an economic theory of self control the concept of self control is incorporated in a theory of individual intertemporal choice by modeling the individual as an organization the individual at a point in time is assumed to be both a farsighted planner and a myopic doer the resulting conflict is seen to be fundamentally similar to the agency conflict between the owners and managers of a firm both individuals and firms use the same techniques to mitigate the problems which the conflicts create this paper stresses the implications of this agency model and discusses as applications the effect of pensions on saving saving and the timing of income flows and individual discount rates

the capital structure and investment decisions of the small owner managed firm some exploratory issues in the burgeoning literature on small firm financing the problem of underidentification in respect to the supply of and demand for capital has not been fully resolved in an attempt to progress this issue the current paper looks at some of the issues influencing the demand for finance in small firms which are owner managed the paper is primarily exploratory in nature and argues that a greater emphasis might usefully be placed on the cost of capital dimension in future research into small business financing in particular it is suggested that where the objective of an owner manager is to maintain control of the firm interdependent investment and financing strategies may be chosen to control the small firms cost of capital this in turn indicates that the tendency for some small firms to invest sub optimally and exhibit slower than average growth may not be primarily determined by limitations on their supplies of finance on the demand side it may well be that in addition to equity aversion a suboptimal capital structure decision is made in the form of a reduced demand for debt in other words given the level of equity that an owner manager chooses debt may not be fully expanded to the capacity limit consistent with value maximisation

exchange rates and the political economy of macroeconomic discipline during the last few years there has been an increasing interest in understanding the relationship between exchange rate regimes and macroeconomic stability some recurrent policy questions are a why do countries still choose fixed nominal exchange rate regimes 25 years after the abandonment of the bretton woods system b do fixed exchange rate regimes impose an effective constraint on monetary and fiscal behavior thus lowering inflation rates over the long run and c are exchangerate based stabilization programs superior to money based programs this paper deals with the first question the selection of the exchange rate regime from a politicaleconomy perspective why certain countries choose a particular type of exchange rate regime is a highly relevant question why does austria have a fixed exchange rate for example while the united kingdom has a flexible one why has argentina chosen a fixed exchange rate while chile has a flexible cumbands system more generally in december 1992 why did 84 countries out of the 167 reported in the imf s international financial statistics peg their currencies to a major currency or a currency composite the theoretical discussion deals with the trade off between credibility and flexibility and it emphasizes the role of politics and institutions in the empirical section i use a large cross country panel data set to analyze the role of various factors including political instability in decid

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

the economics of small business finance the roles of private equity and debt markets in the financial growth cycle abstract this article examines the economics of financing small business in private equity and debt markets firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle we show the sources of small business finance and how capital structure varies with firm size and age the interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment we also analyze a number of research and policy issues review the literature and suggest topics for future research

did the federal trade commission s advertising substantiation program promote more credible advertising this paper examines the effects of the federal trade commission s advertising substantiation program developed in the early 1970s this program coupled changes in the legal definition of deception with more vigorous ftc enforcement the authors analyze changes in advertising intensity media choice media wealth and the progress of new entrants the evidence suggests that adoption of substantiation requirements increased the credibility of advertising copyright 1990 by american economic association

the carnegie conjecture some empirical evidence this paper examines tax return generated data on the labor force behavior of people before and after they receive inheritances the results are consistent with andrew carnegie s century old assertion that large inheritances decrease a person s labor force participation for example a single person who receives an inheritance of about 150 000 is roughly four times more likely to leave the labor force than a person with an inheritance below 25 000 additional albeit weaker evidence suggests that large inheritances depress labor supply even when participation is unaltered warren kendall heir to an insurance company fortune says he s worth about 5 million and has an income of about oh 300 and some thousand a year h e has never held a job or wanted to going down to sea in cruise ships is his full time pursuit he estimates that he has taken about 250 cruises over the past couple of decades spending at least 50 percent to 70 percent of the year afloat morgenthaler 1991 p al

exchange rate economics 1986 in the past fifteen years key exchange rates have moved in larger and more persistent ways than advocates of flexible rates in the late 1960s would have left anyone free to imagine certainly there was no expectation of constancy for nominal exchange rates but real exchange rate movements of 30 or forty percent were definitely not suggested as a realistic possibility moreover where these large movements did occur they did not obviously appear to be connected with fundamentals and hence seemed difficult to explain in terms of the exchange rate theories at hand the persistence of rate movements was as surprising as the rapid unwinding of apparent misalignments when they did ultimately occur the past fifteen years provide a natural dividing line between the keynesian and monetary approaches of the 1960s and the more recent analysis that takes into account exchange rate expectations and portfolio issues which took off in the early 1970s as well as the brand new approaches that concentrate on partial equilibrium microeconomics to review these ideas the paper starts with a brief look at the u s experience with flexible exchange rates from there it proceeds to the mundell fleming model as a comprehensive framework of analysis the following sections deal with persistent effects of policy disturbances links between exchange rates and prices the political economy of exchange rate movements and the question of policies toward excess capital mobility this abstract was borrowed from another version of this item

agency relationships in family firms theory and evidence does owner management necessarily eliminate the agency costs of ownership drawing on agency literature and on the economic theory of the household we argue that private ownership and owner management expose privately held owner managed firms to agency threats ignored by jensen s and meckling s 1976 agency model private ownership and owner management not only reduce the effectiveness of external control mechanisms they also expose firms to a self control problem created by incentives that cause owners to take actions which harm themselves as well as those around them jensen 1994 p 43 thus shareholders have incentive to invest resources in curbing both managerialand owner opportunism we extend this thesis to the domain of the family firm after developing hypotheses which describe how family dynamics and specifically altruism exacerbate agency problems experienced by these privately held owner managed firms we use data obtained from a large scale survey of family businesses to field test our hypotheses and find evidence which suggests support for our proposed theory finally we discuss the implications of our theory for research on family and other types of privately held owner managed firms

impact of ownership on the international involvement of smes this paper analyses the relationship between the internationalisation strategies of smes and types of ownership different types of ownership affect firms and this in turn will influence the internationalisation strategy adopted using a sample of spanish smes our results show that internationalisation is negatively related to family ownership and positively related to corporate ownership we have also observed that the presence of a corporate blockholder in family firms encourages internationalisation these results support the idea that ownership type influences the decision to internationalise

