fired or retired a competing risks analysis of chief executive turnover we apply duration analysis to model the tenure and mode of exit of ceos from ftse 350 companies from 1996 2005 a decade in which corporate governance reforms have sought to increase the accountability of the ceo to shareholders and their representatives on the board we find a greater likelihood of dismissal in the latter part of the period however we also find that the likelihood of forced departure sharply decreases from the fifth year of a ceo s tenure we find evidence that this is because ceos who survive beyond year four are able to entrench themselves in their position

exchange rate volatility and irish uk trade 1979 1992 this study examines how exchange rate volatility affected ireland s exports to its most important trading partner the united kingdom from 1979 to 1992 to ensure reliable inferences regarding income and price elasticities and the impact of exchange rate volatility on exports the time series properties of the series used are investigated the analysis here is conducted at both aggregate and 2 digit sitc division levels since exchange rate volatility can reasonably be presumed to affect sectors differently since expectations matter for exchange rate determination real volatility was generated according to a first order garch process both real and nominal volatility were important determinants for over 35 of irish uk trade with positive effects predominating this may be due to the nature of irish firms operating in a small open economy where they have little option in dealing with increased exchange rate risk except to weather the storm for fear of losing market share or facing costs of either exit

the choice of exchange rate regime and the volatility of exchange rates after the asian crisis a counterfactual analysis the objective of this paper is to carry out a counterfactual analysis of the impact of alternative exchange rate regimes on the volatility of the nominal effective exchange rate neer and the bilateral rate against the us dollar for nine east asian countries after the asian financial crisis our hypothetical regimes include a unilateral basket peg ubp a common basket peg cbp and a hard peg against the dollar we find that a ubp would minimise effective exchange rate volatility for all countries and provides the highest regime gains compared to actual although the gains for a cbp are always less than those for a ubp the absolute differences between the two regimes appear to be small in terms of the bilateral relationship against the dollar the gains from a ubp or cbp could be quite significant for the non dollar peggers since a fall in effective instability would be accompanied by a fall in bilateral instability

the end of cheap chinese labor abstract in recent decades cheap labor has played a central role in the chinese model which has relied on expanded participation in world trade as a main driver of growth at the beginning of chi

job quality and the economics of new labour a critical appraisal using subjective survey data this paper assesses the record on job quality during the early term of office of the new labour government by interpreting from a political economy perspective changes in a variety of subjective measures of job quality taken from several different data sources we find some improvements in job quality over the period 1998 2004 however we argue that these improvements have arisen not because of new labour s policies towards the workplace but because of low and falling rates of unemployment despite recent improvements a large number of workers in britain remain in low quality jobs and without a radical change of policy direction sustained and substantial progress in the quality of work will remain elusive

the neoclassical trojan horse of steady state economics the vision of a steady state economy elaborated by herman daly describes an economy that uses materials and energy within the regenerative and assimilative limits of the planet s ecosystems sustainable scale just distribution and efficient allocation are its constitutive theoretical goals this paper is a critique of the theoretical foundations of steady state economics it argues that steady state economics consists in an attempt to squeeze neoclassical economics into a biophysical and ethical corset as a result many fundamental flaws and criticisms of neoclassical economics remain as a consequence steady state economics does not lead to a radical departure from or improvement upon neoclassical theory but rather to fundamental internal inconsistencies between the old economics paradigm and new progressive ecological economic thinking contradictions appear at various levels ranging from ontology and methodology to theory and values as daly has pioneered the foundations of ecological economics with his thinking these ambiguities are not only problematic for steady state economics but ecological economics as a field more generally the paper concludes that ecological economics has to let go of neoclassical foundations as they contradict its core values and ambitions a new and consistent theory of political economy of the environment along heterodox lines is needed

exchange rate volatility and foreign trade evidence from thirteen ldc s this article investigates empirically the impact of real exchange rate volatility on the export flows of 13 less developed countries ldc s over the quarterly period 1973 1996 estimates of the cointegrating relations are obtained using johansen s multivariate procedure estimates of the short run dynamics are obtained for each country using the error correction technique the major results show that increases in the volatility of the real effective exchange rate approximating exchange rate uncertainty exert a significant negative effect on export demand in both the short run and the long run in each of the 13 ldc s these effects may result in significant reallocation of resources by market participants

empirical implications of alternative models of firm dynamics abstract this paper considers two models of firm behavior that allow for heterogeneity among firms idiosyncratic or firm specific sources of uncertainty and discrete outcomes exit and or entry both the characteristics of firm level panel data sets and the nature of the questions we characteristically ask of them imply that models with these features are likely to underlie most detailed empirical work on microdata sets the models we consider are a bayesian learning model due to jovanovic 20 and a model of research and exploration due to ericson and pakes 11 the paper provides a simple set of empirical procedures to help determine which if either of these two models might be appropriate for alternative data sets we conclude by checking for the implications of the two models on an eight year panel of wisconsin firms the results indicate that one model is consistent with the data on manufacturing firms while the other is consistent with the data on retail trade journal of economic literature classification numbers c52 l60 l80

