institutional adaptability in china local developmental models under changing economic conditions summary distinct patterns of regional development have emerged in china s political economy since the initiation of economic reforms in late 1970s in particular the localities of suzhou wenzhou and dongguan each achieved dramatic economic growth during the first three decades of reform earning them national reputations as developmental models for other cities in china to recognize and emulate however the local states of suzhou wenzhou and dongguan responded differentially to changing conditions in the broader domestic and global economy and the global financial crisis at the end of the 2000s affected the three localities with varying levels of severity this article thus seeks to explain why previously well performing developmental models diverged in their performance and capacity to recover from a major economic shock drawing on national economic census data in depth field interviews and relevant secondary literature we argue that variation in the institutional adaptability of suzhou wenzhou and dongguan throughout the course of their developmental experiences had a defining effect on how these cities fared during the financial crisis the process tracing case studies reveal that a locality s ability to adjust to changing market conditions may be conditioned by structural endowments but ultimately hinges on agent centric factors including motivated and capable local leadership openness to new policy ideas and state capacity for policy implementation ultimately our analysis makes the broader observation that in a dynamic environment factors that promote economic success at one point can become barriers later on hence exploring a region s institutional adaptability and identifying the factors that facilitate or impede such adaptability in local economic governance provides a more nuanced means for understanding a locality s evolving developmental patterns and performance during normal times as well as more challenging periods

china s shallow integration networked production and the new challenges for late industrialization summary chinese enterprises have become extensively linked with the global economy yet in a shallow manner they remain stuck in commodity manufacturing undifferentiated activities for which innovation is absent competition then revolves around cutthroat cost cutting this outcome stems from three factors first it reflects the new challenges to development posed by globally networked production second it reflects tensions between the political economic imperatives of successful post socialist transition and the institutional imperatives for upgrading in networked economies third it reflects uncertainty surrounding the adjustment of traditional industrial policy to the new demands of development through participation in global supply chains

option pricing when the variance changes randomly theory estimation and an application in this paper we examine the pricing of european call options on stocks that have vari ance rates that change randomly we study continuous time diffusion processes for the stock return and the standard deviation parameter and we find that one must use the stock and two options to form a riskless hedge the riskless hedge does not lead to a unique option pricing function because the random standard deviation is not a traded security one must appeal to an equilibrium asset pricing model to derive a unique option pricing function in general the option price depends on the risk premium associated with the random standard deviation we find that the problem can be simplified by assuming that volatility risk can be diversified away and that changes in volatility are uncorrelated with the stock return the resulting solution is an integral ofthe black scholes formula and the distribution function for the variance of the stock price we show that accurate option prices can be computed via monte carlo simulations and we apply the model to a set of actual prices

bureaucracy infrastructure and economic growth evidence from u s cities during the progressive era recent work in the sociology of economic development has emphasized the establishment of a professional bureaucracy in place of political appointees as an important component of the institutional environment in which private enterprise can flourish i hypothesize that establishment of such a bureaucracy will lengthen the period that public decision makers are willing to wait to realize the benefits of expenditures leading to allocation of a greater proportion of government resources to long gestation period projects such as infrastructure this hypothesis can be tested using data generated by a natural experiment in the early part of this century when a wave of municipal reform transformed the governments of many u s cities controlling for city and time effects adoption of civil service is found to increase the share of total municipal expenditure allocated to road and sewer investment other estimates imply that this increased share raises the growth rate of city manufacturing employment by one half percent per year this abstract was borrowed from another version of this item

the pricing of options on assets with stochastic volatilities one option pricing problem that has hitherto been unsolved is the pricing of a european call on an asset that has a stochastic volatility this paper examines this problem the option price is determined in series form for the case in which the stochastic volatility is independent of the stock price numerical solutions are also produced for the case in which the volatility is correlated with the stock price it is found that the black scholes price frequently overprices options and that the degree of overpricing increases with the time to maturity one option pricing problem that has hitherto remained unsolved is the pricing of a european call on a stock that has a stochastic volatility from the work of merton 12 garman 6 and cox ingersoll and ross 3 the differential equation that the option must satisfy is known the solution of this differential equation is independent of risk preferences if a the volatility is a traded asset or b the volatility is uncorrelated with aggregate consumption if either of these conditions holds the risk neutral valuation arguments of cox and ross 4 can be used in a straightfoward way this paper produces a solution in series form for the situation in which the stock price is instantaneously uncorrelated with the volatility we do not assume that the volatility is a traded asset also a constant correlation between the instantaneous rate of change of the volatility and the rate of change of aggregate consumption can be accommodated the option price is lower than the blackscholes b s 1 price when the option is close to being at the money and higher when it is deep in or deep out of the money the exercise prices for which overpricing by b s takes place are within about ten percent of the security price this is the range of exercise prices over which most option trading takes place so we may in general expect the b s price to overprice options this effect is exaggerated as the time to maturity increases one of the most surprising implications of this is that if the b s equation is used to determine the implied volatility of a near the money option the longer the time to maturity the lower the implied volatility numerical solutions for the case in which the volatility is correlated with the stock price are also examined the stochastic volatility problem has been examined by merton 13 geske 7 johnson 10 johnson and shanno 11 eisenberg 5 wiggins 16 and

