staggered and synchronized price policies under inflation the multiproduct monopoly case this paper analyses the optimum pricing policies of a multiproduct monopoly in the presence of inflation and fixed costs of nominal price changes we examine the conditions which lead to staggered or synchronized pricing policies when the timing of price changes is endogenous two aspects of the decision problem are emphasized the interactions in the joint profit function between the prices of the various goods and the interactions in the costs of price adjustment we show that with positive interactions in the profit function and costs of price adjustments that are independent across products staggering is unlikely depending on initial conditions a firm may follow a staggered steady state or a synchronized steady state path but the former is locally unstable while the latter is attained from a broad set of initial conditions for a small rate of interest the staggered policy is optimal if the interaction in profits is negative

the state and economic stagnation in tropical africa abstract politics while only one strand in the explanation of africa s massive economic problems is nonetheless a significant factor a central conundrum facing postcolonial political leaders is how to govern and hold together unintegrated peasant societies in the absence of legitimacy personal rule a particular mode of patrimonial governance provides an answer permitting regime survival and the advancement of political insiders but personal rule has an economically destructive tendency that only shrewd political leadership and propitious world economic conditions can check if uncontrolled certain political practices corrode bureaucratic and legal rationality and promote the misallocation of scarce public resources the result can be a downward spiral of interrelated political and economic decline that is increasingly difficult to reverse

sources of stagnation in sub saharan africa abstract this paper investigates the sources of economic stagnation in sub saharan africa during the 1970s several policy variables are considered as well as a set of environmental variables which include climate violence export prices and other exogenous factors the paper uses statistical analysis in an attempt to identify the relative importance of the policy variables and the environmental variables taken as groups it also seeks to identify particular policy variables which seem to have been most significant in determining growth outcomes the technique employed for investigation is reduced form econometric estimation in a preliminary analysis the impact of the international trade environment on average economic performance in africa during the period since independence is investigated the results suggest an extremely close relationship between movements in export prices and average performance throughout the 20 year period a second econometric exercise investigates the joint impacts of environmental and policy variables on growth in a cross section of african states since 1970 the spirit of the approach is exploratory and a relatively large number of variables are constructed and tested through multivariate analysis a primary finding is that the environmental variables seem to have had more impact on growth as a group than the policy variables this finding must be qualified however by the continuing lack of some important policy variables agricultural price data have not yet become available in sufficient quantity for cross section analysis nor have several important human resource variables and indices of the use of resources in the public domain among the policy variables which have been used for the analysis those identified with retrenchment during periods of declining commodity prices seem most significant primary among these are the real effective exchange rate and some measures of effectiveness in foreign exchange reallocation during periods when imports must contract severely in the final section of the paper the cross section results are used for a counterfactual analysis of the growth experiences of individual african states measures of growth opportunity cost are constructed which suggest the degree to which errors in management and uncontrollable circumstances have held states below their potential growth paths the results suggest that some success stories may owe much to good luck while some failures may well be due less to bad management than to adverse circumstances

nash and stackelberg solutions in a differential game model of capitalism abstract this paper examines two noncooperative open loop solution concepts in a simple model of economic growth and distribution formulated as a differential game between workers who may save or consume and capitalists who may consume or invest it is demonstrated that both players prefer the stackelberg game to the nash game furthermore it is shown that under fairly realistic assumptions about the parameters of the model both workers and capitalists would prefer to act as the follower in the stackelberg game this means that capitalism is in a stalemate i e in a position where neither class wants to take the initiative and announce its strategy first the result is interpreted as an explanation of the difficulties met in designing and implementing incomes policies and social contracts

imperfect information and staggered price setting many keynesian macroeconomic models are based on the assumption that firms change prices at different times this paper presents an explanation for this staggered price setting the authors develop a model in which firms have imperfect knowledge of the current state of the economy and gain information by observing the prices set by others this gives each firm an incentive to set its price shortly after other firms set theirs staggering can be the equilibrium outcome in addition the information gains can make staggering socially optimal even though it increases aggregate fluctuations copyright 1988 by american economic association