why so small explaining the size of firms in latin america hile a great deal of effort has been devoted to study the determinants ofaggregate economic growth in developing economies little attention hasbeen paid to the factors in uencing the creation growth and destruction of rmsin these economies deriving policy implications from empirical results basedon macroeconomic data is a risky proposition especially for policies that areexpected to have an effect through the response of rms a key issue at a microeconomic level is the extent to which rms are con strained on their pro t maximising technology and on their sales through ele ments such as excessive regulation trade barriers and corruption if world oroecd averages constitute a good proxy for optimal rm size then deviations notexplained by technology differences can be viewed as evidence of inef ciencydue to the presence of those factors the aim of this paper is to empiricallyinvestigate this issue with particular attention to those determinants of rm sizethat might be altered through the adoption of government policies this topic is particularly relevant for latin america a region with one of thelowest rates of growth during the second half of the twentieth century secondonly to the sub saharan countries inter american development bank 2000 ch 1 and where the largest rms in each country are severely undersized notonly by international standards but also in comparison with other developingcountries in fact latin american rms are small with respect to world patterns both in terms of the quantity of assets they control and with respect to the amountof employment they generate the idea that possibilities for business development are more limited inlatin america than in other regions is reinforced by business surveys that assesshow a variety of factors hinder the growth of rms worldwide according to the

firm size and the nature of innovation within industries the case of process and product r d the effect of firm size on the allocation of r d effort between process and product innovation is examined it is hypothesized that relative to product innovations process innovations are less saleable in disembodied form and spawn less growth this implies that the returns to process r d will depend more on the firm s output at the time it conducts its r d than the returns to product r d incorporating this distinction in a simple model the authors derive and test predictions about how the fraction of r d devoted to process innovation varies with firm size within industries

science park location and new technology based firms in sweden implications for strategy and performance one logical way to assess the performance of science parks is to compare the performance of their firms to similar firms not located there a total of 273 new technology based firms ntbfs were surveyed of which 134 were on a science park and 139 were not on a park there were significant differences in the means of strategy dimensions between the on park and off park firms it can be seen that the ntbfs who located in science parks showed significantly greater emphasis on firm characteristics as innovation ability competitor and market orientation sales and employment growth high profits etc the differences indicates a slight advantage for the science park firms the off park sample reported proximity to other firms to be of higher importance than the on park sample in their choice of location however these differences do not show any clear pattern making it difficult to understand if ntbfs who locate on science parks are systematically looking for something different in their location

incentives learning and compensation a theoretical and empirical investigation of managerial labor contracts this article analyzes properties and implications of multiperiod managerial labor contracts under two alternative hypotheses incentives in which productivity depends on unobservable effort and learning in which ability is unknown and is revealed over time shared and conflicting implications of these competing models are developed in terms of experienceearnings profiles and the relation between compensation and performance i empirically examine these theoretical results by using a longitudinal sample of 1 488 chief executive officers followed from 1974 1985 the data yield mixed evidence that generally supports the learning hypothesis over the incentive hypothesis

compensation benchmarking leapfrogs and the surge in executive pay scholars frequently argue whether the sharp rise in chief executive officer ceo pay in recent years is efficient or is a consequence of rent extraction because of the failure of corporate governance in individual firms this article argues that governance failure must be conceptualized at the market rather than the firm level because excessive pay increases for even relatively few ceos a year spread to other firms through the cognitively and rhetorically constructed compensation networks of peer groups which are used in the benchmarking process to negotiate the compensation of ceos counterfactual simulation based on standard and poor s execucomp data demonstrates that the effects of ceo leapfrogging potentially explain a considerable fraction of the overall upward movement of executive compensation since the early 1990s

a materialist development of some recent contributions to the labour theory of value the paper offers a novel interpretation and affirmation of the opening arguments of capital answering the fundamental but neglected question of why labour is the substance of value marx s arguments require that two philosophical threads often separated in the literature on value be woven together the argument that value is the intrinsic content making commodities exchangeable employs the thread of realism the argument that abstract labour is the emergent social substance of value employs the thread of dialectics this interpretation develops the materialist and dialectical philosophy of e v ilyenkov and deepens the approach to value theory initiated by ben fine

exchange rate volatility and exports new empirical evidence from the emerging east asian economies this paper examines the impact of bilateral real exchange rate volatility on real exports of five emerging east asian countries among themselves as well as to 13 industrialised countries we recognise the specificity of the exports between the emerging east asian and industrialised countries and employ a generalised gravity model in the empirical analysis we use a panel comprising 25 years of quarterly data and perform unit root and cointegration tests to verify the long run relationship among the variables the results provide strong evidence that exchange rate volatility has a negative impact on the exports of emerging east asian countries in addition the results suggest that the pattern of bilateral exports is influenced by third country variables an increase in the price competitiveness of other emerging east asian countries has a negative impact on a country s exports to a destination market but the magnitude of the impact is relatively small these results are robust across different estimation techniques and do not depend on the variable chosen to proxy exchange rate uncertainty the results of the gmm iv estimation also confirm the negative impact of exchange rate volatility on exports and suggest that this negative relationship is not driven by simultaneous causality bias

exchange rate uncertainty and agricultural trade using a sample of bilateral trade flows across ten developed countries between 1974 and 1995 this article explores the effect of exchange rate uncertainty on the growth of agricultural trade as compared to other sectors based on a gravity model that controls for other factors likely to determine bilateral trade the results show that real exchange rate uncertainty has had a significant negative effect on agricultural trade over this period moreover the negative impact of uncertainty on agricultural trade has been more significant compared to other sectors

