learning from failure towards an evolutionary model of collaborative ventures this paper reports on a longitudinal case study of the interaction between two partners to a failed international joint venture we develop a model of the collaboration process in partnership and alliances based on earlier work by ring and van de ven 1994 and by doz 1996 we employ a series of events that occurred in the course of the relationship as the unit of analysis in order to trace the interactions between the partners and to explicate the impact that external shocks have on their perceptions of efficiency and equity the impact of these events as well as the responses they elicit on the quality of the relationship and vice versa are also considered we find that the partners assessments cause them to either engage in renegotiation of the terms of the contract or to modify their behavior unilaterally in an attempt to restore balance to the relationship the process feeds back until a new mutual understanding of equity is restored or else the relationship deteriorates gradually until a point when the venture is dissolved we conclude that positive feedback loops are critical in the evolutionary process that relationship quality is both an outcome and a mediating variable and that procedural issues are critical from the start in fostering a climate for positive reinforcement and the building of mutual trust and confidence in the relationship

competition and microfinance abstract competition between microfinance institutions mfis in developing countries has increased dramatically in the last decade we model the behavior of non profit lenders and show that their non standard client maximizing objectives cause them to cross subsidize within their pool of borrowers thus when competition eliminates rents on profitable borrowers it is likely to yield a new equilibrium in which poor borrowers are worse off as competition exacerbates asymmetric information problems over borrower indebtedness the most impatient borrowers begin to obtain multiple loans creating a negative externality that leads to less favorable equilibrium loan contracts for all borrowers

group lending repayment incentives and social collateral abstract in this paper we investigate the impact on repayment rates of lending to groups which are made jointly liable for repayment this type of scheme especially in the guise of the grameen bank in bangladesh has received increasing attention we set up and analyze the repayment game which group lending gives rise to our analysis suggests that such schemes have both positive and negative effects on repayment rates the positive effect is that successful group members may have an incentive to repay the loans of group members whose projects have yielded insufficient return to make repayment worthwhile the negative effect arises when the whole group defaults even when some members would have repaid under individual lending we also show how group lending may harness social collateral which serves to mitigate its negative effect

overcoming institutional voids via arbitration extending the literature on institutional voids we introduce theory from law that highlights the ability of firms to choose the laws and enforcement mechanisms that govern their international joint ventures ijvs specifically firms may overcome institutional voids by borrowing institutions via binding international commercial arbitration bica rather than relying on host market institutions leveraging an institution based view we develop a theoretical framework to articulate the conditions under which ijv partners may choose bica as opposed to domestic courts to overcome institutional voids in host markets

how strong is the case for a populist central banker a note conventional wisdom holds that a conservative central banker reduces equilibrium inflation with no cost in terms of real activity more recently this proposition has been turned around in models with inflation averse wage setters who are stackelberg leaders vis a vis the central bank in this case a populist central banker with no interest in inflation was shown to lead to the first best equilibrium this note demonstrates that the stackelberg assumption is crucial for this result and that the nash solution of the same model does not generally support the case for a populist central banker

the impact of microcredit programs on self employment profits do noncredit program aspects matter microcredit programs provide a two tiered approach to poverty alleviation credit for the purchase of capital inputs in order to promote self employment and noncredit services and incentives these noncredit aspects may be an important component of the success of microcredit programs however because they are costly to deliver and their contribution to the success of the programs is difficult to measure they may not be properly valued this paper uses primary data on household participants and nonparticipants in grameen bank and two similar microcredit programs to measure the total and noncredit effects of microcredit program participation on productivity the total effect is measured by estimating a profit equation and the noncredit effect by estimating the profit equation conditional on productive capital productive capital and program participation are treated as endogenous variables in the analysis i find large positive effects of participation and the noncredit aspects of participation on self em

information content of wages and monetary policy we examine whether it is sufficient for central banks to observe and forecast nominal variables only analyzing the interplay of wage setting unions and a central bank we show that although central banks may not gain more information by directly acquiring data about indicators of real shocks in the economy such activities are nevertheless beneficial for central banks and yield lower social losses moreover the extent of research activities by central banks should depend on the process of union formation

inflation and social consensus in the seventies it is widely believed that the two oil price shocks of the i 970s played a major role in the increase in inflation in industrial countries while this hypothesis is consistent with the timing of changes in inflation at the global level it seems to break down when applied to individual countries cross sectionally for example over the period i973 9 switzerland had an average inflation rate of 4 7 while in neighbouring italy inflation averaged i5 6 over the same period furthermore inflation in the pre opec period i97i 2 was actually higher in switzerland than in italy it seems that a supply shock explanation of inflation in the seventies also requires an explanation of why different countries responded so differently to a similar set of shocks at the world level the purpose of this paper is to offer such an explanation and to test the hypothesis with a cross sectional equation accounting for differences in average inflation rates over the period i973 9 in eighteen oecd countries this time period includes the year of the first opec shock i 973 and the following six years up to the time of the second opec shock the hypothesis to be tested is set in the framework of a model similar to that of brunner et al i 980 the key features of the brunner model are that the adjustment of real wage expectations is subject to lags and that labour supply is positively related to the difference between the perceived real wage and the expected or target real wage given these two assumptions a negative supply shock gives rise to a period of stagflation whose intensity will be greater the slower is the speed of adjustment of real wage expectations the model of this paper extends the brunner model in three ways first across countries the speed of adjustment of real wage expectations or targets is assumed to depend positively on the degree of social consensus as proxied negatively by an indicator of average long run strike activity second the model allows for the possibility of inflation inertia or systematically incorrect inflation expectations as well as a sluggish adjustment of real wage expectations third the model incorporates the hypothesis that money supply growth will vary across countries according to variations in inflationary pressures as perceived by governments the first section of the paper provides a discussion of the rationale for the key proposition regarding strikes and social consensus as well as a brief discussion of the role of wage bargaining institutions section ii develops a theoretical model which yields a reduced form cross sectional equation relating the average i 973 9

