bipolarity multipolarity and free trade recent literature typically attributes the relative scarcity of open international markets to the prisoner s dilemma structure of state preferences with respect to trade i argue that the prisoner s dilemma representation does not reflect the most critical aspect of free trade agreements in an anarchic international system security externalities explicit consideration of these effects suggests that a bipolar international political system has an advantage relative to its multipolar counterpart with respect to the opening of markets among states less credible exit threats and stronger incentives to engage in altruism within its alliances explain the advantage of a two power system the real income gains that motivate free trade are also the source of the security externalities that impede it their ability to internalize these effects makes military alliances the natural basis of agreements to open international markets the evolutionary prospects of alliances vary however ones that are the products of bipolar systems are more likely to evolve into free trade coalitions than are their multipolar counterparts i argue that less credible exit threats and stronger incentives to engage in alliance altruism explain the advantage of a two power system several important limits of the argument should be made clear immediately i argue at the systemic level i attempt to isolate the political and economic incentives for free trade that occur at the level of the international system i do not therefore consider the impact of unitlevel factors on the pursuit of these incentives for example neither the role of special interest groups nor the organization of domestic exchange via hierarchies instead of markets is considered doyle 1986 frieden 1988 ruggie 1982 the conditions i assume are those of standard international trade theory ethier 1983 and illustrative rather than systematic empirical referents are used these restrictions are appropriate given my purpose to demonstrate analytically the advantage of a bipolar international political system with respect to free trade

optimal contracting and the organization of knowledge we study contractual arrangements that support an efficient use of time in a knowledge intensive economy in which agents endogenously specialize in either production or consulting the resulting market for advice is plagued by informational problems since both the difficulty of the questions posed to consultants and the knowledge of those consultants are hard to assess we show that spot contracting is not efficient because lemons in this case self employed producers with intermediate knowledge cannot be appropriately excluded from the market however an ex ante firm like contractual arrangement uniquely delivers the first best this arrangement involves hierarchies in which consultants are full residual claimants of output and compensate producers via incentive contracts this simple characterization of the optimal ex ante arrangement suggests a rationale for the organization of firms and the structure of compensation in knowledge intensive sectors our findings correspond empirically to observed arrangements inside professional service firms and between venture capitalists and entrepreneurs

international economic structures government interests and international coordination of macroeconomic adjustment policies analysts have commonly argued that there has been a decline in international coordination of the kinds of policies that governments can use to manage the international payments imbalances that emerge when different governments pursue different macroeconomic policies the decline typically has been attributed to a posited decline in american hegemony in contrast this article argues that international coordination of macroeconomic adjustment policies trade and capital controls exchange rate policies balance of payments financing and monetary and fiscal policies was at least as extensive for much of the 1980s as it had been in the 1960s there was however a shift away from coordination of balance of payments financing and other policies that have limited direct consequences for domestic economic and political conditions and a concurrent shift toward coordination of monetary and fiscal policies that are critically important for domestic politics and economics this change is best explained as a consequence of changes in the structure of the international economy most important international capital market integration encouraged governments to coordinate monetary and fiscal policies because balance of payments financing and exchange rate coordination alone are insufficient to manage the enormous payments imbalances that emerge when capital is able to flow internationally in search of higher interest rates and appreciating currencies

costly communication and incentives this paper discusses the introduction of incentive considerations in a model of costly communication it starts from a simplified version of a team theoretic model due to dessein and santos 2003 which relates the design of an organization to its adaptiveness to environmental uncertainty incentives are introduced in this setting following an approach developed by dewatripont and tirole 2005 doing so enriches the analysis by allowing for the coexistence of various forms of communication in particular cheap talk versus costly communication 2006 by the european economic association

rational hegemons excludable goods and small groups an epitaph for hegemonic stability theory in defining international free trade as a public good hegemonic stability theory posited early in the 1970s that its reliable supply depended upon a distribution of international power analogous to that within a privileged group more recently however critics have challenged three assumptions fundamental to hegemonic theory its premises of free trade public goods and privileged groups they have concluded that hegemony is not necessary for and indeed may be antithetical to a stable world economy based on market exchange the author argues that the critics overstate their case the assumptions they attack allow hegemonic theory to represent analytically several critically important barriers to free trade among states among these are the existence of strategic interdependence among the actors and the prevalence of informational asymmetries the most significant flaw in hegemonic theory is its neglect of the essence of the domain to which it applies the politics of inter state trade in an anarchic world