exchange rate effects a case study of the export performance of the swiss agriculture and food sector the swiss franc appreciated strongly against the currencies of switzerland s most important trading partners after the global financial crisis in 2008 this has raised the question of how sensitive swiss exports are with respect to exchange rate movements we analyse this question for exports of the swiss agriculture and food sector using both time series and dynamic panel data models based on data from 1999 to 2012 we find that in the long run a one per cent appreciation of the swiss franc leads on average to a decrease in exports of agricultural and food products between 0 8 and 0 9 per cent our results suggest that on average producers in the swiss agriculture and food sector are able to successfully avoid price competition by differentiating their products producing high quality products for niche markets

the nature of economics and the failings of the mainstream lessons from lionel robbins s essay lionel robbins in his famous essay on the nature and significance of economic science correctly showed that the task of economics is to develop step by step a realistic comprehension of the economic system based upon the abstract starting point of a theory of value his mistake was to think that the marginal utility theory of value can be and was actually in the process of being developed in a concrete and realistic direction in fact marginal utility theory has not to this day been developed in a concrete and realistic direction and ironically one can find in robbins s cogent exposition of marginal utility theory the reason why it is impossible to do so this reason is not primarily methodological attachment to equilibrium to formalism or some such philosophical attachment to positivism or ideological pro capitalist bias rather the reason is theoretical specifically marginal utility theory can provide no comprehension of the macroeconomic aggregates that drive the reproduction and development of the economic system the implications for contemporary economics are clear utterly unrealistic toy models will persist in economics until an alternative value theory is adopted that is able to justify macroeconomic aggregation these implications ironically bring into consideration the very labour theory of value that robbins had argued to be usurped by marginal utility theory copyright 2012 oup

what has been learned about labor supply in the past twenty years the main advance in the study of labor supply in the past 20 years has come in recognizing and interpreting the variety of different labor supply functions that coexist in the empirical literature a crucial theoretical distinction with important empirical payoff is that between labor supply choices at the extensive margin i e labor force participation and employment choices and choices at the intensive margin i e choices about hours of work or weeks of work for workers another important distinction is the one between a descriptive labor supply function and a structural supply function that can be the basis for out of sample policy investigations concerning responses to tax and welfare programs and evaluations of welfare losses a full understanding of the participation hours dichotomy leads to an appreciation of the importance of the problem of selection bias what is the wage to impute to a nonworking person these distinctions are a legacy of the research conducted on labor supply over the past 20 years many important empirical questions have been addressed i how strong are the effects of taxes welfare and transfer programs on labor supply ii how important is intertemporal substitution can life cycle labor supply models explain business cycle labor supply behavior iii has the consensus view of the 1960 s of high labor supply elasticities for married women and low labor supply elasticities for married men held up all of the empirical evidence assembled on labor supply must be called into question in the light of important research on the basic quality of the data conducted by analysts at the university of michigan i discuss this evidence in a concluding section except for my discussion of measurement issues i focus only on the major discoveries about which a general consensus has emerged

collaboration in the boardroom behavioral and performance consequences of ceo board social ties empirical research has typically rested on the assumption that board independence from management enhances board effectiveness in administering firms the present study shows how and when a lack of social independence can increase board involvement and firm performance by raising the frequency of advice and counsel interactions between ceos and outside directors hypotheses were tested with original survey data from 243 ceos and 564 outside directors on behavioral processes and dynamics in management board relationships

exchange rate volatility exchange rate regime and trade volume evidence from the uk us export function 1889 1999 abstract this paper investigated the impact of exchange rate volatility and exchange rate regime on the british exports to the united states using data for the period 1889 1999 the empirical findings suggest that neither exchange rate volatility nor the different exchange rate regimes that spanned the last century had an effect on export volume

the anatomy of corporate control directors shareholders and executive remuneration in giant us and uk corporations this paper provides a contemporary comparison of the anatomy of corporate contol in giant u s and u k corporations the comparison draws upon an analysis of share ownership executive remuneration board membership and the patterns of interlocking directorships the results are of significance not only for the managerialist hypothesis but also for the wider issues concerning the control and behavior of these giant corporations the evidence presented leads to some qualifications of the managerialist position furthermore the study identifies the potentially key role played by nonexecutiv e directors particularly where their board membership is associated with significant shareholdings of financial institutions copyright 1987 by oxford university press

one money one market the effect of common currencies on trade currency unions their dramatic effect on international trade a gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade the panel data bilateral observations for five years during 1970 90 covering 186 countries includes 300 observations in which both countries use the same currency i find a large positive effect of a currency union on international trade and a small negative effect of exchange rate volatility even after controlling for a host of features including the endogenous nature of the exchange rate regime these effects statistically significant imply that two countries sharing the same currency trade three times as much as they would with different currencies currency unions like the european emu may thus lead to a large increase in international trade with all that that entails andrew rose

