employer search and employment subsidies in this paper insights into the literature on employment subsidy evaluation and that on employer search are merged to explore uncharted territory the firm and job characteristics leading to deadweight loss in employment subsidy schemes a model is developed which integrates various arguments found in the existing employer search literature using a survey of dutch firms for 1999 the model predictions are confirmed the richness of the data set enables one to construct some measures of deadweight loss which are new to the existing literature it turns out that firms which experience low screening costs large firms firms that forego substantial production due to unfilled jobs vacancies for full time jobs and firms operating in slack labour market conditions cause significantly more deadweight loss

green by choice cross national variations in firms responses to ems based environmental regimes environmental management systems emss represent a new generation of voluntary beyond compliance environmental policies that neither set substantive goals nor specify final outcomes as a result many stakeholder groups are lukewarm toward them since 1993 two major supranational emss iso 14001 and the european union s environmental management and audit scheme emas have been introduced firms receive formal accreditation after their ems has been certified by outside verifiers this accreditation can potentially bestow monetary and nonmonetary benefits on these firms firm level ems adoption patterns in the united kingdom germany and the united states vary thereby suggesting that national contexts influence firms responses to them in germany and the u k a significant number of sites have become either iso 14001 or emas certified while the take up of iso 14001 in the u s emas is available only to european sites has been less enthusiastic this article begins with the hypothesis that firms in countries with adversarial economies where regulators and business are on less than friendly terms are less likely to adopt ems based programs this hypothesis explains why iso 14001 take up has been relatively high in the u k and relatively low in the u s however it cannot explain 1 the high rate of take up of both iso 14001 and emas in germany where the stringency of environmental legislation has been a contentious issue between the government and industry and 2 why emas has been more popular in germany than in the u k this article argues that the original hypothesis while largely correct is underspecified to better explain the cross national differences in ems adoption one must take into account the type of adversarial economy adversarial legalism versus prescriptive interventionism and the nature of the policy regime procedural versus substantive

jump diffusion processes and the term structure of interest rates the authors investigate the term structure of interest rates when the underlying state variables and production technologies follow the jump diffusion processes even in some cases where the traditional expectations theory about the term structure is consistent with general equilibrium under diffusion processes the traditional theory is not consistent under jump diffusion processes it is shown that bond prices are strictly higher under jump risks than otherwise and that consumers with logarithmic utility functions will develop hedge portfolios in the presence of jump diffusion a number of continuous time asset pricing models have been derived under stochastic diffusion processes with continuous sample paths see e g black and scholes 2 merton 21 breeden 3 and cox ingersoll and ross 8 however recent empirical studies see e g brown and dybvig 4 feinstone 10 and jarrow and rosenfeld 17 suggest that the underlying processes may follow

valuing agricultural firms an examination of the contingent claims approach to pricing real assets abstract uncertainty about prices output demand and managerial decisions is not easily incorporated into a valuation model for real assets however techniques originally developed in the option pricing literature can accommodate these complexities this paper examines the contingent claims approach to valuing real assets a model for the value of an agricultural producer is derived optimal shutting and reopening volatile output and demand and other realistic features are included the model differs markedly from conventional discounted cash flow models empirical tests using prices of rubber and palm oil estates listed on the stock exchange of singapore offer some support for the model

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

employment policies wage formation and trade union behavior in a small open economy a model of trade union determined wages is developed which provides an explanation of underemployment based on optimizing behavior it is shown that fiscal policy will in general affect employment under perfect foresight and immediate wage flexibility future consequences of short run stabilization policies are discussed ratchet effects with respect to government expenditure and game theoretic interdependence between government and trade union behavior are emphasized if the trade union takes short run policy measures in order to increase employment as an indication of an employment stabilization rule the future behavior of the trade union changes and the result may be a decrease in long run employment

thinking about developmental states in africa during much of the 1980s and 90s a literature emerged suggesting that developmental states were impossible in africa the arguments given ranged from cultural ones about the pervasive nature of clientalism to structural ones on the dependence of african economies or the atypical levels of rent seeking in african economies this paper argues that africa has had states that were developmental in both their aspirations and economic performance it further argues that these experiences need to be examined critically for useful lessons an exercise that has been hindered by an excessive levelling of the african political and economic landscapes