eminent domain power and afterwards leviathan s post taking opportunism this paper investigates post taking procedures a research area not yet fully explored it discusses the economic implications underlying the landowner s repurchase right rr which can be invoked upon the occurrence of a so called change in use after taking rr is compared with the government s discretion regarding such changes the lack of post taking accountability tends to create power ripe for abuse and rr appears to be an effective device for constraining leviathan s opportunism finally a parsimonious estimation supports that under the overriding rr regime there exists the systematic post taking opportunism whereby original public projects are changed into inappropriate projects

intergenerational succession in small family businesses borrowing constraints and optimal timing of succession small family businesses differ from non family businesses in that their functioning is not independent of the life cycle of the owner operator and in that other family considerations sometimes lead to sub optimal managerial decisions from the point of view of the business this is why a smooth intergenerational succession is essential to the profitability of the business and to the welfare of the family as a whole succession within the family involves first of all the choice of a successor the choice is affected by birth order age differentials and qualifications of potential successors choosing a successor means reaching an agreement about the timing of succession and income distribution before and after succession this paper focuses on the decision of the business operating family when to bring in the designated successor a utility maximizing time is shown to differ from the income maximizing time only in the presence of binding borrowing constraints such constraints are likely to enhance an earlier succession in order to use the successor s accumulated off business assets to ease the constraints and to increase future business income due to earlier accumulation of business specific human capital by the successor an additional model shows that the successor will not be willing to wait indefinitely for the formal ownership transfer of the business because of the risk of being disinherited in some future period the consequences of possible strategic behaviors of both the owner and potential successors on the results of these models is discussed informally

on becoming more flexible exchange rate regimes in latin america and the caribbean abstract this paper examines the shift from fixed to more flexible exchange rate regimes among countries in latin america and the caribbean in contrast to most traditional approaches the one followed here recognizes that fixed rates can be and often are adjusted but argues that policy makers incur a political cost from devaluation at the same time flexible exchange rates even managed ones may be very volatile with persistent misalignment a stylized model of regime choice is developed based on the perceived losses from exchange rate misalignment incurred under fixed versus more flexible regimes the model is estimated for a sample of 24 countries over the period 1978 1992 and empirical results are quite supportive misalignments proxied by current account deficits and moderate to high rates of inflation were associated with a move to more flexible rates during 1978 1986 misalignment indicators appear to have mattered less during 1987 1992 however there appears to have been a major reduction in the perceived difficulty of managing flexible rates during this period the paper then cautions against attributing differences in economic growth between groups of countries to their exchange regime the central point here is that the endogeneity of regime choice introduces selection biases into the samples of countries with fixed and with more flexible exchange regimes

explaining exchange rate volatility an empirical analysis of the holy trinity of monetary independence fixed exchange rates and capital mobility abstract this paper uses a panel of data from twenty two countries between 1967 and 1992 to explain exchange rate volatility focusing on potential tradeoffs between fixed exchange rates independent monetary policy and capital mobility i use monetary models to parameterize monetary divergence and factor analysis to measure capital mobility exchange rate volatility is loosely linked to both monetary divergence and the degree of capital mobility interestingly exchange rate volatility is significantly correlated with the width of the explicitly declared exchange rate band even after taking monetary divergence and capital mobility into account

the impact of external parties on brand name capital the 1982 tylenol poisonings and subsequent cases an examination of the 1982 tylenol poisonings reveals stock market losses to johnson johnson that far exceed direct costs and losses shared with other pain reliever producers this evidence provides support for the klein and leffler 1981 theory of brand names as quality assuring mechanisms of the subsequent cases only the 1986 tylenol poisonings were associated with significant stock market losses prior to the 1982 and 1986 tylenol poisonings tylenol was the number one pain reliever whereas the other pain relievers that were poisoned had a much lower level of brand name capital to lose

a unified systems perspective of family firm performance abstract theory and practice indicate that in family influenced firms the interaction of the family unit the business entity and individual family members create unique systemic conditions and constituencies that impact the performance outcomes of the family business social system habbershon and williams fam bus rev 12 1999 1 have suggested that these unique systemic family influences can be captured through an analysis of the resources and capabilities of the organization in this paper we pursue their line of thinking and more specifically examine the systemic relationship of resources and capabilities as a source of advantage or constraint to the performance outcomes for family influenced firms the idiosyncratic firm level bundle of resources and capabilities resulting from the systems interactions are referred to as the familiness of the firm wealth creating performance for family influenced firms is a function of the distinctive familiness generated by the family business system the performance model focuses on a particular subset of family influenced firms whose performance goal is transgenerational wealth and wealth creation potential we refer to those families that meet this premise as enterprising families we develop a unified systems model of performance that links the resources and capabilities generated in the enterprising families system with their potential for transgenerational wealth creation

market incentives for safe commercial airline operation using a sample of nearly all fatal u s airline accidents between 1960 and 1985 this paper attempts to quantify the costs that airlines incur due to crashes the potential costs include those due to loss of life and equipment tort liability increased regulatory oversight and loss of demand as consumers turn away from products perceived to be unsafe examination of the deviations from expected demand following accidents reveals little or no effect prior to airline deregulation and weak indication of a response to recent crashes these results are consistent with the changes in an airline s equity value following an accident which are statistically significant but quite small relative to the total social cost of the accident

small firm growth access to capital markets and financial structure review of issues and an empirical investigation this article investigates the financial structure of small firms with an emphasis on growth and access to capital markets neo classical economic life cycle pecking order and agency theory perspectives are reviewed in order to formulate testable propositions concerning levels of long term short term and total debt and liquidity up to date financial data were collected from the u k private database for a large sample comprising of both listed and unlisted small firms regression results indicate significant relationships between financial structure and profitability asset structure size age and stock market flotation but not growth except when rapid and combined with lack of stock market flotation analysis of stock market flotation as an interactive dummy reveals major differences between listed and unlisted small firms the results indicate that the variety of financial structures observed in practice may reflect rational trade offs of various costs on the part of small firm owner managers but that the over reliance on internally available funds and the importance of collateral in the case of unlisted small firms are likely to be major constraints on economic growth

