cost reduction competition and industry performance in many markets firms compete over time by expending resources with the purpose of reducing their costs sometimes the cost reducing investments operate directly on costs in many instances they take the form of developing new products that deliver what customers need more cheaply therefore product development can have the same ultimate effect as direct cost reduction in fact if one thinks of the product as the services it delivers to the customer in the way that lancaster pioneered then product development often is just cost reduction

micro incentives and municipal behavior political decentralization and fiscal federalism in argentina and mexico summary this article analyzes the mixed results of political and fiscal decentralization in latin america by comparing taxing and spending policies in six cities in argentina and mexico consistent with previous studies we find that decentralization has been frustrated by overconcentration of power at the provincial level and large vertical fiscal imbalances though we characterize these as functional elements in a system of redistributive policy making that benefits a wide array of provincial and municipal actors we seek to add a new dimension to the literature by arguing that micro level incentives conditions and circumstances particular to specific places are more important determinants of municipal behavior than macro level structures those policy and institutional changes intended to make officials more responsive to local conditions federalism local elections intergovernmental transfers and own source revenues we conclude that the theory of decentralization relies on a flawed conception of the causal mechanisms that are hypothesized to create responsiveness in local officials

from technological catch up to innovation based economic growth south korea and taiwan compared abstract this paper sets out to analyse the divergent models pursued by south korea and taiwan in regard to technological catching up and their ongoing transition towards innovation based economies it is found that south korea s former high debt and chaebol dominated model inclined it to pursue a schumpeterian scale based technological development while taiwan s former pro stability small and medium sized enterprise sme based model tended to favour its emphasis on a neo marshallian network based technological development it will be argued that the state s approach to economic liberalisation and firms demand for capital for technological upgrading are the major factors that have underpinned the adjustment efforts of these two countries

both institutions and policies matter but differently for different income groups of countries determinants of long run economic growth revisited summary this paper revisits the recent debate on the determinants of long run economic growth with the simple idea that different factors matter at different country groups classified by income levels this paper improves on the methodology by conducting not only cross section estimations but also fixed effects panel and system gmm estimations the results suggest that new policy variables such as technology and tertiary education as well as institutions matter as the determinants of long run economic growth in addition this paper finds that while secondary education and institution turn out to be important for lower income countries an emphasis on technology and higher education appears to be effective in generating growth for the upper middle and high income countries but not for the lower middle and low income countries

expenditures and receipts testing for causality in state and local government finances the results of our tests indicate similarities between the expenditure tax receipt relations of state governments to those previously reported for the federal government in manage and marlow 1986 the results reported here indicate support for the hypothesis that tax receipts cause expenditures at the state level of government for tests utilizing symmetric lag structures ranging from three to five years state expenditures appear to follow state tax receipts for the shortest lag length 2 2 the determination of bidirectional causality does not make us reject the hypothesis that higher spending levels result from higher revenue levels rather the causality appears to be in both directions for the shortest lag length

the limits of capital transcending the public financer private producer split in industrial r d abstract a near consensus has emerged supporting the public funding of industrial r d as a solution to a host of market failures however the common policy prescription urges government to go no further than minimal market enhancing intervention largely keeping the state to the role of financer of privately conducted r d by focusing on three general issues in the context of industrial r d trust coordination and motivation this article develops an argument for a more expansive government role two models of state intervention are at the center of the analysis public production of r d and state sponsorship of inter firm and inter organizational networks it is argued that both these models have distinct advantages as well as weaknesses in addressing common challenges to industrial r d production informed by the positive experiences of different states that have moved in recent years from high technology industries periphery to the center this article explains how the two models of state intervention address the various problems associated with pure private production it is concluded that while even advanced countries with well developed markets might find it advantageous to actively intervene in industrial r d the two models should especially be considered in cases of economies that suffer from weak market signals low retention of value added functions limited professional capacities and limited institutional thickness and networks

