market power of local cable television franchises evidence from the effects of deregulation the 1989 cable act eliminated most price regulation of cable television operators including the right of municipalities to enforce price terms in franchise agreements deregulation was justified at least partially by the contention that competition from other entertainment media eliminated any market power of cable franchises we examine the value at sale of existing cable systems before and after deregulation assuming that this value represents the expected present value of future profits deregulation had the predicted negligible effect on profits in cities with significant broadcast competition however profits appear to have increased in areas where the competition from broadcast television was less severe we explore several explanations for this increase and conclude that significant market power is the most plausible explanation

divestment investment sanctions and disinvestment an evaluation of anti apartheid policy instruments pressure for divestment and mandatory disinvestment sanctions directed against south africa are an instance of domestic interest groups in one country seeking policy change in another the link from shareholder divestment to disinvestment by firms is tenuous however since south africa active firms do not seem to suffer as a consequence of divestment pressure and legislated sanctions are likely to have unpredictable and sometimes perverse effects on the extent of apartheid practices

compensation unionization and deregulation in the motor carrier industry abstract previous research on the deregulation of the motor carrier industry has concluded that firms have become more efficient under deregulation and that costs have fallen largely at the expense of labor most studies that examine the effects on labor use current population survey data and find that wage premiums to union labor have fallen as a result of deregulation this study uses firm data and finds that deregulation had a very small effect on the average compensation paid by surviving union firms for nonunion firms the impact of deregulation is much larger these results suggest that the compensation premium for the labor of surviving union firms has increased but this increase applies only to surviving union labor in the paper we also point to and note a major exodus of union firms with the result that union labor levels have fallen and fallen dramatically

regulatory fog the role of information in regulatory persistence abstract regulation is very persistent even when inefficient we propose an explanation for regulatory persistence based on regulatory fog the phenomenon by which regulation obscures information regarding the value of counterfactual policies we construct a dynamic model of regulation in which the underlying need for regulation varies stochastically and regulation undermines the social planner s ability to observe the state of the world compared to a full information benchmark regulation is highly persistent often lasting indefinitely regulatory fog is robust to a broad range of partially informative policies and can be quite detrimental to social welfare regulatory experiments modeled as costly and imperfect signals of the underlying state do not eliminate the effects of regulatory fog we characterize their effects and provide a framework for choosing amongst a set of potential regulatory experiments

trade wages and the political economy of trade protection evidence from the colombian trade reforms abstract worker industry affiliation plays a crucial role in how trade policy affects wages in many trade models yet most research has focused on how trade policy affects wages by altering the economy wide returns to a specific worker characteristic i e skill or education rather than through worker industry affiliation this paper exploits drastic trade liberalizations in colombia in the 1980s and 1990s to investigate the relationship between protection and industry wage premiums we relate wage premiums to trade policy in an empirical framework that accounts for the political economy of trade protection accounting for time invariant political economy factors is critical when we do not control for unobserved time invariant industry characteristics we find that workers in protected sectors earn less than workers with similar observable characteristics in unprotected sectors allowing for industry fixed effects reverses the result trade protection increases relative wages this positive relationship persists when we instrument for tariff changes our results are in line with short and medium run models of trade where labor is immobile across sectors or alternatively with the existence of industry rents that are reduced by trade liberalization in the context of the current debate on the rising income inequality in developing countries our findings point to a source of disparity beyond the well documented rise in the economy wide skill premium because tariff reductions were proportionately larger in sectors employing a high fraction of less skilled workers the decrease in the wage premiums in these sectors affected such workers disproportionately

a status based model of market competition this article explores the significance of status processes for generating and reproducing hierarchy among producers in a market it develops a conception of a market as a status order in which each

measuring the effects of regulation with stock price data this article examines the usefulness of stock returns in measuring the effects of regulation when the dates on which market expectations change are not known and standard sources e g the wall street journal are used to choose announcement dates twenty major changes in regulatory constraint since 1887 are considered tests using either monthly or daily data are found to have surprisingly little ability to detect the effects of regulation the evidence shows that formal regulatory announcements are generally anticipated in cases where it is unclear when expectations change

cost structure and productivity growth in european railway systems the purpose of this paper is threefold first to empirically investigate the coststructure of the railway systems in ten european countries belgium denmark france germany greece italy luxembourg the netherlands portugal and the united kingdom of the european union second to provide measures of economies diseconomies of scale and fully investigate the manner by which economies of scale have affected the cost structure of the system and have been affected by the growth in input prices and technology and third to measure economic efficiency and identify its sources in achieving this purpose the translog technology has been used and the translog model was estimated using time series data covering the period 1969 1993 zellner s iterative method was used in estimating the translog model

the competitive effects of resale price maintenance the competitive effects of resale price maintenance rpm are theoretically diverse rpm can cause allocation distortions or promote productive efficiencies in the distribution process moreover extant cross sectional empirical evidence is incapable of distinguishing among the potentially disparate effects of rpm this paper conducts hypothesis tests of the alternative theories of rpm the empirical framework relates estimates of the effects of rpm for a cross section of observations to necessary conditions of the alternative models this analysis indicates that rpm is used both to foster cartels and promote efficiencies in the distribution process this result is consistent with the growing body of case study analysis that suggests that rpm is used for a variety of reasons this result also questions the current per se illegal status of rpm in the antitrust laws evidence is also provided concerning the strategic interaction between manufacturers and dealers in the distribution process and the use of financial data in analyzing propositions in industrial organization

corporate demography and income inequality we examine the relationship between income inequality and corporate demography in regional labor markets and specify two mechanisms through which the number and diversity of employers in a labor market affect wage dispersion vertical differentiation or variation in the ability of organizations of a particular kind to benefit from labor inputs amplifies inequality through quality sorting as the most productive employees in a particular domain pair with the most productive employers increasing horizontal differentiation variation in the kinds of organizations reduces inequality as individuals can more easily find firms interested in their distinctive attributes and talents our analysis of danish census data provides support for each thesis increased numbers of organizations operating within an industry in a region a proxy for vertical differentiation increases wage dispersion in that industry region variation in wages however declines with increased horizontal differentiation among employers th

an empirical oligopoly model of a regulated market abstract we model a three firm oligopoly the spanish fertilizer industry from 1976 to 1988 which was subject to price regulation in the form of price ceilings a theoretical and econometric model is developed in order to identify simultaneously the behaviour of the firms and the degree to which regulation constrained the price the collusive market sharing arrangements involving asymmetric firms and the less collusive outcomes of cournot and stackelberg together with their constrained counterparts are considered as particular behavioural hypotheses the estimation of an aggregated and a disaggregated version of the model by general method of moments techniques leads us to identify the regulation constrained stackelberg equilibrium as the most likely outcome given the observed data

cost padding in regulated monopolies abstract this paper considers the regulated monopoly that pads or falsifies its costs to increase the cost reimbursement it receives from the regulator contrary to the standard literature on cost regulation the firm engages in cost reducing investment before it enters into a regulatory contract this pre contractual investment in cost reduction determines the firm type at the contracting stage the paper derives both the optimum incentive compatible falsification contract and the equilibrium type distribution with the distribution of cost types determined endogenously by the pre contractual investment choice an increase in the cost of falsification has two effects first there is a direct effect that reduces cost padding because it becomes more expensive to do so second there is an indirect effect that increases cost padding because the firm responds by choosing lower investments and lower investments are associated with more cost padding it is demonstrated that the direct effect will dominate and both expected levels of cost padding and expected costs for falsification will be reduced however the indirect effect increases real costs and despite the reduction in cost padding the net effect can reduce welfare it is determined that these conclusions are significantly different from those obtained when the distribution of cost types is exogenously fixed