bureaucracy and growth a cross national analysis of the effects of weberian state structures on economic growth the role of bureaucratic authority structures in facilitating economic growth has been a sociological concern since max weber s classic contributions almost 100 years ago using a recent and original data set we examine the characteristics of core state economic agencies and the growth records of a sample of 35 developing countries for the 1970 1990 period our weberianness scale offers a simple measure of the degree to which these agencies employ meritocratic recruitment and offer predictable rewarding long term careers we find that these weberian characteristics significantly enhance prospects for economic growth even when we control for initial levels of gdp per capita and human capital our results imply that weberianness should be included as a factor in general models of economic growth they also suggest the need for more attention by policymakers to building better bureaucracies and more research by social scientists on variations in how state bureaucracies are organized

grounded globalization foreign capital and local bureaucrats in china s economic transformation summary how does a globalized context influence domestic development policies and the allocation of government resources in an authoritarian country like china this study explores the coalitional politics in china s transition from foreign direct investment fdi attraction to domestic technology upgrading which created winners and losers in the local allocation of government resources drawing on comparative case studies semi structured interviews and newly compiled data at the city level the study finds that the varied levels of government support for domestic upgrading are shaped by coalitions for or against the transition the major obstacle for bureaucrats within a city government to garner resources for domestic technology does not directly depend on the overall level of fdi rather it comes from the vested interest of international commerce bureaucrats these bureaucrats are more likely to form a cohesive coalition when the export share of foreign firms is large at the same time such a coalition is more likely to gain political influence when industrial sales are concentrated in large firms the direction and magnitude of foreign capital influence therefore is channeled and manifested through local bureaucratic coalitions this study sheds light on the politics of implementing development policies in an era in which globalization has cultivated fragmented interests within the local bureaucracy

a reference price theory of the endowment effect abstract the common finding that selling prices exceed buying prices the so called endowment effect is typically explained by the assumptions that consumers evaluate potential transactions with respect to their current holdings and that the owners of a good regard its potential loss to be more significant than nonowners regard its potential acquisition in contrast to this pain of losing account the authors propose that the endowment effect reflects a reluctance to trade on terms that appear unfavorable with respect to salient reference prices in six experiments and eight more summarized in appendixes the authors show that manipulations that reduce the gap between valuations and reference prices reduce or eliminate the endowment effect these results suggest that the endowment effect is often best construed as an aversion to bad deals rather than an aversion to losing possessions

zero as a special price the true value of free products when faced with a choice of selecting one of several available products or possibly buying nothing according to standard theoretical perspectives people will choose the option with the highest cost benefit difference however we propose that decisions about free zero price products differ in that people do not simply subtract costs from benefits but instead they perceive the benefits associated with free products as higher we test this proposal by contrasting demand for two products across conditions that maintain the price difference between the goods but vary the prices such that the cheaper good in the set is priced at either a low positive or zero price in contrast with a standard cost benefit perspective in the zero price condition dramatically more participants choose the cheaper option whereas dramatically fewer participants choose the more expensive option thus people appear to act as if zero pricing of a good not only decreases its cost but also adds to its benefits after documenting this basic effect we propose and test several psychological antecedents of the effect including social norms mapping difficulty and affect affect emerges as the most likely account for the effect

international listing as a means to mobilize the benefits of financial globalization micro level evidence from china summary this paper proposes a micro level framework to account for how firms in developing economies overcome domestic institutional constraints it illustrates that the mechanisms enabling those firms to benefit from financial globalization are more complex than the direct financial channels outlined in the neo classical approach china provides an important example in this context as its capital market liberalization has been limited and neither the legal nor the financial system is well developed yet micro level evidence from china s internationally listed enterprises indicates that innovative firms can overcome institutional thresholds secure access to international capital and benefit and learn from international capital markets this can in turn induce market level improvements through regulatory competition and demand for a more standardized system of economic regulation

credit rationing and the demand for owner occupied housing abstract this study applies cross sectional data to test whether default risk induced credit constraints affect the demand for owner occupied housing credit constrained households are argued to exhibit different elasticities of demand for housing than less constrained households housing demand elasticities are then estimated separately for households obtaining va insured and non va loans the government guarantee on va loans insures lenders against default enabling lenders to apply easier nonprice terms of credit results indicate that observed demand elasticities differ significantly across va and conventional mortgage holders that marginal changes in credit constraints affect housing demand and that fha financing mitigates the effect of mortgage constraints

pricing options under generalized garch and stochastic volatility processes in this paper we develop an efficient lattice algorithm to price european and american options under discrete time garch processes we show that this algorithm is easily extended to price options under generalized garch processes with many of the existing stochastic volatility bivariate diffusion models appearing as limiting cases we establish one unifying algorithm that can price options under almost all existing garch specifications as well as under a large family of bivariate diffusions in which volatility follows its own perhaps correlated process through an equilibrium argument duan 1995 shows that options can be priced when the dynamics for the price of the underlying instrument follows a general autoregressive conditionally heteroskedastic garch process the theory of pricing under such processes is now well understood however the design of efficient numerical procedures for pricing them is lacking most applications resort to large sample simulation methods with a variety of variance reduction techniques the complexity of pricing arises from the massive path dependence inherent in garch models this path dependence causes typical lattice based procedures to grow exponentially in the number of time increments the lack of efficient numerical schemes hinders empirical tests among the wide array of competing garch models most tests of garch models limit themselves to the use of high frequency data on spot assets with little attention placed on the information content of options 1

