optimal incentive schemes with many agents the grossman hart principal agent model of moral hazard is extended to the multiple agent case to explore the use of relative performance in optimal incentive contracting under the assumption that the principal chooses incentive schemes to implement agent actions as nash equilibria necessary and sufficient conditions are derived for the optimality of independent contracts of rank order tournaments and for attainability of the first best in this context the relation of the principal s welfare to the correlation between the underlying randomness in outputs of different agents is also investigated finally some problems with the nash equilibrium implementation assumption are discussed in this paper we extend the grossman hart analysis of the principal agent problem to a multiple agent setting in this version of the problem a risk neutral principal is assumed to observe the output or a performance index for each risk averse agent the output of any agent depends on a privately observable action chosen by the agent and an exogenous random variable the realization of which is not observed either by the principal or by the agent before choosing its action we especially focus attention on the role of relative performance evaluation in optimal incentive contracts and the way this depends on properties of the underlying production technology and the joint distribution of the random variables affecting the outputs of different agents in section 2 of the paper we consider the principal s problem of finding an optimal incentive scheme and an action tuple for agents subject to the constraint that the latter be implemented as a nash equilibrium between agents by the chosen incentive scheme where agents must attain at least their reservation utilities a characterization of optimal incentive schemes is derived analogous to the grossman hart characterization for the single agent problem this characterization is then utilized to find sufficient and generically necessary conditions for a optimal contracts for any agent to be independent of the performance of other agents and b optimality of rank order tournaments where payments depend solely on ordinal comparisons of output across agents we then describe a necessary and sufficient condition for the principal to extract maximum advantage from relative performance clauses i e achieve the first best level of expected utility in the multiagent situation an implication of this result is that under fairly weak conditions perfect correlation in the underlying production uncertainties for different agents enables the principal to attain the first best if and only if sufficiently heavy penalties can be inflicted on agents we then enquire what happens in intermediate cases of non perfect correlation it turns out that while in general the principal s welfare is a continuous function of the correlation coefficient it is not always nondecreasing in the latter because the correlation coefficient is not a general measure of association between two random variables but rather a measure of linear association between them

the empirical analysis of the determinants for environmental technological change a research agenda abstract technological change is usually considered a necessary albeit not sufficient condition for a transition to sustainability however the empirical analysis of the determinants to environmental technological change has not received too much attention in the environmental ecological economics literature and many open questions remain in this context based on a careful review of the literature this paper argues that further analysis should address several issues at different levels i e regarding the conceptual framework the thematic scope of the studies some methodological issues and other aspects related to the environmental policy variable first an integrated conceptual framework which takes into account the interplay between relevant variables influencing environmental technological change i e factors internal and external to the firm and characteristics of the environmental technologies and all the stages of this process with a greater emphasis on the invention stage should be developed other aspects should then be tackled including a focus on several themes i e a greater attention to cross sectoral technologies the barriers to different types of environmental technologies the international dimension of environmental technological change and environmental technological change in small and medium size enterprises methodological issues combination of case studies and econometric modelling and several issues related to the environmental policy variable

effects of indirect taxation in a mixed oligopoly abstract in a mixed oligopoly an increase in tax ad valorem or specific does not change total output but increases the output of the public firm and the tax revenue also privatization may increase both tax revenue and welfare

a mixed oligopoly in the presence of foreign private firms in this paper a mixed oligopoly model is considered in which a state owned public firm competes with both domestic and foreign private firms previous articles on mixed oligopoly did not include foreign private firms the effect on the equilibrium involves a lower price and a different allocation of production relative to the case when all private firms are domestically owned in addition issues such as the effects of an open door policy allowing foreign firms to enter and the effects of foreign acquisition of domestic firms are discussed

nonrenewable resource scarcity nonrenewable resource theory often is summarized by hotelling s rule this paper reviews theoretical extensions and empirical investigations of resource extraction models observed data are often inconsistent with the hotelling rule suggesting that other characteristics of nonrenewable resource supply including exploration heterogeneous ore quality technological progress and capital investment are important determinants of the dynamic behavior of resource prices given the persistent recurrence of concern about nonrenewable resource scarcity measures of nonrenewable resource scarcity and the empirical evidence for the time trends of those measures are reviewed finally the implications of nonrenewable resource scarcity for economic growth are examined

new firm startups technology and macroeconomic fluctuations new firm startup activity is examined within a framework pooling a cross section of 117 industries over six time periods between 1976 and 1986 a model is introduced relating startup activity both to elements of the business cycle in particular the macroeconomic growth rate the cost of capital and the unemployment rate and to industry specific characteristics especially the technological conditions underlying the industry the pooled cross section regression results suggest that macroeconomic fluctuations as well as industry specific elements contribute to startup activity while new firm startups respond positively to macroeconomic growth they are promoted by a low cost of capital and high unemployment rate a somewhat surprising result is that new firm startups are not apparently deterred in capital intensive industries and where r d expenditures play an important role the empirical results suggest that new firms may be able to overcome their inherent size and experience disadvantages in such markets through exploiting university research and pursuing innovative activity

the politics of financial development evidence from trade liberalization incumbents in various industries have different incentives to promote or oppose financial development changes in the relative strength of promoter and opponent industries thus result in changes in the political equilibrium level of financial development we conduct an event study using a sample of 41 countries that liberalized trade during 1970 to 2000 and show that the strengthening of promoter relative to opponent industries resulting from liberalization is a good predictor of subsequent financial development the benefits of developing the financial system are insufficient for financial development and rents in particular hands appear to be necessary to achieve it copyright c 2008 by the american finance association

comparisons between small business data base useem and bureau of labor statistics bls employment data 1978 1986 the bls versus useem comparison generally points out some major classification differences in the data sets particularly in the classification and growth of larger establishments useem and bls data generally agree as to the direction of employment growth over the 1978 to 1986 period differences occur in 7 of the 63 comparisons of employment growth but bls attributes a greater proportion of growth to larger reporting units useem to smaller establishments bls and useem data have concurring positive or negative growth rates for all size classes in the construction wholesale trade services and finance insurance and real estate industries

reform of the coal sector in an open economy the case of china cheap abundant and easy to transport and store coal has been produced and consumed to meet people s energy needs the last decade s growth in global coal use has been driven mainly by developing economies like china whose phenomenal economic growth has been powered by coal fired electricity and promoted by the export of manufactured goods a recent reform focus in china s coal sector is on coal taxation the paper develops a game theoretic model tailored to the context of china where coal taxation reform takes place against the background of privatisation of coal firms and an open economy it finds that the adoption of special coal taxes is optimal for social welfare under most circumstances but may induce coal firms to commit opportunistic behaviour in the process of privatisation the paper also cautions about potential resistance to the reform from consumers coal firms and government officials

