uncertainty risk and the financial crisis of 2008 the distinction between uncertainty and risk originally drawn by frank knight and john maynard keynes in the 1920s remains fundamentally important today in the presence of uncertainty market actors and economic policy makers substitute other methods of decision making for rational calculation specifically actors decisions are rooted in social conventions drawing from innovations in financial markets and deliberations among top american monetary authorities in the years before the 2008 crisis we show how economic actors and policy makers live in worlds of risk and uncertainty in that world social conventions deserve much greater attention than conventional ipe analyses accords them such conventions must be part of our toolkit as we seek to understand the preferences and strategies of economic and political actors

policy uncertainty and household savings using german microdata and a quasi natural experiment we provide evidence on how households respond to an increase in uncertainty we find that household saving increases significantly following the increase in political uncertainty observed in the run up to the 1998 german general election we also find evidence of a labor supply response by workers who can use the margin offered by part time employment our results are suggestive of the economic effects of wars of attrition when political disagreement leads to delays in adopting a reform or the possibility that earlier reforms may be revoked the increased uncertainty could slow the economy

are contributions to public pension programmes a tax on employment many studies describe the potentially adverse impact on employment of the payroll costs of financing public pension programmes conventionally empirical studies treat contributions to public pension programmes as a pure tax in for example calculations of the tax wedge by oecd but this approach ignores any future rights to benefits that are perceived by contributors in fact public pension programmes contain both an actuarial and a redistributive component the former closer to saving the latter a tax the paper constructs indicators of the tax component of pension programmes both between and within generations across a range of oecd countries and time periods it uses these measures in a cross country panel analysis of the determinants of age and gender specific economic activity rates the results reveal robust evidence that when public pension programme contributions are broken down into a tax component and a savings component the tax component of the payroll contribution reduces economic activity rates among women while a higher retirement saving component has the opposite effect there is little evidence that average tax rates however constructed have any adverse impact on the economic activity rates of men richard disney

a status based model of market competition this article explores the significance of status processes for generating and reproducing hierarchy among producers in a market it develops a conception of a market as a status order in which each

specialized supplier networks as a source of competitive advantage evidence from the auto industry this study examines the relationship between interfirm asset specificity and performance in the auto industry more specifically i examine the extent to which differences in supplier automaker asset specialization may explain performance differences between japanese automakers nissan and toyota and u s automakers chrysler ford general motors the findings indicate a positive relationship between supplier automaker specialization and performance in particular the data suggest a positive relationship between interfirm human asset cospecialization and both quality and new model cycle time moreover site specialization is found to be positively associated with lower inventory costs the findings suggest that in the auto industry a tightly integrated production network characterized by proximity and a high level of human cospecialization will outperform a loosely integrated production network characterized by low levels of interfirm specialization

foreign entry cultural barriers and learning this paper examines the longevity of foreign entries hypotheses are developed on the mode start ups vs acquisitions and ownership structure wholly owned vs joint ventures in relation to cultural distance the hypotheses are tested within a framework of organizational learning using data on 225 entries that 13 dutch firms carried out from 1966 onwards results show that the presence of cultural barriers punctuates an organization s learning cultural distance is a prominent factor in foreign entry whenever this involves another firm requiring the firm to engage in double layered acculturation we also identify locational paths of learning the longevity of acquisitions is positively influenced by prior entries of the firm in the same country similarly the longevity of foreign entries in which the firm has a majority stake improves whenever the expanding firm engaged in prior entries in the same country and in other countries in the same cultural block

competitive dynamics and economic learning an extended resource based view in this paper a conceptual framework for the analysis of economic learning is developed economic learning by analogy with organizational learning results in the development of economic competences or capabilities shared between firms which rest on a foundation of economic resources from which value is generated and economic routines through which resources are utilized it is the mobility of resources and their exchange and production dynamics along evolutionary pathways which underpins the plausibility of a notion of economic learning the paper elaborates this framework as a resource based view rbv of the economy as a whole as an extension of the rbv of the firm such a framework captures the dynamics of exchange and circulation of technologies know how and intangible assets as well as of tangible assets and capital goods it is concerned with investment behavior by entrepreneurs rather than with the behavior of producers and consumers in goods and services markets within this resource economy framework it is possible to generate an account of the resource dynamics that underpin production of goods and services including resource propagation diffusion imitation replication and recombination these processes encompass evolutionary pressures experienced through resource variation selection and retention entrepreneurial initiatives take the form of resource recombinations while resource innovation captures the creation of new economic resources such as technological standards such a perspective brings into focus the resource specialization and configurations that drive real economies within firms and between firms that translates into enhanced or diminished performance of the economy as a whole copyright 2003 oxford university press