second generation fiscal federalism political aspects of decentralization and economic development summary this essay contributes to second generation fiscal federalism sgff which traces the implications of incentives created by political and fiscal institutions the approach explores how various forms of fiscal federalism work in the presence of political officials who rather than being benevolent social planners face various forms of political incentives the paper focuses on three sets of positive models first it explores self enforcing federalism that is how federal systems are held together given various tendencies for federal systems to become centralized or fall apart second it considers how specific political institutions such as democracy interact with decentralization finally it studies various political impediments to economic growth again highlighting the interaction with decentralization 2013 elsevier ltd all rights reserved

tenure choice and the demand for housing this paper deals with the estimation by means of nonlinear methods of preference parameters from observation of behaviour in housing markets it differs from previous work on housing market behaviour in several important aspects first it treats the choice of tenure mode that is whether to rent or own and the housing consumption decision as a joint decision second it explicitly uses the same behavioural model in analysing these discrete and continuous elements of housing market behaviour third it allows for an analysis of the role of capital market imperfections and discriminatory practices in constraining housing market decisions

the role of site and job characteristics in hedonic wage models recent economic analyses of wage rate differentials have generally used some form of hedonic framework in explaining the observed wage structure while these studies have adopted this common theoretical justification the models have been used to serve two distinct objectives the first of these is an empirical test of the theory of equalizing differences originally introduced by adam smith in such applications see brown 7 lucas 26 olson 28 thaler and rosen 36 and viscusi 40 as examples specific job characteristics measured with technical information or with worker perceptions have been used to explain differences in wage rates across individuals and jobs while there are a number of these studies there has not been a consistent pattern of support for the theory indeed with the exception of job risks many characteristics that a priori would be expected to lead to equalizing differences have often exhibited incorrect and or statistically insignificant measured effects on wages the second use for wage models has been as the basis for an index of the quality of life in urban areas in this framework households are assumed to select residential locations so as to maximize their individual welfare migration between cities provides the mechanism for an equilibrium household assignment under ideal conditions the pattern of equilibrium wage rates reflects the attributes of the cities involved see hoch 20 izraeli 23 cropper lo cropper and arriaga salinas 111 and rosen 31 as examples the purpose of this paper is to develop a model for wage rate differentials that includes both job and site characteristics and to estimate the model with a large micro data set our wage models provide estimates of a market clearing envelope which includes each of two types of past analyses as a

asymmetric buyer information influence on price in a homogeneous housing market buyers often pay different prices for almost identical houses one possible explanation is that there are information asymmetries in housing markets perhaps buyers from outside the area have higher search costs and know less about the local market relative to that of current residents in addition an out of town buyer s price expectations could be anchored to market prices in their town of origin this study examines the effect of buyer heterogeneity in the form of geographic location on house prices we use a new data set to examine the non local buyer information asymmetry and anchoring hypothesis using transaction data from a large development in chengdu china our empirical models are estimated with relatively homogeneous units sold over a short period of time by one seller to minimise possible bias resulting from omitted variables our results support the hypotheses that non local buyers pay higher prices and that high price anchoring occurs

the business of governing business in china institutions and norms of the emerging regulatory state china began to establish markets a quarter century ago but only in the last decade has its government made a concerted effort to design new institutions to govern them hence a regulatory state is emerging the prevailing literature focuses on a seeming convergence of china s institutions with the dominant global model of the independent regulator including the establishment of new regulatory commissions yet research on china s strategic industries those in the infrastructure and financial services sectors suggests that assumptions of convergence obscure key elements of a regulatory design characterized by continued state ownership as opposed to privatization maximization of the value of these assets and active government structuring of these industries moreover regulators in the existing party state bureaucracy have relatively weak authority this research cautions us to rethink dominant models of chinese political economy so that we retain a place for the central state in directing market reform at the commanding heights of the economy

the high frequency trade off between speed and sophistication abstract central to the ability of a high frequency trader to make money is speed in order to be first to trading opportunities firms invest in the fastest hardware and the shortest connections between their machines and the markets yet this is not enough algorithms must be short no more than a few instructions as a result there is a trade off in the design of optimal high frequency trading strategies being the fastest necessitates being less sophisticated to understand the effect of this tension a computational model is presented that captures latency both of code execution and information transmission trading algorithms are modelled through genetic programming with longer programmes allowing more sophisticated decisions at the cost of slower execution times it is shown that depending on the market composition short fast strategies and slower more sophisticated strategies may both be viable and exploit different trading opportunities the relative profits of these different approaches vary however slow traders benefit and social welfare increase in the presence of hfts a suite of regulations are tested to manage the risks associated with high frequency trading the majority are found to be ineffective though constraining the ratio of orders to trades may be promising

the impact of corruption on investment predictability matters abstract this paper argues that it is not only level of corruption that affects investment but also the nature of corruption corruption regimes that are more predictable in the sense that those seeking favors from government do obtain those favors have less negative impact on investment than those that are less predictable using the data collected by world bank in preparing the world development report of 1997 we provide empirical support for the conjecture

