the political economy of taking and just compensation by creating an implicit right to judicial review and lowering the transaction costs a property owner must incur to challenge a taking the just compensation restriction on eminent domain limits the tendency of political decision makers to avoid the subjective costs their actions inflict on property owners and moves the level of taking closer to the social optimum its impact however is partially to completely erased by the risk aversion of the property owner and the fiscal illusion of the political decision maker unless there are additional constraints in the fiscal constitution

disadvantageous collusion and government regulation abstract the semi collusion model indicates that when firms collude on outputs and compete on capacities cartel members may be worse off why do rational firms choose such kind of disadvantageous collusion in order to solve the puzzle this article uses taiwan s flour cartel case to investigate firms incentives and finds that government regulation seems to be the primary reason to create such a predicament

smuggling and price disparity abstract this paper proposes a model of smuggling consistent with the coexistence of smuggling legal trade and price disparity defined as a domestic price which exceeds is less than the return from legal export import these phenomena have been found to characterize indonesian smuggling a framework is presented in which legal trade is used to cloak smuggling activity with the implication that the greater the volume of legal trade the less the costs of smuggling this model is then used to explain the observation noted above and to show that smuggling may be welfare increasing vis a vis the non smuggling situation and that even if the suppression of smuggling is costless tax revenue maximization may require a positive level of smuggling in addition the model is applied to coffee and rubber exports from indonesia

foreign competition immigration and structural adjustment abstract the paper uses the ricardo viner r v model to investigate the relationship in a capital abundant economy between trade competition and immigration in doing so it derives new results for the r v model especially on the welfare implications of migration with and without an initial tariff

monopoly wealth and international debt rents generated by long lasting government policies may be capitalized as assets with life cycle saving behavior these rents raise international indebtedness shifts in policy that affect their capitalized value generate correlated movements in the current account and the real exchange rate eliminating rent creating policies imposes a capital loss born entirely by generations currently alive while the benefit of removing a distortion is shared between those alive and unborn generations reform may therefore reduce the expected welfare of everyone alive with monopoly in the provision of nontraded goods there may be multiple pareto ranked equilibria copyright 1989 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the effects of volatility in the terms of trade on output growth new evidence abstract this paper examines the empirical evidence for the hypothesis that there is a negative relationship between terms of trade volatility and output growth it finds a statistically significant link between income terms of trade volatility and lower growth rates when the degree of volatility in the income terms of trade is decomposed into its components fluctuations in real exports are of a magnitude similar to those in the relative price of tradables similarly the volatility in the net barter terms of trade is equally affected by variations in the price of exports and of imports any policies aimed at stabilizing the terms of trade or any of its components need to take account of this

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

on trust as a commodity and on the grammar of trust abstract i look at trust in the light of two constructions taken from economic science general competitive analysis and the theory of games i draw on baier s anti contractarian perspective as well as on one informed by wittgenstein s writings the former focuses on relations between inherently unequal and asymmetrical individuals while the latter draws on and revolves around the imperative in the philosophical investigations let the use teach you the meaning p 212 also p 220 i try to spell out how the choice of language has epistemological implications for an analysis of trust for the trustworthiness of the scientific constructions i use for analyzing trust and thereby more generally for defining ourselves and our form of life

on the performance of universities in north rhine westphalia germany government s redistribution of funds judged using dea efficiency measures abstract in fandel and gal 2001 fandel g gal t 2001 redistribution of funds for teaching and research among universities the case of north rhine westphalia european journal of operational research 130 111 120 a solution for a real process of redistributing funds for teaching and research among the universities in north rhine westphalia in germany according to specific criteria was presented the solution was based on aggregated proportional data and was determined by a negotiation process now that the absolute data with respect to the different subject areas of the universities are available it is studied to which extent the results of the redistribution can be justified by the relative efficiency measures using data envelopment analysis moreover the inefficiencies or slacks respectively in the usage of personnel give reasons to reallocate the staff among the universities or to reduce it correspondingly