on the dominance of capitalists leadership in a feedback stackelberg solution of a differential game model of capitalism abstract this paper deals with a modified version of the lancaster model of capitalism where it is assumed that there is a cost jointly borne by the two groups of players workers versus capitalists and associated with the bargaining of a larger share of consumption for the workers it is shown that a feedback stackelberg solution with the capitalists acting as leaders and announcing their investment policy at the beginning of each period is a solution dominating the feedback nash solution the paper is also intended to be a tutorial on the feedback stackelberg solution a concept not so often used by economic modelers

the spirit of capitalism and savings behavior abstract this paper presents a capitalist spirit model of savings by including wealth in the intertemporal utility function while this model includes the life cycle model and bequest model as two special cases it sheds light on why wealth holding has tended to increase with age why decumulation of wealth after retirement has not happened and why households with and without children have not shown significant differences in their savings behavior the capitalist spirit approach is especially useful for understanding savings by the rich and savings across countries and over time jel e21 b10

institutions and agricultural productivity in sub saharan africa agricultural productivity in 41 sub saharan africa ssa countries from 1960 to 1999 is examined by estimating a semi nonparametric fourier production frontier over the four decades the estimated rate of productivity change was 0 83 per year although the average rate from 1985 99 was a strong 1 90 per year former uk colonies exhibited significantly higher productivity gains than others while liberia and countries that had been colonies of portugal or belgium exhibited net reductions in productivity we measure a significant reduction in productivity during political conflicts and wars and a significant increase in productivity among those countries with higher levels of political rights and civil liberties

why u s wage and employment behavior differs from that in britain and japan if a poll were to be conducted among american academic economists to select the most mystifying economic phenomenon of our time surely the sticky nominal wage rate would emerge at or near the top of the list the slow and partial response of the nominal wage rate to changes in aggregate nominal spending has been a central postulate of macroeconomic theory for the past 45 years from keynes general theory down to the standard postwar textbook keynesian paradigm to the more modern fixed wage price models of robert barro and herschel grossman i976 and edmond malinvaud i977 unwilling passively to accept nominal wage rigidity as an unexplained assumption many labour market theorists have followed the lead of costas azariadis i975 and martin baily i974 in building models to explain rigid wages and layoff unemployment as the rational outcome of a profit maximising calculus as i pointed out in an early critique of the azariadis baily model i976a their assumptions cannot explain cycles in employment but rather why workers would want fixed incomes i e a fixed wage rate and fixed employment soon thereafter barro i977 went one step further and argued that contract theory is a facade which cannot explain why workers would choose a rigid wage and variable employment in preference to the classical equilibrium quantity of employment that equates the marginal product of labour with the marginal value of time now an examination of the evidence has led me to the realisation that rigid wages cannot provide the underpinnings for a universally valid theory of the business cycle simply because wages are not universally rigid i document below with postwar quarterly data that the share of fluctuations in the manufacturing wage bill taking the form of nominal wage changes as compared to changes in hours worked is five to ten times greater in britain and japan than in

why countries with the same technology and preferences can have different growth rates abstract a standard ak model of endogenous growth has been extended to allow for an intertemporal conflict between capitalists and workers for the dynamic game thus obtained an equilibrium solution in feedback nash markovian strategies have been computed however many equilibria in trigger strategies can dominate the former there are dominating strategies that depend on the country specific bargaining power of the workers versus capitalists they are both pareto optimal and subgame perfect this provides an explanation why countries which are completely identical in preferences technology and factor endowments can experience different long term growth rates

what drives the swing voter in africa what makes african voters up for grabs existing approaches to the swing voter have several liabilities this article introduces a new measure enabling a more comprehensive assessment of swing voting including the differentiation between clientelistic and collective goods motivations the issue of swing voting is then brought to an environment where voters are rarely considered persuadable africa using a count model estimation technique and original survey data from ghana s critical 2008 elections the analysis challenges the near consensus in african politics on clientelism as the only electoral strategy when voters perceive politicians as providing collective developmental goods the efficacy of clientelism as a tool to win over voters is reduced many persuadable voters can also be won over by both clientelistic and collective goods thus contradicting the literature presenting these as mutually exclusive finally the analysis shows that incumbents do better when they provide collective goods even in highly clientelistic environments