effects of fdi flows on institutional development does it matter where the investors are from global fdi flows to and from developing countries have increased significantly since the 1990s while developing countries saw this as a positive development many economists and policy makers in developed countries have raised concerns regarding the institutional effects of developing country investments in other developing countries in this paper we explore the effects of bilateral fdi flows on institutional development gaps between countries and whether such effects are conditional on the direction of flows including south south south north north south and north north directions the empirical results using bilateral flows between 134 countries and a variety of institutional development measures during 1990 2009 suggest that the institutional development effects of fdi flows in any direction including the north south or south south directions are not significant in any case we do not find any significant convergence or divergence effect of fdi flows on the institutional distance between host and home countries we also fail to find any significant effect of aggregate north south fdi flows on host country institutions in contrast we find that aggregate south south fdi flows have a significantly negative effect on host country institutions furthermore we find some evidence that south south fdi flows may be harmful to institutional development in natural resource rich countries while the opposite is true for north south flows overall the results suggest that there is no strong evidence of any benevolent or malevolent effects of bilateral fdi flows from developed or developing countries to developing countries

using genetic algorithms to find technical trading rules1 abstract we use a genetic algorithm to learn technical trading rules for the s p 500 index using daily prices from 1928 to 1995 after transaction costs the rules do not earn consistent excess returns over a simple buy and hold strategy in the out of sample test periods the rules are able to identify periods to be in the index when daily returns are positive and volatility is low and out when the reverse is true these latter results can largely be explained by low order serial correlation in stock index returns

regional decentralization and fiscal incentives federalism chinese style abstract aligning the interests of local governments with market development is an important issue for developing and transition economies using a panel data set from china we investigate the relationship between provincial government s fiscal incentives and provincial market development we report three empirical findings first we find that during the period of fiscal contracting system the discrepancy between ex ante contracts and ex post implementation was relatively small suggesting that the fiscal contracts were credible second we find a much higher correlation about four times between the provincial government s budgetary revenue and its expenditure during 1980s and 1990s as compared to 1970s demonstrating that provincial governments faced much stronger ex post fiscal incentives after reform third we find that stronger ex ante fiscal incentives measured by the contractual marginal retention rate of the provincial government in its budgetary revenue are associated with faster development of the non state sector as well as more reforms in the state sector in the provincial economy this holds even when we control for the conventional measure of fiscal decentralization finally we compare federalism chinese style to federalism russian style

industrial governance structures innovation strategies and the case of japan sectoral or cross national comparative analysis in comparative research on industrial policy strategies attention has shifted from national level variables to sectoral variables in both the description and the explanation of policy the sectoral literature however lacks analytic focus and has provided little systematic insight into the causes of cross sectoral variance in governance structures and policy strategies based on recent contributions to the economics and sociology of formal organizations this article attempts to sharpen the concept of industrial sector and to provide a rationale for why sectoral structures and strategies vary next it develops a synthetic explanatory framework that combines sectoral analysis and national domestic structuralism in order to account for industrial innovation strategies in advanced capitalist countries in the final section the fruitfulness of this approach is illustrated by developing a new account of japan s success and failure in industrial innovation an account that overcomes the contradictions among the main alternatives offered in the past the key objective of the article however is to develop a new set of theoretical hypotheses for cross national research not a rigorous empirical test of its main propositions

union membership in the united states 1973 1981 this paper reports estimates of union membership gathered from may current population surveys from 1973 to 1981 the authors present data by occupation industry selected states and smsas race gender and educational attainment the paper both extends and differs from that by freeman and medoff which presents unionism estimates for the private sector for 1968 75 to facilitate longitudinal analysis this paper reports three year moving averages of occupational and industry data and annual estimates of demographic classifications the data include public sector as well as private sector workers and they exclude workers not covered by the national labor relations act also the authors provide only union membership estimates not estimates on workers covered by union contracts this paper suggests that the percentage of all workers that are unionized in the united states remained fairly constant over the 1973 81 period

reform without losers an interpretation of china s dual track approach to transition this paper develops a simple model to analyze the dual track approach to market liberalization as a mechanism for implementing efficient pareto improving economic reform that is reform achieving efficiency without creating losers the approach based on the continued enforcement of the existing plan while simultaneously liberalizing the market can be understood as a method for making implicit lump sum transfers to compensate potential losers of the reform the model highlights the critical roles of enforcement of the plan for achieving pareto improvement and full liberalization of the market track for achieving efficiency we examine how the dual track approach has worked in product and labor market liberalization in china

a hybrid stock trading system using genetic network programming and mean conditional value at risk abstract this paper describes a hybrid stock trading system based on genetic network programming gnp and mean conditional value at risk model gnp cvar the proposed method combining the advantages of evolutionary algorithms and statistical model has provided useful tools to construct portfolios and generate effective stock trading strategies for investors with different risk attitudes simulation results on five stock indices show that model based on gnp and maximum sharpe ratio portfolio performs the best in bull market and that based on gnp and the global minimum risk portfolio performs the best in bear market the portfolios constructed by markowitz s mean variance model performs the same as mean cvar model it is clarified that the proposed system significantly improves the function and efficiency of original gnp which can help investors make profitable decisions

housing demand and community choice an empirical analysis abstract housing demand reflects the household s simultaneous choice of the neighborhood whether to own or rent the dwelling and the quantity of housing services demanded existing literature emphasizes the final two factors but overlooks the choice of community this paper develops an econometric model that incorporates all three components and then estimates this model using a sample of tampa florida households incorporating community choice increases the price elasticity of demand and reduces the differential between white and comparable nonwhite households the results are robust to the inclusion of permanent income and taxes

the roles and performance of state firms and non state firms in china s economic transition summary it is commonly accepted that state owned enterprises soes are inefficient and that non state firms drive the phenomenal growth in china however why soes are not dying out and how the non state firms thrive in a poor institutional environment remain unanswered we apply the institutional and principal agent perspectives to explain how firms with different ownerships deploy their resources and formulate strategies to achieve their goals using china s industrial census data we find that soes tend to adopt strategies conducive to fulfilling administrative tasks and empire building whereas the non state firms tend to be more profitable in the market policy and strategic implications are discussed

one swallow doesn t make a summer new evidence on anchoring effects some researchers have argued that anchoring in economic valuations casts doubt on the assumption of consistent and stable preferences we present new evidence that explores the strength of certain anchoring results we then present a theoretical framework that provides insights into why we should be cautious of initial empirical findings in general the model importantly highlights that the rate of false positives depends not only on the observed significance level but also on statistical power research priors and the number of scholars exploring the question importantly a few independent replications dramatically increase the chances that the original finding is true