loan guarantees costs of default and benefits to small firms abstract governments of most countries seek to encourage small and medium sized enterprise sme growth and the job creation that many believe is fostered by such growth substantive growth usually requires expansion capital it is often perceived that compared with larger firms smes face disproportionately less access to the debt capital they need for start up growth and survival consequently governments and trade associations have often intervened in credit markets by taking on the role of guarantor of loans that financial institutions advance to smes for example the small business administration in the united states provides guarantees of loans made by banks to qualifying small firms similar schemes are in effect in among other countries canada japan the u k korea and germany trade associations take on such roles in france spain and other nations loans that support the expansion of small enterprises may convey significant benefits to the borrowing firms and through job creation and retention to the rest of society however to the extent that some borrowers are unable to meet the repayment obligations of their debt guarantors also face material real costs of honoring their guarantee to the lenders loan guarantee programs are designed in a variety of ways often these programs do not appear to reflect guidance from economic theory or experience this paper draws on empirical evidence to compare costs with benefits in addition it uses the results and economic theory to provide some guidance for the design of loan guarantee programs finally the study shows that loan guarantee programs can be an effective means of supporting start up growth and survival of new and risky enterprises the work finds that substantial total and incremental job creation may be attributed to the canadian loan guarantee program the paper reviews previous attempts to conduct cost benefit analyses of loan guarantee programs it finds wide variation internationally in default rates published data suggests default rates vary from less than 5 germany to more than 40 u k the empirical analysis reported here focuses on the canadian implementation of loan guarantees the small business loans act sbla findings include 1 loan guarantees granted under the terms of the sbla provide an extremely efficient means of job creation with very low estimated costs per job 2 default rates are higher for newer firms increase with the amount of funds borrowed and vary widely by sector borrowers in the retail and accommodation and food and beverage sectors were significantly more likely to default than borrowers in other sectors and 3 the widening eligibility to larger firms and to larger loans may not be well advised and is inconsistent with the goals of the program moreover reducing the loan ceiling would arguably discourage fraudulent applications while servicing those smes most in need of early stage capital in addition analysis of the lenders motives suggests that default rates on the portfolio of guaranteed loans and therefore the costs of honoring guarantees are particularly sensitive to the level of the guarantee small reductions in the level of the guarantee for example guaranteeing 80 of principal and accrued interest instead of 85 could lead to substantial reductions in default rates debate persists in economic theory about whether or not government intervention in the credit market is warranted in spite of the findings that loan guarantees seem to make positive contributions further analysis of these issues is advised

asean and china export rivals or partners in regional growth hina s initial opening to the world economy in the late 1980s followed by its relatively rapid trade liberalisation in the second half of the 1990s and its recent wto accession has prompted extensive debate amongst the policy community in many countries 1 governments of the asean group in particular have been extremely concerned at the prospect of fdi diversion and the loss of export market share in oecd economies to china this paper summarises detailed empirical research by the authors intended to strengthen the basis of evidence on the important issue of export rivalry in particular we seek to elucidate the underlying properties of comparative advantage and export competition in the countries concerned synthesising detailed trade flow and econometric analysis our econometric results indicate that in the short run at least asean and china are experiencing intensified export competition in prominent third markets such as japan and the us more extensive trade flow analysis reveals however that in the long run globalisation can accommodate export growth by all the economies of east asia if aggregate growth can be sustained to facilitate the structural adjustments necessary for an optimal regional division of labour more specifically the path forward is not without potential rivalry but wellinformed policy makers can anticipate emergent challenges and take the steps necessary to mitigate adjustment costs and promote longer term efficiency whatever the ultimate course of development in east asia it is clear that the forces at work are complex and in many cases unprecedented policy makers relying on

the unknown masterpiece marx s model of capital this paper develops an alternative to traditional interpretations of karl marx rooted in his 1859 preface widely regarded as the definitive summary of his materialist conception of society it does this by reading marx in the light of the ontology of realism and the reproductive mode of inference via an examination of some pivotal texts centered around the grundrisse notebooks the paper indicates how a realist understanding of marx s reproductive method can be used to reconstruct and develop its creation marx s model of capital copyright 1998 by oxford university press

board structure and executive pay evidence from the uk we examine the impact of board structure on executive pay for 1 880 uk public firms over the period 1983 2002 using panel data analysis first the proportion of non executive directors tends to decrease the rate of increase in executive pay whereas board size tends to increase it second the proportion of non executives strengthens the relation between the rate of increase in executive pay and changes in performance in particular although for firms in general the pay performance link is much weaker when performance is poor a higher proportion of non executives strengthens this link considerably finally firms that increase the number of nonexecutives in order to comply with the cadbury code of 1992 experience both a decline in the rate of increase in executive pay and an increase in pay performance sensitivity

appointments pay and performance in uk boardrooms by gender this article uses uk data to examine issues regarding the scarcity of women in boardroom positions the article examines appointments pay and any associated productivity effects deriving from increased diversity evidence of gender bias in the appointment of women as non executive directors is found together with mixed evidence of discrimination in wages or fees paid however the article finds no support for the argument that gender diverse boards enhance corporate performance proposals in favour of greater board diversity may be best structured around the moral value of diversity rather than with reference to an expectation of improved company performance

social positioning and the nature of money the question of the nature of money is pursued drawing on results generated in the field of social ontology as well as on observations from history the conception of the nature of money found in this manner to be the most sustainable is compared to various other prominent if usually held to be mutually incompatible theories

heads i win tails you lose a career analysis of executive pay and corporate performance the paper utilises a novel career perspective to examine managerial theories of organisational control in the context of executive reward principal agent theory managerial power and neo institutionalism are evaluated detailed career histories of boardroom executives in all ftse350 companies between 1996 and 2008 are utilised using both a fixed effects panel and a career based approach rival hypotheses are tested in addition to the payperformance relationship the probability of job loss as a function of performance is also estimated the evidence presented points to the importance of institutional considerations in the standard agency theory and managerial power perspectives and lends support to a social theory of agency the analysis is empirical in nature and an effort is made to draw on qualitative studies to further flesh out the discussion the practical implications of the findings point to the inadequacy of existing arrangements to deliver efficient pay outcomes where performance is poor whilst highlighting dangers of relying on naive policy remedies that ignore the role played by institutional forces in their implementation also highlighted is the distinct advantage of boards adopting a cumulative or career oriented approach when evaluating executive performance from a policy perspective the case is made for truly long term incentives in the form of career shares

