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This paper uses options pricing techniques to estimate the value of the government’s tax claim on household or business incomes. It treats the annual tax claim as a European call option on taxable income (a European call is an option that can be exercised at its expiration date and not before). The option’s expiration date is the end of the fiscal year and its strike price is the threshold level of income below which income is not subject to tax. The paper derives three alternative valuation formulas, each associated with an alternative functional form for the tax code (a flat tax, a step-function and a more general tax function). The application of options pricing theory to tax claims is found to be relatively straightforward. The approach proposed here could be used to refine accounting on the assets side of the government’s balance sheet. It would not be more difficult to implement than many common applications of options theory ...
This paper examines the issue of intra-industry trade in a transition economy. We address the question of whether the market-opening reforms in China have resulted in an increasing exchange of similar products, or whether foreign trade is still playing the role of filling the gap of products not produced within the country. We find that the proportion of intra-industry trade in China-OECD trade has increased from 12 per cent of total manufacturing trade in 1980 to over 20 per cent in 1992. The highest shares of intra-industry trade with China are reported for Japan and the United Kingdom.
Due to the large differences between China and the OECD countries in terms of factor endowments, we expect intra-industry trade to be of the vertical nature, i.e., two-way trade in varieties of a product characterised by different qualities. Empirical evidence indeed shows that the majority of the intra-industry trade between China and the OECD is of the vertical nature; China exports lower quality ...
This paper is concerned with a number of conceptual and practical issues associated with the use of vouchers to distribute public services. Section 1 proposes a definition of vouchers and considers the position which voucher distribution occupies in the spectrum of possible mechanisms for the production and distribution of public services; this leads into a discussion of the objectives which voucher distribution might promote. Section 2 classifies the contexts in which vouchers might be applied and types of voucher systems. This permits a preliminary mapping of combinations of policy objectives and characteristics of the public service in question onto alternative forms of voucher distribution. Section 3 provides an illustrative review of the use of vouchers in the distribution of public services. Many of the examples discussed are in the field of education, where discussion of or use of vouchers is most developed, but experience of other public services is included where it is available. Section 4 contains conclusions.
In recent years, academics and policy makers have emphasised the role of human capital formation in economic development. By creating human capital, countries become more attractive to private investment, both domestic and foreign. And through such investment, countries grow and prosper.
Yet the empirical evidence in support of this theory remains elusive. While foreign direct investment (FDI) has multiplied in many countries around the world since the 1980s, its effects on growth are uncertain. Why is that the case?
In this paper I argue that political economy pathways exist that may lead countries away from sustained growth. In countries that lack well-developed capital and education markets, many otherwise qualified citizens may be denied the basic skills they need in order to contribute fully to the nation’s economic development. As societies become divided, they become more conflicted, and this conflict dampens growth, irrespective of the level of foreign direct investment ...
Israel has a higher level of venture capital as a share of GDP than any OECD country. Most Israeli venture capital is channelled to early-stage companies, particularly start-ups in sectors based on information and communications technology (ICT) and biotechnology. The Israeli venture capital industry was built through government funding, particularly through the YOZMA group, which leveraged financing from foreign corporations and institutions. There is now a need for a change in tactics to maintain private venture funding for both portfolio and seed firms. While new incentives are being given to foreign investors, domestic venture investments could be encouraged through tax breaks, expanded opportunities for institutional investors, and reforms to the Israeli stock exchange. Israel needs to sustain growth in the venture sector while reducing dependence on a limited number of capital sources. This paper analyses trends in Israeli venture capital markets and makes policy ...
Canada has one of the highest levels of venture capital investment as a share of GDP among OECD countries. Between 1995 and 2001, Canada realised phenomenal growth in venture capital supply and the creation of over 200 new venture capital funds. However, the largest share of Canadian venture capital goes to follow-on funding of smaller firms -- rather than to new deals involving start-ups -- and to traditional manufacturing sectors. In the late 1990s, the Canadian government began attempts to diversify the sources of venture funds through liberalising rules for institutional and foreign investors, modifying tax incentives and introducing government equity funds. Foreign investors, particularly from the United States, are now the major players and are targeting their funding to technology-based start-ups. This paper analyses trends in Canadian venture capital markets and makes policy recommendations which have been developed through an OECD peer review process ...
Despite high levels of private equity financing in the United Kingdom, relatively little funding is reaching small, technology-based companies. Institutional investors, both domestic and foreign, remain focused on later-stage deals. The United Kingdom has implemented several policy initiatives to improve the access of small firms to equity financing, including generous tax incentives and support for business angel networks. However, problems persist in targeting financing to smaller enterprises, start-ups and outlying regions. A new policy approach, which follows the example of the United States, has recently been introduced. This combines government equity with private sector management to leverage private financing for small deal sizes and also eases rules on institutional investors. This paper analyses trends in UK venture capital markets and makes policy recommendations which have been developed through an OECD peer review process ...
The Korean venture capital market has grown dramatically in recent years, starting from a negligible base in the early 1990s and almost tripling between 1998 and 2001. Korea now ranks among the leading OECD countries in venture capital investment as a share of GDP. Korea weathered the severe financial crisis of 1997-98 to face the challenge of reducing the influence of large corporations (the chaebol) and augmenting the role of technology-oriented small firms. The government jump-started the venture capital market in 1998 through direct infusion of equity capital, generous tax incentives and equity guarantees, and the designation of certain small firms as “venture businesses”. Concerns relate to the need to further privatise the venture capital system and to increase the supply of investment-ready small firms. This paper analyses trends in Korean venture capital markets and makes policy recommendations which have been developed through an OECD peer review process ...