the impact of deregulation on the production structure of the motor carrier industry empirical analysis of the motor carrier industry pre and post regulatory reform reveals that deregulation resulted in significant changes in firm production structure and lower real average costs translog cost functions for firms operating in 1977 and 1983 were estimated and compared for other specialized commodity carriers fitted average costs were computed from these functions the results indicate significant differences in the cost functions and real costs that cannot be attributed to technological changes but rather suggest efficiency gains the results also suggest that it is inappropriate to predict outcomes of deregulation using empirical analyses of firms in the regulated environment

collective bargaining after deregulation do the teamsters still count using data from the american trucking associations and a 1991 telephone survey of 223 major firms in the general freight segment of the trucking industry sic 4213 the author describes the restructuring of the trucking industry that occurred following economic deregulation that began in 1977 and examines how that restructuring affected industrial relations outcomes such as wages and union strength he finds that both market concentration and competition increased after 1977 he also concludes that regulatory restructuring led the general freight industry to divide into two sectors one handling full truckload shipments shipments of 10 000 pounds or more and one handling less than truckload shipments the teamsters union lost bargaining power in the truckload sector but it retained much of its bargaining power within the less than truckload sector

union work rules and efficiency in the building trades this paper estimates the effect of union work rules in the building trades on employment and costs by comparing factor demand elasticities for union and nonunion contractors and subcontractors over micro data from two different types of construction the results show that the elasticities of substitution between labor and nonlabor inputs and own price elasticities for nonlabor inputs are about the same for union and nonunion contractors in contrast the elasticities of substitution among different skill categories of labor and the own price elasticities for each category are much lower under unionism

gradual incorporation of information pharmaceutical stocks and the evolution of president clinton s health care reform abstract we examine the effect of the evolution of president clinton s health care reform proposal over january 1992 october 1993 on pharmaceutical stock prices we identify a 52 3 percent decline in market adjusted prices which we then associate with health care reform applying a new technique isotonic regression we find most of the decline occurred gradually much of the decline occurred as the clinton plan adopted strategies to contain health care costs including managed competition and implicit regulation indirect evidence suggests that the wealth lost by pharmaceutical companies may have been largely an anticipated transfer our results are relevant to understanding the likely effects of the clinton plan and more recent proposals many other policy changes are marked by gradual public revelation of information which may not be completely observable by a researcher our approach may uncover information about the anticipated effects of policies unavailable from a traditional event study

uniformity versus differentiation in regulating externalities abstract in the regulation of pollutant emissions a regulator may treat different sources with different costs and environmental damage as though they were the same for institutional informational or transaction cost reasons this may occur despite the efficiency gains from regulatory differentiation of sources this issue has been a source of much controversy in the environmental economics literature and is examined here from a theoretical perspective using a two pollutant economy emissions and net social benefits are compared for the case of efficient differentiated regulation and the case of uniform undifferentiated regulation of the aggregate of the two pollutants we show when aggregate emissions will be greater than equal to or less than efficient emissions and we derive conditions for each of these three possibilities further we show that when marginal costs and benefits become more steeply sloped the inefficiency associated with undifferentiated regulation increases

an econometric analysis of changes in the cost and production structure of the trucking industry 1953 1982 a cost function is estimated using a time series cross section database for the trucking industry covering the time period from 1953 through 1982 i e after the implementation of the motor carrier act of 1980 which essentially deregulated the industry two conclusions emerge first similarities between early periods of regulation and deregulation are greater than between early and late periods of regulation second a comparison of the regulated and deregulated cost functions indicates that the heaviest burden of regulation was borne by those firms which faced the highest costs copyright 1988 by mit press

shareholder wealth effects of legislative events the case of airline deregulation this paper presents empirical evidence about the impact on shareholder wealth of legislative events leading to the enactment of the airline deregulation act of 1978 in contrast to prior regulatory event studies this paper examines not only the final legislative enactment but also the congressional hearings that preceded it no significant effect on shareholder wealth is indicated when averaged across all airline firms and all legislative events impact of deregulation however was expected to be different for trunk airlines than for local airlines moreover market expectations likely changed with the change in the political climate during the course of deregulation deliberations from an industry financial health emphasis under a republican ford administration to a consumer welfare emphasis under a democratic carter administration we find that trunk airlines experienced significant positive abnormal returns during the ford administration but negative abnormal returns during the carter administration in contrast local airlines exhibited significant negative abnormal returns during both the ford and carter eras systematic risk of both trunk and local airlines also increased with the change in the political climate

stock market reactions to the depository institutions deregulation and monetary control act of 1980 abstract this paper evaluates the effects of events leading to the passage of the depository institutions deregulation and monetary control act of 1980 the evidence suggests that the initial proposal of the act by then president carter and the final passage of the act by the house of representatives produced positive abnormal returns to stockholders of large commercial banks stockholders of small commercial banks and small savings and loans on the other hand generally experienced negative abnormal returns furthermore when hopes of passage of the act faced significant negative positive abnormal returns were experienced by stockholders of large small commercial banks

racial discrimination dualistic labor markets and foreign investment abstract this paper presents a model of racial discrimination in a stylized two sector dual economy model with direct foreign investment racial discrimination is analyzed both in terms of preferences and in terms of regulations that favor one ethnic group at the expense of another the focus is on the gains to white labor that accrue from restrictions on employment of black labor both in a closed economy and in one open to direct foreign investment

entry and competitive structure in deregulated airline markets an event study analysis of people express this paper proposes an alternative approach to the study of competitive structure in deregulated airline markets that avoids some of the weaknesses of previous studies this approach uses reactions of incumbent airlines stock prices to announcements of entry by people express to shed light on competitive structure these stock reactions reveal significant route specific profits or sunk costs and also provide evidence on the degree of competitive localization present in the industry the conclusions emerging from this analysis are corroborated by an examination of price sales quantity and schedule changes that followed people express entry

an examination of the impact of the garn st germain depository institutions act of 1982 on commercial banks and savings and loans this paper evaluates the effects of events leading to the passage of the garn st germain depository institutions act of 1982 the evidence suggests that the call for reform by president reagan s housing commission and the senate passage of the bill produced positive abnormal returns to stockholders of large savings and loans and commercial banks stockholders of small s ls and banks on the other hand generally experienced negative abnormal returns furthermore when hopes of passage of the act faded significant negative positive abnormal returns were experienced by stockholders of large small s ls and banks this study examines the impact of the passage of the garn st germain depository institutions gsgdi act of 1982 on commercial bank and savings and loan stockholder returns the gsgdi act represents one of two major revisions of the financial system over the last twenty years the other being the depository institutions deregulation and monetary control act of 19801 the proposal for such a change reflected the growing inadequacy of the regulatory structure of financial institutions to adapt to rapid changes in technology shifting consumer demands for financial services and extremely volatile interest rates efforts to reform the financial system resulted in passage of the gsgdi act of 1982 which included provisions seeking to improve both the implementation of monetary policy and the degree of equity in the regulation of financial institutions such improvements were intended to reduce the operational and financial risk of financial institutions a central issue in the economics of regulation is whether regulatory actions benefit the economic agents they are intended to benefit a large body of literature exists which examines the economic effects of regulation much of this literature has utilized the concepts and methods of welfare economics to assess the extent

