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Abstract Global firms finance themselves through foreign subsidiaries, often shell companies in tax havens, which obscures their true economic location in official statistics. We associate the universe of traded securities issued by firms in tax havens with their issuer's ultimate parent and restate bilateral investment positions to better reflect the financial linkages connecting countries around the world. Bilateral portfolio investment from developed countries to firms in large emerging markets is dramatically larger than previously thought. The national accounts of the United States, for example, understate the U.S. position in Chinese firms by nearly $600 billion. Further, we demonstrate how offshore issuance in tax havens affects our understanding of the currency composition of external portfolio liabilities and the nature of foreign direct investment. Finally, we provide additional restatements of bilateral investment positions, including one based on the geographic distribution of sales.more » « less
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Investing in college carries high returns but comes with considerable risk. Financial products like equity contracts can mitigate this risk, yet college is typically financed through non-dischargeable, government-backed student loans. This paper argues that adverse selection has unraveled private markets for college-financing contracts that mitigate risk. We use survey data on students’ expected post-college outcomes to estimate their knowledge about future outcomes and quantify the threat of adverse selection in markets for equity contracts and several state-contingent debt contracts. We find students hold significant private knowledge of their future earnings, academic persistence, employment, and loan repayment likelihood, beyond what is captured by observable characteristics. Our empirical results imply that a typical college-goer must expect to pay back $1.64 in present value for every $1 of equity financing to cover the financier’s costs of covering those who would adversely select their contract. We estimate that college-goers are not willing to accept these terms so that private markets unravel. Nonetheless, our framework quantifies significant welfare gains from government subsidies that would open up these missing markets and partially insure college-going risks.more » « less
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Abstract New land protection is expensive, and many conservation NGOs rely on loans to help fund land acquisition in the short term. Conservation loans are offered by a range of philanthropic organizations that often allow much more flexible terms than traditional loans. Thus, conservation loans may behave differently from other types of loan. There are costs and benefits to relying on loan financing to fund land protection that organizations need to consider, but few data are available to inform such evaluations. Here, we focus on estimating the financial cost of these loans, by analyzing loans used to support land protection projects that were provided through an internal revolving fund at a large U.S. conservation NGO. We estimate loan financing cost through accrued interest and test deal‐level characteristics for their ability to explain or predict loan interest. We find that loan performance can be highly uncertain and costs can be substantial in relation to the total purchase price. An improved ability to estimate the overall cost of conservation loans upfront may determine just which conservation projects are prioritized for investment and avoid costly misallocations of conservation resources.