what does reputation really assure the relationship of trademarks to expectations and legal remedies i introduction klein and leffler 1981 and shapiro 1982 1983 have shown that a firm that engages in repeat transactions has an incentive to use the market as distinct from formal legal processes to assure the quality of its product the firm charges a price above salvageable costs of production and invests the premium in reputation trademark capital that it forfeits wholly or in part if it allows quality to fall below the standards it represents to its customers 1 the quality assurance hypothesis seems to be supported by stock market event studies such as those by jarrell and peltzman 1985 and karpoff and lott 1993 which show that product recalls airline crashes deceptive advertising and fraud result in trademark losses the quality assurance hypothesis however does not explain the massive size of these losses which typically are many times the outlays incurred by the firm as a result of the event the law and economics literature on contracts offers an answer to this and related puzzles suggesting that trademark capital does more than assure quality it assures specific performance that is fulfillment of the precise terms of the contract 2 after developing the specific performance hypothesis section ii we show that it is supported by the evidence from event studies furthermore it explains other phenomena not covered by the quality assurance hypothesis including why competitors of firms whose products are recalled lose wealth why some damages such as those in airline crashes intentionally fail to provide full compensation and why firms who sell to other firms also invest in trademark capital section iii we conclude with a summary and a few remarks on the issue of market versus legal forces section iv ii the specific performance hypothesis the quality assurance hypothesis focuses on the problems that arise when the physical characteristics of a commodity are costly to determine even after purchase and sellers warranties and quality representations are costly to enforce because higher quality usually costs more to produce and can be sold at a higher price producers have an incentive to represent their goods as being of higher quality than they really are or having established a reputation to cut quality and costs when consumers observe that the quality of the goods they purchase is lower than they had been led to believe they shift to lower cost lower quality goods whose quality is easier to determine higher quality goods seemingly are driven off the market klein and leffler 1981 hypothesize that a firm that engages in repeat transactions can gain by producing higher quality goods charging a price above salvageable costs of production and investing the premium in firm specific trademark capital the value of this trademark also described as reputation or goodwill is the present value of the expected stream of price premiums misrepresentation causes a reduction in this income stream and a corresponding loss in trademark capital 3 thus trademarks assure quality without a third party to enforce the contract 4 a buyer however is concerned about other characteristics of a transaction besides the physical attributes of the product the expected harm if the seller breaches the contract for example by misrepresenting the product failing to deliver it on time or failing to provide future service and the ability of the legal system to assure full compensation also matter accordingly a seller who engages in repeat transactions has an incentive to provide a bond that assures specific performance rather than just product quality when a breach results in damages that are hard to measure and the legal system does not enforce contracts costlessly the next task therefore is to examine the limitations of the legal system in enforcing contracts and providing compensation in case of breach specific performance and penalty clauses the courts could require contracting parties to provide specific performance

brand names ignorance and quality guaranteeing premiums recent literature contains several theories of how self enforcing agreements rely on repeat purchase mechanisms to ensure product quality some have suggested the use of advertising as a signal of future actions in such games this article extends these recent studies for the case where firms face temporary changes in cost or demand curves and offers an initial attempt at providing a statistical test of the klein leffler model it is found that the deviations in the advertising sales ratio from the levels that can be explained by industry specific characteristics are consistently contrary to what their model predicts these results hold over a very wide range of depreciation rates for advertising and for the many individual industries examined the results are only weakly affected when the presence of measurement error is explicitly recognized

variants of agency contracts in family financed ventures as a continuum of familial altruistic and market rationalities abstract funding is a critical dimension of new creation although instances of family involvement in new venture financing are common ironically their role has been largely ignored in much of the mainstream business and economics literature when family members invest in the ventures of other family members they must make many choices either explicitly or implicitly about organizational form and governance consequently the governance of these exchange relationships tends to be highly variable this paper explores the primary rationalities governing the exchange relationships in family investment decisions during the early stages of new venture creation it presents activities as variants of agency contracts occurring within a continuum of familial altruistic and business market rationalities existing venture capital theory is extended through the introduction of rationalities and more comprehensive models of decision making

democratic institutions and exchange rate commitments since the collapse of the bretton woods system countries have been able to choose from a variety of exchange rate arrangements we argue that politicians incentives condition the choice of an exchange rate arrangement these incentives reflect the configuration of domestic political institutions particularly electoral and legislative institutions in systems where the cost of electoral defeat is high and electoral timing is exogenous politicians will be less willing to forgo their discretion over monetary policy with a fixed exchange rate in systems where the costs of electoral defeat are low and electoral timing is endogenous politicians are more likely to adopt a fixed exchange rate regime consequently differences in domestic political systems can help account for variations in the choice of exchange rate arrangements we test this argument using constrained multinomial logit and binomial logit on a sample of twenty democracies over the period 1974 95 domestic political institutions have a significant effect on exchange rate regime choice even after controlling for systemic macroeconomic and other political variables

capital structure and small public firms abstract most analyses of capital structure from both a theoretical and an empirical viewpoint focus on large corporations as a result of data availability problems empirical studies deal with large corporations theoretical frameworks typically use illustrations and casual empirical evidence involving large firms only limited amounts of research focus on small growing entrepreneurial corporations and the factors affecting the capital structures of these firms much of current theory in capital structure deals with factors that are not easily and objectively quantified by outside researchers these factors include items such as expected bankruptcy costs information asymmetries between management and the financial marketplace agency costs of monitoring management and managerial risk preferences this paper reports on a survey sent to over 400 small high growth corporations questions on the survey were derived from various strands of the theoretical financial literature on capital structure over 27 of the surveys were completed and returned and give insight into the motivations and preferences of chief financial officers from over 100 small high growth corporations examination of the responses shows that contrary to financial theory factors dealing with bankruptcy costs agency costs and information asymmetries play little if any major role in affecting capital structure policy rather the responding financial officers seem to follow a pecking order in financing their firm s needs use internal cash as much as possible issue debt if necessary issue equity only as a last resort while being concerned with market conditions and their own preferences the following are implications of these findings first financial theory which is more and more focusing on micro factors while still theorizing efficient macro markets may be incorrectly ignoring the effect that management risk perceptions and preferences play in making capital structure decisions thus additional work is necessary to include the management in theories of capital structure second this survey allows outsiders to peer inside the managerial black box and gain insight into the factors that motivate and impact capital structure decisions it provides an empirical basis to help determine which influences are important third managers of entrepreneurial firms and investors in venture capital can compare their own beliefs perceptions and motivations against the mean results obtained from our sample of high growth firms

what s in a sign trademark law and economic theory the aim of this paper is to summarize the extant theory as it relates to the economics of trademark and to give some suggestions for further research with reference to distinct streams of literature the proposed line of study inevitably looks at the complex relationship between signs and economics copyright 2006 the authors journal compilation 2006 blackwell publishing ltd