unemployment labor market reform and monetary union monetary union such as the economic and monetary union in europe emu may affect incentives for labor market reform and thus equilibrium unemployment through several mechanisms if an inflation bias exists there is usually a stronger incentive to reduce equilibrium unemployment through national reform outside rather than inside the emu absent such a bias emu membership could lead to more reform one reason is that reform may increase wage flexibility which can substitute for monetary policy in the emu another reason could be a precautionary motive for low equilibrium unemployment to reduce the utility cost of increased macroeconomic variability in the emu

the economics of worldwide stagflation the last fifteen years have witnessed dramatic changes in economics not only in the manner in which the economics profession views economics but also in the manner in which the general public views economics and economists by the late 1960 s there had emerged more or less a consensus macroeconomic framework that is an agreed upon structure to be used to study economic problems at the aggregate level robert solow stated as quoted in leijonhufvud 1968

monetary union and the assignment problem proposals for the creation of an independent central bank in a european monetary union do not always take into account the interactions between monetary and fiscal policy this analysis describes a system of two similar economies forming either a joint fiscal and monetary union or a simple monetary union policy authorities aim to achieve target values for inflation and the budget balance if the monetary and fiscal authorities pursue their targets independently of each other there is a risk that unstable interactions will be set up the results indicate a hazard of the separation of monetary and fiscal management

funding microfinance under asymmetric information abstract we consider a model where poverty minimizing donors fund microfinance lenders that are heterogeneous in cost under asymmetric information the donors face a choice whether to issue grants or to charge the lenders for funds while charging for funds leads to higher interest rates a higher rate can induce separation by squeezing the higher cost lenders whether separation is good for aggregate poverty reduction or not depends on the quantity of supply of funds when the supply is small grants are best but when the supply is large enough it is better that lenders pay for external funding

education ranking and competition for jobs i study workers incentives to invest in general human capital education in the presence of search induced unemployment workers queue for jobs and firms prefer to hire the most productive applicants because of rent sharing as a result an unemployed worker s ranking relative to other job seekers will influence his job finding rate this creates a rat race where workers invest in education partly in order to achieve a better ranking in equilibrium identical workers may have incentives to diversify in terms of education and the investments in education may exceed the socially optimal level

european monetary union or hard ems abstract this paper contributes to the debate engendered by the delors report on the issue of european monetary union it focuses on the options of a strengthened or hard ems with a commitment to a fixed exchange rate relative to the deutschmark or a european central bank with full monetary union emu under hard ems an anti inflationary reputation is acquired by all as a result of bundesbank credibility as regards emu it is possible that too rapid a more through the latter stages of the delors process will produce a central bank with little or no anti inflation credibility here we make the starkest assumption of no credibility under emu and compare it with hard ems for various supply and demand shocks using a two bloc model the latter exhibiting short run wage price stickiness but with long run natural rate properties a non ems regime with floating exchange rates is used to examine the incentive compatibility of hard ems and emu with a cooperative reputational regime to act as a benchmark

public private partnerships in micro finance should ngo involvement be restricted this paper examines public private partnerships in micro finance whereby ngos can help in channelizing credit to the poor both in borrower selection as well as in project implementation we argue that a distortion may arise out of the fact that the private partner i e the ngo is a motivated agent we find that whenever the project is neither too productive nor too unproductive reducing such distortion requires unbundling borrower selection and project implementation with the ngo being involved in borrower selection only further we compare and contrast two alternative credit delivery mechanisms the linkage mechanism which is the focus of this paper with the grameen one

capital market imperfections and the theory of optimum currency areas this paper studies how within and cross country capital market imperfections affect the welfare effects of forming a currency union the analysis considers a bank only world where intermediaries compete in cournot fashion and monitoring and state verification are costly the first part determines the credit market equilibrium and the optimal number of banks prior to joining the union the second part discusses the benefits from joining a currency union a competition effect is identified and related to the added monitoring costs that banks may incur when operating outside their home country through an argument akin to the brander krugman reciprocal dumping model of bilateral trade however in our framework whether joining a union raises welfare of the home country is ambiguous it depends on the relative strength of investment creation and intermediation diversion effects

mixed signals central bank independence coordinated wage bargaining and european monetary union plans for the european monetary union emu are based on the conventional postulate that increasing the independence of the central bank can reduce inflation without any real economic effects however the theoretical and empirical bases for this claim rest on models of the economy that make unrealistic information assumptions and omit institutional variables other than the central bank when signaling problems between the central bank and other actors in the political economy are considered we find that the character of wage bargaining conditions the impact of central bank independence by rendering the signals between the bank and the bargainers more or less effective greater central bank independence can reduce inflation without major employment effects where bargaining is coordinated but it can bring higher levels of unemployment where bargaining is less coordinated thus currency unions like the emu may require higher levels of unemployment to control inflation than their proponents envisage they will have costs as well as benefits and these will be unevenly distributed among and within the member nations depending on the changes they induce in the status of the bank and of wage coordination

revisiting the case for a populist central banker it is known that discretionary policy may give rise to an inflationary bias if wages are negotiated in nominal terms in a recent issue of this review guzzo and velasco argued that this bias can be eliminated and welfare maximized by the appointment of a central banker who does not care at all about inflation a populist central banker a conceptual flaw of the latter result is identified here it is shown that when wages are negotiated in nominal terms the result is true only in the special case of a single all encompassing union in the more general case of multiple unions however inflation increases linearly with their number and a populist central bank may turn out to decrease welfare

economic policy precommitment and social welfare abstract the claim that economic policy precommitment is advantageous is investigated in a context in which the welfare basis of the government s objectives is explicit three results are demonstrated each one defining a class of welfare functions and a class of models such that precommitment would not raise welfare in models of that class it is concluded that if a purely welfare economic argument for precommitment is to be found attention will have to be paid either to conflicts asymmetries and differences within the private sector or to multiple equilibria

monetary policy cooperation may not be counterproductive this paper qualifies rogoff s famous 1985 result that international monetary policy cooperation is counterproductive in a model similar to his it is shown that if wage setters are non atomistic and inflation averse as policymakers are cooperation leads to higher employment and possibly lower inflation

