environmental policy and international trade when governments and producers act strategically some environmentalists express concern that trade liberalization may damage the environment by giving governments incentives to relax environmental policies to give domestic producers a competitive advantage support for such concern may be given by models of imperfectly competitive trade where there may be rent shifting incentives for governments to relax environmental policies but there are also incentives for producers to act strategically e g through their investment in rd ii allowing governments to act strategically increases the incentive for producers to act strategically iii welfare is lower when both parties act strategically and iv strategic behavior by producers and governments is greater when governments use emission taxes than when they use emission standards

location and the multinational enterprise john dunning s thoughts on receiving the journal of international business studies 2008 decade award a retrospective by john h dunning on location and the mne written in the form of responses to questions posed by rajneesh narula in an interview recorded at the university of reading which was shown at the jibs decade award session at the aib annual meetings in milan june 2008

financial intermediation and endogenous growth an endogenous growth model with multiple assets is developed agents who face random future liquidity needs accumulate capital and a liquid but unproductive asset the effects of introducing financial intermediation into this environment are considered conditions are provided under which the introduction of intermediaries shifts the composition of savings toward capital causing intermediation to be growth promoting in addition intermediaries generally reduce socially unnecessary capital liquidation again tending to promote growth

multiproduct firms and environmental policy coordination the literature that analyzes the coordination of environmental taxes by governments considers that firms produce a single good at a single plant however in practice firms tend to produce several goods at various production plants multiproduct firms these firms may organize themselves in a centralized or decentralized fashion for purposes of decision making this affects their output and pollution levels this paper sets out to analyze the coordination of environmental taxes considering multiproduct firms we find that the organizational structure chosen by the owners of the firms depends on whether or not governments coordinate with one another in setting taxes and on whether the goods produced are substitutes or complements social welfare is greater if a supranational authority sets taxes in all countries in this case joint welfare is never lower if the authority is constrained to set the same tax in all countries

equilibrium pollution taxes in open economies with imperfect competition abstract this paper argues that imperfect competition in global markets creates a strategic interaction between governments that can lead to the inefficient distortion of pollution taxes this distortion can be decomposed into a rent capture effect and a pollution shifting effect the rent capture effect lowers equilibrium taxes as each country attempts to gain a competitive advantage over its trading partner and thereby capture foreign rent through net exports the pollution shifting effect raises equilibrium taxes as each country attempts to transfer production and its associated pollution to the other country this effect vanishes if pollution is perfectly transboundary because shifted pollution causes as much damage to the domestic environment as does domestic pollution the net effect on symmetric equilibrium taxes is negative except in the special case of perfect competition with no transboundary pollution in this case the two effects are mutually offsetting and the nash equilibrium is efficient when pollution is at least partially transboundary there also arises the usual transboundary externality and this reinforces the negative net strategic effect giving rise to equilibrium taxes that are lower than what is globally efficient

environmental policy with endogenous plant locations in a game between the governments of two countries each chooses its own environmental policy the nash equilibria of the game are generally not pareto optimal on the one hand each country may want to attract industry giving it an incentive to choose low environmental taxes or standards on the other hand if disutility from pollution is sufficiently high each country might prefer that a firm locates only in other countries this effect tends to make the environmental policy under non cooperation stricter than it would be with cooperation

generalized q models for investment the authors extend the q theory of investment to allow for adjustment costs for labor under the additional assumption that the firm is a monopolistic competitor in the output market the issue of nonconstant returns to scale is also discussed the authors show that the standard q model is a special case of a more general model involving testable parameter restrictions estimates for the u s manufacturing sector suggest that the departure from the assumption of perfect competition and lack of adjustment costs for labor receive empirical support in the data copyright 1991 by mit press

endogenous timing in duopoly games stackelberg or cournot equilibria abstract simultaneous versus sequential play is studied in an extended game in a preplay stage players decide whether to select actions in the basic game at the first opportunity or to wait until observing their rivals first period actions in one extended game players first decide when to select actions without committing to actions in the basic game the equilibrium has a simultaneous play subgame unless payoffs in a sequential play subgame pareto dominate those payoffs in another extended game deciding to select at the first turn requires committing to an action both sequential play outcomes are the equilibria only in undominated strategies

efficient climate policy with internationally mobile firms a major concern in the design of an incomplete climate agreement is thatfirms that use fossil fuels intensively may respond to emission regulationsby relocating their plants from cooperating to non cooperating countries this paper analyses how the cooperating countries might deal with the issueof firm delocation through emission taxes trade provisions and alocalisation subsidy to mobile firms it is shown that firms should not beinduced to stay in the cooperating countries by lowering emission taxesbelow the pigouvian tax rate incentives to stay should be given partlythrough trade provisions and partly through a localisation subsidy a secondbest solution without localisation subsidies is also discussed in thatcase the efficient emission tax is lower than the pigouvian tax rate finally the paper discusses the implications of the first best and thesecond best policy regimes for the pattern of firm localisation

