a revealed preference test of rationing abstract this paper derives a revealed preference test for utility maximization under rationing and can detect for which goods rationing is binding without specifying a functional form or imposing rationing constraints prior to estimation for uk data from 1920 55 we find evidence of utility maximization under rationing with rationing binding for food and other services estimated virtual prices exceed observed food prices by 16 5 in 1947 and observed prices of other services by 10 9 in 1952

competition cooperation and innovation organizational arrangements for regimes of rapid technological progress abstract discussions of the link between firm size and innovation are outmoded because the boundaries of the firm have become fuzzy in recent decades strategic alliances constellations of bilateral agreements among firms are increasingly necessary to support innovative activities such alliances can facilitate complex coordination beyond what the price system can accomplish while avoiding the dysfunctional properties sometimes associated with hierarchy antitrust law and competition policy need to recognize that these new organizational forms are often the functional antithesis of cartels though they may have certain structural similarities a more complete understanding of bilateral contracts and agreements ought to reveal when and how cooperation can support rather than impede innovation and competition

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

competing models of international lending activity abstract four competing models of the world bank s lending to developing countries are constructed and econometrically estimated by pooled time series and cross section data the analysis suggests that a model combining economic and political determinants performs best besides per capita income inflation balance of payment and budget deficit external debt and past growth political determinants such as the capitalist climate or political instability are also important as well as a recipient country s former status as a colony or dominion this politico economic model is successfully used to forecast the distribution of ibrd loans and ida credits among the developing countries

on the transmission of world agricultural prices two questions are asked about the relationship between domestic prices and world prices of agricultural commodities are variations in world prices transmitted to domestic prices domestic prices are regressed on world prices in various forms taking into account the possible effects of exchange rates and inflation the empirical analysis is based on data from the food and agriculture organization of the united nations for 58 countries from 1968 78 and for the countries of the european community from 1961 85 the results show that most of the variations in world prices are transmitted and that they constitute the dominant component in the variations of domestic prices

balancing act learning from organizing practices in cultural industries the dilemmas experienced by managers in cultural industries are also to be found in a growing number of other industries where knowledge and creativity are key to sustaining competitive advantage firms that compete in cultural industries must deal with a combination of ambiguity and dynamism both of which are intrinsic to goods that serve an aesthetic or expressive rather than a utilitarian purpose managers involved with the creation production marketing and distribution of cultural goods must navigate tensions that arise from opposing imperatives that result from these industry characteristics in this paper we outline five polarities that are shaping organizational practices in cultural industries first managers must reconcile expression of artistic values with the economics of mass entertainment second they must seek novelty that differentiates their products without making them fundamentally different in nature from others in the same category third they must analyse and address existing demand while at the same time using their imagination to extend and transform the market fourth they must balance the advantages of vertically integrating diverse activities under one roof against the need to maintain creative vitality through flexible specialization and finally they must build creative systems to support and market cultural products but not allow the system to suppress individual inspiration which is ultimately at the root of creating value in cultural industries

bayesian modeling and computations in final offer arbitration this article develops a bayesian model for the analysis of bidding behavior in final offer arbitration posterior calculations are obtained using a markov chain algorithm an example is considered using salary data from major league baseball

bilateralism and free trade we study a setting with many countries in each country there are firms that can sell in the domestic as well as foreign markets countries can sign bilateral free trade agreements that lower import tariffs and thereby facilitate trade we allow a country to sign any number of bilateral free trade agreements a profile of free trade agreements defines the trading regime our principal finding is that in symmetric settings bilateralism is consistent with global free trade we also explore the effects of asymmetries across countries and political economy considerations on the incentives to form trade agreements

comparative productivity the ussr eastern europe and the west this paper compiles comparative measures of output per worker in 1975 in four socialist and seven western market economy wme countries and explores sources of observed differences between the two groups of countries in that regard such differences seem explicable only partially by reference to differences in per worker capital stock and farm land a residual disparity of 25 to 34 percent in favor of wme countries appears to testify to superior efficiency in the latter copyright 1987 by american economic association

origin of alliance portfolios entrepreneurs network strategies and firm performance alliance portfolios are ubiquitous and influential for firm performance extant research addresses attributes of high performing alliance portfolios but not how executives originate such portfolios