social security and retirement decision a positive and normative approach social insurance for the elderly is judged responsible for the widely observed trend towards early retirement in a world of laissez faire or in a first best setting there would be no such trend however when first best instruments are not available because health and productivity are not observable the optimal social insurance policy may imply a distortion on the retirement decision the main point we make is that while there is no doubt that retirement systems induce an excessive bias towards early in many countries a complete elimination of this bias i e a switch to an actuarially fair system is not the right answer this is so and for two reasons first some distortions are secondbest optimal this is the normative argument second and on the positive side the elimination of the bias might be problematic from a political perspective depending on the political process it may either not be feasible or alternatively it may tend to undermine the political support for the pension system itself

franchising liquidity constraints and entry the short and long run incentives to franchise are considered while monitoring problems due to geographic dispersion ensure that franchising is an efficient organizational form in the long run entry costs suggest that franchising is an efficient solution to the formidable problems posed by entry in the short run this explains the intensive use of franchising in the early growth stages followed by a greater proportion of company owned outlets as the system matures

explaining interfirm cooperation and performance toward a reconciliation of predictions from the resource based view and organizational economics interfirm cooperation and its performance implications are examined in the context of two widely cited theoretical approaches to organizations broadly speaking the resource based view suggests that firms seek to capitalize on and increase their capabilities and endowments whereas organizational economics asserts that firms focus on minimizing the costs of organizing although these perspectives agree on managers likely actions in many areas their predictions diverge when interfirm cooperation is considered we take a step toward reconciling these differences by positing that firms place resource based concerns in front of considerations from organizational economics when deciding whether or not to engage in interfirm cooperation we examined this prediction using data from 94 publicly held restaurant chains the results support our integrated view but also suggest that giving primacy to resource concerns detracts from the performance of some firms we derive several implications of these findings in an effort to guide subsequent inquiry copyright 1999 john wiley sons ltd

asset stock accumulation and sustainability of competitive advantage given incomplete factor markets appropriate time paths of flow variables must be chosen to build required stocks of assets that is critical resources are accumulated rather than acquired in strategic factor markets barney barney j 1986 strategic factor markets expectations luck and business strategy management sci october 1231 1241 sustainability of a firm s asset position hinges on how easily assets can be substituted or imitated imitability is linked to the characteristics of the asset accumulation process time compression diseconomies asset mass efficiencies inter connectedness asset erosion and causal ambiguity

emu and labour market reform needs incentives and realisations despite improving labour market conditions in recent years a number of emu countries still suffer from high and persistent unemployment it could therefore be expected that labour market reform would be given a prominent position on the political agenda the new constraints associated with the common monetary policy only increase the pressure for reform relying on the introduction of the single currency as a trigger for labour market reform may be a risky strategy emu generates a complex set of re optimising strategies of the players on the labour market which makes it difficult to get a clear idea what impact it will have on labour market reform evaluation of recent reform measures does not make one confident either the empirical analysis confirms to some extent the idea that countries with higher unemployment rates have carried out more labour market reform this finding holds however only for countries that do not belong to emu emu countries have on average carried out no more reform than countries outside emu and any link between the initial unemployment level and the labour market reform indicators seems to lack it may become apparent that more reform is needed once the macroeconomic environment becomes more unfavourable