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

taxing variable cost environmental regulation as industrial policy abstract conventional wisdom has it that a country that enacts strict environmental regulations will place its firms at a competitive disadvantage this view has been challenged recently some commentators argue that stricter regulation will enhance domestic competitiveness strict regulations induce innovation we evaluate this argument in a strategic trade model in very special cases a strengthening of regulation may result in a shift of profits from foreign to domestic firms this is not a general result however environmental regulation should of course be imposed to control externalities but it is unlikely that it will serve to generate industrial advantage

toward a theory of regulation for developing countries following jean jacques laffont s lead the efficient operation and expansion of infrastructures in developing countries is crucial for growth and poverty reduction however recent reforms aimed at improving the performance of these sectors have had limited success evidence suggests that in many instances this was because the traditional regulatory theory relied on by policymakers was not suitable for the institutional context in developing countries this article surveys more recent theoretical work focusing on problems with regulation in these countries at the heart of the survey is the work of jean jacques laffont who in the last decade of his life set about developing a theoretical framework for regulation in developing countries we consider the implications of his work which focused on the key institutional limitations faced in developing countries we then discuss where experience suggests that there are important omissions from this modeling bringing in extensions and alternative approaches pursued by other authors we conclude by summarizing the key ways in which regulatory policy will be different when institutions are weak overall we find that an understanding of the institutional context and its implications are crucial when designing a regulatory framework for developing countries

technological regimes and sources of entrepreneurship this paper concerns the technological determinants of entrepreneurial behaviour by applying a typology of technological regimes which describes the nature of the technological environment in which firms operate this paper examines the sources and obstacles to entrepreneurial entry related to the process of technical change two major points are suggested first innovation in technologies of high or increasing opportunities is not always associated with entrepreneurial behaviour but can enhance the competitive advantage of existing firms second opportunities for entrepreneurship are shaped by the nature of knowledge underlying different technologies these points are illustrated using u s patent statistics classified by technical field and sector of firm s principal product activity different combinations of sources of technological entry barriers and technological opportunity are identified in science based technologies chemical technologies core technologies in complex systems product engineering technologies and process engineering technologies this paper argues that such a characterisation of the dynamics of knowledge accumulation is important for interpreting the variety of dynamics of industrial competition

the impact of resource tax reform on china s coal industry abstract contributing to approximately two thirds of primary energy consumption coal usage is the focus of china s energy policies to regulate the resource taxation system and reduce the burden of coal enterprises the chinese government launched a reform of its resource tax system in 2014 for coal introducing the ad valorem system to replace the volume based system that had been in place for the preceding thirty years to assess the impact of the tax reform this paper constructs two stage dynamic game models by taking the coal and coal fired power industries as the players the market situations of shortage and oversupply are investigated separately empirical data are collected to estimate the model parameters for numerical simulations the model results suggest that the tax reform will reduce both coal prices and the coal industry profitability if the tax levied on each ton of coal is maintained at the same level as before the reform regardless of whether the market is in a shortage or an oversupply situation however the increased buyer s power will amplify the effect of the tax reform the numerical simulations also provide an estimation of the tax rate of the ad valorem system that maintains the profit of the coal industry considering the demand and supply situations in china s coal market policy recommendations are provided to guide further reform of china s resource tax system

accounting for net entry into greek manufacturing by establishments of varying size adopting the view that size matters in understanding entry exit patterns this research explores the nature and causes of net entry patterns of various size defined groups of establishments in the case of a less industrialised country greece the hypothesis to be tested is that the determinants of entry are not independent of firm size throughout this paper the analysis has had to confront difficulties arising from the use of net entry rates defined at the size class level the degree of size disaggregation used in this paper is considerably finer than used before five employment defined size classes have been used instead of sliding cut off points discriminating between small and large firms unlike other research using pooled models to explain variation in entry exit rates across industries the data used here are characterised by the absence of significant industry specific systematic variation overall the results obtained in this paper indicate that there is a gradation in the responses of different size classes to stimuli defined at the industry level evidence is offered that small firms are different in that they manage to overcome entry barriers perhaps adopting different survival strategies and that large firms are well aware of market conditions and are in an advantageous position to overcome many of the problems imposed by entry barriers size classes in the middle of the size class distribution offer a rather mixed result due to size related advantages and disadvantages

net entry of firms into greek manufacturing the effects of business conditions this research explores the nature and causes of net entry into manufacturing industry in greece previous work has rarely considered these issues in the context of small but open and not particularly industrialised economies the exact nature of the focus of interest net entry is discussed first illustrating that this is a complex variable to account for although arguably still interesting and useful net entry needs to be considered as variable worthy of study in its own right as it reflects an outcome of processes of gross entry and exit certainly it need not be interpreted only as entry as is often the case next comes the question of the degree of variation both temporally and sectorally that net entry exhibits in the context of contemporary greek manufacturing some temporal variation in net entry rates is demonstrated and there follows a discussion of how such variation might be explained potentially in theory the empirical testing of these hypotheses point to findings that are different to those discovered in different contexts for greek manufacturing profitable business opportunities were not shown to be a sufficient condition of higher net entry but the cost advantages of large scale operations did both encourage entry and discourage exit the cost of capital and the overall condition of the economy were negatively related to net entry however the role of industry growth import penetration and export orientation tend to confirm findings in other studies