competitive depreciation and the role of distorting taxes in an interdependent economy abstract this paper investigates the manners in which international cooperation in monetary policies affects the rate of inflation in a two country sticky price model within reasonable parameter values international monetary coordination increases the steady state inflation for given tax policies when the tax regime is endogenously chosen however self oriented monetary policies can engage in competitive depreciation and induce a higher average inflation than the first best inflation rate

how will emu affect inflation and unemployment in europe this paper explores how european monetary union will change the wage setting behavior of national labor unions we derive the impact of national inflation aversion and labor militancy on the performance of national labor markets under different monetary arrangements a common central bank raises inflation and unemployment if it acts as conservatively as national central banks however unemployment falls in countries that previously tied their monetary policy to the bundesbank we also examine the composition of emu and the influence of national labor market legislation jel classification e24 f02 f33

corporatism monetary policy and macroeconomic performance a simple game theoretic analysis the effects of corporatism on inflation and output are analyzed in a model of a game between a government and a union this model allows consideration of aspects of corporatism other than centralization of wage bargaining and permits monetary policy to be endogenized corporatist attitudes on the part of the union have beneficial effects on economic performance provided the game is played noncooperatively with simultaneous moves through the nature of their impact depends critically on the government s preferences if the government leads certain forms of corporatism can be inflationary cooperative play reduces inflation but has an ambiguous effect on output copyright 1995 by the editors of the scandinavian journal of economics

monetary institutions monopolistic competition unionized labor markets and economic performance recent literature on the interactions between labor unions and monetary institutions features either a supply or a demand channel of monetary policy but not both this leads to two opposing views about the effects of central bank conservativeness we evaluate the relative merits of those conflicting views by developing a unified framework we find that i the effect of conservativeness on employment depends on unions relative aversion to unemployment versus inflation and ii for plausible values of this relative aversion and more than one union social welfare is maximized under a highly conservative central bank we also evaluate the effects of centralization of wage bargaining and product market competition on unemployment and inflation

social corporatism a superior economic system social corporatism and economic performance introduction and conclusions jukka pekkarinen et al lessons from corporatist theorizations goran therborn corporatism and wage bargaining matti pohjola corporatism and labour market performance bob rowthorn corporatism patterns of employment and access to consumption andrew glyn saving and economic growth from a nordic perspective katri kosonen social corporation and long term economic performance michael lanesmann and juhana vartiainen industrial policies and social corporatism michael landesmann exchange rate policy and employment in small open economies sixten korkman corporatism and economic performance in sweden norway and finland jukka pekkarinen corporatism success or failure austrian experiences alois guger the swiss model corporatism or liberal capitalism wolfgang blaas the unexpected emergence of australian corporatism robin archer

monetary conservatism and fiscal coordination in a monetary union abstract in monetary unions time inconsistency provides the rationale for monetary conservativeness and against fiscal coordination however this depends on the assumption of exogenous labor markets once wage setting behavior is explicitly modeled fiscal coordination and less conservative central bankers improve the performance

uncertainty opportunism and governance the effects of volatility and ambiguity on formal and relational contracting comparing the effectiveness of contractual and relational governance in constraining opportunism under conditions of volatility and ambiguity we hypothesize that relational contracts will be robus

large labour unions and terms of trade externality this paper shows that large labour unions reduce the incentive for uncoordinated monetary policies to improve the terms of trade this finding implies that concentrated labour markets significantly affect the optimal policy prescription in an open economy

multiple wage bargaining systems in the single european currency area little attention in the emu literature has been paid to the interaction between central bank monetary rules and systems of collective wage bargaining analytically and empirically coordinated wage bargaining systems respond with real wage restraint to non accommodating monetary policy since wage determination is dominated by collective bargaining in all the emu member states and wage coordination within the member states has grown since 1980 this is a topic of potential importance in particular the replacement of the bundesbank directly targeting german inflation by an ecb targeting european inflation has removed a major institutional support of wage restraint in germany the consequences of this for emu are worked out under two scenarios that inflation expectations will be generated by ecb monetary policy and that they will reflect german inflation outcomes possible institutional developments are discussed including government union bargains the bundesbank has also played a major role in maintaining fiscal rectitude by targeting excess fiscal deficits in germany again its replacement by the ecb targeting if at all european rather than german fiscal policy loosens fiscal constraints for underlying structural reasons therefore it is possible that germany and other emu countries will move to a period of fiscal activism with wage restraint and low inflation purchased through social contract negotiations

stabilisation policy targets and unemployment in imperfectly competitive economies this paper argues that the rate of equilibrium unemployment depends on the objectives of the central bank in a model where the central bank uses monetary policy to stabilise the economy we show that unemployment and inflation will be lower with an inflation target than with targets for output money or nominal gdp the intuition for this is that the elasticities of demand in both the product and the labour markets are greater when there is an inflation target we show that this leads to a lower mark up of price over marginal cost and makes wages more sensitive to unemployment

labour markets and monetary union a strategic analysis this paper shows that the effects of a monetary union depend on several labour market features in particular the switch from national monetary policies to a common monetary policy usually affects both inflation and unemployment even when all structural parameters of the economy and of unions and policymakers preferences remain the same the benchmark case of a monetary union between identical countries suggests that the switch to a monetary union is likely to make labour unions more aggressive increasing unemployment qualifications to this result are provided under alternative institutional scenarios like cross country asymmetries pre union erm membership and wage leadership

union cooperation and nontraded goods in general equilibrium a general equilibrium model of a small open economy with traded and nontraded goods and sector specific trade unions is set up wage formation is either noncooperative or cooperative egalitarian union wage policy is shown to be the equilibrium under cooperation important asymmetries are encountered and an alternative model of cooperative behavior called bargaining cooperation is proposed bargaining cooperation is shown to have qualitatively different implications than simple cooperation the welfare and employment effects of bargaining cooperation compared to simple cooperation are ambiguous

the macroeconomics of social pacts in this paper we analyze macroeconomic interactions between trade unions the central bank and the fiscal policymaker we explicitly model unions concern for public expenditure paving the way for an analysis of the potential gains from cooperation between the fiscal policymaker and the unions i e the so called corporatist or social pacts that have characterized economic policies in a number of european countries in the last few decades we also highlight the profoundly different incentives generated by institutional arrangements such as the maastricht criteria and the stability and growth pact the former has unambiguously induced more efficient outcomes the latter is likely to backfire