prepayment and the valuation of mortgage backed securities this paper puts forward a valuation framework for mortgage backed securities rather than imposing an optimal value minimizing call condition we assume that at each point in time there exists a probability of prepaying this conditional probability depends upon the prevailing state of the economy to implement our valuation procedure we use maximum likelihood techniques to estimate a prepayment function in light of recent aggregate gnma prepayment experience by integrating this empirical prepayment function into our valuation framework we provide a complete model to value mortgagebacked securities given an optimal value minimizing call policy a mortgage should never be called when its market value is less than its call price similarly a mortgage should be called if it is worth more than its call price however mortgagors often call their loans when the prevailing refinancing rate exceeds the contract rate on the loan dunn and mcconnell 1981 in addition some mortgagors do not call their loans when the loan s contract rate exceeds the prevailing refinancing rate the purpose of this paper is to put forward a valuation framework for mortgagebacked securities consistent with these stylized facts associated with mortgage prepayments the mortgagor s prepayment decision is integral to our valuation framework however we do not impose an optimal value minimizing call condition to price these securities rather we assume that at each point in time there exists a probability of prepaying this conditional probability depending upon the prevailing state of the economy by integrating this prepayment function into our valuation framework we provide a complete model to value mortgage backed securities to implement our valuation procedures we estimate a prepayment function given recent gnma prepayment experience we follow green and shoven 1986 by using a proportional hazards model to estimate the influence of various explanatory variables or covariates on the mortgagor s prepayment decision distinct from green and shoven we explicitly model the effects of seasoning as well as investigating the influence of interest cost savings from refinancing in addition we also consider the effects of lagged refinancing rates heterogeneity

does financial reform raise or reduce saving the effect of financial liberalization on private saving is theoretically ambiguous not only because the link between interest rate levels and saving is itself ambiguous but also because financial liberalization is a multidimensional and phased process sometimes involving reversals using principal components we construct 25 year time series indices of financial liberalization for each of eight developing countries chile ghana indonesia korea malaysia mexico turkey and zimbabwe these are employed in an econometric analysis of private saving in these countries our results cannot offer support for the hypothesis that financial liberalization will increase saving on the contrary the indications are that liberalization overall and in particular those elements that relax liquidity constraints may be associated with a fall in saving

the economic consequences of regulatory taking risk on land value and development activity abstract in this paper the real options approach to land valuation is extended by i showing how land value may be adversely effected when localities threaten a regulatory taking with less than full compensation ii quantifying the resulting probability of development which may increase in an attempt to thwart the taking of development rights and iii measuring the value of lost income on an ex ante basis when an interim taking occurs we find that the economic impact of such regulation can be substantial which has implications for measuring just compensation claims as well as for general land use regulatory policy and related legal theory

the pension costs from a defined benefit to individual pension accounts do they cost more in the case of taiwan this article develops a market based liability valuation model to price individual pension costs of a defined benefit db pension plan the purpose is to compare them with the new labour pension plan individual pension accounts ipas in the case of taiwan the results based on the numerical approach show that the new ipas cost a company more than the old db plan except if the average wage growth relative to the risk free interest rate is high enough

the funding for a defined benefit db pension plan based on the fair valuation of the plan s insolvency risk this study provides a contingent claims valuation approach model to value a sponsor s claim on a salary related defined benefit db pension plan the model is further developed to numerically estimate a suggested optimal contribution cost that allows the sponsor to fairly bear the risk of the plan s insolvency the results demonstrate that the traditional actuarial valuation underestimates the cost of pension benefits and that the normal contribution cost is not enough for the sponsor to fairly charge the value of bearing the plan s insolvency

neopatrimonialism and the political economy of economic performance in africa critical reflections during the past two decades neopatrimonialism has become the convenient all purpose and ubiquitous moniker for african governance the school of thought behind this research program which the author refers to as the neopatrimonialism school has produced an impressive literature on africa its analysis informs policymakers and its language permeates media reportage on african states while neopatrimonialism has long been a focus of development studies in recent times it has assumed politically and economically exigent status the school identifies causal links between neopatrimonialism and economic performance and makes predictions drawing from what is referred to as the logic of neopatrimonialism neopatrimonialism is said to account for trade policies hyperinflation economic stagnation low investment in infrastructure urban bias andultimately the lack of economic development in africa this article examines the empirical basis of predictions and policy prescriptions it argues that while descriptive of the social practices of the states and individuals that occupy different positions within african societies the concept of neopatrimonialism has little analytical content and no predictive value with respect to economic policy and performance