international sanctions as international punishment much of the contemporary literature on the utility of international sanctions approaches the apparent riddle of why sanctions are embraced so eagerly when they are supposedly such an ineffective tool of statecraft by focusing on the instrumental and rational purposes of sanctions as a result one purpose that does not always lend itself to a rational means end calculus the purpose of punishment tends to be overlooked or more commonly dismissed outright this article explores punishment as both a useful and an effective purpose of international sanctions it argues not only that sanctions should be distinguished from other forms of hurtful statecraft but also that they are a form of international punishment for wrongdoing despite the difficulties of applying the term punishment in the context of international relations the article then examines the purposes of punishment and reveals that only some are understandable when a model of means end rationality is used suggesting that the element of the nonrational also plays an important role in international sanctions the argument is then applied to the case of u s sanctions imposed after the soviet union s invasion of afghanistan to demonstrate the different purposes of punishment at work in this case the article concludes that just as we cannot understand punishment as a purposive human activity solely by reference to a rational model of a means to a clearly delineated end so too we cannot entirely understand sanctions as a form of international punishment by an attachment to a rational model of policy behavior however some forms of punishment are exceedingly effective and this may explain why sanctions continue to be a popular instrument of statecraft

salary arbitration and pre arbitration negotiation in major league baseball two assumptions in this analysis of baseball salary arbitration are that 1 players and clubs to serve their interests in pre arbitration negotiation submit final offers to maximize and minimize

strategic delegation in bargaining abstract principals have the opportunity to delegate to an agent in the context of the nash bargaining model this paper resolves a shortcoming in the related bargaining literature in equilibrium a symmetric outcome typically will not result and multiple equilibria exist

bose einstein dynamics and adaptive contracting in the motion picture industry audiences discover what films they like and spread the word information feedback produces bose einstein dynamics in the motion picture box office revenue distribution information cascades generate box office hits and flops the revenue distribution evolves recursively over the run as a mixture of the opening and a stochastic competition among films the motion picture run is decentralized adaptive and self organizing semistationary admission prices local information and contingency rich contracts match the film rental price and the supply of theatrical engagements to demand copyright 1996 by royal economic society

on the determinants of the success of economic sanctions an empirical analysis theory theories predicting the success of economic sanctions are tested on the universe of sanction episodes from 1914 to 1989 hypotheses the probability of success depends upon the cost to the target nation the extent of trade linkages between target and sender the stability of the target the amount of time sanctions are in force and whether financial sanctions are utilized method data are analyzed using logistic regression results the factors affecting success depend upon the goals of the sending nations when that goal is simply destabilization the principal determinant of success is the initial stability of the target for other goals the use of financial sanctions is most effective we also find evidence of a modest downward trend over time in the relative effectiveness of sanctions in the latter category

why democracies may actually be less reliable allies recent research builds on the observation that democracies have more durable alliances to argue that democracies make more reliable allies this need not be the case alliances serve as commitment devices adding ex ante credibility to states claims about ex post behavior variation in alliance durability must reflect differences in the desirability of formalizing alignments put simply democracies are most improved by formal commitments we offer two related explanations for why democracies might actually be less reliable alliance partners information costs for participating in policymaking and the advantages of organized interest groups combined with distributional incentives generated by the periodic turnover of governments may conspire to make informal commitments on the part of democracies problematic determining the net effect of democratic virtue and vice is best done empirically we test alliance reliability by focusing on intervention rather than on the duration or the number of commitments our results suggest that democracies make less reliable allies

the transition to a market economy pitfalls of partial reform we present a theory of a partial economic reform of a planned economy similar to the one that took place in russia since 1988 and in china earlier in such a reform some markets are liberalized in the sense that producers can sell output to whomever they want including private firms at free prices but at the same time must sell to state firms at state prices we show that such a reform can result in a substantial diversion of subsidized inputs away from state firms and toward private firms even when state firms value these inputs more the result may be a reduction of total output the simple analysis sheds light on many consequences of the soviet reform such as breakdown of coordination of production increased state policing of delivery quotas prohibitions of trading cooperatives and opposition to privatization the model also explains why partial reform failed in russia but worked in china

ostracism and forgiveness many communities rely upon ostracism to enforce cooperation if an individual shirks in one relationship her innocent neighbors share information about her guilt in order to shun her while continuing to cooperate among themselves however a strategic victim may herself prefer to shirk rather than report her victimization truthfully if guilty players are to be permanently ostracized then such deviations are so tempting that cooperation in any relationship is bounded by what the partners could obtain through bilateral enforcement ostracism can improve upon bilateral enforcement if tempered by forgiveness through which guilty players are eventually readmitted to cooperative society

a theory of buyer seller networks this paper introduces a new model of exchange networks rather than markets of buyers and sellers it begins with the empirically motivated premise that a buyer and seller must have a relationship a link to exchange goods networks buyers sellers and the pattern of links connecting them are common exchange environments this paper develops a methodology to study network structures and explains why agents may form networks in a model that captures characteristics of a variety of industries the paper shows that buyers and sellers acting strategically in their own self interests can form the network structures that maximize overall welfare

