the impact of exports on economic growth it s the market form abstarct this paper unites explanations about the growth effects from various trade characteristics proposing the market form into which a country exports as the main driver exporting into concentrated world markets oligopolies or monopolies leads to higher profit margins similar to fundamental microeconomic logic the paper develops an index measuring the average market form of a country s exports this index produces a positive and statistically significant coefficient in conventional growth regressions a one standard deviation increase is suggested to raise growth by 0 885 percentage points this result holds for numerous extensions and seems particularly important for developing economics

efficient and durable decision rules with incomplete information we compare six concepts of efficiency for economies with incomplete information depending on the stage at which individuals welfare is evaluated and on whether incentive constraints are recognized an example is shown in which an incentive efficient decision rule may be unanimously rejected by the individuals in the economy we define durable decision rules which can resist such unanimous rejection and show that efficient durable decision rules exist

efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

how does government ownership affect firm performance a simple model of privatization in transition economies abstract we present a game theoretical model of privatization in transition economies we consider the costs and benefits of government ownership and derive the net effect of government ownership on firm performance model predictions are consistent with empirical evidence in the literature

smallholder market participation concepts and evidence from eastern and southern africa abstract this paper reviews the evidence on smallholder market participation with a focus on staple foodgrains i e cereals in eastern and southern africa in an effort to help better identify what interventions are most likely to break smallholders out of the semi subsistence poverty trap that appears to ensnare much of rural africa the conceptual and empirical evidence suggests that interventions aimed at facilitating smallholder organization at reducing the costs of intermarket commerce and perhaps especially at improving poorer households access to improved technologies and productive assets are central to stimulating smallholder market participation and escape from semi subsistence poverty traps macroeconomic and trade policy tools appear less useful in inducing market participation by poor smallholders in the region

boundedly rational versus optimization based models of strategic thinking and learning in games harstad and selten s article in this forum performs a valuable service by highlighting the dominance of optimization based models over boundedly rational models in modern microeconomics and questioning whether optimization based models are a better way forward than boundedly rational models this article complements rabin s response to harstad and selten focusing on modeling strategic behavior i consider harstad and selten s examples and proposed boundedly rational models in the light of modern behavioral economics and behavioral game theory commenting on the challenges that remain and the most promising ways forward

perspectives on mechanism design in economic theory economics began with xenophon s oeconomicus c 360 bce in which socrates interviews a model citizen who has two primary concerns he goes out to his farm in the country to monitor and motivate his workers there then he goes back to the city where his participation in various political institutions is essential for maintaining his rights to own this farm such concerns about agents incentives and political institutions are also central in economic theory today but they were not always two centuries ago economics developed as an analytical social science by focusing on produc tion and allocation of material goods developing methodologies of national income accounting and price theory questions about resource allocation seemed particularly amenable to math ematical analysis because flows of goods and money are measurable and should satisfy flowbalance equations and no arbitrage conditions from this perspective the classical economic problem was that people s ability to satisfy their desires is constrained by limited resources the classical economic result was that unrestricted free trade can achieve allocative efficiency in the sense that reallocating the available resources cannot improve everyone s welfare a shift of focus from allocation of resources back to analysis of incentives began from the time of augustin cournot 1838 when economic theorists began to analyze optimal decisions of rational individuals as a tool for understanding supply and demand in price theory see jurg

the enduring power of coase abstractby many measures ronald coase has been among the most influential economists of the past 60 years why is this so we suggest that coase s work has enduring appeal to and insight for social scientists in part because it addresses the biggest and most important social problems how do we solve governance and coordination problems when limited information common resource issues and public good issues produce conflicts among several people at once any scholar who works on issues of corporate or common pool governance pollution allocation of seats on legislative committees regulation of systemic risk in financial markets provision of military forces patent thickets creation of optimal communications networks regulation of decreasing cost industries or compensation of corporate officers can see his or her work stemming from several of coase s original insights just as john nash s work reshaped economic theory almost every field of economics and political science is shaped by coasean insights

chinese villages and townships as industrial corporations ownership governance and market discipline1 public firms in a reforming socialist economy face two problems the old soft budget constraint syndrome and new principal agent problems china s township village government owned enterprises tves outperform state owned enterprises soes in growth rate and productivity three explanations are proposed in the literature 1 tves represent informal or ambiguous private property rights which are most efficient in partial reform 2 the small size and scale of township village governments as industrial corporations allows officials to monitor tves directly and to limit their wherewithal for cross subsidizing 3 strict market disciplines facing tves render indirect market monitoring to mitigate agency problems effectively analyses of jiangyin data show that a while both superior to local soes village and township enterprises share similar productivity and b the scale of township village corporations slightly increases productivity i conclude that local state corporatism should be revised to inc

the proper scope of government theory and an application to prisons when should a government provide a service in house and when should it contract out provision we develop a model in which the provider can invest in improving the quality of service or reducing cost if contracts are incomplete the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee has however the private contractor s incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on noncontractible quality the model is applied to understanding the costs and benefits of prison privatization

crisis of the tax state this paper presents a simple model of the tax state where a progressive income tax is used to finance publicly supplied goods that are distributed free of charge the individual citizens may be dissatisfied with such a fiscal system if more than 50 are dissatisfied we speak of a crisis of the tax state

trends and volatilities in foreign patents registered in the usa this study analyses the patent trends and volatilities for the top 12 foreign patenting countries in the us market from 1975 to 1997 japan is ranked first in terms of foreign patents registered in the usa followed by germany patent registrations from each of these countries have increased steadily over time but at different rates using monthly time series data for 1975 1997 the time varying volatility of australian japanese and german patents registered in the usa is examined in detail the asymmetric ar 1 gjr 1 1 model is found to be suitable for australia and japan while the best fitting model for germany is the symmetric ar 1 garch 1 1 model