firm size wage gaps job responsibility and hierarchical matching i present the fact that wage gaps due to firm size increase with job responsibility i use swedish data to determine whether wage gaps increase with a direct measure of job responsibility to compare the age patterns of the wage gaps for blue and white collar workers and to compare wages by job responsibility and spans of control with u s data i compare supervisory to nonsupervisory occupations and find that wage gaps increase with job responsibility for most occupational ladders this fact is consistent with hierarchical matching models in which the larger number of subordinates amplifies managerial talent

power politics and international trade r recent literature attributes the relative scarcity of open international markets to the prisoner s dilemma structure of state preferences with respect to trade we argue that the prisoner s dilemma representation does not reflect the most critical aspect of free trade agreements in an anarchic international system namely their security externalities we consider these external effects explicitly doing so leads us to two conclusions 1 free trade is more likely within rather than across political military alliances and 2 alliances are more likely to evolve into free trade coalitions if they are embedded in bipolar systems than in multipolar systems using data drawn from an 80 year period beginning in 1905 we test these hypotheses the results of the analysis make it clear that alliances do have a direct statistically significant and large impact on bilateral trade flows and that this relationship is stronger in bipolar rather than in multipolar systems in the early 1970s students of international relations began what would become a long and heated debate about the political correlates of open international markets recently however an important element of consensus has begun to emerge most contributors to this debate now seem to agree that the prisoner s dilemma structure of state preferences with respect to trade explains the relative dearth of open international markets here we argue that what has become the standard prisoner s dilemma representation neglects the most critical aspect of free trade agreements in the anarchic international system namely their security externalities we consider these external effects explicitly in order to do so we construct and analyze a simple game theoretic model the results of this analysis demonstrate that tariff games between allies differ systematically from those played between actual or potential adversaries these differences imply that free trade is more likely within rather than across political military alliances however our analysis also suggests that the evolutionary prospects of alliances vary those that are the products of bipolar systems are more likely to evolve into free trade coalitions than are their multipolar counterparts less credible exit threats and clearer responsibilities for alliance stability explain the advantage of a bipolar system we test this argument using data drawn from an 80 year period beginning in 1905 the empirical analysis supports our argument it demonstrates that alliances have a direct statistically significant and large effect upon bilateral trade moreover it shows that on average alliances have a much stronger effect on trade in a bipolar than in a multipolar world 2

who is at the wheel when communities drive development evidence from the philippines summary community driven development cdd approaches have become an important part of development operations using data from 1 200 households in 66 communities participating in a cdd project in the philippines we analyze how communities select their proposals and how resources are allocated across villages resources flow to the poorest and more politically active villages controlling for poverty more unequal villages are more likely to receive funding this surprising result is because in more unequal villages the elected village leader is more likely to override community preferences and to influence inter village competition such that project resources flow to their villages

hegemonic stability theory and 19th century tariff levels in europe although the theory of hegemonic stability has attracted an impressive array of adherents current formulations leave many conceptual issues unresolved existing formulations also fail to draw from the theory any implications concerning the process by which a hegemonic state creates and maintains a regime as an example great britain is generally agreed to have been hegemonic in the nineteenth century but britain s behavior was generally inconsistent with that implied by a theory of hegemonic stability i advance an alternative set of explanations for changes in international tariff levels based on the notion of a political business cycle

matching problems with expertise in firms and markets when should expertise be shared in markets and when in firms knowledge exchanges in the market involve less information about the quality of the provider s expertise but facilitate good utilization of experts knowledge in a firm management holds soft information about individuals expertise and thus improves on the matching of experts to problems however the usage of experts is not smooth and thus firms experience over or underutilization of experts time thus the trade off between firms and markets is between utilization the market allows for better smoother utilization of knowledge than firms and the quality of matching between problems and problem solvers the market provides less information about experts quality