endogenous changes in the exchange rate regime a bureaucratic incentive model public choice submits that legal changes can be endogenous in such a way that they are manipulated by bureaucrats who want to maximize rents from transactions with various interest groups this paper takes the change in exchange rate regimes to empirically examine the premise it offers a two stage method in which we first show that the exchange rate is influenced by interest group pressures and subsequently that the 1990 market average regime mar as a phase in policy in korea was introduced mainly to serve bureaucratic incentives this method is expected to be useful to a host of countries for various studies attempting to test a possible existence of bureaucratic or other hidden motivations behind any isolated event of policy change

the perception and measurement of transaction costs the chapter discusses various explanations of how transaction cost minimising corporate configurations come about it contrasts darwinian with rational explanations finding both unsatisfactory what matters rather than computation of fully recognised transaction costs are managerial perceptions of transaction costs these perceptions are not expressed in numbers but in language this is related to arguments derived from bounded rationality and from transaction cost economics the chapter argues that issues of managerial perception must become central to analysis existing academic traditions which accord primacy to perception and to language are drawn upon and argued to be of great relevance to future work

politics and exchange rate forecasts abstract standard exchange rate models perform poorly in out of sample forecasting when compared to the random walk model we posit part of the poor performance of these models may be due to omission of political factors we test this hypothesis by including political variables that capture party specific election specific and candidate specific characteristics surprisingly we find our political model outperforms the random walk in out of sample forecasting at 1 12 month horizons for the pound dollar mark dollar pound mark and the trade weighted dollar mark and pound exchange rates

the influence of family ownership dispersion on debt level in privately held firms the aim of this article is to investigate the financing behavior of privately held firms along the dispersion of family ownership drawing on the socio emotional wealth perspective we argue that debt levels are contingent on the degree of ownership dispersion among family members based on a sample of 2451 observations in a 10 year time frame our results reveal the existence of an inverted u shaped relationship between debt level and intra family ownership dispersion we demonstrate that this relationship is moderated by the generational involvement that inverts it in later generations

financing new venture exporters this paper investigates the demand for and access to financing for young small and medium sized enterprises smes the work compares theoretically and empirically two sets of new firms those that export and those that do not export as to the frequency with which they seek and obtain external financing the work hypothesizes that new growth firms and new exporter firms are especially likely to seek external financing yet less likely to obtain financing empirical findings confirm these expectations demonstrating that young growth firms were more likely than non growth firms to seek all forms of capital and exporters were particularly likely to apply for equity and trade credit commercial lenders were less likely to approve loan applications from early stage growth firms and especially so for applications from young growth oriented sme exporters the implications of these results for research and public policy are discussed

on the existence of an optimal capital structure theory and evidence one of the most contentious issues in the theory of finance during the past quarter century has been the theory of capital structure the geneses of this controversy were the seminal contributions by modigliani and miller 18 19 the general academic view by the mid 1970s although not a consensus was that the optimal capital structure involves balancing the tax advantage of debt against the present value of bankruptcy costs no sooner did this general view become prevalent in the profession than miller 16 presented a new challenge by showing that under certain conditions the tax advantage of debt financing at the firm level is exactly offset by the tax disadvantage of debt at the personal level since then there has developed a burgeoning theoretical literature attempting to reconcile miller s model with the balancing theory of optimal capital structure e g deangelo and masulis 5 kim 12 and modigliani 17 the general result of this work is that if there are significant leverage related costs such as bankruptcy costs agency costs of debt and loss of non debt tax shields and if the income from equity is untaxed then the marginal bondholder s tax rate will be less than the corporate rate and there will be a positive net tax advantage to corporate debt financing the firm s optimal capital structure will involve the trade off between the tax advantage of debt and various leverage related costs the upshot of these extensions of miller s model is the recognition that the existence of an optimal capital structure is essentially an empirical issue as to whether or not the various leverage related costs are economically significant enough to influence the costs of corporate borrowing the miller model and its theoretical extensions have inspired several timeseries studies which provide evidence on the existence of leverage related costs trczinka 28 reports that from examining differences in average yields between taxable corporate bonds and tax exempt municipal bonds one cannot reject the miller hypothesis that the marginal bondholder s tax rate is not different from the corporate tax rate however trczinka is careful to point out that this finding does not necessarily imply that there is no tax advantage of corporate debt if the personal tax rate on equity is positive indeed buser and hess 1 using a longer time series of data and more sophisticated econometric techniques estimate that the average effective personal tax rate on equity is statistically positive and is not of a trivial magnitude more importantly they document evidence that is consistent with the existence of significant leverage related costs in the economy

product reliability and firm value the experience of american and japanese automakers 1973 1992 in a typical month several recall campaigns of motor vehicles are announced by automobile manufacturers they are carried out to correct defective vehicles whether safetyor pollution related recalls imply that the products made available to consumers are not what they were supposed to be a question arises then as to whether and how much the offending automakers are affected by these recall campaigns the answer to this question has been ambiguous in the literature we have two purposes in this paper first on the basis of a longer and broader database we offer additional and more conclusive evidence that documents significant and negative market reactions to automobile recall announcements our finding therefore helps to resolve the ambiguity in the literature on this question second we offer new evidence on japanese automobile companies they too suffer from significant and negative stock market reactions but the incidence of recalls is less frequent perhaps as a result the magnitude of the stock market reaction to each recall is somewhat larger nevertheless because recalls are much less frequent the total losses

rent seeking noncompensated transfers and laws of succession my purpose in this paper is to analyze inefficiencies that may emerge from the noncompensated transfer of valued rights among persons this source of inefficiency has not to my knowledge been fully incorporated either in the economic theory of property rights or in orthodox tax analysis my discussion is based on the elementary fact that all noncompensated transfers are rents to the recipients implications for the emergence of rent seeking behavior follow straightforwardly the now familiar propositions to the effect that rent seeking may dissipate economic value can be applied to a variety of transfer settings only a few of which are explored in this paper 1 to the extent that the efficiency criterion is the relevant norm direct implications may be drawn for policy with respect to the laws or rules for succession

real exchange rate misalignment and redistribution abstract developing countries frequently maintain an overvalued nominal exchange rate resulting in real exchange rate misalignment to finance import demand at the overvalued exchange rate countries have to raise the level of income taxation or they have to resort to monetary finance this paper explains nominal and implicitly real exchange rate misalignment as the outcome of the political process more specifically the paper explains the misalignment of an import exchange rate relative to a market exchange rate used for exports voters differ in their ownership of a single factor of production real exchange rate overvaluation results if the median voter spends a relatively large share of his income on the importable good the political economy of explicit and implicit import subsidies is first analyzed in a real model which is then extended to include money holdings and exchange rate policy