structure and performance the task of economic history jhe cliometric revolution in ecoknomic history wedded neoclassical economics and quantitative methods in order to describe and explain the performance of economies in the past economic history gained in rigor and scientific pretension but at the expense of exploring a much more fundamental set of questions about the evolving structure of economies that underlies performance 2 cliometricians have turned their backs on a long tradition stretching back from joseph schumpeter to karl marx to adam smith these scholars regarded economic history as essential because it added a dimension to economics its purpose was to analyze the parameters held constant by the economist if economics is a theory of choice subject to specified constraints a task of economic history was to theorize about those evolving constraints the failure of economic historians to provide their colleagues with a historical dimension to their perspective has reduced the effectiveness of economists in dealing with contemporary problems failure of economists to appreciate the transitory character of the assumed constraints and to understand the source and direction of these changing constraints is a fundamental handicap to further development of economic theory the challenge to the economic historian which has equally compelling implications for the economic theorist is to explain the transformation of the structure of the american economy in the past century 3 in the rest of this essay i shall explore this issue in order to specify some of the dimensions of the economic historian s task

an evolutionary approach to norms iorms provide a powerful mechanism for regulating conflict in groups even when there are more than two people and no central authority this paper investigates the emergence and stability of behavioral norms in the context of a game played by people of limited rationality the dynamics of this new norms game are analyzed with a computer simulation based upon the evolutionary principle that strategies shown to be relatively effective will be used more in the future than less effective strategies the results show the conditions under which norms can evolve and prove stable one interesting possibility is the employment of metanorms the willingness to punish someone who did not enforce a norm many historical examples of domestic and international norms are used to illustrate the wide variety of mechanisms that can support norms including metanorms dominance internalization deterrence social proof membership in groups law and reputation

intellectual property litigation activity in the usa abstract brand names or trademarks carry incredible economic power and prestige there is increasing recognition by world bodies that intellectual property ip whether manifested in patents trademarks copyrights or trade secrets is highly valuable and must be protected through robust ip enforcement the usa is an interesting natural laboratory as patent trademark and copyright litigation battles have been raging domestically for some time the paper discusses the four main forms of ip assets the legal remedies that are available to enforce the property rights inherent in each type of ip asset the basic damages theory relating to each form of ip and how damages may be calculated when each type of asset is presumed to be infringed the increased recognition of the value of ip has led to stronger enforcement of ip protection an increase in ip litigation and growing policy actions that are focused on how that protection should be manifested an empirical analysis of how the ip litigation activity in the usa has changed over time is also presented

efficient adaptation in long term contracts take or pay provisions for natural gas to mitigate the inflexibility of long term contracting for natural gas parties will look for terms that minimize the need for costly adjudication while maintaining incentives for appropriate adaptation the authors examine the incident of take or pay provisions in contracts between natural gas producers and pipelines from this perspective they argue that take obligations can be viewed as a mechanism for effecting appropriate incentives for contractual performance and show that efficient breach considerations define an optimal take percentage as a function of characteristics of the transaction these incentives are distorted by regulated price ceilings which cause the adoption of take obligations in excess of optimal levels the findings refute the common perception that take or pay provisions are just an artifact of wellhead price regulation and serve no useful purpose in the absence of regulation 20 references 1 figure 1 table

the tradeoff of the commons under stochastic use abstract we develop a model of scarce renewable resources to study the problem of the commons our model formulation differs from the existing literature in that it assumes the use of the commons to be stochastic in nature one example is microwave spectrum for mobile and wireless communications we investigate three mechanisms of resource allocation free usage the exclusive franchise and a regulated monopoly we show that the welfare tradeoff among these three mechanisms depends on the characteristics of the commons and their usage patterns in particular we find that property rights are not always the best solution we then make four extensions that apply to spectrum allocations

asset specificity and economic organization abstract this paper examines the optimization problem of firm and market organization in which both production cost and transaction cost differences are expressed as a function of asset specificity in general markets enjoy advantages by aggregating the demands of many buyers thereby realizing economies of scale or scope such production cost savings need to be assessed in relation to the transaction cost advantages that internal organization sometimes enjoys over markets in adapting to changed circumstances as it turns out both production cost economies and the transaction cost differences between firm and market organization vary systematically with the characteristics of the investments this paper employs a unified framework to assess the choice of organization form the condition of asset specificity is featured

capture and ideology in the economic theory of politics the economic theory of regulation long ago put public interest theories of politics to rest these theories have correctly been viewed as normative wishings rather than explanations of real world phenomena they have been replaced by models of political behavior that are consistent with the rest of microeconomics anthony downs 1957 james buchanan and gordon tullock 1965 george stigler 1971 sam peltzman 1976 recently however debate has arisen over whether some version of a public interest theory of regulation will have to be readmitted to our thinking about actions and results in the political arena what is at issue is the empirical importance of the altruistic publicly interested goals of rational actors in determining legislative and regulatory outcomes james kau and paul rubin 1979 kalt 1981 peltzman 1982 this study assesses the nature and significance of publicly interested objectives in a particular instance of economic policymaking u s senate voting on coal strip mining regulations the existence of such objectives is of course no contradiction of the economic view of human behavior kenneth arrow 1972 gary becker 1974 and may well be rooted in genetic biological history becker 1976 jack hirshleifer 1978 generally however individuals altruistic publicly interested goals have been given little attention this reflects the judgment that such goals are so empirically unimportant as to allow the use of occam s razor in positive models or well founded apprehensions that these goals are unusually difficult to identify measure and analyze notwithstanding the latter problem we find that approaches which confine themselves to a view of political actors as narrowly egocentric maximizers explain and predict legislative outcomes poorly the tracking and dissecting of the determinants of voting on coal strip mining policy suggest that the economic theory of politics has been prematurely closed to a broader conception of political behavior

