economic deregulation days of reckoning for microeconomists economic deregulation of american industry is one of the most important experiments in economic policy of our time 1 in 1977 17 percent of u s gnp was produced by fully regulated industries 2 by 1988 following ten years of partial and complete economic deregulation of large parts of the transportation communications energy and financial industries that total had been cut significantly to 6 6 percent of gnp 3 the political forces behind the decision to change the market conditions under which roughly 600 billion of u s output is produced were strong and varied but according to political scientists martha derthick and paul quirk 1985 p 36 deregulation would never have occurred if economists especially microeconomists had not generally supported it through their research 4 in retrospect it is fair to ask were microeconomists able to develop a theoretical and empirical framework to explain regulation and its effects and to form predictions of deregulation s effects were they able to predict the actual effects of deregulation this paper surveys the evidence to address these questions and of

issues every plan to reform health care financing must confront this paper focuses on three main issues of fundamental health care reform first should experience rating the linkage of premiums to actual loss experience be retained despite widespread support for experience rating among economists the paper argues that it should be abandoned for reasons of efficiency and equity second would abandonment of experience rating cause much redistribution the paper shows that redistribution among industries could require significant transitional adjustments third should companies or individuals be subject to an insurance mandate the paper calls for combining individual mandates which have long term advantages with employer mandates which have short run pluses

efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

some macroeconomics for the 21st century this note describes a numerical simulation of a model of economic growth a simplified version of robert tamura s 1996 model of world income dynamics based on technology diffusion the model makes predictions for trends in average world income growth and about the evolution of the relative income distribution that accord well with observation the model is used to forecast the course of world income growth and income inequality over the century to come

effect sizes and the interpretation of research results in international business journal editors and academy presidents are increasingly calling on researchers to evaluate the substantive as opposed to the statistical significance of their results to measure the extent to which these calls have been heeded i aggregated the meta analytically derived effect size estimates obtained from 965 individual samples i then surveyed 204 studies published in the journal of international business studies i found that the average effect size in international business research is small and that most published studies lack the statistical power to detect such effects reliably i also found that many authors confuse statistical with substantive significance when interpreting their research results these practices have likely led to unacceptably high type ii error rates and invalid inferences regarding real world effects by emphasizing p values over their effect size estimates researchers are under selling their results and settling for contributions that are less than what they really have to offer in view of this i offer four recommendations for improving research and reporting practices

from state to market private participation in china s urban infrastructure sectors 1992 2008 summary public private partnership ppp has gained popularity during the market oriented reforms in china s urban infrastructure sectors this paper explores how city characteristics spatial pressures and other institutional forces condition the extent of liberalization reforms in local infrastructure markets the findings advance the policy diffusion literature by suggesting that the different diffusion mechanisms not only function independently but also moderate each other s effects under certain conditions specifically this research finds that the effects of peer pressure undermine the effects of spatial exposure and the influence of provincial government reduces the effectiveness of peer pressure and epistemic influences

the translation of corporate governance changes across national cultures the case of germany contrasting systems of corporate governance persist internationally but are subject to regulatory and firm level institutional change such changes may be viewed as organisational innovations often imported from the usa in the face of different national cultures this paper analyses the implications of national culture for the translation of innovations and provides case study illustrations of regulatory and firm level governance changes experienced in germany these illustrations demonstrate that the diffusion of both kinds of change has been subject to substantial translation that is consistent with german national culture

foreign aid an instrument for fighting communism abstract in this paper we test the argument that the sizeable reduction in aggregate aid levels in the 1990s was due to the end of the cold war we test two different models using a dynamic econometric specification on a panel of 17 donor countries spanning the years 1970 97 we find aid to be positively related to military expenditures in the former eastern bloc during the cold war but not in the 1990s suggesting that the reductions in aid disbursements are driven by the disappearance of an important motive for aid we also study the effect on aid allocation but here we do not find any robust effects of the end of the cold war

economists capitalists and the making of globalization north american free trade in comparative historical perspective why did globalization happen current explanations point to a variety of conditions under which states have made the free market policy changes driving international economic integration since the 1980s such accounts disagree however about the key actors involved this article provides a reconciliation showing how two different combinations of actors and two different political economic pathways have led to globalization in recent decades in developed countries mobilization by business has been central elsewhere technocrats both constrained and empowered by international finance have pursued globalization more independently of business in both contexts economists technical authority has helped legitimate liberalization despite the limited diffusion of their ideas the article validates and elaborates this model using a comparative historical study of how the united states canada and mexico proposed negotiated and ratified agreements for free trade in north america

demand inducement and the physician patient relationship the physician patient relationship is a paradigm for any expert client relationship the physician both diagnoses the patient s illness and recommends a treatment this dual role gives the physician incentive to recommend treatments whose costs outweigh their medical benefits these socially inefficient treatments correspond to the notion of physician induced demand the level of inducement chosen by the physician is shown to depend on the price and potential medical benefits of treatment and the relative diagnostic skills of physician and patient this model offers several testable hypotheses some of which are confirmed by related studies

great powers hierarchy and endogenous regimes rethinking the domestic causes of peace this paper blends recent research on hierarchy and democratization to examine the theoretical and empirical costs of treating regime type exogenously in the literature most identified with studying its impact on international politics it argues that the apparent peace among democratic states that emerges in the aftermath of world war i is not caused by domestic institutional attributes normally associated with democracy instead this peace is an artifact of historically specific great power settlements these settlements shape subsequent aggregate patterns of military conflict by altering the organizational configuration of the system in three critical ways by creating new states by altering hierarchical orders and by influencing regime type in states these claims are defended with a series of tests that show first how the statistical relationship between democracy and peace has exhibited substantial variation across great power orders second that this statistical relationship breaks down with theoretically motivated research design changes and third that great powers foster peace and similar regime types within their hierarchical orders in short the relationship between democracy and peace is spurious the international political order is still built and managed by great powers

