One of the enduring puzzles for researchers on FDI has been the role and importance of "horizontal" and "vertical" FDI. Horizontal FDI tends to mean locating production closer to customers and avoiding trade costs. Vertical FDI, on the other hand, represents firms' attempts to take advantage of cross-border factor cost differences. A central challenge for study has been the absence of firm-level data to distinguish properly among the types of and motivations for FDI. Alfaro and Charlton analyzed a new dataset, and in this paper present the first detailed characterization of the location, ownership, and activity of global multinational subsidiaries. Key concepts include:

• Most FDI occurs between rich countries.
• In contrast to previous research, it appears that the share of vertical FDI is larger than commonly thought, even within developed countries.
• Multinational firms have tended to embrace vertical FDI for highly skilled and later stages of production, and for arm's-length transactions for lower-skill inputs and processes.

We use a new firm level data set that establishes the location, ownership, and activity of 650,000 multinational subsidiaries—close to a comprehensive picture of global multinational activity. A number of patterns emerge from the data. Most foreign direct investment (FDI) occurs between rich countries. The share of vertical FDI (subsidiaries which provide inputs to their parent firms) is larger than commonly thought, even within developed countries. More than half of all vertical subsidiaries are only observable at the four-digit level because the inputs they are supplying are so proximate to their parent firms' final good that they appear identical at the two-digit level. We call these proximate subsidiaries 'intra-industry' vertical FDI and find that their location and activity are significantly different to the inter-industry vertical FDI visible at the two-digit level. These subsidiaries are not readily explained by the comparative advantage considerations in traditional models, where firms locate their low skill production stages abroad in low skill countries to take advantage of factor cost differences. We find that overwhelmingly, multinationals tend to own the stages of production proximate to their final production giving rise to a class of high-skill intra-industry vertical FDI.

Entrepreneurs are, on average, significantly wealthier than people who work in paid employment. Research shows that entrepreneurs comprise fewer than 9 percent of households in the United States but they hold 38 percent of household assets and 39 percent of the total net worth. This relationship between personal wealth and entrepreneurship has long been seen as evidence of market failure, meaning that talented but less wealthy individuals are precluded from entrepreneurship because they don't have sufficient wealth to finance their new ventures. Nanda studied how changes in the cost of external finance affected the characteristics and likelihood of individuals becoming entrepreneurs. He finds that market failure accounts for only a small fraction of the relationship between personal wealth and entrepreneurship in advanced economies such as the U.S. Key concepts include:

• Entrepreneurs are, on average, significantly wealthier than people who work in paid employment. The wealthy are also more likely to become entrepreneurs.
• Talent matters in entrepreneurship, more so for the less wealthy. The relationship between individual wealth and entrepreneurship in advanced economies is driven at least in part by the fact that wealthy individuals can start lower growth-potential businesses because they do not face the discipline of external finance.
• It may be misguided to provide a simple scheme of cheap credit for new ventures, as not all who take up the scheme will be those who really need it.

 This paper examines the extent to which the positive relationship between personal wealth and entry into entrepreneurship is due to financing constraints. I exploit a tax reform and use unique micro-data from Denmark to study how exogenous changes in the cost of external finance shape both the probability of entering entrepreneurship and the characteristics of those who become entrepreneurs. As expected, differences-in-differences estimates show that the entry rates for individuals who faced an increase in the cost of finance fell by 40% relative to those whose cost of external finance was unchanged. However, while some of the fall in entry was due to less wealthy individuals with high human capital (confirming the presence of financing constraints), the greatest relative decline in entry came from individuals with lower human capital, many of whom were above median wealth. This finding suggests that an important part of the positive relationship between personal wealth and entrepreneurship may be driven by the fact that wealthy individuals with lower ability can start new businesses because they are less likely to face the disciplining effect of external finance.

Prize-linked savings (PLS) products are savings vehicles that may appeal to people with little savings and little interest in traditional savings products. PLS products offer savers a return in the form of the chance to earn large prizes, rather than in more traditional forms of interest or dividend income or capital appreciation. The probability of winning is typically determined by account balances, and the aggregate prize pool can be set to deliver market returns to all savers. Prize-linked assets are offered in over twenty countries around the world—including the U.K., Sweden, South Africa, and many Latin American and Middle Eastern countries—but are not available in the United States, where state laws and federal regulations make the offering of prize-linked programs problematic. This working paper provides a first look into demand for a PLS product in the United States. Key concepts include:

• PLS products are promising, despite formidable barriers to success in the United States.
• The low income population that was studied expressed substantial interest in a savings product that provides prizes as part of its return.
• This product appeals to non-savers, who do not save with traditional products.
• The product appeals to heavy lottery players, and by virtue of this fact, has the potential of turning their gambling activities into demand for savings.
• PLS products might face an uphill battle in the United States due significantly to well-established gambling and lottery industries that might oppose PLS, and the roadblocks due to legal uncertainty and prohibitions around this new product.
• Businesses or state treasurers might be reluctant to innovate around a product that must compete against heavily marketed alternatives.

This paper reports on a small-scale survey of the potential American demand for prize-linked savings accounts, an account that awards prizes as part of the saving product's return. In October 2006, Centra Credit Union launched a prize-linked savings pilot. As part of that initiative, we conducted a mall intercept survey of over 500 people in Clarksville, Indiana, the community where the program was launched. This preliminary data suggests that low-to-moderate income Americans may have substantial demand for prize-linked savings, with a majority of survey participants expressing an interest in opening a prize-linked savings account. As predicted by theory and international experience, interest in prize-linked savings is greatest among people who do not have regular saving habits, who have little actual savings, who play lotteries extensively, and who are optimistic about their futures.