historical legacies a model linking africa s past to its current underdevelopment abstract recent studies have found evidence linking africa s current under development to colonial rule and the slave trade given that these events ended long ago why do they continue to matter today i develop a model exhibiting path dependence which provides one explanation for why these past events may have lasting impacts the model has multiple equilibria one equilibrium with secure property rights and a high level of production and others with insecure property rights and low levels of production i show that external extraction when severe enough causes a society initially in the high production equilibrium to move to a low production equilibrium because of the stability of low production equilibria the society remains trapped in this suboptimal equilibrium even after the period of external extraction ends the model provides one explanation why africa s past events continue to matter today

internal borders ethnic based market segmentation in malawi summary ethnic diversity is associated with poorer economic development but why i argue that market segmentation is one mechanism linking diversity to economic underdevelopment when ethnic groups are geographically segregated and trust is concentrated within groups markets will be tend to be segmented along ethnic lines i evaluate this argument using maize price data from seventy malawian markets over 14 years and combine it with census data on the spatial distribution of ethnic groups i find that maize price differences a key indicator of market segmentation are indeed larger for ethnically dissimilar markets even after taking sub national administrative borders geographic barriers and climatic differences into account these statistical findings are complemented by interview data from farmers and traders in three markets across malawi which highlight the centrality of trust in small scale maize trading as well as a preference for coethnic trading partners together these findings suggest that ethnic diversity and ethnoregional segregation in particular can have a negative impact on market integration an important driver of food security and long term economic development

the feedback equilibria of a differential game of capitalism abstract the feedback equilibria of a capitalistic game described by kelvin lancaster are derived under concave utility functions with a constant degree of absolute risk aversion and standard production function it is shown that the equilibrium solution is unique if the rate of time preference and the constant degree of absolute risk aversion are sufficiently great some properties of the equilibrium solution are reported

a theory of dynamic oligopoly iii cournot competition abstract we study the markov perfect equilibrium mpe of an alternating move infinite horizon duopoly model where the strategic variable is quantity we exhibit a pair of difference differential equations that when they exist differentiable mpe strategies satisfy for quadratic payoff functions we solve these equations in closed form and demonstrate that the mpe corresponding to the solution is the limit of the finite horizon equilibrium as the horizon tends to infinity we conclude with a discussion of adjustment costs and endogenization of the timing

a theory of dynamic oligopoly ii price competition kinked demand curves and edgeworth cycles we provide game theoretic foundations for the classic kinked demand curve equilibrium and edgeworth cycle we analyze a model in which firms take turns choosing prices the model is intended to capture the idea of reactions based on short run commitment in a markov perfect equilibrium mpe a firm s move in any period depends only on the other firm s current price there are multiple mpe s consisting of both kinked demand curve equilibria and edgeworth cycles in any mpe profit is bounded away from the bertrand equilibrium level we show that a kinked demand curve at the monopoly price is the unique symmetric renegotiation proof equilibrium when there is little discounting we then endogenize the timing by allowing firms to move at any time subject to short run commitments we find that firms end up alternating thus vindicating the ad hoc timing assumption of our simpler model we also discuss how the model can be enriched to provide explanations for excess capacity and market sharing keiiwords tacit collusion markov perfect equilibrium kinked demand curve edgeworth cycle excess capacity market sharing endogenous timing

on relative wealth effects and the optimality of growth abstract we present a model of endogenous growth in which a desire for social status lead individuals to care about their relative wealth the growth rate of the economy is socially optimal if the status motive is sufficiently important but the presence of status seeking may also lead to excessive growth

the long term effects of africa s slave trades can part of africa s current underdevelopment be explained by its slave trades to explore this question i use data from shipping records and historical documents reporting slave ethnicities to construct estimates of the number of slaves exported from each country during africa s slave trades i find a robust negative relationship between the number of slaves exported from a country and current economic performance to better understand if the relationship is causal i examine the historical evidence on selection into the slave trades and use instrumental variables together the evidence suggests that the slave trades have had an adverse effect on economic development