bargaining and the role of expert agents an empirical study of final offer arbitration abstract expert agents such as lawyers play a prominent role in conflict resolution yet little is known about how they affect outcomes we construct a model that permits us to estimate the influence of agents and test whether the parties in a dispute face prisoner s dilemma incentives using eighteen years of final offer arbitration data from new jersey we find the parties do significantly better when they retain agents and that the parties learn about this benefit over time however we also find that the gain to using an agent is fully offset when the opposing party also hires an agent since agents are costly this noncooperative equilibrium is pareto inferior

sanctions on south africa what did they do this paper considers the economic sanctions that were applied in the mid 1980s to pressure the south african government to end apartheid it asks what role those sanctions played in the eventual demise of the apartheid regime and concludes that the role was probably very small an alternative explanation for the regime change is offered the communist bloc combined to bring about the change if one is to argue for the efficacy of sanctions two key obstacles are their limited economic impact and the substantial lag between the imposition of sanctions and the political change since sanctions preceded the change of government it is impossible to rule them out as a determinant however their principal effect was probably psychological the implication is that the south african case should not serve as the lone major instance of effective sanctions this abstract was borrowed from another version of this item

colluding victims a public choice analysis of international alliances analysis of international alliances is often premised on predicted responses by nation states when nation states are assumed to behave as utility maximising actors large allies are exploited by small allies when output is a public good empirical analysis of defence expenditures in nato yields results consistent with the proposition that exploitation increases as alliance output approximates a pure public good but why would large countries acquiesce a public choice analysis offers a different perspective if producers of armaments are rent seeking are large allies able to capture rent by incurring a disproportionate share of defence expenditure

arbitration and bargaining across the pacific this paper reports laboratory experiments comparing arbitration behavior between and across two countries with extensive trade relations the united states and japan besides comparing disputes in both locations we evaluate disputes between them while we find nominal differences between the countries we observe significant changes in both groups behavior when facing someone from the other country specifically americans seek larger profits when facing a japanese counterpart and japanese subjects settle more frequently with an american counterpart our results suggest that the literature on bargaining behavior across cultures paints an incomplete picture of international comparisons by failing to consider bargaining interactions

the impact of economic sanctions in the 1990s the end of the cold war served as a strating point for a true proliferation in the use of economic sanctions as an instrument of foreign policy diplomacy is increasingly resorting to economic sanctions

impacts of economic reform in poland incidence and welfare changes within a consistent framework the costs of shortages and rationing are not captured by standard consumer price indices thus the change in real gdp per capita is an overestimate of welfare losses in transition economics in this study virtual prices are used to calculate new cost of living indices clis the results for polant show that from 1987 to 1992 the cli ignoring the rationing effects is biased upward from 1 53 to 3 71 percentage points per year compared to the estimates of welfare loss that neglect the rationing effects during the prereform period the estimated welfare losses that reflect the rationing are reduced by 50 using hausman virtual prices and by 75 using external proxy virtual prices

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

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

bias in salary arbitration the case of major league baseball this study analyses all baseball arbitration cases from 1985 90 to determine if decisions differ among ethnic groups unlike earlier arbitration analyses extensive controls for individual and team performance are used holding performance constant the results indicate that latin american players have 33 less chance and blacks 19 less chance than does a white player of winning a case these differences are not reflected by more risky salary demands by minority players and only marginally reflected by market salary practices toward minority players therefore bias appears to emanate from arbitrator utility functions

nexus between economic sanctions and inflation a case study in iran abstractconventional studies have applied dummy variables to analyse the relationship between economic sanctions and inflation while we construct an index which is called trade financial sanctions

new horizons or a strategic mirage artist led distribution versus alliance strategy in the video game industry abstract in this paper we contribute to the debate between researchers who argue that the emergence of online distribution allows content producers in the creative industries to bypass powerful publishers and distributors and other researchers who argue that this strategy cannot succeed without the complementary assets that these intermediaries provide we use a case study of the dutch video game developer dvgd bringing to market an identical game using two different but comparable distribution channels as a quasi experiment in the first release dvgd used online distribution to reach consumers directly whereas in the second it used an alliance with an established video game publisher we find that while the alliance required dvgd to share with the publisher a substantial fraction of the value appropriated by the game the alliance strategy resulted in greater absolute financial performance and relative market performance compared to the self publishing strategy we conclude that the differences in performance can be traced back to specialized complementary assets required for successful commercialization

productivity growth in pre 1990 mongolian agriculture spiralling disaster or emerging success the reasons for the spectacular collapse of so many centrally planned economies are a source of ongoing debate in this paper we use detailed farm level data to measure total factor productivity tfp changes in mongolian grain and potato farming during the 14 year period immediately preceding the 1990 economic reforms we measure tfp growth using stochastic frontier analysis sfa and data envelopment analysis dea methods our results indicate quite poor overall performance with an average annual tfp change of 1 7 in grain and 0 8 in potatoes over the 14 year period however the pattern of tfp growth changed substantially during this period with tfp growth exceeding 7 per year in the latter half of this period this suggests that the new policies of improved education greater management autonomy and improved incentives which were introduced in final two planning periods in the 1980s were beginning to have a significant influence upon the performance of mongolian crop farming crown copyright c 2002 published by elsevier science b v all rights reserved