behavior of the firm under regulatory constraint a recent article by akira takayama discusses an earlier paper by harvey averch and leland l johnson on fair rate of return regulation of public utilities although takayama p 255 agrees with averch and johnson s general conclusions that a firm will tend to increase its investment with the introduction of an active constraint on its rate of return he criticizes the a j argument as being confusing ambiguous and in error takayama then attempts a clarification and presents a new formulation which leads to the a j result quoted above this comment will discuss several of takayama s criticisms in addition to showing that the so called a j effect cannot be derived from the basic assumptions made by both averch and johnson and takayama 1 we will show that the very assumptions used to prove the a j effect by defining the region of x require an assumption that the a j effect exists in the first place

regulatory reform and technical change new evidence of scale economics in trucking economists have long argued against the regulation of motor carriers in the united states because the industry has been considered to be competitive in nature federal control of trucking has produced inefficiently high rates as well as costs advocates of regulatory reform have foreseen benefits accruing to shippers and consumers in general as greater rate freedom the entry of new firms and the removal of regulatory constraints lead motor carriers to reduce costs 16 and lower prices 17 many of these projected benefits were premised on the perceived competitive market structure of the trucking industry these perceptions have been largely supported by pre deregulation cost studies of general freight carriers which have found evidence of either constant returns to scale or diseconomies of scale friedlaender and wang chiang 8 find that for 20 interregional carriers over 1965 73 the typical firm operating at the sample mean is subject to mild scale diseconomies in a subsequent study of multiproduct economies of scale using 1976 proprietary data they 14 obtain the same basic results the typical firm has constant returns to scale while the representative large firm operates under moderate diminishing returns daughety nelson and vigdor 4 also find mild decreasing returns to scale for a panel of firms spanning 1953 58 in another study over 1974 79 friedlaender and bruce 6 find slight economies of scale for the typical firm based on simulations with the largest and smallest firms in their sample they suggest that over time large carriers have become more characterized by scale economies and small carriers by scale diseconomies however their evidence is far from clear cut given this conventional wisdom that the technology of the less than truckload segment of this industry was constant returns to scale before deregulation few if any economists doubted the desirability of the motor carrier act of 1980 the purpose of this paper is to determine empirically whether the sweeping legislative changes were justified on solely economic grounds it is possible that previous cost studies are biased as a consequence of the regulatory constraints facing the firms has deregulation itself corrected for distortions created by the regulatory environment and thus produced changes in the production choices of trucking companies was friedlaender and spady s 7 contention that truckload carriers may have experienced regulatory rather than technology based increasing returns to scale correct if so perhaps past results for general freight carriers are similarly due to regulation however in this case the reason may be regulatory

auditor reputation the impact of critical reports issued by government inspectors in recent years u k department of trade investigations into the affairs of a specific company have sometimes been critical of the work done by its auditors and reporting accountants this article assesses the impact of this criticism on the auditor s reputation in particular it examines the stock price performance of the auditor s listed clients the results show a small wealth loss for the audit clients the article also examines the impact of the department of trade criticism on an audit firm s number of listed clients and its future audit fees compared to a control group the criticized auditors appear to suffer a small loss in market share based on number of listed clients and on audit fees the evidence suggests that criticized auditors incurred economic losses from the damage to their reputations this is consistent with models of reputation advanced in the industrial organization literature

improving patent valuations for management purposes validating new indicators by analyzing application rationales abstract this paper analyzes the validity of so far untested indicators of patent value to enhance the quality of patent assessments using indicators at the corporate level the article expands the theory by eliciting patent attorneys filing rationales to maximize profits from protecting intellectual property to inspire the computation of new value indicators including patent full texts then based on a newly compiled data set consisting of 813 ep patents the probability of an opposition against a patent is modeled by established and new value indicators the results show that accelerated examination requests and qualified word counts enhance the quality of existing valuation methods

public education supply and student performance this paper develops a model of public exchange whereby voters and education policy makers exchange with one another within school districts because school district consolidation lowers alternatives to voters parents consolidation is hypothesized to raise public education spending because weakened intergovernmental competition allows policy makers to promote their own utility rather than that of constituents models of public education spending and academic performance are estimated over 1988 1990 while evidence indicates little support for the traditional treatment of the leviathan hypothesis that greater competition lowers public spending this paper argues that education spending by itself does not fully provide a valid test of the leviathan hypothesis since spending by itself does not necessarily indicate the quality of public education programmes empirical evidence indicates that greater numbers of schools and school districts promote higher student achievement as evidenced by higher math and v

community and capital in entrepreneurship and economic growth we argue that social integration in the sense of within community interconnectedness and venture capital have a complementary relationship in fostering innovation entrepreneurship and economic gr

using stock price data to measure the effects of regulation the interstate commerce act and the railroad industry this article usesjinancial data to measure the effects of the passage of the interstate commerce act of 1887 and subsequent legislative and judicial developments on firms in the railroad industry the results indicate that the interstate commerce act had a significant positive impact on railroad stock prices and that court decisions in the 1890s which severely restricted the powers of the interstate commerce commission caused negative stock price reactions thesefindings offer support for the revisionist view of regulatory history according to which the railroads welcomed regulation as a means offacilitating the enforcement of cartel like agreements

the economic incidence of the interstate commerce act of 1887 a theoretical and empirical analysis of the short haul pricing constraint the public and private interest hypotheses permeate contemporary regulatory analyses both theories are used to explain the inception of the first major federal regulatory agency the interstate commerce commission icc according to the public and private interest hypotheses the regulations promulgated by the icc benefited either railroads or shippers this paper presents an alternative view consistent with the multiple interest theory of regulation it is demonstrated that the major regulatory instrument of the icc the short haul pricing constraint shpc altered the equilibria of railroad markets in a way which benefitted the class of shippers short haul shippers facing monopolistic railroad markets the shpc also benefitted some railroads by increasing the correspondence between unregulated cooperative and regulated noncooperative levels of long haul shipments the proposition that the icc benefited short haul shippers and railroads is supported by an empirical analysis of the effects of the inception of federal regulation and implementation of the shpc on stock prices the results of the paper indicate that the public and private interest interpretations of the icc are neither contradictory nor complete but instead are complementary a theoretical and empirical analysis of the chief regulatory mechanism of the icc provides this synthesis

ethnic matching in the u s venture capital market we document the role of entrepreneurial founder and venture capital vc partner co ethnicity in shaping investment relationships co ethnicity increases the likelihood that a vc firm invests in a company conditional on investment co ethnicity strengthens the degree of involvement by raising the likelihood of vc board of director involvement and increasing the size and scope of investment these results are consistent with trust and social network based mechanisms shared ethnicity in our sample is associated with worse investment outcomes as measured by investment liquidity however which our results suggest might stem from looser screening and or corporate governance

