spurious volatility in historical unemployment data this paper shows that the stabilization of the unemployment rate between the pre 1930 and post 1948 eras is an artifact of improvements in data collection procedures prewar methods are used to construct postwar unemployment data that are consistent with the historical data the constructed postwar series is nearly as volatile as the pre 1930 unemployment data the constructed postwar data are systematically more volatile than the actual postwar data because the cyclical behavior of the labor force and productivity are misspecified in the construction procedures the relationship between the actual and constructed postwar unemployment series is used to construct new historical data

meta paradigm change and the theory of the firm many seemingly unrelated debates on the theory of the firm are in fact part of a single deeper transformation of the social sciences as the foundational assumptions of 20th century social science have slowly been shown by science to be false new sub paradigms have emerged which cumulatively drop i theoretical assumptions about markets to explain firms ii epistemological assumptions about knowledge to explain diversity and iii metaphysical assumptions about causality to explain technical change debates occur across each of these levels

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

rain and the democratic window of opportunity according to the economic approach to political transitions negative transitory economic shocks can give rise to a window of opportunity for democratic change we examine this hypothesis using yearly rainfall variation over the 1980 2004 period in 41 sub saharan african countries we find that a 25 drop in rainfall increases the probability of a transition to democracy during the following two years by around 3 percentage points a 5 fall in income due to low rainfall raises the probability of democratization by around 7 percentage points we also find that rainfall does not affect transitions from democracy to autocracy

a theory of political transitions we develop a theory of political transitions inspired by the experiences of western europe and latin america nondemocratic societies are controlled by a rich elite the initially disenfranchised poor can contest power by threatening revolution especially when the opportunity cost is low for example during recessions the threat of revolution may force the elite to democratize democracy may not consolidate because it is redistributive and so gives the elite an incentive to mount a coup highly unequal societies are less likely to consolidate democracy and may end up oscillating between regimes and suffer substantial fiscal volatility

why corporations insure corporations insure to reduce the shirking information problem of joint production insurance encourages specialization in ownership increasing the returns to monitoring and lowering shareholders demand for a more diversified portfolio it enhances the credibility of specific capital as a performance bond and it lowers the cost to shareholders of compensating other members of the team for investing in firm specific assets tax and other factors may further encourage individual corporations to insure

organizing technological interdependencies a coordination perspective on the firm this paper develops a coordination perspective on the firm the basic idea is to combine insights into the division of labor with insights into the allocation of property rights thus a basic argument is that use rights over productive assets are necessary in order to accumulate the experience needed to perform improvements in production an increase in the division of labor in production accelerates the accumulation of skills from learning by doing in production however an increasing division of labor introduces greater complexity and new kinds of tools and equipment and this in turn can create uncertainty about the best way of coordinating the specialized and interdependent tasks the result may be bottlenecks in production and uneven development of components experimenting with the coordination of tasks is necessary in order to eliminate these problems however such experimentation is best facilitated by a certain structure of property rights coordination by direction provides a cheap way of conducting the experiments needed to collect information on how best to coordinate interdependent activities copyright 2001 by oxford university press

moral markets and moral managers revisited in the wake of recent corporate scandals this paper examines the claim made by john boatright that business ethics as it is currently conceived rests on a mistake ethics in business should not be achieved through managerial vision discretion or responsibility rather ethics should shape the design of institutions that regulate business from the outside what ethicists should advocate for according to boatright are moral markets not moral managers i explore the empirical and normative dimensions of his claim with special attention paid to the extent to which boatright s development of the economic theory of the firm supports his position i conclude by suggesting some reasons why moral markets and moral management are compatible frameworks for corporate reform

do voters demand responsive governments evidence from indian disaster relief abstract using rainfall public relief and election data from india we examine how governments respond to adverse shocks and how voters react to these responses the data show that voters punish the incumbent party for weather events beyond its control however fewer voters punish the ruling party when its government responds vigorously to the crisis indicating that voters reward the government for responding to disasters we also find evidence suggesting that voters only respond to rainfall and government relief efforts during the year immediately preceding the election in accordance with these electoral incentives governments appear to be more generous with disaster relief in election years these results describe how failures in electoral accountability can lead to suboptimal policy outcomes

investigating inflation persistence across monetary regimes under inflation targeting estimates of the indexation parameter in hybrid new keynesian phillips curves are either equal to zero or very low in the united kingdom canada sweden and new zealand analogous results hold for the euro area under the european monetary union and for switzerland under the new monetary regime under stable regimes with clearly defined nominal anchors inflation appears to be purely forward looking these results question the notion that the intrinsic inflation persistence found in post wwii u s data is structural in the sense of lucas carnegie rochester conference series on public policy 1 1976 19 46 and suggest that hardwiring inflation persistence in macroeconomic models is potentially misleading