strategizing by firms in the presence of markets for resources strategizing by firms from the resource based view is concerned with the process through which firms acquire a distinctive bundle of resources that is costly and time consuming for competitors to duplicate or imitate a central question facing any firm therefore is its strategy for accumulating the resources that underpin its production activities in this article the process of resource accumulation is discussed as one involving potentially both internal resource development and external resource acquisition from the perspective of the strategic issues involved in making a choice between these options emerging markets for technologies and know how through licensing and other forms of resource exchange have opened up new avenues through which firms may jostle for advantage the article is concerned with three major aspects of this process illustrating the discussion with cases from biotechnology and pharmaceuticals first the strategizing by firms around the internal development vs external sourcing issue is discussed as informed by the practices of leading firms and how these lend greater variety of strategic options for firms second the potential competitive advantages as well as disadvantages to be secured by firms through the process of external sourcing as compared with the well known potential advantages accruing to incumbents through internal development such as time compression diseconomies and causal ambiguity and third the criteria to be used by firms to strategically evaluate resources individually as contrasted with the strategic evaluation of the resource bundle or totality these criteria it is argued turn on the issues of marginal value contribution resource complementarities and synergies resource variety and transferability involving intellectual property issues successful firms it is argued expand their options through blending internal resource accumulation with external resource leverage thereby deepening their distinctive dynamic capabilities this approach extends the framework of the rbv enabling it to encompass resource driven schumpeterian competition and such aspects of industrial dynamics as specialization modularization and imitative challenge copyright 2003 oxford university press

politicians as experts electoral control and fiscal restraints we propose an argument for fiscal restraints that is based on the premise that the services of politicians are credence goods politicians are experts who specialize in observing the true state of the economy budget maximizing politicians are better informed than the electorate about the level of public spending necessary to manage public affairs voters who are able to observe the size of the budget but not the necessary level of spending affect the government s spending behavior via electoral control a fiscal restraint limits the maximum spending a government can choose we identify conditions under which such a fiscal restraint improves voter welfare and discuss the role of the political opposition as a second expert in situations in which the state of the economy requires a level of spending which exceeds the fiscal restraint

competitive dynamics and economic learning an extended resource based view in this paper a conceptual framework for the analysis of economic learning is developed economic learning by analogy with organizational learning results in the development of economic competences or capabilities shared between firms which rest on a foundation of economic resources from which value is generated and economic routines through which resources are utilized it is the mobility of resources and their exchange and production dynamics along evolutionary pathways which underpins the plausibility of a notion of economic learning the paper elaborates this framework as a resource based view rbv of the economy as a whole as an extension of the rbv of the firm such a framework captures the dynamics of exchange and circulation of technologies know how and intangible assets as well as of tangible assets and capital goods it is concerned with investment behavior by entrepreneurs rather than with the behavior of producers and consumers in goods and services markets within this resource economy framework it is possible to generate an account of the resource dynamics that underpin production of goods and services including resource propagation diffusion imitation replication and recombination these processes encompass evolutionary pressures experienced through resource variation selection and retention entrepreneurial initiatives take the form of resource recombinations while resource innovation captures the creation of new economic resources such as technological standards such a perspective brings into focus the resource specialization and configurations that drive real economies within firms and between firms that translates into enhanced or diminished performance of the economy as a whole copyright 2003 oxford university press

cooperative research in a newly industrialized country taiwan abstract partly triggered by the successful experience of the japanese vlsi program taiwan has launched several cooperative research projects aimed at enhancing industrial competitiveness these undertakings however have not performed as well as expected under such circumstances the taiwanese government is anxious to explore which factors affect the inter industry and inter firm variation in cooperative research activity and to evaluate the feasibility of such r d cooperative projects our analysis suggests that the more research active the industry is the greater is the proportion of those funds allocated to cooperative arrangements and foreign competition is the principal factor which influences a firm s decision to engage in cooperative research activity furthermore we conclude that taiwanese firms should look beyond their own r d as the major source of new technology and become involved in cooperative research the reasons for such a necessity are due to the accelerating pace of technological change scale barriers in high tech industries and taiwan s small and medium sized enterprise dominant status in the industrial structure however a compromise which allows research goals to fall in the middle ground between research oriented and product oriented measures is advisable to match taiwan s current environment in addition implementing a new cost sharing principle and an appropriate incentive scheme to improve research efficiency in government led cooperative programs are urgently needed

the origins and dynamics of production networks in silicon valley abstract computer systems firms in silicon valley are responding to rising costs of product development shorter product cycles and rapid technological change by focusing and building partnerships with suppliers both within and outside of the region well known firms like hewlett packard and apple computers and lesser known ones like silicon graphics and pyramid technology are organized to combine the components and sub systems made by specialist suppliers into new computer systems as these firms collaborate to both define and manufacture new systems they are institutionalizing their capacity to learn from one another three cases a contract manufacturer a silicon foundry and the joint development of a microprocessor illustrate how inter firm networks help account for the sustained technological dynamism of the regional economy