are there asymmetries in the response of bank interest rates to monetary shocks this article examines the velocity and asymmetry of the response of bank interest rates to monetary policy shocks using an asymmetric vector error correction model it analyses the pass through of changes in money market rates to retail bank interest rates in italy in the period 1985 2002 the main results of the article are 1 the speed of adjustment of bank interest rates to monetary policy changes increased significantly after the introduction of the 1993 consolidated law on banking 2 interest rate adjustment in response to positive and negative shocks is asymmetric in the short run but not in the long run 3 banks adjust their loan deposit rate faster during periods of monetary tightening easing 4 this asymmetry almost vanished since the 1990s

is there a european wage leader wage spillovers in the european monetary union the introduction of the euro had been accompanied by expectations of increased inflationary pressures due to a de coordination shock to national wage bargaining systems though if anything systematically happened after the introduction of the euro wage restraint increased this paper argues that an interdependency of wage setting under german dominance has emerged in europe which fuelled the transmission of mutual wage restraint we will investigate wage and nominal unit labour cost spillovers in the european monetary union emu exploring a panel of 13 manufacturing sectors from 1992 to 2005 and quantify the effects of different countries strong interdependencies across emu member countries with regard to nominal wage growth are found a leading role accrues to germany which is responsible for a cumulative reduction of trans european wage growth rates of 0 62 by conservative estimates remarkably the influence of germany is strongest on southern europe with regard to wage growth interdependencies however the situation is inverted with regard to the development of nominal unit labour costs where the german influence on southern europe is substantially weaker than on neighbouring economies copyright the author 2012 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

micro finance competition motivated micro lenders double dipping and default abstract we develop a tractable model of competition among socially motivated mfis so that the objective functions of the mfis put some weight on their own clients utility we find that the equilibrium involves double dipping i e borrowers taking multiple loans from different mfis whenever the mfis are relatively profit oriented further double dipping necessarily leads to default and inefficiency and moreover borrowers who face relatively higher transactions costs optimally decide to double dip interestingly an increase in mfi competition can increase the extent of double dipping and default further the interest rates may go either way with the interest rate likely to increase with more competition if the mfis are very socially motivated

the profit orientation of microfinance institutions and effective interest rates summary with the rise in the number of for profit microfinance institutions mfis commentators are asking whether the sector benefits by mfis having stronger profit orientations we address this question by analyzing the relationship between interest rates and adopting the for profit legal form appointing private sector representation and traditional banking experience to advisory boards and participating in more extensive for profit networks the results consistently indicate that a stronger for profit orientation corresponds with higher interest rates for mfi clients however this does not contribute to greater profitability and therefore sustainability because the stronger profit orientation is also associated with higher mfi costs

stagflationary bias and the interaction of monetary policy and wages in a unionized economy economics research centre school of economic and social studies university of east anglia norwich nr4 7tj u k the paper investigates the claim of gylfason and lindbeck public choice 1994 that a stagflationary bias arises from the interaction between monetary policymaking and wagesetting if among other things the government and unions share a concern for inflation it uses a game theoretic model of this interaction in which the government plays an economy wide union though simple this nests several other models as special cases in that corresponding to gylfason and lindbeck s model the factors which they identify are shown to be sufficient for stagflationary bias in a specified sense however for the union to care about inflation is not a necessary condition the main result of the paper concerns the more general model it establishes a set of necessary and sufficient conditions for stagflationary bias as previously defined these conditions do not include a shared concern for inflation the paper comments briefly on the significance of this result for stagflation and economic modelling

policy cooperation among benevolent governments may be undesirable this paper presents a simple counterexample to the belief that policy cooperation among benevolent governments is desirable it also explains circumstances under which such counterexamples are possible and relates them to the literature on time inconsistency since the work of hamada 1976 investigating the effects of increasing policy cooperation among countries has been a major topic in international economics a standard conclusion of this work is that increasing policy cooperation among countries is desirable in a seminal paper rogoff 1985 has challenged this view using a simple monetary model rogoff shows that cooperation among policy makers can lead to a lower level of welfare than noncooperation does rogoff s result has caused much consternation among those who advocate policy cooperation and his work has been criticized along several dimensions for example some authors including canzoneri and henderson 1988 have noted that a key assumption in rogoff s model is that the objective function of each country s policy maker does not coincide with the objective function of its residents indeed if in his model policy makers maximize the welfare of their country s residents the counterexample is overturned and cooperation strictly dominates noncooperation this feature leads some to interpret rogoff s result as simply saying that if policy makers form a coalition against the private sector they may be worse off than if they do not others such as neck and dockner 1988 have claimed that rogoff s result depends on private agents acting strategically under this interpretation rogoff s result is relevant to say economies with a large trade union but not to economies with a large number of competitive private agents in a somewhat different vein persson 1988 and especially devereux 1986a b have questioned the significance of welfare comparisons across different institutional regimes in a model without a solid foundation for the behavioural relationships this paper presents a simple model in which governments are benevolent but cooperation is still undesirable the model is a two country version of fischer s 1980 optimal tax model in it private agents are competitive in that each agent takes both prices and government policies as uninfluenced by his actions and each government maximizes the welfare of its country s residents in the paper the two different regimes cooperative and noncooperative

bargaining structure and economic performance in the open economy abstract it seems nowadays accepted that both centralized wage bargaining and negotiation at the firm level perform better than sectoral wage bargaining this is because sectoral unions have enough market power to raise wages but do not internalize all the effects of their actions however the ranking may be different in an open economy facing a less than infinitely elastic foreign demand because raising wages improves the country s terms of trade as in the optimal tariff argument as a result welfare is higher in the centralized setting while sectoral bargaining is better than full decentralization when imported goods represent a large share of total consumption

monetary union and pegging in the presence of labor unions as the european economic and monetary union grows power over monetary policy is shifting away from the original founders previously researchers have analyzed the impact of replacing an exchange rate peg with a monetary union in the presence of labor unions in these studies the authors have consistently concluded that unemployment in the country that originally controlled monetary policy will rise although they cite very different reasons in this paper we present a more general model that reproduces the previous results in special cases and clarifies the relations across the results in addition the more general model shows that the results are reversed in certain conditions