the measurement and impact of corruption victimization survey evidence from latin america summary does democracy suffer when corruption is high unfortunately most studies of corruption have been descriptive making it difficult to develop a well supported answer to this question there are of course quantitative corruption measures but the most popularly used of them are measures of corruption perception aggregated at the national level rather than corruption experience at the individual level it is difficult to draw firm conclusions about the impact of corruption from such data this paper proposes a corruption victimization measure based on a survey research approach to the measurement problem and discusses in a non technical fashion its strengths and limitations the paper then presents data from studies conducted by the vanderbilt university latin american public opinion project lapop and demonstrates the impact of corruption victimization on belief in the legitimacy of the political system a critical element in democratic political stability

the cyclical structure of the uk inflation rate 1210 2016 abstract in this paper we examine the cyclical structure of the uk inflation rate using historical data dating back to 1210 based on a methodology that allows for fractional orders of integration at a non zero frequency and stochastic cycles the results indicate the presence of cycles that repeat themselves approximately every 4 years and that the order of integration is constrained between 0 10 and 0 20 implying long memory moreover this pattern seems to be stable over time

trends and cycles in macroeconomic time series two structural time series models for annual observations are constructed in terms of trend cycle and irregular components the models are then estimated via the kalman filter using data on five u s macroeconomic time series the results provide some interesting insights into the dynamic structure of the series particularly with respect to cyclical behavior at the same time they illustrate the development of a model selection strategy for structural time series models

on the sources and significance of interindustry differences in technological opportunities abstract the set of technological opportunities in a given industry is one of the fundamental determinants of technical advance in that line of business we examine the concept of technological opportunity and discuss three categories of sources of those opportunities advances in scientific understanding and technique technological advances originating in other industries and in other private and governmental institutions and feedbacks from an industry s own technological advances data from the yale survey on industrial research and development are used to measure the strength of various sources of technological opportunity and to discern interindustry differences in the importance of these sources we find that interindustry differences in the strength and sources of technological opportunities contribute importantly to explanations of cross industry variation in r d intensity and technological advance

what do we learn from the weather the new climate economy literature a rapidly growing body of research applies panel methods to examine how temperature precipitation and windstorms influence economic outcomes these studies focus on changes in weather realizations over time within a given spatial area and demonstrate impacts on agricultural output industrial output labor productivity energy demand health conflict and economic growth among other outcomes by harnessing exogenous variation over time within a given spatial unit these studies help credibly identify i the breadth of channels linking weather and the economy ii heterogeneous treatment effects across different types of locations and iii nonlinear effects of weather variables this paper reviews the new literature with two purposes first we summarize recent work providing a guide to its methodologies datasets and findings second we consider applications of the new literature including insights for the damage function within models that seek to assess the potential economic effects of future climate change jel c51 d72 o13 q51 q54

is there a local knowledge advantage in federations evidence from a natural experiment in economics the local knowledge advantage is arguably one of the key arguments in favor of decentralizing the public sector however empirical investigations of this particular effect have been scarce this paper tests the existence of the local knowledge advantage in a real world setting specifically it looks at the variation in local knowledge across regions based on the origins and careers of regional politicians assuming that politicians who have spent more time in a particular region possess more and better knowledge of that region than outsiders to avoid the reverse causality problem the paper investigates how local origins affected the performances of politicians in a natural experimental environment studying the responses of regional governors in russia to disastrous forest fires in 2010 we confirm that local knowledge improves gubernatorial performance in a highly centralized federation such as russia though the effect is dependent on access to federal resources obtainable through close ties to the federal center we also discuss alternative interpretations of the local origins of politicians and test whether the effects found are indeed more plausibly explained by local knowledge

fiscal decentralization and natural hazard risks at least to some extent due to pressure from international donors many countries have become more fiscally decentralized the underlying premise being that greater decentralization might improve the provision of local public goods and services we test this proposition by determining whether relatively more decentralized countries fare better when natural disasters strike in terms of its effects on the population overall we find evidence supporting our maintained hypothesis though the effect appears much more robust in developing countries

financial planning where the firm s demand for funds is nonstationary and stochastic the incentive for a firm to engage in planning prearranging for its future financing derives from the interaction of uncertainty concerning the amount and timing of future needs and the cost of negotiating and terminating contracts in capital markets three conditions on relative costs and probability distributions are identified under which no financial slack should be raised if those conditions are not met then under one set of reasonable assumptions the optimum amount of slack will be more than the largest possible future need the model allows for surprises which can cause upward or downward in contrast to eoq models revisions in the future regarding the optimal level of slack to continue to carry