the valuation of multiple claim insurance contracts this paper provides a closed form solution for the value of a multiple claim insurance contract that is subject to a deductible amount and or an upper limit on claims the solution is a time integral of european option prices the model provides three important insights first systematic risk in insurance policies is altered in the presence of deductibles and maximum indemnity levels second idiosyncratic risk affects policy valuation and the required rates of return on underwriting portfolios finally contrary to traditional actuarial intuition changes in the risk free interest rate may either increase or reduce policy values

the role of the private sector in global climate and energy governance the private sector plays an active role in implementation of mechanisms concerning the mitigation of climate change in spite of that the corporate actors play a limited direct role in international arenas when it comes to negotiating the design of climate and energy regime the climate and energy governance in the united nations system remains mostly state centric but the active participation of corporate actors in negotiation of climate and energy regimes is essential to increase the effectiveness of their governance business is not just a subject of a regulatory climate and energy imposed by the state rather business is an intrinsic part of the fabric of climate and energy governance as rule maker particularly in the many voluntary regimes however the architecture in place should guarantee that the private sector does not highjack the decisions and its positions are balanced by other non governmental actors in the process this article analyzes the role that the private sector can play in the global climate and energy governance the private sector does not only play a rule taker role in the climate change and energy regime indeed they are not passive observers as they influence through indirect means the results suggest that the private sector is able to play a key role in global climate and energy governance based on the principle of multi stakeholder participation in global decision making but the architecture should be able to balance the goods and bads of private direct influence in international regimes

an intertemporal general equilibrium model of asset prices this paper develops a continuous time general equilibrium model of a simple but complete economy and uses it to examine the behavior of asset prices in this model asset prices and their stochastic properties are determined endogenously one principal result is a partial differential equation which asset prices must satisfy the solution of this equation gives the equilibrium price of any asset in terms of the underlying real variables in the economy in this paper we develop a general equilibrium asset pricing model for use in applied research an important feature of the model is its integration of real and financial markets among other things the model endogenously determines the stochastic process followed by the equilibrium price of any financial asset and shows how this process depends on the underlying real variables the model is fully consistent with rational expectations and maximizing behavior on the part of all agents our framework is general enough to include many of the fundamental forces affecting asset markets yet it is tractable enough to be specialized easily to produce specific testable results furthermore the model can be extended in a number of straightforward ways consequently it is well suited to a wide variety of applications for example in a companion paper cox ingersoll and ross 7 we use the model to develop a theory of the term structure of interest rates many studies have been concerned with various aspects of asset pricing under uncertainty the most relevant to our work are the important papers on intertemporal asset pricing by merton 19 and lucas 16 working in a continuous time framework merton derives a relationship among the equilibrium expected rates of return on assets he shows that when investment opportunities are changing randomly over time this relationship will include effects which have no analogue in a static one period model lucas considers an economy with homogeneous individuals and a single consumption good which is produced by a number of processes the random output of these processes is exogenously determined and perishable assets are defined as claims to all or a part of the output of a process and the equilibrium determines the asset prices our theory draws on some elements of both of these papers like merton we formulate our model in continuous time and make full use of the analytical tractability that this affords the economic structure of our model is somewhat similar to that of lucas however we include both endogenous production and

economic statism private capital and the dilemmas of accumulation in nigeria abstract nigeria s persistent economic stagnation is attributable to a mutually reinforcing political dynamic comprising a weak developmental state and pervasive rent seeking within the private sector this syndrome was a source of nigeria s initial economic crisis in the early 1980s and it continues to impede structural adjustment initiatives economic policy reform has been compromised by state strategies designed to preserve the gains of elite rentier groups while private entrepreneurs have responded to policy change by seeking new rental havens in finance and other nontradable sectors in consequence structural adjustment has failed to elicit a supply response or to generate significant political support for a more propitious enabling environment nigeria s experience reinforces the perception that changes in nominal incentives must be accompanied by broader institutional transformation if economic reform is to be effective

fair trade organic coffee production in nicaragua sustainable development or a poverty trap abstract this article assesses the impact of fair trade organic coffee production on the well being of small scale farmers in nicaragua studying the results of organic management is crucial for evaluating the advantages of fair trade because approximately half of all fair trade coffee is also organically certified a wide range of farmers representatives of cooperatives and export companies in nicaragua were interviewed during seven months of field work between 2005 and 2008 fair trade organic production raises farmer income when low intensity organic farming is an alternative to low intensity conventional farming however low intensity farming produces very little coffee in the case of the most marginalized farmers keeping these farmers in poverty with higher intensities of management the economic advantages of fair trade organic production largely depend on prices in the mainstream market

