does productive capital affect the order of resource exploitation abstract the purpose of this paper is to show that in a general equilibrium framework it is not always optimal to exploit resources in strict sequence beginning with the lowest cost deposit even if it is possible to accumulate productive capital indeed if there is an exogenous upper bound on the flow of the substitute it is always optimal to consume it simultaneously with a lower cost stock moreover it may be optimal to consume the high cost substitute before using a lower cost resource

location and the multinational enterprise john dunning s thoughts on receiving the journal of international business studies 2008 decade award a retrospective by john h dunning on location and the mne written in the form of responses to questions posed by rajneesh narula in an interview recorded at the university of reading which was shown at the jibs decade award session at the aib annual meetings in milan june 2008

inflation and welfare in a monetary economy it is in everyone s private interest to try to get someone else to hold non interest bearing cash and reserves but someone has to hold it all so these efforts must simply cancel out all of us spend several hours per year in this effort and employ thousands of talented and highly trained people to help us these person hours are simply thrown away wasted on a task that should not have to be performed at all

financial innovation and the transactions demand for cash we document cash management patterns for households that are at odds with the predictions of deterministic inventory models that abstract from precautionary motives we extend the baumol tobin cash inventory model to a dynamic environment that allows for the possibility of withdrawing cash at random times at a low cost this modification introduces a precautionary motive for holding cash and naturally captures developments in withdrawal technology such as the increasing diffusion of bank branches and atm terminals we characterize the solution of the model which qualitatively reproduces several empirical patterns we estimate the structural parameters using micro data and show that quantitatively the model captures important economic patterns the estimates are used to quantify the expenditure and interest rate elasticity of money demand the impact of financial innovation on money demand the welfare cost of inflation and the benefit of atm ownership

human capital and fdi inflow an assessment of the african case summary this study assesses the role of human capital hk on fdi inflows to sub saharan africa it uses panel data for the period 1980 2012 to asses if changing skill needs influence fdi inflows several measures of hk are used to assess whether the quality of labor explains fdi flows over the study period various versions of an fdi model were estimated and the results show that all measures of hk have a significant influence on fdi as are the traditional variables there is no evidence of the increasing importance of hk on fdi over time probably reflecting the type of fdi flowing into ssa

human capital and fdi inflows to developing countries new empirical evidence abstract despite the dramatic increase in total foreign direct investment fdi flows to developing countries in the last few years the bulk of the inflows has been directed to only a limited number of countries it has been argued that developing countries might enhance their attractiveness as locations for fdi by pursuing policies that raise the level of local skills and build up human resource capabilities nevertheless the empirical evidence in the literature in support of this recommendation for a large sample of developing countries is scant this paper evaluates this argument in the light of the evolution in the structural characteristics of fdi and empirically tests the hypothesis that the level of human capital in host countries may affect the geographical distribution of fdi the empirical findings are a human capital is a statistically significant determinant of fdi inflows b human capital is one of the most important determinants and c its importance has become increasingly greater through time

foreign direct investment and economic growth an increasingly endogenous relationship summary this paper investigates whether foreign direct investment fdi affects economic growth based on a panel of data for 84 countries over the period 1970 99 both single equation and simultaneous equation system techniques are applied to examine this relationship a significant endogenous relationship between fdi and economic growth is identified from the mid 1980s onwards fdi not only directly promotes economic growth by itself but also indirectly does so via its interaction terms the interaction of fdi with human capital exerts a strong positive effect on economic growth in developing countries while that of fdi with the technology gap has a significant negative impact

disagreement and learning dynamic patterns of trade we study volume dynamics when there are disagreements among investors for that purpose we develop a dynamic model in which differences in the interpretation of public information lead to trade we obtain a simple linear equilibrium in closed form in which risk averse agents take into account future trading opportunities when solving for their optimal portfolio allocation using this framework we then study what restrictions on the disagreement process are needed to generate empirically observed patterns in volume and prices we show that having infrequent but major disagreements leads to autocorrelation in volume and correlation between volume and absolute price changes when agents disagree on past news but agree on the interpretation of current news there is learning and the convergence of agents opinions leads to trade