who benefits from aid for trade comparing the effects on recipient versus donor exports recent studies offer an ambiguous picture on the effectiveness of foreign aid in strengthening the export capacity of recipient countries moreover the literature on aid for trade aft has often neglected that exporters in the donor countries may be among the main beneficiaries we hypothesize that aft is as much in the self interest of donor countries as it may have promoted the exports of recipient countries we simultaneously estimate and compare the effects of aft on trade in both directions we find that aft increases recipient exports to donors as well as recipient imports from donors the first effect tends to dominate the latter which contradicts the skeptical view that donors grant aft primarily to promote their own export interests

jon elster s securities against misrule juries assemblies elections a review essay the standard economic approach to designing institutions for collective decision making recognizes individuals strategically rational motivations for misrepresentation and asks how best given an objective function to design a set of incentives and constraints to internalize or negate such motivations securities against misrule offers in the author s phrase an essay in persuasion to the effect that such an approach is fundamentally misguided instead elster argues for a behavioral approach centered on designing institutions for good decision making rather than good outcomes by individuals whose actions are chronically subject to emotional self interested and prejudicial distortions jel d02 d71 d72 d82

economica coase lecture reference points and the theory of the firm i argue that it has been hard to make progress on coase s theory of the firm agenda because of the difficulty of formalizing haggling costs i propose an approach that tries to move things forward using the idea of aggrievement costs and apply it to the question of whether a transaction should be placed inside a firm in house production or in the market place outsourcing

the new institutional economics and the theory of the firm abstract concepts of importance in the literature of the new institutional economics such as transaction costs and bounded rationality have been used to extend the standard neoclassical model of the firm but the hybrid models created have failed to provide adequate explanations of enterprise behavior an alternative neoinstitutional model of the firm is developed in the paper that differs from the pure neoclassical model and hybrid models in respect to both the nature of the solution it yields and the process by which it reaches a solution the neoinstitutional firm cannot be expected to achieve either the hypothetical allocative efficiency promised by the frictionless neoclassical model or the relatively efficient constrained pareto optimal solutions predicted by the largely frictionless hybrid models the orthodox marginal rules of neoclassicism can only be used to solve lower level problems that appear within the firm

on trust as a commodity and on the grammar of trust abstract i look at trust in the light of two constructions taken from economic science general competitive analysis and the theory of games i draw on baier s anti contractarian perspective as well as on one informed by wittgenstein s writings the former focuses on relations between inherently unequal and asymmetrical individuals while the latter draws on and revolves around the imperative in the philosophical investigations let the use teach you the meaning p 212 also p 220 i try to spell out how the choice of language has epistemological implications for an analysis of trust for the trustworthiness of the scientific constructions i use for analyzing trust and thereby more generally for defining ourselves and our form of life

the reference point approach to the theory of the firm an introduction there is a small but growing literature on the reference point approach to incomplete contracts as formulated by hart and moore the reference point approach has begun to be applied to the theory of the firm in 3 recent papers this introduction reviews the main theoretical aspects of each of these papers it then discusses the relationship between the reference point approach to the firm the transaction cost approach and the property rights approach here it is argued that the reference point approach is a step back towards ex post inefficiencies away from reliance on ex ante inefficiencies

democracy and national economic performance the preference for stability appear to arise because democracies ameliorate the effects of social cleavages another mechanism that might explain democratic stability when growth and volatility are jointly examined democracies reveal highly favorable economic results oes democracy affect national economic performance and if so how no question is more central to the study of political economics almost all previous work on democracy and economic performance has focused exclusively on growth rates with contradictory and confusing results in this article we argue that to reveal the impact of democratic institutions on economic performance scholars must consider two dimensions of economic performance growth rate and volatility we begin with a novel hypothesis economic policy in democracy is risk avoiding relative to policy in nondemocracies 1 because voters are riskaverse they penalize incumbent governments for economic volatility and democratic governments respond accordingly in nondemocracies we posit that elites are more likely to seek risk that voters would reject consequently autocracies produce systematically more economic volatility than

fairness and the optimal allocation of ownership rights we report on several experiments on the optimal allocation of ownership rights the experiments confirm the property rights approach by showing that the ownership structure affects relationship specific investments and that subjects attain the most efficient ownership allocation despite starting from different initial conditions however in contrast to the property rights approach the most efficient ownership structure is joint ownership these results are neither consistent with the self interest model nor with models that assume that all people behave fairly but they can be explained by the theory of inequity aversion that focuses on the interaction between selfish and fair players

reading cournot reading nash the creation and stabilisation of the nash equilibrium the concept of the cournot nash equilibrium is central to noncooperative game theory and the latter s use in macroeconomic theory this paper considers the creation of this theoretical construct examining the separate contributions of both cournot and nash and showing how the two were ultimately joined together in the eyes of contemporary economic theorists rather than simply showing how cournot served as a precursor to nash the author challenges the traditional approach and emphasizes the shifts in interpretation of their respective contributions in so doing he addresses some pertinent questions about the manner in which economic theorists view the evolution of their own discipline copyright 1994 by royal economic society