hospital profits the effects of reimbursement policies this paper provides a theoretical and empirical analysis of the effect of cost based reimbursement cbr on hospital costs and charges it takes issue with previous analyses which have treated cbr as paying economic costs plus a mark up and have concluded that the mark up is too small to significantly distort hospital decision making the basic thesis here is that if reimbursement is based on costs accounting costs become a price to cost paying patients and will be optimized to maximize revenue a hospital serving both cost and charge paying private patients can set two price schedules accounting profits ratio of charges to costs are not a measure of economic profit but of relative prices to these two groups of patients in the absence of constraints from regulation or patient co payment the optimum level of accounting costs would be infinite in practice the medicare reimbursement formula links allowable costs to charges received from charge paying patients this formula creates incentives for the hospital to raise charges above the single price profit maximizing monopoly level this inflationary effect of the medicare formula does not presuppose that medicare pays less than full cost the empirical analysis of hospital laboratory costs and charges generally supports the predictions for other departments the conclusions are consistent but more tentative because of data limitations overall evidence suggests minimal cross subsidy between cost and charge paying patients comparisons of cost and charge levels in for profit voluntary non profit and government hospitals are presented but it is emphasized that inferences about relative efficiency and profitability cannot be drawn from accounting data given the incentives created by cbr

reevaluating the modernization hypothesis we revisit and critically reevaluate the widely accepted modernization hypothesis which claims that per capita income causes the creation and the consolidation of democracy existing studies find support for this hypothesis because they fail to control for the presence of omitted variables controlling for these factors either by including country fixed effects in a linear model or by including parameterized random effects in a nonlinear double hazard model removes the correlation between income and the likelihood of transitions to and from democratic regimes in addition the estimated fixed effects from the linear model are related to historical factors that affect both the level of income per capita and the likelihood of democracy in a country this evidence is consistent with the idea that events during critical historical junctures can lead to divergent political economic development paths some leading to prosperity and democracy others to relative poverty and non democracy

diffusion and the international context of democratization democracy does not evolve sui generis the spatial clustering in democ racy and transitions suggests that international factors play a prominent role in forg ing democracies as well as influencing their durability we argue that democracy often comes about as a result of changes in the relative power of important actors and groups as well as their evaluations of particular institutions both of which are often influenced by forces outside the country in question the scope and extent of con nections with other democratic countries in a region can strengthen support for dem ocratic reform and help sustain institutions in transitional democracies results from a transition model demonstrate that international factors can exert a strong influence on the prospects for transitions to democracy and the spatial clustering in democ racy and transitions cannot adequately be explained by the hypothesized domestic social requisites of individual countries

quality vs quantity in military procurement it is often argued that the same expenditures on military procurement would produce a more effective defense if larger numbers of less sophisticated and thus cheaper weapons were purchased this paper shows that such a result can occur even if the military derives no private consumption value from technically sophisticated weapons rather the organization of the decision making process itself can produce this result this suggests some possible solutions through organizing decision making in a different fashion copyright 1990 by american economic association

global markets and national politics collision course or virtuous circle increasing exposure to trade foreign direct investment and liquid capital mobility have not prompted a pervasive policy race to the neoliberal bottom among the oecd countries one reason is that there are strong political incentives for governments to cushion the dislocations and risk generated by openness moreover countries with large and expanding public economies when balanced with increased revenues even from capital taxes have not suffered from capital flight or higher interest rates this is because the modern welfare state comprising income transfer programs and publicly provided social services generates economically important collective goods that are undersupplied by markets and that actors are interested in productivity value these range from the accumulation of human and physical capital to social stability under conditions of high market uncertainty to popular support for the market economy itself as a result arguments about the demise of national autonomy in the global economy are considerably overdrawn

income and democracy evidence from system gmm estimates abstract does higher income cause democracy accounting for the dynamic nature and high persistence of income and democracy we find a statistically significant positive relation between income and democracy for a postwar period sample of up to 150 countries our results are robust across different measures of democracy and instrumentation strategies

measuring poverty in a growing world or measuring growth in a poor world the extent to which growth reduces global poverty has been disputed for 30 years although there are better data than ever before controversies are not resolved a major problem is that consumption measured from household surveys which is used to measure poverty grows less rapidly than consumption measured in national accounts in the world as a whole and in large countries particularly india china and the united states in consequence measured poverty has fallen less rapidly than appears warranted by measured growth in poor countries one plausible cause is that richer households are less likely to participate in surveys but growth in the national accounts is also upward biased and consumption in the national accounts contains large and rapidly growing items that are not consumed by the poor and not included in surveys so it is possible for consumption of the poor to grow less rapidly than national consumption without any increase in measured inequality current statistical procedures in poor

ties to the rest autocratic linkages and regime survival the relationship between international linkages and the nature and survival of political regimes has gained increasing attention in recent years but remains one that is poorly understood in this article we make three central contributions to our understanding of international linkage politics and autocratic regime survival first we introduce and develop the concept of autocratic linkage and highlight its importance for understanding the international politics of autocratic survival second we use event history analysis to demonstrate that autocratic linkage has a systematic effect on the duration of authoritarian regimes finally we complement our quantitative analysis with a focused comparison of autocratic linkage politics in the middle east we show that variation in saudi arabian support for autocratic incumbents in the wake of the arab spring protests can be explained in significant part by variation in linkage relationships

the rebirth of the liberal creed paths to neoliberalism in four countries1 since the 1970s market based economic policies have been institutionalized as a nearly global policy paradigm using four national case studies this article shows that economic and financial globalization played a critical role in fostering the transition to neoliberal policies but that local institutional conditions were decisive in shaping the nature and meaning of the shift while the analysis finds that developing countries appear more dependent upon direct external pressures than developed ones it also shows that institutionalized patterns of state society relations determined the way in which neoliberal transitions were carried out somewhat irrespectively of the level of economic development in chile and britain poorly mediated distributional conflict created the ideological conditions for a monetarist revolution in mexico and france on the other hand neoliberalism was understood mainly as a necessary step to adapt the country to the international economy