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

long run industry equilibrium with uncertainty abstract in this paper we consider the effects of uncertainty on industry equilibrium when firms must commit themselves to production before prices are revealed we show that a an increase in demand uncertainty will i not affect the equilibrium number and size of firms if they are risk neutral ii reduce the equilibrium number of firms if they are risk averse but will have an ambiguous effect on their size b in equilibrium firms operate at capacity if they are risk neutral but at excess capacity if they are risk averse

market uncertainty and competitive equilibrium entry abstract firms facing an uncertain market environment can choose the optimal mix of early and late production by trading off informational advantages of late production against cost advantages of early production consequently their choice of entry into the market whether early and or late depends on the interplay of cost and stochastic demand conditions this paper characterizes the competitive equilibrium conditions that determine the mode of market entry and derives comparative statics results to show how competitive equilibrium entry modes vary with changes in various market conditions

advanced x efficiencies for ccr and bcc models towards peer based dea controlling abstract classical ccr and bcc dea models follow a general concept they allow each dmu to evaluate its in efficiency in the most favorable way and then propose input reduction and or output raise so as to follow its best practice units a first step beyond this self appraisal is the consideration of x efficiencies thus evaluating dmus with optimal weights of a peer doing this for all possible peers yields a cross efficiency matrix either for ccr or for bcc models this matrix might help to find a fair peer for the remaining dmus in a second step recent contributions analyze for ccr models how such x evaluated dmus might improve their efficiency with respect to a peer s weight system in these models even free variation of inputs outputs is possible rather than reduction and or raise such models will be portrayed here and generalized for variable returns to scale the remaining discomfort which a dmu might feel with the choice for peer among business rivals leads to the concept of a virtual peer vp this paper proposes such a peer as a consensual option for all dmus now for either return to scale ccr and bcc for an input or output oriented focus and by free variation of inputs and outputs they can meet the requirements of vp the dmus pay a heavy price however the peer controls their respective weights and even their activities he is a dictator

rent seeking in a market with morality solving a puzzle about corporate social responsibility rent seeking by lobbying for government favors is generally thought to be wasteful in view of this wastefulness it is puzzling that rent seeking by corporations has not been criticized as a failure to be socially responsible or even as an unethical business practice this article examines the compatibility of rent seeking with corporate social responsibility by utilizing thomas dunfee s idea of a marketplace with morality this idea is useful for solving this puzzle because in considering whether rent seeking is compatible with corporate social responsibility it is necessary first to define rent seeking which this article argues is a normative concept and second to find some principled way of identifying rent seeking behavior it also solves the puzzle about rent seeking by revealing that the concept of rent seeking itself is of little use in determining whether certain conduct is or is not socially responsible since rent seeking activity cannot be identified without first evaluating which activity is rent seeking

foreign owned land while foreign investment augments the capital stock it also affects land prices if it causes land values to rise then the resulting capital gain benefits current landowners but the perma nent effect can be to reduce welfare other things equal more crowde d countries have higher land prices and lower steady state welfare b ut their net foreign indebtedness depends on technology savings beha vior and the interest rate even when it does not affect the domesti c capital stock a land tax raises steady state welfare copyright 1988 by american economic association

industry equilibrium uncertainty and futures markets abstract this paper studies competitive long run industry equilibrium with uncertainty and futures trading we also provide a long run analysis of futures trading instead of the conventional short run analysis it is shown without using a general equilibrium model that given uncertain demand and risk aversion a bias backwardation or contango arises in long run industry equilibrium given risk neutrality such a bias however disappears we find that the occurrence of the bias depends not only on the existence of a risk premium but also on the length of the period considered each risk averse firm operates at a less efficient scale and moreover an expected spot price never accords with marginal cost when the expected spot price is less than marginal cost the risk averse firm can secure profit by selling futures contracts more than the amount of its output in the presence of production supply uncertainty a risk neutral firm operates with excess capacity under additive risk while the firm operates with proper capacity under multiplicative risk the key lies in whether its average cost curve is shifted by production risk