theocracy and resilience against economic sanctions abstract this paper provides a simply theory to explain the impact of sanctions on a regime s policies and behavior sanctions are generally put to strip the target country from its available rents and weaken the government s stance against growing discontent in the population we show however that sanctions may give legitimacy to an incumbent government by influencing the optimal level of religious ideology provided by the state and further stabilizing its grip to power and rents while in a good state of nature sanctions build resilience as long as religious ideology among the population is strong at bad times they compel the target country to move towards ideological moderation in a world of asymmetric information the target country always finds it optimal to send a signal that truly represents the prevailing state of nature in order to induce learning and reach a win win outcome

sanctions in networks the most unkindest cut of all the extensive literature on sanctions has mainly focused on a dyadic interaction between sender and target in contrast this paper examines sanctions when the sender and target are embedded in a network of linkages to other agents the sender can assemble a sanctioning coalition of neighbors to sever their links execute multi link cuts to the target and her allies efficacy of sanctions is now crucially dependent on the network architecture we characterize the structural properties of networks in which a sender can effectively sanction a target in the short run when links can only be deleted and the long run when links can be both deleted and added

sanctions some simple analytics governments often seek influence beyond their borders one way is through what thomas schelling 1960 1966 calls brute force taking direct physical control less extreme methods are to promise rewards for taking desired actions or to threaten punishments for not carrying them out sanctions sanctions involve two parties the sender and the target to help identify pronouns antecedents we consider a feminine sender and masculine target the sender s objective is to influence the target by threatening to impose some measure against him for acting contrary to her interest sanctions have long been important in international relations athens imposed a trade embargo against megara ultimately setting off the peloponnesian war 431 404 bc sanctions are central to such international agreements as the united nations charter the world trade organization and the montreal protocol governing chlorofluorocarbons u s law prescribes the use of sanctions in circumstances related for example to national security human rights intellectual property and international trade do sanctions actually achieve senders objectives a common claim is that they usually fail and are costly to senders recent u s legislation proposes to limit unilateral u s sanctions except trade related ones on the grounds that they cost more than they are worth history provides examples of sanctions that were costly and ineffectual such as the league of nations sanctions against the italian occupation of abyssinia or u s sanctions against cuba united nations sanctions against iraq remain in place having achieved less than full success to say the least see gary hufbauer et al 1990 more systematic studies suggest that sanctions often do succeed particularly when objectives are modest hufbauer et al 1990 examine 116 episodes of sanctions with military or political objectives deeming about one third successful sanctions imposed under u s trade law have worked even better about three fourths of the time see e g sykes 1992 thomas bayard and kimberly a elliott 1994 elliott and j david richardson 1997 here we develop a simple framework to explain how sanctions can worl and what is required for them to succeed our framework exploits advances in the theory of repeated games and bargaining under incomplete information while a game theorist would recognize the flavor of our results the setting here is a fresh one 2 we find success more likely when the threatened measure costs the sender little relative to the gain from modifying the target s behavior while the damage to the target is large relative to his cost of complying with the sender s will results consistent with both intuition and empirical evidence as well as with adam smith 1776 book iv ch i moreover a more patient sender is more likely to succeed while the target s patience can work to the sender s disadvantage 3

cooperation with network monitoring this paper studies the maximum level of cooperation that can be sustained in perfect bayesian equilibrium in repeated games with network monitoring where players observe each other s actions either perfectly or not at all the foundational result is that the maximum level of cooperation can be robustly sustained in grim trigger strategies if players are equally well monitored comparative statics on the maximum level of cooperation are highly tractable

a comparison of conventional final offer and combined arbitration for dispute resolution two widely used forms of arbitration are conventional arbitration in which the arbitrator makes an unconstrained settlement choice and final offer arbitration in which the arbitrator must choose between disputants final offers under an innovative as yet unused approach called combined arbitration if the arbitrator s notion of a fair settlement lies between the disputants final offers final offer arbitration rules are used otherwise conventional arbitration rules are used theoretically by combining the risks that the two standard forms of arbitration pose for disputants who do not voluntarily settle combined arbitration should generate convergent final offers the results of this controlled laboratory study show however that dispute rates are highest in combined arbitration and lowest in conventional arbitration these results challenge the theoretical predictions for combined arbitration as well as claims that final offer arbitration should reduce disputes compared to conventional arbitration the results are however consistent with a simple theory of disputant optimism

