definition consistent measurement of exchange market pressure currencies can be under severe pressure but in a managed exchange rate regime that is not fully visible via the change in the exchange rate the literature has proposed a way to measure such exchange market pressure emp indirectly by adding interest rate changes and forex interventions to the exchange rate change we demonstrate that this measure is not consistent with the definition of emp and develop a new measure that is consistent this is first derived within the commonly used monetary exchange rate model then we generalize the analysis by avoiding the use of an exchange rate model we find that the interest rate should not be taken in the first difference form used so far but rather in level form and relative to the interest rate chosen if the country had no exchange rate objective applications on the european monetary system and east asian crises confirm that this improvement is highly relevant in practice

distributed energy infrastructure paradigm community microgrids in a new institutional economics context abstract this paper provides a theoretical framework based on new institutional economics nie concepts to guide the development of community microgrids given limited application thus far of such energy systems this paper also draws on empirical studies and experiences from the planning and development of other public community infrastructure and utility services in the development of this framework it links an efficient ownership and governance structure with transactional characteristics such as asset idiosyncrasy frequency and uncertainty defined in section 3 1 the key role of the customers and the microgrid service provider and more specifically their bilateral monopoly relationship and its effects on the choice of institutional structure is highlighted the paper examines the optimum conditions for public private or hybrid financial ownership and for unified or network governance through long term contracting this allows ex ante investment uncertainty and ex post appropriation risks to be efficiently managed the analysis suggests that long term contract completeness future demand for electricity and level of uncertainty are the determining factors in the selection of institutional structure this has significant real world implications for the communities seeking to achieve electricity self sufficiency and environmental benefits through community microgrids service providers and other private or public actors

control rights in complex partnerships this paper develops a theory of the allocation of authority between two players who are in a complex partnership that is a partnership which produces impure public goods we show that the optimal allocation depends on technological factors the parties valuations of the goods produced and the degree of impurity of these goods when the degree of impurity is large control rights should be given to the main investor irrespective of preference considerations there are some situations in which this allocation is optimal even if the degree of impurity is very low as long as one party s investment is more important than the other party s if the parties investments are of similar importance and the degree of impurity is large shared authority is optimal with a greater share going to the low valuation party if the importance of the parties investments is similar but the degree of impurity is neither large nor small the low valuation party should receive sole authority we analyze an extension in which side payments are infeasible we check for robustness of our results in several dimensions such as allowing for multiple parties or for joint authority and apply our results to interpret a number of complex partnerships including those involving schools and child custody jel d02 o23 h41 l31

adam smith or machiavelli political incentives for contracting out local public services why do some local governments deliver public services directly while others rely on providers from the private sector previous literature on local contracting out and on the privatization of state owned enterprises have offered two competing interpretations on why center right governments rely more on private providers some maintain that center right politicians contract out more because like adam smith they believe in market competition others claim that center right politicians use privatization in a machiavellian fashion it is used as a strategy to retain power by purchasing the electoral support of certain constituencies using a unique dataset which includes the political attitudes of over 8 000 swedish local politicians from 290 municipalities for a period of 10 years this paper tests these ideological predictions together with additional political economy factors which have been overlooked in previous studies such as the number of veto players results first indicate support for the machiavellian interpretation as contracting out increases with electoral competition second irrespective of ideological concerns municipalities with more veto players in the coalition government contract out fewer services

factors explaining local privatization a meta regression analysis this paper aims at explaining the differences in the results of empirical studies of motivations for local privatization by undertaking a meta regression our results suggest that fiscal constraints and interest groups were especially relevant in the early studies of the us which considered several services further studies that focus on one service capture the influence of scale economies more accurately finally our results show that small towns are more affected by fiscal and political factors while ideology plays a major role for european and large cities thus no clear conclusions emerge from this literature because the findings of each study are sensitive to its characteristics

bureaucrats or politicians part ii multiple policy tasks abstract policies are typically chosen by politicians and bureaucrats this paper investigates first the normative criteria with which to allocate policy tasks to elected policymakers politicians or non elected bureaucrats politicians are preferable if there is uncertainty about social preferences and flexibility is valuable or if policy complementarities and compensation of losers is important bureaucrats are preferable if time inconsistency and short termism is an issue or if vested interests have large stakes in the policy outcome we then compare this normative benchmark with the case in which politicians choose when to delegate and show that the two generally differ

the estimated cost impact of privatizing student transportation in minnesota school districts student transportation makes up a substantial portion of a typical school district s operating budget and sub contracting bus service to private firms has been advanced by some as a way to reduce transportation costs previous studies have found conflicting evidence regarding the cost impact of privatization this paper seeks to improve on previous studies by estimating cost equations using data that spans six school years the primary result is that privatization acts to substantially increase transportation costs estimates using a pooled cross section predicted that going from fully outsourced to fully in house reduced costs by approximately 15 8 while the analogous estimate using a first differenced equation was a savings of 20 7