sectoral conflict and foreign economic policy 1914 1940 the period from 1914 to 1940 is one of the most crucial and enigmatic in modern world history and in the history of modern u s foreign policy world war i catapulted the united states into international economic and political leadership yet in the aftermath of the war despite grandiose wilsonian plans the united states quickly lapsed into relative disregard for events abroad it did not join the league of nations disavowed responsibility for european reconstruction would not participate openly in many international economic conferences and restored high levels of tariff protection for the domestic market only in the late 1930s and 1940s after twenty years of bitter battles over foreign policy did the united states move to center stage of world politics and economics it built the united nations and a string of regional alliances underwrote the rebuilding of western europe almost single handedly constructed a global monetary and financial system and led the world in commercial liberalization

the sterling dollar franc triangle monetary diplomacy 1929 1937 the late interwar years encompass a full spectrum of international monetary conflict and cooperation why did great britain france and the united states cooperate in some periods and not in others first the transience of monetary cooperation and conflict is explained in part by inherent characteristics of gold exchange and floating monetary systems second environmental changes swings between prosperity and depression between peace and the threat of war and between monetary orthodoxy and inflationist heresy altered the strategic setting confronting the central monetary powers third the actions of governments both followed from and shaped the circumstances that they confronted through strategies of composition across issues and decomposition across time and actors nations deliberately fostered the emergence of cooperation by altering the context of monetary diplomacy

the concentration of capabilities and international trade over the course of the previous two decades political scientists have become increasingly interested in the relationship between international politics and global trade much of the literature on this topic centers on the effects of a hegemonic distribution of power on commerce hegemonic stability theorists argue that hegemony is a necessary condition for the existence of a liberal economic order and that in the absence of a hegemon a liberal international economy is particularly difficult to establish and maintain however a growing number of theoretical and empirical critiques have been leveled against the gemonic stability theory and the issue of whether hegemony helps shape patterns of global trade continues to be the topic of heated debate

the taxation of superstars how are optimal taxes affected by the presence of superstar phenomena at the top of the earnings distribution to answer this question we extend the mirrlees model to incorporate an assignment problem in the labor market that generates superstar effects perhaps surprisingly rather than providing a rationale for higher taxes we show that superstar effects provide a force for lower marginal taxes conditional on the observed distribution of earnings superstar effects make the earnings schedule convex which increases the responsiveness of individual earnings to tax changes we show that various common elasticity measures are not sufficient statistics and must be adjusted upwards in optimal tax formulas finally we study a comparative static that does not keep the observed earnings distribution fixed when superstar technologies are introduced inequality increases but we obtain a neutrality result finding tax rates at the top unaltered

first in village or second in rome though individuals prefer high quality peers there are advantages to being high up in the pecking order within a group in this environment sorting of agents yields an overlapping interval structure in the type space segregation and mixing coexist in a stable equilibrium with transfers this equilibrium corresponds to a competitive equilibrium where agents bid for relative positions and entails less segregation than the efficient allocation more egalitarianism within organizations induces greater segregation across organizations but can improve the allocation efficiency since competition is most intense for intermediate talent effective personnel policies differ systematically between high quality and low quality organizations

cooperation in the liberalization of international trade after hegemony what nations dwell in perpetual anarchy for no central authority imposes limits on the pursuits of sovereign interests because as states they cannot cede ultimate control over their conduct to an supranational sovereign they cannot guarantee that they will adhere to their promises the possibility of a breach of promise can impede cooperation even when cooperation would leave all better off yet at other times states do realize common goals through cooperation under anarchy

setting international standards technological rationality or primacy of power standards have become one of the most important nontariff barriers to trade especially national product standards that specify design or performance characteristics of manufactured goods divergent national standards often inhibit trade whereas regional and international standards increasingly serve as instruments of trade liberalization consequently the setting of international standards seemingly technical and apolitical is rapidly becoming an issue of economic and political salience but who sets international standards who wins who loses this article offers a fresh analytical approach to the study of international standards which the authors call the institutional complementarities approach it builds on insights from realism and the battle of the sexes coordination game but emphasizes complementarities of historically conditioned standardization systems at the national level with the institutional structure of standardization at the international level it posits that after controlling for other factors that influence involvement in international standardization differences in institutional complementarities play a critical though largely accidental role in placing firms from different countries or regions in a first or second mover position when standardization becomes global the authors illustrate the insightfulness of this approach through statistical analyses of the first scientific set of data on standards use and standardization collected by the authors through an international online survey