a theory of collective reputations with applications to the persistence of corruption and to firm quality the paper is a first attempt at modelling the idea of group reputation as an aggregate of individual reputations a member s current incentives are affected by his past behaviour and because his track record is observed only with noise by the group s past behaviour as well the paper thus studies the joint dynamics of individual and collective reputations and derives the existence of stereotypes from history dependence rather than from a multiplicity of equilibria or from the existence of a common trait as is usually done in the literature it shows that new members of an organization may suffer from an original sin of their elders long after the latter are gone and it derives necessary and sufficient conditions under which group reputations can be rebuilt last the paper applies the theory to analyse when a large firm can maintain a reputation for quality 1 collective reputations collective reputations play an important role in economics and the social sciences countries ethnic racial or religious groups are known to be hard working honest corrupt hospitable or belligerent some firms enjoy substantial rents from their reputations for producing high quality products some departments are reported to treat their faculty or students fairly the paper is a first attempt at modelling the idea of group reputation as an aggregate of individual reputations a member s current incentives are affected by her past behaviour and because her track record is observed only with noise by the group s past behaviour as well the paper studies the joint dynamics of individual and collective reputations in a model in which current generations are progressively replaced by new ones and derives the existence of stereotypes from history dependence rather than from a multiplicity of equilibria or from the existence of a common trait as is usually done in the literature see section 2 for a detailed comparison with the literature it shows that new members of an organization may suffer from an original sin of their elders long after the latter are gone and it derives necessary and sufficient conditions under which group reputations can be rebuilt last the paper applies the theory to analyse when a large firm can maintain a reputation for quality let us spell out the building blocks of our theory in more detail a a group s reputation is only as good as that of its members each member is characterized by individual traits such as talent diligence or honesty past individual behaviour conveys information about these traits and generates individual reputations

vertical integration and firm boundaries the evidence since ronald h coase s 1937 seminal paper a rich set of theories has been developed that deal with firm boundaries in vertical or input output structures in the last twenty five years empirical evidence that can shed light on those theories also has been accumulating we review the findings of empirical studies that have addressed two main interrelated questions first what types of transactions are best brought within the firm and second what are the consequences of vertical integration decisions for economic outcomes such as prices quantities investment and profits throughout we highlight areas of potential cross fertilization and promising areas for future work

how does country risk affect innovation an application to foreign patents registered in the usa abstract innovation can occur at the national level under a wide range of settings however the leading innovative countries internationally have several common traits including economic financial and political stability which are reflected in various measures of country risk the purpose of the paper is to examine for the first time the relationship between the economic financial and political country risk ratings on the one hand and innovation as measured by a country s registered patents on the other the relationships between various monthly country risk ratings and registered patents are analyzed for the leading 12 foreign patenting countries in the usa from 1975 to 1997 the empirical results show that economic financial and political risk ratings have a considerable impact on the innovative activities of the 12 countries total us patent applications are also influential in inducing innovation in the 12 countries such issues have not previously been addressed in the literature on country risk and innovation

the paradox of plenty a meta analysis since sachs and warner s seminal article in 1995 numerous studies have addressed the link between natural resources and economic growth although the resource curse effect was commonly accepted at first many articles have challenged its existence and the results found in the literature are ambiguous in this paper we aim to quantitatively review this literature in order to i identify the sources of heterogeneity and ii assess the impact of natural resources on economic growth a meta analysis is performed on 69 empirical studies on the resource curse totaling 1 419 estimates our findings show that i only developing countries suffer from the resource curse although it is soft ii the way natural resources are taken into account is crucial to understand the heterogeneity found in the literature iii the negative impact of the volatility of the terms of trade on growth should be qualified an additional mra performed on indirect effects size also indicate that when institutions are at their best level the resource curse disappears and may be turned into a blessing

bargaining in the shadow of the law divorce laws and family distress this paper exploits the variation occurring from the different timing of divorce law reforms across the united states to evaluate how unilateral divorce changed family violence and whether the option provided by unilateral divorce reduced suicide and spousal homicide unilateral divorce both potentially increases the likelihood that a domestic violence relationship ends and acts to transfer bargaining power toward the abused thereby potentially stopping the abuse in extant relationships in states that introduced unilateral divorce we find a 8 16 percent decline in female suicide roughly a 30 percent decline in domestic violence for both men and women and a 10 percent decline in females murdered by their partners

equilibrium in strategic interaction the contributions of john c harsanyi john f nash and reinhard selten during the past 15 years or so a game theoretic revolution of economics has taken place microeconomic theory has been rewritten in the language of a game theory see kreps 1 990b i publications in industrial organization differ substantially from work published in this area two decades ago in macroeconomics issues of time consistency credibility and reputation have been analyzed by means of game theoretic tools trade theory has been cast in game theoretic terms in financial economics problems of market micro structure are analyzed by means of non cooperative games fundamental concepts and techniques developed by this year s nobel laureates have enabled this revolution to take place as kreps writes

incentive intensity forbearance law and the governance of transactions this paper uses a simple make or buy model to summarize and illustrate some of the distinguishing aspects of williamson s transaction cost theory it is shown that each mode of governance is associated with a different degree of incentive intensity which in turn is attributable to the difference in court access and in the control of accounts copyright 2004 oxford university press

a theory of holdouts in wage bargaining holdouts the continuation of negotiations beyond the contract expiry date are the most common form of disputes in labor contract negotiations the authors model holdouts as a delaying tactic employed by unions to obtain information about other bargaining outcomes in their industry novel implications of their model include a positive association between holdout duration and the number of bargaining pairs negotiating contracts simultaneously bunching of holdout durations within these negotiating groups and fewer strikes among holdouts which end later in groups using a large panel of contract negotiations in canadian manufacturing the authors find considerable support for these predictions copyright 1998 by american economic association

interim third party selection in bargaining abstract third party intervention can reduce the risk of conflict in situations where the bargaining failure is due to asymmetric information in this paper i consider the selection of a third party in a two person bargaining problem where each disputant has private information about its relative strength or weakness for a class of problems i find that the disputants choose the third party that is best for the strong type but worst for the weak type due to the incentive of each disputant to avoid seeming weak to their adversary the selected third party s intervention entails a higher ex ante chance of conflict than intervention by any other alternative this paper shows how the process of interim third party selection can have important consequences for the outcome of a third party intervention in bargaining

