delegating climate policy to a supranational authority a theoretical assessment abstract this paper studies the delegation of climate policy to a supranational environmental authority we develop a simple model of a world consisting of a large number of countries which derive utility from energy consumption countries suffer from global warming and local air pollution both caused by the combustion of fossil fuels and decide individually on investments in clean technologies for energy production a supranational environmental authority decides for each country on the maximally permitted amount of greenhouse gas emissions we demonstrate that the authority faces a dynamic inconsistency problem that leads to welfare losses but these losses can be kept small if the authority is endowed with an optimally designed mandate the optimal mandate penalizes the cost of local air pollution very heavily relative to the cost of global warming however delegation of climate policy faces a further difficulty as countries have a recurrent incentive to change the authority s mandate over time

how delegation improves commitment abstract mccallum 1995 american economic review papers and proceedings 85 2 207 211 conjectures that delegation merely relocates the commitment problem but does not solve it this holds if optimal ex ante policies do not change if additional information becomes available however with a flexibility credibility trade off delegation improves credibility

rogoff s conservative central banker restored we show that delegation of monetary policy to a weight conservative central banker can be desirable although the government can also use an inflation contract an employment target an inflation target or any combination of these to control the central banker the key feature of our model is a stochastic inflation bias arising when wage setters receive some information about a supply shock prior to signing nominal wage contracts weight conservatism is found to be desirable if fully state contingent delegation is not possible and the stochastic inflation bias cannot be eliminated by optimal choice of the delegation parameters

the inflation bias when the central bank targets the natural rate of unemployment abstract this paper studies the proposition that an inflation bias can arise in a setup where a central banker with asymmetric preferences targets the natural unemployment rate preferences are asymmetric in the sense that positive unemployment deviations from the natural rate are weighted more or less severely than negative deviations in the central banker s loss function the bias is proportional to the conditional variance of unemployment the time series predictions of the model are evaluated using data from g7 countries econometric estimates support the prediction that the conditional variance of unemployment and the rate of inflation are positively related

why the microbrewery movement organizational dynamics of resource partitioning in the u s brewing industry1 the number of small specialty brewers in the u s beer brewing industry has increased dramatically in recent decades even as the market for beer became increasingly dominated by mass production brewing companies using the resource partitioning model of organizational ecology this article shows that these two apparently contradictory trends are fundamentally interrelated hypotheses developed here refine the way scale competition among generalist organizations is modeled and improve the theoretical development of the sociological bases for the appeal of specialist organizations products especially those related to organizational identity evidence drawn from qualitative and quantitative research provides strong support for the theory the article offers a brief discussion of the theoretical and substantive issues involved in application of the model to other industries and to other cultures

should renewable energy policy be renewable political flexibility brings about trade offs for policy makers aiming to support the deployment of renewable energy sources res on the one hand it allows incorporating new information on ex ante uncertain benefits and costs of res policy on the other hand it may deter res investments this paper scrutinizes how these trade offs play out economically and politically when res policy makers choose the degree of flexibility as well as the instruments to implement flexibility the analysis builds on a theoretical framework distinguishing between flexibility by design and by adjustment it is complemented by a discussion of three case studies res support schemes in germany and the united kingdom and the eu emissions trading scheme theoretical as well as empirical results suggest that the politically chosen degree of flexibility by policy design may be sub optimally low in contrast flexibility by policy adjustment is often excessively high