the political determinants of international trade the major powers 1907 1990 we test three arguments about the effect of international politics on trade flows the first argument states that trade flows are greater between states with similar interests than those with dissimilar interests the second that trade flows are greater in democratic dyads than nondemocratic dyads and the third that trade flows are greater between allies we examine trade flows between the major powers from 1907 to 1990 this period provides variation on all three independent variables of interest and allows us to separate the three arguments empirically we estimate a gravity model of trade with the above political variables added our results demonstrate that joint democracy and common interests increase trade in a dyad but alliances generally do not even when controlling for polarity of the system

hierarchies and entrepreneurship we establish a correlation between the hierarchical structure of a firm and the likelihood of business creation among its former employees using a sample of 16 million observations of swedish workers and a novel proxy for hierarchies based on occupation data conditional on firm size and many other variables employees in firms with more layers are less likely to enter entrepreneurship to become self employed and to switch to another employer the effects of layers are much stronger for business creation than for job switching and they are stronger for entrepreneurship than for self employment we discuss two potential explanations for the distinctive hierarchy effect we find part of the effect could be to be due to preference sorting by employees and part due to employees in firms with fewer layers having a broader range of skills one test showing that the probability of entrepreneurship increases with their prior rank in an organization is consistent with ability sorting and inconsistent with preference sorting

interests power and multilateralism multilateralism characterizes to varying degrees patterns of interaction among states and the formal organizations they construct the utility of multilateral norms or organizations varies with the type of cooperation problem states confront thus the functional logic of international cooperation leads to hypotheses about the conditions under which the institution of multilateralism may be a feasible and efficient solution as in coordination problems and those under which it will not as in collaboration problems within these constraints powerful states choose institutions that will serve their interests with multilateral arrangements becoming more attractive as the future is valued more highly multilateral institutions should be stable in circumstances of changing distributions of power relative to more hierarchical institutions the vulnerability of patterns of international cooperation to various exogenous changes depends on the type of strategic interaction underlying state behavior

inequality and the organization of knowledge since the seminal work of lawrence f katz and kevin m murphy 1992 the study of wage inequality has taken as its starting point a neoclassical constant elasticity of substitution production function using as inputs capital and lowand high skill labor this approach assumes that the organization of production is fixed and determined by a particular specification of technology and it ignores both the source of the interaction between workers and the organizational aspects of this interaction these shortcomings are particularly important in light of growing empirical evidence that points first to the importance of decreases in the cost of processing and communicating information and second to the complementarity between organizational change and adjustments in the distribution of wages e g timothy f bresnahan et al 2002 this paper argues that theories that seek to guide empirical research on these areas must put knowledge and information at the center of the analysis of organizations and link the organizational structure with aggregate variables via equilibrium frameworks in garicano and rossi hansberg 2003 we present a model of this kind it determines the patterns of organization as manifested by the communication and specialization patterns and the implied wage structure that result from different costs of acquiring and communicating information here we present a simple variant of this theory that allows us to focus on one of the main aspects of that framework the sorting of agents into teams and the wage and organizational structure that accompanies that sorting we use this simple model to analyze the changes in organization and wages that result from a very specific type of technological change a reduction in the cost of communicating knowledge or information this model allows us to consider the effect on within class wage inequality and the impact of information technology on the creation and form of organizations e g size distribution of hierarchies however because knowledge is exogenously given and agents cannot invest in learning an important margin of the model in garicano and rossi hansberg 2003 is fixed namely the degree of decentralization or the extent to which problems are solved at lower levels that model allows the simultaneous study of the acquisition of knowledge spans of control and matching in equilibrium moreover it goes beyond the current analysis in that it allows for organizations with an unconstrained number of layers and in that it studies two aspects of the impact of information technology communication technology like here and the technology to acquire knowledge or information e g processing power through cheaper database access