testing market integration new approaches with case material from the west bengal food economy given the inferential dangers of received methods a new methodology is introduced to provide a sequence of tests using weekly spot prices to examine the dynamic relationship of market commodity prices in three locations in west bengal tests suggest that the markets are integrated but a lower degree of integration of paddy and rice prices is identified the hypothesis of full market integration is rejected structural and institutional factors which affect the specifics of performance are identified physical isolation the institutional complexity of marketing systems and contractual forms the polarisation of assets assets specificity the institutional control of information and price formation the underdevelopment of linked markets and the idiosyncratic implementation of state regulatory policy and auto regulatory responses enter the explanation

globalization local ecosystems and the rural poor summary in this paper we draw upon models from ecology and new institutional economics to examine the various mechanisms through which globalization can lead to loss in resilience of ecosystems and thus increase the vulnerability of poor people who depend on it to illustrate ecological dynamics we examine a semi arid savanna ecosystem that is characterized by nonlinearities and multiple steady states we discuss how traditional knowledge and institutions affect resource use patterns and resilience of such an ecosystem in the absence of trade then we examine the effects of trade liberalization and international technology transfers on institutional and ecological dynamics and consequently on poverty

nash equilibrium and the history of economic theory john nash s formulation of noncooperative game theory was one of the great breakthroughs in the history of social science nash s work in this area is reviewed in its historical context to better understand how the fundamental ideas of noncooperative game theory were developed and how they changed the course of economic theory

efficient relocation of spectrum incumbents changes in technologies and in consumer demands have made prior radio spectrum allocations far from efficient to address this problem the fcc has recently reallocated spectrum for more flexible use in bands that are partially occupied by incumbent license holders often it is necessary for the new license holder to relocate incumbents to make efficient use of the spectrum regulations structuring the negotiation between incumbent and new entrant can promote efficiency in particular giving the new entrant the right to move the incumbent with compensation can reduce negotiation costs and promote efficiency when there is private information about spectrum values but good public information about the cost of relocating the incumbent we examine the experience of broadband pcs entrants in relocating microwave incumbents we conclude with some remarks on how these ideas might be applied to digital television spectrum

from institutions to financial development and growth what are the links this paper presents an integrated overview of the literature linking institutions financial development and economic growth from the large body of research on institutional development the paper first selects those contributions that make it possible to study the role of institutional arrangements in ameliorating worsening the information frictions and transaction costs that characterize the development of financial markets the paper then investigates the theoretical mechanisms by which these specific frictions affect economic growth and presents the stock of empirical evidence quantifying the impact of institutions on growth through financial development

debt relief and governance quality in developing countries summary in this paper we empirically discuss whether or not debt relief has been economically rational in the past 15 years from analyzing the determinants of debt relief our results suggest that governance quality did not play a role in the decision of creditor countries to forgive debt in the 1990s furthermore even the actual debt burden of highly indebted poor countries was not crucial in deciding whether or not debt forgiveness was granted rather debt relief followed a strong path dependence those countries whose debt had been forgiven in the first half of the 1990s were also granted debt forgiveness in the second half of the decade however this allocation pattern changed at the beginning of the 21st century when path dependence diminished and some dimensions of governance quality were taken into account by donor countries

thinking about the firm a review of daniel spulber s the theory of the firm in this review i describe how economists have moved beyond the firm as a black box to incorporate incentives internal organization and firm boundaries i then turn to the way that the theory of the firm is treated in daniel spulber s book the theory of the firm microeconomics with endogenous entrepreneurs firms markets and organizations spulber s goal is to explain why firms exist how they are established and what they contribute to the economy to accomplish this spulber defines a firm to be a transaction institution whose objectives differ from those of its owners for spulber this separation is the key difference between the firm and direct exchange between consumers i raise questions about whether this is a useful basis for a theory of the firm jel d21

institutions and economic growth an historical introduction abstract in this essay the interdependence of political and economic institutions is examined against premises in neoclassical theories of economies which maintain that population and savings are the principal determinants of economic growth that institutions matter in the development of economies is the difference in assumptions i examine i look at the institutional frameworks that preceded adoption of the united states constitution and the northwest ordinance in early america i then trace the precedents of these american institutions to the evolution of common law in england where interests unconcerned with the crown coalesced to form competing political units i then contrast england s institutional development with the comparatively centralized enforcement mechanisms of spain to examine the hypothesis that institutional differences produce economic consequences

john nash the master of economic modeling during the past two decades non cooperative game theory has become a central topic in economic theory many scholars have contributed to this revolution none more than john nash following the publication of von neumann and morgenstern s book it was nash s papers in the early fifties which pointed the way for future research in game theory the notion of nash equilibrium is indispensable nash s formulation of the bargaining problem and the nash bargaining solution constitute the cornerstone of modern bargaining theory his insights into the non cooperative foundations of cooperative game theory initiated an area of research known as the nash program nash s analysis of the demand game in which he uses a perturbation of a game to select an equilibrium inspired the construction of several refinements of the notion of nash equilibrium a scholar s influence does not necessarily qualify him for a nobel prize one may argue that such awards are a social institution established to serve social goals it is legitimate to ask what message the swedish academy sends to the scientific community and the rest of the world in some cases prizes are designed to encourage individuals to invest their resources in endeavors that are important to society nash s achievements depend more on his genius than on characteristics which can be encouraged by utilitarian incentives sometimes prizes are expressions of social indebtedness towards members of society who have devoted their life towards advancing a social goal nash s active career was intensive but very short and i have not heard that he deliberately sacrificed attractive alternatives in favor of advancing economic knowledge prizes are also intended to promote the recipient s field of research by now game theory is well recognized any graduate student in economics is familiar with the foundations of non cooperative game theory and i doubt that there is any further need to expand the influence of game theory