substitution between production labor and other inputs in unionized and nonunionized manufacturing comment age points of the productivity decline after correcting faulty calculations in deriving a new price deflator errors in measuring the left hand side account for another 7 5 percentage points together they account for 56 5 of the observed decline this is a more modest accomplishment than the 92 claim of my earlier paper but still a substantial one in light of earlier research efforts such as stokes 1981 which could not explain any of the observed decline

behavior of the firm under regulatory constraint a recent article in this review by averch and johnson 3 on the fair rate of return regulation in public utilities industries or more generally regulated industries attracted the attention of many economists in essence averch johnson argues that the introduction of an active constraint of a fair rate of return type would induce the firm to invest more than the original profit maximizing value of capital and this would create an inefficient allocation of inputs in addition to frequent citations in verbal arguments it has invited some thieoretical extensions by economists such as wvestfield 8 and klevorick 5 all of the writers seem to accept the basic theoretical foundations set by averch and johnson for example klevorick 5 recently proposed that the fair rate of return should be inversely related to the size of the capital of a firm the intuitive basis for this is apparent for it in effect creates a penalty as the amount of capital used by the firm increases however it seems to me that averchjohnson s original arguments are sketchy and contain somewhat ambiguous logic at several important points although their conclusion for which they tried to find empirical support that a firm will tend to increase its investment with the introduction of an active constraint seems to be correct it does not follow from their arguments in particular there seems to be a serious error which arises from confusing movements along a curve and shifts of a curve in section ii we clarify those ambiguities and if necessary correct the mistakes in the third section of this paper we shall provide a new formulation of the problem we shall find that the new formulation will give the same answer as averchjohnson namely that a firm will tend to invest more with the iiltroductioin of an active constraint it should be noted however that while the conclusion happens to be the same this was not the necessity for we needed a completely new formulation to obtain the old conclusion

a generalized model of pricing for homogeneous goods under imperfect information this paper generalizes the model developed in wilde and schwartz 1979 to allow downward sloping demand curves and u shaped average cost curves it shows that the basic qualitative conclusions of wilde and schwartz still hold moreover it shows that the critical proportion of comparison shoppers needed to generate a competitive equilibrium falls as demand becomes more elastic or average costs become more inelastic finally it shows that when imperfect information generates non competitive outcomes they are bounded below in welfare terms by the monopolistically competitive equilibrium

does diversity pay race gender and the business case for diversity the value in diversity perspective argues that a diverse workforce relative to a homogeneous one is generally beneficial for business including but not limited to corporate profits and earnings this is in contrast to other accounts that view diversity as either nonconsequential to business success or actually detrimental by creating conflict undermining cohesion and thus decreasing productivity using data from the 1996 to 1997 national organizations survey a national sample of for profit business organizations this article tests eight hypotheses derived from the value in diversity thesis the results support seven of these hypotheses racial diversity is associated with increased sales revenue more customers greater market share and greater relative profits gender diversity is associated with increased sales revenue more customers and greater relative profits i discuss the implications of these findings relative to alternative views of diversity in the workplace

self employment and the earnings of immigrants we examine the question of the economic returns to immigrants engaged in self employment based on samples of four entrepreneurial immigrants plus control samples of blacks and whites from the 1980 u s public use microdata sample we find large differences in the net effect of self employment depending on the use of a linear absolute dollar values or loglinear relative returns form we examine various explanations for the discrepancy and identify the role of outliers as significant the loglinear form fits the data better but at the cost of obliterating substantively important information namely the preponderance of the self employed among positive outliers effects of excluding the latter from the linear form and the theoretical and policy implications of alternative specifications of the earnings equation are examined excerpt

value event studies this paper discusses appropriate methodology for measuring the effect of an event on the value of a firm s equity th e key points are 1 cumulative abnormal returns do not measure the effect of an event on firm value if there are dividends during the event window 2 it is generally appropriate to use pre event parameters of the return generating process even if the event alters the parameters during the event window and 3 controlling for fact ors other than the return on the market portfolio improves the power of the estimation the formula for the effect of an event on the value of a firm when there are dividends during the event window is developed a nd applied to a study of the effect of the bhopal disaster on the value of union carbide copyright 1992 by mit press

cost reductions cost padding and stock market prices the chilean experience with price cap regulation we study the chilean electricity distribution industry and find that costs the ratio of reported costs to revenues have fallen since price caps were introduced cost reductions are u shaped since 1989 strong initial cost reductions reverse every four years coinciding with regulatory reviews a possible explanation is that firms are behaving strategically we then use stock market data to complement our study we construct a measure of cumulative abnormal returns for regulated firms around their quarterly announcements and a measure of naive cost expectations which excludes any indication of the occurrence of review periods in general cost reports in excess of naive cost expectations have a negative effect on returns even after we control for company fixed effects the exception is cost surprises that happen during review periods which increase abnormal returns the estimated effects fall over time this is consistent with the hypothesis of strategic firms and that the regulatory regime translates these games into higher rates in a way that is not completely anticipated by the market more generally the results suggest there may be value in complementing regulatory procedures with stock market information

regulation and industrial organization this paper examines the effects on firm behavior and industry structure of industry wide price regulation by the state such regulation wherein regulators set prices with regard to an industry wide aggregate performance measure has been and still is widely used and is shown to induce inefficiencies in firm operation in general such regulation can result in setting prices high enough to maintain inefficient firms and it encourages to inefficient firm operation due to incentives to inflate costs and averch johnson effects

strategic responses to regulatory threat in the credit card market abstract models of endogenous regulatory threat suggest that firms may cut prices in order to ease a threat of regulation i test the implications of these models using stock market data from an episode of regulatory threat in the credit card market the data show that the initial threat led to negative abnormal returns for a portfolio of credit card issuers consistent with the regulatory threat hypothesis price cuts announced after the threat led to abnormal returns that are significantly more positive than those following similar cuts outside the period of regulatory threat this pattern exists not only for those issuers announcing cuts but also for their rivals which suggests that the cuts reduced an industry wide threat of regulation factors that proxy for issuers exposure to and influence on the probability of regulation affect the size of these returns which provides corroborative evidence in favor of the regulatory threat hypothesis

the economic theory of regulation and trucking deregulation shifting to the state level federal deregulation of the trucking industry in 1980 created a general gain in economic welfare at the expense of the monopoly rents of powerful interests leading some scholars to ponder the limitations of the economic theory of regulation however analyzing only the federal changes excludes evidence from the significant intrastate sector of the trucking industry regulation of which remains largely unchanged from that prior to 1980 this paper argues that after a decade of clear federal policy success truckers continue to capture most state regulators sustaining monopoly rents in what would otherwise be an inherently competitive industry using data from the fifty states we demonstrate the extent to which the economic theory is in fact consistent with trucking industry evidence

stock price effects of u s trade policy responses to japanese trading practices in semi conductors over much of the last decade the united states and japan have been embroiled in a trade dispute over access to japanese markets for semiconductors and downstream products this study examines stock price reactions for firms affected by a subset of events commencing with the filing of a section 301 petition by the u s semiconductor industry association alleging unfair practices by the japanese and culminating in the 1986 trade agreement the evidence suggests that u s semiconductor consumers as well as producers benefited from these events

