Economics - Doctoral Theses
Permanent URI for this collection
Browse
Recent Submissions
Item The role of household wealth in funding self-employment in European countries(University College Cork, 2023) Liu, Yibin; Power, Bernadette; Doran, Justin; Chicago Society of Coating Technology; China Scholarship CouncilThis thesis explores the role of household wealth in funding self-employment across euro-zone countries. The thesis considers key types of household wealth (i.e., assets, liabilities, income, and inheritances) and their components. It uses a highly detailed cross-country micro dataset constructed from three waves of the European Central Bank’s Household Finance and Consumption Survey (HFCS), over the period 2010-2017. Household wealth is perceived as a vital financial resource in assisting would-be and actual self-employed individuals to alleviate financial constraints, which can significantly hinder the decision to be self-employed and impair the performance of self-employed business (Quadrini, 2009; Cole and Sokolyk, 2018; Levine and Rubinstein, 2020). The financial constraints experienced by those in self-employment are mainly triggered by asymmetric information in the capital market, and usually result in restrictive access to finance (Moscalu et al., 2020), limited credit financing and borrowing (Banerjee et al., 2017), and a lack of financial liquidity (Gentry and Hubbard, 2004). Within this context, different types of household wealth have been found to support those in self-employment to enable them to obtain finance (Bhaird and Lucey, 2010; Jensen et al., 2022; Åstebro and Bernhardt, 2003; Demirgüc et al., 2007; Lin et al., 2000). Essentially, household wealth is potentially able to enhance creditworthiness and add financial liquidity to self-employment and self-employed businesses. Existing literature focuses on one or two type(s) of household wealth, resulting in comparatively ambiguous findings about the influence of household wealth on funding self-employment. This thesis addresses this gap by extensively examining aggregate measurement of each key type of household wealth and detailed measurements of their components. Doing so allows this thesis to address three overreaching objectives: (1) to identify the difference in household wealth between self-employment and paid employment; (2) to investigate the impact of household wealth on the decision to be self-employed; and (3) to examine whether household wealth affects the performance of self-employed businesses. The first empirical Chapter of this thesis provides a comparison of household wealth between self-employed individuals and paid employees. A propensity score matching methodology is employed, which includes household assets, liabilities, other income (excluding self-employment income), and their components and inheritances, while also controlling for specific demographic factors. Results indicate that self-employed individuals hold more household real assets and inheritances than paid employees. However, the self-employed have less household income from other sources and have a lower level of secured loans in comparison with paid employees. The self-employed have higher level unsecured debts than paid employees. The discussion of the results for each component adds a comprehensive understanding to sources of differential household-level finance of self-employed individuals and paid employees in Europe. The second empirical Chapter disentangles the impact of household wealth on occupational decisions (self-employment vis paid employment). It uses an instrumental variables probit estimation to explore the significance of different types of household wealth and their components on an individual’s decision to be self-employed. Results reveal that, household’s assets and their components and liabilities generally encourage individuals to be self-employed, which adds new evidence to inform how financial constraints can be combatted (Zissimopoulos et al., 2009; Lim, 2018). The volume of household inheritances is not significantly associated with the decision to be self-employed. This Chapter also finds that household income diminishes the likelihood of being self-employed. To date detailed empirical evidence of the impacts identified in this Chapter do not exist in the literature. Therefore, this thesis offers a unique insight into household wealth as a potential financial resource related to the occupational decision to be self-employed. Lastly, the third empirical Chapter of this thesis investigates the ways in which household wealth impacts on the performance of self-employed businesses using a Heckman two-step estimation procedure. The results indicate that a positive impact is not only evident for total household real assets but also for the components of the real assets. Concerning total household liabilities, it is found to be positively associated with business value. The findings highlight the negative influence of the mortgage on household main residence, implying that pledging your household main residence to secure loans for business use seems to impair business performance. Finally, results suggest a negative association of household income from other sources and business value. By showing how the specific type and components of household-level finance are associated with the performance of self-employed business, this thesis provides novel evidence in a particularly underdeveloped area.Item An analysis of subjective well-being in China(University College Cork, 2024) Feng, Ruixue; Murphy, Rosemary; Walsh, EdelSubjective well-being measures an individual's quality of life based on their own evaluation (Anusic et al., 2017). The importance of subjective well-being as a measure of individual and societal progress is increasingly recognised, leading to a rise in research on the topic (Knight et al., 2009). Cheng and Mishra et al. (2017) state that studying