would you like to shrink the welfare state a survey of european citizens welfare state reform a survey of what europeans want the fundamental problems facing european welfare states high unemployment and unsustainable public pensions plans in particular have been in the political debate for years so why have we seen so little reform to find out we surveyed the opinions of citizens in france germany italy and spain on their welfare states and on various reform options this is what we found first most workers underestimate the costs of public pensions though they are aware of their unsustainability second the status quo is a majoritarian outcome a majority of citizens opposes cuts to social security and welfare spending but also opposes further increases since population ageing without reform implies an automatic expansion our results suggest that most citizens would favour reforms that stabilize but do not shrink the current welfare states third many would welcome changes in the allocation of benefits a large number of workers in italy and germany would be willing to opt out of public pensions and replace them with private pensions though the details of how this scheme is formulated matter for its popularity and many italians and spaniards would welcome an extension of the coverage of unemployment insurance fourth conflicts over the welfare state are mainly shaped by the economic situation of the respondent while political ideology plays a limited role disagreements are found along three dimensions young versus old rich versus poor and outsider versus insider in terms of labour market status from a practical point of view this suggests that there is scope to bundle reforms strategically in order to build a large and mixed coalition of supporters tito boeri axel borsch supan and guido tabellini

agency theory and franchising some empirical results this article provides an empirical assessment of various agency theoretic explanations for franchising including risk sharing one sided moral hazard and two sided moral hazard the empirical models use proxies for factors such as risk moral hazard and franchisors need for capital to explain both franchisors decisions about the terms of their contracts royalty rates and up front franchise fees and the extent to which they use franchising in this article i exploit several new sources of data on franchising to construct a cross section of 548 franchisors involved in various business activities in the united states in 1986 the data are most consistent with a model based on two sided moral hazard the empirical models are also more successful at explaining the extent to which franchisors choose to franchise stores than at explaining the terms of franchise contracts finally contrary to the predictions of several theoretical models i find that royalty rates and franchise fees are not negatively related

the dangerous obsession with cost competitiveness and the not so dangerous obsession with competitiveness judging solely by the continued prevalence of the term in policy makers discourse paul krugman s now famous warnings as to the dangerous obsession of competitiveness have fallen on deaf ears in this paper i argue that this is at least in part because policy makers as distinct perhaps from business school gurus never understood competitiveness in quite the manner he assumed i suggest that krugman largely misdiagnosed the problem of competitiveness directing us to the link between competitiveness and protectionism that was always less prevalent and more tenuous than he imagined as a consequence he overlooked other more pertinent and problematic aspects of the discourse of competitiveness that persist relatively unchallenged in spite of his warnings more specifically i seek to show that krugman s understanding of competitiveness is insufficiently differentiated and rests on inferences drawn from an overly stylised model of competition for market share in product markets that exhibit a high demand price elasticity and in which success is associated exclusively with strategies of cost containment as i show through a series of extensions to his model this leads him to fail to see that it is the privileging of cost competitiveness specifically rather than the pursuit of competitiveness per se that is the dangerous obsession from which we most need protecting today

the public as thermostat dynamics of preferences for spending theory democratic accountability requires that the public be reasonably well informed about what policymakers actually do such a public would adjust its preferences for more or less policy in response to policy outputs themselves in effect the public would behave like a thermostat when the actual policy temperature differs from the preferred policy temperature the public would send a signal to adjust policy accordingly and once sufficiently adjusted the signal would stop hypotheses in domains where policy is clearly defined and salient to the public changes in the public s preferences for more policy activity are negatively related to changes in policy methods a thermostatic model of american public preferences for spending on defense and a set of five social programs is developed and then tested using time series regression analysis results changes in public preferences for more spending reflect changes in both the preferred levels of spending and spending decisions themselves most importantly changes in preferences are negatively related to spending decisions whereby the public adjusts its preferences for more spending downward upward when appropriations increase decrease thus consistent with the eastonian model policy outputs do feed back on public inputs at least in the defense spending domain and across a set of social spending domains

a little fairness may induce a lot of redistribution in democracy we use a model of self centered inequality aversion suggested by fehr and schmidt 1999 to study voting on redistribution we theoretically identify two classes of conditions when an empirically plausible amount of fairness preferences induces redistribution through referenda we test the predictions of the adapted inequality aversion model in a simple redistribution experiment and flnd that it predicts voting outcomes far better than the standard model of voting assuming rationality and strict self interest

make buy or ally a transaction cost theory meta analysis since the publication of williamson s markets and hierarchies many empirical articles have investigated the tenets of transaction cost theory using meta analytic techniques we quantitatively syn