job relocation and the racial gap in unemployment in detroit and chicago 1980 to 1990 the spatial mismatch hypothesis argues that residential segregation and job decentralization combine to adversely affect the employment opportunities of minorities while employment is increasingly located outside of central cities residential segregation prevents minorities from moving closer to suburban jobs although this hypothesis has intuitive appeal there is little consensus regarding its empirical validity this study 1 constructs detailed geographic measures of changes in employment opportunities 2 estimates a fixed effects model of changes in the unemployment rate over time and 3 accounts for spatial correlation in the error term neighborhood level employment data from 1980 and 1990 are used to measure changes in the distance to jobs from census tracts in the detroit and chicago metropolitan areas in both cities the decentralization of employment and the loss of manufacturing jobs resulted in substantial changes in the spatial distribution of employment the empirical results indicate that a decline in the spatial proximity to employment is associated with an increase in the unemployment rate for blacks

strong ties weak ties and islands structural and cultural predictors of organizational innovation how does the tendency of entrepreneurs to engage in innovation relate to their structural and cultural embeddedness using micro data on entrepreneurial teams and the organizational innovations they attempt to develop this article presents a predictive model of creative action to address this question capacity for creative action is seen to be a function of the ability of entrepreneurs to i obtain non redundant information from their social networks ii avoid pressures for conformity and iii sustain trust in developing novel and potentially profitable innovations probit analyses of over 700 organizational startups suggest that these mechanisms exercise effects on innovation via the network ties and enculturation of entrepreneurs

the impact of unionization on motor carrier costs i introduction the increasingly competitive markets fostered by the motor carrier act of 1980 have forced motor carriers to focus on cost saving strategies intended to reduce operating miles fuel consumption and capital and labor expenses there are two reasons unions firms may be at a competitive disadvantage in these efforts first although the union nonunion wage differential has decreased following regulatory reform rose 1987 and hirsch 1988 find that union firms still pay higher wages second managers of unionized firms may have less flexibility in the use of inputs since union work rules restrict the activities and substitutability of drivers terminal workers and terminal facilities indeed harrington 1987 reports that post 1980 trucking expenses are still 40 higher for unionized motor carriers than for nonunion firms unionization may affect carrier cost both by increasing the price of labor and by potentially affecting cost function parameters if union rules make labor less productive the entire cost function will shift upwards for a given set of factor input prices further freeman and medoff 1982 argue that work rules may be expected to result in reduced elasticities of substitution between labor and other inputs in the unionized setting indeed they find that substitution between production labor and other labor in manufacturing is generally lower in unionized settings the impact of unionization on production has been investigated in industries such as construction coal mining hospitals and the cement industry by allen 1984 1986a 1986b byrnes et al 1988 and clark 1980a 1980b the results have been inconclusive with unionized firms being more productive than nonunion firms in some instances and less productive in others studies such as allen 1986c and addison and hirsch 1989 have utilized production function methodologies that use restrictive functional forms which impose homogeneity and identical elasticities of substitution between pairs of inputs allen 1986c examines the relative efficiency of union and nonunion firms with a translog cost function allowing for union effects using intercept and slope parameters that vary by union status in his study of different types of construction projects he finds significant differences between the cost functions for union and nonunion firms but no evidence of the inelasticity of factor substitutions as hypothesized by medoff and freeman in fact his estimates of factor demand elasticities show no discernible pattern for union versus nonunion firms leading him to conclude that work rules do not have the anticipated impact on elasticity the purpose of this study is to test whether unionization impacts motor carrier costs and if so to determine the direction of the impact of particular interest is whether the work rules imposed by the teamster s union have had a significant impact on factor substitutability in unionized firms as argued by freeman and medoff 1982 friedlaender and spady 1981 daughety et al 1985 mcmullen and stanley 1988 grimm et al 1989 and ying s 1990 studies of motor carrier industry costs have used translog cost functions which implicitly assume that union and nonunion cost functions arise from the same production technology this is equivalent to accepting the hypothesis that unionization does not affect the production structure of motor carrier firms if unionization does affect a firm s production process the results from these studies could be biased accordingly this study uses a translog cost function to test for differences in the cost structure of union and nonunion carriers not only is the translog cost function standard in the motor carrier literature permitting comparison of these results with those of previous work it also allows the flexibility necessary to examine the differential impact of unions on cost function parameters and elasticities of substitution between factors

contributions of neoclassical economics to public utili iy analysis neoclassical economics the dominant economics paradigm has influenced and been influenced by developments in regulated industries we identify major theoretical and empirical accomplishments discuss the impactofthese accomplishmentsonpolicydevelopment andlist the channelsthrough which the impacts are madepossible we then discuss regulatorypolitics lack ofresearchperspective an overly narrow focus on economic efficiency and the academic profession as factors limiting the impact of neoclassical economics on public policy

using information diffusion models to estimate the impacts of regulatory events on publicly traded firms abstract analysis and evaluation of regulatory actions require inexpensive and timely information about resultant costs and benefits this paper extends the traditional event study methodology for assessing the impact of regulatory actions on the value of publicly traded firms we use diffusion theory to construct several models of how markets adjust to regulatory events ex ante preference for a particular model is based on prior knowledge about the characteristics of the regulatory event and information diffusion patterns we demonstrate the use of the methodology by applying it to an analysis of the impacts of a regulatory action taken to protect the northern spotted owl

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

the decline of unionization in the united states what can be learned from recent experience the dramatic decline in unionization over the last decade is investigated in the context of a supply demand model of union status determination using data from surveys of workers conducted in 1977 and 1984 along with data from the national labor relations board on representation elections it is concluded that the decline in unionization since 1977 is accounted for largely by 1 an increase in employer resistance to unionization probably due to increased product market competitiveness and 2 a decrease in demand for union representation by nonunion workers due to an increase in the satisfaction of nonunion workers with their jobs and a decline in nonunion workers beliefs that unions are able to improve wages and working conditions

the effect of wholesale market deregulation on shareholder wealth in the electric power industry abstract this paper analyzes electric utility stock price reactions to events preceding the passage of the energy policy act of 1992 a development that precipitated the onset of competition in the wholesale sector of the electric utility industry and accelerated the pace toward state level deregulation of the retail sector for the industry as a whole we find that at worst investors had neutral reactions to events preceding wholesale deregulation however stock price reactions vary systematically with differences in incumbent utilities marginal costs though not with differences in fixed costs or purchased power costs these results are consistent with the notion that new technologies have substantially reduced barriers to entry into the electric power generation industry rendering capital cost advantages of incumbent utilities vulnerable to being neutralized by new entrants however marginal cost advantages are more likely to be sustainable because they are likely to be driven by inimitable locat

millionaire migration and taxation of the elite evidence from administrative data a growing number of u s states have adopted millionaire taxes on top income earners this increases the progressivity of state tax systems but it raises concerns about tax flight elites migrating from high tax to low tax states draining state revenues and undermining redistributive social policies are top income earners transitory millionaires searching for lower tax places to live or are they embedded elites who are reluctant to migrate away from places where they have been highly successful this question is central to understanding the social consequences of progressive taxation we draw on administrative tax returns for all million dollar income earners in the united states over 13 years tracking the states from which millionaires file their taxes our dataset contains 45 million tax records and provides census scale panel data on top income earners we advance two core analyses 1 state to state migration of millionaires over the long term and 2 a sharply focused discontinuity anal