job additionality and deadweight spending in perfectly competitive industries the case for optimal employment subsidies abstract this paper links the old literature on employment subsidies with the current theories of contract and regulation one important source of inefficiency of employment subsidies is non additional employment and deadweight spending which occur when private firms receive a subsidy for jobs that would have been created without the subsidy we identify the asymmetry of information between the government and the private firm as the source of these problems when the government proposes optimal incentive contracts to promote employment we show that all employment creations are additional and that the deadweight spending is equal to the information rent which may be null when firms types are discrete

setting international standards technological rationality or primacy of power standards have become one of the most important nontariff barriers to trade especially national product standards that specify design or performance characteristics of manufactured goods divergent national standards often inhibit trade whereas regional and international standards increasingly serve as instruments of trade liberalization consequently the setting of international standards seemingly technical and apolitical is rapidly becoming an issue of economic and political salience but who sets international standards who wins who loses this article offers a fresh analytical approach to the study of international standards which the authors call the institutional complementarities approach it builds on insights from realism and the battle of the sexes coordination game but emphasizes complementarities of historically conditioned standardization systems at the national level with the institutional structure of standardization at the international level it posits that after controlling for other factors that influence involvement in international standardization differences in institutional complementarities play a critical though largely accidental role in placing firms from different countries or regions in a first or second mover position when standardization becomes global the authors illustrate the insightfulness of this approach through statistical analyses of the first scientific set of data on standards use and standardization collected by the authors through an international online survey

can africa s saving collapse be reversed private saving in sub saharan africa declined from more than 11 percent of disposable income in the 1970s to less than 8 percent in the 1980s and only partially recovered to less than 9 percent in the 1990s this article analyzes the determinants of private saving in sub saharan africa seeking to explain the region s dismal performance and identify policies that could help to reverse the region s decline in saving the analysis shows that in sub saharan africa causality runs from growth to investment and perhaps to private saving whereas a rise m the saving rate granger causes an increase in investment the empirical analysis of private saving in sub saharan africa and other regions over 1970 95 suggests that private saving in africa can be explained by standard behavioral models according to these models private saving in africa lags behind that in other regions most notably the high performing asian economies because of the region s lower per capita income high young age dependency ratio and high dependence on aid the combined effects of these factors substantially outweigh africa s advantage from its lower public saving and higher government consumption finally analysis of the experiences of kenya zimbabwe and botswana provides further insight into the saving process in sub saharan africa

shifting fortunes the political economy of financial liberalization in nigeria abstract on the recommendation of the world bank nigeria began to liberalize its financial sector in 1986 contrary to the prediction of financial repression theory savings and investment decline in the wake of banking deregulation by 1995 the nigerian financial system was in a state of collapse the paper locates the main failure of nigeria s financial deregulation in the political and institutional setting of reform the institutional mechanisms needed to supervise and regulate banking under the new system were absent while private sector banking capacities were weak moreover financial liberalization was quickly captured by a clientalist state as a means of reallocating rents to strategic constituents an additional precipitating factor was macroeconomic instability the paper points to the importance of incorporating political and institutional variables into any model of financial reform or transformation

price regulation in property liability insurance a contingent claims approach a discrete time option pricing model is used to derive the fair rate of return for the property liability insurance firm the rationale for the use of this model is that the financial claims of shareholders policyholders and tax authorities can be modeled as european options written on the income generated by the insurer s asset portfolio this portfolio consists mostly of traded financial assets and is therefore relatively easy to value by setting the value of the shareholders option equal to the initial surplus an implicit solution for the fair insurance price may be derived unlike previous insurance regulatory models this approach addresses the ruin probability of the insurer as well as nonlinear tax effects

trade taxes and tribute market liberalizations and the new importers in west africa this paper examines dynamics of state business relations in the era of trade liberalization in senegal and cote d ivoire it challenges the orthodox view that replacing nontariff barriers such as licenses and quotas with tariffs depoliticizes trade reduces commercial rent seeking activities and creates a level playing field which will encourage underground activities to surface allowing the state to capture more revenue the paper illustrates that liberalization failed to suppress commercial rent seeking helped to encourage the ascendancy of new politically connected merchant groups the mourides in senegal and the lebanese in cote d ivoire and to some degree increased tax evasion leading to the further erosion of state revenue flows the cases show that trade centered rentierism is rooted in structural features of these west african economies