can africa catch up towards globalisation has been manifested in the sustained growth of world trade and flows of investment and technology as well as in the convergence of national economic and social systems for most regions this growing integration has led to rapidly increasing per capita incomes while africa has stagnated at the income level achieved about three decades ago the question posed in this paper is whether africa can link up with the rest of the world and start a catch up process or whether marginalisation is inevitable the paper is structured as follows the second section looks at whether africa has really been marginalised or in what sense this has happened this is done through a comparison with other regions the third section investigates to what extent africa has been open to the rest of the world the fourth section looks at structural adjustment policies introduced from the 1980s onwards to open up african economies and discusses the impacts of these reforms the fifth section looks at possible reasons as to why africa has not taken off while the final section discusses the way forward for africa the facts of african marginalisation after world war ii africa was a reasonably important trading partner and an interesting arena for foreign investment during the period up to the early 1960s the continent went through a process of decolonisation in terms of development strategy the liberation did initially not imply any

the wage price spiral this paper rehabilitates the old wage price spiral it shows that after an increase in aggregate demand the process of adjustment of nominal prices and nominal wages results from attempts by workers to maintain or increase their real wage and by firms to maintain or increase their markups of prices over wages under continuous price and wage setting the process of adjustment would be instantaneous under staggering of price and wage decisions the adjustment takes time the more inflexible real wages and markups are to shifts in demand the higher is the degree of price level inertia and the longer lasting are the effects of aggregate demand on output

counterinflationary policy in a unionised economy with nonsynchronised wage setting a model of the determination of wages and employment in a unionised economy with nonsynchronised wage setting is presented in this paper it is shown that a monetary deflation can lead to prolonged unemployment even though the unions act rationally and with full information about the change in policy the model generates a statistical phillips curve in which the rate of change of money wages depends on the anticipated growth rate of the money supply and on disequilibrium unemployment conventional incomes policies are shown to have desirable social effects but run counter to the perceived self interest of the trade unions and are therefore likely to be resisted taxes on wage increases have desirable long run effects but do not appear able to reduce the transitional unemployment costs of monetary deflation

aggregate pattern of time dependent adjustment rules i a game theoretic analysis of staggered versus synchronised wage setting this paper studies the benefits of staggered wage setting in reducing strategic conflicts it is shown that when wage setters interact strategically and dynamically they prefer moving alternatingly because by doing so they are able to commit temporarily not to offset the effects of each other s action it is also shown that synchronization represents a better arrangement when agents are able to coordinate these results are consistent with the presence of nonsynchronous and decentralized wage decisions in the united states and the united kingdom and the presence of synchronous bargaining in shunto and coordination in wage determination in japan copyright 1996 by royal economic society

wealth risk and activity choice cattle in western tanzania abstract imperfect credit markets force households to use their savings for investment profitable activities often require lumpy investments limiting entry by poorer households resulting in increasing welfare differences in tanzania cattle are a profitable but lumpy investment and a liquid asset for consumption smoothing richer households own substantial cattle herds while poorer households specialize in low return low risk activities a dynamic programming model and simulations are presented to analyze entry into asset accumulation under income risk the evidence suggests that households with lower endowments are less likely to own cattle and returns to their endowments are lower

aggregate pattern of time dependent adjustment rules ii strategic complementarity and endogenous nonsynchronization abstract this paper provides an explanation for an important institutional feature of staggered time dependent adjustment rules assumed in a number of macroeconomic models it identifies strategic complementarity as the crucial factor leading to nonsynchronized decisions in a game theoretic framework the paper first shows that nonsynchronization is the equilibrium outcome in an infinite horizon game in which strategic complementarity is present whether the players choose predetermined or fixed actions by pursuing the interpretation of a nonsynchronized move dynamic game as a series of games with symmetric stackelberg leadership it is further suggested that the relationship between strategic complementarity and the benefit to the stackelberg follower provides the insight to the game theoretic explanation of nonsynchronization the results of this paper reveal a link between strategic complementarity and nonsynchronization two important macroeconomic features journal of economic literature classification numbers e30 l16

rates of return on physical and human capital in africa s manufacturing sector in this paper two sets of issues are addressed using panel data from the manufacturing sector of five african countries first how high are the returns to human relative to physical capital second what is the relative importance of technology and endowments of human and physical capital in determining differences in earnings and productivity across the countries evidence from earnings functions shows that the private returns to both experience and education rise with the level of education private returns rise from 3 per cent at the primary level to 10 per cent at the secondary level and 35 per cent for tertiary evidence from the production function gives lower returns on education than from the earnings function rates of return on physical capital exceed 20 per cent and greatly exceed the average return on human capital data is available on the stocks of human and physical capital across the countries productivity and earnings differentials are shown to be large between cameroon and ghana these differences are due almost entirely to differences in physical not human capital endowments this abstract was borrowed from another version of this item