privatization in latin america what does the evidence say privatization is under attack criticisms run from corrupt deals to abuse of market power and social welfare losses we evaluate the empirical record on privatization relying on recent comprehensive studies from latin america the paper presents four main results first the increased profitability of privatized firms is not explained by sample selection biases second in the quest to identify the sources of increased profitability after privatization we find little evidence that validates concerns of generalized market power abuses exploitation of workers and lack of fiscal benefits third the manner in which privatization is carried out matters transparency and homogeneity in procedures speed and limited restructuring prior to privatization lead to better outcomes and less room for corruption and discretion finally privatization s success is enhanced by two complementary policies deregulation or reregulation of industries previously shielded from competitive forces and an effective corporate governance framework that facilitates privatized firms access to capital at lower cost overall the empirical record shows that privatization leads to increased profitability and productivity firm restructuring fiscal benefits output growth and even quality improvements most cases of privatization failure can be linked to poor contract design opaque processes with heavy state involvement lack of reregulation and a poor corporate governance framework

bank lending in transition economies bank privatization and tighter credit enforcement are believed indispensable to facilitate the eastern european transition process we analyze lending by value maximizing banks the only source of capital in the transition faced by non performing loans to the state owned sector we show that banks have a perverse incentive to fund former debtors although less efficient and more risky than private firms because they gain the potential repayment of previous debts this leads to a lower productivity of investment and a greater concentration of risk the expansion of more efficient private firms is delayed leading to a slower recovery and a greater risk of financial crisis

towards green growth how does green innovation affect employment abstract we examine the relationship between green innovation and employment from data taken from the spanish technological innovation panel pitec for period 2007 2011 the increasing relevance of environmental issues for the spanish economy its unemployment problem and the uniqueness in its innovation structure make it a proper and interesting context to investigate green innovation dynamics we find a positive relationship between green innovation and employment and the relationship is stronger for firms in the so called dirty industries in addition we show that the relationship is positive for firms that introduce green innovation voluntarily as compared to firms that introduce green innovation merely to comply with regulations a positive and significant relationship is also found between employment and firms that report an increase in the degree of importance paid to green innovation

post socialist financial fragility the case of albania the 1997 collapse of the albanian economy caused by the collapse of economy wideponzi schemes contrasts sharply to itssuccess status as a post socialist transition country in the years 1992 1996 inthis paper an attempt is made to explain this albanian paradox the specific albanian conditions for the growth of ponzischemes are identified theoretically thealbanian paradox can be interpreted as one version of the financial instabilityhypothesis suggested by minsky investigation of the underlying factors that render financial markets fragilesuggests that the albanian case is extreme butnot rare in the region in the post socialist setting expectations of thepopulation and other potential investors based on alack of reliable information on returns may lead to excessive capital inflow this trend is reinforced if governments areweak and if transition policies rely largely on liberal financial marketdevelopment rapid privatisation and external capitalinflows facilitating the tendency to instability identification of this trendis hindered if policy makers and observers largelyrely on macroeconomic indicators in monitoring the economy

privatization in eastern europe irreversibility and critical mass effects abstract this paper proposes a model to shed light on two important policy features of privatization in central and eastern europe the idea of a necessary critical mass of privatization on one hand and the great difficulties encountered in the actual privatization process on the other the model incorporates a positive externality related to the size of the private sector multiple equilibria may arise for political and economic reasons policies of free distribution are analysed with the model they may eliminate the danger of policy reversals due to excess unemployment but may at the same time increase the relative cost of restructuring leading in some cases to pareto inferior outcomes

adoption of green chemistry an analysis based on us patents abstract green chemistry patents are an indicator of environmental innovation and r d over 3200 green chemistry patents were granted in the us patent system between 1983 and 2001 with most assigned to the chemical sector the university and government sectors place greater emphasis on green chemistry than most industrial sectors worldwide the emphasis on green chemistry technology relative to chemical plastic rubber and polymer technologies has increased since 1988 the united states appears to have a competitive advantage in green chemistry the most rapid growth in the emphasis on us green chemistry patents coincides with revisions to major us environmental laws in the late 1980s and early 1990s however the ratio of green chemistry patents to patents in other areas of chemical sciences in heavily regulated industries are low suggesting that these industries did not necessarily embrace green chemistry as a means to reduce their regulatory burden

on the persistence of rationing following liberalization a theory for economies in transition abstract many economic theorists and policy makers argue that a rapid liberalization in which prices are allowed to equilibrate supply and demand is critical for a successful transition in the formerly socialist economies yet despite the advantages of market clearing prices many local governments in these economies have kept their prices for basic goods low and induced rationing in the state sector this paper develops a theory explaining why a local government chooses either a low state price that induces rationing or a higher price that clears the market the theory predicts that a necessary condition for a local government representing its constituents interests to set a market clearing price is that the private sector is monopolistic while a market clearing price in the state sector curtails private monopoly power it also implies that the state price is higher than in the rationing regime it is shown that a local government s marginal benefit of restraining private monopoly power is higher than the marginal costs of higher state prices when there is an increase in either state sector costs or private capacity this implies that a local government is more prone to set a market clearing price as its costs increase and as private capacity grows furthermore when there are at least two private firms and the private sector is monopolistic a local government that sets a market clearing price also stabilizes private sector pricing

the relationship between firm growth size and age estimates for 100 manufacturing industries this study uses a sample of all firms operating in 100 manufacturing industries to examine some aspects of firm dynamics it finds that firm growth the variability of firm growth and the probability that a firm will fail decrease with firm age it also finds that firm growth decreases at a diminishing rate with firm size even after controlling for the exit of slow growing firms from the sample gibrat s law therefore fails although the severity of the failure decreases with firm size copyright 1987 by blackwell publishing ltd