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

the impact of site characteristics on housing cost estimates abstract hedonic housing regressions using micro data for owners and renters from the 1972 1973 consumer expenditure survey are presented by including tract characteristics and public goods in these regressions evidence is presented which indicates sensitivity of the physical housing variable coefficients to the choice of included site related characteristics furthermore omission of public good variables can result in misleading and possibly perverse coefficients on access intermetropolitan housing cost estimates however are shown to be relatively insensitive to the choice of site related characteristics

market simulation and the provision of public goods a non paternalistic response to anomalies in environmental evaluation most normative economics assumes that individuals have coherent preferences this paper responds to growing evidence of failures of this assumption particularly in the context of stated preference methods widely used in environmental policy analysis it proposes a non paternalistic concept of consumer sovereignty that does not assume preference coherence is satisfied by competitive markets and can be applied to the provision of public goods a key implication is that decisions should reflect valuations revealed at the point of consumption such valuations which can be inferred from hedonic prices may be less susceptible to willingness to accept wta willingness to pay wtp disparities than those elicited by stated preference methods

adding asymmetrically dominated alternatives violations of regularity and the similarity hypothesis an asymmetrically dominated alternative is dominated by one item in the set but not by another adding such an alternative to a choice set can increase the probability of choosing the item that dominates it this result points to the inadequacy of many current choice models and suggests product line strategies that might not otherwise be intuitively plausible

federalism as a commitment to reserving market incentives the authors advance a new perspective in the study of federalism their approach views federalism as a governance solution of the state to credibly preserving market incentives market incentives are preserved if the state is credibly prevented from compromising on future economic success and from bailing out future failures the salient features of federalism decentralization of information and authority and interjurisdictional competition help provide credible commitment or these purposes in addition the authors suggest that some federalism are self sustaining

does governance cause growth evidence from china this study tests the causal relationships between quality of governance and economic growth at the provincial level in china during the post mao reform era exploiting the wide cross provincial variation and rapid change over time in governance institutions and economic performance in china during this period covering 1985 2005 the study provides a new perspective on the relationship between governance and growth whereas a large body of prior literature has demonstrated a strong positive association between high quality governance institutions and good economic performance at the cross country level few quantitative studies have explicitly tested the direction of causality between changes in governance quality and changes in economic outcomes this study aims to address this gap in the literature by testing two causal hypotheses on the interplay between provincial level governance and economic performance in china i improvements in provincial quality of governance predict subsequent economic growth rates and ii increases in provincial economic growth rates predict subsequent changes in quality of governance using new heterogeneous granger causality tests that allow for potential differences in the causal relations across provinces i show a significant and positive effect of economic growth on subsequent quality of governance largely driven by growth in the secondary sector but no significant effect of quality of governance on economic growth these findings suggest that improvements in formal governance have not been a key factor driving china s rapid growth instead the observed positive association between governance and growth reflects the ability of provincial governments to harness the potential created by economic growth to implement subsequent governance improvements for researchers studying the effect of governance on growth the results suggest that greater attention should be paid to possible reverse causality from economic outcomes to governance changes

wages rents and the quality of life this study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities the theory demonstrates that if the amenity is also productive then the sign of the wage gradient is unclear while the rent gradient is positive the theory is extended to include the housing market and nontraded goods these extensions require little modification of the conclusion the empirical work on wages shows that the regional wage differences can be explained largely by these local attributes with the use of site price data implicit prices are estimated and quality of life rankings for the cities are computed

new estimates of quality of life in urban areas implicit markets capture compensation for intraurban and interregional differe nces in amenities and yield differences in housing prices and wages these pecuniary differences become preference based weights in a qual ity of life index hedonic equations are estimated using microdata fr om the 1980 census and assembled county based amenity data on climati c environmental and urban conditions ranking of 253 urban counties reveals substantial variation within as well as among the 185 urba n areas the quality of life differences across counties within one s msa is almost one half of the difference between the top and bottom ranked counties in the nation copyright 1988 by american economic association

strong legacies and weak markets bulgarian state owned enterprises during early transition the authors examine the factors affecting the performance of state owned enterprises soes during early transition to a market economy data come from a longitudinal study of a representative sample of bulgarian soes for the period from 1989 the last year under communism to 1993 three years after major macroeconomic shifts they investigate how changes in authority structure work organization technology marketing strategy and organizational boundaries during these years affected organizational performance in 1993 they also assess the degree of path dependence in performance and the role of competitive industry conditions numerous organizational changes made by soes during early transition had little effect on performance yet organizational performance from 1989 to 1993 was highly path dependent although this dependence was mediated by the competitive conditions stronger markets displayed less path dependence overall the results favor the interpretations derived from selected neo institutional and ecological perspectives of organizational sociology over neoclassical economic interpretations