testing commitment models of monetary policy evidence from oecd economies in ation rates in a number of oecd follow a common trend over the past four decades in ation starts out low in the 1960s rises for a time before peaking in the 1970s or early 1980s and then falls back to initial levels this similarity in the behavior of trend in ation suggests that any explanation of long run in ation trends ought to apply across oecd countries ireland 1999 shows that a simple time inconsistency model of monetary policy modifled to allow for a time varying nairu can explain long run trends in u s in ation in this paper we show that this result cannot serve as an explanation of the common trend in oecd in ation as it flts the data only in the u s we investigate two important variants of the hypothesis i that time inconsistency was an important component of central bank behavior in earlier decades but has become less signiflcant in recent years and ii that time inconsistency problems drive u s in ation which afiects in ation rates in other countries as a result of central bankers attempts to manage nominal exchange rate movements vis a vis the u s dollar we flnd that the flrst hypothesis flts the data no better than the baseline model we flnd some support for the international spillovers version of the model but the behavior of non u s central bankers with respect to domestic unemployment rates is not well described by the time inconsistency mechanism

issues in new political economy an overview a brief overview of the historical background nature and rapid growth in volume and scope of new political economy since the early 1980s is provided the paper continues with some general reflections on the strengths and weaknesses of the new political economy approach illustrated by the other contributions to this special issue of the journal of economic surveys the final section summarises these contributions

the conditional nature of embeddedness a study of borrowing by large u s firms 1973 1994 economic and organizational sociologists have increasingly demonstrated that the actions of individuals and firms are affected by the social networks within which they are embedded in recent years scholars have begun to recognize that the effects of these social networks may vary across populations or types of relations this article examines the extent to which the effects of interfirm networks on the behavior of firms are historically contingent focusing on the level of debt financing among approximately 140 large u s corporations over a 22 year period the authors show that the extent to which the firms use of debt was influenced by those with which they were tied through director interlocks declined over time the authors argue that this decline in the network effect reflected a shift in the institutional environment within which the firms operated and that it was driven by three processes the professionalization of the finance function within the firm the internalization of financial decision

social movements and organizational form cooperative alternatives to corporations in the american insurance dairy and grain industries how do social movements promote diversity and alternative organizational forms we address this question by analyzing how cooperative enterprise was affected by the grange a leading anticorporate movement in the united states during the late nineteenth and early twentieth centuries state level analyses across three industries yield three findings first the grange had positive effects on cooperatives and mutuals during the nineteenth century populist struggles over corporate capitalism second these effects were stronger where corporations counter mobilized to block challengers political efforts grangers pursued economic organization as an alternative to politics and in response to blocked political access third the grange continued to foster cooperatives even as populist revolts waned it did so however by buffering cooperatives from problems of group heterogeneity and population change rendering them less dependent on supportive communities and specific economic conditions these findings advance research at the movements organizations interface by documenting movement effects and by isolating different causal pathways through which mobilization counter mobilization and political opportunity shape economic organization the results also provide economic sociology with new evidence on how social structure moderates economic forces and help revise institutional analyses of american capitalism by showing how cooperatives emerged as significant rather than aberrant elements of the u s economy

price level targeting vs inflation targeting a free lunch price level targeting without base drift and inflation targeting with base drift are compared under commitment and discretion with persistence in unemployment price level targeting is often said to imply more short run inflation variability and thereby more employment variability than inflation targeting counter to this conventional wisdom under discretion a price level target results in lower inflation variability than an inflation target if unemployment is at least moderately persistent a price level target also eliminates the inflation bias under discretion and as is well known reduces long term price variability society may be better off assigning a price level target to the central bank even if its preferences correspond to inflation targeting a price level target thus appears to have more advantages than commonly acknowledged

the stages of the policy process and the equal rights amendment 1972 1982 studies of how social movements impact policy outcomes typically treat policy change as a dichotomous phenomenon a governmental unit either adopts or does not adopt a particular policy in a particular time frame this simplistic view of the policy process runs the risk of masking how movements and other factors matter at various stages of the policy process each stage is characterized by different rules and different consequences thus movements and other factors ought to matter differently at each stage the authors examine three stages of policy development with regard to state ratification of the equal rights amendment results show that movements mattered more to legislative decisions in the earlier stages of the policy process but that their effects were eclipsed in later stages by public opinion