catching up or falling behind patterns in international interfirm technology partnering abstract the central issue in this paper is to what extent diverging international patterns in the distribution of technological capabilities are also found in interfirm technology cooperation to answer this question attention will be paid to two largely different forms of interfirm technology partnering one is the phenomenon of strategic technology partnering the other covers interfirm technology transfer agreements other mechanisms for international technology transfer that we discuss put the central subject of the present contribution in a wider context the analysis enables us to address the possible limits of catching up through technology partnering and the major differences between the developed economies newly industrialized countries nics and less deeveloped countries ldcs a major conclusion in that interfirm partnering so far has not led to a catching up of ldcs and most of the nics as it is much more part of a process of concentration of technological competencies within the developed economies

establishing property rights establishing secure property rights in transition economies amounts to solving two problems inefficiency structures of control rights over assets and poor contract enforcement politicians and bureaucrats still wield excessive control over assets which results in inefficient underinvestment by entrepreneurs corruption is one way of getting around political control but the drawbacks are considerable particularly the limited enforceability of corruption contracts more workable strategies for establishing property rights in transition economies are giving equity to the bureaucrats and other parties that have control reforming the civil service and removing bureaucratic control rights through privatization russia s experience shows how privatization combined with equity incentives for enterprise insiders transfers control rights from the bureaucrats and stimulates political and economic pressures to protect private property rights

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

political decentralization and corruption evidence from around the world abstract how does political decentralization affect the frequency and costliness of bribe extraction by corrupt officials previous empirical studies using subjective indexes of perceived corruption and mostly fiscal indicators of decentralization have suggested conflicting conclusions in search of more precise findings we combine and explore two new data sources an original cross national data set on particular types of decentralization and the results of a firm level survey conducted in 80 countries about firms concrete experiences with bribery in countries with a larger number of government or administrative tiers and given local revenues a larger number of local public employees reported bribery was more frequent when local or central governments received a larger share of gdp in revenue bribery was less frequent overall the results suggest the danger of uncoordinated rent seeking as government structures become more complex

inequality of opportunity inequality of income and economic growth abstract despite the firm consensus that income inequality is intrinsically undesirable its impact on economic growth is much disputed we posit that the relationship between income inequality and economic growth is conditioned by the level of equality of opportunity our testable hypothesis is simple in societies where opportunities are unequally distributed where the material circumstances of parents act as binding constraints on the opportunities available to their children income inequality exerts a greater drag on future growth in contrast in societies with a more equal distribution of opportunities an increase in income inequality can be more easily reversed and need not constrain investment opportunities and growth we identify equality of opportunity with intergenerational mobility that is the degree of the correlation between parents attainments income and education and childrens attainments we use several recently developed internationally comparable measures of intergenerational mobility including the world bank s comprehensive gdim database to confirm that the negative impact of income inequality on growth is higher the lower is intergenerational mobility our results suggest that omitting intergenerational mobility leads to misspecification shedding light on why the empirical literature on income inequality and growth has been so inconclusive

rights equity and economic efficiency the adelman morris premise that economic development and equity are incompatible is not supported by the evidence of a strong relationship between equality of rights and the income distribution the premise that equity requires the denial of individual rights and the affirmation of state control is an oxymoron what has been overlooked in the literature on growth and equity is the effect of the rights structure on both economic efficiency and on the income distribution the evidence is that free societies have much larger shares of income going to the middle 60 percent of the distribution than is observed in societies where men are not free to choose in politically open societies compared to politically closed regimes the share of income to the middle three quintiles is q2 10 7 vs 8 0 q3 16 0 vs 11 5 and q4 22 9 vs 17 9 in the aggregate the shares to the middle quintiles are 49 6 vs 37 4 in nations that obey the rule of law compared to regimes in which the rights of the state relative to the individual are paramount the comparisons are q2 11 2 vs 7 4 q3 16 3 vs 10 6 q4 23 0 vs 17 3 summing the three quintiles yields a comparison of 50 5 vs 35 3 in countries that have private property market allocation of resources and minimum intervention by the state compared to command economies the shares of income to the middle quintiles are q2 10 8 vs 8 0 q3 16 0 vs 11 1 and q4 22 8 vs 17 7 aggregated the shares of the middle class in regimes with high levels of economic liberty are 49 6 vs 36 8 for regimes with restricted private economic rights