divestiture market valuation and strategy an empirical study of 78 divestitures examines the relationship between type of divestiture and financial market valuation it was found that divestitures linked to corporate or business level stra

dangerous flexibility retirement reforms reconsidered flexible retirement is supposed to increase labor supply of older workers without touching the third rail of pension politics the highly unpopular increase of the retirement age while this may have intuitive appeal this paper shows that it might be wishful thinking economic theory tells us that flexible retirement policies can have a zero or positive effect on labor force participation while the effect on hours worked can be positive or negative depending on the distribution of leisure preferences thus the overall effect is ex ante unclear empirical results from nine oecd countries show that the effect on labor force participation is ex post small and positive while the effect on hours worked is negative overall there is no evidence of the desired positive effect on total labor supply rather we see evidence of a dangerous decline in total labor supply we conclude that the flexibility reforms enacted so far have failed to increase old age labor supply and delineate several alternative options to achieve this aim

grey power and the economy aging and inflation across advanced economies what explains the cross national variation in inflation rates across countries in contrast to most literature which emphasizes the role of ideas and institutions this article focuses on electoral politics and argues that aging leads to lower inflation rates countries with a larger share of elderly exhibit lower inflation because older people are both more inflation averse and politically powerful forcing parties seeking their votes to pursue lower inflation logistic regression analysis of survey data confirms that older people are more inflation averse and more likely to punish incumbents at the ballot box for inflation panel data regression analysis shows that social democratic parties have more economically orthodox manifestos in european countries with more elderly people and that the share of elderly is negatively correlated with inflation in both a sample of 21 advanced economies and a larger sample of 175 countries aging therefore pushes governments to pursue lower inflation

making new franchise systems work this paper argues that new franchise systems are more likely to survive if they are structured to economize on agency costs after controlling for industry effects and firm age and size this paper shows empirical support for six of nine hypotheses about the linkage between mechanisms for economizing on agency costs and the survival of new franchise systems 1998 by john wiley sons ltd

always the third rail pension income and policy preferences in european democracies social transfer programs are thought to generate beneficiary groups who will act politically to defend their programs from retrenchment but little empirical research has been conducted to either verify or disconfirm the micro foundations of this hypothesis which lies at the heart of the new social risks thesis as well as many economic analyses of welfare state politics this article tests empirically whether benefiting from public pensions leads individuals to greater support of the pension system status quo net of other factors it uses cross data set imputation to combine cross nationally comparable individual level data on income from public pensions with political attitudes toward proposed pension reforms the hypothesis that public pension systems create policy feedbacks of self interested beneficiaries supporting further pension spending is not supported in any of 11 european countries in either 1992 or 2001

public attitudes toward government spending this study examines the nature sources and consequences of citizens attitudes toward government spending data from the 1984 cps national election study are used to perform a scaling analysis of mass spending preferences across a set of 10 public policies the empirical results indicate that there is a coherent structure underlying citizens attitudes toward social welfare spending in contrast spending preferences for nonwelfare programs are separate and largely unrelated concerns i argue that this distinction is essential for understanding public opinion on government spending and further analyses incorporating the difference between welfare and nonwelfare spending preferences provide important theoretically relevant insights about the relationship between citizens in the mass public and stimuli in the political world

explaining social policy preferences evidence from the great recession to what extent do personal circumstances as compared to ideological dispositions drive voters preferences on welfare policy addressing this question is difficult because a person s ideological position can be an outcome of material interest rather than an independent source of preferences the article deals with this empirical challenge using an original panel study carried out over four years tracking the labor market experiences and the political attitudes of a national sample of americans before and after the eruption of the financial crisis the analysis shows that the personal experience of economic hardship particularly the loss of a job had a major effect on increasing support for welfare spending this effect was appreciably larger among republicans than among democrats a result that was not simply due to a ceiling effect however the large attitudinal shift was short lived dissipating as individuals employment situations improved the results indicate that the personal experience of an economic shock has a sizable yet overall transient effect on voters social policy preferences