incentives and the efficiency of public sector outsourcing contracts abstract outsourcing the provision of traditionally publicly provided services has become commonplace in most industrialized nations despite its prevalence there still is no consensus in the academic literature on the magnitude and determinants of expected cost savings to the government nor the sources of those savings this article considers the arguments for and against outsourcing and then examines the empirical evidence pertaining to whether any observed savings occur and whether they persist over time in addition we examine the existing evidence for the redistribution hypothesis and the quality shading hypothesis which critics have used to argue that outsourcing lowers government expenditure by lowering wages and conditions and or lower quality services finally we consider the impact of contract design on outsourcing outcomes while the power of incentives is a strong theme in economics recent work has suggested that high powered incentives may be suboptimal for many public sector services because they may crowd out intrinsic motivation particularly in instances where agents are highly motivated we discuss the implications of this insight for the efficiency of public sector outsourcing

the political economy of mass privatisation and imperfect taxation winners and loosers this article investigates the connection between the apparently uncorrelated issues of tax evasion and privatisation in a political economy framework we first consider how the political process given a country s level of development and income distribution will affect the efficiency of the tax system we then discuss the impact of the efficiency of the taxation system on the outcomes of privatisation we consider under which condition privatisation will proceed and who will be the political supporters as well as the main winners of the privatisation process moreover we investigate the impact of different forms of corruption both on the initial public support for privatisation as well as on its long term political sustainability

the proper scope of government theory and an application to prisons when should a government provide a service in house and when should it contract out provision we develop a model in which the provider can invest in improving the quality of service or reducing cost if contracts are incomplete the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee has however the private contractor s incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on noncontractible quality the model is applied to understanding the costs and benefits of prison privatization

efficiency effects of unit based pricing systems and institutional choices of waste collection municipal residential waste costs are rising therefore it is important to introduce measures that lower waste collection and disposal costs based on a large panel data set for the netherlands we show that unit based pricing systems are more important from a cost minimizing point of view than the institutional mode of waste collection in particular the bag based and frequency based pricing systems are preferred moreover dividing the cost effects between cost price and quantity effects we illustrate that lower administrative costs and a smaller waste quantity are the most important drivers of cost decreases it also shows that a disadvantage of the bag based system is that it is not easy to price compostable waste in addition if more general cost functions are analyzed these estimations suggest that there are economies of scale for small municipalities

gratitude conscience and reciprocity models of supplier motivation when quality is non contractible abstract standard game theoretic models that apply principal agent problems to analyse buyer supplier relations have postulated that in a single period game the agent will not choose non contractible quality however evidence exists that suppliers or service providers choose costly quality in non contractible dimensions even in absence of reputation concern if they are offered a premium such actions violate the axiom of individual rationality and are not subgame perfect in standard game theory wherein only material payoffs are considered this paper builds three models of supplier behaviour in a single period stackelberg like buyer supplier game by using the framework of psychological game theory and explains supplier motivations to choose quality on non contractible dimensions in absence of any reputation effect if the buyer offers a price higher than the market price the supplier may be motivated to choose non contractible quality due to a sense of gratitude or because of his conscience or in order to reciprocate kindness the results show that maximum possible quality is chosen by the supplier only in the presence of a sufficiently strong sense of gratitude or a sufficiently strong conscience however the buyer is better off with a fair supplier who is motivated to reciprocate than a supplier having a very poor sense of gratitude or one having a weak conscience because the buyer can choose an optimal premium above market price to ensure that a fair and reciprocal supplier chooses an optimal quality

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

market and public provision in the presence of human capital externalities for many goods and services such as health education legal services police protection the cost incurred by an individual supplier for providing quality is affected by the human capital of her colleagues the paper shows that this human capital externality is crucial to determine whether such goods and services should be privately or publicly provided public and private provisions give individuals different incentives to acquire human capital and the paper shows that either may be socially preferable depending on the nature of the human capital externality private provision of the final goods and services gives stronger incentives to human capital acquisition and may therefore be socially preferable if own human capital and one s colleagues human capital are substitutes and if suppliers with high human capital benefit more than suppliers with low human capital from their colleagues human capital but not excessively so

stature and the standard of living research on the standard of living now emphasizes alternatives or supplements to the national income accounts this paper reviews the results of two decades of research using stature as a measure of health aspects of human welfare after comparing and contrasting stature with per capita income i consider height patterns discovered by economic historians that challenge traditional beliefs about the past including long term trends cycles in heights and the dreadfully small stature of slave children that was followed by catch up growth the paper concludes with comparisons to work in development economics and suggestions for research