technology and the dynamics of industrial structures an empirical mapping of dutch manufacturing this paper explores the empirical link between on the one hand innovation and on the other hand industrial structure and dynamics in the netherlands we use the concept of technological regimes as the guiding framework to interpret this relationship the data are drawn from the production statistics and the business register of manufacturing firms in the netherlands and the second community innovation survey a classification of technological regimes that refines pavitt s taxonomy is applied to the data our analysis is aimed at identifying the variables that are best able to discriminate between technological regimes for our dutch case we find that a mix of innovation related and market structure related variables account for most variability and broad differences across regimes dynamic market structure variables account for an additional share of variability and finer differences across regimes overall we conclude that the concept of technological regimes provides a useful framework that helps to shed further light on the relationship between innovation and market structure

tightening environmental standards the benefit cost or the no cost paradigm ms ff ichael porter and claas van der linde have written a paper that is interesting and to us at least somewhat astonishing it is a defense of environmental regulation indeed an invitation to more stringent regulation that makes essentially no reference to the social benefits of such regulation this approach contrasts starkly with the methods that economists and other policy analysts have traditionally used when assessing environmental or other regulatory programs the traditional approach consists of comparing the beneficial effects of regulation with the costs that must be borne to secure these benefits for environmental regulation the social benefits include the reductions in morbidity or premature mortality that can accompany cleaner air the enhanced recreational opportunities that can result from water quality improvements the increased land values that might attend the cleanup of a hazardous waste site the enhanced vitality of aquatic ecosystems that might follow reductions in agricultural pesticide use or any of the other potentially significant benefits associated with tighter standards from this benefit cost approach emerges the standard tradeoff discussed in virtually every economics textbook porter and van der linde deny the validity of this approach to the analysis of environmental regulation claiming it to be an artifact of what they see as a static mindset in their view economists have failed to appreciate the capacity of

reform without losers an interpretation of china s dual track approach to transition this paper develops a simple model to analyze the dual track approach to market liberalization as a mechanism for implementing efficient pareto improving economic reform that is reform achieving efficiency without creating losers the approach based on the continued enforcement of the existing plan while simultaneously liberalizing the market can be understood as a method for making implicit lump sum transfers to compensate potential losers of the reform the model highlights the critical roles of enforcement of the plan for achieving pareto improvement and full liberalization of the market track for achieving efficiency we examine how the dual track approach has worked in product and labor market liberalization in china

toward a new conception of the environment competitiveness relationship accepting a fixed trade off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress studies finding high environmental compliance costs have traditionally focused on static cost impacts ignoring any offsetting productivity benefits from innovation they typically overestimated compliance costs neglected innovation offsets and disregarded the affected industry s initial competitiveness rather than simply adding to cost properly crafted environmental standards can trigger innovation offsets allowing companies to improve their resource productivity shifting the debate from pollution control to pollution prevention was a step forward it is now necessary to make the next step and focus on resource productivity

the virtues of gradualism and legitimacy in the transition to a market economy this paper presents a simplified model of sectoral restructuring in eastern europe a move towards allocative efficiency is desired by the reform minded government but the shift to higher productivity which such efficiency requires would lead to massive layoffs and labour reallocation in the transition period we look at the impact of political constraints unanimity and or majority worker approval on reform proposals when the government faces a heterogeneous workforce holding private information on relative outside opportunities when the budgetary consequences of exit compensations are so important as to make partial reforms preferable to full reforms gradualism emerges as the optimum in a dynamic context without government commitment it is also shown that under democratic majority rule a government in control of the agenda of reforms can win majority approval for plans which end up hurting majority interests intertemporally by threatening to switch majorities in future reform proposals this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

privatization technology choice and aggregate outcomes abstract we analyze the macroeconomic consequences of privatization policies in transition economies due to the particular market structure in those economies strategic completnentarities in restructuring of privatized firms occur giving rise to multiple macroeconomic equilibria restructuring and the resulting macroeconomic outcomes crucially depend on how property rights are distributed and which method of privatization is chesen firm sales to single or core investors may easily lead to bad equilibria without restructuring if employees are given profit claims this is so even if the workers give up parts of their wages as a compensation for stocks wage equity swaps contrary to conventional wisdom mass privatization can have favourable influence on micro economic efficiency and may therefore lead to a good aggregate outcome as an additional feature favouring mass privatization we argue that a big bang approach to privatization might lead to a favourable equilibrium

eliminating price supports a political economy perspective abstract this paper characterizes information and politically constrained government programs for eliminating price supports the issues which we examine in this model include i to what extent is it possible to reduce the size of oversubscribed industries in light of the information and political constraints that exist is a complete decoupling of a worker s compensation from her output possible or desirable ii which type of workers as characterized by their skill levels and outside employment opportunities remain in the industry iii which type of worker is harmed by the relocation program which coalitions of workers will oppose the reorganization

inertial credit and opportunistic arrears in transition in a transition economy enterprise restructuring may exhibit a laffer curve response to tighter credit as a result of rational collective inertia in the presence of a rigid production structure unenforceable contracts and high adjustment costs a contraction in credit finance subtracts more liquidity than enterprises can generate internally because unrestructured firms are forced to extend trade credit to illiquid buyers an increase in their number increases the availability of forced supplier credit in turn increasing the attractiveness of inertial behavior as trade credit cannot be enforced a critical mass of trade and wage arrears causes pressure for a collective bailout thus validating inertial behavior even by reformable firms

taxation of nonrenewable resources at various stages of production a general method of assessing tax policy effects in exhaustible resource industries is derived the model includes both extraction and processing by a vertically integrated firm and taxation can occur at any stage of production many of the standard results of the theoretical resource taxation literature are derived in a unified framework when stages of production are introduced it is seen that tax policy effects can differ dramatically from those predicted by the simpler model after the method of determining the effects of existing taxes is derived a procedure for designing taxes that achieve desired goals is analysed