the economics of controlling stock pollutants an efficient strategy for greenhouse gases abstract optimal control theory is applied to develop an efficient strategy to control stock pollutants such as greenhouse gases and hazardous waste the optimal strategy suggests that at any time the marginal costs of abatement should be equated with the present value of the marginal damage of timely unabated emission the optimal strategy calls for increasingly light abatement over time as the pollutant stock accumulates the optimal policy applied to greenhouse gases suggests moderate abatement efforts at present with the potential for much greater future efforts

financial control in the transition from classical socialism to a market economy the transition from socialism to capitalism poses severe problems of financial management that have yet to be resolved in principle let alone in practice one unfortunate consequence is continual financial turmoil as socialist economies of the soviet union and eastern europe attempt reform inflation either open or repressed first accompanies and then undermines attempts to decentralize decision making to dampen inflation and prevent economic chaos even reform governments may be provoked to reintervene by seizing the financial assets of enterprises reinstituting price controls or commandeering outputs through state orders and similar devices but why should the transition from central planning to a market economy be inflationary understanding the system of financial control in the preexisting regime of classical socialism is the key to understanding what might go wrong in the transition under classical socialism all the means of production industrial and agricultural are state owned output targets input levels wages and prices are all set by a stalinist system of central planning accordingly i shall first identify 1 how domestic fiscal and monetary processes interact with and complement central planning in the classical socialist economy and then discuss 2 why this mechanism for securing domestic financial control and avoiding inflation under classical socialism tends to break down when decentralization begins and central planning is weakened the discussion will then turn to 3 how in a more deliberate transition domestic tax and monetary arrangements might be managed to keep the average price level stable as the market prices of individual goods and services become free to fluctuate after sufficient domestic financial control is secured

cross hauling of polluting factors abstract this paper analyzes the investment environment overlap using a two stage model of two jurisdictions capital exports are modeled as choice variables for capital owners who weigh income considerations against the effects of capital exports on the quality of their local environments and on environmental policy this framework reveals that capital owners have an incentive to cross haul polluting factors across jurisdictions when direct controls are used to regulate emissions and that this cross hauling induces policymakers to ratchet up environmental policies in both locations the importance of instrument type and commitment on environmental policy is also analyzed

does environmental dumping lead to delocation environmental dumping is often viewed as an instrument used by some countries in the attempt to attract foreign investments stated otherwise the delocation of firms would be a major outcome of a stiff environmental policy in this paper we study the impact of a strict anti pollution policy pursued by a government on domestic firms locational decisions and determine the main variables that interact with such a policy some preliminary welfare implications are also provided

endogenous timing in strategic environmental policymaking in this paper we endogenize the timing of policymaking in a simple two country model of strategic environmental policy we consider a timing game in which two policymakers non cooperatively decide their preferred sequence of moves before setting emission tax rates we show that whether the policymakers implement emission tax policies simultaneously or sequentially crucially depends on the magnitude of environmental damages when the damages are insignificant the tax rates are strategic substitutes and the simultaneous move policymaking emerges in equilibrium in contrast when the damages are significant the tax rates are strategic complements and sequential move policymaking emerges we also extend the model by allowing for differences in the vulnerability to environmental damages between countries when the differences are large the unique equilibrium of the game is the situation where the less vulnerable country acts as a leader in the case where multiple equilibrium emerges the risk dominant equilibrium is also that where the less vulnerable country leads

von stackelberg and cournot duopoly choosing roles under what circumstances will firms agree on the choice of roles of leader and follower in the von stackelberg duopoly model a key determinant is the slope of the firms reaction function in either price or quantity space the duopolists will disagree over the choice of roles if they have downward sloping reaction functions each will prefer to be the leader they will also disagree if they have upward sloping reaction functions and similar profit functions each will prefer that the other be the leader preferences between von stackelberg and cournot outcomes are also considered

financial system architecture this article builds a theory of financial system architecture we ask what is a financial market what is a bank and what determines the economic role of each starting with basic assumptions about primitives the types of agents and the nature of the informational asymmetries we provide a theory that explains which agents coalesce to form banks and which trade in the capital market it is shown that borrowers of higher observable qualities access the financial market moreover a financial system in its infancy will be bank dominated and increased financial market sophistication diminishes bank lending article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