precautionary reserves and the interbank market large excess reserve balances are held by banks in the u s despite the ability of large banks to closely target end of day balances close to zero we show that the friction faced by small banks to participate in the fed funds market leads to all banks holding precautionary reserves the precautionary motive for reserves can explain that small banks hold relatively large amounts of excess reserves overnight while at the same time lending large amounts to large banks small banks are large net lenders despite their reluctance to lend as large of a percentage of available balances during the day as large banks we also explain an increase in the volatility of the fed funds rate late in the day

a search based model of the interbank money market and monetary policy implementation we present a search based model of the interbank money market and monetary policy implementation banks are subject to reserve requirements and the central bank tenders reserves interbank payments redistribute holdings and banks trade with each other in a decentralized over the counter market the central bank provides standing facilities where banks can either deposit surpluses or borrow to cover shortfalls of reserves overnight the model provides insights on liquidity trading volume and rate dispersion in the interbank market features largely absent from the canonical models in the tradition of poole 1968 and fits a number of stylized facts for the eurosystem observed during the recent period of unconventional monetary policies moreover it provides insights on the implications of different market structures

the economics of energy service contracts energy service contracting can provide a cost effective route to overcoming barriers to energy efficiency energy service contracts allow the client to reduce operating costs transfer risk and concentrate attention on core activities however the energy services model may only be appropriate for a subset of energy services and energy using organisations a challenge for both business strategy and public policy is to identify those situations in which energy service contracting is most likely to be appropriate and the conditions under which it is most likely to succeed energy service contracting is a form of outsourcing it will only be chosen where the expected reduction in the production cost of supplying energy services can more than offset the transaction cost of negotiating and managing the relationship with the energy service provider production costs will be determined by a combination of the physical characteristics of the energy system and the technical efficiency of the relevant organisational arrangements including economies of scale and specialisation transaction costs in turn will be determined by the complexity of the energy service the specificity of the investments made by the contractor the competitiveness of the energy services market and the relevant legal financial and regulatory rules this paper develops these ideas into a general framework that may be used to assess the feasibility of energy service contracting in different circumstances the framework leads to a number of hypotheses that are suitable for empirical test

competing for the island lifeline european law state aid and regional public services bennett p 2006 competing for the island lifeline european law state aid and regional public services regional studies 40 953 966 ensuring the freedom to provide services in europe often means that state subsidies for loss making but essential services are subject to competitive tendering for the past three decades lifeline ferry services to the islands of western scotland have been operated by the state owned company caledonian macbrayne state owned companies are not exempt from european union state aid and procurement rules however and the scottish executive is about to issue an invitation to tender for these services this paper examines the aims of european union rules on state aid procurement and services of general economic interest and their application to ferry services in the spatial periphery of europe the advantages and disadvantages of competitive tendering are then considered focusing on the consequences for efficiency labour quality and investment and the likelihood o

economic growth population theory and physiology the bearing of long term processes on the this lecture sketches a theory of the secular decline in morbidity and mortality that takes account of changes induced in physiological functioning since 1700 the synergism between technological and physiological improvements has produced a form of human evolution biological though not genetic rapid culturally transmitted and not necessarily stable which is still ongoing in both oecd and developing countries thermodynamic and physiological aspects of economic growth are defined and their impact on growth rates is assessed implications of this theory for population forecasting measurement of national income demand for leisure pension policies and demand for health care are considered excerpt

a micro model of the federal funds market this paper demonstrates that valuable insights into the determination of federal funds rates can be gained through modeling the micro decisions of market participants fed fund demand functions are derived for different bank valuation functions and several implications are discussed specifically it is i possible to rationalize the observation that large banks are net purchasers and small banks net sellers of fed funds ii to explain the positive spread of fed funds rates over other short term money market rates and iii to link the size of this spread to the federal reserve s underlying monetary policy strategy

effects of public ownership over firms size and overstaffing problems a model is presented to analyse the impact ofownership over the problem of excess of employmentgenerally found in public firms a government has toprovide a service or build an infrastructure underuncertainty about the valuation of the project byconsumers three possible ownership schemes areconsidered for the provision of this service astate owned firm a private firm with a completecontingent contract or a private firm with anincomplete contract in all three schemes the agentthat chooses the size of the project is always thegovernment without any asymmetries of information even though multiple solutions are feasible and nodefinitive conclusion is found to be valid for allstates of nature an evaluation of outcomes shows thata private firm tends to underprovide infrastructure orservices more often while under public ownership thefirm is typically larger if incomplete contracting isadded to the private firm case the model exhibitssolutions in which outcomes could be socially worsethan those obtained by a public firm only changes inthe voting behaviour of workers and contracting costsare required in this model to derive these results thus the paper provides an example that ownershipper se may have an effect on the size andefficiency of firms even under symmetric informationconditions an extreme that has been generally deniedin the literature on public firms and privatisation