a resource based theory of the firm knowledge versus opportunism this paper develops a resource based knowledge based theory of the firm its thesis is that the organizational mode through which individuals cooperate affects the knowledge they apply to business activity we focus on the polar cases of organization within a firm as compared to market contracting there will be a difference in the knowledge that is brought to bear and hence in joint productivity under the two options thus as compared to opportunism based transaction cost theory we advance a separate yet complementary answer to the question why do firms exist our aim is to develop an empirically relevant and complementary theory of why firms are formed a theory based on irreducible knowledge differences between individuals rather than the threat of purposeful cheating or withholding of information we assume limited cognitive abilities on the part of individuals bounded rationality and assume that opportunistic behavior will not occur the latter allows us to determine whether resource based

preferences in context micro preferences macro contexts and the demand for social policy political economists have increasingly looked to understand social welfare policy as a product of individual level demand for social spending this work hypothesizes that individuals with riskier j

why do firms offer employment protection this paper derives optimal employment contracts when workers are risk averse and there are employment and unemployment risks without income insurance consumption rises during employment and falls during unemployment optimal employment contracts offer severance compensation and sometimes give notice before dismissal severance compensation smooths consumption during employment and dismissal delays insure partially against the unemployment risk because of moral hazard during the delay consumption falls to give incentives to the worker to search for another job no dismissal delays are optimal if exogenous unemployment compensation is sufficiently generous

what drives public acceptance of reforms longitudinal evidence from a dutch pension reform governments often find it hard to pursue economic reforms even if they eventually will benefit a majority of voters the literature remains inconclusive about the reasons for this some scholars on the one hand stress the role of distributional conflicts between different classes for instance dividing the young and the old in the case of pay as you go pensions others have highlighted that resistance to reform is rather broad based owing to the public s poor understanding of the need for reform this paper attempts to disentangle the drivers of public acceptance of reform by means of a case study the 2012 increase of the dutch statutory retirement age from 65 to 67 we exploit a unique longitudinal dataset on the attitudes of dutch households respecting pension reform in the 2003 2013 period our findings offer various new insights first we find that education occupational status and psychological traits were the most systematic drivers of reform preferences while age had a limited impact second and significantly we find that the year fixed effects were the main drivers of respondents acceptance of reform we interpret the pattern of the year coefficients as evidence of a collective learning process whereby households gradually updated their expectations and reform preferences in light of new information

the choice of organizational form the case of franchising abstract we examine companies that franchise some units and centrally operate own others the agency problems confronting these two organizational forms are analyzed testable hypotheses are developed the empirical results support the notion that owning versus franchising reflects a trade off among agency related problems the cost of monitoring store managers appears to be especially important in the own franchise decision the level of repeat business and initial investment requirements per unit also appear to be important

voters commitment problem and reforms in welfare programs when will a vote seeking government pursue unpopular welfare reforms that are likely to cost it votes using a game theoretical model we show that a government enacts reforms that are unpopular with the median voter during bad economic times but not during good ones the key reason is that voters cannot commit to re elect a government that does not reform during bad times this voters commitment problem stems from economic voting i e voters tendency to punish the government for a poorly performing economy the voter commitment problem provides an explanation for the empirical puzzle that governments sometimes enact reforms that voters oppose

where ricardo and mill rebut and confirm arguments of mainstream economists supporting globalization most noneconomists are fearful when an emerging china or india helped by their still low real wage rates outsourcing and miracle export led developments cause layoffs from good american jobs this is a hot issue now and in the coming decade it will not go away prominent and competent mainstream economists enter into the debate to educate and correct warm hearted protestors who are against globalization here is a fair paraphrase of the argumentation that has been used recently by alan greenspan jagdish bhagwati gregory mankiw douglas irwin and economists john or jane doe spread widely throughout academia yes good jobs may be lost here in the short run but still total u s net national product must by the economic laws of comparative advantage be raised in the long run and in china too the gains of the winners from free trade properly measured work out to exceed the losses of the losers this is not by mysterious fuzzy magic but rather comes from a sharing of the trade induced rise in total global vectors of the goods and services that people in a democracy want never forget to tally the real gains of consumers alongside admitted possible losses of some producers in this working out of what schumpeter called creative capitalist destruction correct economic law recognizes that some american groups can be hurt by dynamic free trade but correct economic law vindicates the word creative destruction by its proof sic that the gains of the american winners are big enough to more than compensate the losers