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had

princes and merchants european city growth before the industrial revolution as measured by the pace of city growth in western europe from 1000 to 1800 absolutist monarchs stunted the growth of commerce and industry a region ruled by an absolutist prince saw its total urban population shrink by one hundred thousand people per century relative to a region without absolutist government this might be explained by higher rates of taxation under revenue maximizing absolutist governments than under nonabsolutist governments which care more about general economic prosperity and less about state revenue

employee choice of health insurance a new specification of health insurance plan choice is developed that uses a nonparametric functional form for the loss function used to evaluate insurance premiums and uncertain out of pocket expenditure the approach is implemented on data resulting from one firm s implementation of a new health plan with three distinct health insurance options health expenditure differences greater than 500 percent are observed indicating extremely strong biased selection plan choices are consistent with a convex loss function for small losses which suggests that consumers underweight high loss low probability outcomes relative to low loss high probability ones copyright 1989 by mit press

unraveling the mne wage premium whereas ib has extensively studied mnes generic positive impact on host economies but rarely on employee wages economics research has only shown an overall mne wage premium we unravel this premium considering multiple levels of analysis and accounting for host country contextual contingencies to unveil mnes different positive or negative distributional effects using unique micro level data from over 40 000 employees in 13 countries we examine mnes distributional effects for employees gender experience and immigrant status the influence of host country property rights protection and labor regulation and interplays with region and industry effects mnes distributional effects show marked differences that largely depend on the host country context and that are positive for experienced and foreign born employees in developed countries but negative for females working in developing countries whereas in developed countries the gender wage gap is smaller in mnes than in domestic firms as hypothesized we find evidence of a larger wage gap in developing countries the analysis also reveals that the higher host countries level of property rights protection the lower the mne wage premium our study points at the need to reassess statements about the generic positive impact of mnes in host countries particularly in developing countries and discusses further research implications

teaching un sustainability university sustainability commitments and student experiences of introductory economics the three largest public universities in british columbia canada have signed the talloires declaration committing themselves to promoting sustainability and creating expectations that they will integrate sustainability across the curriculum in order to improve students environmental literacy and stewardship about 40 of north american university students take a mainstream introductory economics course few of these students take economics at more advanced levels as such introductory economics courses are an important vehicle for students to learn economic theory they have the potential to contribute to the knowledge that students can mobilize to foster sustainability interviews were held with 54 students who had recently completed an introductory level mainstream economics course at one of the three universities students reported that introductory economics courses place little emphasis on the environment and sustainability they recalled course content with normative connotations that are problematic from a sustainability perspective and they described how discussion of the limitations of mainstream theory was set aside student reports of the insights introductory economics offers into environmental problems imply that these courses are failing to substantively increase students understanding of sustainability and linkages between the environment and the economy findings suggest that current introductory economics curriculum undermines the universities sustainability commitments

reimbursing health plans and health providers efficiency in production versus selection the tradeoff between an insurer s or medical provider s incentives to select good risks and to produce efficiently is governed by the supply price analog to the demand price tradeoff between moral hazard and risk aversion under a variety of models the optimum supply price is a mixture of capitation and fee for service payments empirical literature shows that pure capitation payment leaves strong incentives for selection that are acted upon the presence of contracting costs in a rothschild stiglitz model means a limited pooling equilibrium can exist and that poor risks will not be at their preferred outcome

developing difference social organization and the rise of the auto industries of south korea taiwan spain and argentina theories of economic development as diverse as modernization dependency world system and market reform take a critical factor view proponents of each theory argue that countries fail to develop because of an obstacle to economic growth we argue instead that neither a critical factor nor a single path leads to economic development viable paths vary economic growth depends on linking a country s historically developed patterns of social organization to the opportunities of global markets we formulate a sociological theory of cross national comparative advantage including not only economic factor endowments but also institutionalized patterns of authority and organization such patterns legitimize certain actors and certain relationships among those actors which facilitate development success in some activities but not in others we illustrate this approach to understanding development outcomes with a comparative analysis of the difficult rise of the automobile assembly and components industries in south korea taiwan spain and argentina

does public support help democracy survive it is widely believed that democracy requires public support to survive the empirical evidence for this hypothesis is weak however with existing tests resting on small cross sectional samples and producing contradictory results the underlying problem is that survey measures of support for democracy are fragmented across time space and different survey questions in response this article uses a bayesian latent variable model to estimate a smooth country year panel of democratic support for 135 countries and up to 29 years the article then demonstrates a positive effect of support on subsequent democratic change while adjusting for the possible confounding effects of prior levels of democracy and unobservable time invariant factors support is moreover more robustly linked with the endurance of democracy than its emergence in the first place as lipset 1959 and easton 1965 hypothesized over 50 years ago public support does indeed help democracy survive

competition and efficiency in the end stage renal disease program abstract estimated coefficients for medical service production or cost functions are subject to a competitive amenity bias which may result in the failure to identify factors that affect economic efficiency our investigation of productivity of dialysis facilities did indeed indicate both the likelihood of bias and some qualitative results these results suggest that it will be difficult to estimate cost and that variation in the level of reimbursement will in competitive markets affect the level of amenity delivered to patients incurred cost amenity and patient well being will all vary positively with the reimbursement level determining the right level of reimbursement requires a policy decision on how much total amenity society wishes to deliver to beneficiaries of public programs