monopolistic competition and the effects of aggregate demand how important is monopolistic competition to an understanding of the effects of aggregate demand on output we ask the question at three levels can monopolistic competition by itself explain why aggregate demand movements affect output can it together with other imperfections generate effects of aggregate demand in a way that perfect competition cannot if so can it give an accurate account of the response of the economy to aggregate demand movements the answers are no yes and yes

staggered vs synchronised wage setting in oligopoly abstract this paper analyses the dynamic equilibrium which emerges when wages are bargained upon at different times in the various firms operating in an oligopolistic industry unions set wages the management of the firms the output level and the outcome of this interaction is captured by the game theoretic concept of markov perfect equilibrium the steady state equilibrium is compared with that which would emerge if all wage negotiations occurred simultaneously it is shown that staggered wage setting leads to higher steady state levels of wage and unemployment than synchronised wage setting it is also shown that a longer duration for wage contracts leads other things equal to lower wages and higher employment the final part of the paper shows that allowing for nash bargaining between union and management and for risk averse unions does not alter the conclusions of the paper

social norms savings behavior and growth we argue that many goods and decisions are not allocated or made through markets we interpret an agent s status as a ranking device that determines how well he or she fares in the nonmarket sector the existence of a nonmarket sector can endogenously generate a concern for relative position in for example the income distribution so that higher income implies higher status moreover it can naturally yield multiple equilibria it is thus possible to explain differences in growth rates across countries without recourse to differences in underlying preferences technologies or endowments different social organizations lead to different reduced form preferences which lead to different growth rates

asynchronized multiperiod commitments and cycles abstract we consider a game where agents can synchronize or stagger their decisions we compare the outcomes of both timing patterns and show that spillovers and strategic interactions are crucial for such a comparison a typology used in industrial organization distinguishing four cases fat cat top dog lean and hungry puppy dog allows us to compare the actions taken in the staggered variant and in the synchronized one the staggered variant exhibits cycles and players are both better off when there are strategic complementarities between them a timing game is then set up so as to endogenize the choice between the two variants we study two examples are developed i bertrand competition and ii a wage setting game when there are two monopoly unions in two interrelated firms we show that the staggering of price decisions generates counter cyclical mark ups in the first example and the staggering of wage decisions generates cycling output in the industry in the second example

economic reform and political transition in africa the quest for a politics of development the 1980s were bracketed by crises in africa as protracted economic malaise was succeeded by a wave of political reform analysts have sought to understand the sources of economic decline as well as the political requisites for recovery in the region neoclassical and structuralist analyses have been challenged by state centric views of economic change the latter perspective emphasizes the need for capable developmental states as a basis for long term adjustment but a political theory of economic change is still lacking such a theory must address the institutional foundations of growth as well as the shifting basis of social coalitions in african regimes political liberalization suggests the possibility of a new setting for economic reform though the effects of political reform on institutions and coalitions remain ambiguous and democratization cannot be regarded as a panacea for the region s developmental failure future research must look more closely at the interests and structures in transitional regimes and scholars should adopt a more comparative vantage on africa s challenges of reform

will wage setters ever stagger decisions models featuring the implications of long term contracts typically impose the pattern of negotiation and then develop the implications of this particular structure with no analysis of whether the structure is optimal or stable recent work however focuses on the choice of the timing of wage negotiations across sectors 1 in fethke and policano 1984 we develop a two sector model in which each sector is subject to both aggregate and relative disturbances the main result is that whenever the variability of relative disturbances exceeds the weighted variability of aggregate disturbances a uniformly staggered pattern of negotiation represents a symmetric noncooperative nash solution the twosector case has special properties first the benefit associated with staggered negotiation apparently depends on the existence of large negotiating sectors in the economy second symmetry of relative disturbances in the two sector case leads to the unusual equivalence of the noncooperative and the joint optimization solutions to the problem of determining the optimal negotiation pattern one natural question concerns whether the incentive to stagger negotiation dates will diminish as the number of sectors increases in this paper we develop the three sector case in detail and then generalize the analysis to any number of sectors the results indicate that the more significant are relative disturbances the larger is the number of sectors that will be supported by a stable nash equilibrium with uniformly staggered negotiation dates in an economy characterized by atomistic sectors the incentive to stagger negotiation dates disappears we also compare the joint optimization solution with the nash solution and find that when there are more than two sectors the requirement for uniform staggering to be optimal is more difficult to satisfy under joint optimization than under the nash strategy this di