extraction capacity and the optimal order of extraction the least cost first extraction rule for deposits with different extraction costs previously has been shown to be invalid in general equilibrium this paper demonstrates that this rule also does not hold in partial equilibrium when extraction capacity is limited necessary and sufficient conditions for several surprising extraction orders are presented if extraction from a high cost resource is constrained it may be optimal to begin extraction from a high cost deposit or backstop strictly before extracting from a lower cost deposit if extraction from a low cost resource is limited it may be optimal to exhaust a high cost deposit strictly before the low cost deposit is exhausted or to abandon extraction temporarily from a high cost deposit and then to exhaust it later the analysis demonstrates how extraction constraints affect the order of extraction and shows that certain cost reversals are caused by limited extraction capacity rather than by the general equilibrium definition of extraction costs

on the optimal order of natural resource use when the capacity of the inexhaustible substitute is limited consider a general equilibrium framework where the marginal cost of extraction from several deposits of an exhaustible resource is constant in terms of an inexhaustible perfect substitute and differs between deposits the instantaneous rate of production form the inexhaustible resource is subject to a capacity constraint

government policies market imperfections and foreign direct investment the internalization eclectic theory of foreign direct investment includes the important insight that government policies create market imperfections which make foreign direct investment an economically rational strategic alternative for firms this paper reexamines the effects of government policies on market imperfections and foreign direct investment fdi it broadens and refines the analysis of the impact of government policies by developing the following arguments 1 there is a wide range of government policies that affect firms fdi decisions via their effects on market imperfections 2 there are numerous dimensions of variability in government policies that need to be identified in order to understand fully the effects of government policies on market imperfections and hence fdi flows 3 some of the effects of government policies on market imperfections and fdi are the opposite of those previously noted in the fdi literature 4 the effects of government policies vary across the several individual components of fdi flows the paper thus examines the following variables and relationships more extensively and precisely than has the previous literature government policy variables as causal factors affecting fdi market imperfection variables as intervening factors in the causal connections between government policies and fdi and the multiple indicators of the various dimensions of fdi as dependent variables

to what extent can foreign direct investment help achieve international development goals for fdi to help alleviate absolute poverty and stimulate economic growth in developing countries two conditions have to be met first developing countries need to be attractive to foreign investors second the host country environment in which foreign investors operate must be conducive to favourable fdi effects with regard to overall investment economic spillovers and income growth this paper argues that it is more difficult to benefit from fdi than to attract fdi the widely perceived concentration of fdi in few developing countries tends to obscure that in relative terms various small and poor countries are fairly attractive to fdi yet the mobilisation of domestic resources remains by far more important than attracting fdi for financing investment and stimulating economic growth furthermore high inward fdi is no guarantee for poverty alleviation and positive growth effects in particular the empirical evidence suggests that host country conditions typically prevailing in poor countries including weak institutions and an insufficient endowment of complementary factors of production constrain the growth enhancing and poverty alleviating effects of fdi the crux is that creating an environment in which fdi may deliver social returns will take considerable time exactly where development needs are most pressing

beyond entry mode choice explaining the conversion of joint ventures into wholly owned subsidiaries in the people s republic of china while there is a vast amount of research on firms choice of ownership form when entering a foreign market little attention has been paid to changes in ownership forms of operation abroad after initial entry using transaction cost economics and institutional theory we identify a number of factors that may help to explain the likelihood of foreign firms converting their joint venture with a local firm into a wholly owned subsidiary we formulate a number of hypotheses and test them against data collected through a questionnaire survey of managers representing foreign subsidiaries in the people s republic of china prc that are run either as international joint ventures ijvs or as wholly owned foreign subsidiaries wfoes that have recently been converted from ijvs into a wfoe the paper contributes to research by showing that transaction cost based thinking is useful for explaining not only the initial choice of ownership mode when entering a new market but also the potential subsequent changes of this ownership mode by combining transaction cost theory with arguments from institutional theory the study identifies a number of factors that contribute to explaining post entry changes of foreign firms ownership forms in the prc and provides empirical evidence of this phenomenon

bidding for firms recently toyota sought a plant location in the united states the 800 million plant will employ 3000 workers and numerous states offered toyota generous investment incentives hoping this would induce toyota to select their state the commonwealth of kentucky won this competition but the price was high the present value of the payments exceeds 125 million the payment of investment incentives for the toyota plant is not unique in 1976 pennsylvania paid 75 million to attract a volkswagen plan nissan honda and mazda received generous investment incentives when locating plants in the united states and this bidding is not limited to states to attract the headquarters of the presbyterian church usa with its 1300 jobs and 38 million annual payroll civic leaders in louisville kentucky offered the church a warehouse and 6 2 million for renovation of the structure bidding the church away from kansas city missouri in this paper we contend that this competition may result from the average cost pricing of publicly provided goods and services 2 when the marginal cost of providing a firm and its workers with public services is less than the tax revenue they generate a government may offer the firm subsidies that reduce the distortions the average cost pricing of the public service creates thus this competition for industry is not a zero sum game where the subsidies are only transfers from the government to the firm rather these subsidies may facilitate the efficient location of industry