signaling and the design of delegated management contracts for public utilities this article analyzes the shape of contracts between local governments and the contractors they hire to run public facilities on their behalf governments are privately informed about the quality of the facility while risk neutral contractors undertake a non verifiable operating eort the design of the contract signals the quality of the facility in such a way that the better this quality the greater the share of operating risk kept by the government this feature reduces the agent s marginal incentives creating a trade o between signaling and moral hazard we provide extensions of our framework in several directions allowing for risk aversion on the agent s side double moral hazard and political delegation the model is supported by some stylized facts from the water industry

does privatisation of vocational rehabilitation improve labour market opportunities evidence from a field experiment in sweden this paper analyses if privatisation of vocational rehabilitation can improve labour market opportunities for individuals on long term sickness absence we use a field experiment performed by the p

does competition among public schools benefit students and taxpayers tiebout choice among districts is the most powerful market force in american public education naive estimates of its effects are biased by endogenous district formation i derive instruments from the natural boundaries in a metropolitan area my results suggest that metropolitan areas with greater tiebout choice have more productive public schools and less private schooling little of the effect of tiebout choice works through its effect on household sorting this finding may be explained by another finding students are equally segregated by school in metropolitan areas with greater and lesser degrees of tiebout choice among districts

public service motivation as an argument for government provision a public service motivation psm inclines employees to provide effort out of concern for the impact of that effort on a valued social service though deemed to be important in the literature on public administration this motivation has not been formally considered by economists when a psm exists this paper establishes conditions under which government bureaucracy can better obtain psm motivated effort from employees than a standard profit maximizing firm the model also provides an efficiency rationale for low powered incentives in both bureaucracies and other organizations producing social services 2000 elsevier science s a all rights reserved

the effect of organizational form on quality the case of franchising abstract the organizational form of franchising has been shown to yield higher profits and faster growth through reducing agency costs why then does anyone not franchise in this paper i argue that the diffuse residual claims of the franchise system reduce overall system quality and that this problem is inherent in the nature of franchising the theory is tested by examining evidence from both the restaurant and the hotel industries including chains that franchise and ones that own all of their units in both industries quality is negatively related to the percent franchising in the chain controlling for size growth in units monitoring costs market segment ownership structure multi chain operation and price the results suggest that the franchise contract increases free riding and decreases quality in decentralized service chains and that quality is not contractible in this setting

transaction costs and the property rights approach to the theory of the firm the standard property rights approach is focused on ex ante investment incentives while there are no transaction costs that might restrain ex post negotiations we explore the implications of such transaction costs prominent conclusions of the property rights theory may be overturned a party may have stronger investment incentives when a non investing party is the owner and joint ownership can be the uniquely optimal ownership structure intuitively an ownership structure that is unattractive in the standard model may now be desirable because it implies large gains from trade such that the parties are more inclined to incur the transaction costs

a critical assessment of the incomplete contracts theory for private participation in public services the case of the water sector in ghana this paper provides a critical analysis of the recent developments in the incomplete contracts theory and its conclusions for privatisation of public services drawing on a case study of management contract for urban water services in ghana and highlighting the flaws in the theory the article argues that contractual incompleteness does not provide a uniform guidance on efficient forms of ownership we argue that methodological individualism utilised in the theory is particularly ineffective for its application to public services where direct or indirect contractual role of the state cannot be eliminated the sterility of the theory with respect to political institutional and distributional context of public service delivery is identified as an important weakness copyright oxford university press

monetary policy transmission with interbank market fragmentation this paper shows how interbank market fragmentation disrupts the transmission of monetary policy fragmentation is the fact that banks depending on their country of location have different probabilities of default on their interbank borrowings once fragmentation is introduced into standard theoretical models of monetary policy implementation excess liquidity arises endogenously this leads short term interest rates to depart from the central bank policy rates using data on monetary policy operations i show that this mechanism has been at work in the euro area since 2008 the model is used to analyze conventional and unconventional monetary policy measures

public versus private production and economies of scale the cost of producing the same good often differs substantially for public and private producers we investigate the effect of organization in a case where the production technology is simple the cleaning of danish schools three forms of organization are used decentral municipal central municipal or private for small schools the organizational form has little impact on cost for larger schools decentral municipal production is the most expensive on average centralization reduces costs by 5 while privatization reduces costs by 30 similar cost differences are reported in the literature for other cases but it is a new result that the cost differences are due to economies of scale public choice theories predict that cost differences are due to ownership or competition we find evidence that both theories help explain the cost differences

