major is natural science or humanities. We have found that science graduates have a higher average income than humanities graduates indicates that the added value they are producing is higher than that of humanities graduates.Of particular interest is the fact that a comparison of humanities graduates of A rank universities who did not sit admission examinations in mathematics with science graduates of B rank university showed that it was the science graduates who recorded higher average income at every age grade. The above comparison also reveals that even those humanities graduates of A rank universities who did sit admission examinations in mathematics are out-earned by science graduates of B rank universities in the under 30 and 55 and over age groups. Keywords: Mathematics education, income, humanities, science, admission difficulty.Download Full Article |
Editor’s Choice : On Poverty Traps and Equilibria in Growth Models
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Abstract: We show that, contrary to a widely spread error, when the savings and the population growth rates are constant, an unstable equilibrium cannot exist in a neoclassical model, because it would imply an increasing average productivity of capital and therefore a negative marginal productivity of labor. As a consequence, a poverty trap, a dire reality, cannot be explained by such an unstable equilibrium, nor cannot it be eliminated by a capital "big-push". We finally give necessary conditions for an economy to escape a poverty trap. Keywords: Unstable equilibria, growth models.Download Full Article |
Editor’s Choice : Capital Flows, Financial Asset Prices and Real Financial Market Exchange Rate: A Case Study for an Emerging Market, India
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Abstract: In this paper we empirically investigate the relationship between capital flows and exchange rates in India based on a new index of real effective exchange rates for the Indian Rupee. Instead of using consumer price indices we deflate exchange rates by MSCI asset price indices. The cointegration analysis indicates a long-run equilibrium relationship between real financial market exchange rate and the net outstanding equity investment in India. In the short run capital inflows are accompanied by an appreciation of real financial exchange rate of the Rupee. Keywords: Short-term Capital Movements, Foreign Exchange, International Financial Markets, India.Download Full Article |
Editor’s Choice : Absence of an Optimal Capital Structure in the Famous Tradeoff Theory!
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Abstract: Within modern theory of capital structure and capital cost by Brusov-Filatova-Orekhova the analysis of wide known tradeoff theory has been made. It is shown that suggestion of risky debt financing (and growing credit rate near the bankruptcy) in opposite to waiting result does not lead to growing of weighted average cost of capital, WACC, which still decreases with leverage. This means the absence of minimum in the dependence of WACC on leverage as well as the absence of maximum in the dependence of company capitalization on leverage. Thus, it seems that the optimal capital structure is absent in famous tradeoff theory. The explanation to this fact has been done. Keywords: Tradeoff theory, debt financing, company capital cost, optimal capital structure, leverage, Modigliani–Miller theory, Brusov–Filatova–Orekhova theory.Download Full Article |
Editor’s Choice : A Qualitatively New Effect in Corporative Finance: Abnormal Dependence of Cost of Equity of Company on Leverage
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Abstract: Qualitatively new effect in corporative finance is discovered: decreasing of cost of equity ke with leverage L. This effect, which is absent in perpetuity Modigliani–Miller limit, takes place under account of finite lifetime of the company at profit tax rate, which exceeds some value T*. At some ratios between cost of debt and cost of equity the discovered effect takes place at profit tax rate, existing in western countries and Russia. This provides the practical meaning of discussed effect. Its accounting is important at modification of tax low and can change the dividend policy of the company. In paper the complete and detailed investigation of discussed effect, discovered within Brusov – Filatova – Orekhova theory (BFO theory), has been done. It has been shown, that the absence of the effect at some particular set of parameters is connected to the fact, that in these cases T* exceeds 100% (profit tax rate is situated in ”non– financial” region). Keywords: Taxes, company capital cost and capital structure, leverage, Modigliani–Miller theory, Brusov – Filatova – Orekhova theory..Download Full Article |