wage contingencies the pattern of negotiation and aggregate implications of alternative contract structures abstract a model of long term contracts is developed in which the choice of the negotiation pattern is endogenized when disturbances to the economy derive primarily from relative shocks staggered negotiation is optimal because adjustments made by negotiating agents transmit desirable employment effects into sectors that are looked into previously negotiated contracts the price level acts as the transmission mechanism indexation of wages to the price level enhances the benefits of staggered negotiation because the sector specific information revealed by the price level acts as a substitute for explicit inclusion in the contract of sector specific information the degree of persistence and the level of variation in aggregate output and employment measures which are commonly used in comparing the merits of synchronized versus staggered regimes are shown to be inappropriate criteria upon which to judge the optimality of the negotiation pattern

the equilibrium and optimal timing of price changes this paper studies the welfare properties of the equilibrium timing of price changes staggered price setting has the advantage that it permits rapid adjustment to firm specific shocks but the disadvantages that it causes unwanted fluctuations in relative prices and that by creating price level inertia it can increase aggregate fluctuations because each firm ignores its contribution to these problems staggering can be a stable equilibrium even if it is highly inefficient in addition there can be multiple equilibria in the timing of prices changes indeed whenever there is an inefficient staggered equilibrium there is also an efficient equilibrium with synchronized price setting

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

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

inflation s children tales of crises that beget reforms are broad reforms the children of high inflation do growth recoveries follow we find that countries that had external debt crises with high inflation both reformed more and recovered better than countries that had external debt crises with low inflation countries with extremely high inflation also later wound up with lower inflation than countries that has moderately high inflation the low inflation debtor countries had more aid than the high inflation debtor countries which may have created stronger incentives to reform in the high inflation countries recent reforms look like they are the children of high inflation even if further paternity tests are in order this abstract was borrowed from another version of this item

income portfolios in rural ethiopia and tanzania choices and constraints the article analyses the different income portfolios of households using survey data from rural ethiopia and rural tanzania it suggests that the different portfolios held by households cannot be e

globalisation and policy effects in africa globalisation or market integration in sub saharan africa is closely linked to the structural adjustment programmes in this paper we focus on their dependence on the politics and institutional characteristics of the countries concerned in particular we argue that one important explanation for the dismal performance of many african countries in spite of all the measures taken towards market liberalisation is the combination of first a magnification of the effects of policy and second a lack of willingness or ability on the part of politicians to respect the restrictions imposed on their behaviour and policy choices by the liberalised markets we look at how the increased exposure to international prices and returns on assets make the economic equilibrium relations the law of one price and uncovered interest parity relevant guidelines for economic policy the argument is illustrated by the case of zimbabwe where lack of respect for the restrictions imposed by international markets has led to an economic crisis with negative growth rates and a departure from globalisation

keeping one step ahead of the joneses status the distribution of wealth and long run growth assuming that the utility of each agent depends on its relative wealth position in the society this chapter constructs an endogenous growth model it is shown that even if the subjective discount rates differ across agents there exists a unique balanced growth equilibrium in which each agent owns a positive share of the world wealth it is also shown that if the agents are identical then an increase in savings incentives always raises the long run growth rate but if they are heterogeneous then an increase in savings incentives may lower the long run growth rate

wages and unemployment in an urban african labour market this paper argues that urban labor markets in africa exhibit a wage curve similar to those found in the united states britain canada and other developed countries drawing on data from the ivory coast the author finds that urban wages are depressed by higher levels of unemployment this result is robust to changes in model specification and level of aggregation it is consistent with the model of wage determination developed by c shapiro and j stiglitz 1984 and d blanchflower and a oswald 1995 but not with claims that urban wages are invariant to unemployment copyright 1996 by royal economic society