state failure and success in uganda and zimbabwe the logic of political decay and reconstruction in africa abstract this article uses the post colonial experiences of uganda and zimbabwe to demonstrate both the strengths and weaknesses of competing theoretical explanations for problems of state and economic failure in africa it shows that they all explain some but not all of these processes it demonstrates the crucial role of contextual circumstances and ongoing structural changes in each country in determining the success or failure of policy regimes and of current prospects for a long term transformation to liberal democratic capitalism

in the name of conservation cafe practices and fair trade in mexico consumers concerns for the environment have led to the creation of niche markets quality certifications and labelling systems built by activists and ngos these systems were adopted by agribusiness such firms try to capture consumers and react to opinion campaigns whilst appropriating the conservation or fair discourse this leads to the rise of new forms of third party certifications of food production based on private standards and hence to new forms of contract relations between producers and buyers the nature of these relationships is not always evident in these new labels or in the discourse built to justify them this is particularly so in the case of goods produced in the south to be traded and sold in the north as the case of starbucks illustrates by the end of the 1990s starbucks operating through an ngo called conservation international ci arrived at the region of el triunfo in chiapas and contacted the producers cooperatives that were trying to find a market for their product ci promoted starbucks standards to raise the coffee quality and won the control over the production system meanwhile the producers forced to sell their coffee through the largest trade company amsa against whom the cooperatives were created lost the control over their own organization when some cooperatives refused the deal they suffered divisions but could survive thanks the fair trade ft network in chiapas

economic crisis and policy choice the politics of adjustment in the third world the acute economic pressures of the 1980s have forced virtually all of latin america and africa and some countries in asia into painful austerity programs and difficult economic reforms scholars have intensively analyzed the economics of this situation but they have given much less attention to the political forces involved in this volume a number of eminent contributors analyze the politics of adjustment in thirteen countries and nineteen governments drawing comparisons not only across the full set of cases but also within clusters selected to clarify specific issues why do some governments respond promptly to signs of economic trouble while others muddle indecisively for years why do some confine their response to temporary macroeconomic measures while others adopt broader even sweeping programs of reform what leads some countries to experiment with heterodox approaches while most however reluctantly pursue orthodox courses why confronted with intense political protest have some governments persisted while others have altered or abandoned course the answers to these questions are political not economic and they are examined here by thomas m callaghy stephan haggard miles kahler robert r kauman joan m nelson and barbara stallings

option pricing when the underlying asset earns a below equilibrium rate of return a note in their classic paper black and scholes 2 present two derivations of the european call option pricing formula the first which we will refer to as the replication derivation relies on the fact that the returns from the option can be replicated by holding a continuously revised position in the underlying asset and bonds this implies that if an option is not priced according to the blackscholes formula there is a sure profit to be made by some combination of either short or long sales of the option and underlying asset this argument is seemingly independent of considerations relating to capital market equilibrium the second derivation which we will call the equilibrium derivation evolves from the requirement that the option earn an expected rate of return commensurate with the risk involved in holding the option as an asset this note considers the pricing of a call option on an asset which earns an expected rate of return lower than that necessary to induce investors to hold it we show in this case that even if the replication strategy is feasible it is inefficient a consequence of this is that the correct option pricing formula is different than the black scholes formula unlike the black scholes formula our formula requires as an input the difference between the expected rate of return on the underlying asset and that expected rate of return which would be required to induce holding of the asset other papers have made a similar point constantinides 3 and cox et al 4 have argued that in equilibrium the prices of traded contingent claims must satisfy a partial differential equation which is identical to the black scholes partial differential equation only when the underlying asset pays no dividends and earns a rate of return sufficient to induce holding of the asset more recently ingersoll 5 has noted that commodities often pay a nonpecuniary service yield the value of which must be taken into account in deriving the option price none of these authors however explain why the black scholes formula is sometimes inappropriate the purpose of this note is to demonstrate why the black scholes formula needs modification even if replication is feasible we provide an intuitive derivation of the correct formula and discuss why divergences of the equilibrium price from the black scholes formula do not result in arbitrage opportunities