ideology and voter preferences as determinants of financial globalization we propose that the global spread of ideas affects international economic openness policies and that to omit ideology as an explanatory variable for economic globalization is to risk omitted variable bias using voting data we create measures of global ideology regarding economic openness and propose that changes in both global and domestic ideology influence how open or closed to international finance an economy is we also test other influences on liberalization including proposed state centered diffusion mechanisms using pcsts and system gmm models we estimate the determinants of change in international capital account regulation for 82 countries 1955 to 1999 we thereby examine diffusion of both liberalizations 1950s and 1990s and closures 1960s and 1970s changes in both global and domestic ideology robustly influence liberalization and closure the capital account policies of neighboring countries positively and of the leading economies negatively also influenced a country s capital account liberalization

the economics of organization the transaction cost approach the transaction cost approach to the study of economic organization regards the transaction as the basic unit of analysis and holds that an understanding of transaction cost economizing is central to the study of organizations applications of this approach require that transactions be dimensionalized and that alternative governance structures be described economizing is accomplished by assigning transactions to governance structures in a discriminating way the approach applies both to the determination of efficient boundaries as between firms and markets and to the organization of internal transactions including the design of employment relations the approach is compared and contrasted with selected parts of the organization theory literature

when elephants fight the grass gets trampled the globe and hofstede projects four aspects of the debate between hofstede and javidan et al are highlighted first it is shown that characterizing cultures either on the basis of aggregated self perceptions or on the basis of aggregated perceptions of others in one s society are not equivalent procedures each has inherent errors and neither can be considered as providing the one best way to denote national cultures furthermore the number of dimensions of national culture that can be usefully studied must be proportional to the limited number of nations available for comparative analyses third although hofstede and javidan et al appear to differ on optimal ways of aggregating individual level data to the nation level both appear to have done so in a way that does not prevent detection of differing relations between items at different levels of analysis finally we need greater clarity as to the ways in which national wealth relates to other aspects of culture it is a major component of contemporary national cultures and must be retained as an element within nation level analyses

imf financial programs and conditionality abstract this paper presents an overview of the development of conditionality and financial programming techniques used by the imf the current analytical framework underlying imf conditionality is described and critically appraised questions are raised on the consistency of the approach followed on the issue of devaluation with the overall framework on the length of programs and the costs of adjustment in cases of structural disequilibria the conclusion is reached that whilst existing financial programming techniques are valid for certain cases they would need to be revised and supplemented to make them relevant to other cases some suggestions for improvement of the fund s operational procedures are made

democracy and financial crisis existing scholarship attributes various political and economic advantages to democratic governance these advantages may make more democratic countries prone to financial crises democracy is characterized by constraints on executive authority accountability through free and fair elections protections for civil liberties and large winning coalitions these characteristics bring important benefits but they can also have unintended consequences that increase the likelihood of financial instability and crises using data covering the past two centuries i demonstrate a strong relationship between democracy and financial crisis onset on average democracies are about twice as likely to experience a crisis as autocracies this is an empirical regularity that is robust across a wide range of model specifications and time periods

factor endowments inequality and paths of development among new world economies whereas traditional explanations of differences in long run paths of development across the americas generally point to the significance of differences in national heritage or religion we highlight the relevance of stark contrasts in the degree of inequality in wealth human capital and political power in accounting for how fundamental economic institutions evolved over time we argue moreover that the roots of these disparities in the extent of inequality lay in differences in the initial factor endowments dating back to the era of european colonization we document through comparative studies of suffrage public land and schooling policies systematic patterns by which societies in the americas that began with more extreme inequality or heterogeneity in the population were more likely to develop institutional structures that greatly advantaged members of elite classes and disadvantaging the bulk of the population by providing them with more political influence and access to economic opportunities the clear implication is that institutions should not be presumed to be exogenous economists need to learn more about where they come from to understand their relation to economic development our findings not only contribute to our knowledge of why extreme differences in the extent of inequality across new world economies have persisted for centuries but also to the study of processes of long run economic growth past and present

central bank independence and macroeconomic performance some comparative evidence this note uses information on a sample of sixteen oecd countries to assess the relationship between central bank independence and macroeconomic performance as previous work suggests politically controlled central banks are more likely to pursue policies that lead to high and variable inflation however the authors find little evidence that political control of central bank policy has any impact on measures of the level or variability of growth unemployment or the ex ante real interest rate copyright 1993 by ohio state university press

a theory of yardstick competition in the typical regulatory scheme a franchised monopoly has little incentive to reduce costs this article proposes a mechanism in which the price the regulatedfirm receives depends on the costs of identical firms in equilibrium each firm chooses a socially efficient level of cost reduction the mechanism generalizes to cover heterogeneous firms with observable differences medicare s prospective reimbursement of hospitals by using diagnostically related groups is a scheme very similar to the one outlined here

diffusion or confusion clustered shocks and the conditional diffusion of democracy scholars observing clustering in transitions to democracy argue that democratization diffuses across borders as citizens in autocracies demand the same reforms they witness in neighboring states we disagree this article demonstrates that diffusion plays only a highly conditional role in democratization we advance and test an alternative two step theory of clustered democratization 1 economic and international political shocks which are clustered spatially and temporally induce the breakdown of authoritarian regimes then 2 democratic diffusion in turn influences whether a fallen dictatorship will be replaced by a democracy or a new autocracy diffusion despite playing an important role is insufficient to explain the clustering of transitions using data on 125 autocracies from 1875 to 2004 we show that economic crises trigger authoritarian breakdowns while diffusion influences whether the new regime is democratic or authoritarian

homeward bound interest identity and investor behavior in a third world export platform1 are indigenous investors in third world export platforms more stable than their allegedly footloose foreign rivals while mainstream economists hold that investor behavior is independent of investor identity and therefore call for the parallel treatment of domestic and foreign firms their critics hold that indigenous investors are more dedicated than their foreign counterparts and therefore call for industrial policies designed to cultivate and defend native entrepreneurs who is correct the author uses a unique combination of qualitative and quantitative data to document and account for the relative stability and dynamism of indigenous investors in the dominican republic s largest export processing zone and thereby brings economic sociology back from the margins of development theory and development theory back into the heartland of sociology