the rationality of u s regulation of the broadcast spectrum in his classic 1983 technologies of freedom ithiel de sola pool so elucidated the prevailing wisdom concerning broadcast licensure in the united states while the key legal questions surrounding this institution involve important first amendment questions hence pool s scarcity analogy to paper ink and presses economists and other policy analysts have often remarked on the more general incongruity in federal licensing while spectrum is regulated on the physical scarcity premise it is awarded to private users on a no fee basis thus conferring significant economic rents on private parties at substantial opportunity cost to the fisc moreover federal communications commission fcc 2 policies have openly sought virtually throughout the agency s entire life span to restrict broadcast licenses and competition for broadcasters particularly cable television to far below the quantity technically available 3 the

the effect of power imbalances on incentives to make non contractible investments we use an experiment to study the effect of ex post sharing rules on relationship specific investments in an incomplete contracting context we find that no power structure can induce first best investments and that equally productive partners reach more efficient outcomes with a balanced power structure i e equal sharing of returns than with an asymmetric one in addition we find evidence for behavioural effects partners make higher investments and reach higher efficiency levels than own payoff maximisation would suggest this behaviour is in line with a model where decision makers care about social efficiency it is not consistent with inequity averse preferences

does aid cause trade evidence from an asymmetric gravity model anderson and vanwincoop developed what has become the standard framework for framing and interpreting empirical work using the gravity model their framework relies heavily on an assumption of symmetry among countries for issues related to north south trade this assumption is problematic in this paper we develop an asymmetric extension of the anderson vanwincoop framework appropriate to the analysis of north south trade where northern countries produce differentiated goods and southern countries homogenous ones in addition we use an appropriately extended version of baier and bergtrand and taylor linear expansion thus permitting its estimation using good old ols the result is an empirical model that i is better suited to the analysis of north south trade ii is easy to estimate and compute comparative statics not requiring a customised nls routine and given the way the south is included iii provides a simple explanation of zero trade flows between some country pairs a fact still not fully explained in the literature as an illustration of its use we examine the empirical link between foreign aid and trade

oligopoly games and the cournot bertrand model a survey traditional oligopoly models hold that firms compete in the same strategic variable output cournot or price bertrand alternatively a hybrid model allows some firms to compete in output and other firms to compete in price also known as the cournot bertrand model when the choice of strategic variable is endogenous the established dominant strategy is output competition a growing body of work demonstrates however that the cournot bertrand outcome can be a subgame perfect nash equilibrium in the presence of market asymmetries observations of real world markets consistent with cournot bertrand behavior bolster justification for the model and have stimulated an impressive and evolving literature on advances and applications we lay out the roots of the cournot bertrand model and explore a number of model developments we categorize 12 primary models in the literature based on alternative assumptions in particular some authors consider when the timing of play as well as the choice of strategic variable are endogenous altogether this research identifies when cournot bertrand behavior can emerge in a dynamic setting and under alternative market conditions we also review the cournot bertrand model applications in the fields of international economics industrial organization labor and public economics we expect the literature to continue to expand in the future

four formal izable theories of the firm in this essay i define and compare elemental versions of four theories of the firm these elemental theories are distilled from important contributions by hart holmstrom klein williamson and others although these contributions have been widely cited and much discussed i have found it difficult to understand the commonalities distinctions and potential combinations of these seemingly familiar contributions in this essay therefore i attempt to clarify these issues in three steps i begin with informal summaries of the theories then turn to simple but formal statements of each elemental theory and finally nest the four elemental theories in an integrative framework

state capacity and military conflict powerful centralized states controlling a large share of national income only begin to appear in europe after 1500 we build a model that explains their emergence in response to the increasing importance of money for military success when fiscal resources are not crucial for winning wars the threat of external conflict stifles state building as finance becomes critical internally cohesive states invest in state capacity while divided states rationally drop out of the competition causing divergence we emphasize the role of the military revolution a sequence of technological innovations that transformed armed conflict using data from 374 battles we investigate empirically both the importance of money for military success and patterns of state building in early modern europe the evidence is consistent with the predictions of our model

monarchy monopoly and mercantilism brazil versus the united states in the 1800s gdp was 738 per capita in brazil and 807 in the united states in 1800 but was 4 854 in the latter in 1900 and actually fell from 738 inbrazil by 1913 relative factor endowments and institutions broadlyconsidered are twin traditional explanations for the extremely diversegrowth rates in this paper we offer a complementary analysis of specificpolitical and economic structures to help explain the success andpersistence of monopoly restrictions in brazil and the failure of internalmercantilism in the u s we conclude that brazilian institutions provideda ripe and efficient environment for rent seeking such conditions did notexist in the u s a fact that helped produce the vast difference ingrowth in the 1800s

sources of growth a reconsideration and general equilibrium application to indonesia abstract a computable general equilibrium cge model of indonesia is developed in which total factor productivity growth in manufacturing is endogenously determined productivity growth is conceptualized as human and social capital accumulation mediated by learning and institutional development stimulated by the trade regime these factors are modeled as externalities determined by export growth and capital equipment imports the model is used to analyze the gains deriving from the externalities and subsidies that amplify their effects leading indonesia to acquire korea like institutions sooner the growth and fiscal implications of such counterfactual simulations are analyzed in a realistic general equilibrium framework with a fully articulated public sector

institutions transaction costs and economic growth this essay develops a theoretical framework which explores the historical obstacles to economic growth these obstacles are examined in the context of the political economic institutional framework of economies in history and consequent transaction costs that determine economic performance and growth the essay concludes with specific suggestions for the study of economic growth

property rights and wireless license values abstract while extending the scope of spectrum property rights promotes efficiency such reforms are often deterred by equity concerns theoretically however the windfalls may be negative relaxing license restrictions may increase profits by allowing enhanced productivity yet liberalization across a class of licensees can reduce the expected profits by increasing competitiveness this article examines license value changes for regimes that decisively shift toward private property rights in radio spectrum by analyzing the average prices paid in international cellular phone license auctions during 1995 2001 this unique data set encompasses 1 365 licenses assigned by competitive bidding in 38 auctions held in 24 countries licenses awarded by regimes with more expansive spectrum property rights generated winning bids that were 61 percent lower adjusting for other factors this evidence reverses the equity argument against liberalization over the policy margin studied and is consistent with coase s view