estimating demand elasticities under rationing eliminating rationing in the united kingdom following the second world war was a concern for policy makers because of potentially large fluctuations in post war prices and the impact on unrationed goods this study shows that in using virtual prices elasticities can be estimated from a free demand system consistent with observed consumer choices substitution estimates without accounting for rationing are misleading in contrast using virtual prices and estimating a free market system yield results similar to those of the pre war period results show that food rationing affected expenditure across unrationed goods rationing on other services had little effect on expenditure across unrationed goods

on smart sanctions abstract we construct a game theoretic model of an oligarchic economy that potentially could be targeted by smart international sanctions oligarchs in this economy provide support for their leader a strong man and potentially an autocrat in return for favors that results in having income higher than the average income in the country we derive the conditions under which smart sanctions lead to compliance by the target country moreover we draw some comparison between the effectiveness of smart and dumb sanctions for these economies

distinguishing characteristics of degrees of success and failure in economic sanctions episodes this paper uses 104 episodes from the hufbauer et al 1985 1990 dataset to examine the correlates of classes of outcomes of economic sanctions the parsimonious equations presented identify the characteristics of sanctions episodes conducive to success rather than marginal success and the characteristics productive of failure rather than marginal failure failure is most likely if there is significant third party assistance to the target and if the pre existing trade linkage between sender and target is small success is most easily achieved when the objective is not classified as modest and when pre sanction relations between sender and target are cordial or neutral the equations presented overcome data and methodological flaws of earlier studies exhibit reasonable predictive accuracy and satisfy a battery of tests of statistical significance hypothesized coefficient sign goodness of fit high likelihood and informational efficiency

when are sanctions effective a bargaining and enforcement framework although a considerable literature identifies the conditions under which sanctions are more likely to be successful few studies examine the question of when sanctioning states or senders are willing to enforce their sanctions laws against their firms using a game theoretic model we argue that imposing sanctions creates a strategic dilemma for senders we demonstrate that senders often have disincentives to enforce their sanctions policies given that the restriction on economic transactions with targeted states may undermine their firms competitiveness the model indicates that sanctions are more likely to succeed when the sender s firm retains a moderate share of the target s market relative to its foreign competitors however the model also demonstrates that sanctions are likely to be imposed only when the conditions do not favor their success the empirical implications of the model are tested using the threat and imposition of economic sanctions ties data set

social capital and social quilts network patterns of favor exchange we examine the informal exchange of favors in societies such that any two individuals interact too infrequently to sustain exchange but such that the social pressure of the possible loss of multiple relationships can sustain exchange patterns of exchange that are locally enforceable and renegotiation proof necessitate that all links are supported any two individuals exchanging favors have a common friend in symmetric settings such robust networks are social quilts tree like unions of completely connected subnetworks examining favor exchange networks in 75 villages in rural india we find high levels of support and identify characteristics that correlate with support

the hidden hand of economic coercion why do policymakers consistently employ economic sanctions even though scholars consider them an ineffective tool of statecraft game theoretic models of economic coercion suggest the success rate may be understated because of selection effects when the targeted country prefers conceding to incurring the cost of sanctions it has an incentive to acquiesce before the imposition of sanctions the bulk of successful coercion episodes should therefore end with sanctions threatened but not imposed this contradicts the recent literature on sanctions which assumes that sanctions rarely if ever work at generating significant concessions from the targeted country and are imposed for domestic or symbolic political reasons if the game theoretic argument is correct the crucial cases to study are those in which coercion is threatened but not implemented a statistical analysis of data on sanctions in pursuit of economic or regulatory goals strongly supports the gametheoretic argument these results suggest that the significance of economic coercion has been undervalued in the study of statecraft and international relations more generally

how do us economic sanctions affect eu s trade with target countries we investigate the impact of us economic sanctions on eu s trade using a panel data approach expressed in a two level framework both multilateral and unilateral sanctions involving the us and the eu have a negative impact on eu trade total imports and exports we argue that unilateral sanctions if extensive in nature would have a depressing impact on target countries trade especially in the stage after sanctions have been imposed over time both multilateral and unilateral sanctions lead to an increase in a target country s exports to the eu lending support to the third country effect of sanctions

union leaders as experts wage bargaining and strikes with union wide ballot requirements to avoid strikes and to curb labour militancy some governments have introduced legislation stating that union leadership as well as wage offers should be decided through union wide ballots this paper shows that members still have incentives to appoint militant union leaders if these leaders have access to information critical for the members voting decisions furthermore conflicts may arise in equilibrium even though the contract zone is never empty and there is an option to resolve any incomplete information ballot requirements hence preclude neither militant union bosses nor inefficient conflicts