political business cycles and macroeconomic credibility a survey there is clear evidence that government popularity and election performance is affected in part by economic performance suggesting that governments may manipulate the economy to political advantage simple models incorporating adaptive expectations which allowed the government to exploit this relationship were developed in the 1970s but fell out of fashion with the advent of new classical economics however modern theories of the political business cycle which are closely related to the macroeconomic policy game literature assume rational expectations and lead to forms of political business cycle driven by the existence of uncertainty of one type or another the international evidence suggests that some aspects of the theories apply although definitive conclusions are as we might expect hard to come by

the effectiveness of monetary policy anchors firm level evidence analyses of monetary policy posit that exchange rate pegs inflation targets and central bank independence can help anchor private sector inflation expec tations yet there are few direct tests of this argument we offer cross national micro level evidence on the effectiveness of monetary anchors in controlling private sector inflation concerns using firm level data from eighty one countries approximately 10 000 firms we find evidence that international anchors exchange rate commit ments correlate significantly with a substantial reduction in private sector concerns about inflation while domestic anchors inflation targeting and central bank inde pendence do not our conjecture is that private sector inflation expectations are more responsive to exchange rate anchors because they are more transparent more con straining and more costly than domestic anchoring arrangements the literature on monetary policy highlights the role of monetary institutions in stabilizing private sector inflation expectations central bank independence cbi inflation targeting it and fixed exchange rates pegs are widely viewed as insti tutions that have the capacity to mitigate private sector concerns that policymak ers will exploit them after they have locked in their price wage and investment decisions while other empirical research explores the institutional correlates of inflation and its variability yielding mixed results we use firm level data in our study to directly assess the impact of monetary anchors on private sector inflation concerns we find evidence that pegs mitigate firm owners concerns with infla tion but that domestic anchors such as it and cbi are uncorrelated with our micro indicators of inflation expectations considerable research has investigated the use of it cbi and pegs as institu tions that establish monetary policy credibility whereas these anchors are expected

delegation time inconsistency and sustainable equilibrium this paper analyzes the effectiveness of delegation in solving the time inconsistency problem of monetary policy using a microfounded general equilibrium model where delegation and reappointment are explicitly included into the government s strategy the method of chari and kehoe 1990 sustainable plans journal of political economy 98 4 783 802 is applied to characterize the entire set of sustainable outcomes countering mccallum s 1995 two fallacies concerning central bank independence american economic review 85 2 207 211 second fallacy delegation is able to eliminate the time inconsistency problem with the commitment policy being sustained under discretion for any intertemporal discount rate

regulating american industries markets politics and the institutional determinants of fire insurance regulation1 this article assesses three approaches to state regulation capture theory interest group analyses and neoinstitutional research state level event history analyses of fire insurance rate regulation from 1906 to 1930 are used contrary to capture theory regulation was not driven simply by firms interests in market control instead consistent with interest group analyses regulation was more likely when anticompany forces farmers and small businesses could challenge big business politically further as neoinstitutional research suggests regulation was more likely when industry governance evoked legitimacy crises when courts and professions endorsed regulation and its underlying models and when states developed system wide administrative capacities institutional conditions also mediated the effects of markets and politics on regulation using these findings we develop a theory of how political and institutional conditions shape industries governance options

ripples of fear the diffusion of a bank panic community reactions against organizations can be driven by negative information spread through a diffusion process that is distinct from the diffusion of organizational practices bank panics offer

the evolution of common law we present a model of lawmaking by appellate courts in which judges influenced by policy preferences can distinguish precedents at some cost we find a cost and a benefit of diversity of judicial views policy motivated judges distort the law away from efficiency but diversity of judicial views also fosters legal evolution and increases the law s precision we call our central finding the cardozo theorem even when judges are motivated by personal agendas legal evolution is on average beneficial because it washes out judicial biases and renders the law more precise our paper provides a theoretical foundation for the evolutionary adaptability of common law