the death of firms exploring the effects of environment and birth cohort on firm survival in sweden this paper investigates the death of firms and seizes a long term perspective it investigates the life spans of nearly 2 200 firms in seven birth cohorts of swedish joint stock companies founded during seven separate years between 1899 and 1950 research has traditionally emphasized individual and micro oriented factors in explaining post entry performance or has often focused on the influence of firm specific structural factors firm age and size a less attended field recognizes environmental forces this paper focuses on the interaction between the micro and macro levels and combines structural and environmental factors employing a cohort approach it relates firm survival to firm age and size as well as to the effect of cohort affiliation and environmental change over time period effects during macroeconomic expansion the risk of death decreases cohort effects are also evident firms founded during times of economic crisis exhibit lower survival rates consequently cohort affiliation and environmental forces i e period effects can explain differences in death rates in different firm populations

privatization risk taking and the communist firm this paper studies alternative methods of privatizing a formerly communist firm in the presence of imperfect risk markets the methods include cash sales a give away scheme and a participation contract where the government retains a sleeping fractional ownership in the firm it is shown that with competitive bidding the participation contract dominates cash sales because it generates both more private restructuring investment and a higher expected present value of revenue for the government under weak conditions the participation contract will induce more investment than the give away scheme and it may even share the cash sales virtue of incentive compatibility

potential entrepreneurship in japan the aim of this paper is to investigate the potential for entrepreneurship in japan using the employment status survey which is the only government administered survey that includes questions about the desire to become an entrepreneur we find that there are still a number of potential entrepreneurs in japan despite a recent decline in the number of new firms being established we also find that there is a large regional variation in the distribution of entrepreneurial potential with clustering into a few regions and the level in tokyo being exceptional further using panel data on 47 prefectures from 1982 to 1997 we examine the determinants of entrepreneurial potential the estimation results show that the price cost margin market size market growth and the unemployment rate have positive effects on the potential for entrepreneurship

reform in eastern europe how can the new governments of eastern europe succeed in moving from centrally planned to freemarket economies this incisive report identifies and describes the major policy choices to be made and discusses what will work and what will not reform in eastern europe provides a comprehensive easily read statement of reform policy that stands in the mainstream of modern western economics based on their experience with stabilization policies in other countries the authors show how eastern europe can reduce unemployment during the painful adjustment process create effective and socially acceptable mechanisms to subject enterprises to market discipline and replace barter trade under cmea with market based international trade

mixed oligopoly with differentiated products abstract the paper analyzes a mixed oligopoly with horizontal product differentiation firms choose their location and price in a model a la hotelling with quadratic transport costs and the solution concept is a subgame perfect nash equilibrium this enables one to determine how the presence of one or several public firms competing with private ones affects social welfare and how the results depend on the total number of firms n and their relative positions it is shown that is only for n 2 or n 6 that a mixed oligopoly with one public firm is socially preferable to the private oligopoly

the political economy of transition the overriding importance of political constraints in the transition process has led to developments of the theory of the political economy of reform what are the main insights from that theory how does it reflect the transition reality what have we learned and what do we still need to learn the present article will attempt to answer those questions

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

mass privatization management control and efficiency abstract we present a model where a government chooses the number of individuals to which ownership in a former state owned firm shall be allocated when making this decision the government maximizes the political support it gets from the firm s incumbent manager and from potential shareholders anticipating that a greater dispersion of shares reduces the control of the manager by the firm s new owners it turns out that shares will be allocated to the maximum number of individuals and thus a policy of mass privatization will be implemented if the manager s utility enters the political support function with a higher weight than the welfare of the potential shareholders the result of the political process however need not conflict with the objective of achieving a pareto optimal allocation thus we contradict a widely shared presumption that mass privatization schemes sacrifice efficiency to satisfy political constraints and show that they can be very attractive from an efficiency point of view

rent extracting tariffs and the management of exhaustible resources this paper examines the interaction between a resource exporting and a resource importing country the exporting country must choose the optimal rate of depletion of an exhaustible resource and also must decide on the allocation of the extracted resource between exports and domestic use optimal management from a national point of view entails inefficiency from a global perspective in that too little resource is exported as the supplying country exploits its monopoly power the importing country however has an incentive to extract some of the resource rent by using a tariff although rent extraction is limited by the exporter s ability to use the resource domestically the optimal tariff is positive and induces greater overall inefficiency

unemployment labour markets and structural change in eastern europe labour markets in eastern europe michael burda unemployment is a major concern in the transforming economies of central and eastern europe the modern flow approach to labour markets suggests both that unemployment is an important component of the transformation process and that the labour market institutions adopted will influence the rate of unemployment in the long run to date eastern european countries exhibit considerable divergences in several of these institutions especially in unemployment benefit systems collective bargaining structures and active labour market policies an aggregate matching function is successfully estimated for data from czech and slovak employment offices emerging labour markets in the east function not so differently from those in the west the implied dynamics make both big bang and benign neglect unattractive strategies for transformation a mixed bang is more appropriate quantitative evidence about the effects on unemployment of different labour market institutions in oecd countries is used to make long term projections of equilibrium rates of unemployment in central and eastern europe given the labour market institutions now in place there with the possible exception of the czech republic high unemployment is likely to be pervasive and persistent

