The Economics of Imperfect Markets: The Effects of Market Imperfections on Economic Decision-Making (Contributions to Economics)

This book is one of the ?nal products of a research project on the effects of market imperfectionson economic behavior and decisions. The project was put together by four Italian universities (Universita ` di Roma "Tor Vergata" and "La Sapienza" U- versita ` Cattolica del Sacro Cuore - Piacenza and the Universita ` di Urbino "Carlo Bo") in 2005 and funded by the Italian Ministry of Higher Education and Research for the period 2006-2007. The research title of the project "Corporate governance, ?nancial systems and ?rms' performances" was indicative of its agenda: to inv- tigate the role of market imperfections and their interactions on ?rms' decisions. In 2006 (May 12) the research group held the ?rst conference at the Universita ` di Urbino where intermediate results were ?rst presented and discussed with o- standing scholars from US, UK, and Italian universities, and the European Central Bank. The book reproduces the papers presented at the Universitad ` iRoma"La Sapienza" conference (May 16-17 2008) and is organized in two parts. The ?rst one discusses imperfectionsthat are mainly related to the working of ?nancial m- kets. The second part includes contributions which focus on different topics of real market imperfections. We wish to thank Steve Nickell, Philip Vermeulen and all the participants at the Urbino and Rome conferences who made both events extremely productive with their scienti?c contributions. We are especially grateful to Bob Chirinko who p- ticipatedinbothconferencesandconstantlyencouragedustocarryoutourscienti?c project on the economics of imperfect markets. Front Matter....Pages i-x Front Matter....Pages 16-16 What Can Cash Shortfalls and Windfalls Tell Us About Finance Constraints?....Pages 17-32 Non-Tobin’s q in Tests for Financial Constraints to Investment....Pages 33-49 Cash Holdings, Firm Value and the Role of Market Imperfections. A Cross Country Analysis....Pages 51-71 Multiple Bank Relationships and the Main Bank System: Evidence from a Matched Sample of Japanese Small Firms and Main Banks....Pages 73-90 The Role of Fixed Assets in Reducing Asymmetric Information....Pages 91-102 Financial Development and Long-Run Growth: Cross-Sectional Evidence Revised....Pages 103-110 Front Matter....Pages 112-112 Investment, Productivity and Employment in the Italian Economy....Pages 113-136 The Macroeconomics of Imperfect Capital Markets: Whither Saving-Investment Imbalances?....Pages 137-166 The Effects of Uncertainty and Sunk Costs on Firms’ Decision-Making: Evidence from Net Entry, Industry Structure and Investment Dynamics....Pages 167-182 Investment and Trade Patterns in a Sticky-Price, Open-Economy Model....Pages 183-212 The Anticompetitive Effects of the Antitrust Policy....Pages 213-232 This book is a collection of eleven papers concerned with the effects of market imperfections on the decision-making of economic agents and on economic policies that try to correct the inefficient market outcomes due to those imperfections. As a consequence, real and financial imperfections are related : economic decisions are simultaneously affected by imperfections present both in real and financial markets. Notwithstanding the obvious fact that market interdependence is not novel, scholar interests are typically concentrated on the specific relationship among economic decisions originating from particular imperfections. This explains why, in the case of perfect financial markets, we can speak of "the" us The real world is characterized by the presence of imperfections in goods, financial and labour markets. These imperfections have the potential to create links among those markets that differ in a relevant way from those outlined in the standard model. In financial markets, imperfections can alter the efficiency of the economy and thus cause unintended effects on goods and labour markets. Moreover, in the presence of market distortions, the interaction between policies and institutions becomes a critical aspect. This book, which brings together essays from distinguished scholars on this subject, provides new insights on how these imperfections affect the outcomes of real-world markets.