financial performance and outreach a global analysis of leading microbanks microfinance contracts have proven able to secure high rates of loan repayment in the face of limited liability and information asymmetries but high repayment rates have not translated easily into profits for most microbanks profitability though is at the heart of the promise that microfinance can deliver poverty reduction while not relying on ongoing subsidy the authors examine why this promise remains unmet for most institutions using a data set with unusually high quality financial information on 124 institutions in 49 countries they explore the patterns of profitability loan repayment and cost reduction the authors find that institutional design and orientation matter substantially lenders that do not use group based methods to overcome incentive problems experience weaker portfolio quality and lower profit rates when interest rates are raised substantially for these individual based lenders one key to achieving profitability is investing more heavily in staff costs a finding consistent with the economics of information but contrary to the conventional wisdom that profitability is largely a function of minimizing cost

group lending with sequential financing contingent renewal and social capital this paper focuses on the dynamic aspects of group lending in particular sequential financing and contingent renewal we examine the efficacy of these two schemes in harnessing social capital we find that for the appropriate parameter configurations there is homogenous group formation so that the lender can ascertain the identity of a group without lending to all its members thus screening out bad borrowers partially moreover under certain parameter configurations negative assortative matching occurs as a robust phenomenon

relative prices in monetary union and floating we analyse a small open economy with a tradable and a sheltered sector if the unions that operate in each sector coordinate their wage demands sectorwise the choice of monetary regime floating cum inflation target vs emu may affect the relative wages and prices of the economy we show that emu results in lower prices for tradable goods and lower real wages in the traded sector while opposite results hold for sheltered sector prices and wages thus if large unions behave strategically the choice of monetary regime has far reaching structural implications

market opening regulation and growth in europe deregulation a political economy analysis lack of urgency explains why continental europe trails in the deregulation process yet there are lessons to be learnt from deregulation elsewhere this paper reviews the situation and focuses on the political preconditions for successful deregulation it finds a clear negative relationship between regulation and economic performance it characterizes european countries by the degree of regulation of labour and product markets and finds that the latter seems to be more important for economic performance finally it notes the importance of a proper management of the deregulation effort which may include some re regulation deregulation is more likely to succeed the more transparent the economic benefits and the more clearly stated the objectives and the time schedule kees koedijk and jeroen kremers

village banking and maternal and child health evidence from ecuador and honduras abstract many microcredit institutions bundle credit with health education or other programs this paper reviews arguments on such tie ins and concludes that net benefits are possible but requires empirical testing quasi experimental data from project hope s health banks and credit only village banks are then examined the paper presents evidence that health practices do not improve automatically with greater wealth in honduras results show that health bank participation is robustly associated with reduced subsequent conditional child diarrhea probability but in no specification does credit only bank participation have this effect in ecuador results suggest a larger effect of credit only banks in both countries health bank participation significantly raises subsequent healthcare over credit only participation and at least reduces the tendency to switch from breast feeding to bottle feeding as income rises effects on expenditures are ambiguous there is no clear link between tie ins and bank performance

centralised wage setting inflation contracts and the optimal choice of central banker the paper examines the appropriate design of central banking institutions in an economy in which the nominal wage is set by an inflation averse monopoly union as a positive mark up over its market clearing value the analysis considers both the optimal choice of central banker and the potential role for a linear inflation contract the optimal set of arrangements is a central banker who attaches less significance to inflation than does society combined with an inflation contract where the value of the contract parameter is related to the union s degree of inflationaversion following the important contribution of rogoff 1985 the appointment of a conservative central banker has been widely accepted as a potential albeit partial solution to the time inconsistency problem associated with discretionary policy making in placing a greater weight on inflation than does the government and society as a whole in the setting of monetary policy the central bank s temptation to create inflation surprises is reduced this then leads to a lower inflation rate in equilibrium than would otherwise prevail whilst in rogoff s stochastic framework this reduction in the inflationary bias has to be weighed against an increase in output variability the appropriate choice of central banker ensures a net improvement in welfare an important feature of rogoff s model is the assumption of an atomistic labour market in which nominal wages embodied in single period contracts reflect interaction between agents who hold no market power such a representation of the labour market also characterises most subsequent extensions of rogoff s analysis e g lohmann 1992 and waller 1992 however a number of recent papers in considering the time inconsistency issue have employed the assumption of unionised wage setting assuming either an allencompassing monopoly union or alternatively a number of individual unions each of which has a non negligible impact on macroeconomic variables examples include agell and ysander 1993 bleaney 1996 cubitt 1992 1995 horn and persson 1988 hutchison and walsh 1998 and skott 1997 these contributions have examined the implications of the assumed labour market imperfection from a variety of perspectives but only those of bleaney and skott directly consider its consequences for the appropriate specification of central bank objectives in what follows we explore the significance of unionised wage setting for

the advantage of tying one s hands ems discipline and central bank credibility abstract it is often argued that the ems is an effective disciplinary device for inflation prone countries in europe since it forces the respective policy makers to pursue more restrictive monetary policies than they would otherwise it is not clear however why these countries should submit themselves to such discipline this paper argues that to answer this question appropriately one must consider that ems membership brings potentially large credibility gains policy makers in inflation prone countries the reason is that not only it attaches an extra penalty to inflation in terms of real appreciation but makes the public aware that the policy maker is faced with such penalty and thus helps to overcome the inefficiency stemming from the public s mistrust of the authorities

monopolistic competition and the effects of aggregate demand how important is monopolistic competition to an understanding of the effects of aggregate demand on output we ask the question at three levels can monopolistic competition by itself explain why aggregate demand movements affect output can it together with other imperfections generate effects of aggregate demand in a way that perfect competition cannot if so can it give an accurate account of the response of the economy to aggregate demand movements the answers are no yes and yes