the evolution of technologies and investment in innovation the proposition that old knowledge is an input in the production of new knowledge is itself old knowledge in a general sense we all know that current innovations derive partly from past innovations and will themselves influence future ones but within a technology is there a time dependent pattern to innovations more specifically do the characteristics of innovations change systematically when compared to those that precede or follow them and are returns to investment in innovation and the consequent level of such investment dependent in a consistent way on the location of innovative effort in the evolution of a technology our analysis is partly motivated by an unresolved controversy in the economic literature between what may be characterised as the kuznets and the schmookler views of technical change it may therefore be helpful to review briefly the content of this debate kuznets i 930 and burns i 934 and later salter i 960 among others saw technological opportunities as declining over the life cycle of a new product or industry each new technology is limited in the extent to which it can be developed and the most promising opportunities for development are exploited first both kuznets and burns explained the eventual decline in the growth in output of new industries by a decline in the rate of technical change as a given technology matures kuznets stressed the role of price reducing changes in production processes as a force generating growth in output a reduction in the rate of such change he argued leads to a decline in the negative rate of change of the relative price of a new product and a consequent decline in the rate of growth of its output a parallel argument can be made for quality enhancing product innovations which contribute to the growth in demand for a new product as opportunities for the most important quality improvements are exhausted the growth rate in demand declines and the industry gradually approaches obsolescence as newer technologies emerge at the macroeconomic level it follows that both the rate of change in productivity and the growth of the economy depend upon the combination of new versus old industries that account for aggregate output this view of the evolution of technologies has been sharply criticised by schmookler i966 given the cost required to produce an innovation the profitability it contributes increases with market size the larger the demand the greater is the revenue collected from a new product or alternatively the larger is the aggregate cost saving from a superior production process it follows ceteris paribus that a larger market leads to an increase in investment in inno

czech privatisation 25 years later privatisation is still a hot political topic today and divides economists as well as politicians and the general public the paper aims to capture the czech privatisation in its historical economic and political contexts the first part explains the difference between transitional privatisation and standard privatisation the second part examines the interests in the privatisation process the third part discusses the privatisation methods used in the czech republic the fourth part offers an international comparison

when does privatization work the impact of private ownership on corporate performance in the transition economies this paper compares the performance of privatized and state firms in the transition economies of central europe while controlling for various forms of selection bias it argues that privatization has different effects depending on the types of owners to whom it gives control in particular privatization to outsider but not insider owners has significant performance effects where privatization is effective the effect on revenue performance is very pronounced but there is no comparable effect on cost reduction overlooking the strong revenue effect of privatization to outsider owners leads to a substantial overstatement of potential employment losses from postprivatization restructuring

the design of reform packages under uncertainty the authors present a model of large scale economic reforms modeled on the transition process in eastern europe with aggregate and individual uncertainty concerning the outcome of reforms the government is assumed to choose the speed and sequencing of reforms the authors compare big bang strategies with gradualist reform packages they show that gradualist reform packages may be easier to get started optimal sequencing of reforms should aim at creating constituencies for further reforms and gradualism may generate a higher investment response because of a lower option value of waiting than would a big bang approach copyright 1995 by american economic association

the productivity effects of privatization longitudinal estimates from hungary romania russia and ukraine this paper estimates the effect of privatization on multifactor productivity using comprehensive panel data on initially state owned manufacturing firms in four economies we exploit the data s longitudinal dimension to control for preprivatization selection and estimate long run impacts the estimates are robust to functional form but sensitive to selection controls our preferred random growth estimates imply positive multifactor productivity effects of 15 percent in romania 8 percent in hungary and 2 percent in ukraine but a 3 percent effect in russia the foreign privatization effect is larger 18 35 percent in all countries positive domestic effects appear immediately in hungary romania and ukraine and continue growing thereafter but emerge only five years after privatization in russia

entry and exit on the competitive fringe microeconomic theories of industry evolution reserve key roles for the entry and exit of firms competitive models of industry supply often assume that individual firms have ushaped long run average cost curves in consequence an industry s output adjustment in movement from one long run equilibrium to another is entirely accomplished through the entry and exit of firms rather than through changes in long run equilibrium output of individual firms in empirical applications the speed of movement to new equilibrium levels of output and price measured by the time it takes for profits to return to competitive levels following a demand shock clearly depends upon the ease of entry and exit however the simplest competitive models have a clear theoretical weakness abundant evidence against u shaped long run average cost curves precludes a simple identification of entry with industry expansion and exit with industry contraction expansion of industry supply can be met either by incumbents or entrants and we have little empirical evidence of the division entry conditions are also a staple of oligopoly and monopoly models potential entry constrains the pricing options open to industry leaders and actual entry of new firms and new products erodes at varying rates the market power of incumbent firms if actual entry responds rapidly to profit opportunities then the persistent exercise of monopoly power will be rare however analyses of monopoly and oligopoly models typically approach entry indirectly by inferring that persistent profit differentials reflect high barriers to entry there are few direct tests of the effects of such barriers on actual entry despite their importance very few empirical studies of entry and exit exist severe data limitations restrict both the number of studies and the scope of extant analyses the research reported in this paper provides measures of entry and exit in 46 food manufacturing industries during the 1976 82 period measures of incidence the number of firms as well as extent the size of firms are provided the analysis also distinguishes between diversified firms and specialist producers entry and exit rates vary considerably across industries and the paper reports the results of statistical analyses that account for industry differences in entry and exit rates by specialist firms

a closer look at the effect of market growth on industries profits everybody talks about the relation of industries profit rates to their markets rates of growth but nobody does anything about it specifically researchers have confirmed the effect of the growth of nominal output on profits in many multivariate studies without specifying closely the hypothesis under test or the measure of demand growth appropriate to test it a profits growth relationship could stem from several mechanisms the lagged adaptation of capacity to unexpected changes in demand reactions of oligopolists to disturbances in their consensus etc these mechanisms how and where they work hold their own normative interest therefore knowing what behavior and what structure lying behind it accounts for the profits growth relationship should do more than improve the specifications of our studies of allocative efficiency it should also expand our knowledge of adaptive processes that are important and hard to observe directly in this paper we shall synthesize the available explanations of why changes in market demand should affect an industry s profits then present a statistical test of the relative significance of the competing explanations

a theory of misgovernance this paper tries to explain why government bureaucracies are often associated with red tape corruption and lack of incentives the paper identifies two specific ingredients that together can provide an explanation the fact that governments often act precisely in situations where markets fail and the presence of agency problems within the government we show that these problems are exacerbated at low levels of development and in bureaucracies dealing with poor people we also argue that we need to posit the existence of a welfare oriented constituency within the government in order to explain red tape and corruption