real output co movements in east asia any evidence for a monetary union of integration in the region would greatly shape the economic structure of each individual economy an d has direct implications for the effectiveness of domestic stabilisation policy and policy coordination this paper empiricall y examines the feasibility of forming a monetary union in east asia by assessing the real output co movements among these economies as suggested by the optimum curr ency area oca theory that losing monetary independence would be the major cost for adopting

does best practice in setting executive pay in the uk encourage good behaviour we examine how uk listed companies set executive pay reviewing the implications of following best practice in corporate governance and examining how this can conflict with what shareholders and other stakeholders might perceive as good behaviour we do this by considering current governance regulation in the light of interviews with protagonists in the debate setting out the dilemmas faced by remuneration setters and showing how the processes they follow can lead to ethical conflicts

the other side of the trade off the impact of risk on executive compensation the principal agent model of executive compensation is of central importance to the modern theory of the firm and corporate governance yet the exiting empirical evidence supporting it is quite wea

on the trade impact of nominal exchange rate volatility what is the effect of nominal exchange rate variability on trade i argue that the methods conventionally used to answer this perennial question are plagued by a variety of sources of systematic bias i propose a novel approach that simultaneously addresses all of these biases and present new estimates from a broad sample of countries from 1970 to 1997 the estimates indicate that nominal exchange rate variability has no significant impact on trade flows

real exchange rate volatility and international trade a reexamination of the theory one of the issues that have received considerable attention in the comparison of the properties of alternative exchange rate regimes is the effect of exchange rate risk on the volume of trade it has been argued that the higher volatility of exchange rates witnessed since the adoption of the floating regime in 1973 has led to a decrease in international trade transactions this is because most trade contracts are not for immediate delivery of goods and since they are denominated in terms of the currency of either the importer or the exporter unanticipated fluctuations in the exchange rate affect realized profits and hence the volume of trade it is implicitly assumed that forward exchange markets that can help traders eliminate this type of variations in profits either are not available as it is true for the majority of currencies because most are not fully convertible thereby impairing forward markets or for some reason they are not utilized to fully hedge exchange risk present in trade transactions the empirical evidence regarding the effect of exchange rate risk on trade has at best been inconclusive the large majority of the empirical studies are unable to establish a systematically significant link between exchange rate variability and the volume of international trade whether on an aggregate or on a bilateral basis abrams 1 akhtar and hilton 2 cushman 4 5 6 and kenan and rodrik 12 find some significant negative effects of exchange volatility on exports however bailey tavlas and uhlan 3 hooper and kohlhagen 10 and an international monetary fund study 11 do not find any supporting evidence for the depressing effect of exchange rate volatility on international trade it is also interesting to note that in many of these studies a significant positive effect of exchange rate volatility on the volume of trade is found for some cases however the positive effect believed to be at odds with the theory was either ignored or dismissed as a perverse result since as far as volumes are concerned theoretical considerations

china s exchange rate trap japan redux today s american mercantile pressure on china to appreciate the renminbi against the dollar is eerily similar to the american pressure on japan to appreciate the yen that began over 30 years ago indeed the yen went all the way from 360 to the dollar in august 1971 at the end of the bretton woods period of fixed exchange rate parities to touch 80 to the dollar in april 1995 then the american government relented and announced a strong dollar policy that signaled the end of japan bashing but the overvalued yen and the expectation of appreciation destabilized the japanese financial system the bubble economy of the late 1980s was followed by a deflationary slump and a zero interest liquidity trap in the 1990s mckinnon and ohno 1997 at least some of today s critics of east asian countries pegging to the dollar would agree that international saving imbalances rather than misaligned exchange rates are the root cause of the u s current account deficit one can argue whether it is mainly a saving deficiency in the united states or a saving glut in the rest of the world bernanke 2005 either way the central position of the united states under the world dollar standard gives it alone an unlimited international line of credit in its own currency however suppose that the u s trade deficit is misdiagnosed to result from a misaligned exchange rate so that a surplus country on the dollar s periphery is forced to appreciate against the world s dominant money it will suffer a slowdown in economic

economic and ecological concepts for valuing ecosystem services abstract the purpose of this special issue is to elucidate concepts of value and methods of valuation that will assist in guiding human decisions vis a vis ecosystems the concept of ecosystem service value can be a useful guide when distinguishing and measuring where trade offs between society and the rest of nature are possible and where they can be made to enhance human welfare in a sustainable manner while win win opportunities for human activities within the environment may exist they also appear to be increasingly scarce in a full global ecological economic system this makes valuation all the more essential for guiding future human activity this paper provides some history background and context for many of the issues addressed by the remaining papers in this special issue its purpose is to place both economic and ecological meanings of value and their respective valuation methods in a comparative context highlighting strengths weakness and addressing questions that arise from their integration

executive compensation and principal agent theory the empirical literature on executive compensation generally fails to specify a model of executive pay on which to base and test hypotheses regarding its determinants in contrast this paper analy