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

competitive production and increases in risk the theory of the firm is a monumental achievement of neoclassical economics without this engine of analysis it would be difficult if not impossible to comprehend the pricing output and input decisions of firms as they respond to routine events like the imposition of a tax the opening of a new market a technical innovation and a sudden shortage of a key factor of production it is remarkable that this theory has been successful in explaining behavior that to a large extent is motivated by both profit and risk when the theory itself has only explicitly considered the profit motive this is not the place to dwell on the evolution of economic theory it suffices to note that there are many important economic phenomena that the purely deterministic theory does not explain the purpose of this note is to elucidate the way in which risk influences the output decisions of riskaverse entrepreneurs and the number of riskneutral firms in a competitive industry in both cases the predicted behavior differs from that of the deterministic theory in our study we shall restrict attention to the behavior of firms in a single period 2 setting the firm has no control over price and because storage makes no sense simply sells all of its output at the going price the source of uncertainty is the requirement that the firm produce before price is known where the price is a random variable with a known probability distribution the firm chooses output to maximize its expected utility it is well known that in the presence of uncertainty the optimal output of the risk averse firm is less than that of the riskneutral firm moreover increases in risk aversion in the sense of arrow and john pratt lead to further diminutions in output on the other hand for a fixed degree of risk aversion the change in output induced by a mean preserving increase in risk depends on the shape of the cost curve as well as the sign of the third derivative of the utility function u and the sign of the second derivative of qu q next competitive industry behavior under uncertainty is analyzed in order to isolate the effect of uncertainty firms are assumed to be risk neutral we show that both the optimal number of firms in the industry and excess capacity increase as industry output becomes riskier results like this are important for probabilistic economics for it would be unfortunate if the vitality of the stochastic theory of the firm relied solely on the controversial assumption of risk aversion 3

estimating the performance effects of business groups in emerging markets business groups confederations of legally independent firms are ubiquitous in emerging economies yet very little is known about their effects on the performance of affiliated firms we conceive of business groups as responses to market failures and high transaction costs in doing so we develop hypotheses about the effects of group affiliation on firm profitability affiliation could either boost or depress firm profitability and members of a group are likely to earn rates of return similar to other members of the same group using a unique data set compiled largely from local sources we test for these effects in 14 emerging markets argentina brazil chile india indonesia israel mexico peru the philippines south africa south korea taiwan thailand and turkey we find evidence that business groups indeed affect the broad patterns of economic performance in 12 of the markets we examine group affiliation appears to have as profound an effect on profitability as does industry membership yet strategy scholars have a much clearer grasp of industries than of groups moreover membership in a group raises the profitability of the average group member in several of the markets we examine this runs contrary to the wisdom conventional in advanced economies that unrelated diversification depresses profitability overall our findings suggest that the roots of sustained differences in profitability may vary across institutional contexts conclusions drawn in one context may well not apply to another copyright 2001 john wiley sons ltd

heterogeneity under competition a standard prediction of neoclassical microeconomics is that with perfect competition free entry and atomistic firms producing a homogeneous product equilibrium finds all firms employing that technology which has minimum average cost that competition drives out inefficient producers and reduces heterogeneity within industries is consequently a commonplace rule of thumb in economic thinking this paper demonstrates that demand uncertainty is sufficient to produce heterogeneity in the equilibrium employment of production technologies and to permit the coexistence of producers exhibiting different minimum average costs this heterogeneity is ubiquitous because the conditions for its presence are not stringent

rent seeking market structure and growth we study the role of productive and unproductive entrepreneurship in economic growth in a setting where firms compete in both economic and political markets specifically firms compete for market share through cost reducing technological innovation and they vie for influence over government transfer policy through rent seeking activities we find that rent seeking affects growth in two ways it allows firms to ignore economic competition leading to less innovation and it alters the number of firms that are supported in equilibrium the former effect is negative while the latter is ambiguous we show how these effects depend on various characteristics of economic and political markets