the alberta dilemma optimal sharing of a water resource by an agricultural and an oil sector we fully characterize the optimal time paths of production and water usage by an agricultural and an oil sector that share a limited water resource we show that for any given water stock if the oil stock is sufficiently large it will become optimal to have a phase during which the agricultural sector is inactive followed by a phase during which both sectors are active again the agricultural sector will always be active in the end as the oil stock is depleted if agriculture is not constrained by the given natural inflow of water then oil extraction will always end with a phase during which oil production follows a pure hotelling path otherwise oil production never follows a pure hotelling path because its full marginal cost must always reflect not only the imputed rent on the finite oil stock but also the positive opportunity cost of water usage the case of oil and agriculture sharing a water resource is but one example our analysis provides a framework to generalize the hotelling rule to other cases where the full marginal opportunity cost of extracting a nonrenewable resource depends on the endogenous activity of some other sector of the economy

competing land uses and fossil fuel and optimal energy conversion rates during the transition toward a green economy under a pollution stock constraint abstract we study the transition to a carbon free economy in a model with a polluting non renewable resource and a clean renewable resource transforming primary energy into ready to use energy services is costly and more efficient energy transformation rates are more costly to achieve renewable energy competes with food production for land and the food productivity of land can be improved at some cost to avoid catastrophic climate damages the pollution stock is mandated to stay below a given cap when the economy is not constrained by the cap the efficiency of energy transformation increases steadily until the transition toward the ultimate green economy when renewable energy is exploited its land use rises at the expense of food production food productivity increases together with the land rent but food production drops the food and energy prices increase and renewables substitute for non renewable energy during the constrained phase the economy follows a constant path of prices quantities efficiency rates food productivity and land rent a phenomenon we call the ceiling efficiency paradox

the location of overseas production and production for export by u s multinational firms abstract the location of overseas manufacturing production is influenced by common factors that operate in all industries notably proximity to the united states and to other markets within industries opposites attract low wage and low capital intensity parents choose high wage countries production for export is attracted by large internal markets in host countries economies of scale in production presumably make large markets economical as export bases another factor is high trade propensities of host countries u s firms tend to export from high wage countries but labor cost is not in general a major influence on the location of export production

finance function matters not size abstract it s fun to pass judgment on waste size usefulness complexity and excessive compensation but as economists we have an analytical structure for thinking about these questions i don t understand it doesn t mean it s bad or regulation will improve it that attitude pervades policy analysis in general and financial regulation in particular and economists do the world a disservice if we echo it i will not offer a competing black box to explain the size of the finance industry i don t claim to estimate the socially optimal size of finance at say 8 267 percent of gdp it s just the wrong question hayek and the failure of planning should teach us a little modesty pronouncing on socially optimal industry size is a waste of time is the finance industry functioning well are there identifiable market or government distortions will proposed regulations help or make matters worse these are useful questions

investment climate and fdi in developing countries firm level evidence this paper uses firm level data across 77 developing countries to show that constraints related to investment climate hamper foreign direct investment fdi the main results show that physical infrastructure problems financing constraints and institutional problems discourage fdi these results are robust to an alternative definition of fdi introduction of additional explanatory variables and some breakdown analyses different sectors of activity and comparison between sub saharan africa and other developing countries the results also highlight that exporter foreign firms are more constrained in their activity by physical infrastructure hurdles and the lack of skilled workers compared to firms supplying the domestic market

why are companies offshoring innovation the emerging global race for talent this paper empirically studies determinants of decision by companies to offshore innovation activities it uses survey data from the international offshoring research network project to estimate the impact of managerial intentionality past experience and environmental factors on the probability of offshoring innovation projects the results show that the emerging shortage of highly skilled science and engineering talent in the us and more generally the need to access qualified personnel are important explanatory factors for offshoring innovation decisions moreover contrary to drivers of many other functions labor arbitrage is less important than other forms of cost savings the paper concludes with a discussion of the changing dynamics underlying offshoring of innovation activities suggesting that companies are entering a global race for talent