democracy development and the international system as noted by seymour m lipset over 50 years ago development and democracy have been strongly correlated in the contemporary world today even after the prolonged democratization wave that started in the 1970s and accelerated in the 1990s the distribution of democracies remains highly skewed by level of per capita income whereas 94 of the countries with a per capita income above 10 000 in constant of 1996 held free and competitive elections in 1999 only 18 with a per capita income below 2 000 did so this empirical relationship between income and democracy was even tighter earlier in history just looking at per capita income we can successfully predict 76 of the annual observations of political regimes in sovereign countries after world war two the proportion of cases that are predicted correctly is 85 for the interwar period and 91 before world war one 1

the incidence of mandated maternity benefits i consider the labor market effects of mandates which raise the costs of employing a demographically identifiable group the efficiency of these policies will be largely dependent on the extent to which their costs are shifted to group specific wages i study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans raising the relative cost of insuring women of childbearing age i find substantial shifting of the costs of these mandates to the wages of the targeted group correspondingly i find little effect on total labor input for that group jel 118 j32 h51 in an era of tight fiscal budget constraints mandating employer provision of workplace benefits to employees is an attractive means for a government to finance its policy agenda consequently in recent years there has been a growth of interest in mandated benefits as a tool of social policy for example the centerpiece of president bill clinton s health care proposal is mandated employer provision of health insurance and more than 20 states have man

embeddedness inflation and international regimes the imf in the early postwar period1 this article explores why the international monetary fund imf adopted a set of orthodox anti inflationary policy prescriptions during the early postwar period when keynesian thinking was predominant drawing on primary documents from the imf archive and secondary literature the author argues that these early trends were fostered by dynamics familiar to organizational sociologists because organizations are designed by architects possessing bounded rationality they must adapt to circumstances unforeseen at their founding they may also be pushed in unexpected directions by the influential actors in their environments the power of professionals and the propensity to routinization international regimes which are partly made up of organizations may therefore be prone to internal contradictions

is there convergence across countries a spatial approach we analyze convergence across countries over the last half century as a result of globalizing forces drawing on theories of modernization dependency the world system political trade blocs and the world society we consider economic demographic knowledge financial and political dimensions of convergence using a new methodology we calculate the minimum volume ellipsoid encompassing different groupings of countries finding that during the 1960 2009 period countries have not evolved significantly closer or similar to one another although groups of countries based on their core periphery status or membership in trade blocs exhibit increasing internal convergence and divergence between one another

top incomes in the long run of history a recent literature has constructed top income shares time series over the long run for more than twenty countries using income tax statistics top incomes represent a small share of the population but a very significant share of total income and total taxes paid hence aggregate economic growth per capita and gini inequality indexes are sensitive to excluding or including top incomes we discuss the estimation methods and issues that arise when constructing top income share series including income definition and comparability over time and across countries tax avoidance and tax evasion we provide a summary of the key empirical findings most countries experience a dramatic drop in top income shares in the first part of the twentieth century in general due to shocks to top capital incomes during the wars and depression shocks top income shares do not recover in the immediate postwar decades however over the last thirty years top income shares have increased substantially in english speaking countries and in india and china but not in continental european countries or japan this increase is due in part to an unprecedented surge in top wage incomes as a result wage income comprises a larger fraction of top incomes than in the past finally we discuss the theoretical and empirical models that have been proposed to account for the facts and the main questions that remain open

bundled payments for healthcare services proposer selection and information sharing the centers for medicare and medicaid services cms has introduced a bundled payments for care improvement bpci initiative each bundle pertains to a specific medical condition a set of linked services and a length of time referred to as an episode of care proposers choose bundles design service chains and propose target values of quality metrics and payments per episode expert panels evaluate proposals based on cms announced relative weights but there is no limit on the number of proposers that may be selected moreover there is no minimum score that will guarantee selection which makes selection uncertain for proposers we develop normative models for the parameter selection problems faced by potential proposers within the cms proposal selection process proposers have private information about their costs of achieving different quality targets which determine their equilibrium responses we show that an optimal strategy for cms under its current approach may be to either announce a fi

an introduction to applicable game theory this paper offers an introduction to game theory for applied economists i try to give simple definitions and intuitive examples of the basic kinds of games and their solution concepts there are four kinds of games static or dynamic and complete or incomplete information complete information means there is no private information the corresponding solution concepts are nash equilibrium in static games of complete information backwards induction or subgame perfect nash equilibrium in dynamic games of complete information bayesian nash equilibrium in static games with incomplete information and perfect bayesian or sequential equilibrium in dynamic games with incomplete information the main theme of the paper is that these solution concepts are closely linked as we consider progressively richer games we progressively strengthen the solution concept to rule out implausible equilibria in the richer games that would survive if we applied solution concepts available for simpler games in each case the stronger solution concept differs from the weaker concept only for the richer games not for the simpler games

introduction epistemic communities and international policy coordination the growing technical uncertainties and complexities of problems of global concern have made international policy coordination not only increasingly necessary but also increasingly difficult if decision makers are unfamiliar with the technical aspects of a specific problem how do they define state interests and develop viable solutions what factors shape their behavior under conditions of uncertainty what are the origins of international institutions and how can we best study the processes through which international policy coordination and order emerge while a variety of analytic approaches have been used to address the problems of international cooperation the approaches have yielded only fragmentary insights at its core the study of policy coordination among states involves arguments about determinism versus free will and about the ways in which the international system is maintained and transformed among the overlapping topics of debate are whether national behavior is determined or broadly conditioned by system level factors unit level factors or some complex interplay between the two whether state policymakers can identify national interests and behave independently of pressures from the social groups they nominally represent and whether states respond consistently to opportunities to create defend or expand their own wealth and power to enhance collective material benefits or to promote nonmaterial values a related question of