controls and the intersectoral terms of trade the indian case sectors the indian economy is substantially insulated from outside market forces and the direction of movement of the intersectoral terms of trade has therefore been regarded as having special policy importance industry is equated with the urban modern sector agriculture with the rural traditional sector while the debate on the north south terms of trade following singer i 950 and prebisch i 964 has prompted discussion of international trade arrangements between developing and developed economies the debate on the intersectoral trade seems to have played a comparable role in india 2 if growth as with singerprebisch causes a deterioration in the terms of trade of the traditional sector then policy measures to offset the associated redistributive effects are seen in india as justified these can take the form of subsidies to agriculture maintenance of the current tax free status of agriculture and other measures equally since extensive redistribution through tax transfer schemes is administratively infeasible an improvement in the agricultural industrial terms of trade in favour of agriculture is often seen as a substitute for other redistributive measures poverty is concentrated in rural areas and manipulating the terms of trade in favour of agriculture through price controls subsidies and the like is a widely supported policy stance in this paper we argue that existing statistical studies of the intersectoral terms of trade in india are misleading since they typically focus on the terms of trade at controlled prices price and other controls in india are so extensive that black market rather than controlled prices should clearly enter any assessment of changes in the intersectoral terms of trade we also argue that the problem with these studies is analytically deeper than simply whether black market or controlled drices should be used because of

import competition international factor mobility and lobbying responses the schumpeterian industry case abstract this paper analyzes the different responses of economic agents to import competition in seeking policy intervention economic agents are divided into three groups capitalists workers and the government the following output restoring policies are considered protection capital importation labour importation and technology importation the paper concentrates on capital intensive technologically progressive industries using both the heckscher ohlin samuelson and the jones neary factor specific models

the economics of special interest politics the case of the tariff this paper investigates the interaction of politicians and special interest lobbies the goal is to model the equilibrium levels of redistributive policies such as taxes subsidies tariffs and regulatory decisions the model is applied throughout to the setting of tariffs by contributing to political campaigns special interest lobbies generate economic returns higher tariffs generate revenue for import competing industries through higher product prices higher milk support prices raise dairy farm income and so forth the lobby invests to maximize these net economic returns in evaluating their chances of election politicians weigh the favorable effects of special interest money against the unfavorable association with the lobby and the social cost of the redistributive policy section i explores the lobby s problem it describes a formalization of mancur olson s discussion of the voluntary provision of public goods and optimal contributions by lobbies to political campaigns section ii describes determination of the equilibrium tariff positions of each politician in a political campaign

advantageous semi collusion the textbook view that cartels increase industry profits and lower consumer welfare ignores the effects of competition in other activities a revisionist view shows that when cartel members compete in other activities i e when they semi collude the cartel members may be worse off and consumers better off using a two stage model in which the non production activity is r d and is subject to technological spillovers we show that both the traditional and revisionist views can be wrong that consumers and producers can both be made worse off or both better off by a semi collusive production cartel

a consensual peer based dea model with optimized cross efficiencies input allocation instead of radial reduction abstract data envelopment analysis dea is a method for estimating in efficiencies of decision making units dmus by means of weighted output to input ratios being the weights optimal virtual prices of such ex post activities for all units the cross efficiency matrix then evaluates these output to input relations with respect to all optimal price systems and hence permits efficiency rankings for the dmus by aggregating the matrix entries line and or columnwise in this contribution the classical input oriented dea approach is generalized twofold its first aim is an optimal efficiency improving input allocation rather than a mere radial input reduction the second aim is the choice of a peer dmu the price system of which is acceptable for the remaining units as free input allocation permits substitutional effects and so rises productivities in view of possible peers and for all units it supports such consensual choice numerical examples show the positive effects of the new concept