an information rationale for the power of special interests political decisions are often biased in favor of special interests at the expense of the general public and they are frequently inefficient in the sense that the losses incurred by the majority exceed the gains enjoyed by the minority this article explains the bias in terms of information asymmetries and the free rider problem first incumbents increase their reelection prospects by biasing policy toward groups that are better able to monitor their activities second because smaller groups are better able to overcome the free rider problem of costly monitoring policy will be biased in their favor third the effect of asymmetric monitoring on voter welfare is ambiguous the inefficiencies created by the policy bias are offset by a positively valued selection bias incumbents of above average quality are more likely to survive voter scrutiny than are low quality types

the political economy of american monetary policy preface 1 introduction thomas mayer 2 studying the fed towards a broader public choice perspective thomas willett 3 the federal reserve reaction function a specification search salwa khouri 4 corporate profitability as a determinant of restrictive monetary policy estimates for the post war united states gerald epstein and juliet schor 5 federal reserve behavior since 1980 a financial market perspective william melton and v vance roley 6 the federal reserve and its institutional environment a review michael munger and brian roberts 7 the political economy of monetary policy robert hetzel 8 political monetary cycles nathaniel beck 9 congress and the fed why the dog does not bark in the night nathaniel beck 10 the federal reserve as a political power james pierce 11 monetary policy and political economy the federal reserve and the bank of japan thomas cargill and michael hutchinson 12 a positive analysis of the policymaking process at the federal reserve raymond lombra and nicholas karamouzis 13 a theory of fomc dissent voting with evidence from the time series thomas havrilesky and robert schweitzer 14 explaining fomc members votes john gildea 15 fed behaviour and x efficiency theory toward a general framework harinder singh and roger frantz 16 minimizing regret cognitive dissonance as an explanation of fomc behavior thomas mayer 17 the discount window william poole 18 leaning against the wind the behavior of the money stock in recession and recovery 1953 8 elmus wicker 19 bureaucratic self interest as an obstacle to monetary reform edward kane index

distinguished lecture on economics in government exchange rate regimes is the bipolar view correct the choice of appropriate exchange rate regime which for economies with access to international capital markets increasingly means a move away from the middle ground of pegged but adjustable fixed exchange rates towards the two corner regimes of either flexible exchange rates or a fixed exchange rate supported if necessary by a commitment to give up altogether an independent monetary policy lawrence h summers 2000 p 8

capital structure decisions during a firm s life cycle the study reported here examines the financing choices of small and medium sized firms i e those most vulnerable to information and incentive problems through the lens of the business life cycle we argue that the controversy in the empirical literature regarding the determinants of capital structure decisions is based on a failure to take into account the different degrees of information opacity and consequently firms characteristics and needs at specific stages of their life cycles the results show that in a bank oriented country firms tend to adopt specific financing strategies and a different hierarchy of financial decision making as they progress through the phases of their business life cycle contrary to conventional wisdom debt is shown to be fundamental to business activities in the early stages representing the first choice by contrast in the maturity stage firms re balance their capital structure gradually substituting debt for internal capital and for firms that have consolidated their business the pecking order theory shows a high degree of application this financial life cycle pattern seems to be homogeneous for different industries and consistent over time

an empirical inquiry into the role of sectoral diversification in exchange rate regime choice abstract whether sectoral diversification affects the exchange rate regime choice and the mechanisms through which this effect might work are largely unknown this study identifies two mechanisms through which sectoral diversification and exchange rate regime choice may be related namely the external shock absorption and rent seeking mechanisms a direct effect of diversification on regime choice is also hypothesized using a panel dataset covering 91 countries over the period 1985 2006 the paper runs a horse race among these potential channels the results show that diversification is associated with flexible regimes in countries experiencing greater external shocks additionally countries characterized by higher levels of corruption and lower levels of diversification opt for fixed regimes suggesting that a fixed regime may shield the powerful elites from international competition there is also weak evidence of the direct effect of diversification in adopting flexible regimes

bootstrapping in small firms an empirical analysis of change over time abstract while bootstrapping is widely utilized as a strategic practice of small firms and has been regarded in the entrepreneurship literature as an important topic of study little has been done to link bootstrapping to organizational theory this paper presents hypotheses and an empirical study regarding bootstrapping and organizational development for small firms the results of the study indicate that different types of bootstrapping are utilized at different periods in the life of a small firm and that the methods utilized coincide to some extent with organizational theory predictions

capital structure decision making a model for family business abstract most theoretical and empirical studies of capital structure focus on public corporations only a limited number of studies on capital structure have been conducted on small to medium size enterprises smes and this deficiency is particularly evident in investigations into factors that influence funding decisions of family business owners theory indicates that there is a complex array of factors that influence sme owner managers financing decisions recent family business literature suggests that these processes are influenced by firm owners attitudes toward the utility of debt as a form of funding as moderated by external environmental conditions e g financial and market considerations a number of other factors have been shown to influence financing decisions including culture entrepreneurial characteristics entrepreneurs prior experiences in capital structure business goals business life cycle issues preferred ownership structures views regarding control debt equity ratios and short vs long term debt age and size of the firm sources of funding for growth attitudes toward debt financing issues relating to independence and control and perceived risk and attitudes toward personal risk although these factors have been identified until now there does not appear to have been any attempts to develop empirically based models that show relationships between these factors and family business owners financing decisions utilizing theories derived from divergent disciplines this study develops an empirically tested structural equation model of financing antecedents of family businesses participants of our study involved a random sample of 5000 business owners who were mailed a 250 item australian family and private business questionnaire developed specifically for this investigation notably our findings reveal that firm size family control business planning and business objectives are significantly associated with debt small family businesses and owners who do not have formal planning processes in place tend to rely on family loans as a source of finance however family businesses in the service industry e g retailers and wholesalers are less likely to use family loans as are those owners who are planning to achieve growth through new products or process development use of capital and retained profits is likely for family businesses planning to achieve growth through an increase in sales but less is likely for family businesses in the manufacturing sector and lifestyle firms in addition debt and family loans are negatively related to capital and retained profits equity is a consideration for owners of large businesses young firms and owners who plan to achieve growth through increasing profit margins however equity is less likely to be a consideration for older family business owners and owners who have a preference for retaining family control our findings suggest that the interplay between multiple social family and financial factors is complex in addition our findings indicate the importance of utilizing theories that also help to explain behavioral factors e g owners needs to be in control that affect financial structure decision making processes practitioners and researchers should consider the dynamic interplay among business characteristics e g size or industry behavioral aspects of business financing e g business objectives and financial factors e g gearing levels when working with and researching family enterprises