fixed costs and the behavior of the federal funds rate abstract this paper presents an equilibrium model of the federal funds market that ties movements in the funds rate to changes in the supply of reserves and to a fixed cost facing banks that borrow at the discount window it is found that the existence of the fixed cost is capable of explaining a number of features of the funds market in particular it is critical for explaining occasional instances of extremely high funds rates it also provides an explanation for heterogeneous behavior across banks towards the discount window and for higher average funds rates at the end of maintenance periods

lessons from the bell curve this paper examines the argument presented in the bell curve a central argument is that one factor g accounts for correlation across test scores and performance in society another central argument is that g cannot be manipulated these arguments are combined to claim that social policies designed to improve social performance cannot be effective a reanalysis of the evidence contradicts this story the factors that explain wages receive different weights than the factors that explain test scores more than g is required to explain either other factors besides g contribute to social performance and they can be manipulated

a dynamic network model of the unsecured interbank lending market abstract we introduce a dynamic network model of interbank lending and estimate the parameters by indirect inference using network statistics of the dutch interbank market from february 2008 to april 2011 we find that credit risk uncertainty and peer monitoring are significant factors in explaining the sparse core periphery structure of the market and the presence of relationship lending shocks to credit risk uncertainty lead to extended periods of low market activity intensified by reduced peer monitoring moreover changes in the central bank s interest rate corridor have both a direct effect on the market as well as an indirect effect by changing banks monitoring efforts

liquidity regulation and the implementation of monetary policy in addition to revamping existing rules for bank capital basel iii introduces a new global framework for liquidity regulation one part of this framework is the liquidity coverage ratio lcr which requires banks to hold sufficient high quality liquid assets to survive a 30 day period of market stress as monetary policy typically involves targeting the interest rate on loans of one of these assets central bank reserves it is important to understand how this regulation may impact the efficacy of central banks current operational frameworks we introduce term funding and an lcr requirement into an otherwise standard model of monetary policy implementation our model shows that if banks face the possibility of an lcr shortfall then the usual link between open market operations and the overnight interest rate changes and the short end of the yield curve becomes steeper our results suggest that central banks may want to adjust their operational frameworks as the new regulation is implemented

a comparison between economic systems with an application to transition abstract this paper develops a general equilibrium theory of endogenous firm and class formation under non contractibility with heterogeneous individuals a collectivist economy a private ownership economy and a mixed economy are compared on the basis of identical economic fundamentals methodological symmetry each economic system generates specific inefficiencies so that none dominates the others in general the main trade off is between the welfare loss associated with risk taking in the private ownership economy and the informational problems in the collectivist economy we then use this framework to study the political economy of transition between economic systems and provide detailed welfare results

winter is possibly not coming mitigating financial instability in an agent based model with interbank market abstract we develop a macroeconomic agent based model to study how financial instability can emerge from the co evolution of interbank and credit markets and the policy responses to mitigate its impact on the real economy the model is populated by heterogenous firms consumers and banks that locally interact in different markets in particular banks provide credit to firms according to a basel ii or iii macro prudential frameworks and manage their liquidity in the interbank market the central bank performs monetary policy according to different types of taylor rules we find that the model endogenously generates market freezes in the interbank market which interact with the financial accelerator possibly leading to firm bankruptcies banking crises and the emergence of deep downturns this requires the timely intervention of the central bank as a liquidity lender of last resort moreover we find that the joint adoption of a three mandate taylor rule tackling credit growth and the basel iii macro prudential framework is the best policy mix to stabilize financial and real economic dynamics however as the liquidity coverage ratio spurs financial instability by increasing the pro cyclicality of banks liquid reserves a new counter cyclical liquidity buffer should be added to basel iii to improve its performance further finally we find that the central bank can also dampen financial instability by employing a new unconventional monetary policy tool involving active management of the interest rate corridor in the interbank market

government control of the media abstract we present a formal model of government control of the media to illuminate variation in media freedom across countries and over time media bias is greater and state ownership of the media more likely when the government has a particular interest in mobilizing citizens to take actions that further some political objective but are not necessarily in citizens individual best interest however the distinction between state and private media is smaller large advertising markets reduce media bias in both state and private media but increase the incentive for the government to nationalize private media media bias in state and private media markets diverge as governments become more democratic whereas media bias in democracies and autocracies converge as positive externalities from mobilization increase