the european central bank independence accountability and strategy a review this paper reviews research on central banking and monetary policy with special emphasis on the position of the future european central bank nowadays it is often thought that an independent central bank with an explicit mandate to aim for price stability constitutes an important institutional device to assure price stability indeed the ecb will be one of the most independent central banks as follows from the codings of various indicators measuring legal independence still it does not follow straightforwardly from the literature that the statute of the ecb is optimal it is also argued that the accountability of the ecb is poorly arranged for in comparison with that of several national central banks finally the discussion about the monetary strategy of the ecb is reviewed

acquisitions as exaptation the legacy of founding institutions in the u s commercial banking industry this study focuses on how founding institutions impact intraorganizational capabilities and how such imprints may have different external manifestations in subsequent historical eras we introduce the concept of exaptation to organizational theory identifying an important process whereby the historical origin of a capability differs from its current usefulness three founding conditions branching policy modernization and political culture influenced banks development of capabilities for managing dispersed branches and these capabilities subsequently led to variation in banks propensity to engage in acquisitions

inflation targeting fiscal rules and the policy mix cross effects and interactions we examine how inflation targeting it and fiscal rules fr affect inflation and fiscal performance in a large panel of countries during 1990 2009 in line with theory both fr and it appear to shape monetary and fiscal outcomes significant cross effects seem to exist as it strengthens fiscal performance whereas the combination of fr and it tends to be associated with more disciplined macroeconomic policies than if only one of these institutions operates our findings suggest that it and fr affect the coordination of the policy mix and point to potential benefits of reforming macroeconomic frameworks in a holistic fashion

structuring a theory of moral sentiments institutional and organizational coevolution in the early thrift industry the authors investigate the coevolution of organizations and institu tions they study how institutional definitions rules and expectations unfold in tandem with the organizational structures and processes that embody those institutions the research site is the early thrift industry changes in thrifts technical environment the rise of a transient and heterogeneous population and institutional environment the rise of progressivism propelled this coevolutionary process the coevolution of thrift organizations and institutions proceeded primarily through selection adaptation was constrained by both institutional factors it was difficult to adopt a novel institutional logic and technical factors early thrifts were generally small so entry and exit were easy

some behavioral perspectives on the dominance of hierarchical over democratic forms of enterprise abstract this paper explores possible reasons why participatory modes of organization whole potentially viable and preferable to hierarchical modes for a large majority of workers may be dominated by the latter in capitalist market economies after exploring the developmental preconditions for the evolution of a mature participatory mode using a behavioral approach to organizations it is suggested that since the interest of those possessing scarce managerial skills may lie with hierarchical firms a participatory sector may be uncompetitive unless rights to enter labor contracts are redefined thus the analysis offers a partial explanation of the political nature of the demand for workplace democracy

the contingent nature of public policy and the growth of u s commercial banking runner up academy of management s best published paper in organization and management theory in 2009

what should fiscal councils do fiscal watchdogs so called fiscal councils have been proposed as a method to counter deficit bias of fiscal policy the paper analyses theoretically what role fiscal councils could play and surve

two fallacies concerning central bank independence this paper takes issue with two basic conclusions prevalent in the literature on central bank behavior first the paper argues that it is inappropriate to presume that central banks will in the absence of any precommitment technology necessarily behave in a discretionary fashion that implies an inflationary bias since there is no functional connection between average rates of money creation or inflation and policy responsiveness to cyclical disturbances it is entirely feasible for the bias to be avoided in other words there is no necessary tradeoff between flexibility and commitment second to the extent that the absence of any absolute precommitment technology is nevertheless a problem it will apply to a consolidated central bank plus government entity as well as to the central bank alone thus contracts between governments and central banks do not overcome the motivation for dynamic inconsistency they merely relocate it this abstract was borrowed from another version of this item