interactive innovation in financial and business services the vanguard of the service revolution abstract the concept of the reverse product cycle as a theoretical model of innovation in services is developed further in this paper using the vanguard sector of financial and business services as a case study example of how innovation operates as an interactive process the parallels between the emerging service revolution and the nineteenth century industrial revolution are explored in order to identify the key characteristics of the vanguard sectors in each technological revolution the particular nature of the new techno economic paradigm based on information technology is then identified leading to a discussion of the unique conjunction of factors favouring financial and business services as the vanguard sector of the service revolution the central part of the paper then offers an elaboration of the reverse product cycle model stressing the interactive nature of the innovation process as it reflects the prevailing technological opportunities market conditions and industry structures within the adopting sector the example of retail banking is used to illustrate how the innovation cycle proceeds from increases in efficiency through improvements in service quality to the generation of new network service products there is then a discussion of the question of the optimal industry structure for innovation suggestion that in the reverse product cycle large corporations are likely to dominate the early stage of incremental process innovations whereas later in the cycle there is an important role for small entrepreneurial firms to advance more radical process and product innovations the concluding section summarises six major characteristics of the service revolution and suggests how it may proceed from its first to its second phase as the focus of innovation shifts from the vanguard sector of financial and business services to a much broader range of higher level knowledge based services many of which are currently delivered by the public sector

agricultural output and productivity in the former soviet republics the paper reviews agricultural development in the fifteen former soviet republics over the period 1965 1997 production functions are estimated and productivity differences and changes calculated large differences were found in terms of productivity and growth between the republics the differences grew after 1990 reflecting variation in reform policies

using the law to change the custom the custom often acts as a powerful hindrance to equity increasing changes in this paper we present a simple model of legal dualism in which a progressive legal reform can under certain conditions shift the conflicting custom in the direction intended by the legislator formal law then acts as an outside anchor that exerts a magnet effect on the custom we also characterize the conditions under which a moderate reform performs better than a radical one in improving the welfare of the disadvantaged sections of the population we illustrate our insights using examples on inheritance marriage and divorce in sub saharan africa and india

in search of complementary assets the determinants of alliance formation of high tech start ups abstract why do new technology based firms ntbfs cooperate starting from teece s teece d j 1986 profiting from technological innovation implications for integration collaboration licensing and public policy research policy 15 285 305 conceptual framework and taking advantage of subsequent literature on alliance formation in the resource and competence based tradition and in the social structure perspective we derive an empirical model that aims at highlighting the inducements and obstacles that these firms face in alliance formation according to firm specific characteristics and the nature of the alliance in particular a distinction is made between exploitative commercial alliances and explorative technological alliances the econometric estimates based on a large sample of italian young high tech firms that are observed from 1994 to 2003 provide strong evidence supporting two key intuitions of teece s work first the combination of specialized complementary assets appears to be a key driver of the formation of exploitative commercial alliances by ntbfs more specifically patent holding affects positively the likelihood to establish commercial alliances but this propensity is found to rapidly decrease with firm size suggesting that as long as ntbfs become larger and possess specialized commercial assets their urge for commercial alliances diminishes second following the parallelism set forth by teece between search for alliance partners and access to external financing the analysis indicates that potentially beneficial alliances may not take place because of the high transaction costs faced by smaller ntbfs in this respect our results clearly support the view that sponsor institutions as public research organizations venture and corporate venture capitalists may sensibly reduce these costs and that their role crucially depends on both the identity of the sponsor and the type of alliance

how international sanctions worked domestic and foreign political constraints on the brazilian informatics policy from 1985 to 1989 a trade conflict between the united states and brazil developed around brazil s protectionist information technology policy during that period and under the threat of trade sanctions some changes were made in the brazilian policy the effectiveness of sanctions in promoting policy changes in brazil resulted not only from economic losses but also from the shift provoked in the balance of political support for the policy within brazilian society moreover sanctions were effective not because they affected the interests of groups benefiting from the policy but because they pushed previously uncommitted groups to join the opposition to it

sanctions and civil conflict using a formal general equilibrium framework this paper analyses how sanctions imposed on the contestants in civil conflict affect the welfare of these contestants and the allocation of resources to conflict it is shown that weak sanctions can hurt the contestant they are supposed to help while strong sanctions augment the expected welfare of their intended beneficiaries moreover sanctions are more likely to be successful if the contestant who is subject to sanctions can expect to derive a positive income in case of compliance the likelihood of success rises as this income increases