real exchange rate variability and the choice of exchange rate regime by developing countries abstract this paper draws together two distinct strands of the exchange rate literature it proposes that real exchange rate variability and the choice of exchange rate regime are jointly determined i test this claim by estimating a simultaneous limited dependent variable model with data from a cross section of developing countries during the recent floating period drawing on the relevant exchange rate literature the paper examines a number of exogenous determinants of exchange rate variability and the choice of exchange rate regime

succession financing in family firms business succession is one of the primary management challenges for family firms however many family firms fail at this task because of financial issues although a vast number of studies have investigated the succession process research thus far has failed to determine how and why family firms select particular forms of financing for succession related expenditures accordingly this study conceptually and empirically investigates succession financing we introduce a conceptual framework that investigates the reasons behind an owner manager s intent to use debt for succession financing specifically our model accounts for general and succession related personal factors however we also include a set of firm specific financing behavioral controls in our research the empirical results are derived from a sample of 187 german family firms and the results highlight financial knowledge attitudes succession experience and succession planning as significant determinants of the owner managers debt usage intentions the implications and avenues for future research are discussed

market incentives for safe foods an examination of shareholder losses from meat and poultry recalls meat and poultry recalls while voluntary are carried out under governmental oversight if firms have financial incentives to avoid being implicated in a recall situation governmental involvement in recalls may cause firms to internalize social costs when making investment decisions concerning food safety controls to examine these incentives we analyze federally supervised meat and poultry recalls from 1982 to 1998 within an event study results show significant shareholder losses when publicly traded food companies are implicated in a recall involving serious food safety hazards we find no evidence that the stock market reacts negatively when recalls involve less severe hazards each year unsafe foods sicken millions and lead to losses in terms of life and productivity mead et al estimate that foodborne pathogens account for 76 million illnesses and 5 000 deaths in the united states given human error and the limitations of food safety technology food items that pose undue risks to the public will be distributed from time to time when this occurs the firms involved stand to incur expenses related to recovering disposing of or reconditioning potentially contaminated products already placed on the market in addition negative publicity can lead to reductions in product demand and may erode prior investments in reputation and brand capital these firms may also face costs from liability claims associated with an outbreak of food related illnesses or injury our main objective in this paper is to examine reductions in food company valuations that result from food contamination incidents we focus specifically on meat and poultry firms that have shipped products that were later recalled for food safety reasons because preventative actions taken by firms can affect the probability of being implicated in a product recall situation the wealth that is lost when companies are required to recall

a fresh look at the rotten kid theorem and other household mysteries gary becker s rotten kid theorem asserts that if all family members receive gifts of money income from a benevolent household member then even if the household head does not precommit to an incentive plan for family members it will be in the interest of selfish family members to maximize total family income i show by examples that the rotten kid theorem is not true without assuming transferable utility i find a simple condition on utility functions that is necessary and sufficient for there to be the kind of transferable utility needed for a rotten kid theorem while restrictive these conditions still allow one to apply the strong conclusions of the rotten kid theorem in an interesting class of examples

family ownership altruism and agency costs in australian small and medium sized enterprises given the continuing uncertainty about whether family firms enjoy lower agency costs this article hypothesizes that a combination of the effects of family ownership altruism and self control is instead at play to begin with family ownership can indeed reduce agency costs through better aligning the interests of owners and managers this is a determining effect in that it independently mitigates one source of agency problems however altruism combined with self control problems arising from the highly concentrated ownership often found in family firms can also increase agency costs this is an embedding effect as it is rooted in the personal relationships within the family firm using the business longitudinal database compiled by the australian bureau of statistics on small and medium sized enterprises smes we find that for larger smes those with 20 200 employees the gains in lower agency costs arising from family ownership are almost completely offset by the losses from altruism and the l

disequilibrium exchange rates as industrialization policy abstract this paper deals with a long standing puzzle why are developing countries so reluctant to change their exchange rates when their currencies have become blatantly overvalued the argument developed here is the following under circumstances that are fairly common to real economies a policy which deliberately maintains the exchange rate at a disequilibrium level can be welfare increasing by promoting structural change this can come via the presence of a systematic link between the real exchange rate and the manufacturing sector s terms of trade vis a vis agriculture the paper considers a model in which there exists a relationship between these two due to technological factors using a two period two sector general equilibrium model it demonstrates that such a link provides authorities with a tool which can be manipulated to bring about industrial growth and increase welfare in the presence of unrealized learning by doing effects

toward a theory of agency and altruism in family firms surprisingly the majority of u s family firms offer employed family members short and long term performance based incentive pay we draw on the household economics and altruism literatures to explain why family firms might feel compelled to do so and develop theory that predicts when this practice will be beneficial results based on data obtained from 883 family firms show that altruism as reflected by the parents estate and share transfer intentions moderates the effect of these pay incentives as our theory predicts as such this article helps explain both how altruism influences agency relationships in family firms and why business practice in family firms differs from those found in other types of firms

jobs in the bureaucratic afterlife a corruption facilitating mechanism associated with law enforcement this article starts with an observation that the employment of former regulatory officers by a regulated firm might be an integral part of the corruption facilitating mechanism cfm the article hypothesizes that such employment constitutes the deferred payment for the corruption previously supplied although anecdotal evidence of this kind of corruption abounds it has proven difficult to substantiate the article provides an explanation for why this deferred payment arrangement might be attractive to both demanders and suppliers of corruption it also offers tentative empirical support for the hypothesis that it plays a role as cfm in korea with the implication that this cfm hypothesis can be generalized to a host of regulatory countries according to a report that the berlin based transparency international ti 1997 published before the onset of the korean economic crisis korea did not fare as well as during the previous year in ti s annual country rankings concerning the prevalence of corruption in society the ti corruption perception index cpi which measured corruption in public life in particular put korea in 34th place down seven places from the previous year and korea s ranking has not improved since the essential insight that the economic models of the law enforcement process offer is that corruption comprises the implementation of government regulations since the returns realized by law enforcers in exchange for supplying corruption exceed the costs the ability of the legislature and the general public to monitor the discretionary implementation by law enforcers is naturally limited benson 1988 this article from the perspective of the economic theory of regulation mcchesney 1997 focuses on corruption mainly as it occurs during the enforcement of regulation we argue that

the debt adjusted real exchange rate abstract we propose the debt adjusted real exchange rate darer that better reflects the real price of the real dollar than the rer when the economy is financing trade deficits by foreign borrowing estimates of darer for the philippines show that in episodes of heavy current account deficits overvaluation of the domestic currency is markedly underestimated by simple rer darer performs unambiguously better than rer as a predictor of devaluation in the philippines and thailand during the period 1980 1992