determinants of democracy a panel study of over 100 countries from 1960 to 1995 finds that improvements in the standard of living predict increase in democracy as measured by a subjective indicator of electoral rights the propensity for democracy rises with per capita gdp primary schooling and a smaller gap between male and female primary attainment for a given standard of living democaracy tends to fall with urbnization and with a greater reliance on natrual resources democracy has little relation to country size but rises with the middle class share of income the apparently strong relation of democracy to colonial heritage mostly disappears when the economic variables are held constant similarly the allowance for these economic variables weakens the interplay between democracy and religious affiliation however negative effects from muslim and non religious affiliations remain intact

using cost observation to regulate firms the paper emphasizes the use of accounting data in regulatory or procurement contracts when the supplier 1 has superior information about the cost of the project and 2 invests in cost reduction the main result states that under risk neutrality the supplier announces an expected cost and is given an incentive contract linear in cost overruns this optimal contract moves toward a fixed price contract as the announced cost decreases an investment choice is then introduced and the use of a rate of return regulation is studied

inequality among world citizens 1820 1992 this paper investigates the distribution of well being among world citizens during the last two centuries the estimates show that inequality of world distribution of income worsened from the beginning of the 19th century to world war ii and after that seems to have stabilized or to have grown more slowly in the early 19th century most inequality was due to differences within countries later it was due to differences between countries inequality in longevity also increased during the 19th century but then was reversed in the second half of the 20th century perhaps mitigating the failure of income inequality to improve in the last decades jel d31 f0 n0 o0

stability in the federal employees health benefits program recently the federal employees health benefits program has been the subject of much discussion in washington as a result of the rather large premium increases in 1982 and 1983 the delayed open season of 1981 and the benefit reductions enrollees responded in may 1982 to the changes a record number switched plans it appears that enrollees were simply responding to the new premiums and benefits in this paper we describe the economic incentives faced by enrollees in the fehbp we find that due to the strong incentives for enrollees to leave certain high cost plans continued instability should be expected in fact the disparity between expected benefits and premium is so great for some plans e g the blue cross high option that their survival is questionable this lack of stability raises important questions about the viability of some pro competition proposals involving multiple insurer systems

thermoclimate culture and poverty as country level roots of workers wages most employees are under or overpaid relative to their country s level of wealth this 58 nation study makes a case for more temperate less cold or hot climate as a root of a more mastery oriented culture which in turn is associated with wealth referenced overpayment overpayment is larger in poorer countries that also have a more temperate climate a more mastery oriented culture or both supplementary examination of 25 rival predictors corroborated the conclusions

perceived organizational support pos across 54 nations a cross cultural meta analysis of pos effects the authors meta analyze relationships of perceived organizational support pos with attitudinal and behavioral outcomes in western i e horizontal individualistic and eastern i e vertical collectivistic cultures the social exchange perspective suggests that pos effects are stronger in western cultures because employees are more likely to see the self as independent and understand their relationship with the organization in terms of reciprocity however the social identity perspective suggests that pos effects are stronger in eastern cultures because employees are more likely to see the self as interdependent and are more attuned to organizational support as an identity related cue addressing these competing hypotheses meta analytic results from 827 independent samples n 332 277 across 54 countries show support for both perspectives in the west pos was more strongly associated with social exchange processes than organizational identification processes in contrast in the east pos was more strongly associated with organizational identification processes than social exchange processes overall pos was more strongly related to job attitudes and performance in the east than in the west cultural differences in pos effects on attitudinal outcomes were found to be increasing over time we discuss the implications of these findings for organizational support theory and research

the kantian peace the pacific benefits of democracy interdependence and international organizations 1885 1992 the authors test kantian and realist theories of interstate conflict using data extending over more than a century treating those theories as complementary rather than competing as the classical liberals believed democracy economic interdependence and international organizations have strong and statistically significant effects on reducing the probability that states will be involved in militarized disputes moreover the benefits are not limited to the cold war era some realist influences notably distance and power predominance also reduce the likelihood of interstate conflict the character of the international system too affects the probability of dyadic disputes the consequences of having a strong hegemonic power vary but high levels of democracy and interdependence in the international system reduce the probability of conflict for all dyads not just for those that are democratic or dependent on trade

globalization pressures and the state the worldwide spread of central bank independence the authors examine the impact of globalization on state structures in the specific instance of the central bank following the world system world society and neoinstitutional perspectives in sociology they assume that states are in cultural political and economic competition with each other thereby seeking to maintain their position and status frequently by adopting organizational forms or practices that make them isomorphic with their environment the authors predict that countries boost the independence of their central bank from the political power as their exposure to foreign trade investment and multilateral lending increases they also model the cross national dynamic process of diffusion of central bank independence by examining the impact of cohesive and role equivalent trade relationships between countries they find support for their hypotheses with information on 71 countries between 1990 and 2000

mexico and the development of the practice of the international monetary fund abstract mexico has had a striking influence on the imf s articles and on the development of some of its most important policies both before and after the present version of the articles took effect in more recent years the problem of mexico s external debt has produced changes in the imf s relations with commercial banks its practice of surveillance and on the use of its resources under stand by arrangements in addition impending changes in the imf s response to external contingencies can be attributed to experience with mexico one of the generalizations drawn from this experience is that the imf s practice is not determined solely by the major industrialized countries

the secondary circuit of capital reconsidered globalization and the u s real estate sector1 the author examines the u s real estate sector to show how the state shapes global real estate flows and networks of activity through the creation and control of liquid resources the analysis focuses on the role of state laws and regulations in the expansion of the mortgage backed securities markets and the development of real estate investment trusts reits these institutional developments represent a series of ad hoc state efforts to delocalize residential and commercial property and embed real estate financing within global capital markets rather than viewing globalization as weakening the state the author argues that the u s state s capacity to influence the degree and development of liquidity is a powerful mechanism of globalization