poverty reduction without economic growth explaining brazil s poverty dynamics 1985 2004 brazil s slow pace of poverty reduction over the last two decades reflects both low growth and a low growth elasticity of poverty reduction using gdp data disaggregated by state and sector for a twenty year period this paper finds considerable variation in the poverty reducing effectiveness of growth across sectors across space and over time growth in the services sector was substantially more poverty reducing than was growth in either agriculture or industry growth in industry had very different effects on poverty across different states and its impact varied with initial conditions related to human development and worker empowerment the determinants of poverty reduction changed around 1994 positive growth rates and a greater absolute elasticity with respect to agricultural growth contributed to faster poverty reduction but because there was so little of it economic growth played a relatively small role in accounting for brazil s poverty reduction between 1985 and 2004 the taming of hyperinflation in 1994 and substantial expansions in social security and social assistance transfers beginning in 1988 accounted for a larger share of the overall reduction in poverty

voice votes and resources evaluating the effect of participatory democracy on well being summary participatory governance is said to enhance governance citizens empowerment and the quality of democracy creating a virtuous cycle to improve the well being of the poor however there is limited empirical evidence for this relationship drawing from an original database of brazil s 220 largest cities we assess whether the adoption of a participatory budgeting pb program is associated with changes in social spending or changes in several indicators of well being we find that pb municipalities spend a slightly higher share of their budget on health and education programs but there is little evidence that this shift in budget priorities affects measurable outcomes

vertical aspects of male female disparity in the labor market abstract the organization based economy model presented by garicano and rossi hansberg g rh 2004 is used to study the vertical dimensions of male female disparity in the labor market this sheds a new light on the major aspects of the phenomenon

is democracy good for the poor many scholars claim that democracy improves the welfare of the poor this article uses data on infant and child mortality to challenge this claim cross national studies tend to exclude from their samples nondemocratic states that have performed well this leads to the mistaken inference that nondemocracies have worse records than democracies once these and other flaws are corrected democracy has little or no effect on infant and child mortality rates democracies spend more money on education and health than nondemocracies but these benefits seem to accrue to middle and upper income groups

u s trade policies in a changing world economy this collection of original essays focuses on issues of international trade and trade policy in a world that is undergoing structural adaptation and in the face of a serious increase in the us trade deficit they bring a new consolidation of analytical perspective to a wide variety of current trade policy issues in their overview chapter alan v deardorff and robert m stern discuss developments in trade and protectionism review the case for free trade and address the arguments in favor of trade intervention rudiger dornbusch and jeffrey frankel analyze the macroeconomic setting in which changes have been made in us tariffs and ntbs stephen p magee and leslie young develop a model of endogenous protection and use it to search for microeconomic and macroeconomic variables that may help to explain changes in tariff and nontariff protection in the us since 1900 paul krugman takes up the question of identifying strategic sectors and the extent to which international competition and national government policies may affect the returns to such sectors under conditions of imperfect competition or when externalities are present avinash dixit analyzes the responses that the us might make to other countries trade policies in terms of how these policies affect us real national income and national security he concludes that the us could use strategic advance responses to alter other countries trade policies in a mutually beneficial way richard n cooper evaluates trade policy as foreign policy by looking at changes through three periods of us history t n srinivasan scrutinizes the national defense argument for government intervention in foreign trade john h jackson in discussing alternative negotiation approaches for the conduct of us trade policies observes that the pursuit of multilateralism may be frustrating and that what may be needed instead is a minilateral approach to trade liberalization in conclusion w max corden offers a package of rules that he believes may be both desirable and possible for the international trading system to attain robert m stern is professor of economics at the university of michigan and director of the institute of public policy studies he is coauthor with allan v deardorff of the michigan model of world production and trade mit press 1985

improving social well being through new democratic institutions we evaluate the role of a new type of democratic institution participatory budgeting pb for improving citizens well being participatory institutions are said to enhance governance citizens empowerment and the quality of democracy creating a virtuous cycle to improve the poor s well being drawing from an original database of brazil s largest cities over the last 20 years we assess whether adopting pb programs influences several indicators of well being inputs processes and outcomes we find pb programs are strongly associated with increases in health care spending increases in civil society organizations and decreases in infant mortality rates this connection strengthens dramatically as pb programs remain in place over longer time frames furthermore pb s connection to well being strengthens in the hand of mayors from the nationally powerful ideologically and electorally motivated workers party our argument directly addresses debates on democracy and well being and has powerful implications for participation governance and economic development