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

do economic sanctions destabilize country leaders do economic sanctions destabilize the governments they target a form of foreign pressure sanctions are typically meant to alter the policies of other countries there is much pessimism on whether they ever work this article shows that economic pressure works in at least one respect it destabilizes the leaders it targets i present a theoretical argument that explains why destabilization is a necessary condition for successful coercion i find evidence that pressure destabilizes in a large panel of cross country time series data the destabilization finding indicates that sanctions may be more effective at altering policies than we think i conclude by noting that greater optimism regarding the effectiveness of sanctions should be balanced by a careful consideration of the policy s real and sizeable costs for those caught in the middle

combining rent seeking and public choice theory in the analysis of tariffs versus quotas economists continuing criticisms of protectionism make a valuable contribution to the general interest element of the forces which operate to keep propensities to protect somewhat in check mckenzie rightly warns however that proposals by economists for giving protection in more efficient forms run the danger of increasing the total supply of protection thus we agree that serious consideration should be given to the political economy responses which may be induced before one advocates ways of doing more efficiently what one believes should not be done in the first place it does not follow however that all such policies will have net negative unanticipated consequences in the case of tariffs versus quotas we do not believe that we have yet sufficient knowledge of all of the relevant political economy considerations to predict about the full effects of legislation which allowed trade protection to only take the form of tariffs we are doubtful however that such a measure would increase the total quantity of protection through the channels outlined by mckenzie we believe that the same type of basic public choice analysis of the individual incentives to lobby which suggests that consumer taxpayers will not force the political process to operate so as to maximize aggregate economic efficiency with respect to the level of protection also suggests that the net lobbying for quotas is likely to be higher on average than the net lobbying for tariffs political effectiveness and ability to overcome free riding on the part of tariff revenue seekers is likely to be low at the margin furthermore issues of visibility and institutional structure are likely to lessen the ability of anti protection forces to lobby against quotas placed within a broader framework public choice and rent seeking theory is consistent with the empirical evidence that where quotas are used protection is high

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

sanctions in networks abstract in this paper we contribute to the sender target models of sanctions by explicitly incorporating the linkages social political or economic that bind the sender and target to other agents given any network model and architecture we draw attention to two factors that play a key role in determining the efficacy of sanctions in reducing the frequency of violations these are respectively strategic complementaritiesbetween the sanctioning action deleting link with target and number of direct links of the sender and the externalities imposed on the sender by third parties we examine the role played by these factors both in the short run when links can only be deleted and the long run when links can also be added as well as when sanctions are unilateral the sender can only delete own links or multilateral the sender can impose on common allies to sever links to the target our analysis allows an active role to the target to build an opposing coalition to deflect sanctions and to third parties to engage in sanction busting it also extends to multiple senders and targets existence of interest groups within sender and target with dissimilar objectives and signed networks allowing both antagonistic and cordial bilateral relationships

show them your teeth first a game theoretic analysis of lobbying and presure this paper investigates the choice of an interestgroup between lobbying words and pressure actions in order to influence a policymaker both lobbying and pressure are modeled asstrategic means of transmitting information that isrelevant to the policymaker however only pressure isdirectly costly to the policymaker the interactionbetween the interest group and the policymaker isframed as a repeated signaling game in equilibriumpressure in contrast to lobbying only occurswhen the interest group s reputation is sufficientlylow and always improves its reputation it is shownthat repeated lobbying cannot completely substitutefor pressure and that the interest group may beforced to sustain its reputation through lobbying weconclude that pressure is typically used to build upa reputation lobbying to maintain a reputation

consumption risk sharing in social networks we develop a model of informal risk sharing in social networks where relationships between individuals can be used as social collateral to enforce insurance payments we characterize incentive compatible risk sharing arrangements and obtain two results 1 the degree of informal insurance is governed by the expansiveness of the network measured by the number of connections that groups of agents have with the rest of the community relative to group size twodimensional networks where people have connections in multiple directions are su ciently expansive to allow very good risk sharing we show that social networks in peruvian villages satisfy this dimensionality property thus our model can explain townsend s 1994 puzzling observation that village communities often exhibit close to full insurance 2 in second best arrangements agents organize in endogenous risk sharing islands in the network where shocks are shared fully within but imperfectly across islands as a result network based risk sharing is local socially closer agents insure each other more

a proposal for using incentive precommitments in public enterprise funding abstract among the central problems of less developed countries ldcs is the poor performance of their public enterprises pes and the seemingly limited ability of governments and other agencies to improve this performance this paper proposes that project agencies be induced as a part of the initial financing of pes to undertake specific types of precommitments a precommitment to liquidate the project if its ex post performance falls below some threshold level and a precommitment to link a non negligible part of employee compensation to actual performance our proposal is not guaranteed to improve pe performance because there are no perfect solutions to what is inherently a politically difficult problem nevertheless we argue that as long as public enterprises exist independent of whether this is a good idea or not a precommitment to use performance based incentives is likely to improve their performance we discuss the primary sources of pe losses compare their probable magnitudes and explain how various precommitments are likely to ameliorate such losses our proposal is aimed at stimulating more thought on this subject and is addressed to a broad audience