optimal central banker contracts and common agency this paper considers the contracting approach to centralbanking in a simple common agency model we suggest thatcentral banker contracts that do not consider the possibilityof more than one principal existing are incomplete contracts such incomplete contracts can be a poor form ofmonetary policy delegation under common agency we develop amodel with two principals society government and ageneric interest group whose objective conflicts withsociety s ex ante preferences by incorporating an inflationarybias we determine when the government offered orinterest group offered contract dominates the central banker sdecision the results largely depend on whether theinterest group offered contract is written in terms of outputor inflation

store wars the enactment and repeal of anti chain store legislation in america1 competition between organizational forms manifests itself in political contention over the law the authors analyze the political strength and organization of the groups that supported and opposed state anti chain store laws the enactment of these laws depended on intrastate political activity and the interstate diffusion of anti chain store legislation the repeal process relied on suprastate activity as nationally organized pro chain store forces shifted the arena of contention to the supreme court and forged national alliances with labor unions and agricultural cooperatives in both enactment and repeal the political resources and strategies of organziational forms interacted with existing institutions to determine the trajectory of institutional change

imperfect credibility and inflation persistence in this paper we formulate a dynamic general equilibrium model with staggered nominal contracts in which households and rms use optimal ltering to disentangle persistent and transitory shifts in the monetary policy rule the calibrated model accounts quite well for the dynamics of output and insation during the volcker disinsation and implies a sacri ce ratio very close to the estimated value our approach indicates that insation persistence and substantial costs of disinsation can be generated in an optimizing agent framework without relaxing the assumption of rational expectations or relying on arbitrary modi cations to the aggregate supply relation jel classi cation e31 e32 e52

dynamic commitment and incomplete policy rules considering the dynamics of commitment highlights some neglected features of time inconsistency problems we modify the standard rules versus discretion question in three ways 1 a government that does not commit today retains the option to do so tomorrow 2 the government s commitment capability is restricted to a class of simple rules and 3 the government s ability to make irrevocable commitments is restricted three results stand out first the option to wait makes the incumbent regime rules or discretion relatively more attractive second the option to wait means that increased uncertainty makes the incumbent regime more attlwactive third because the commitment decision takes place in real time policy choice displays hysteresis when monetary policy is subject to dynamic inconsistencies optimal policy requires some precommitment by the central bank despite a proliferation of mechanisms designed to address this problem work in this area has continued to assume a once and for all choice between rules and discretion this paper asks two closely related questions first what happens if commitment decisions are made in real time so that failure to commit today does not rule out the possibility of commitment tomorrow second if governments can make only commitments that are difficult but not impossible to reverse what determines the dynamics of commitment and reversal the assumption of once and for all choice enforces simplistic dynamics on the policy process if the standard models are interpreted literally for example the commitment problem for u s monetary policy is moot having been resolved with the founding of the federal reserve system in 1914 if not at the constitutional convention of 1789 much of the interest in dynamic inconsistency however arises pre

running for the exit community cohesion and bank panics bank panics attract scholarly interest because they reflect distrust of each bank that experiences a run as a result of diffusion of information rumors about such bank runs trigger additional runs elsewhere however the contagion of bank runs is highly selective for reasons that are unrelated to the financial strength of the individual banks this presents a puzzle that extant theories on institutions and reputations cannot fully explain to solve this puzzle we turn to the characteristics of the community in which the banks operate we develop theory on how communities with diverse affiliation structures and economic inequality have weaker community cohesion and communication making such communities less likely to experience widespread distrust and hence bank runs we test hypotheses on the effects of community ethnic diversity national origin diversity religious diversity and wealth inequality using data from the great bank panic of 1893 and we find strong community effects on bank runs these f

the inflationary bias in a model of the open economy a note abstract in this paper we highlight the importance of aggregate supply effects on the size of the inflationary bias under discretionary policy making using a simple model of an open economy that imports a foreign resource input we show that under discretion the inflationary bias bears an inverse relationship to the elasticity of output supplied with respect to the real exchange rate this theoretical finding is consistent with romer 1993 romer d 1993 openness and inflation theory and evidence quarterly journal of economics 108 869 903 empirical results that point to the existence of a negative association between openness and inflation