why is it so difficult to find an effect of exchange rate risk on trade abstract it is commonly argued that exchange rate risk hampers international trade however the large literature on this subject has not yet provided conclusive evidence this paper analyzes why it is so difficult to obtain a clear answer from time series analyses we use data on bilateral aggregate u s exports to the other g7 countries the results show that as far as the exchange rate is concerned export decisions are mostly affected by the probability distribution of the about one year ahead rate the riskiness of the exchange rate at such a long horizon appears fairly constant over time with only short term fluctuations this makes it difficult to discover the true effect of exchange rate risk on trade from the time series data that are typically available

international trade with forward futures markets under exchange rate and price uncertainty abstract the paper examines a risk averse firm s decisions on the level of trade when the exchange rate and the commodity price are uncertain and the extent of forward exchange and commodity futures commitments first we verify the separation theorem and the full double hedging theorem second we investigate the implications of the existence of both forward foreign exchange and commodity futures markets in comparison to the case where only one or no market is available to the firm the second exercise enables us to focus on conditions under which establishing forward futures arrangements promotes international trade

how do the renminbi and other east asian currencies co move abstract this paper investigates the degree and the nature of exchange rate co movements between the renminbi and a set of seven east asian currencies by estimating markov switching models with regime dependent correlations and time varying transition probabilities these models have several advantages first exchange rate co movements can vary across different depreciation and appreciation regimes second the renminbi can act as a transition variable that provides information regarding how the exchange rates evolve over time after controlling for global effects and exchange market pressures the results yield robust evidence of the renminbi s rising role in east asia as a significant factor in currency fluctuations a key result is that regional currencies tend to overreact when the renminbi depreciates and underreact when it appreciates suggesting that east asian economies are not willing to allow their currency to substantially appreciate against the chinese currency

exchange rate volatility and international trade the purpose of this note is to show that a positive effect of exchange rate volatility on export production has a theoretical basis the key to this claim is that as the exchange rate volatility increases so does the value of the real option to export to the world market higher volatility increases the potential gains from trade this may explain part of the mixed empirical findings regarding the effects of exchange rate risk on international trade

the parallel currency approach to asian monetary integration since the crisis of 1997 1998 there has been a proliferation of proposals for fostering asian monetary integration asian countries it is suggested should collectively peg their currencies to the dollar the yen or a dollar yen euro basket or establish a multilateral currency grid like the european monetary system ems the resulting exchange rate stability would promote intraregional trade simplify investment planning and encourage cross border participation in local bond markets experience with establishing and maintaining a system of stable exchange rates would help ready the region for the introduction of a single currency asia in this view should emulate europe s approach to regional monetary integration along with the attractions of the european example however there are also dangers defending a system of currency pegs in the presence of high capital mobility requires the close convergence of policies and the maintenance of confidence if either precondition is disturbed a country will require extensive financial support in order to defend its peg or to undertake an orderly realignment in practice asian countries possess neither the willingness to subordinate other policies to these imperatives nor the solidarity needed to offer extensive financial supports absent an appetite for political integration there is little readiness to create a regional central bank like the european central bank since there is no counterpart to the european parliament to hold it accountable for its actions hence there is little prospect of early monetary union to tie down expectations a system of asian currency pegs would consequently be fragile and crisis prone as a road to monetary unification it would be a dead end it would be better for governments to create an asian currency unit acu constituted as a weighted average of asian currencies and allow it to circulate alongside their national currencies this would have three advantages first it would not be necessary to stabilize exchange rates between the currencies comprising the basket hence fragility would be less second the parallel currency would be more stable than any one national currency in terms of aggregate asian production and exports it would thus be a vehicle for encouraging intraregional trade and investment third the decision to move to a single currency could be driven by economics rather than politics only when a critical mass of producers exporters and investors had adopted the parallel currency would it be clear that asian economies were ready for monetary unification

can africa compete with china in manufacturing the role of relative unit labor costs in this paper examine sub saharan africa s ssa bilateral trade and cost competitiveness with china we review patterns of bilateral trade between ssa and china showing an extraordinary imbalance in the structure of trade in that china overwhelmingly exports manufactured products to ssa and almost exclusively imports primary products in return our principal means of assessing the competitiveness of ssa s manufacturing sector vis a vis china are measures of relative unit labor costs rulc we find that african rulc levels have generally been very high relative to china but declined over the 2000s as china s wages have risen faster than chinese productivity while the reverse is true for the ssa countries in our sample nevertheless rulc vis a vis china remained elevated for many ssa countries as of 2010 generally high rulc along with weaknesses in the business climate suggest that most ssa countries are unlikely to be competitive in labor intensive manufacturing any time soon

aggregation and deliberation in valuing environmental public goods starting from a distinction between kantian principle based and utilitarian preference based approaches in political theory this essay argues that we may understand normative judgments individuals make about policy to express principled views of the public interest or purpose not private preferences about their own consumption opportunities these judgments in other words state opinions about what we ought to do as a society rather than report preferences about what i want as a utility maximizer this essay then argues that contingent valuation can take into account these kinds of judgments which dominate public discourse about the environment only if it moves toward a deliberative discursive jury like research method emphasizing informed discussion leading toward a consensus based on an argument about the public interest

are ceos really paid like bureaucrats a common view is that there is little correlation between firm performance and ceo pay using a new fifteen year panel data set of ceos in the largest publicly traded u s companies we document a strong relationship between firm performance and ceo compensation this relationship is generated almost entirely by changes in the value of ceo holdings of stock and stock options in addition we show that both the level of ceo compensation and the sensitivity of compensation to firm performance have risen dramatically since 1980 largely because of increases in stock option grants