political support for reforms economics of voting in transition countries i analyze the relationship between economics and politics across eight parliamentary elections in four transition countries the czech republic hungary poland and slovakia i argue that support for reform reflects the balance between positive and negative effects of the reform accordingly i identify economic groups that support or oppose the reform the former are private entrepreneurs white collar workers and university educated voters the latter are the unemployed retirees and blue collar and agricultural workers this general pattern holds both within countries and across countries and across tenures of different governments in contrast with the responsibility hypothesis voters in the transition countries are found to be forward looking not retrospective

typology of the french regional development revealing the refugee versus schumpeter effects in new firm start ups in this article we analyse the relationships between unemployment rates and new firm start up rates in france using a quarterly data basis covering the period 1993 to 2011 we identify thanks to data analysis methods different classes that show different types of development among the french regions for each of these classes the existence of refugee schumpeter effects both in the short run and in the long run is revealed at the national level it appears that the refugee effect explains the dynamics of entrepreneurship in france over the period 2000 to 2011 necessity is the key motivation for new french firms

extraction costs and the economics of nonrenewable resources the study questions the fundamental assumption of the standard aggregate exploration extraction model of nonrenewable resources that extraction costs and the level of reserves are inversely related it also raises questions about the model s conclusions regarding exploration incentives and the valuation of reserves an empirically tested disaggregate model is presented that suggests that exploration activity occurs from firms attempting to balance marginal extraction plus user costs at the intensive and extensive margins exploration is carried out until the marginal discovery cost of a deposit equals its present asset value and a u shaped price path is indicated

determinants of firm start up size an application of quantile regression for ireland in this paper we provide empirical evidence on the determinants of firm start up size using data for the manufacturing sector in ireland and compare our results with recent findings for portuguese manufacturing industries mata and machado 1996 to allow for firm heterogeneity between firm entrants we use quantile regression techniques for our empirical estimation we find that the determinants of start up size differ in their importance for small and large scale entrants in particular industry size and industry growth seem to affect large scale entrants only

patterns of innovation and organizational demography in emerging sustainable fields an analysis of the chemical sector this paper examines the patterns of environmental innovation in the chemical sector and focuses in particular on detecting whether the rise of sustainable chemistry technologies sct has stimulated the emergence of new organizations this question is important to assess the extent to which sct are sustaining the technological advantage of industry incumbents or are creating opportunities for new firms aspiring to develop radically new environmental innovations we found that sct still represent a relatively low proportion of chemical technologies and that they have not stimulated in a significant way the emergence of new firms however the importance of new firms has grown in the last 20 years and their technologies seem to have a higher potential of radicalness than incumbents technologies this indicates that although incumbents advantage remains strong a small group of young firms has started to weaken such advantage moreover the important role played by research organizations in generating sct may signal that technological opportunities are expanding and that some governments in particular the us government are committed to develop sct these results suggest that if supported by effective policies technological ferment in the field which at the present appears still limited has a potential of growth

speed of adjustment and self fulfilling failure of economic reform abstract an economic reform programme where inefficient public labour is laid off is considered the immediate effect is a lowering of wages and increased profitability in the private modern sector over time as capital accumulates in the modern sector wages and production increases big bang reform generates a sharp transitory drop in wages while gradual reform gives a more modest decline in the presence of a subsistence wage constraint popular resistance can cause the cancellation of big bang reform two arguments for gradualism can in that case be made first a more gradual reform requires a less abrupt drop in the wage and will therefore be feasible second the initial wage drop will be stronger if a cancellation of reform is expected and since cancellation is dependent on the severity of the initial wage drop multiple equilibria occurs the existence of multiple equilibria is dependent on the speed of reform sufficiently gradual programmes have a unique successful equilibrium

small firm entry in us manufacturing a cross section empirical analysis examining the entry behavior of small firms is provided in this paper while the authors find that certain traditional market structure characteristics and entry barriers have a strong impact on small firm entry behavior the reliance upon innovative strategy by small firms also explains a significant amount of the variation in the pattern of entry by small firms they conclude that small firm entry is at least partially determined by entry barriers industry specific characteristics facilitating retaliatory conduct by incumbent firms and the reliance upon innovative strategy by small firms copyright 1989 by the london school of economics and political science

pricing and depletion of an exhaustible resource when there is anticipation of trade disruption this paper considers pricing and depletion of an exhaustible nonrenewable resource in an economy wherein domestic consumption is provided for by supplementing extraction from the economy s own resource stock with imports the future supply of which is not assured the socially optimal response to threat of trade disruption is a more conservationist depletion program for the domestic resource stock than would be called for if import supplies were assured to persist competitive domestic firms adopt the socially optimal conversationist program however firms anticipating domestic market power after the disruption of import supplies are revealed to overextract the domestic resource stock 33 references 2 figures

privatization policies in central and eastern europe privatization in central and eastern europe patrick bolton and gerard roland this paper assesses policies of mass privatization in germany czechoslovakia hungary and poland a central concern stemming from the analysis is that in view of the fiscal crisis facing economies in transition it is crucial for governments to try to maximize the proceeds from the sale of state assets because of the low initial level of private wealth it is important in this respect to let potential buyers borrow from the government or issue claims on future revenues obtained with the privatized assets to the government in order to pay for the privatized firms allowing for such non cash bids removes the government s incentive to delay privatization for fiscal reasons reduces its ability to squander immediately the proceeds from privatization and improves the decentralization of control by allowing less wealthy but more able bidders to buy the firms they are best suited to run

popular attitudes toward free markets the soviet union and the united states compared random samples of the moscow and new york populations were compared in their attitudes towards free markets by administering identical telephone interviews in the two countries in may 1990 although the soviet respondents were somewhat less likely to accept exchange of money as a solution to personal problems and although their attitudes toward business were less warm the authors found that the soviet and american respondents were basically similar in some very important dimensions in their attitudes toward fairness income inequality and incentives and in their understanding of the working of markets copyright 1991 by american economic association