leading companies and networks of strategic alliances in information technologies abstract strategic alliances joint ventures and a wide array of cooperative r d pacts have received considerable attention in recent years in this paper an attempt is made to understand not only some recent trends in inter firm cooperation in information technologies but also to reveal the role played by a large group of companies the research is based on a large databank with information on thousands of alliances and their participating companies applying a number of statistical techniques it is possible to identify the major players within information technology and its sub fields the analysis enables us to recognize the major international networks of inter firm alliances the changes over time and different positions taken by world leading companies in several industrial and technological settings

leviathan in a dual economy this paper studies the policies of a leviathan state with an ambition to make money and to stay in power the economic framework is a developing country characterized by dual markets government revenue is raised by taxing the agricultural sector part of this revenue is offered to the politically influential urban population in the form of low productive but well paid public sector employment i calculate the optimal level of rural taxation from the point of view of the leviathan and investigate its effects on migration industrialization public sector employment and urban unemployment in different political scenarios

interdependencies between transport fuel demand efficiency and quality an application to austria abstract this paper focuses on the interdependencies between technical efficiencies and energy demand which are often either treated in isolation or do not get the sufficient attention in the literature more precisely this paper uses technical efficiencies as one crucial determinant of energy demand in order to integrate at least two issues that are usually investigated separately from each other the rebound effect resulting from improved technical efficiencies and the asymmetry of energy demand in this regard our paper sets out a theoretical framework which has the following implications higher efficiency increases service demand first order rebound low fuel prices and higher efficiency increases the demand for quality second order which in turn increases service demand further third order ceteris paribus energy price shocks should increase scrapping rates fuel prices direct the rd those on engine efficiency are irreversible which has the consequence that energy price elasticities depend on the history of energy prices rather than being asymmetrical derived implications are subsequently tested on austrian data in particular the purchasing decision diesel versus gasoline powered cars allows to refute the myth that consumers apply high implicit rates for discounting the future benefit from efficient cars

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

optimal central banker contracts and common agency this paper considers the contracting approach to centralbanking in a simple common agency model we suggest thatcentral banker contracts that do not consider the possibilityof more than one principal existing are incomplete contracts such incomplete contracts can be a poor form ofmonetary policy delegation under common agency we develop amodel with two principals society government and ageneric interest group whose objective conflicts withsociety s ex ante preferences by incorporating an inflationarybias we determine when the government offered orinterest group offered contract dominates the central banker sdecision the results largely depend on whether theinterest group offered contract is written in terms of outputor inflation

reviving leviathan fiscal federalism and the growth of government this article revisits the influential leviathan hypothesis which pos its that tax competition limits the growth of government spending in decentralized countries i use panel data to examine the effect of fiscal decentralization over time within countries attempting to distinguish between decentralization that is funded by intergovernmental transfers and local taxation first i explore the logic whereby decentralization should restrict government spending if state and local governments have wide ranging authority to set the tax base and rate especially on mobile assets in countries where this is most clearly the case decentralization is associated with smaller government second consistent with theoretical arguments drawn from wel fare economics and positive political economy i show that governments grow faster as they fund a greater portion of public expenditures through intergovernmental transfers

on the simultaneity problem in the aid and growth debate this paper shows that foreign aid has a significant positive average effect on real per capita gross domestic product gdp growth if and only if the quantitatively large negative reverse causal effect of per capita gdp growth on foreign aid is adjusted for in the growth regression instrumental variables estimates show that a 1 percentage point increase in gdp per capita growth decreased foreign aid by over 4 adjusting for this quantitatively large negative reverse causal effect of economic growth on foreign aid shows that a 1 increase in foreign aid increased real per capita gdp growth by around 0 1 percentage points

japanese research consortia a microeconometric analysis of industrial policy despite the existence of much theoretical research analyzing the potential benefits and costs of r d consortia there has been little corresponding empirical work on their efficacy in this paper we undertake a large sample econometric study of japanese government sponsored research consortia we find evidence that frequent participation in these consortia has a positive impact on research expenditure and research productivity these results hold after controlling for the potential endogeneity of intensity of participation in consortia to participating firms research productivity furthermore we find evidence that part of this impact arises from the increased knowledge spillovers that take place within these consortia