voluntary reserve targets we study monetary policy implementation through an operating regime involving voluntary reserve targets vrts operating regimes based on reserve requirements may lead to a collapse in interbank trade as they have since the financial crisis we show that no matter the abundance of reserves vrts encourage market activity and support the central bank s control over interest rates we consider i the impact of anticipated and unanticipated liquidity injections by the central bank on market outcomes and ii a comparison with the implementation framework currently adopted by the federal reserve overall a vrt framework may provide several advantages over other frameworks

numeracy and the impact of high food prices in industrializing britain 1780 1850 abstract using census based data on the ability to recall one s age we show that low levels of nutrition impaired numeracy in industrializing england 1780 to 1850 cognitive ability declined among those born during the napoleonic wars the effect was stronger in areas where grain was expensive and relief for the poor an early form of welfare support was limited nutritional shortages had a nonlinear effect on numeracy with severe shortages impairing numeracy more nutrition during childhood also mattered for labor market outcomes individuals born in periods or counties with low numeracy typically worked in occupations with lower earnings

monetary policy implementation in a negative rate environment monetary policy implementation could in theory be constrained by deeply negative rates since overnight market participants may have an incentive to invest in cash rather than lend to other participants

the micromechanics of the federal funds market implications for day of the week effects in funds rate variability the federal funds rate arguably is the most important interest rate in the u s capital market because it plays a central role in monetary policy and the term structure this paper examines the micromechanics of the funds market we show that in a continuous market with asynchronous trading regulatory constraints and accounting conventions that focus agents attention on discrete time instants have important implications for the dynamics of trading activity and realized market prices we also exhibit a model of the market that explains observed regularities in the intertemporal behavior of the funds rate

service quality in the electricity industry the role of privatization and managerial behavior abstract this paper analyzes the relationship between privatization and service quality in the electricity industry and tests the hypothesis that managerial behavior is a significant intervening factor the sample includes 31 italian distributors over the period 1998 2004 their quality performance is represented by continuity of supply an aspect of quality that is both contractible and regulated results of the empirical analysis suggest that the transfer of shareholdings to private investors does not lead to quality degradation the results also suggest that managerial dominance translates into a reduction in supply quality this effect is likely to be particularly strong for public sector utilities

payment obligations reserve requirements and the demand for central bank balances we develop a model in which a bank s demand for reserves depends on the joint distribution of transactions reserve requirements and the interest rate by devoting resources to its liquidity management a bank can save on costly reserves required to settle its payments on time we test the model with data from the largest banks in the swiss interbank clearing system we find that the turnover ratio the speed with which a bank turns over its reserves in the payment system depends largely on the aggregate value of its payments we also find that reserve requirements impose a highly uneven burden on the banks

privatization public investment and capital income taxation abstract this paper investigates the optimal line of demarcation between the public and private production sectors as affected by the government s privatization decision only the private sector is subject to taxation in the form of investment taxes in deciding on privatization the government trades off the tax distortion affecting private production against the relative production inefficiency of public production at the optimum the public sector is too large in the sense that the government carries out some production activities where it is inefficient relative to the private sector also public production is relatively capital intensive

interest rate corridors and reserves abstract this paper evaluates reserves regimes versus interest rate corridors which have become competing frameworks for monetary policy implementation rate corridors relying on lending and deposit facilities to create ceilings and floors for overnight interest rates evince mixed results on controlling volatility reserve requirements allow period average smoothing of interest rates but even if remunerated are subject to reserve avoidance activities a system of voluntary period average reserve commitments could offer equivalent rate smoothing advantages if central banks created symmetric opportunity costs of meeting or falling short of period average reserve requirements or commitments they could achieve flat reserve demand on settlement day

corridor system and interest rates volatility and asymmetry the corridor system in its current form is believed to reduce the volatility of overnight interest rates and to eliminate any chance of persistent upward or downward bias the model presented here serves to highlight two main findings one is that a central bank can further reduce the volatility of overnight interest rates by allowing banks some flexibility to meet their reserve targets within a small range as observed in the uk data the second is that a seemingly symmetric corridor may be asymmetric in practice due to several distortions as the uk and euro area data suggest

monetary policy in a channel system abstract channel systems for conducting monetary policy are becoming increasingly popular despite its popularity the consequences of implementing policy with a channel system are not well understood we develop a general equilibrium framework of a channel system and study the optimal policy a novel aspect of the channel system is that a central bank can tighten or loosen its policy without changing its policy rate this policy instrument has so far been overlooked by a large body of the literature on the optimal design of interest rate rules

corruption in procurement and public purchase abstract the paper studies capture and extortion in public purchase it shows that capture yields a dead weight loss while extortion does not based on the calibration of the model the total cost of capture is between 1 2 and 2 88 times the amount of the bribes the theoretical analysis focuses on capture fight the legal framework that emerges from the normative analysis involves open tender for larger purchases and no monitoring for the smaller ones the rule is independent of a country s characteristics large public purchases should hence be ruled by international legislation for markets of medium range national legislation differs when susceptibility to corruption rises there is a shift from the capture to the extortion regime