wage differentials of transportation industries deregulation versus regulation this article investigates the wage differentials of similar occupations in three for hire transportation carrier industries railroad truck and motor bus under regulation and deregulation the estimation results indicate that the union wage gaps among all occupations have widened under deregulation specifically the union wages of railroad occupations have increased relative to those of truck drivers and the union wages of truck drivers have increased relative to those of motor bus drivers further wage gaps for all occupations for this period are greater among nonunion than among union workers jel l92 i introduction economic regulation of u s transportation carrier industries has been classified into three distinct eras the monopoly regulatory era the competition regulatory era and the regulatory reform era beginning in the late 1800s the 1930s and the 1970s talley 1983 these eras addressed carrier abuses destructive intramodal and intermodal competition and the negative impacts of regulation respectively the 1887 interstate commerce act sought to prevent monopolistic abuses and limit discriminatory practices of railroads the motor carrier act of 1935 of the competition regulatory era placed motor carriers freight and passenger under federal regulation by the 1970s advocates for federal regulatory reform argued that economic regulation protected inefficient carriers promoted high rates and fares and in general fostered an inefficient allocation of resources subsequently a number of deregulation or regulatory reform acts were passed including the railroad revitalization and regulatory reform act of 1976 the staggers rail act of 1980 the motor carrier act of 1980 and the bus regulatory reform act of 1982 though shippers and passengers have generally benefited from transportation deregulation paying lower real rates and fares the impact on carrier labor earnings has been negative for example the real weekly wages of union railroad engineers have declined 11 7 talley and schwarz miller 1998 the real hourly wages of union and nonunion for hire truck carrier drivers have declined 23 and 10 hirsch and macpherson 1998 and the real hourly wages of both union and nonunion for hire motor bus carrier drivers have declined 17 schwarz miller and talley 1994 the impact of deregulation however on the relative labor earnings of transportation carrier industries is unknown specifically have wage differentials changed from those of the regulation period if so have these differentials widened narrowed under deregulation thereby increasing decreasing the gap in the labor earnings of one industry relative to those of another do the changes in wage differentials differ for union and nonunion labor the purpose of this article is to investigate occupational wage differentials among transportation industries under regulation and deregulation as intermodal competition intensifies such information is expected to play a more important role in industry wage negotiations wage differentials of similar occupations in three for hire carrier industries under regulation and deregulation are estimated the three industries are the railroad truck and motor bus industries and the occupations include railroad engineers conductors and brakemen switchmen truck drivers and motor bus drivers the estimation results indicate that the union wages of railroad occupations have increased relative to those of truck drivers and the union wages of truck drivers have increased relative to those of motor bus drivers during the postderegulation period further wage gaps for all occupations for this period are greater among nonunion than among union workers the remainder of this article is structured as follows section ii discusses railroad truck and motor bus for hire carrier industries and in particular their labor under regulation and deregulation

substitution between production labor and other inputs in unionized and non unionized manufacturing the ease of substitution between labor and other factors of production is an important determinant of the elasticity of demand for labor and thus of the economic effects of unionism all else the same the greater the elasticity of substitution the greater is the elasticity of derived demand and the greater the displacement of labor for a given union induced wage increase in sectors where this elasticity is large unions are likely to be relatively weak and able to win only slight wage gains freeman and medoff 1981 and forthcoming or if they win large gains will have to pay a high price in terms of lost jobs in the sectors where the elasticity is small unions may be able to extract a substantial wage premium at little cost in terms of employment moreover as a simple general equilibrium model indicates the elasticity of substitution between labor and other factors in the unionized sector is a key parameter in determining the impact of the iiunion wage effect on the earnings of nonunion workers and on the efficiency of the economy johnson and mieskowski 1970 despite the importance of the elasticity of labor demand for an analysis of unionism little attention has been given to the absolute and relative magnitude of this elasticity under collective bargaining while there is some discussion of technological change and the substitution of capital and nonproduction workers for organized production workers in the institutional literature e g slichter 1941 slichter healy and livernash 1960 bok and dunlop 1970 modern econometric work provides no estimates of the relevant parameters as a result johnson and mieskowski 1970 rees 1963 lewis 1964 and others have been forced to evaluate union effects with guesstimates of the elasticities of concern in union settings this paper attempts to fill some of the gap in our knowledge by providing estimates for u s manufacturing of the constant output elasticity of demand for unionized and nonunionized production workers and of the elasticity of substitution between these workers and other inputs the analysis concentrates on what we call the relative inelasticity hypothesis which states that the demand for production workers will be more inelastic in the presence of a union for two reasons the likelihood that unions have organized and survived in sectors with low elasticities and the effects of various contract provisions on the ability of management to substitute other factors for production labor the study is divided into four sections section i develops the rationale for the relative inelasticity hypothesis and describes the nature of the empirical analysis conducted to test its validity the second section uses a 1972 state by 2 digit standard industrial classification sic industry data file for manufacturing to estimate the elasticity of substitution between production labor and both nonproduction labor and capital in the union and nonunion sectors of u s manufacturing industries section iii provides estimates based on a 1968 72 sample of manufacturing establishments of the elasticity of substitution between production and nonproduction labor the only two inputs for which information is available the final section briefly summarizes the findings and discusses their implications for understanding the impact of trade unionism on the u s economy to preview the ensuing discussion our main conclusion is substitution between production labor and other inputs is generally lower in union received for publication march 6 1978 revision accepted for publication august 17 1981 both authors are with harvard university and the national bureau of economic research supported by u s department of labor grant no j 9 m 6 0094 national science foundation grant no apt77 16279 and the national bureau of economic research under its program of research on labor economics we are especially grateful to jane mather for her invaluable assistance on this project and to greg bialecki charles brown gary chamberlain kathy coons jon fay martin van denburgh and lori wilson for their significant contributions the study has not been reviewed by the board of directors of the national bureau

is regulation necessary for value of service pricing this article presents evidence for the existence of value of service pricing in the neverregulated market for trucking services to haul florida produce rates per truckload are found to increase by eleven to twelve cents for every one dollar increase in the average daily loss in the value of the cargo due to product deterioration ceteris paribus this result is at variance with the commonly held belief that value of service pricing in transportation is a form of price discrimination made possible by the policies of rate bureaus and regulatory agencies

standard errors in event studies even if true abnormal returns are uncorrelated estimated abnormal returns are not this paper presents a simple formula for the variance of estimated cumulative abnormal re turns both returns and dummy variable procedures for estimating the standard error correctly taking account of both intertemporal and contemporaneous correlation of esti mated residuals are discussed they are then applied to an event study of post merger performance it is shown that ignoring either the intertemporal or contemporaneous correlation of residuals can result in significant underestimates of standard errors