let s work it out or we ll see you in court litigation and private dispute resolution in vertical exchange relationships we examine how partners in vertical exchange relationships actually resolve disputes that are sufficiently serious to get lawyers involved reaching beyond the usual domain of organizational and management research we leverage findings from law and economics to offer a novel organizational perspective on litigation and private dispute resolution and we develop hypotheses about the likelihood of litigation in different exchange settings our empirical analysis generates three sets of new findings first counter to the received wisdom we see that the involvement of lawyers does not necessarily signal the bitter end of an exchange relationship because firms frequently manage to avoid litigation and resolve their disputes privately and they do so in a manner that accords with our theoretical predictions second we see that familiarity with exchange partners does not automatically lead to increased willingness to work things out rather our empirical results suggest that the impact of exchange duration on parties willingness to resolve disputes privately is contingent on the development of norms of cooperation in the event that such norms do not develop the probability of a litigated outcome actually increases over time finally we see that firms willingness to work things out privately is also influenced positively by the shadow of the future these findings are suggestive of a discriminating alignment between exchange characteristics and the choice of dispute resolution procedure and they thus inject important new evidence into ongoing discussions about the legal underpinnings of different governance forms

identifying interdependent behaviour in an empirical model of labour supply in this paper we test a particular form of interdependent behavior namely the hypothesis that individuals choices of hours of work are influenced by the average hours of work in a social reference group there are problems to empirically disentangle the effects of interdependent behavior and preference variation across groups we show that panel data or data from several points in time are needed in the empirical analysis we combine cross section data from 1973 1980 and 1990 our results support the hypothesis of interdependent behavior the implication is that conventional tax policy predictions in which preference interdependencies are neglected will tend to underestimate the effect of a tax reform on hours of work our point estimates suggest that conventional calculations would capture only about a third of the actual change in hours of work

a meta analysis of the exchange hazards interfirm governance relationship an informal institutions perspective the existing literature is ambiguous on how exchange hazards influence interfirm governance drawing on institutional theory this study revisits this relationship by examining the moderating effects of national culture by meta analyzing 167 articles involving 38 183 interfirm relationships in 35 countries we found support for the moderating effects of three facets of national culture collectivism power distance and uncertainty avoidance we discuss the implications of the findings for theory and practice

the case for a populist central banker abstract we present a general equilibrium optimizing model in which we study the joint effects of centralization of wage setting and central bank conservatism on economic performance several striking conclusions emerge in relatively centralized labor markets employment and output are decreasing and inflation is intially increasing and then decreasing in the degree of central bank conservatism a radical populist central banker who cares not at all about inflation alternatively who is not conservative maximizes social welfare economic performance is not u shaped in the degree of centralization of the labor market in contrast to conventional wisdom

the nonneutrality of monetary policy with large price or wage setters monetary rules matter for the equilibrium rate of employment when the number of price wage setters is small even when assuming rational expectations complete information central bank precommitment and absence of nominal rigidities if the central bank is nonaccommodating sufficiently large unions bargaining independently have an incentive to moderate sectoral money wages and thereby expected real wages the result is an increase in the real money supply and hence higher demand and employment this does not hold with accommodating monetary policy since unions wage decisions cannot then affect the real money supply a similar argument holds for large monopolistically competitive price setters

competition and incentives with motivated agents a unifying theme in the literature on organizations such as public bureaucracies and private nonprofits is the importance of mission as opposed to profit as an organizational goal such mission oriented organizations are frequently staffed by motivated agents who subscribe to the mission this paper studies incentives in such contexts and emphasizes the role of matching the mission preferences of principals and agents in increasing organizational efficiency matching economizes on the need for high powered incentives it can also however entrench bureaucratic conservatism and resistance to innovations the framework developed in this paper is applied to school competition incentives in the public sector and in private nonprofits and the interdependence of incentives and productivity between the private for profit sector and the mission oriented sector through occupational choice jel d23 d73 h41 l31 the late twentieth century witnessed a historic high in the march of market capitalism with unbridled optimism in the role of the profit motive in promoting welfare in the production of private goods moreover this generated a broad consensus on the optimal organization of private good production through privately owned competitive firms when it comes to the provision of collective goods no such consensus has emerged debates about the relative merits of public and private provision still dominate this paper suggests a contracting approach to the provision of collective goods it focuses on two key issues how to structure incentives and the role of competition between providers at its heart is the idea that organizations that provide collective goods cohere around a mission 2 thus production of collective goods can be viewed as mission oriented

european inflation dynamics abstract we provide evidence on the fit of the new phillips curve npc for the euro area over the period 1970 1998 and use it as a tool to compare the characteristics of european inflation dynamics with those observed in the u s we also analyze the factors underlying inflation inertia by examining the cyclical behavior of marginal costs as well as that of its two main components namely labor productivity and real wages some of the findings can be summarized as follows a the npc fits euro area data very well possibly better than u s data b the degree of price stickiness implied by the estimates is substantial but in line with survey evidence and u s estimates c inflation dynamics in the euro area appear to have a stronger forward looking component i e less inertia than in the u s d labor market frictions as manifested in the behavior of the wage markup appear to have played a key role in shaping the behavior of marginal costs and consequently inflation in europe

strategic monetary policy with non atomistic wage setters monetary policy analyses usually assume an atomistic private sector thereby ignoring potential interactions between policy and wage setting decisions yet non atomistic wage setters are a key feature of several industrialized economies we study the economic consequence of non atomistic agents and show that this qualifies previous results on the effects and desirability of a conservative central banker in particular the central bank aversion to inflation may have a permanent effect on structural employment while no such effect emerges with atomistic agents

learning to contract evidence from the personal computer industry organizational forms involving more detailed contracts than are found in traditional spot market exchanges appear to be increasingly prevalent there has been relatively little analysis however of the extent to which firms learn how to use contracts to manage their interfirm relationships over time in this paper we conduct a detailed case study of a time series of 11 contracts concluded during 1989 1997 between the same two partners both of whom participate in the personal computer industry to explore whether and how firms learn to contract we find many changes to the structure of the contracts that cannot be fully explained by changes in the assets at risk in the relationship and evidence that these changes are largely the result of processes in which the firms were learning how to work together including learning how to contract with each other the nature of this learning appears to have been quite incremental and local that is not very far sighted we suggest how and when contracts might serve as repositories for knowledge about how to govern collaborations and suggest some boundary conditions for this phenomenon our findings also provide implications for the debate about whether contracts have a positive or negative effect on interorganizational trust we conclude with suggestions for future research