efficiency and bargaining power in the interbank loan market using detailed transactions level data on interbank loans we examine the efficiency of an overnight interbank lending market and the bargaining power of its participants our analysis relies on the equilibrium concept of the core which imposes a set of no arbitrage conditions on trades in the market for canada s large value transfer system we show that although the market is fairly efficient systemic inefficiency persists throughout our sample the level of inefficiency matches distinct phases of both the bank of canada s operations as well as phases of the 2007 8 financial crisis we find that bargaining power tilted sharply toward borrowers as the financial crisis progressed and surprisingly toward riskier borrowers

motivating wealth constrained actors we examine how owners of productive resources e g public enterprises or financial capital optimally allocate their resources among wealth constrained operators of unknown ability optimal allocations exhibit 1 shared enterprise profit the resource owner always shares the operator s profit 2 dispersed enterprise ownership resources are widely distributed among operators of varying ability 3 limited benefits of competition the owner may not benefit from increased competition for the resource and sometimes 4 diluted incentives for the most capable more capable operators receive smaller shares of the returns they generate implications for privatizations and venture capital arrangements are explored

day to day monetary policy and the volatility of the federal funds rate we propose a model of the interbank money market with an explicit role for central bank intervention and periodic reserve requirements and study the interaction of profit maximizing banks with a central bank targeting interest rates at high frequency the model yields predictions on biweekly patterns of the federal funds rate s volatility and on its response to changes in target rates and in intervention procedures such as those implemented by the fed in 1994 theoretical results are consistent with empirical patterns of interest rate volatility in the u s market for federal funds

day to day monetary policy and the volatility of the federal funds interest rate we propose a model of the interbank money market with an explicit role for central bank intervention and periodic reserve requirements and study the interaction of profit maximizing banks with a central bank targeting interest rates at high frequency the model yields predictions on biweekly patterns of the federal funds rate s volatility and on its response to changes in target rates and in intervention procedures such as those implemented by the fed in 1994 theoretical results are consistent with empirical patterns of interest rate volatility in the u s market for federal funds

the determinants of price and quality in competitively tendered contracts traditional analysis of the impact of competitive tendering on service provision has focused on costs and prices critics have argued that price reductions lead to lower quality we tested this hypothesis using a two equation econometric model with data from a panel of 61 cleaning service contracts the results indicated that while competition reduced price significantly quality of service was maintained or even enhanced the effect of competition turned out to be greater on prices than on quality and the influence of ownership appeared to be negligible on both the evidence does not support the hypothesis that efficiency gains are traded off for lower quality copyright 1995 by royal economic society

the effect of adolescent experience on labor market outcomes the case of height taller workers receive a wage premium net of differences in family background the disparity is similar in magnitude to the race and gender gaps we exploit variation in an individual s height over time to explore how height affects wages controlling for teen height essentially eliminates the effect of adult height on wages for white men the teen height premium is not explained by differences in resources or endowments the teen height premium is partially mediated through participation in high school sports and clubs we estimate the monetary benefits of a medical treatment for children that increases height

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

population technology and growth from malthusian stagnation to the demographic transition and beyond this paper develops a unied growth model that captures the historical evolution of population technology and output it encompasses theendogenous transitionbetween three regimes that have characterized economic development the economy evolves from amalthusianregime wheretechnologicalprogressis slow andpopulationgrowthprevents anysustainedriseinincomepercapita intoapost malthusianregime wheretechnological progress rises and population growth absorbs only part of output growth ultimately a demographic transition reverses the positive relationship between income and population growth andtheeconomyentersamoderngrowthregimewithreducedpopulationgrowth

the impact of return on collateral in a channel system we empirically investigate the relationship between the return on collateral and monetary policy implementation in the channel system recent developments in monetary theory suggest that the return on government assets which measures the opportunity cost of holding collateral should have negative impacts on the interest rate spread and the interbank market rate the central bank should set a higher spread when the return on collateral is below a cutoff but implements a lower spread when the return on collateral is higher than the cutoff the interbank market rate tends to lie above the policy target rate when the return on collateral is low and vice versa we use data from eurozone area and six industrialized countries to test these theoretical implications we propose two econometric models one is more structural and closely related to the monetary model to test the negative relationships and the other is based on the threshold autoregression model to detect the potential cutoffs our findings provide conditional support for the negative impact of return on collateral jel e40 e52 e58