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

exchange rate evidence on the effectiveness of united nations policy this paper analyzes the effectiveness of international interventions through their impact on exchange rates if a specific intervention actually increases decreases a country s economic and political stability then its currency should appreciate depreciate estimates suggest that peacekeeping forces in lebanon caused long run appreciations while economic sanctions imposed upon south africa only caused temporary depreciations in both cases repeated u n resolutions condemning or demanding actions that were not backed by actual interventions did not cause changes in the exchange rate the results in this paper are supportive of predictions from the public choice approach applied to international organizations and policies

conjoint analysis of price premiums for hotel amenities over the past decade or so conjoint analysis green and rao 1971 johnson 1974 appears to have become one of industry s most widely applied marketing research techniques for estimating consumer s multi attribute utility functions cattin and wittink 1982 however a continuing problem in application of conjoint analysis is how to handle the price attribute in the construction of stimulus profiles for presentation to respondents in many cases of practical interest the price level will be highly correlated with other product attribute levels if the researcher ignores this correlation by allowing the price levels to vary independently of other attributes the resulting profiles may appear sufficiently unrealistic to result in respondents discounting each profile s attractiveness thus reducing the validity of the results a related problem which adds to the complexity of new product pricing research is the bundling issue in the context of conjoint analysis the question is whether one can predict a respondent s evaluation of a bundle of product attributes and price as a simple linear function of the summed part worths of the entities making up the bundle when each entity is presented with its actual price metric hybrid conjoint models have received a fair amount of industry application to date the purpose of these models is to reduce data collection time while still retaining individual differences in part worth functions the present paper extends this class of models to include categorical conjoint analysis in which the criterion variable is classificatory this model is applied to an extremely large conjoint problem involving over 40 attributes and over 100 attribute levels the study results support the viability of the model for dealing with extremely large conjoint problems the study also shows evidence of the inability of simple functions of self explicated utilities for components of a bundle of hotel amenities to predict respondents preferences for the total bundle journal of business 1984 vol 57 no 1 pt 2 1984 by the university of chicago all rights reserved 0021 9398 84 5712 0019 0 1 50

the effect of discretionary price control decisions on equity values abstract the macro literature presents conflicting evidence on the effects of price controls in this study the fact that the macro economic effect of wage and price controls is the aggregation of the micro economic effects is used to implement a different approach to measure the effects of price controls the effect of price controls is inferred from examining the impact of discretionary regulatory decisions on the equity values of individual firms during phase ii of nixon s economic stabilization program the empirical results indicate that violators of the regulations incurred significant abnormal losses that were unrelated to the explicit penalties this suggests that implicit penalties were imposed on offending firms the analysis of price increase decisions provides weak evidence that these price commission decisions had an impact on equity values

studying firm specific effects of regulation with stock market data an application to oil price regulation regulations are often introduced and reformed in response to unanticipated changes in market forces in late 1973 for example opec quadrupled the world price of oil and u s policy makers responded by imposing oil price regulation such events pose a fundamental problem of interpretation for studies that use stock prices to identify the economic effects of regulation what portion of the capital gains or losses experienced by investors in regulated firms is due to regulation and what portion is due to unanticipated economic events to answer these questions we use microeconomic theory to derive hypotheses about how the capital gains and losses created by opec pricing and u s regulatory policies are related to the underlying characteristics of petroleum firms we test the hypotheses by including a model of firm specific abnormal returns in the standard market models of common stock returns earned by investors in petroleum firms the results indicate the u s oil production and refiner access to price controlled crude oil were sources of capital gains and that u s and foreign refining were sources of capital losses

trucking deregulation and labor earnings is the union premium a compensating differential this article examines wage determination among union and nonunion truck drivers using the 96 monthly current population surveys for 1983 90 union density in the previously regulated for hire sector of the trucking industry fell from about 60 during the regulatory period of the 1970s to about 25 by 1990 union log wage premiums fell from 0 40 in the 1970s to 0 30 or below in the 1980s longitudinal estimates from multiple panels for 1983 84 through 1989 90 suggest far smaller union premiums supporting the thesis that part of the wage differential following deregulation is a compensating premium for driver quality

venture capital entrepreneurship and economic growth abstract using a panel of u s metropolitan areas we find that increases in the supply of venture capital positively affect firm starts employment and aggregate income our results remain robust to a variety of specifications including ones that address endogeneity the estimated magnitudes imply that venture capital stimulates the creation of more firms than it funds which appears consistent with two mechanisms first would be entrepreneurs anticipating financing needs more likely start firms when the supply of capital expands second funded companies may transfer know how to their employees thereby enabling spin offs and may encourage others to become entrepreneurs through demonstration effects

the incidence of regulatory rents in the motor carrier industry this article focuses on two questions in the debate over motor carrier regulation first did regulation create eliminate or have no effect on monopoly rents in the trucking industry second ifthere were rents what was their incidence were they received by owners oftrucking firms dissipated through higher costs or captured by the teamsters union data on share price responses to deregulation announcements reveal declines in expected profits of 8 19 of totalfirm value this suggests that regulation created monopoly profits and indicates that at least some of these rents accrued to owners of trucking firms firms responses to regulatory change are modelled as functions of company s operating characteristics and measures of unionization operating efficiency and service characteristics are shown to affect the impact of deregulation on share values

the effect of wage bargains on the stock market value of the firm the author estimates the change in the value of common stock resulting from an unexpected change in collectively bargained labor costs using bargaining unit wage data and nyse stock returns he estimates a dollar for dollar trade off between these variables this result is consistent with stock valuations based on present value maximizing managerial decisions that is the results are consistent with hotelling s lemma the author also finds support for the hypothesis that collective bargains maximize the sum of shareholder and union member wealth that is the results are consistent with strong efficiency in the contracting environment copyright 1989 by american economic association

an economic theory of apartheid an economic theory of apartheid apartheid is a regulatory system designed to effect redistributions in favor of white workers and farmers at the expense of black workers and white capitalists this paper uses a competitive interest group theory of the apartheid state to formalize a collective choice analysis of apartheid as endogenous policy the level of apartheid is conceived as a continuous variable that is determined by the relative influence of competing interest groups within the white polity and by the costs of maintaining and defending apartheid institutions some empirical implications of this approach are explored i introduction since south african apartheid embodies essentially a complex web of politically determined restrictions affecting the level of employment and mobility of the black labor force it is not surprising that most economic analyses of apartheid institutions have focused on their evident allocative inefficiency and distributional inequity see nattrass 1981 31 32 some economists have hinted at the possibility of formally modeling the economic social and political institutions of apartheid as endogenous products of a process of collective choice in other words the question has been raised of the existence of an economic rationale for apartheid thus richard porter 1978 and subsequently mats lundahl 1982 have initiated rigorous analysis of what porter terms a south african type economy a competitive market system the operation of which is constrained by state imposed apartheid regulation while the porter lundahl characterization of the south african type economy is an invaluable starting point for an economic analysis of apartheid it falls short of providing a satisfactory explanation for the existence and extent of south african discriminatory policies the inevitable contradiction between economic efficiency and the political requirements of apartheid leads both porter and lundahl to treat the goals of apartheid as exogenously determined by political considerations 1 the purpose of this paper is to show how it is possible to provide an explicitly economic explanation of apartheid institutions apartheid is viewed here as a vector of policies which can be varied in intensity along a continuum thus the level of apartheid regulation is treated as a continuous endogenous variable responsive to the relative influences of interest groups which receive benefits or incur costs associated with apartheid the intention is not to claim originality in recognizing the economic motives for apartheid policy which have been well documented in the literature as indicated in section ii but rather to formalize this approach in section iii and to suggest some methods of testing its implications in section iv the effort to formalize an analysis of apartheid in terms of a competitive interest group model of social choice should be of interest not only to students of south african but also to economists more generally concerned with endogenous public policy the south african case provides a laboratory for this type of analysis because the boundaries which delineate interest groups are very clearly drawn ii a brief political economy of apartheid it has long been recognized by economists and scholars of south africa that the apartheid system representing a comprehensive set of regulations affecting all aspects of economic social and political life arose essentially as a response on the part of the white working class to the threat of black labor market competition 2 although apartheid itself is phenomenon of the post 1948 era of national party rule it is really only the most recent phase of a long history of white labor elitism and black exclusion brought about through the medium of an interventionist statist polity characterized by a racially limited franchise the harnessing of the instruments of state power to further the interests of the white labor force at the expense not only of blacks but also of white capitalists dates from the earliest period of industrialization in south africa which followed the discovery of precious minerals in the 1860s and 1870s