corruption and microenterprises in russia abstract in russia compliance with the rules and regulations that govern almost all aspects of economic life has created a hostile environment for microenterprises more serious than the regulations per se however is the potential niche they create for opportunistic behavior by regulatory authorities in russia the regulatory state has created a corrupt cadre of government bureaucrats who frequently engage in rent seeking behavior while enforcing regulations firms are not uniformly affected by corruption however this paper shows empirical evidence of differential incidence of extortion based on firm and entrepreneurial characteristics corruption in russia is similar to a regressive tax and acts as a disincentive to innovation and growth it may induce technologically inefficient production decisions and can dilute economies of scale and scope

a dynamic specific factors model of international trade in a dynamic economy land and capital serve not only as factors of production but as assets which individuals use to transfer income from working periods to retirement changes in the terms of trade and in the endowments of fixed factors do not necessarily have the same effects on factor prices and on the composition of output as they do in a static framework changes in these variables affect both total savings and the amount of savings that is diverted toward investment in capital results derived from the traditional specific factors model are more likely to emerge when the sector using land as a factor of production has a higher labor share than the sector using capital in this case the land using sector dominates factor markets more than asset markets once the roles for land and capital as assets are recognized the possibility of natural resource booms that reduce steady state welfare arises at the same time an increase in population can raise steady state welfare

the welfare consequences of directly unproductive profit seeking dup lobbying activities price versus quantity distortions abstract this paper is a contribution to the growing literature on the theory of what bhagwati 1982 has christened the theory of dup activities these are activities that use up real resources in making profits i e income without producing directly or indirectly a good they result therefore in the contraction of the availability set defined on goods for one generic subset of such dup activities namely distortion triggered lobbying activities the paper establishes asymmetrical propositions on the possibility of such dup lobbying resulting in a paradoxical improvement of welfare

stochastically dominating shifts and the competitive firm abstract the production responses of the competitive firm to stochastically dominating shifts in the distribution of output price have been the object of much research in a recent paper simpson and sproule metroeconomica 51 2 2000 168 181 present five sets of sufficient conditions any one of which may be used to jointly sign the production responses of the competitive firm to first second and third order stochastically dominating shifts this paper demonstrates that one of the conditions outlined in the above mentioned reference is unnecessarily restrictive in the case of the logarithmic and the positive power utility functions

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

the welfare effects of rent saving and rent seeking this paper uses an overlapping generations framework to model the allocation of import licences of intermediate goods according to firm capacity it shows that this method of allocation encourages rent seeking and also thereby improves welfare compared with a method that does not allow rent seeking a o kreuger 1975 1974 and j n bhagwati and p desai 1970 describe how turkey and india have allocated imports on the basis of firm capacity which led to rent seeking through overexpansion of capacity j n bhagwati and t n srinivasan 1980 first recognized the possibility that rent seeking may actually improve welfare in the presence of a distortion as it does in this paper

privatization and economic growth an empirical investigation from a sample of developing market economies this paper explores the economic determinants of privatization programmes and the macroeconomic impact of this institutional reform on the growth rate of the gdp a sample of thirty five developing market economies is considered over the 1988 92 period probit and tobit models are used to identify the determinants of successful privatization programmes then regressions are run where probabilities probit and expected values tobit are successively included as additional regressors beside the potential influence of other economic policy variables a significant positive effect is highlighted giving evidence of the importance of divestiture the economic effect is found to be stronger when this institutional reform took place in industry or infrastructure

distortion triggered lobbying and welfare a contribution to the theory of directly unproductive profit seeking activities abstract the paper considers the normative implications of lobbying for non exclusive income generated by an exogenously specified policy intervention such lobbying activities are a subset of what bhagwati has termed directly unproductive profit seeking dup activities it is demonstrated that the welfare effects of lobbying triggered by a policy distortion depend critically on whether the direct impact of the policy constraint is on price or an quantity it is also shown that several standard comparative static welfare analyses of alternative policy distorted states are significantly affected once the policy intervention is assumed to be continuously accompanied by lobbying for the associated non exclusive income