bureaucracy and growth we revisit the hypothesis that a weberian bureaucracy enhances economic growth theoretically we develop arguments for why such a bureaucracy may enhance growth and discuss plausible counterargume

ebay s crowded evenings competition neglect in market entry decisions do firms neglect competition when making entry decisions this paper addresses this question analyzing the time of day at which ebay sellers set their auctions to end consistent with competition neglect it is found that i a disproportionate share of auctions end during peak bidding hours ii such hours exhibit lower selling rates and prices and iii peak listing is more prevalent among sellers likely to have chosen ending time strategically suggesting disproportionate entry is a mistake driven by bounded rationality rather than mindlessness the results highlight the importance for marketing researchers of assessing rather than assuming the rationality of firm behavior

kinship networks and entrepreneurs in china s transitional economy1 this research draws insights from two theoretical traditions one is new institutionalism which emphasizes the role of institutions both formal and informal in economic growth the other is social network analysis which highlights the role of interpersonal relations in producing and enforcing informal norms integrating these two approaches yields the thesis that social networks affect economic growth via enforcing informal institutions the article focuses on the economic payoff of kinship networks in the context of china s rural industrialization to argue that kin solidarity and kin trust played an important role in protecting the property rights of private entrepreneurs and reducing transaction costs during the early stages of market reform when formal property rights laws were ineffective and market institutions underdeveloped data from 366 villages show that the strength of kinship networks has large positive effects on the count and workforce size of private rural enterprises and insignificant

the globalization of liberalization policy diffusion in the international political economy one of the most important developments over the past three decades has been the spread of liberal economic ideas and policies throughout the world these policies have affected the lives of millions of people yet our most sophisticated political economy models do not adequately capture influences on these policy choices evidence suggests that the adoption of liberal economic practices is highly clustered both temporally and spatially we hypothesize that this clustering might be due to processes of policy diffusion we think of diffusion as resulting from one of two broad sets of forces one in which mounting adoptions of a policy alter the benefits of adopting for others and another in which adoptions provide policy relevant information about the benefits of adopting we develop arguments within these broad classes of mechanisms construct appropriate measures of the relevant concepts and test their effects on liberalization and restriction of the current account the capital account and the exchange rate regime our findings suggest that domestic models of foreign economic policy making are insufficient the evidence shows that policy transitions are influenced by international economic competition as well as the policies of a country s sociocultural peers we interpret the latter influence as a form of channeled learning reflecting governments search for appropriate models for economic policy

performance in a hostile world economic growth in capitalist democracies 1974 1982 many recent studies argue that labor organization and government partisanship were important determinants of the economic performance of the advanced industrial democracies during stagflation they do not however take into account the potential impact on performance of position in the international economy the relationships reported may therefore be largely spurious even when the strong effects of international position most notably the extent of dependence on imported sources of oil were controlled for domestic political structures remained powerful determinants of economic performance during stagflation corporatist political economies dominated by leftist governments in which labor movements were densely and centrally organized and market political economies in which labor was much weaker and rightist governments were predominant performed significantly better than the less coherent cases in which the power of labor was distributed asymmetrically between politics and the market

balancing priorities aligning interests developing mitigation capacity in china and india debates about how to respond to climate change have largely focused on the difficulties in agreeing on national targets for reducing greenhouse gas emissions by assuming that the main obstacle to

china and india in the age of globalization sectoral variation in postliberalization reregulation in recent years china and india have extensively liberalized their economies they have departed from the east asian developmental states which have restricted foreign direct investment fdi to protect domestic industry and the liberal fdi strategy of latin america during a similar stage of development as they have eschewed dependent development instead they have taken a liberalization two step which follows liberalization with reregulation that varies across industrial sectors country and sectoral case studies demonstrate the perceived strategic value of a sector sectoral characteristics and the organization of state institutions shape the ways in which reregulation varies insulated from political pressures the chinese state shifts from universal controls on the aggregate level to selective controls at the sectoral level and adopts a bifurcated strategy in its reregulation in india the government liberalizes fdi according to state goals but reregulates as a function of sectoral interests

trade expansion and contract enforcement consider a world of traders separated in geographic economic or social space honest trade offers larger gains for more distant traders but frequencies of meetings and information flows about cheating have local bias honesty is self enforcing only between pairs of sufficiently close neighbors global honesty prevails only in a sufficiently small world the extent of self enforcing honesty is likely to decrease when the world expands beyond this size costly external enforcement is useful only if the world is sufficiently large and its net payoff need not be larger than that of a self governing small community intermediate size worlds fare worst

political bias in policy convergence privatization choices in latin america since the early 1980s privatization has spread in latin america under both right wing rulers and populist presidents this regional convergence toward privatization seemed to announce the end of partisan policy making however not all governments implement privatization in the same way even in the context of policy convergence technocrats propose similar policy options in countries where capital dearth creates pressures for convergence yet politicians build the electoral and government coalitions that make these policies possible and their preferences shape the institutions chosen at implementation the bias introduced by politicians depends on their prior beliefs and constituencies which shape their institutional preferences beliefs about economic nationalism and state intervention influence the selection of regulations at the time of privatization whereas coalition building with political constituencies shapes the definition of selling conditions in privatized companies this political bias which is contingent on the privatizing government explains that the regional policy convergence toward privatization did not extend to its implementation that is although politicians may be losing influence about whether to privatize they still have a say in the choice of how to privatize this article analyzes the impact of this political bias by focusing on the choice of regulatory institutions and selling conditions in five cases of privatization of electricity and telecommunications in latin america