on the virtues of privatization when government is benevolent abstract this paper shows that privatizing a public firm can be welfare improving even if the government is a welfare maximizer we consider a setup where the firm s owner a profit maximizing entrepreneur or a benevolent government employs a manager who can invent and implement an innovative production technology wage arrangements are optimal given the verifiable information all parties behave rationally and the information structure is the same in both governance modes nevertheless privatization turns out to be preferable in a wide variety of situations government ownership yields the first best if producing under the old technology is not viable

monetary policy implementation and overnight rate persistence overnight money market rates are the predominant operational target of monetary policy as a consequence central banks have redesigned the implementation of monetary policy to keep the deviations of the overnight rate from the key policy rate small and short lived this paper uses fractional integration techniques to explore how the operational framework of four major central banks afiects the persistence of overnight rates our results suggest that a well communicated and transparent interest rate target of the central bank is a particularly important condition for a low degree of overnight rate persistence

auctions versus negotiations which is the more profitable way to sell a company an auction with no reserve price or an optimally structured negotiation with one less bidder we show under reasonable assumptions that the auction is always preferable when bidders signals are independent for affiliated signals the result holds under certain restrictions on the seller s choice of negotiating mechanism the result suggests that the value of negotiating skill is small relative to the value of additional competition the paper also shows how the analogies between monopoly theory and auction theory can help derive new results in auction theory jel d44 g34 there are close analogies between standard price theory and the theory of auctions in an absolute english auction in which the price rises continuously until only one bidder remains and the seller is required to accept the final bid the sale price equals the lowest competitive price at which supply equals demand in the theory of optimal auctions the seller is treated as a monopolist who can choose any

open mouth operations abstract this paper explains how central bank statements rather than open market operations can be used to implement monetary policy in the extreme policy instruments can be held constant and yet interest rates will evolve along the path desired by the central bank we show how the recent implementation of monetary policy in new zealand works in this way using announcement data from new zealand we find that open mouth operations lead to large changes in interest rates across all maturities and these changes cannot be explained by open market operations implications are drawn for monetary policy in other jurisdictions

factors influencing the privatisation of urban solid waste collection in spain this paper analyses some of the organisational aspects of urban solid waste collection it starts by discussing some of the theoretical issues of contracting out then an explanatory model is spec

job design with conflicting tasks reconsidered a principal wants two sequential tasks to be performed by wealth constrained agents suppose that there is an outcome externality i e a first stage success can make second stage effort more or less effective if the tasks are conflicting the principal s profit maximizing way to induce high efforts is to hire one agent to perform both tasks so that the prospect to get a larger second stage rent after a first stage success motivates the agent to work hard in the first stage in contrast when there is an effort externality i e first stage effort reduces or increases the probability of a second stage success then the principal prefers to hire two agents whenever the tasks are conflicting

public employees as swing voters empirical evidence on opposition to public reform reform offers economic gains for society atlarge but can represent a threat to theinterests of public employees publicsector reform faces opposition from votersemployed in public sector norwegian dataallow for an analysis this interpretation survey data show that public employeesprefer less reform than the rest of thepopulation the voting behavior of publicemployees is more sensitive to reform thanis that of other voters the swing voterhypothesis and hence shares of publicemployees in a local jurisdiction have anegative impact on the probability ofreform

contracting out by the public sector theory evidence prospects unlike privatization contracting out or simply contracting does not generally involve the sale of publicly owned assets yet it has been widely used as a mechanism for reform of public sector service provision contracting introduces ex ante competition competition for the market through competitive tendering this article examines both the theory and evidence of contracting by the public sector it considers the theoretical conditions such as contractual incompleteness and the ownership of physical assets which may impede efficient contracting it also reviews the international evidence which suggests that savings in the order of 20 percent are achievable without sacrificing the quality of service provided in the uk savings of between 240m pounds and 280m pounds have been estimated for contracts let at the central government level substantial savings have also been generated by contracting at the local government level copyright 1997 by oxford university press

bank liquidity interbank markets and monetary policy a major lesson of the recent financial crisis is that the interbank lending market is crucial for banks facing large uncertainty regarding their liquidity needs this paper studies the efficiency of the interbank lending market in allocating funds we consider two different types of liquidity shocks leading to di erent implications for optimal policy by the central bank we show that when confronted with a distribu tional liquidity shock crisis that causes a large disparity in the liquidity held among banks the central bank should lower the interbank rate this view implies that the traditional tenet prescribing the separation between prudential regulation and mon etary policy should be abandoned in addition we show that during an aggregate liquidity crisis central banks should manage the aggregate volume of liquidity two di erent instruments interest rates and liquidity injection are therefore required to cope with the two di erent types of liquidity shocks finally we show that failure to cut interest rates during a crisis erodes financial stability by increasing the risk of bank runs