the role of freedom growth and religion in the taste for revolution a fundamental question about the determinants of civil conflict is the relative importance of political freedoms versus economic development this paper takes a new approach to provide an answer by using micro data based on surveys of revolutionary tastes of 130 000 people living in 61 nations between 1981 and 1997 controlling for personal characteristics country and year fixed effects more freedom and economic growth both reduce revolutionary support losing one level of freedom equivalent to a shift from the us to turkey increases support for revolt by 4 percentage points to reduce support by the same amount requires adding 14 percentage points onto the gdp growth rate being muslim in a free country has no effect on the probability of supporting revolt compared to a non religious person however being muslim in a country that is not free increases it by 13 percentage points being christian in a free country decreases the chance of supporting revolt by 4 percentage points compared to a non religious person and in a not free country by 1 percentage point

retirement expectations pension reforms and their impact on private wealth accumulation abstract we estimate the effect of pension reforms on households expectations of retirement outcomes and private wealth accumulation decisions exploiting a decade of intense italian pension reforms as a source of exogenous variation in expected pension wealth the survey of household income and wealth a large random sample of the italian population elicits expectations of the age at which workers expect to retire and of the ratio of pension benefits to pre retirement income between 1989 and 2002 we find that workers have revised expectations in the direction suggested by the reform and that there is substantial offset between private wealth and perceived pension wealth particularly by workers that are better informed about their pension wealth

estimation of a hedonic price equation for bordeaux wine does quality matter in this paper the hedonic price technique is applied to bordeaux wine in the hedonic price function we include not only the objective characteristics appearing on the label of the bottle but also the sensory characteristics of the wine our data come from an experimental study in which juries have evaluated and graded a sample of bordeaux wines the estimation of the hedonic price equation shows that the market price is essentially determined by the objective characteristics the estimation of a jury grade equation shows that quality unlike the market price is essentially determined by the sensory characteristics

capabilities transaction costs and firm boundaries although the literature on firm boundaries has been greatly influenced by transaction cost economics strategy scholars often emphasize the importance of capabilities considerations in these decisions this has led to a debate that we suggest has generated more heat than light we argue that the two sets of considerations are in fact so intertwined dynamically that treating them as independent competitive explanations is fundamentally misleading we offer a theoretical synthesis of transaction cost and capabilities approaches to firm boundaries that seeks to overcome each approach s limitations and provides a unified and logically consistent understanding of boundary decisions

towards an economic theory of the multiproduct firm this paper outlines a theory of the multiproduct firm important building blocks include excess capacity and its creation market imperfections and the peculiarities of organizational knowledge including its fungible and taut character a framework is adopted in which profit seeking firms are seen to diversify in order to avoid the high transactions costs associated with using various markets to trade the services of various specialized assets neoclassical explanations of the multiproduct firm are shown to be seriously deficient

are government employees more likely to vote an analysis of turnout in the 1996 u s national election in this paper we develop and test a model of voter turnoutthat permits us to differentiate turnout rates for governmentemployees and other citizens controlling for the effects of awide range of other variables relating to turnout using 1996anes data we find that there is a significant difference inturnout rates for bureaucrats and nonbureaucrats both insimple bivariate analyses and in a full multivariate model the magnitude and significance of the coefficient forgovernment employment even in the face of controls suggeststhere is something about government employment per sethat has an effect on turnout

a leaky bucket in the real world estimating inequality aversion using survey data existing evidence of inequality aversion relies on data from class room experiments where subjects face hypothetical questions this paper estimates the magnitude of inequality aversion using representative survey data with questions related to the real economy situations the respondents face the results reveal that inequality aversion can be measured in a meaningful way using survey data but the magnitudes of the estimates depend dramatically on how inequality aversion is measured no matter how measured the revealed inequality aversion predicts opinions on a wide range of questions related to the welfare state such as the level of taxation tax progressivity and the structure of unemployment benefits

the effects of recent spanish pension reforms on sustainability and pension adequacy the spanish pension system has been recently reformed as a response to the demographic challenge and with the objective of ensuring the sustainability of the pension system in the long term the ov