wages rents and amenities differences among workers and regions what explains persistent regional earnings differences this paper argues that regional differences in amenities can account for the wage differences in contrast cost of living variations do not account for wage differences but actually exacerbate them this conclusion results from a model in which variations in rents and wages are equalizing differences for amenity differences empirical results are consistent with the model

institutional impact of foreign direct investment in china summary we provide firm level empirical evidence that the presence of foreign direct investment fdi has positively affected the institutional quality of the host regions in china specifically chinese domestic firms located in regions with a higher level of fdi tend to enjoy a lower level of tax and fee burdens less arbitrariness in such burdens as well as better legal protection to address the potential issue of endogeneity we adopt the instrumental variable approach in addition we explore the specific mechanisms through which the institutional impact is materialized and provide various extensions of the empirical findings that offer further support for the fdi induced institutional improvement argument

short run subsidies and long run adoption of new health products evidence from a field experiment short run subsidies for health products are common in poor countries how do they affect long run adoption a common fear among development practitioners is that one off subsidies may negatively affect long run adoption through reference dependence people might anchor around the subsidized price and be unwilling to pay more for the product later but for experience goods one off subsidies could also boost long run adoption through learning this paper uses data from a two stage randomized pricing experiment in kenya to estimate the relative importance of these effects for a new improved antimalarial bed net reduced form estimates show that a one time subsidy has a positive impact on willingness to pay a year later inherit to separately identify the learning and anchoring effects we estimate a parsimonious experience good model estimation results show a large positive learning effect but no anchoring we black then discuss the types of products and the contexts inherit for which these results may apply

the house doesn t always win evidence of anchoring among australian bookies abstract we examine australian horseracing bookmakers responses to late scratches instances in which a horse is abruptly withdrawn after betting has commenced our observed bookies exhibit anchoring on the original odds and fail to re adjust odds fully on the remaining horses after a scratch thereby earning lower profit margins and occasionally creating nominal arbitrage opportunities for bettors we also examine which horses odds bookies adjust after a scratch and demonstrate diminished profit margins even after controlling for these endogenous adjustments our results indicate that bookies adjustments recover approximately 80 of lost profit margin but that bookies forgo the remaining 20 due to systematic under adjustments

option values under stochastic volatility theory and empirical estimates abstract this paper numerically solves the call option valuation problem given a fairly general continuous stochastic process for return volatility statistical estimators for volatility process parameters are derived and parameter estimates are calculated for several individual stocks and indices the resulting estimated option values do not differ dramatically from black scholes values in most cases although there is some evidence that for longer maturity index options black scholes overvalues out of the money calls in relation to in the money calls

bilateral investment treaties and fdi does the sector matter summary developing and transition countries have increasingly engaged in the signing of bilateral investment treaties bits in order to attract fdi based on the widely shared view that fdi can contribute significantly to economic development and poverty reduction however the degree to which foreign investments can be expected to generate employment offer access to international technology and know how and ultimately create growth varies considerably depending on the type of investment it is therefore important to determine what type of fdi is attracted by bits by providing a legal commitment to the fair and equitable treatment of foreign investors bits aim to decrease investment risk and to attract foreign investors we argue that bits can be expected to be most effective in those sectors of the economy with a larger risk of expropriation i e sectors characterized by large sunk costs relatively low levels of firm specific know how and in sectors that are politically sensitive to foreign ownership this paper represents the first attempt to empirically study the heterogeneous effect that bits may have across different sectors of investments we analyze investments made in 13 countries in the former soviet union and central and eastern europe disaggregated over seven sectors we indeed find the effect of bits to differ considerably across sectors of investment using capital intensity as a proxy we confirm that fdi in those sectors with higher sunk costs responds more strongly to the signing of bits given the considerable differences in the development impact that can be expected from fdi in different sectors it remains to be shown whether bits are an effective tool to attract those types of investments that are most beneficial for the development of the host economy

foreign direct investment inflows and the industrialization of african countries summary this paper examines the relationship between inward foreign direct investment fdi and the industrialization process in africa it uses panel data from 49 countries over the period of 1980 2009 the results indicate that fdi did not have a significant impact on the industrialization of these countries while other variables such as the size of the market the financial sector and international trade were important this study concludes that the role of fdi in the transformation agenda which is currently being discussed in africa should be carefully analyzed to maximize the impact of these capital inflows

local governments as industrial firms an organizational analysis of china s transitional economy despite widespread skepticism about government ownership in transitional economies china s rapid industrial growth has been led by public enterprises kornai s theory of soft budbet constraints born of the failure of earlier hungarian reforms fosters such skepticism but it assumes as fixed organizational characteristics that in fact vary widely across government jurisdictions local governments with smaller industrial bases have clearer financial incentives and constraints fewer nonfinancial interests in enterprises and a greater capacity to monitor them in china s vast public sector the fastest growth in output and productivity has occurred where government ownership rights are clearest and most easily enforced which enables officials to manage public industry as a diversified market oriented firm