justice and corporate governance new insights from rawlsian social contract and sen s capabilities approach by considering what we identify as a problem inherent in the nature of the firm the risk of abuse of authority we propound the conception of a social contract theory of the firm which is truly rawlsian in its inspiration hence we link the social contract theory of the firm justice at firm s level with the general theory of justice justice at society s level through this path we enter the debate about whether firms can be part of rawlsian theory of justice showing that corporate governance principles enter the basic structure finally we concur with sen s aim to broaden the realm of social justice beyond what he calls the transcendental institutional perfectionism of rawls theory we maintain the contractarian approach to justice but introduce sen s capability concept as an element of the constitutional and post constitutional contract model of institutions with special reference to corporate governance accordingly rights over primary goods and capabilities are constitutionally granted by the basic institutions of society but many capabilities have to be turned into the functionings of many stakeholders through the operation of firms understood as post constitutional institutional domains the constitutional contract on the distribution of primary goods and capabilities should then shape the principles of corporate governance so that at post constitutional level anyone may achieve her his functionings in the corporate domain by exercising such capabilities in the absence of such a condition post constitutional contracts would distort the process that descends from constitutional rights and capabilities toward social outcomes

greener than thou the political economy of fish ecolabeling and its local manifestations in south africa summary developing country governments and industries have been reluctant to support ecolabels fearing their potentially protectionist effects this reluctance has been countered by international organizations such as fao and ecolabel initiatives with assurances of transparency non discrimination and technical assistance the analysis of the marine stewardship council msc label shows that developing country fisheries and small scale ones in particular have been marginalized furthermore the msc certification of the hake industry in south africa illustrates that ecolabeling is sought in the context of competitive pressures and specific political economies not simply on the basis of value free science and systemic management this article concludes that developing country producers need dedicated systems of standards and verification procedures not only special flexibilities

the long gestation and brief triumph of import substituting industrialization abstract as a set of ideas and practices import substituting industrialization became the dominant development strategy after wwii this article examines the highly diverse origins of what became a kind of consensus one that was most explicitly articulated through the ecla cepal school inspired by raul prebisch explicit attention is paid to the congruence of economic strategy and political formations as the washington consensus displaces the ecla consensus one must ask how those developing countries that have not yet industrialized may do so in the absence of high levels of protection

natural rate theory and oecd unemployment our mission is to examine from the perspective of the intertemporal equilibrium models of endogenous natural rate theory the huge swings in unemployment among the oecd countries in recent times we first look at the huge rise in jobless rates between the early 1970s and the early 1990s throughout the oecd in the united states a rise from about 51 per cent to 7 per cent canada from about 6 to 10 japan from 11 to 21 italy from 31 to about 71 the united kingdom from about 33 to about 9 france from about 23 to about 10 and west germany from 4 to 5 1 we then look at the developing recovery of the general unemployment rate most notably in the united kingdom and the united states amid a generally continued elevation of jobless rates among the less educated we see the mid 1990s surge of unemployment in germany france and italy as another story there are other older perspectives of course keynesians interpreted events in the 1970s and in the 1980s as signs of effective demand and effective supply shocks feldstein 1986 fitoussi and phelps 1986 malinvaud 1985 pissarides 1990 but if the natural rate was unchanged they had to explain why the subsequent disinflation was short lived why inflation even turned up in the late 1980s or early 1990s despite high unemployment lacking an endogenous natural rate keynesians could explain the durability of the slump only by positing either a permanent expectational disequilibrium or hysteresis i e non ergodicity as in phelps 1972 or a degree of persistence so great as to be empirically indistinguishable from hysteresis as the slump ran on the expectational possibility wore thin so they were down to hysteresis hicks 1974 launched a break with the keynesian monetarist perspective in the 1980s with his appeal to real frictions or rigidities if wage setting mechanisms make the real wage v sticky in the sense of lerner hence predetermined in the short run the unemployment rate u will rise in the short run in response to a shock contracting the demand wage i e a downward shift of the labour demand schedule in the 1 u v plane bruno and sachs 1985 another landmark was a bargaining model with the property that its natural unemployment rate rose in response to several much discussed shocks such as higher taxes and an energy shock reducing labour productivity layard and

converting unemployment benefits into employment subsidies although unemployment benefit systems vary widely among oecd countries they all tend to increase the unemployment whose effects they are meant to mitigate the reasons are well known they push up wages by improving workers fall back positions in wage negotiations and they discourage job search for when unemployed people find jobs their unemployment benefits are withdrawn and they have to pay taxes thereby many unemployment benefit systems not only generate inefficiencies and inequities in their own right but also augment common labor market failures particularly those highlighted by the efficiency wage insider outsider and union theories these market failures have serious dynamic consequences for the longer people are unemployed the more their skills erode and the more discouraged and stigmatized they become in the job search process when unemployment benefit systems amplify these dynamic effects they put the long term unemployed at a greater disadvantage in competing for jobs this disadvantage is augmented by market failures in the provision of training the long term unemployed often have had relatively little opportunity to acquire firmspecific skills and thus in imperfectly com