the rise and fall of railtrack plc an event study forming railtrack was a key part of the privatization of british rail br railtrack took over the ownership of br s fixed infrastructure in april 1994 and its parent company the railtrack group was floated in may 1996 on the london stock exchange lse despite the group posting some excellent financial results in the early years railtrack s record on infrastructure improvement and safety was frequently criticized this apparent inconsistency between shareholder interests and public service obligations culminated in railtrack being placed in administration in october 2001 in view of this apparent inconsistency and the high court claim for additional compensation brought against the government by a group of 49 000 small investors the reaction of the stock market to 19 key events is modelled among other things we find when railtrack announced after the fatal derailment of a high speed train near the hertfordshire town of hatfield that there would be a 6 month programme of emergency track repairs t

trade liberalization comparative advantage and scale economies stock market evidence from canada abstract the canada united states free trade agreement fta provides an excellent opportunity to analyze the impact of a comprehensive trade liberalization in this paper a stock market event study is employed to capture investors expectations about the consequences of this agreement for manufacturing firms in canada the primary question addressed is whether abnormal stock market returns corresponding to news about the fta are consistent with hypotheses based on comparative advantage and economies of scale the results indicate that both comparative advantage and scale economies played a role in determining investors perceptions of the impact of the fta

the inefficiency of regulating a competitive industry productivity gains in trucking following reform this study confirms the higher productivity levels predicted by advocates of regulatory reform in trucking and shows that these gains have been substantial cost simulations suggest that following a year of higher expenditures efforts to remain competitive have yielded considerable cost savings that increase over time from 1 percent in 1981 to 23 percent in 1984 the indirect effects of reform through the independent variables initially decrease costs but later lead to higher costs the cumulative effect has been a less than 1 percent increase in costs in 1980 becoming by 1984 a significant 16 percent productivity gain copyright 1990 by mit press

freight charge variations in truck transport markets price discrimination or competitive pricing it is well known that truck freight rates for different commodities over a given route vary and that rates per unit distance for the same commodity over different routes vary in previous studies this variation has been attributed to noncompetitive behavior in this paper a hypothesis that observed variations in truck rates are consistent with competitive behavior is tested using conjoint analysis trade offs between costs or rates and other attributes of transport service are estimated from experiments using panels of truck brokers and carriers the results are consistent with competitive behavior in the trucking industry

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had

motor carrier deregulation and highway safety an empirical analysis the passage of the motor carrier reform and modernization act of 1980 mca 1980 effectively marked the end of rate and entry regulation in the interstate trucking industry and most economists agree that this legislation has created many important economic benefits during the 1980s for example shipping rates fell in real terms service expanded and improved in quality and generally resources were used more efficiently there is increasing concern however that deregulation has led firms to reduce safety expenditures in order to remain competitive and that trucking accidents and fatalities have increased as a consequence 4 9 indeed brock adams former u s secretary of transportation claims that trucking accidents have increased since 1980 for this very reason 2 the limited empirical evidence reported in the literature suggests otherwise moore 17 for example shows that accident fatality and injury rates have fallen since 1980 despite the rapid increase in the number of truck miles traveled 13 his analysis however is based on a comparison of rates across time and does not reveal any of the potential economic or institutional forces that may be affecting the evolution of these data in a more systematic analysis traynor 22 finds that deregulation has reduced accident rates in california although it may be difficult to extend his results to the national experience as a whole this paper has two major objectives the first is to estimate an empirical model using a pooled cross section of state data to determine whether the evidence traynor 22 reports for california holds in general for all other states the second objective is to determine empirically those factors that may be driving the results in moore 17 pooling these data allow us to test

confidence intervals for elasticity estimators in translog models this paper examines the distribution fu nctions of elasticity estimators in translog demand models the authors consider the normaland ratio of normals distributions and present confidence intervals for the elasticity estimators the results suggest that only elasticity estimato rs based on the means of the actual cost shares are likely to follow either the normal or ratio of normals distribution function examination of three published empirical studies demonstrates that inferences regarding the values of elasticities cannot be made from point estimates alone and suggests a trade off between the level of aggregation and the width of confidence intervals for the elasticit y estimators copyright 1986 by mit press

the theory of international economic sanctions a public choice approach comment william kaempfer and anton lowenberg in this review september 1988 have developed an engaging model of the sanctions process grounded in public choice they identify potentially influential private forces that might affect the nature of a sanctions package while the spirit of their effort is laudable the model fails to incorporate some absolutely essential information about the legal institutional and strategic framework in which sanctions decisions are made as a consequence they reach a conclusion that flies in the face of existing facts contrary to what is suggested by kaempfer and lowenberg kl and contrary to the implications of their model the evidence clearly indicates there is an unequivocal bias against the use of import restrictions in favor of export controls the recent history of economic sanctions shows that only somewhat more than one third of sanction episodes involved both export and import controls further gary hufbauer and jeffrey schott 1985 observe that in instances where only one or the other is invoked export controls are almost always preferred to restrictions on imports 2 an almost exclusive reliance on export controls in economic foreign policy measures is particularly evident in the actions of the united states in the 1970s 3 the purpose of this comment is to explore the causes of this asymmetry there are at least three reasons why export controls have been favored over import controls reasons that play no part in the kl model first the general agreement on tariffs and trade gatt has institutionalized a bias against import barriers in favor of export controls second in the united states domestic legal constraints favor export controls and discourage import controls third as will be argued export controls are more easily reversed than import controls and reversibility is a desirable component in any foreign policy based trade intervention consider these points in turn in the 1946 1948 period during which time the gatt was first negotiated trade barriers were identified most often with those artificial impediments to trade that restrict foreign access to domestic markets especially tariffs for this reason gatt rules and actions have sought primarily to dismantle import barriers john jackson 1969 p 502 notes that despite the fact that extensive export controls do exist there has been only one complaint with respect to such controls reflected in gatt documents this is the czechoslovakian complaint against the united states in 1949 for the imposition of discriminatory export controls 4 jackson p 502 observes that there is very little if any effective gatt policing of export control policy and he comments later p 539 that insofar as any gatt obligations can be avoided without consequences this avoidance operates in effect as an exception this suggests that those foreign policy export controls that are pro department of economics university of arizona tucson az 85721 i thank alan deardorff bernard hoekman and robert stem for helpful discussions on work related to this note my thanks also to two anonymous referees for their constructive comments see p 28 and tables 4 1 4 5 pp 70 77 hufbauer and schott 1985 2ibid p 28 3see for example richard cooper 1987 pp 301 302 and p 305 and kenneth abbott 1981 p 741 4this is confirmed more recently by barry carter 1988 p 97 the only other event involving export restrictions challenged before the gatt was the u s embargo against nicaragua in 1985 which involved both import and export restrictions