determinants of environmental innovation in us manufacturing industries abstract this paper provides new evidence on the determinants of environmental innovation we employ panel data models to study how environmental innovation by us manufacturing industries responded to changes in pollution abatement expenditures and regulatory enforcement during the period 1983 through 1992 we find that 1 environmental innovation as measured by the number of successful environmental patent applications granted to the industry responded to increases in pollution abatement expenditures however 2 increased monitoring and enforcement activities related to existing regulations did not provide any additional incentive to innovate we also find some empirical evidence that environmental innovation is more likely to occur in industries that are internationally competitive

animal spirits technology shocks and the business cycle the last few years have witnessed a revival of business cycle models in which beliefs of agents have played a leading role in explaining economic fluctuations 1 most of these models involve strong economy wide increasing returns to scale in order for sunspot equilibria to exist in a recent paper however basu and fernald 1996 present evidence that returns to scale are far from evenly distributed across the u s economy in particular they report that scale economies are present mainly in the domain of durable goods production in the nondurable goods sector of the u s economy evidence of increasing returns to scale cannot be found

mixed oligopoly privatization and subsidization abstract this paper demonstrates three effects of domestic production subsidies in a mixed oligopoly industry regarding privatization and efficiency first if subsidies are used before and after privatization welfare is unchanged by privatization second if subsidies are used only before privatization then privatization always lowers welfare regardless of the number of private firms in the industry third the subsidy contributes to overall efficiency in a mixed oligopoly due to cost distribution effects

critical mass effect and restructuring in the transition towards a market economy abstract restructuring firms in a transition economy produces a sort of network externality in that the profitability of restructuring depends on the number of firms that already adopted this strategy we investigate under what conditions a critical mass exists i e a situation in which such externality is positive and restructuring spurs imitation possibly leading to the eventual transformation of the whole economy we find a critical mass effect when the main effect of restructuring is an increase in value added i e aggregate demand rather than an increase in the firm s ability to compete against rival home firms the critical mass case becomes the typical one when competition spurs firms efficiency

international r d rivalry and industrial strategy this paper presents a theory of government intervention which provides an explanation for industrial strategy policies such as r d or export subsidies in imperfectly competitive international markets domestic net welfare is improved by the capture of a greater share of the output of rent earning industries although the subsidy ridden noncooperative international equilibrium is jointly suboptimal behaviour of governments and firms is modelled as a three stage subgame perfect nash equilibrium the assumption that the government is the first player in this game allows it to influence equilibrium outcomes by altering the set of credible actions open to firms

innovation and the international diffusion of environmentally responsive technology abstract new evidence is presented on environmental innovation and diffusion over the 1970s and 1980s at a global level a substantial amount of innovations occurred in the united states japan and germany the share of environmental patents in all patents varied between 0 6 and 3 and as such was higher than the corresponding share of pollution abatement expenditure in gdp japanese environmental innovation rates were consistently high certain plausible connections between environmental regulation and innovation also emerge across these three countries and over time innovation responded to pollution abatement expenditure an indicator of the severity of environmental regulations environmental patenting rates in developing countries were also high reaching 2 in many years in brazil developing country innovators obtained a non trivial number of patents most of which appear geared towards adapting imported technologies to local conditions however domestic innovation was only one path to new technologies imports of disembodied environmental technologies foreign patents registered in developing countries were substantial foreign patents were typically important or generic patents evidence also suggests that such patents protected intellectual property in equipment exported developing countries especially in east asia often chose to obtain technologies embodied in pollution abatement equipment

the business cycle macroeconomic shocks and the cross section the growth of uk quoted companies we bring to light a significant aspect of firm level heterogeneity over the business cycle analysing the responsiveness of firm growth quoted uk companies to aggregate shocks we find that the effects of aggregate shocks are more pronounced for firms in the middle range of growth rapidly growing and rapidly declining firms are less sensitive to aggregate shocks than firms in the interior of the growth range this is consistent with the fact that the higher moments of the distribution of firm growth rates have significant cyclical patterns these findings throw new light on growth of firms as well as on business cycle dynamics

the imf s unmet challenges the international monetary fund is a controversial institution whose interventions regularly provoke passionate reactions we will argue that there is an important role for the imf in helping to solve information commitment and coordination problems with significant implications for the stability of national economies and the international monetary and financial system in executing these functions the effectiveness of the imf like that of a football referee depends on whether the players see it as competent and impartial we will argue that the fund s perceived competence and impartiality and hence its effectiveness are limited by its failure to meet four challenges concerning the quality of its surveillance of individual countries groups of countries and the global system the relevance of conditionality in loan contracts the utility of the fund s approach to debt problems and the fund s failure to adopt a system of governance that gives appropriate voice to different stakeholders these problems of legitimacy will have to be addressed in order for the imf to play a more effective role in the 21st century

too many to fail evidence of regulatory forbearance when the banking sector is weak this paper studies bank failures in 21 emerging market countries in the 1990s by using a competing risk hazard model for bank survival we show that a government is less likely to take over or close a failing bank if the banking system is weak this too many to fail effect is robust to controlling for macroeconomic factors financial crises the too big to fail effect domestic financial development and concerns due to systemic risk and information spillovers the paper also shows that the too many to fail effect is stronger for larger banks and when there is a large government budget deficit

capital accumulation unemployment and self fulfilling failure of economic reform abstract i consider fiscal reform and the consequences of expectations about reform cancellation the reform implies reduced taxes and the laying off of employees in an inefficient public sector if the resulting unemployment level declines sufficiently fast the reform is completed on the other hand if high unemployment levels prevail for too long the reform is cancelled cancellation affects the return on capital negatively hence expectations about cancellation will depress capital accumulation and increase the level of unemployment as a result multiple rational expectation equilibria may arise where expectations about cancellation prove self fulfilling the modelling framework is leontief technology in combination with ramsey optimization that exhibits simple and attractive algebra