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

investment opportunities and corporate demand for lines of credit abstract the behavior of a risk neutral corporation in selection of a line of credit is modeled in a new framework where demand for credit lines by a firm arises from the stochastic arrival in continuous time of short lived opportunities to capture investment projects the firm needs speed and secrecy to capture projects before competitors the firm chooses a credit line that balances its up front commitment cost against the expected extra cost of borrowing in the spot market upon exhaustion of its credit line the firm s demanded credit line depends upon both relative pricing within the contract and the nature of the firm s growth opportunities interestingly while credit line demand is positively related to business growth prospects it is potentially negatively related to uncertainty in those prospects

the determination of fair profits for the property liability insurance firm although the property liability insurance industry has been subject to price regulation for many years surprisingly little research has been directed at producing valuation models of a property liability insurance firm although property liability price regulation has historically involved setting minimum prices to reduce the risk of insolvency some commissions have begun to move toward setting prices more in the spirit of public utility regulation 1 if in an effort to promote efficiency the working objective of such regulation requires the determination of prices that would prevail under competition then regulation must be founded on some model of the costs of regulated firms under competition with free entry prices just cover all economic costs including the opportunity costs of investment by suppliers of capital and a valuation model is required to explain how the market value of the firm and therefore the cost of capital reacts to changes in the prices it charges our objective in this chapter is to provide such a framework

addressing the global sustainability challenge the potential and pitfalls of private governance from the perspective of human capabilities contemporary global politics is characterized by an increasing trend toward experimental forms of governance with an emphasis on private governance a plurality of private standards codes of conduct and quality assurance schemes currently developed particularly though not exclusively by tncs replace traditional intergovernmental regimes in addressing profound global environmental and socio economic challenges ranging from forest deforestation fisheries depletion climate change to labor and human rights concerns while this trend has produced a heated debate in science and politics surprisingly little attention has been paid on the effects of private governance on questions of distribution and justice this is highly problematic at the beginning of the twenty first century global inequalities are greater than ever before while rapid economic social political and environmental changes threaten to further derail sustainable development and humanitarian objectives if private governance creates or intensifies some of the pressing global inequalities e g food security and alleviates others e g environmental degradation from a business ethics perspective we need to know which aspects need to be strengthened and where appropriate interventions are necessary and desirable this paper proposes a framework to examine and classify the distributive outcomes of private governance institutions through the lenses of one particular approach to distributive justice the capability approach empirically it focuses on agrifood one area where the controversy regarding the distributive concerns of private governance are particularly pronounced

vouchers as a way to finance unemployment benefits abstract instead of financing unemployment benefits through payroll taxes we propose to finance them through the sale of vouchers to firms unemployment benefits act as employment subsidies and dismissal penalties aggregate unemployment is lower and may remain constant and displacement effects are smaller than in alternative proposals

the portable guarantee to exchange back an old defined benefit for a new defined contribution dc pension plan as a defined contribution dc pension plan is introduced to replace a defined benefit db pension plan the portability benefit from a dc pension plan costs the employees to bear the investment risk from managing the pension fund to protect the retirement income and maintain the portability benefit a guarantee to exchange back the old defined benefit is supposed to be demanded for the new dc plan s participants in the guarantee market in light of such a demand this article applies a claim terminating insurance pricing model to offer a contingent claims pricing model for a portable pension guarantee using the new labor pension plan of taiwan as an illustration a guaranteed dc pension will carry an extra cost of almost 50 up to over 100 of the plan s contributions over the participant s work life given the current mandatory minimum requirement of a contribution rate of 6

false promise or false premise the experience of food and input market reform in eastern and southern africa abstract the literature on the effects of agricultural market reform in africa is sharply divided and inconsistent this article attempts to reconcile opposing viewpoints on the effects of food and input market policy reform in eastern and southern africa drawing from studies of ethiopia kenya malawi zambia and zimbabwe we argue that a major source of the controversy stems from assumptions that countries have actually moved to a liberalized market environment we find that many of the most fundamental elements of the reform programs either remain unimplemented were reversed within several years or were implemented in such a way as to negate private sector investment incentives a framework is developed for explaining why some countries have been able to liberalize their food and fertilizer markets while others have not these findings have implications for how donor assistance and policy oriented research can more constructively contribute to an improved policy environment