the vanishing hand the changing dynamics of industrial capitalism alfred chandler s portrayal of the managerial revolution of the late nineteenth and early twentieth centuries does not extend well into the late twentieth century when widespread vertical disintegration began replacing the classical multi unit managerial enterprise this paper attempts to explain the new economy in a manner consistent with chandler by providing an enlarged theoretical account of industrial evolution in this account clusters of chandlerian firms appeared as a temporary episode within a larger smithian process of the division of labor

using threshold models to explain international relations the outcome of political opposition or revolution is a public good which suggests that free riding will diminish the effectiveness of these forms of collective action the private gains from contributing to collective goals are increased however if individuals place some value on ideological conformity or group identity nevertheless some external stimulus is often needed to set in motion a tendency toward social motivation that is strong enough to outweigh the free rider incentive this paper investigates the extent to which international pressure and demonstration effects can serve to signal support for the objectives of domestic groups in a target country and thereby mobilize collective action in pursuit of their goals it is of interest to know not only the extent to which inherent barriers to effective collective action are overcome by outside support but also to show how foreign economic policy can have an impact on political processes in the target country even when that policy itself has minimal economic effects

institutions freedom and technical efficiency the impact of institutions on economic performance is currently the subject of much research in this study we use panel data to estimate a stochastic production frontier and the sources of inefficiency for a broad set of countries a maximum likelihood procedure is used to estimate the parameters for the stochastic production frontier and the determinants of inefficiency simultaneously our results show that institutions that promote greater economic freedom in turn promote efficiency

the relative efficiencies of market and planned economies are planned economies systematically more or less productive than market economies this question provoked heated intellectual debate since the time of hayek 11 keynes 16 lange 19 lange and taylor 20 and lerner 22 the collapse of the communist systems of east europe since 1989 closed the debate planned economies were without doubt less efficient in utilizing economic resources than market economies but how much less efficient this question is of obvious scientific interest but it has not been answered some work addressing the broad question of comparative efficiency has been done by bergson 4 5 6 marer 25 26 moroney 28 and others all indicate comparatively lower efficiency in planned economies but none addresses the question by how much our contribution here is to answer this question using a novel methodology we estimate aggregate frontier production functions for two groups of countries 7 centrally planned economies in east europe and 17 predominantly market economies in west europe estimating frontier production functions enables two types of comparisons that have not

when higher incomes reduce welfare queues labor supply and macro equilibrium in socialist economies starting from a micro model of consumer behavior under rationing by queuing that utilizes gary becker s allocation of time framework we develop a simple macroeconomic model of a socialist economy the length of the queue is the key endogenous variable that equilibrates aggregate supply and aggregate demand comparative statics analysis shows that an increase in wages over money prices brings about longer queues that reduce labor supply output and welfare when shortages grow beyond a certain critical level queues fail to sustain aggregate equilibrium in the economy

quadratic engel curves and consumer demand this paper presents a model of consumer demand that is consistent with the observed expenditure patterns of individual consumers in a long time series of expenditure surveys and is also able to provide a detailed welfare analysis of shifts in relative prices a nonparametric analysis of consumer expenditure patterns suggests that engel curves require quadratic terms in the logarithm of expenditure while popular models of demand such as the translog or the almost ideal demand systems do allow flexible price responses within a theoretically coherent structure they have expenditure share engel curves that are linear in the logarithm of total expenditure we derive the complete class of integrable quadratic logarithmic expenditure share systems a specification from this class is estimated on a large pooled data set of u k households models that fail to account for engel curvature are found ro generate important distortions in the patterns of welfare losses associated with a tax increase

dynamics in innovation systems evidence from japan s game software industry in contrast to the us and recently europe japan appears to be unsuccessful in establishing new industries an oft cited example is japan s practical invisibility in the global business software sector literature has ascribed japan s weakness or conversely america s strength to the specific institutional settings and competences of actors within the respective national innovation system it has additionally been argued that unlike the american innovation system with its proven ability to give birth to new industries the inherent path dependency of the japanese innovation system makes innovation and establishment of new industries quite difficult however there are two notable weaknesses underlying current propositions postulating that only certain innovation systems enable the creation of new industries first they mistakenly confound context specific with general empirical observations and second they grossly underestimate or altogether fail to examine the dynamics within innovation systems this paper will show that it is precisely the dynamics within innovation systems dynamics founded on the concept of path plasticity which have enabled japan to charge forward as a global leader in a highly innovative field the game software sector 2008 elsevier b v all rights reserved

public policies pressure groups and dead weight costs abstract this paper presents a model of competition among special interest groups for political influence each active group exerts pressure to affect its taxes and subsidies where activities of different groups are related by the equality between total tax collections and total tax subsidies the dead weight costs and benefits of taxes and subsidies play a major role in our model an increase in the dead weight cost of taxation encourages pressure by taxpayers while an increase in the dead weight costs of subsidies discourages pressure by recipients various applications of the analysis are discussed