pattern bargaining and wage leadership in a small open economy pattern bargaining where the tradables manufacturing sector acts as wage leader is a common form of wage bargaining in europe our results question the conventional wisdom that such a bargaining set up produces wage restraint we find that all forms of pattern bargaining give the same macroeconomic outcomes as uncoordinated bargaining under inflation targeting and a flexible exchange rate under monetary union a fixed exchange rate wage leadership for the non tradables sector is conducive to wage restraint and high employment whereas wage leadership for the tradables sector is not loss aversion and comparison thinking in wage setting where unions evaluate the utility of the wages of their members relative to a wage norm may lead the follower to set the same wage as the leader such equilibria can arise when the leader sector is the smaller sector and promote high employment

non grant microfinance incentives and efficiency abstracti show that charging interest on funds provided by donors or investors to microfinance institutions mfis can increase efficiency the total number of loans and borrower welfare compared to grant or concessionary funding in a setting in which mfis supply costly non contractible effort putting a price or raising the price of loanable funds strengthens the mfis incentives to put effort in credit administration or monitoring to extend more loans and or reduce overhead costs this theoretical result is robust to several variations of the benchmark model allowing for an endogenous lending rate motivated mfis and endogenous overhead costs

who i am and how i contract the effect of contractors roles on the evolution of contract structure in university industry research agreements in this exploratory study of university industry sponsored research agreements we investigate how organizational roles direct the relational learning of contracting personnel which subsequently influences contract evolution integrating theory with comments from field interviews we posit that as scientists gain contracting experience with an exchange partner their focus of attention on knowledge creation supports the establishment of a relationship based on technical competence behavioral experience and operational routines that cause the enforcement terms of subsequent contracts to become less detailed we also submit that contract administrators because of their focus on knowledge protection mitigating opportunism and enforcement primarily accumulate joint governance experience and establish administrative routines that cause the enforcement terms of subsequent contracts to become more detailed rich content analysis of monitoring and intellectual property terms of sponsored research agreements supports our theoretically grounded hypotheses

monetary regimes and the co ordination of wage setting abstract a recent literature argues that a strict monetary regime may reduce equilibrium unemployment by disciplining wage setters as wage setters abstain from raising wages to avoid a monetary contraction however in this literature the wage setters are assumed not to co ordinate their wage setting the present paper argues that precisely because a strict monetary regime may discipline the unco ordinated wage setting thus lowering unemployment in the unco ordinated outcome it also reduces wage setters incentives to co ordinate it is shown that an accommodating monetary regime may reduce equilibrium unemployment via the strengthening of the wage setters incentives to co ordinate

wage setting under different monetary regimes in an economy with large wage setters like industry unions the monetary regime affects the trade off between consumer real wages and employment and profits faced by the wage setters this paper shows that an exchange rate target including participation in a monetary union is likely to involve lower wages in the traded sector and higher wages in the non traded sector than does a price target an exchange rate target also involves higher prices on non traded goods relative to on traded goods overall welfare is likely to be higher under a price target

the interaction of monetary policy and wages this paper focuses on the interaction of monetary policy and wage formation in economies with strong labor unions government and unions are viewed as endogenous utility maximizers and the macroeconomic consequences of their strategic interaction are explored with the aid of some elements of simple game theory specifically it is shown a how labor unions adjust wages to prices so as to maximize their utility following changes in monetary policy b how the effectiveness of monetary policy is circumscribed without necessarily being nullified by the utility maximizing reactions of unions and c how the interplay of government and unions can create a persistent tendency towards inflation and unemployment simultaneously

which microfinance institutions are becoming more cost effective with time evidence from a mixture model italian speakers tend to stress the second component of german morphologically complex words such as compounds and prefix verbs even if the first component is lexically stressed to improve their prosodic phrasing an automatic pronunciation teaching method was developed based on auditory feedback of prosodically corrected utterances in the learners own voices basically the method copies contours of f0 local speech rate and intensity from reference utterances of a german native speaker to the learners speech signals it also adds emphasis to the stress position in order to help the learners better recognise the correct pronunciation and identify their errors a perception test with german native speakers revealed that manipulated utterances significantly better reflect lexical stress than the corresponding original utterances thus two groups of italian learners of german were provided with different feedback during a training session one group with manipulated utterances in their individual voices and the other with correctly pronounced original utterances in the teacher s voice afterwards both groups produced the same sentences again and german native speakers judged the resulting utterances resynthesised stimuli especially with emphasised stress were found to be a more effective feedback than natural stimuli to learn the correct stress position since resynthesis was obtained without previous segmentation of the learners speech signals this technology could be effectively included in computer assisted language learning software

goodwill bazaar ngo competition and giving to development this paper builds a model of competition through fundraising between horizontally differentiated ngos ngos allocate their time resource between working on the project and fundraising which attracts private donations if the market size is fixed the fundraising levels increase with the number of ngos and the free entry equilibrium number of ngos can be larger or smaller than the socially optimal number depending on the efficiency of the fundraising technology if the market size is endogenous and ngos cooperate in attracting new donors fundraising levels decrease with the number of ngos and the free entry equilibrium number of ngos is smaller than the one that maximizes the welfare of donors and beneficiaries if ngos can divert funds for private use multiple equilibria with high diversion and no diversion of funds appear

is monetary union necessarily counterproductive abstract this paper analyses the case of a monetary union between identical countries characterised by oligopolistic competition in their labour market it suggests that the switch to a common currency may improve their macroeconomic performances depending on labour market features

the rise and fall of centralized wage bargaining during the three decades spanning the early 1950s to the early 1980s the wage setting process in most northern european countries was dominated by centralized bargaining i e peak level labor and employer associations set wages nationwide in the early 1980s centralized wage bargaining began to collapse in this paper we assess a novel explanation for both the initial establishment of a centralized wage setting process and its subsequent collapse according to our theory centralized wage bargaining was set up as a response to the spillovers created by the unemployment benefit program its collapse was the result of the increase in the productivity gap across workers brought about by equipment specific technological progress and equipment skill complementarity