a theory of price control price or rent control is but one of many forms of legislative action which interfere with private contracting in the market place to delimit the scope of my analysis i shall use the term price control to refer only to any set of regulations which satisfies the following three conditions first the control must fix the price or income terms of private contracts this categorically excludes any laws which regulate the distribution of income among the contracting parties on a share or percentage basis 2 second the control must involve no appropriation of proceeds to or from the government taxation and subsidization are thus excluded finally the fixing of price must not be associated with direct government sales purchases or manipulation of resources so as to maintain the regulated price 3 by this stipulation price support is also excluded even on such terms legal regulations to control price are still many and varied to evaluate our understanding of the class of phenomena which we seek to explain it is essential that we discover implications refutable by facts by this criterion the available body of economic theory pertaining to price control is deficient indeed the massive literature on the subject offers few such implications 4 an alternative approach to analyzing the observable effects of price control is presented here

the structure of ownership and the theory of the firm the separation of ownership from control produces a condition where the interests of owner and of ultimate manager may and often do diverge and where many of the checks which formerly operated to limit the use of power disappear in creating these new relationships the quasi public corporation may fairly be said to work a revolution it has divided ownership into nominal ownership and the power formerly joined to it thereby the corporation has changed the nature of profit seeking enterprise 1

the making of economic policy a transaction cost politics perspective economic policymaking as a political process the normative approach to policy analysis the positive view of political economy a synthesis the policy process in real time a theme transaction costs the transaction cost politics framework political outcomes and economic efficiency transaction cost analysis in politics mechanisms to cope with transaction costs in politics national differences two case studies to illustrate transaction cost politics tax and expenditure reform in the united states the gatt and national trade politics some reflections and suggestions some lessons for the policy process the role of the economist concluding comments appendix multiprincipal multitask agencies

learning from schelling s strategy of conflict thomas schelling s strategy of confl ict is a masterpiece that should be recognized as one of the most important and infl uential books in social theory this paper reviews some of the important ideas in strategy of confl ict and considers some of the broader impact that this book has had on game theory economics and social theory by his emphasis on the critical importance of information and commitment in strate gic dynamics schelling played a vital role in stimulating the development of non cooperative game theory more broadly schelling s analysis of games with multiple equilibria has redefi ned the scope of economics and its place in the social sciences jel d74 f51 h56

endogenous emergence of credit markets contracting in response to a new technology in ghana abstract access to credit is important for the productivity and overall welfare of farmers in developing countries we present a theoretical framework which shows that a change in the mode of shipping from air to sea in the ghanaian pineapple industry made it profitable for pineapple exporters to provide myopic farmers with both in kind loans to improve productivity and cash loans for consumption smoothing despite being unable to monitor farmers or enforce repayment the innovative theoretical result is that providing farmers with additional cash loans can enforce greater input use without compromising repayment we provide evidence in the form of a case study documenting the dramatic rise of informal credit through contract farming after the switch to sea freight between 1996 and 2001 using this anecdote we argue that credit arrangements can arise spontaneously absent non market interventions to meet market needs even in the absence of proper legal protections for creditors

the double edged sword of legitimacy in base of the pyramid markets as compared to developed countries a much higher proportion of entrepreneurs within base of the pyramid bop markets operate unregistered businesses prior research has suggested that the primary cause of such informal activity in these settings is the general failure of weak institutions to provide sufficient resources to warrant formalization we attempt to extend such thinking by deconstructing the discrete and inter related effects of formal business registration on the level of resources obtained by entrepreneurs from financial labor and legal institutions within bop markets using a multi method approach involving 299 entrepreneurs within guatemala city our results suggest that being seen as a legitimate registered business can actually lead to both increased resource provision and resource appropriation more specifically adhering to the norms and rules prescribed by regulatory institutions within weak legal environments can convey positive signals of stability and profitability that both attract the desired attention from formal institutional actors as well as unwanted attention from criminals

assigning property rights to radio spectrum users why did fcc license auctions take 67 years abstract while leo herzel 1951 and ronald coase 1959 persuasively argued for auctioning licenses issued by the federal communications commission fcc not until 1993 did the u s congress grant the fcc authority to assign wireless operating permits via competitive bidding why were auctions with obvious efficiency and equity advantages so long in coming why were comparative hearings in the public interest first abandoned as assignment tools in 1981 not for auctions but for lotteries and why were radio and tv licenses pointedly excluded from auctions four factors the special interest of regulators in influencing broadcasting content the limits placed on explicit program regulation by the u s constitution the recent increase in the relative economic importance of nonbroadcast wireless services and the agency problem embedded in central planning are used to explain both the political stability of economically inefficient licensing methods and recent reforms

institutions economics and the development quest institutions crucial for the analysis of how agents deal with uncertainty have been gaining increasing relevance on the economic research agenda in this paper we analyze the institutional literature aiming to explain why this perspective obtains better results than others in development economics in particular we stress the relevance of new institutional economics as an adequate framework for a broad understanding of development issues

new directions for modelling strategic behavior game theoretic models of communication coordination and cooperation in economic relationships author s crawford vp abstract in this paper i discuss the state of progress in applications of game theory in economics and try to identify possible future developments that are likely to yield further progress to keep the topic manageable i focus on a canonical economic problem that is inherently game theoretic that of fostering efficient coordination and cooperation in relationships with particular attention to the role of communication i begin with an overview of noncooperative game theory s principal model of behavior nash equilibrium i next discuss the alternative thinking and learning rationales for how real world actors might reach equilibrium decisions i then review how nash equilibrium has been used to model coordination communication and cooperation in relationships and discuss possible developments