the threat of cream skimming in the post reform nhs the allocation of budgets to general practitioners to enable them to purchase selected hospital services has been one of the most imaginative elements of the recent national health service reforms in britain however reliance on historic costs budgeting has weakened the efficiency incentives of fund holding while perpetuating the large variations in resource use endemic in general practice on the other hand policy changes aimed to introduce elements of capitation funding although welcome raise the spectre of cream skimming the paper explores the potential for protection against cream skimming offered by incorporating chronic health factors into the formula

the economic consequences of mrs thatcher it is difficult to overstate the gravity of what is now happening to the uk economy output is falling at an almost unprecedented rate unemployment is at a level not experienced since the inter war depression and is increasing rapidly towards 3 million or 13 of the labour force which would mean rates of 20 and above in large areas of the country nor is there any foreseeable prospect of unemployment coming down instead all the signs point to a continuing increase the social and political consequences of this are hard to predict it is not just a matter of the financial hardship suffered by those thrown out of work through no fault of their own or of the strain imposed on the social welfare system but also of the mental stress disillusionment and sense of helpless ness which come with not being able to find a job this could well have a damaging long term effect on attitudes towards work particularly among young people con demned to go straight from school on to the unemployment register and is almost bound to lead to widespread social unrest the cause of sudden high unemployment in the uk is a backlash against the consensus post war economic policies of demand management to maintain near full employment of support for industry and of income maintenance and the provision of social welfare services policies which were developed in response to the experience of the inter war years the thatcher government has embraced a doctrinaire monetarist strategy for controlling inflation and a laissez faire approach to the supply side of the economy without attempting to moderate the social impact of these policies the extreme nature of this experiment has attracted a good deal of interest from abroad especially from the usa where the new president has expressed admiration for mrs thatcher and what her government is doing if only because there is a danger of governments in other countries following the uk s lead particularly as both the imf and oecd have recently urged the pursuit of similar policies it is important to draw international attention to what is now happening in the uk 18 months after mrs thatcher took office in sharp contrast to the rhetoric of government promises the economy has been set on a path of rapidly falling output and escalating unemployment leading towards the destruction of large parts of manufacturing industry at the same time the social advances which have been made during the post war period are beginning to be reversed as the government desperately seeks ways of offsetting the increase in its budget deficit caused by deepening recession

institutional emergence in an era of globalization the rise of transnational private regulation of labor and environmental conditions1 why have systems of transnational private regulation recently emerged to certify corporate social and environmental performance different conceptions of institutional emergence underlie different answers to this question many scholars argue that firms create certification systems to solve problems in the market a view rooted in a conception of institutions as solutions to collective action problems the author develops a different account by viewing institutions as the outcome of political contestation and by analyzing conflict and institutional entrepreneurship among a wide array of actors using a comparative case study design the analysis shows how these arguments explain the formation of social and environmental certification associations both theoretical approaches are needed but strong versions of the market based approach overlook an important set of dynamics that the author calls the political construction of market institutions the analysis shows how both problem solving in markets and

political and monetary institutions and public financial policies in the industrial countries institutions and policies vittorio grilli donato masciandaro and guido tabellini why do countries as similar as the industrialized oecd countries go through such different experience in terms of public deficits and debts or in terms of inflation the answer cannot come from macroeconomic policy responses to different disturbances nor from the principles of optimal taxation but rather from politics this article focuses on the role that particular institutions exert in providing constraints and incentives which shape the actions of policymakers the electoral process and political traditions affect the ability of governments to deal with deficits and mounting debts what seems to matter most it is found is the effect of the durability of governments governments with short horizons act myopically and never quite tackle the hard choices such governments typically exist in countries with an electoral system favouring many small political parties central bank independence promotes low inflation with no apparent costs in terms of real economic performance irrespective of the political institutions in fact there is no link between monetary and fiscal discipline these findings carry powerful implications for countries facing high indebtedness or stubborn inflation but also for the construction of the european economic and monetary union

split awards procurement and innovation in many procurement settings it is possible for a buyer to split a production award between suppliers in this article we develop a model of split award procurement auctions in which the split choice is endogenous we characterize the set of equilibrium bids and allocations for optimizing agents in an environment in which suppliers are fully informed about each other s costs split award equilibria simultaneously exhibit strong collusive features and cost efficiency properties despite the former property of the equilibria upstream investment considerations may lead a buyer to prefer a split award auction format to a winner take all auction format

reforming payments to healthcare providers the key to slowing healthcare cost growth while improving quality the seemingly intractable debate about how to slow the growth of healthhe seemingly intractable debate about how to slow the growth of healthcare costs in the united states and elsewhere has traditionally boiled care costs in the united states and elsewhere has traditionally boiled down to efforts to limit prices and quantities directly in public healthdown to efforts to limit prices and quantities directly in public healthcare programs the focus in the united states is often on tighter price regulation care programs the focus in the united states is often on tighter price regulation for example the balanced budget act of 1997 achieved most of its savings by for example the balanced budget act of 1997 achieved most of its savings by reducing the growth of regulated prices in medicare for physicians hospitals reducing the growth of regulated prices in medicare for physicians hospitals and most other healthcare providers the affordable care act of 2010 also and most other healthcare providers the affordable care act of 2010 also achieved most of its scored budgetary savings which were used as a partial achieved most of its scored budgetary savings which were used as a partial offset for the costs of coverage expansions through reducing medicare price offset for the costs of coverage expansions through reducing medicare price growth elmendorf 2010 a

the global economy as instituted process the case of central and eastern europe i argue that economic globalization indicated by the tremendous rise in world foreign direct investment fdi in recent decades is not driven simply by investor considerations of economic risk and return but is significantly shaped by the construction of demand for foreign capital by receiving states states signal this demand through the levels of formal and substantive legitimacy they grant to fdi they institutionalize globalization in formal rule as a normatively desirable development strategy states substantiate this commitment by providing domestic and foreign actors with ideational and organizational resources to facilitate fdi to illustrate this argument i use the case of central and eastern europe which was largely closed to global capital before the collapse of communism analyses of quantitative and qualitative data show that substantive legitimacy granted to fdi by host states more than formal regulations determined the size of foreign capital flows into postsocialist countries in the