exchange rate volatility and international trading strategy abstract it is usually argued that an increase in exchange rate volatility reduces the volume of international trade as trading firms are risk averse this paper shows that exporting firms benefit under fairly general conditions from an increase in exchange rate volatility firms optimally adjust their export volumes to the level of the exchange rate exporting is an option which is exercised if profitable in addition the paper presents conditions under which the volume of international trade grows with exchange rate volatility

just how low are china s labour costs this paper provides a new perspective on chinese international competitiveness in manufacturing using relative unit labour costadvantage than that implied by a comparison of wages alone china s cost advantage derives from large currency devaluations thas t preceded the establishment of a de facto peg around 1995 and rapid productivity growth in the period since 1995 we nd that chinese unit labour costs are about 25 40 per cent of us labour costs they are also low relative to costs in the eu japan mexico korea and most other newly industrialising countries however china s relative unit labour costs indicatea substantially smaller cost

endogenously chosen boards of directors and their monitoring of the ceo author s hermalin benjamin e abstract this paper develops a model in which the effectiveness of a board s monitoring of the ceo depends on the board s independence the independence of new directors is determined through negotiations implicit or explicit between the existing directors and the ceo the ceo s bargaining position and thus influence over the board selection process depends on an updated estimate of the ceo s ability based on prior performance many empirical findings about board structure and performance arise as equilibrium phenomena in this model we also explore the implications of this model for proposed regulations of corporate governance structures please contact the program in law and economics at boalt hall school of law uc berkeley berkeley ca 94720 for a copy of this paper

machine replacement and the business cycle lumps and bumps this paper explores investment fluctuations due to discrete changes in a plant s capital stock the resulting aggregate investment dynamics are surprisingly rich reflecting the interaction between a replacement cycle the cross sectional distribution of the age of the capital stock and an aggregate shock using plant level data lumpy investment is procyclical and more likely for older capital further the predicted path of aggregate investment that neglects vintage effects tracks actual aggregate investment reasonably well however ignoring fluctuations in the cross sectional distribution of investment vintages can yield predictable nontrivial errors in forecasting changes in aggregate investment

the role of small firms in the technology development of china science technology s t is high on the chinese policy agenda and the country aims at becoming an innovation driven economy small firms have been important in technology development in other east asian countries but the situation in chinese small firms has been far less explored we examine how much s t has been accounted for by small firms and how their s t intensity differs across industries and ownership groups we also analyse how various firm characteristics differ over size categories and s t status this study is based on newly processed micro level data provided by the national bureau of statistics with information on a large number of s t indicators for manufacturing firms in china in 2000 and 2004 our results suggest that the role of small firms in chinese s t is similar to that in many other countries they account for a comparably small share of total s t and most small firms are not engaged in any s t however those small firms that do engage in s t tend to be more s t intensive and have a higher output in terms of patents than larger chinese s t firms

exchange rate volatility international trade and the value of exporting firms abstract increased exchange rate volatility positively affects the value of exporting firms via the price and volume impacts of exchange rates and also makes an exporting strategy more attractive relative to the direct investment investment in export production capacity could therefore be a positive function of exchange rate volatility firms would also be more willing to sustain losses i e to engage in dumping before they abandon their export markets the effect on the volume and value of trade is ambiguous

corporate performance and managerial remuneration an empirical analysis abstract economic theories of efficient compensation predict a positive relationship between executive pay and corporate performance and yet efforts to document this relationship have been largely unsuccessful in this paper we argue that previous cross sectional studies have omitted important variables which seriously bias their results using data that focus on individual executives over time we find that executive compensation is strongly positively related to corporate performance as measured by shareholder return and growth in firm sales the results are robust to the stock market performance measure utilized

do ceos encounter within tenure settling up a multiperiod perspective on executive pay and dismissal we consider a central puzzle surrounding ceo accountability what explains the payoffs and penalties that ceos receive invoking fama s concept of settling up we examine how a ceo s entire perfo

two paradoxes with one stone a critical reading of ecological modernization abstract the current contribution aims at critically reviewing state initiatives in the frame of ecological modernization under the lenses of the labor theory of value further the article addresses two phenomena related to ecological modernization that have received much attention namely the porter hypothesis and the jevons paradox state led environmental regulation in terms of environmental legislation as well as initiatives to promote green technology can be understood as a twofold attempt which ultimately leads to re defining socially necessary labor time first state intervention would wish to remove surplus profit from polluting or resource depleting capitals through legislation which would tend to increase socially necessary labor time in the branch of production under reference state policy might then attempt to propel the adoption of green technology which would tend to decrease socially necessary labor time in the sectors targeted through state initiatives competition among rival capitals would be re aligned so as to allow for conditions of production to be renewed the porter hypothesis can be approached as a strategy followed by individual capitals to gain an early mover advantage while the jevons paradox can be seen as the result of an imitation process when rival capitals take up technological modifications launched by innovators

exchange rate volatility and pakistan s exports to the developed world 1974 85 abstract the paper attempts to estimate the impact of exchange rate uncertainty on pakistan s exports to the developed world for 1974 85 discovering strong evidence to suggest that exports were adversely affected by the increased variability of its bilateral exchange rates unlike much of the recent evidence on developed countries however it is the variability in nominal rather than real exchange rates that is significant the computations also suggest the presence of strong third country effects