but who will guard the guardians a pre recorded version of leonid hurwicz prize lecture was presented on 8 december 2007 at aula magna stockholm university the lecture was introduced by professor jorgen weibull chairman of the economics prize committee this abstract was borrowed from another version of this item

north s institutionalism and the prospect of combining theoretical approaches the distinction between new and old institutional economics may be unhelpful in depicting those theorists who defy clear categorisation one such writer is douglass north who is associated with the new institutionalism but who deviates from the neoclassical principles which supposedly form the foundations of this school the paper analyses his work to show how he combines both mainstream and alternative ideas in attempting to reconcile individual agency with social structure north suggests that institutions provide the constraints under which decisions are made but that individuals and organisations can alter those constraints while his work is an attempt to advance interdisciplinary research it fails to provide a fully integrated theoretical approach

the economics of governance the economics of governance is an effort to implement the study of good order and workable arrangements where good order includes both spontaneous order in the market which is a venerated tradition in economics adam smith 1776 friedrich hayek 1945 kenneth a arrow and gerard debreu 1954 and intentional order of a conscious deliberate purposeful kind chester irving barnard 1938 p 9 also i interpret workable arrangements to mean feasible modes of organization all of which are flawed in comparison with a hypothetical ideal avinash dixit 1996 pp 4 9 the object is to work out the efficiency logic for managing transactions by alternative modes of governance principally spot markets various long term contracts hybrids and hierarchies interest among social scientists economists included in the study and practice of good order and workable arrangements has been steadily growing in contrast with the orthodox lens of choice prices and output supply and demand the economics of governance is a lens of contract construction broadly in the spirit of james buchanan s 2001 p 29 observation that mutuality of advantage from voluntary exchange is the most fundamental of all understandings in economics the economics of governance as herein described is principally an exercise in bilateral private ordering by which i mean that the immediate parties to an exchange are actively involved in the provision of good order and workable arrangements to be sure the need for private ordering varies with the rules of the game as provided by the state distinctions between lawlessness where the state provides limited or unreliable protection for property and contract dixit 2004 and lawfulness where the state undertakes to protect property and enforce contracts in a principled way are pertinent the first of these applies mainly to primitive and transition economies the second is commonly associated with western democracies recourse to private ordering under conditions of lawlessness is altogether understandable given the absence of state support the walter a haas school of business university of california berkeley ca 94720 1900 the paper has benefited from workshop presentations at the university of california berkeley the university of valencia insead fountainebleau and the 2004 annual conference of the international society for new institutional economics an abbreviated version was also given as the horst claus recktenwald lecture at nuremburg on 4 november 2004 comments and suggestions from fred balderston ernesto dalbo avinash dixit robert gibbons witold henisz ian larkin steven tadelis and dean williamson are especially acknowledged 1 lon fuller s 1954 p 477 definition of eunomics as the science theory or study of good order and workable arrangements is very much in the spirit of what i refer to as governance 2 one of the immediate ramifications of insistently comparing feasible alternatives all of which are flawed is that the purported inefficiencies that are ascribed to failures to achieve first best optimality are not dispositive but invite the query as compared with what i return to this issue in section iv 3 excluding corporate governance the numbers of articles that used the word governance during the period 1998 2000 as compared with the period 1977 1979 in selected economics business management sociology organization and political science journals were 60 vs 1 76 vs 4 79 vs 18 and 60 vs 25 where the journals surveyed were the american economic review journal of political economy quarterly journal of economics rand journal of economics and journal of economic perspectives in economics strategic management journal management science academy of management journal and academy of management review in business management administrative science quarterly organization science american journal of sociology american sociological review and annual review of sociology in sociology organization and american political science review political science quarterly journal of politics and political research quarterly in political science combining these four categories articles using the word governance increased from 48 to 275 over this 20 year interval dixit 2004 pp 149 50 reports that the number of web pages that turn up under the search for governance is huge

optimal abolition of fcc spectrum allocation ronald coase based his 1959 call for spectrum markets on theoretical conjecture today abundant evidence supports his case targeted liberalization in cellular markets as contrasted with regulatory planning of the digital tv transition and other traditional policies suggest enormous efficiency gains are available from wider use of the price system with exclusive frequency rights assigned to owners markets widely reconfigure spectrum use coordinating complex spectrum sharing resulting social gains include increased consumer surplus from enhanced technological innovation and wireless service competition a social bonus arrives in the benefits associated with wider scope for free speech yet the administrative allocation system continues to distribute rents and garner political support liberal reforms in contrast produce large but broadly dispersed efficiency gains and are undersupplied this paper proposes an incremental extension of property rights in spectrum to move beyond the current rent seeking equilibrium eliminating the federal communications commission s centralized spectrum allocation process and with it an attractive nuisance generating anticonsumer outcomes

capitalism and socialism a review of kornai s dynamism rivalry and the surplus economy understanding the nature of capitalism has been a central theme of economics the collapse of the eastern bloc and the global financial crisis spurred the reemergence of the political economy as a new frontier and the revival of interest in the nature of capitalism janos kornai s book dynamism rivalry and the surplus economy two essays on the nature of capitalism fills an important intellectual gap in understanding the dynamic nature of capitalism by comparing it with its mirror image socialism to further develop the themes contained in the book serious challenges are posed theoretically and empirically as well as in subjects such as hybrid capitalism

john nash and the analysis of strategic behavior abstract this essay describes one economist s view of how four extraordinary papers by john nash two on non cooperative game theory proceedings of the national academy of sciences usa 36 1950b 48 49 annals of mathematics 54 1951 286 295 and two on the theory of bargaining econometrica 18 1950a 155 162 econometrica 21 1953 128 140 influenced the development of game theory as a tool for analyzing strategic behavior