Central and East European Bank Responses to the Financial ‘Crisis’: Do Domestic Banks Perform Better in a Crisis than their Foreign-Owned Counterparts?

In the context of transition, nine out of the 10 post-communist countries that ultimately joined the European Union reluctantly privatised the bulk of their banking sectors with foreign capital. The financial crisis of 2008–2009 therefore sparked fears that foreign banks would remove their operations from their Central and East European markets because of a ‘home bias’ in lending. Such fears were predicated on the widely held beliefs that banks' loyalties lie with their home markets and that it is therefore desirable to protect domestic bank ownership to help combat an economic downturn. This essay casts doubt on the value of banking sector protectionism by comparing foreign and domestic bank behaviour in Central and Eastern Europe during the crisis. The essay finds no consistent relationship between domestic control and either limited economic vulnerability or countercyclical lending.     

Performance and prize decomposition in contests

This paper focuses on the effect of additive contest decomposition on performance: winning probabilities and efforts of the contestants. Our main result provides a sufficient condition for invariance of contest performance to the decomposition of a contest, when the sum of the possibly differently valued prizes in the segmented contests is equal to the value of the prize in the original grand contest and the relative prizes in the sub-contests are equal for every contestant. It is shown that this condition is satisfied by the commonly used exponential logistic contest success functions. With these functions the contest designer does not have an incentive to split the prize and create additive, segmented sub-contests. We then prove that when the additive contest decomposition is asymmetric, contest decomposition may adversely affect the designer; that it, reduce the total efforts of the contestants.     

Legislating from both sides of the aisle: Information and the value of bipartisan consensus

This paper motivates bipartisanship through a formal model in which committee members are assumed to possess policy expertise. Its central findings are: 1) bipartisan support for legislation is more informative than partisan support; 2) bipartisanship is preferred when the uncertainty surrounding outcomes is large and partisan policy differences are small; 3) “minority party gatekeeping” is possible when minority party members refuse to endorse majority party proposals; and 4) legislators with extreme preferences need minority party support to pass legislation. An equilibrium selection criterion is also introduced and applied to the model to predict under what conditions the majority party will seek bipartisan support.     

Group specific public goods, orchestration of interest groups with free riding

We consider a situation in which two groups contest group-specific public goods. Each member of the group may have a different valuation of the prize. Our model can be interpreted as the contestants’ cost of lobbying efforts being non-linear, or the returns to their efforts being decreasing. We show that the level of free-riding depends on the return of the investment. We consider the situation under which one group initiates a contest to which different individuals and/or groups can be added. The question we pose is what is the optimal structure of additional groups?