delegating optimal monetary policy inertia abstract in a forward looking business cycle model central banks can achieve the timeless optimal commitment equilibrium even in the absence of a commitment technology if they are delegated with an objective function that is different from the societal one the paper develops a general linear quadratic method to solve for the optimal delegation parameters that generate the optimal amount of inertia in a markov perfect equilibrium and studies the optimal design of some policy regimes that are nested within this framework the squared optimal targeting rule inflation output gap growth and nominal income growth targeting and inflation and output gap contracts

new developments in monetary economics two ghosts two eccentricities a fallacy a mirage and a mythos monetary theory and policy are part of intertemporal public finance the two ghosts are the liquidity trap and the real balance effect the eccentricities are negative nominal interest rates and the helicopter drop of money the fallacy is the fiscal theory of the price level a logically inconsistent theory of the link between the government s intertemporal budget constraint and the general price level the mirage is the prediction that financial deregulation and technical change in the payments and settlements technology will cause monetary policy to lose its capacity to influence even nominal economic variables mythos refers to the independent central bank

inflation band targeting and optimal inflation contracts in this paper we provide a theoretical treatment of how inflation target ranges cope with the time inconsistency problem arising from incentives for the monetary policymaker to exploit the short run trade off between employment and inflation to pursue short run employment objectives as in a barro gordon 1983 model inflation band targets are able to achieve many of the benefits that arise under practically less attractive solutions such as the conservative central banker and optimal inflation contracts our theoretical model also shows how an inflation targeting range should be set and how it should respond to changes in the nature of shocks to the economy

the markup and inflation evidence in oecd countries in this paper we evaluate the dynamic inconsistency argument put forth by kydland and prescott 1977 and barro and gordon 1983 as an explanation for differences in the average inflation experience across oecd countries the focus is on the empirical evidence relating the overall degree of competition among firms as measured by the markup of price over marginal cost and inflation over the 1973 88 period the prediction is that higher markups raise the monetary authority s incentive to increase output leading to higher equilibrium rates of inflation we find that the markup does well in explaining cross country differences in average inflation jel classification e31 e58 d43 l ecart du prix par rapport au cout marginal et l inflation resultats pour les pays de l ocde ce memoire examine l argument mis de l avant par kydland et prescott 1977 et barro et gordon 1983 pour expliquer les differences dans le taux moyen d inflation entre les pays de l ocde on porte une attention speciale aux resultats empiriques qui relient le degre general de concurrence entre les entreprises mesure par l ecart du prix par rapport au cout marginal et le niveau d inflation entre 1973 et 1988 la prediction est que des ecarts prix cout marginal plus eleves augmentent l incitation des autorites monetaires a accroitre le niveau de production ce qui entraine des taux d inflation d equilibre plus eleves il s avere que l ecart du prix par rapport au cout marginal tend a expliquer bien les differences dans le niveau moyen d inflation entre pays

asymmetric monetary policy rules in australia abstractin this study the hypothesis that the reserve bank of australia rba implements an asymmetric monetary policy rule is tested we estimate both linear and asymmetric monetary policy reaction functions for the period before inflation targeting was adopted for the period when inflation targeting was explicitly adopted and for the full sample period the results of the linear monetary policy rules are consistent with the estimates reported from other studies that estimate linear monetary policy rules for australia on the other hand the results of estimating the asymmetric monetary policy rules for the pre inflation targeting period shows that the rba had reacted symmetrically suggesting that it had acted with the same aggressiveness towards both inflation and output gaps of the same magnitude over both phases of the business cycle however for the inflation targeting period the results show that the rba had reacted asymmetrically in its policy response to the inflation gap output gap or both