alternative time patterns of decisions and dynamic strategic interactions this paper offers a simple approach to study steady state markov perfect equilibria arising in dynamic games when players are obliged to commit their actions for several periods it highlights the importance of spillovers and dynamic strategic interactions when assessing the various time patterns conceivable in such games the obtained results are then applied to various either micro or macroeconomic issues where time patterns of decisions matter

a global compact to end poverty brian snowdon presents the text of a two hour interview conducted with jeffrey d sachs of columbia university a wide ranging discussion relating to professor sachs s work over the past thirty years on macroeconomic stabilisation the economics of transition and several important issues in the field of international economic development first snowdon provides some background to the debate relating to professor sachs s most recent work that has helped focus international attention on the growth tragedy of sub saharan africa this key humanitarian issue has received enormous coverage in the media throughout 2005 and has been highlighted in particular at the g8 meetings in gleneagles and worldwide live 8 concerts in july 2005 and the un world summit in september

saving in developing countries theory and review in the literature on economic development much of the interest in saving has been focused on the relation between saving and growth but saving is not only about accumulation it is about smoothing consumption in the face of volatile and unpredictable income and helping to ensure the living standards of poor people whose lives are difficult and uncertain this paper develops a model of households which cannot borrow but which accumulate assets as a buffer stock to protect consumption when incomes are low such households dissave as often as they save do not accumulate assets over the long term and have on average very small asset holdings but their consumption is markedly smoother than their income much of the evidence is as consistent with this view of saving as it is incosistent with standard views of smoothing over the life cycle and with explanations of the link between saving and growth in terms of life cycle saving behavior consumption smoothing is also a useful way of thinking about government policy where volatility in the world prices of taxed commodities can generate sharp fluctuations in government revenues as well as reallocations of revenue between the private and public sectors many important policy issues in developing countries hinge on issues of consumption and smoothing and research on these issues is currently likely to be more productive than work on the relation between saving and growth

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

the spirit of capitalism and stock market prices in existing theory wealth is no more valuable than its implied consumption rewards in reality investors acquire wealth not just for its implied consumption but for the resulting social status max m weber 1958 refers to this desire for wealth as the spirit of capitalism the authors examine both analytically and empirically implications of weber s hypothesis for consumption savings and stock prices when investors care about relative social status propensity to consume and risk taking behavior will depend on social standards and stock prices will be volatile the spirit of capitalism seems to be a driving force behind stock market volatility and economic growth copyright 1996 by american economic association

status the distribution of wealth private and social attitudes to risk this paper supposes an individual cares about his her own wealth not only directly but also via the relative standing that this wealth induces the implications for risk taking are investigated in particular such a model provides a natural explanation of the concave convex concave utility described by friedman and savage however there are a number of key differences between the present model and any model based on own wealth alone for example an equilibrium wealth distribution here may have a middle class further the status interaction involves an externality and an equilibrium wealth distribution may be pareto inefficient but also about the implied relative standing in the distribution of wealth has a long but checkered history an early exponent of such ideas was of course veblen 1899 it is indeed a notion which most economists reject albeit usually without explicit comment a notable and articulate exception however is frank 1985 for example see also the references frank cites on pp 33 34 it is however a notion with substantial intuitive appeal and it seems useful to ascertain its consequences before coming to a final judgement as to its merits the present paper is concerned with deriving the consequences of such valuation of status for risk taking what seems to be the sharpest possible model is adopted here this assumes that what is essentially ordinal rank in the wealth distribution enters von neumann morgenstern utility as an argument in addi tion to wealth itself thus higher wealth increases utility not only directly but also indirectly via higher status in the interests of both simplicity and drama it is typically assumed here that all individuals have identical utility functions which are concave in wealth but convex in status section 2 discusses how the model provides a natural explanation of the fundamental phenomenon addressed by friedman and savage 1948 that individuals may simultaneously purchase insurance and participate in lotteries although each individual here has a utility function which is concave in wealth itself utility can nevertheless be convex in wealth over some range when the indirect effect via status is included this effect is enhanced by the convexity of utility in status but will follow in any case if increasing wealth entails moving up in status much more rapidly than losing wealth entails moving down it is shown