beyond natural resources horizontal and vertical fdi diversification in sub saharan africa this article uses firm level data to analyse the drivers of foreign direct investment fdi to the manufacturing and services sectors of 30 sub saharan african countries it shows that improving the investment climate helps to attract aggregate fdi by analysing disaggregate fdi data the article establishes that there is considerable contrast in behaviour between vertical fdi foreign firms producing for export and horizontal fdi foreign firms producing for local markets in particular the latter firms are attracted to areas with higher trade regulations highlighting their interest in protected markets furthermore horizontal fdi is more affected by financing and human capital constraints and less affected by infrastructure and institutional constraints than vertical fdi is

intertemporal depletion of resource sites by spatially distributed users mineral deposits and other exhaustible resources are scattered around the globe as are their users yet the theory for analyzing depletion of such resources assumes that all resource sites and all users are located in the same place when applying the theory therefore one is forced to disregard what often seems to be an important real world consideration our purpose here is to generalize harold hotelling s 1931 theory of exhaustible resources to accommodate situations in which resource sites and their users are spatially distributed our analysis has many applications it can be applied to a conventional exhaustible resource like oil alternatively it can be applied to an unconventional exhaustible resource like scarce landfill space shipments of solid waste to landfills in other states or countries have become a prominent public policy issue eduardo ley et al 2000 finally our analysis can be applied in situations where the space reflects not geographical location but characteristics of the resource e g the sulfur content hardness and so forth of coal which users find distinctive 2 only two theoretical papers in resource economics have introduced spatial considerations 3 jean jacques laffont and michel moreaux 1986 studied the extraction of resources from sites located along a line segment with all users at one end charles kolstad 1994 was the first to consider spatially distributed users in his formulation consumers are distributed uniformly along a line segment with resource sites at each end kolstad s approach although innovative requires that the set of users be parti

specialization and non renewable resources ricardo meets ricardo abstract the one demand hotelling model fails to explain the observed specialization of non renewable resources we develop a model with multiple demands and resources to show that specialization of resources according to demand is driven by ricardian comparative advantage while the order of resource use over time is determined by ricardian absolute advantage an abundant resource with absolute advantage in all demands must be initially employed in all demands when each resource has an absolute advantage in some demand no resource may be used exclusively the two by two model is characterized resource and demand specific taxes are shown to have significant substitution effects

firm ownership preferences and host government restrictions an integrated approach two approaches may explain how multinational enterprises mnes select ownership structures for subsidiaries the first argues that mnes prefer structures that minimize that transaction costs of doing business abroad the second argues that ownership structures are determined by negotiations with host governments whose outcomes depend on the bargaining power of the firm this paper presents a framework integrating these two approaches and uses statistical methods to separate their effects empirically

investigating geography and institutions as determinants of foreign direct investment in africa using panel data this article uses a cross country econometric approach to identify the determinants for foreign direct investment fdi in africa the contribution is 3 fold firstly we recognize that the estimation techniques used elsewhere such as ordinary least squares may be flawed we therefore use a dynamic one step generalized method of moments gmm estimator due to arellano and bond 1991 the gmm estimates identified a number of robust determinants of fdi namely government consumption inflation rate investment governance political stability accountability regulatory burden rule of law and initial literacy it is concluded that geography does not seem to have a direct influence on fdi flows to africa neither market seeking nor re exporting motives of fdi seem to dominate with different policy instruments being significant in the different specifications this does not discount the importance of good policies but probably indicates the importance of good policies made by good institutions institu

does low latency trading improve market efficiency a discussion abstract chordia and miao 2020 provide evidence that low latency trading llt improves the long term informational efficiency of stock prices this discussion raises two primary concerns with their analysis first the mechanism through which llt enhances long term efficiency is unclear second cm s measure of llt trading activity is correlated with non llt trading activity which may in turn cause the documented improvements in efficiency we close by proposing an alternative explanation changes in market microstructure have had a bifurcated impact on liquidity enhancing efficiency for large and liquid stocks but not for small and illiquid stocks