risk aversion performance pay and the principal agent problem this paper calculates numerical solutions to the principal agent problem and compares the results to the stylized facts of ceo compensation the numerical predictions come from parameterizing the models of grossman and hart and of holmstrom and milgrom while the correct incentives for a ceo can greatly enhance a firm s performance providing such incentives need not be expensive for many parameter values ceo compensation need increase only by about 10 for every 1 000 of additional shareholder value for some values the amount is 0 003 cents

exchange rate volatility and intra asia trade evidence by type of goods this paper examines the impact of intra asia exchange rate volatility on intra asia trade in primary goods intermediate goods equipment goods and consumption goods from 1980 to 2009 for asia the evidence shows that as intraregional exchange rate volatility increases intraregional exports in these goods fall this adverse impact is even more pronounced in the subregion of association of southeast asian nations asean 5 comprising asean member countries plus the people s republic of china hong kong china japan the republic of korea and taipei china and especially among intermediate and equipment exports again the impact magnifies in an even smaller subgroup excluding the smaller asean economies these results underline the significant impact of exchange rate volatility on the region s production networks for south asia however exchange rate volatility appears to have a positive impact on exports still caution is warranted given that south asian economies trade relatively little with each other

implicit contracts a survey 7mplicit contracts resolve the distribution of uncertainty and utilization of specific human capital between risk averse workers and less risk averse firms incomplete contracts are required to yield involuntary layoffs in contract markets otherwise contracts are efficient and pareto optimal by construction there is a close relation between contract theory and neoclassical labor market theory contracts smooth consumption but increase the volatility of labor supply and labor utilization to demand disturbances because contractural insurance eliminates the income effects of socially diversifiable risks this result is similar to the intertemporal substitution hypothesis however the price mechanism in a contract is substantially different contracts embody a nonlinear two part pricing scheme the lump sum part allocates the income consumption consequences of risks and the marginal pricing part allocates production and labor utilization this implicit pricing mechanism is in all respects flexible though the observed average hourly wage combines both parts and may give the outward appearanceof rigidity furthermore the observed average wage rate in a contract does not reflect marginal conditions necessary for structural econometric estimation indivisibilities appear necessary to account for the split between work sharing and layoffs contracts with private information are also considered in the nonlinear pricing context this abstract was borrowed from another version of this item

the impact of exchange rate volatility on international trade flows despite the best efforts of economists a basic paradox as to the impact of exchange rate volatility on trade flows remains unresolved at both the theoretical and empirical level this paper surveys the vast literature in the area in an attempt to identify major issues which have contributed to the development of the debate and examine whether any general direction for consensus may be found

why is china so competitive measuring and explaining china s competitiveness this paper evaluates factors responsible for the competitiveness of china in the world economy and relative to its east asian rivals china has been highly successful in capturing world export markets chinese competitiveness is not just a matter of an undervalued exchange and extremely low labor costs it reflects primarily the coincidence of favorable cost conditions with improvements in china s ability to produce products that meet world market specifications these improvements are closely related to foreign participation in china s economy through foreign direct investment and joint venture enterprises

exchange rate policy options for post crisis southeast asia is there a case for currency baskets following the recent financial crises in southeast asia and elsewhere the perennial issue of the exchange rate policy options for small and open developing countries has resurfaced there seems to be an emerging consensus that the frequency with which soft pegs have been susceptible to speculative attacks in this era of escalating global capital flows has increased pressure for developing countries to adopt corner exchange rate regimes this paper takes issue with this popular one size fits all prescription of exchange rate arrangements for developing countries and explores exchange rate policy options for post crisis southeast asia the principal purpose of this paper is to discuss the case for currency baskets as a general regime in its own right for southeast asia as opposed to being a compromise between the two corner solutions

has exchange risk depressed international trade the impact of third country exchange risk abstract this paper argues that the effect of exchange risk on bilateral and aggregate trade flows should be analyzed by including the impact of third country exchange risk factors in addition to direct bilateral or multilateral risk after a theoretical examination of these effects us bilateral export flow to its six largest trading partners are analyzed empirically i find individuality and jointly significant third country risk effects in most cases in contrast to some recent bilateral efforts i find a steadily growing negative impact on trade flows from exchange risk during floating and in contrast to recent aggregate trade flow studies i conclude that there was no temporary decline in exchange risk during the late 1970s

an analysis of the principal agent problem most analyses of the principal agent problem assume that the principal chooses an incentive scheme to maximize expected utility subject to the agent s utility being at a stationary point an important paper of mirrlees has shown that this approach is generally invalid we present an alternative procedure if the agent s preferences over income lotteries are independent of action we show that the optimal way of implementing an action by the agent can be found by solving a convex programming problem we use this to characterize the optimal incentive scheme and to analyze the determinants of the seriousness of an incentive problem

exchange rate variability and trade why is it so difficult to find any empirical relationship this paper discusses why previous literature has found little evidence of any effect of exchange rate variability on international trade methodological and statistical issues are discussed in particular comparisons are made of estimations based on different specifications or using different data sets and changes in the results depending on the method used are shown

south africa s international cost competitiveness and exports in manufacturing abstract the new south african government has embraced globalization with mixed results to date controversies center on south africa s international cost competitiveness and whether south african exports respond to changes in competitiveness we measure competitiveness by relative unit labor costs we find that south african relative unit labor costs declined in the 1990s but are still high relative to other developing countries econometric analysis reveals a strong effect of relative unit labor costs on exports