public sector employment rent seeking and economic growth surplus labor in the public sector a characteristic of many developing countries is viewed in this paper as the consequence of rent seeking behavior a theory is presented of a segmented labor market with endogenous government hiring in response to unemployment a simple computable general equilibrium model is used to illustrate how this can give rise to dynamic social costs and to quantify them fiscal resources are diverted to support the unproductive sink the effect of surplus labor on economic growth is shown to be substantial while the government s attempt to reduce unemployment is shown to be futile copyright 1991 by royal economic society

municipal annexation and local monopoly power we have found that the fiscal power of a city can be increased by extension of its borders within a land area that is homogeneous with respect to earning opportunities even when numerous rival jurisdictions exist in the area we hypothesized that extending municipal boundaries will have a positive effect on discretionary outlays and on expenditures per capita the evidence presented supports these hypotheses furthermore municipal wages appear to be significantly increased in cities experiencing annexation growth therefore we would expect to find that municipal employees are more inclined to favor annexation than the rest of the electorate from a policy standpoint this study suggests that significant perverse effects on fiscal efficiency may follow adoption of legal reforms that facilitate the ability of municipalities to extend their borders or that restrict the formation of new municipalities

enhancing value via cooperation firms process benefits from participation in a standard consortium firms benefit from participating in a consortium in two ways from final products and from the cooperation process process benefits including interorganizational learning and social capital benefits are critical to motivate firms to participate in a consortium however there is limited understanding of what factors enable firms to obtain process benefits via consortium activities based on 232 member surveys collected from seven e business standard consortia we find that firms anticipate more process benefits if they are more technically capable value the forthcoming standards higher and participate in a better managed consortium surprisingly although relational risks exist due to potential competition among consortium members their impacts on process benefits are insignificant in e business standard consortia furthermore our empirical analysis suggests that more technically capable firms handle relational risk less effectively when learning within the consortium copyright 2012 the author 2011 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

small firms social capital and the enhancement of business performance through innovation programmes the paper explores the extent to which social capital is advantageous to small and medium enterprise sme growth social capital is a communal property involving civic engagement associational membership high trust reliability and reciprocity in social networks it is capable of being identified in social political and economic contexts often associated with strong communities however not all strong communities exert the effects of social capital in respect of business activities this paper assesses government programmes to promote collaboration amongst smes for improving innovation capacity by increasing social capital through networking it shows that for a sizeable proportion of programme funded firms in denmark ireland and wales u k social capital building was associated with enhanced business knowledge and innovation performance of particular importance was the opportunity afforded to firms for linkage with external innovation networks and the build up of embeddedness or the institutional basis for the enhancement of social capital as a consequence of discovering the advantages of social capital over a third of respondents planned to continue to develop it in future in many cases funding such activities privately rather than calling on the public purse

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

political economy of mechanisms we study the optimal mirrlees taxation problem in a dynamic economy in contrast to the standard approach where the taxation mechanism is operated by a benevolent planner with full commitment power we focus on economies in which policy decisions are made by self interested politicians who cannot commit to policies the society controls politicians using elections we show that the provision of incentives to politicians can be partly separated from redistribution across agents and that political economy constraints can be modeled as introducing additional aggregate distortions in the dynamic mirrlees problem we provide conditions under which the political economy distortions persist or disappear in the long run if the politicians are as patient as the agents the best sustainable mechanism leads to an asymptotic allocation where the aggregate distortions arising from political economy disappear in contrast when politicians are less patient than the citizens positive aggregate labor and capital taxes remain even asymptotically we conclude by providing a brief comparison of centralized

the origins and dynamics of taiwan s r d consortia a series of collaborative r d ventures have emerged in taiwan within a quite distinctive institutional framework unlike the case of many of the collaborative arrangements between established firms in the us europe or japan where mutual risk reduction is frequently the driving influence in the case of taiwan it is technological learning upgrading and catch up industry creation that is the object of the collaborative exercises the taiwan r d alliances were formed hesitantly in the 1980s but have flourished in the 1990s as institutional forms have been found which encourage firms to cooperate in raising their technological levels several alliances could be counted in taiwan in the late 1990s bringing together firms and public sector research institutes with the added organizational input of trade associations and catalytic financial assistance from government the article discusses the evolving organizational architecture of these r d alliances utilizing several case studies and seeks to draw comparisons between these institutional innovations in taiwan and established collaborative arrangements in the usa japan and europe