the macroeconomic consequences of disasters abstract natural disasters have a statistically observable adverse impact on the macro economy in the short run and costlier events lead to more pronounced slowdowns in production yet interestingly developing countries and smaller economies face much larger output declines following a disaster of similar relative magnitude than do developed countries or bigger economies a close study of the determinants of these adverse macroeconomic output costs reveals several interesting patterns countries with a higher literacy rate better institutions higher per capita income higher degree of openness to trade and higher levels of government spending are better able to withstand the initial disaster shock and prevent further spillovers into the macro economy these all suggest an increased ability to mobilize resources for reconstruction financial conditions also seem to be of importance countries with more foreign exchange reserves and higher levels of domestic credit but with less open capital accounts appear more robust and better able to endure natural disasters with less adverse spillover into domestic production

aligning branding strategies and governance of vertical transactions in agri food chains this article looks at the interactions between branding strategies and governance of vertical transactions branding strategy refers to the choice of information provided to consumers through a brand name governance refers to contractual agreements organizing transactions in vertical chains we build on the logic of transaction costs economics to analyze these interactions we provide an empirical analysis based on case studies to illustrate how governance structures are aligned with branding strategies we show that the governance will depend on the salience of transactions critical or quality relevant transactions are more tightly controlled than the others we also explore the consequences of our results for the alignment principle described in oliver williamson s work

can extreme rainfall trigger democratic change the role of flood induced corruption using a new dataset of extreme rainfall covering 130 countries from 1979 to 2009 this paper investigates whether and how extreme rainfall driven flooding affects democratic conditions our key finding indicates that extreme rainfall induced flooding exerts two opposing effects on democracy on one hand flooding leads to corruption in the chains of emergency relief distribution and other post disaster assistance which in turn impels the citizenry to demand more democracy on the other hand flooding induces autocratic tendencies in incumbent regimes because efficient post disaster management with no dissent chaos or plunder might require government to undertake repressive actions the net estimated effect is an improvement in democratic conditions

transaction costs risk aversion and the choice of contractual arrangements publisher summary this chapter discusses transaction costs risk aversion and the choice of contractual arrangements every transaction involves a contract and the transactions conducted in the marketplace entail outright or partial transfers of property rights among individual contracting parties the contractual arrangements through which these transfers are negotiated are several and varied the chapter presents a theory that states that economic efficiency is the same under various land tenure arrangements subject to the constraint of private property rights although transaction costs exist in the real world the theory enables the understanding of much of the farming behavior however the presence of a variety of contractual arrangements under the same constraint of competition poses the question of the choice of these arrangements if a firm can increase efficiency in production by employing productive resources of more than one resource owner a contract to combine the resources will be obtained the formation of the contract involves partial transfers of property rights in one form or another such as leasing hiring or mortgaging

the contractual nature of the firm for their helpful comments i am grateful to armen a alchian yoram barzel keith leffler john s mcgee and dean worcester 1 ronald h coase the nature of the firm 4 economica 386 1937 the paper however was written several years earlier see note 3 infra 2 the social sciences citation index provides the following information breaking down the period of 1966 80 into three five year periods the total citations of coase s firm paper for each subperiod are 1966 70 17 citations 1971 75 47 citations and 1976 80 105 citations

transaction cost economics in real time this paper attempts to place the theq of the boundaries of thejirm within the context of the passage of time more precisely it resurrects and places in a modem frame some of the insights of the chsical and marshallian theories of organization the modem reinterpretation of those theories centers around the capabilities view of the jirm taken together with governance costs the capabilities ofjirm and market determine the boundaries of the jirm in the short run ovw time capabilities change as firms and markets learn which implies a kind of information or knowledge cost the cost of trandewing the firm s capability to the market w vice versa these dynamic governance costs are the costs of persuading negotiating and coordinating with and teaching others they arise in the face of change notably txchnological and organizational innovation in fit they are the costs of not having the capabilities you need when you need them dynamic transaction costs provide an explanation for vertical integration that is arguably more general than those dominant in the literature in the face of uncertainty and divwgent views ofthe future common ownership of multiple stages of production is a supwior institutional arrangement for coordinating systemic change asset specrfity is neither necessary nor suffient for this to be true dynamic governance costs may also affit internal organization it may sometimes be costly in 3 terms of persuasion negotiation and teaching to create within the firm capabilities readily available on the market indeed in cases in which systemic coordination is not 4 the issue the market may turn out to be the superior institution of coordination in e 2 genwal the capabilities view of the jirm suggests that we look atfim2 and market as alternative and sometimes overlapping institutions of learning 1 transaction costs in the long rzln and the short 9 x classical and neoclassical perspectives