the paper work of medicine understanding international medical costs this paper draws on international evidence on medical spending to examine what the united states can learn about making its healthcare system more efficient we focus primarily on understanding contemporaneous differences in the level of spending generally from the 2000s medical spending differs across countries either because the price of services differs for example a coronary bypass surgery operation may cost more in the united states than in other countries or because people receive more services in some countries than in others for example more bypass surgery operations within the price category there are two further issues whether factors earn different returns across countries and whether more clinical or administrative personnel are required to deliver the same care in different countries we first present the results of a decomposition of healthcare spending along these lines in the united states and in canada we then delve into each component in more detail administrative costs factor prices and the provision of care received bringing in a broader range of international evidence when possible finally we touch upon the organization of primary and chronic disease care and discuss possible gains in that area

depletion of the environmental basis for renewable resources the economics of interdependent renewable and nonrenewable resources abstract this paper synthesizes familiar theories of nonrenewable and renewable resource economics in a two sector partial equilibrium analysis of efficient trade offs between renewable resource production and environmental development the irreversible impacts of coastal zone development provide a motivating example while development proceeds the efficient harvest of renewable resources may exceed the sustainable rate while development may involve several periods of growth and decline once development begins it proceeds without significant interruptions if a profitable renewable sector survives development ceases before exhausting all profitable opportunities interdependent stocks reduce distinctions between resource types because each sector exhibits features of the other

the effect of population health on foreign direct investment inflows to low and middle income countries this paper investigates the effect of population health on gross inflows of foreign direct investment fdi we conduct a panel data analysis of 74 industrialized and developing countries over 1980 2000 our main finding is that gross inflows of fdi are strongly and positively influenced by population health in low and middle income countries our estimates suggest that raising life expectancy by one year increases gross fdi inflows by 9 after controlling for other relevant variables these findings are consistent with the view that health is an integral component of human capital for developing countries

the volatility of offshore investment abstract offshore investment often bears the image of footloose industry with little to hinder movement to the most favorable environment an effort to describe this particular segment of u s direct investment supports some elements of the colorful anecdotal portrait painted by critics in the third world semiconductor assemblers are moderately sensitive to wage rates and adjust quite rapidly in maintaining what they perceive as a diversified portfolio of risky ldc production locations on the other hand this reaction is small enough to guarantee that modest increases in wages will not send all investment fleeing from an export platform new methods of modelling direct foreign investment when risk diversification is important in explaining industrial location decisions are introduced in this paper

international investment location decisions abstract in international location tournaments governments compete for foreign investment with tax and other short run incentives such tournaments can be won if agglomeration economies are sufficiently powerful to overcome investors desire to spread investments as a hedge against risk we focus on manufacturing investments by u s multinationals in the 1980s our econometric results suggest that agglomeration economies are indeed the dominant influence on investor calculations paradoxically short run incentives have limited apparent impact on location choice we conclude that high cost tournament play is unnecessary for countries with good infrastructure development specialized input suppliers and an expanding domestic market

foreign direct investment and local linkages this paper analyses the pattern of local linkages in foreign direct investment fdi treating such local linkages as an investment in local relationships using taiwanese manufacturing firms investing abroad as the sample for our case study we find that the local linkage intensity of a foreign subsidiary differs by fdi location entry mode firm size and the nature of the production network in which an investor is embedded more local linkages will be pursued by an investor if it is in search of distinctive and inimitable resources as opposed to homogeneous and reproducible resources investment in local linkages always begins with the linkage that carries the lowest risk to the original business network for manufacturing firms the sequence of such linkages is workers components and parts subcontracting and finally sources of r d

multinational enterprises and wage costs vertical fdi revisited abstract this study explores how wage costs for high skilled and less skilled labor in host countries affect the level of affiliate activities conducted by foreign mnes we find support for vertical fdi in the sense that more fdi is conducted in countries where less skilled labor is relatively cheap in addition we find that skilled wage cost premia also affect fdi activities previously associated with horizontal fdi i e local affiliate sales consequently the potential effects of relative wage costs on mne activities are large rough calculations suggest that more than 20 percent of us affiliate sales in 1998 can be attributed to skilled wage cost premia

vertical multinationals and host country characteristics abstract we inquire into the question of what country characteristics particularly market size and labor force composition attract inward investment this approach is motivated by the empirical observation that the poorest countries attract a far smaller share of world direct investment than their share of income small markets receive less investment per capita than larger ones we develop a model that generates both stylized facts in equilibrium suggesting the existence of a development trap for small skilled labor scarce countries