subjective well-being in China enhances the understanding of China's economy and society, and also helps to develop and extend existing theories of subjective well-being. This thesis aims to explore the factors associated with subjective well-being in China, where happiness is the measure of the concept of subjective well-being. The data used for this study is from the 2015 Chinese General Social Survey. To achieve this, the estimation models of subjective well-being are developed and the relationship between income inequality and subjective well-being is further analysed. Chapter 1 introduces the overall structure of the thesis, including the rationale, relevant background literature, data description, and analysis techniques. Chapter 2 reviews previous literature on subjective well-being definitions and theories and describes the relationships between key factors and subjective well-being. Chapter 3 presents the analytical techniques used in this thesis. Chapter 4 describes the data used in this thesis, which is based on data from the 2015 Chinese General Social Survey. Chapter 5 analyses the factors associated with subjective well-being by applying the ordered probit model. Chapter 6 explores the factors associated with subjective well-being by implementing semi-nonparametric techniques to estimate the model of subjective well-being. In Chapter 7, the positive correlations between income inequality and subjective well-being in China are assessed and the mediating effect of relative income is investigated. The thesis employs ordered probit and semi-parametric techniques to investigate the correlation between various factors and subjective well-being in China. The analysis provides a number of findings: Firstly, age, religion, political status, health status, income, marital status, and social fairness are all positively associated with subjective well-being. Additionally, achieving education above the second level is positively correlated with higher levels of subjective well-being. A high frequency of social interactions and having a resident account (hukou account) are also associated with higher subjective well-being level. Conversely, employment in non-agricultural or agricultural sectors is found to have a negative impact on subjective well-being. Additionally, women report higher levels of subjective well-being than men. In addition to the above findings, the thesis highlights a significant relationship between income inequality and subjective well-being in China. It also confirms the mediating role of relative incomes in the relationship between income inequality and subjective well-being. These findings contribute to a deeper understanding of the factors associated with subjective well-being and point to aspects that can be taken into account in promoting the overall societal well-being. Economic literature suggests that an analysis of the factors associated with an individual's subjective well-being is necessary as it helps policymakers to increase the level of well-being of citizens, which is one of their goals (Dolan and White, 2007). This thesis uses a complex econometric approach to analyse and present these factors and possible explanations. Furthermore, the thesis analyses the relationship between income inequality and subjective well-being. Finally, the findings presented in this thesis can be used to provide potential policy recommendations for the implementation of the promotion of general social well-being in ChinaItem An analysis of firm dynamics and seedbed role(University College Cork, 2023) O'Leary, Daragh; Power, Bernadette; Doran, Justin; Irish Research CouncilFirm dynamics research can be considered an important area of study given the relationship between firm dynamics and economic growth. Firm births can increase economic growth and employment (Doran et al., 2016). Meanwhile firm deaths can reduce economic growth via increases in unemployment (Arcuri et al., 2019). However, firm deaths can also reallocate resources and create market room within the economy for other firms (Carree and Dejardin, 2020). Additionally, the post-entry growth of firms is an important aspect of firm dynamics for economic growth because most of the growth derived from entrepreneurship comes from a very small number of high-performing firms (Shane, 2009). As such, some have recommended the prioritising of investment into firms with fast-growth potential to achieve optimal economic growth (Du and Vanino, 2021). The importance of firm dynamics to economic growth is such that government organisations and policymakers look to promote entrepreneurship to achieve economic growth (BE, 2020; EU, 2021). Therefore, research concerning the birth, death, and performance of firms can be considered of interest to governments and policymakers as well as the academic literature. This Thesis looks to contribute to the small firm dynamics literature (Hopenhayn, 1992). Using Eurostat, OECD, and Irish Central Statistics Office data, econometric analysis is used to produce four empirical research papers which examine firm interrelationships, the regional determinants of firm births and deaths, and how the seedbed role influences the performance of new start-ups. This analysis provides several contributions to the literature. Firstly, the competition and multiplier effects set out by Johnson and Parker (1994) are examined and particular interest is paid to analysing these effects across different countries and over different periods of time. Secondly, the role of urbanisation and localisation economies as well as externalities related to regional diversification are examined in determining firm births and deaths across different countries while controlling for the mitigating effect of firm interrelationships. Thirdly, the role of relatedness is incorporated into firm interrelationships to see how competition and multiplier effects operate across different sectors (related and unrelated). Finally, a contribution is made to the literature concerning seedbed role, described by Beesley and Hamilton (1984), by analysing the influence of the seedbed process on the post-entry performance of new Irish firms. The findings of the analyses on firm interrelationships indicate that firm interrelationships can change across time and sectors. Evidence of the multiplier is observed over one year where firm births appear to increase firm births the following year. However, over two and three years, evidence for the competition effect is found whereby firm births can increase firm deaths in two- and three-years’ time and that firm deaths can increase firm births in two years’ time. Furthermore, multiplier effects appear more likely to occur between firms in related sectors and competition effects appear more likely to occur between firms in unrelated sectors. Significant variations in firm birth and death rates are also observed across countries. Findings regarding regional factors as determinants of firm births and deaths indicate that both urbanisation and localisation economies increase firm births and decrease firm deaths. Related variety appears to reduce firm births and increase firm deaths, while unrelated variety is found to increase firm births and decrease firm deaths. Finally, the seedbed process is shown to influence the growth of new Irish start-ups as firms set up by individuals who previously worked at firms which died are themselves more likely to die and more likely to have lower mean annual employment growth during their existence. However, they are also more likely to exhibit fast-firm growth at some point during their existence. Implications for policy and contributions for the literature are discussed in the Thesis.Item The importance of non-bank lending to small businesses(University College Cork, 2023) McGeown, Eimear; Power, Bernadette; Shinnick, EdwardThis thesis investigates the role of non-bank debt in the SME finance ecosystem in Ireland. Non-bank debt is defined as external debt, contractually provided by formal institutions other than banks. An important source of funding to large firms, non-bank debt has more recently emerged as a significant source of SME finance, both nationally and internationally (CBI, 2021a; Gopal and Schnabl, 2022). This thesis examines the characteristic of SME lenders, borrowers and the impact of non-bank debt on firm performance. On the supply side novel data gathered through fieldwork with non-bank lenders is used to identify the characteristics on the non-bank lenders. On the demand side, secondary data from the Irish Central Statistics Office’s Access to Finance Survey is used to examine the characteristics of SME firms that use non-bank debt. In addition, secondary data from the Irish Department of Finance’s SME Credit Demand Survey is employed to examine the impact of the use of non-bank debt on SME firm performance. Despite its importance as a source of SME funding, there is little research on the SME non-bank lending sector. This is mainly due to the lack of data as the sector is not prudentially regulated. This thesis addresses this gap by gathering primary data in face-to-face interviews with 40 non-bank lenders from Q2, 2019 to Q1, 2020 to describe the characteristics of the non-bank lending market in Ireland. This study is the only supply-side study on SME non-bank debt. It generates a number of key findings. Specifically, it finds that (1) non-bank debt is reducing the funding gap for bank rejected borrowers; (2) non-bank lenders use both transaction and relationship lending technologies to screen and monitor borrower firms; (3) collateral is important to non-bank lenders in overcoming information asymmetry; and (4) non-bank lenders differ from bank lenders in their provision of more diverse and bespoke lending products. These features assist the non-bank lenders in closing the funding gap for small and medium SME firms but not for micro or young borrowers. On the demand-side the thesis contributes to the literature by examining the non-bank lending channel inclusive of all the non-bank debt lending technologies. The focus on non-bank debt reflects the SME preference for debt and the policy focus on reducing SME dependence on bank debt. Whilst banks are expected to continue as the dominant source of SME finance, the growth of non-bank lending, particularly for higher risk borrowers, appears to contradict the financial intermediation literature which asserts that banks are best able to monitor opaque firms through their lending relationships. However, it is reflective of the changing nature of the borrower-bank relationship and structural changes in the banking sector (consolidation and rationalisation) and developments in the use of transactional lending technologies, innovation and technology to screen and monitor borrowers. The thesis also examines the impact of non-bank debt on SME firm performance differentiating from previous studies examining the effect of fund sources on firm performance (Li et al., 2018; López-Gracia and Sogorb-Mira, 2008; Michaelas et al., 1999; Sogorb-Mira, 2005; Trinh et al., 2017) by differentiating between the bank and non-bank lending channel. This novel finding highlights the importance of controlling for credit risk when assessing the impact of capital structure on firm performance. This study highlights the negative impact of finance gaps on firm performance and the importance of a resilient debt sector for SME performance, allocative efficiency, and growth within an economy. Structural changes to the SME finance model were in response to the financial crisis. Given the importance of the SME sector and the challenges ahead including economic and environmental shocks, governments need to understand the non-bank sector and its impact on the supply and demand for funds to support business growth and the performance of