the equilibrium valuation of risky discrete cash flows in continuous time this paper values a contingent claim to discrete stochastic cash flows generated by a poisson arrival process with a randomly varying intensity parameter in the most general case both the size and the arrival intensity of cash flows may correlate wih state variables in a continuous time economy assuming the conditions of an intertemporal capital aset pricing model solutions for the value of the contingent claim can be found using various techniques the paper suggests immediate applications to the valuation of insurance contracts the decision to build a firm with unknown future investment opportunities and the pricing of mortgage backed securities

the failed africanization of commerce and industry in kenya abstract in the 1970s a number of authors challenged the dependency perspective with respect to kenya they maintained that a viable domestic capital class nurtured by state sponsorship had emerged since independence this article questions the revisionist interpretation of state business relations in kenya kenya does possess a dynamic entrepreneurial sector led mainly by kenyan indians government efforts to aid african entrepreneurs or to establish a vigorous state capitalist sector have been ineffective this is evident from surveys of the state enterprise sector private manufacturing and commerce revisionist authors tended to overestimate the capacity of kenyan state agencies to implement policy goals and they neglected the political context of africanization as an instrument of ethnic patronage for state leaders

why has africa grown slowly we distinguish between policy and destiny explanations of africa s slow growth during the past three decades policies were poor high export taxation and inefficient public service delivery and destiny was adverse landlocked tropical locations and terms of trade deterioration during the 1990s africa s economic policies improved although with considerable variation both between countries and between policies trade and exchange rate policies improved much more than service delivery thus the differing explanations of past slow growth imply different predictions for growth in the coming decade we argue that poor public economic services are likely to be the binding constraint

party system competition and private sector development in africa abstractdemocratic transitions by many african countries have generated much analysis of the organisational features of political parties or their role in voter mobilisation during elections yet scholars have largely overlooked how parties negotiate economic policymaking or interact with the private sector in countries that are incipient democracies and emerging markets this article argues that the stability or fragmentation of the party system affects patterns of private sector development and shapes linkages between the state business and labour it compares mozambique and zambia to demonstrate how variations in party system characteristics influence the relationship between economic and political interests

public finance solutions to the european unemployment problem public finance solutions a tax shift away from low paid labour may fight unemployment unemployment in europe is heavily concentrated among low skilled workers it has therefore been suggested that structural unemployment could be reduced by shifting the tax burden away from low skilled labour and away from the production of consumer services which are intensive in the use of such labour this paper finds that a tax shift away from low paid labour may raise aggregate employment and welfare but only if wage formation is sufficiently responsive to changing tax incentives the analysis also suggests that non negligible employment and welfare gains could be reaped by offering tax concessions or subsidies to those parts of the consumer service sector which compete most directly with low productivity home production and with underground economic activity peter birch sorensen

in the market but not of it fair trade coffee and forest stewardship council certification as market based social change summary this paper discusses two well known market based social change initiatives fair trade coffee and forest stewardship council certification which harness market forces to pursue social and environmental objectives a serious challenge for both is to operate in the conventional market without undermining their original objectives a global commodity chain analysis approach is combined with insights from economic sociology embeddedness theory to explore the social cultural and organizational factors shaping the initiatives governance structures both initiatives are seen to move along opposite organizational trajectories but face similar pressures from conventional market logics practices and dominant actors a preliminary framework is proposed for comparative assessment focusing on distribution of benefits how conventional market institutions may be questioned and how internal governance manages diverse stakeholder interests and influence

on tax efforts and colonial heritage in africa abstract one commonly observed phenomena about taxation in africa are regional differences and the fact that southern african countries have higher levels of shares of taxation in gdp this article argues that the major source of differences in tax effort is the colonial histories of various countries using standard measures of tax effort in a panel data framework and dividing colonial africa along forms of incorporation into the colonial system it shows that african countries and others with similar colonial histories have higher levels of tax effort however the difference disappears when we control for the colonial factor these results hold under different model specifications

africa s overgrown state reconsidered bureaucracy and economic growth how close is the link between outsized states and economic stagnation in africa this article shows that african public bureaucracies are not as large as often portrayed that they have been getting smaller and that reducing their size alone has not bee n a prescription for economic revival to the contrary the countries with higher levels of public employment such as botswana and mauritius are apt to have the better economic records these findings suggest that a superabundance of public personnel is not in itself a major impediment to growth in africa too much attention has been paid to quantitative or first generation bureaucratic problems and too little attention has been given the second generation issues of bureaucratic quality