screening by the company you keep joint liability lending and the peer selection effect we look at an economic environment where borrowers have some information about the nature of each other s projects that lenders do not we show that joint liability lending contracts similar to those used by credit cooperatives and group lending schemes will induce endogenous peer selection in the formation of groups in a way that the instrument of joint liability can be used as a screening device to exploit this local information this can improve welfare and repayment rates if standard screening instruments such as collateral are unavailable

group lending sequential financing lender monitoring and joint liability abstract we develop a simple model of group lending based on peer monitoring and moral hazard we find that in the absence of sequential financing or lender monitoring group lending schemes may involve under monitoring with the borrowers investing in undesirable projects moreover under certain parameter configurations group lending schemes involving either sequential financing or a combination of lender monitoring and joint liability are feasible in fact group lending schemes with sequential financing may succeed even in the absence of joint liability though the repayment rate will be lower in the absence of joint liability however group lending with lender monitoring is unlikely to be feasible

why hold ups occur the self enforcing range of contractual relationships one of my most enjoyable intellectual experiences was working with armen alchian on the klein crawford and alchian 1978 hold up paper in this paper i extend the basic framework presented in that paper pointing out what i now consider to be its shortcomings and providing insights into the nature of hold ups and the form of contracts chosen by transactors to avoid hold ups the major analytical extension entails combining hold up analysis with my work on private enforcement because private enforcement capital is limited and written contract terms are necessarily imperfect transactors must optimally combine court enforced written terms together with privately enforced unwritten terms to define what i call the self enforcing range of their contractual relationship hold ups occur when unanticipated events place the contractual relationship outside the self enforcing range this probabilistic framework where transactors enter contractual relationships knowing that a hold up may take place but believing that the expected gains from trade outweigh the expected rent dissipating costs associated with the hold up risk is shown to have important implications for understanding the structure of contracts adopted by transactors in the marketplace i why do hold ups occur i begin with a simple example that illustrates the basic economic forces involved in a hold up assume that a builder constructs a house on a piece of land the builder does not own but rather only leases short term after the initial land lease expires the landowner could hold up the builder by raising the land rent to reflect the costs of moving the house to another lot this example illustrates all the hold up factors emphasized in klein crawford and alchian a the builder has made an investment that is highly specific to a particular piece of land and b the landowner has taken advantage of the incompleteness of the contract that governs the relationship in particular the fact that the lease does not cover future years to c expropriate the quasi rents on the builder s specific investment the obvious question is why anything like this would ever occur that is why would someone be so naive as to build a house on land for which they had only a short term lease our primary goal in klein crawford and alchian was not to explain the existence of hold ups but rather the institutions adopted by transactors to avoid hold ups for example we would expect that builders anticipating a potential hold up problem would decide to purchase the land or at least to sign a long term ground lease before starting construction however we do present some examples in the paper of hold ups that actually occurred the implicit reason we give for the occurrence of these hold ups is transactor ignorance apparently transactors are not always smart enough to choose the contractual arrangement that would eliminate the hold up problem oliver williamson provides a similar but much more explicit answer to the question of why hold ups occur when defining opportunism he states by opportunism i mean self interest seeking with guile this includes but is scarcely limited to more blatant forms such as lying stealing and cheating opportunism more often involves subtle forms of deceit more generally opportunism refers to the incomplete or distorted disclosure of information especially to calculated efforts to mislead distort obfuscate or otherwise confuse 1 for example the hold up may have occurred in our illustrative house construction example because the landowner deceived the builder with a low up front land rental price and vague promises about the future relying on the ability of one transactor to take advantage of the naivete or ignorance of another transactor is a highly unsatisfactory way to explain the incidence of hold ups simple examples of deception such as a builder constructing a house on land that is only rented short term rarely if ever occur

central bank independence centralization of wage bargaining inflation and unemployment theory and some evidence abstract this paper proposes a conceptual framework to investigate the effects of central bank independence of the degree of centralization of wage bargaining and of the interaction between those institutional variables on real wages unemployment and inflation in a framework in which unions are averse to inflation this aversion moderates union s wage demands as they attempt to induce the central bank to inflate at a lower rate an increase in the degree of centralization of wage bargaining a decrease in the number of unions triggers two opposite effects on real wages unemployment and inflation it reduces the substitutability between the labor of different unions and therefore the degree of effective competition between them this reduced competition effect raises real wages unemployment and inflation but the decrease in the number of unions also strengthens the moderating effect of inflationary fears on the real wage demands of each union this strategic effect lowers real wages unemployment and inflation for sufficiently inflation averse unions the interaction between those two effects produces a calmfors driffill type relation between real wages and centralization the paper analyzes the effects of central bank independence on the position and the shape of this relation as well as on inflation and unemployment the paper features two mechanisms one of which is novel through which monetary institutions have real effects the model implies that if there is a single union social welfare is maximized when the central bank attaches a zero weight to inflation but when the number of unions is larger than one this result is no longer true in general empirical evaluation of some of the theoretical implications using data from 19 developed economies is for the most part supportive of those implications

complementarity and evolution of contractual provisions an empirical study of it services contracts an increasing volume of business activity appears to be occurring via alliances or other interfirm arrangements in which complex contracts are featured yet there has been relatively little study of contract design in the strategy or management literatures the economics literature on contracting has been extensive but it has been less concerned with learning and evolution phenomena in which strategy and organization scholars are deeply interested in this paper we investigate the relationship between two types of contractual provisions that are important in high technology contracts or contracts for which environmental uncertainty or technological complexity are significant namely contingency planning and task description previous research suggests that contracts can vary significantly in the degree of detail with which such key provisions are written and that they are each subject to learning in this paper we find evidence from a sample of 386 contracts that contingency planning and task description behave as complements in contractual design we argue that this complementarity reflects patterns of learning to contract we also find that repeated exchange between two firms leads to greater effort at contingency planning in subsequent contracts a finding that is also consistent with learning effects but not with frequently made claims that contracts and trust are substitutes