implications of breach remedy and renegotiation design for innovation and capacity amanufacturer writes supply contracts with n buyers then the buyers invest in innovation and the manufacturer builds capacity finally demand is realized and the firms renegotiate the supply contracts to achieve an efficient allocation of capacity among the buyers the court remedy for breach of contract specific performance versus expectation damages affects how the firms share the gain from renegotiation and hence how the firms make investments ex ante the firms may also engage in renegotiation design inserting simple clauses into the supply contract to shape the outcome of renegotiation for example when a buyer grants a financial hostage to the manufacturer or is charged a per diem penalty for delay in bargaining the manufacturer captures the gain from renegotiation tradable options which grant buyers the right to trade capacity without intervention from the manufacturer return the gain from renegotiation to the buyers this paper proves that under surprisingly general conditions the firms can coordinate their investments with the simplest of supply contracts fixed quantity contracts this may require renegotiation design and certainly requires that the firms understand the breach remedy and set their contract parameters accordingly

the latent demand for bank debt characterizing discouraged borrowers concerns that small firms encounter credit constraints are well entrenched in the literature despite widespread empirical evidence that a relatively small proportion of small firms have their loan applications rejected however many firms may be discouraged from applying for fear of rejection these businesses are the focus of this paper based on responses to a large scale postal survey of uk small and medium sized enterprises smes we find that twice as many businesses were discouraged from applying for a bank loan than had their loan request denied more particularly we observe a number of distinguishing characteristics of discouraged borrowers relative to applicants these include strategy sector prior entrepreneurial experience and banking relationships the implications of our findings for policy and future research are briefly discussed

altruists egoists and hooligans in a local interaction model the authors study a population of agents each of whom can be an altruist or an egoist altruism is a strictly dominated strategy agents choose their actions by imitating others who earn high payoffs interactions between agents are local so that each agent affects and is affected by only his neighbors altruists can survive in such a world if they are grouped together so that the benefits of altruism are enjoyed primarily by other altruists who then earn relatively high payoffs and are imitated altruists continue to survive in the presence of mutations that continually introduce egoists into the population copyright 1998 by american economic association

appropriating signs and meaning the elusive economics of trademark this paper deals with economic analysis of trademark its presence in markets is originally connected with the problem of information asymmetries and the need to provide information for assisting exchanges so as to avert the market failure brought about by adverse selection however this information conveying function is also accompanied by a differentiation effect arising from the power of persuasion that signs can exert on individuals the exploitation of differentiation has given rise to the practice of branding which ties markets and consumption to the realms of meaning and experience branding is so all pervasive in today s economy as to have somehow transfigured it so that the role of persuasion is now pre eminent nonetheless the mainstream economic theory tends to resist acknowledging this change which would to a large extent call into question well established hypotheses and theoretical tools the general response has therefore been to assume that the informational role of trademark predominates and to use this hypothesis to construct models welfare evaluations and policy prescriptions that bear little or no relation to the actual markets the opposing approach in the shadow of the nelson s and arrow s seminal papers on economics of information is recognising the idiosyncratic character of information and therefore drawing conclusions and devising solutions that while still based upon the welfare criterion also incorporate a wider awareness and a deeper representation of the scenario under study the present work attempts to move in this direction showing how different disciplines can provide some key epistemological tools for enabling economists to effectively evaluate the welfare outcomes of the introduction and progressive alteration of a particular intellectual property right within the realm of signs and meanings

exchange rate regimes and the cross country distribution of the 1997 financial crisis robin m grier we study variations in the severity of the 1997 financial crisis in a sample of 25 developing countries we use both currency depreciation and stock market returns as crisis measures our key findings are that countries that started 1997 with an exchange rate peg experienced significantly greater currency depreciation and significantly lower stock returns than would be predicted from the levels of various macroeconomic indicators jel f3 f4 i introduction the asian financial crisis of 1997 is still a very hot topic a recent search of econlit turned up 243 articles in the system with asian crisis in the subject field 1 several recent articles attempt to explain variations in the severity of the crisis across developing countries using macroeconomic and financial variables and show that the distribution of the crisis is somewhat predictable our article extends this literature in two directions first we examine whether the initial exchange rate regime in place at the beginning of 1997 had any effect on the distribution of the financial crisis once the relevant macro and financial indicators are included in the model second given that a real crisis followed on the heels of the financial one we study the relationship between exchange rate regime currency depreciation and stock market performance in 1997 our sample consists of 25 developing countries in 1997 2 though a cross sectional approach limits the generality of our results we believe we can ask and answer two interesting questions about the average performance of different exchange rate regimes in 1997 the first question is controlling for economic indicators what was the average effect of having an initially pegged exchange rate on currency depreciation there are theoretical arguments presented in section ii that can justify either positive negative or zero effects we find that on average countries with a pegged regime at the beginning of the year experienced more depreciation than what was predicted by their macro indicators the second question we study is what was the average effect of currency depreciation on stock market performance in 1997 again there are arguments presented in section iii supporting either a positive negative or neutral relationship we find that on average depreciation has a marginally significant negative impact on stock returns however in the 12 countries that began 1997 with a floating exchange rate currency depreciation had a significantly positive effect on stock returns whereas the effect of depreciation on stock returns was negative and significant for the 13 countries that started the year with a pegged currency this relationship holds for stock returns measured either in u s dollars or in local currencies the papers most similar to ours in the literature are tornell and velasco 1995 edwards 1993 corsetti et al 1999 hereafter cpr and tornell 1999 tornell and velasco and edwards study whether or not the choice of exchange rate regime affects economic outcomes 3 cpr and tornell study the asian financial crisis of 1997 in the broader context of developing country performance they create a crisis index and estimate several regressions using macro and financial indicators to predict the extent of the crisis in a sample of developing countries our article applies the idea that the choice of exchange rate regime can affect macroeconomic and financial outcomes to the study of the determinants of the severity of the 1997 crisis in a model similar to those of cpr and tornell in what follows below section ii studies the relationship between macro and financial indicators the initial exchange rate regime and currency depreciation in 1997 section iii considers the depreciation exchange rate regime stock market connection in 1997 section iv presents our conclusions ii macro indicators currency depreciation and exchange rate regime in 1997 the question of what exactly determines the value of the exchange rate is an important unsolved issue in open economy macroeconomics and we are not going to settle it here

