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41. An Old Boys' Club No More: Pluralism in Participation and Performance at the Olympic Games

Author:
Marcus Noland and Kevin Stahler
Publication Date:
05-2015
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Decades ago, the Summer Olympic Games were an old boys' club; by many measures the Winter Games still are. Now, however, this old boys' club must compete with talented athletes from almost every country on earth, large and small, rich and poor, many of whom have found their comparative sporting niches. Looking forward, the image of the incumbent champion—rich, European, and male—will become ever more antiquated. This paper models the historical determinants of success at the Olympic Games in the context of their growing pluralism, evolving from their aristocratic and largely European male roots to the more gender-inclusive and geographically diverse showcase of athletic talent that is seen today. A wide set of socioeconomic variables is correlated with winning medals, particularly with respect to the Summer Games and women's events. Host advantage is particularly acute in judged contests such as gymnastics. However, there is evidence that the influence of correlates such as country size, per capita income, and membership in the communist bloc is declining over time as competition becomes increasingly diverse. These effects are less evident in the Winter Games, events that require significant capital investments, and judged contests.
Topic:
Diplomacy, Economics, Gender Issues, and Sports
Political Geography:
Global Focus

42. Testing the Modigliani-Miller Theorem of Capital Structure Irrelevance for Banks

Author:
William R. Cline
Publication Date:
04-2015
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Some advocates of far higher capital requirements for banks invoke the Modigliani-Miller theorem as grounds for judging that associated costs would be minimal. The M&M theorem holds that the average cost of capital to the firm does not depend on its capital structure (ratio of equity finance to debt finance), because any reduction in capital cost from switching to higher leverage using lower-cost debt is exactly offset by an induced increase in the unit cost of higher-cost equity capital as a consequence of the associated rise in risk. Statistical tests for large US banks in 2002–13 find that less than half of this M&M offset attains in practice. Higher capital requirements would thus impose increases in lending costs, with associated output costs from lower capital formation. These costs to the economy would need to be compared with benefits from lower risk of banking crises to arrive at optimal levels of capital requirements.
Topic:
Economics, International Trade and Finance, Markets, Politics, and Budget
Political Geography:
Global Focus