small firms. Policy makers should consider addressing the micro enterprises funding gap using the credit union model. Governments need to engage with, and monitor, the non-bank debt sector to fully understand both the benefits and risks to the sector. In particular, the non-bank funding model should be reviewed for cyclicality and subsidised funding, particularly for SME investments in targeted areas such as greening supply chains and digitisation. SMEs need to be educated on the alternatives to bank finance and on financial literacy, so that they can signal their ability to repay and avail of non-bank funding products.Item Motivations, incentives, and commitments: financial benefits and citizen participation in onshore wind energy in Ireland(University College Cork, 2023) le Maitre, Julia; Ryan, Geraldine; Power, Bernadette; Horizon 2020; Irish Research Council; Sustainable Energy Authority of IrelandSocial acceptance of onshore wind energy is a fundamental constraint for the delivery of sustainable electricity supply (Wüstenhagen et al., 2007). For a country such as the Republic of Ireland, this is a significant impediment to the decarbonisation of the energy sector (Brennan et al., 2017; Hallan and González, 2020; Van Rensburg et al., 2015), since onshore wind energy is expected to increase from approximately a third of the electricity mix to 80% by 2030 (SEAI, 2023). In 2019, Ireland introduced the Renewable Electricity Support Scheme with the aim of quadrupling its supply of onshore wind energy. The policy introduced a variety of financial benefits directed towards local communities to facilitate social acceptance, including community benefit funding and incentives focused on households closest to the wind farm, in the form of ‘near-neighbour’ compensation (DECC, 2021). The scheme also opened consideration for a new mechanism to encourage citizen investment into wind farms (DCCAE, 2020). The novelty, scope, and value of these mechanisms underscore the need for detailed research to identify how they could be designed and implemented to enhance their fairness, benefit, and acceptance. This thesis asks how specific attributes of financial participation mechanisms aimed at enhancing social acceptance influence citizens' willingness to accept, or to invest in, wind farms in their community. This thesis is based on two specialised surveys to examine how Irish citizens trade-off between different features of wind farm developments and their associated financial benefits. The research provides detailed insights into the preferences of supporters, conditional supporters, and non-supporters for wind farm developments in the community and presents recommendations concerning distributive and procedural issues across each phase of project development. Firstly, the findings show that citizens’ preferences for the distribution of financial benefits from wind farms are affected by procedural factors over planning, construction, and operation. Community participation in the governance of the community benefit fund and in the ownership of the wind farm have particularly high relative importance for strong supporters of wind farms. In addition, the developer and the proximity of the wind farm strongly influence willingness to accept. Secondly, the thesis contributes new evidence towards the design of citizen wind energy investments, and reveals a strong relationship between community acceptance, the proximity of the wind farm, and citizen investment preferences. Overall, financial attributes including the level of risk and expected return on investment have the greatest influence on citizen investment. However, the structure of voting rights, ownership and administration of the investment are generally regarded as having a higher relative importance if the wind farm is within 2km of the community, or a respondent is supportive of wind energy development. Thirdly, familiarity with a wind farm, whether a result of its proximity or phase of development, is a significant determinant of residents’ willingness to accept further development in the community. Critical points for local support of wind farms are at the earliest pre-planning / planning phases of development, as well as for households within the 2km radius of a wind farm. Other latent factors, such as attitudes towards wind electricity, trust in information provided by a developer, or awareness of community energy initiatives significantly affect community acceptance. Lastly, a comparative case study analyses the design of financial benefits, citizen investment and near-neighbour incentives in Ireland with corresponding mechanisms introduced by Denmark, Germany, and the United Kingdom. Based on a critical assessment of the design and adaptation of policy mechanisms over time, the findings suggest that it is becoming more common for these governments to endorse the development of community trusts or municipality community benefit funds. It also suggests that community-led wind farms experience difficulties related to the competitive nature of the auction regime. The chapter recommends that when defining eligibility or boundaries on citizen financial participation, policymakers could use a phased approach, first prioritising residents closest to a wind farm, and then opening opportunities across a wider geography in the second instance. The research is relevant for policy and practice. It enhances the understanding of citizens’ preferences for financial participation mechanisms in onshore wind farms, which is conducive to social acceptance and fairer local energy transitions. It would be valuable for future studies to develop on this evidence in the context of offshore wind energy and demand-side response which are increasingly important for the Irish energy transition. The diffusion of these innovative technologies similarly depends on citizen participation, fairness, and ultimately social acceptance.