how effective is public health expenditure in improving overall health a cross country analysis the primary emphasis of this paper is on seeking some justification for the worldwide phenomenon of increasing government involvement in health care the disability adjusted health expectancy dale rankings of countries in the world health report 2000 ranked wealthier countries with a typically large public sector involvement in health care higher on the list contrary to the possible implications for this ranking this paper finds that the comparatively higher dale in wealthier countries is not a result of greater public health expenditures in the middle income and less developed countries however there is some evidence of effective public involvement in health care

tax revenue instability with particular reference to sub saharan africa this article examines the temporal instability of tax revenues across a sample of developed and less developed countries it is shown that instability is especially high in ldcs and is highest in open economies with low per capita income high output variance and inflationary problems even allowing for these factors revenue instability appears to be particularly high in sub saharan africa revenue instability can be expected via the government budget constraint to be associated with expenditure instability and or instability in the sources of deficit finance cross section evidence for ldcs confirms that countries with high tax revenue instability tend also to have high expenditure instability time series evidence for six african countries however suggests that revenues and expenditures do not move together in a uniform manner and the direction of causality is generally ambiguous there is some evidence however that foreign borrowing is used more to finance expenditure increases than to counteract

quality of medical care and choice of medical treatment in kenya an empirical analysis underutilization of medical facilities in african countries is widely believed to be a result of consumer disappointments with quality of care this paper uses data from a randomized household survey enriched with exogenous information on health facility attributes to examine more deeply the quality factor in health care demand in rural kenya we find that broad availability of drugs in a medical facility is positively related to medical care use contrary to intuitive expectations lack of prescription drugs is also positively related to medical care demand while lack of aspirin reduces demand we explain this counter intuitive result by noting that any measure of availability of a consumable input is evidence of both demand and supply demand may be positively correlated with lack of drugs for example precisely because there is excess demand for available supplies the results indicate the importance of selecting truly exogenous indicators of service quality for demand analysis we also find that health care demand decreases with user fees and with greater distance to the provider but increases with income gender is not a significant determinant of the choice of medical care in this dataset whether considered separately or interacted with service variables

solving the mystery of the africa dummy abstract most empirical studies have reported a negative effect on growth of being an african country even when accounting for ethnic heterogeneity modeling policy choices has reduced this effect in recent studies but these have begged the question of why africa appears adverse to developmental policies this paper uses a cross sectional data set to show that the governments of arbitrary postcolonial states as are most african states face substantial limitations to their power and are constrained in their responses deriving greater relative power payoffs from neo patrimonial than from developmental policies differing levels of state legitimacy account therefore largely for the policy choices which characterize most of africa

on endogenously staggered prices taylor s model of staggered contracts is an influential explanation for nominal inertia and the persistent real effects of nominal shocks however in standard imperfect competition models if agents are allowed to choose the timing of pricing decisions they will typically choose to synchronize this paper provides a simple model of imperfect competition which produces stable staggering our argument relies on strategic interaction at two levels between firms within an industries and across industries and produces a continuum of staggered price equilibria these equilibria are strict and hence stable under a simple adaptive learning process an enduring problem for business cycle theory is an explanation for the persistent effects of nominal shocks explaining persistence is particularly problematic for theories based on nominal shocks as opposed to real shocks this is because rational expectations implies that nominal shocks themselves cannot be serially correlated since nominal shocks are the deviation of realized nominal magnitudes from expected values in two important papers taylor 1979 1980 provided an argument as to why a nominal shock can have persistent effects taylor s argument required two important assumptions first he assumed that firms could adjust prices only in alternate periods an assumption which may be justified by menu or information costs taylor s second assumption was that price setting was staggered half the firms were constrained to adjust prices in odd periods while the other half were allowed to adjust prices in even periods these two assumptions combined to provide dramatic results on nominal inertia the adjustment of prices to a nominal shock is slow and hence output effects are long lasting taylor s results on persistence arise due to strategic complementarity between price setting decisions this implies that each firm s optimal price is an increasing function of the aggregate price level if a shock arrives in an even period firms in the even cohort will not adjust fully to the nominal shock since firms in the odd cohort have fixed prices in the current period furthermore with rational expectations the even cohort also takes into account the fact that its own failure to adjust fully will also make for partial adjustment in future periods this elegant story has made taylor s model possibly the most influential of new keynesian models by providing a dynamic setting within which small nominal rigidities may result in persistent nominal inertia