incentives information and organizational form we model an organization as a hierarchy of managers erected on top of a technology here consisting of a collection of plants in our framework the role of a manager is to take steps to reduce the adverse consequences of shocks that affect the plants beneath him we argue that different organizational forms give rise to different information about managers performance and therefore differ according to how effective incentives can be in encouraging a good performance in particular we show that under certain assumptions the m form multi divisional form is likely to provide better incentives than the u form unitary form because it promotes yardstick competition i e relative performance evaluation more effectively we conclude by presenting evidence that the assumptions on which this comparison rests are satisfied for chinese data

is technical analysis in the foreign exchange market profitable a genetic programming approach using genetic programming techniques to find technical trading rules we find strong evidence of economically significant out of sample excess returns to those rules for each of six exchange rates over the period 1981 1995 further when the dollar deutsche mark rules are allowed to determine trades in the other markets there is significant improvement in performance in all cases except for the deutsche mark yen betas calculated for the returns according to various benchmark portfolios provide no evidence that the returns to these rules are compensation for bearing systematic risk bootstrapping results on the dollar deutsche mark indicate that the trading rules detect patterns in the data that are not captured by standard statistical models

coherent arbitrariness stable demand curves without stable preferences economic theories of valuation generally assume that prices of commodities and assets are derived from underlying fundamental values for example in finance theory asset prices are believed to reflect the market estimate of the discounted present value of the asset s payoff stream in labor theory the supply of labor is established by the tradeoff between the desire for consumption and the displeasure of work finally and most importantly for this chapter consumer microeconomics assumes that the demand curves for consumer products chocolates cds movies vacations drugs and so forth can be ultimately traced to the valuation of pleasures that consumers anticipate receiving from these products because it is difficult as a rule to measure fundamental values directly empirical tests of economic theory typically examine whether the effects of changes in circumstances on valuations are consistent with theoretical prediction for example whether labor supply responds appropriately to a change in the wage rate whether compensated demand curves for commodities are downward sloping or whether stock prices respond in the predicted way to share repurchases however such comparative static relationships are a necessary but not sufficient condition for fundamental valuation e g summers 1986 becker 1962 was perhaps the first to make this point explicitly when he observed that consumers choosing commodity bundles randomly from their budget set would nevertheless produce downward sloping demand curves

reference dependent job search evidence from hungary we propose a model of job search with reference dependent preferences with loss aversion relative to recent income the reference point in this model newly unemployed individuals search hard since consumption is below their reference point over time though they get used to lower income and thus reduce their search effort in anticipation of a benefit cut their search effort rises again then declines once they get accustomed to the lower postcut benefit level the model fits the typical pattern of exit from unemployment even with no unobserved heterogeneity to distinguish between this and other models we use a unique reform in the unemployment insurance ui benefit path in 2005 hungary switched from a single step ui system to a two step system with overall generosity unchanged the system generated increased hazard rates in anticipation of and especially following benefit cuts in ways the standard model has a hard time explaining we estimate a model with optimal consumption endogenous search effort and unobserved heterogeneity the reference dependent model fits the hazard rates substantially better than plausible versions of the standard model including habit formation our estimates indicate a slow adjusting reference point and substantial impatience likely reflecting present bias jel codes d03 j64 j65

governance and growth a simple hypothesis explaining cross country differences in productivity growth cross country evidence shows that a subset of developing countries isgrowing very rapidly taking advantage of opportunities to catch up atthe same time that other developing countries are growing slowly we arguethat this is due to differences in the quality of governance inparticular we show that productivity growth is higher in better governedcountries

mistake 37 the effect of previously encountered prices on current housing demand based on contrast effects studies from psychology we predicted that movers arriving from more expensive cities would rent pricier apartments than those arriving from cheaper cities we also predicted that as people stayed in their new city they would get used to the new prices and would readjust their housing expenditures countering the initial impact of previous prices we found support for both predictions in a sample of 928 movers from the psid alternative explanations based on unobserved wealth and taste and on imperfect information are ruled out

federalism chinese style the political basis for economic success in china china s remarkable economic success rests on a foundation of political reform providing a considerable degree of credible commitment to markets this reform reflects a special type of institutionalized decentralization that the authors call federalism chinese style this form of decentralization has three consequences first it fosters competition not only in product markets but also among local governments for labor and foreign capital this competition in turn encourages local government experimentation and learning with new forms of enterprises regulation and economic relationships second it provides incentives for local governments to promote local economic prosperity finally it provides a significant amount of protection to local governments and their enterprises from political intrusion by the central government

invested interests the politics of national economic policies in a world of global finance capital moves more rapidly across national borders now than it has in at least fifty years and perhaps in history this article examines the effects of capital mobility on different groups in national societies and on the politics of economic policymaking it begins by emphasizing that while financial markets are highly integrated within the developed world many investments are still quite specific with respect to firm sector or location it then argues that contemporary levels of international capital mobility have a differential impact on socioeconomic groups over the long run increased capital mobility tends to favor owners of capital over other groups in the shorter run owners and workers in specific sectors in capital exporting countries bear much of the burden of adjusting to increased capital mobility these patterns can be expected to lead to political divisions about whether or not to encourage or increase international capital market integration the article then demonstrates that capital mobility also affects the politics of other economic policies most centrally it shifts debate toward the exchange rate as an intermediate or ultimate policy instrument in this context it tends to pit groups that favor exchange rate stability against groups that are more concerned about national monetary policy autonomy and therefore less concerned about exchange rate stability similarly it tends to drive a wedge between groups that favor an appreciated exchange rate and groups that favor a depreciated one these divisions have important implications for such economic policies as european monetary and currency union the dollar yen exchange rate and international macroeconomic policy coordination