global networks and domestic policy convergence a network explanation of policy changes national economies are embedded in complex networks such as trade capital flows and intergovernmental organizations igo s these globalization forces impose differential impacts on national economies depending on a country s network positions this article addresses the policy convergence divergence debate by focusing on how networks at the international level affect domestic fiscal monetary and regulatory policies the author presents two hypotheses first similarity in network positions induces convergence in domestic economic policies as a result of peer competitive pressure second proximity in network positions facilitates policy learning and emulation which result in policy convergence the empirical analysis applies a latent space model for relational dyadic data and indicates that position similarity in the network of exports induces convergence in fiscal and regulatory policies position similarity in the network of transnational portfolio investments induces convergence in fiscal policies and position proximity in igo networks is consistently associated with policy convergence in fiscal monetary and regulatory policies

income and democracy existing studies establish a strong cross country correlation between income and democracy but do not control for factors that simultaneously affect both variables we show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and vari ous measures of democracy we present instrumental variables estimates that also show no causal effect of income on democracy the cross country corre lation between income and democracy reflects a positive correlation between changes in income and democracy over the past 500 years this pattern is con sistent with the idea that societies embarked on divergent political economic development paths at certain critical junctures jel d7 e 1

money and monetary stability in europe 1300 1914 abstract this paper investigates the determinants of monetary stability in europe from the late medieval era until world war i through this period the anchor for monetary policy was the silver or gold value of the monetary unit states however frequently abandoned this anchor some depreciating their monetary units against silver and gold less than 10 fold and others more than 10 000 fold between 1500 and 1914 to understand the determinants of these differences we compile a new and comprehensive monetary history dataset for all major states in europe and test alternative theories we find strong evidence that political factors and in particular fiscal capacity political regime and warfare explain patterns of monetary stability this finding is robust to addressing endogeneity controlling for the instability induced by the mechanics of the monetary system and accounting for the impacts of new monetary technologies and the advent of fiat standard

international systems and domestic politics linking complex interactions with empirical models in international relations following older debates in international relations literature concerning the relative importance of domestic versus systemic factors newer debates emphasize interdependence among states and the complex interactions between systemic and domestic factors as globalization and democratization advance theories and empirical models of international politics have become more complicated we present a systematic theoretical categorization of relationships between domestic and systemic variables we use this categorization so that scholars can match their theory to the appropriate empirical model and assess the degree to which systemic factors affect their arguments we also present two advances at the frontier of these empirical models in one we combine hierarchical models of moderating relationships with spatial models of interdependence among units within a system in the other we provide a model for analyzing spatial interdependence that varies over time this enables us to examine how the level of interdependence among units has evolved we illustrate our categorization and new models by revisiting the recent international political economy ipe debate over the relationship between trade policy and regime type in developing countries

bidding for contests the procurement of product development and production services brings special strategic considerations to the buyer seller relationship in industrial and institutional markets multiple sourcing in particular dual sourcing is a likely way of dealing with the increased risks faced by buyers however there is lack of dual sourcing models that analyze the selection and control process in an integrated fashion this omission had led to apparently contradictory findings in agency and auction theory the paper models the strategic issues for a cost containment contest between two suppliers the suppliers are drawn from several vendors who participate in a bidding competition the supplier with the lower final cost in the contest wins a larger share of the pooled profit fee propositions are derived for the optimal cost plus contest and comparisons are made with the common incentive contract for the integrated selection and control model the larger the winner s share the greater the effort the buyer can make a credible commitment to the optimal winner s share as the winner s share rises however the bid prices increase due to increased contract risk this incentive risk tradeoff determines a the optimal winner s share that minimizes expected procurement price b the corresponding profit fee bid by suppliers c the ensuing cost control effort and d the final price for the procurement comparisons with the common incentive contract tell us when the cost plus contest induces more effort and when bidding for a contest results in a lower final procurement price

a world economy restored expert consensus and the anglo american postwar settlement although british and u s officials held markedly different views during the initial negotiations for a postwar economic order they were able to reach watershed trade and monetary agreements that set the terms for the reestablishment of an open world economy how does one explain this anglo american settlement reached at bretton woods in 1944 structural explanations based on underlying configurations of power and interests are helpful but leave important issues unresolved given the range of postwar economic orders that were possible and potentially consistent with underlying structures and also given the divergent and conflicting views both within and between the two governments why did the economic order take the particular shape it took this article argues that agreement was fostered by a community of british and american economists and policy specialists who embraced a set of policy ideas inspired by keynesianism and who played a critical role in defining government conceptions of postwar interests shaping the negotiating agenda for example shifting the focus of negotiations from trade issues which were highly contentious to monetary issues about which there was an emerging middle ground created by keynesian ideas and building coalitions in support of the postwar settlement

from poverty to perversity ideas markets and institutions over 200 years of welfare debate to understand the rise of market fundamentalism from the margins of influence to mainstream hegemony we compare the u s 1996 personal responsibility and work opportunities reconciliation act and the english 1834 new poor law two episodes in which existing welfare regimes were overturned by market driven ones despite dramatic differences across the cases both outcomes were mobilized by the perversity thesis a public discourse that reassigned blame for the poor s condition from poverty to perversity we use the term ideational embeddedness to characterize the power of such ideas to shape structure and change market regimes the success of the perversity thesis is based on the foundations of social naturalism theoretical realism and the conversion narrative in the poverty to perversity conversion narrative structural blame for poverty is discredited as empiricist appearance while the real problem is attributed to the corrosive effects of welfare s perverse incentives on poor people themselves