the relative gains problem for international cooperation modern realism claims that the fear that others will enjoy relatively greater benefits frequently impedes international cooperation recent articles in this review by duncan snidal and robert powell modeled conditions under which the impact of relative gains varied joseph grieco criticizes snidal s model as based on assumptions that allow him to avoid rather than confront the realist arguments he also argues that powell s model while constructive ignores important additional sources of sensitivity to relative gains in response powell discusses the value of alternative assumptions about preferences and constraints in international relations snidal defends his analysis and presents an additional proof to support the independence of his central result the diminishing impact of relative gains with increasing numbers of states from assumptions of concern to grieco both responders emphasize their work as contributing to a contextually rich theory of international politics that builds on elements of both realism and neo liberalism

the growing importance of social skills in the labor market the labor market increasingly rewards social skills between 1980 and 2012 jobs requiring high levels of social interaction grew by nearly 12 percentage points as a share of the u s labor force math intensive but less social jobs including many stem occupations shrank by 3 3 percentage points over the same period employment and wage growth were particularly strong for jobs requiring high levels of both math skill and social skills to understand these patterns i develop a model of team production where workers trade tasks to exploit their comparative advantage in the model social skills reduce coordination costs allowing workers to specialize and work together more efficiently the model generates predictions about sorting and the relative returns to skill across occupations which i investigate using data from the nlsy79 and the nlsy97 using a comparable set of skill measures and covariates across survey waves i find that the labor market return to social skills was much greater in the 2000s than in the mid 1980s and 1990s

the unconditional most favored nation clause and the maintenance of the liberal trade regime in the postwar 1870s international institutions within the past thirty years become the subject of renewed interest as scholars vigorously dispute their utility neorealists draw on the post world war ii era to advance sweeping general claims of institutional inefficacy this study by contrast deploys the same hard test method grieco applied to the 1970s tokyo round negotiations to the crisis rife 1870s to construct a unique methodological objective a rigorous hard test of nineteenth century institutional autonomy three principal findings emerged first the maintenance of a liberal world economy in the turbulent 1870s is explained by an unlikely commercial instrument and the unprecedented regime design of an unexplored international institution respectively the unconditional most favored nation mfn clause and the informal conventional tariff system cts regime it underpinned not british hegemony second the international trade regime was not a public good unilaterally provisioned by hegemonic britain via the 1846 corn laws repeal the regime was instead a private good that was collectively provisioned by all its constituent member states via the unprecedented interstate practices institutionalized in the 1860 cobden chevalier treaty and then autonomously maintained by a negarchical and self enforcing sanctioning mechanism finally the informal cts regime s enforcement mechanism autonomously altered the interests and behaviors of states in directions incongruent with executive preferences solely through the brute force of rational calculations imposed by decentralized international institutional constraints both the french and british executives in the 1870s believed the regime was normatively inappropriate and unsuccessfully attempted to exit amid eight system threatening crises nonetheless the mfn based regime s self enforcing sanctioning mechanism autonomously induced compliance conceptualized as unitary states behavior deviating from executives first order preference the extraordinarily turbulent 1870s therefore provide an unexplored historical vantage point to make strong institutionalist claims in an era issue area and under conditions that they are least likely to be validated

openness of the economy terms of trade and arms it is estimated that world military spending in 2011 amounted to over 2 5 of the world s gross domestic product gdp this corresponds to a spending of 233 per person in the world at 2010 constant prices an amount close to the gdp per capita of the poorest country in the world therefore it is important for economists to understand the allocation of resources to this sector of the economy i present a model that explores the determinants of a country s level of military spending i show how greater gains from trade can lead to greater military expenditures to protect them it is also found that expansion in the demand for a country s tradable commodities that is an improvement in that country s terms of trade will impact defense spending several other propositions emerge from the model which are then empirically tested using both pooled and time series data the statistical results support the model s propositions