transaction costs and technological development the case of the danish fruit and vegetable industry abstract it is argued that technological change can be understood in terms of attempts to reduce transaction costs as well as production costs two types of paths of technological development are identified a production cost minimizing path and a transaction cost minimizing path the creation of new technological opportunities underlying the path of production cost minimizing depends on the emergence of problems of optimizing the performance of products and processing technology the exploitation of such opportunities may easily be interpreted within a production perspective since the economic consequences would be reduced production cost the creation of new technological opportunities within the transaction cost minimizing path depends on the continual emergence of problems related to the control of variability in product quality or performance the economic consequence from exploiting such opportunities however can only be interpreted in a transaction cost perspective since the economic benefit is reduced cost of buying a product of a specific quality at a given price in other words an exchange transaction cost perspective on technological development is useful as a complementary perspective in addition to the conventional production perspective the theoretical points are continuously illustrated by the case of technological development in the danish fruit and vegetable industry

price level uncertainty and instability in the united kingdom abstract was uk inflation more stable and or less uncertain before 1914 or after 1945 we address these questions by estimating a statistical model with changing volatilities in transient and persistent components of inflation three conclusions emerge first since periods of high and low volatility occur in both eras neither features uniformly greater stability or lower uncertainty when comparing peaks with peaks and troughs with troughs however we find clear evidence that the price level was more stable before world war i we also find some evidence for lower uncertainty at pre 1914 troughs but its statistical significance is borderline

coaching team production coaching team production the actual function of managers is the subject of much debate using data on more than 3000 male college basketball players their coaches and their skill levels we find a positive and significant relation between our ability to replicate an individual coach s allocation of playing time across players and his winning percentage although this result does not answer the central question of just what it is that managers contribute the results do support the property rights paradigm managers are the employees of workers and more generally sports data can be used to help understand related economic processes where quantifiable measures of inputs and outputs are more costly to obtain what is meant by performance input energy initiative work attitude perspiration rate of exhaustion or output sometimes by inspecting a team member s input activity we can better judge his output effect it is not always the case that watching input activity is the only or best means of detecting measuring or monitoring output effects of each team member but in some cases it is a useful way i introduction a major tenet of the alchian demsetz 1972 representation of the firm is that managers are hired by workers to prevent shirking and malfeasance in their own ranks absent overseers individual workers bear only a fraction of the cost of shirking and hence everyone undersupplies labor relative to its opportunity cost in this world the managerial function is to monitor inputs and meter rewards thereby reducing the incentive to shirk and raising each worker s marginal productivity the more dependence there is in the marginal products of laborers the more important the role of management this view of supervision is simultaneously intuitively pleasing and difficult to quantify this paper investigates the role of management in a setting where indisputably there is team production intercollegiate basketball 1 data on 3012 college basketball players across ten years and sixty five teams are used to replicate one aspect of coaching the allocation of playing time next we attempt to link coaching decisions to winning the goal is to determine if coaches who manage well by our standards are successful section ii motivates the paper in section iii the empirical methodology is detailed the monitoring function is estimated and related to coaching success section iv contains a summary and conclusion ii coaching decisions the essence of team production is interdependence and the inherent immeasurability of marginal productivity across workers however this does not mean that proxies for marginal productivity cannot be developed managers monitor worker inputs and deduce marginal products accordingly of course some inputs are more cheaply quantified than others attitude is hard to measure but heart rate is easy sweat is observed cheaply but workers can feign exhaustion in the famous chinese boatpullers fable the coxswain uses his whip to insure that coolies pull efficiently to persuade each worker to give the appropriate effort 2 mcmanus 1975 341 relates a story told by cheung boats are pulled upstream by a team of coolies prodded by an overseer with a whip an american lady horrified at the sight of the overseer whipping the men as they strained at their harness demanded that something be done about the brutality she was quickly informed those men own the rights to draw boats over this stretch of water and they have hired the overseer and given him his duties here the monitor uses his vision intuition and experience to determine shirking counseling the loafers with his whip but employing subjective observation is just one way to monitor

international politics and import diversification abstractthis paper examines how international politics affects trade in the absence of empires or wars we first show that deterioration of relations between the united states and another country measured by divergence in their united nations general assembly voting patterns reduced u s imports from that country during 1962 2000 though statistically significant the magnitude of the effect of political distance on trade is small indeed we show that except for petroleum and some chemical products u s imports are not affected by international politics american firms however diversify their oil imports significantly away from political opponents of the united states oil trade is often associated with backward vertical foreign direct investment that is subject to the expropriation risk in contrast to the usual claim that oil is a strategic commodity we provide suggestive evidence that trade in products when rents are appropriable is more likely to be affected by international politics