fiscal policies and the choice of exchange rate regime a common argument against either a monetary union or a regime or a fixed exchange rates is that they preclude flexible use of the inflation tax the authors address this point of view by comparing three alternative exchange rate regimes a pure float an ems regime in which the exchange rate is fixed but can be realigned and a monetary union the authors model the three regimes as alternative commitments on future seigniorage policies this approac h suggests that it is not possible to pareto rank the three regimes o n the other hand the authors provide intuitive conditions under which each of the systems is superior to the others copyright 1993 by royal economic society

the political economy of overvaluation most of the literature on political business cycles e g nordhaus 1975 macrae 1977 van der ploeg i984 assumes that the incumbent political party attempts to secure re election by maximising the expected number of votes cast in its favour at the forthcoming election and to exploit lags due to adaptive expectations the government can then fool the electorate by judiciously depressing output in the early part of its term in office in order to force down the expected rate of inflation and to create a boom without too many adverse inflationary consequences towards election eve in order to gain the sympathy of the electorate such political business cycles rely on a naive electorate and cannot occur in new classical economies with market clearing and rational expectations because then the electorate would see through the government s vote maximising strategy e g mccallum 1978 minford and peel i982 if the private sector has rational expectations and prices or wages are sticky this is observationally equivalent to adaptive expectations and flexible prices and wages e g sargent 1976 but nevertheless the electorate would see through a vote maximising strategy and thus no political business cycle would occur in any case it is not clear that the empirical evidence supports this view of the political business cycle e g frey 1978 one reason for this is that it may not be realistic to assume that output can be changed instantaneously whilst inflation can through expectations only be influenced in a gradual fashion in an open economy it is much easier and faster to affect real income and consumers prices through the exchange rate than it is to have an effect on aggregate demand output and employment an appreciation of the exchange rate immediately cuts import prices and consumers prices and therefore immediately boosts real income this combined with the reduction in the real value of imports depresses aggregate demand but over time standard neoclassical substitution effects ensure that the volume of exports decreases the volume of imports decreases and therefore aggregate demand and output increase the above argument is based on the j curve effect in the balance of trade for which there is ample empirical evidence e g diaz alejandro 1966 magee 1973 this note explores the implications of the j curve effect for the political business cycle in a small open economy as suggested by van der ploeg i984 and dornbusch i987 section iv section i sets up the model of the economy section ii derives the development of the exchange rate real income and output over the course of the political business cycle section iii concludes with an interpretation and qualification of the results

outlines of a behavioral theory of the entrepreneurial firm abstract in a behavioral theory of the firm btf cyert and march cyert r m march j g 1963 a behavioral theory of the firm prentice hall englewood cliffs nj present a clutch of ideas for explaining the behavior of established firms within an environment of well defined markets stakeholder relationships technologies and so on in this paper we outline a behavioral theory of the entrepreneurial firm that emphasizes transforming environments rather than acting within extant ones in particular we explicate three ideas that parallel key concepts in btf 1 accumulating stakeholder commitments under goal ambiguity in line with a political conception of goals 2 achieving control as opposed to managing expectations through non predictive strategies and 3 predominately exaptive rather than adaptive orientation

democracy and markets the case of exchange rates the relationships between the workings of democratic institutions and currency markets are studied severa competing propositions about how political re equilibration affects currency markets are derived and tested the results support the view that democratic politics affects currency markets expectations and uncertainty about electoral outcomes and government survival affect the probability of switching between currency market equilibria additionally opinion polls about chief executive performance have a direct effect on the probabilities of switches between currency regimes suggesting that these polls cause currency traders to revise their expectations about the stability of governments and or the contents of public policies electoral institutions mitigate the impact of politics on currency market equilibria political effects are weaker in countries with proportional representation electoral systems than in countries with majority plurality systems there is less evidence that central bank independence consensual corporatist systems or political coherency reduces the effect of politics on currency markets he study of democracy and markets is at the heart of political economy understanding how political equilibration and economic equilibration are related is one of the main challenges facing this field the size and nature of currency markets make them especially important cases substantively with globalization currency markets have become important constraints on elected governments reducing their room to maneuver analytically in comparison to most goods markets currency markets are informationally efficient asset markets with distinctive equilibria today s exchange rate is determined by currency traders fully informed expectations about tomorrow s exchange rate the sensitivity of these markets to the arrival of new information therefore makes them particularly well suited for studying the effects of political news and uncertainty on economic equilibration 1 this article demonstrates there are informationally relevant political factors insofar as exchange rate determination is concerned factors that directly affect the transition probabilities between currency market equilibria moreover these factors vary in important ways across democracies some electoral institutions lessen the effects of politics on currency

separating economic from political influences on government decisions abstract the public interest theory is a poor predictor of government decisions relative to interest group theories but a sophisticated public interest theory is a more serious alternative to the former testing the sophisticated theory s predictions is problematic however when public interest is coincident with an interest group s interests a four step method is developed that disentangles public interest and interest group interests by separating economic from political incentives applying the method to the national forest service decisions about wilderness designations indicates whether interest groups were successful in influencing allocation decisions and whether allocation decisions were in the public interest

the dilemma of accountability for professionals a challenge for mainstream management theories professional institutions are increasingly confronted by fiscal constraints and political pressures to improve and increase their accountability in a competitive consumer driven market accordingly the need to ensure efficiency and accountability is of strategic importance this article reports on a qualitative study of medical professionals that assessed the utility of financial incentives and external control methods derived from agency theory to ensure accountability of professionals the authors argue that approaches derived from stewardship and institutional theories can extend the principal agent perspective to sustain greater social and ethical accountability

exchange rate regimes and export performance of developing countries a fter the breakdown of the bretton woods system in 1973 many developing countries moved away from single currency pegging to more flexible exchange rate regimes an extensive literature on the appropriateness of various exchange rate regimes for developing countries economic performance has developed one issue concerns how developing countries choice of exchange rate regime affects their export performance comparative analyses of the impact of various exchange rate regimes on developing countries exports have however been overlooked different exchange rate regimes give rise to different tendencies for exchange rate misalignments and exchange rate volatility there are two reasons why the exports of developing countries may be subject to more severe consequences of exchange rate misalignments and exchange rate volatility than the exports of developed countries first exporters in developing countries may be expected to be more vulnerable to exchange rate misalignments since developing countries exports are often made up of raw material and agricultural products in which exporters usually have little market power it follows that exporters will have to respond to exchange rate misalignments by changing the export quantity rather than the export price second since developing countries usually have underdeveloped financial markets exchange rate volatility may be more harmful