Denmark has one of the lowest levels of venture capital investment as a share of GDP among OECD countries. The Danish government tried a number of supply-side initiatives in the 1990s with varying degrees of success. Problems stem from a lack of equity investment culture, the high levels and complexity of taxes, a dominant role played by banks in venture financing, and few contributions from other institutional investors. A new strategy focuses on providing seed capital to start-ups through a reorganised government equity fund and technology incubators. The challenge is to build on this momentum to further diversify early-stage financing and deepen the entrepreneurial culture. This paper analyses trends in Danish venture capital markets and makes policy recommendations which have been developed through an OECD peer review process.
Sweden has one of the highest levels of private equity investment as a share of GDP among OECD countries. However, its strength lies in later-stage investments, financed primarily by foreign investors. This reflects an industrial structure based on large manufacturing conglomerates. A lack of entrepreneurial demand and equity-related management expertise hinder the growth of the domestic venture capital industry. The Swedish government is now considering a set of changes to its regulatory and fiscal system to better target the needs of small, technology-based firms. Removing quantitative restrictions on institutional investors, lowering tax rates, and restructuring equity programmes are necessary steps. This paper analyses trends in Swedish venture capital markets and makes policy recommendations which have been developed through an OECD peer review process ...
The United States has the oldest and most developed venture capital industry in the OECD. Several successful high-technology companies in computers and communications, as well as in healthrelated sectors and services, were venture-backed. Young high-growth firms also benefit from a continuum of complementary finance from business angels, institutional investors and second-tier stock markets. The government played an active role in the early phases of the venture capital industry through the Small Business Investment Company (SBIC) program and various technology development schemes. A reduction in capital gains tax rates and liberalisation of rules for pension fund investments in risky assets in the late 1970s also unlocked new capital sources. Venture capital activity, however, has been quite cyclical. Periods of high fund-raising and investment in the 1980s and 1990s were followed by market downturns with negative effects on small firm survival and growth. Fundamental structural ...
Spain's expanding venture capital market is still biased towards mature firms in traditional sectors with little investment in technology-based start-ups. Although the country has benefited from substantial inflows of foreign venture capital, steps are needed to increase domestic levels of entrepreneurship and risk investment expertise. The government maintains a number of small firms participatory loan schemes, which could be transformed into privately-managed equity programmes to attract venture investors. Restrictions relating to authorised venture investors and amounts could also be lightened. This paper analyses trends in Spanish venture capital markets and makes policy recommendations which have been developed through an OECD peer review process ...
The Norwegian venture capital market is oriented towards expansion investments in traditional sectors and suffers from a lack of private risk capital as well as of entrepreneurial demand. Norway needs to increase the entry of innovative start-ups in order to diversify the economy beyond its resource-based sectors. In addition to reducing its dominant role in providing venture capital through privatisation of SND Invest, the government should further privatise industrial holdings, reduce quantitative restrictions on institutional investors, and remove the wealth tax which deters venture investing. This paper analyses trends in Norwegian venture capital markets and makes policy recommendations which have been developed through an OECD peer review process.
The small Portuguese venture capital market is characterised by expansion-stage investments in manufacturing industries, primarily consumer goods. Government equity programmes, which have tended to be investment vehicles for European structural funds, have crowded out potential private investors. Recent initiatives, including a new venture captial law and a scheme aimed at leveraging private venture funding, should help stimulate venture activity. Measures are also needed to foster the emergence of more entrepreneurs, create a less risk-averse investment culture, and take fuller advantage of international venture capital flows. This paper analyses trends in Portuguese venture capital markets and makes policy recommendations which have been developed through an OECD peer review process ...
This report presents the VVER MOX Core Computational Benchmark Specification and Results, which was proposed as a benchmark within the OECD/NEA Expert Group on Reactor-based Plutonium Disposition (TFRPD). Benchmark results, obtained using three computer codes, are presented. The codes include: the MCU Monte Carlo code (Kurchatov Institute, Russian Federation), RADAR (Kurchatov Institute, Russian Federation), and the MCNP Monte Carlo code (GRS, Germany). The codes use different methods and different nuclear data. A comparison of the results shows good agreement among the various codes.
This study resulted from a discussion at the June 2002 meeting of the OECD/NEA Nuclear Science Committee, at which it was first suggested to set up a project to address very high burn-ups (specifically average discharge burn-ups in the range 60-100 GWd/t). The outcome was the setting-up in 2003 of the Expert Group on Very High Burn-ups in LWRs, which was charged with the single task of delivering a state-of-the-art report on high burn-ups in LWRs. It was felt that the report should concentrate on LWRs because that is where the bulk of experience and knowledge resides, but much of the analysis will also be applicable to other reactor types, even if not all the details are transferable.
In the recent past, the analysis of plant transients and the analysis of reactor core behaviour were performed separately. Usually, the core was represented by a point kinetics model to analyse plant transients and, for the core physics calculations, boundary conditions were imposed at the inlet and the outlet of the core. In reality, these boundary conditions depend on the power generation in the core. To ensure a realistic description of the physical phenomena in an accident analysis, the application of coupled codes is required. In recent years code developers began coupling three-dimensional (3-D) neutron kinetics codes with advanced thermal-hydraulics system codes. Such complex computer codes allow modelling of the entire reactor system, including a 3-D neutronics core. When reactivity initiated accidents with an asymmetric neutron flux distribution in the core are analysed, only such coupled codes are capable of estimating the real feedback effects. These codes can perform safety analyses in order to replace the conservative estimations with best-estimate calculations.