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

the hassle factor an explanation for managerial location shunning this study investigates the widely overlooked phenomenon of multinational enterprise mne location avoidance utilizing a multi method research design and data on 131 foreign investment locations it complements economic choice based location research by adding contextual dimensions at the country level that matter to managers personally and affect decisions at the firm level we provide a connection between international business research the behavioral stream in economic geography and the microfoundations stream in the strategic management literature the results suggest that in addition to traditional location choice criteria including investment potential internationalization strategy and various geographic and psychic distances foreign location decisions in mnes are influenced by how troublesome it is for managers to travel to or live in certain places an 11 item measure composed of travel inconveniences shows a significant negative moderating effect on the relationship between foreign direct investment potential and investment intensity the effect is stronger for non resource seeking industries we call this phenomenon the hassle factor

environmental taxes and first mover advantages this paper studies whether governments prefer to be leaders or followers in environmental policies to analyze this question i assume transboundary pollution and two countries that have to decide whether to set environmental taxes sequentially or simultaneously when taxes are set sequentially an effect denoted as the sequential setting effect arises that raises the equilibrium taxes i show that whether governments prefer to be leaders or followers in taxes depends on the degree to which environmental pollution spills over to trading partners when this overspill is low enough taxes are strategic complements and both the leader and the follower obtain greater welfare than under a simultaneous tax setting however the leader country obtains greater welfare than the follower in this case governments set taxes sequentially when the degree to which environmental pollution spills over to trading partners is high enough taxes are strategic substitutes and governments set taxes simultaneously in this case each government wants to avoid becoming the follower in taxes

end of pipe or cleaner production how to go green in presence of income inequality and pro environmental behavior in this paper we consider a vertically differentiated duopoly model in which a green producer competes with a brown rival in a market in which consumers are environmentally concerned in particular consumers are assumed to value not only the intrinsic quality of a certain product but also its environmental impact this environmental valuation has a positional content consumers attach a positive attribute to the green product while penalizing the brown one in this context we consider the choice of the green firm between cleaner and end of pipe abatement efforts we find that the interplay between the intensity of market competition consumers income disparity and environmental concern can play a crucial role in directing the green producer towards one or the other technological choice more precisely the adoption of cleaner production technologies can be discouraged by low average income and by tough competition while it can be spurred by the moral social incentive towards pro environmental behavior

mnes as border crossing multi location enterprises the role of discontinuities in geographic space spurred by the classic work of dunning mne location has become the focus of a growing body of research in the field in this paper we argue that international business ib research examining the spatial dimension has serious weaknesses stemming from its traditional assumption of the country as the location unit of analysis while border crossing remains the key research context of ib placing it within a general spatial framework that recognizes both international and subnational spatial heterogeneity opens up vast new vistas for research analyzing mnes as border crossing multi location enterprises allows the researcher to distinguish between discrete border effects and continuous distance effects and undertake a more fine grained analysis of location within such analysis national borders may appear as qualitative discontinuities in space that is points at which spatial heterogeneity changes abruptly however subnational spatial heterogeneity is often the characteristic that drives firm strategy as mnes decide to locate in particular agglomerations and not at random locations within a country the complex firms that ib scholars study typically include multiple units within the same country so that a complete analysis requires considering both subnational distance effects as well as international border effects

international trade and environmental regulation time series evidence and cross section test this paper examines empiricallywhether more stringent domestic environmental policiesreduce the international competitiveness ofenvironmentally sensitive goods esgs our timeseries evidence indicates that there are no systematicchanges in trade patterns of esgs in the last threedecades despite the introduction of more stringentenvironmental regulations in most of the developedcountries in the 1970s and 1980s this observedphenomenon is then subjected to a multi countryeconometric test using an extended gravity equationframework the test suggests that overall morestringent environmental regulations do not reducetotal exports exports of esgs and exports ofnon resource based esgs neither was there anyevidence to support the hypothesis that new tradebarriers emerge to offset the effects of morestringent environmental regulations

environmental policy when market structure and plant locations are endogenous abstract a two region two firm model is developed in which firms choose the number and the regional locations of their plants both firms pollute and market structure is endogenous to environmental policy there are increasing returns at the plant level imperfect competition between the home and the foreign firm and transport costs between the two markets at critical levels of environmental policy variables small policy changes cause large discrete jumps in a region s pollution and welfare as a firm closes or opens a plant or shifts production to from a foreign branch plant the implications for optimal environmental policy differ significantly from those suggested by traditional pigouvian marginal analysis

creation of financial markets in previously centrally planned economies abstract one of the key issues in reforming previously centrally planned economies is the creation of financial markets in the present paper the macroeconomic consequences of their introduction are investigated given the impossibility of the immediate introduction of a complete set of markets in the transition phase the second best theorem applies using an overlapping generation model it is shown that the existence of financial markets allows the choice of different combinations of growth and consumer s welfare given the existing trade off between these two targets financial markets can exist under different ownership schemes in the context of the model chosen it is shown that it is impossible to obtain unequivocal conclusions about the sequence of financial reforms and the optimal ownership scheme thus it is necessary to judge on a case by case basis and caution is suggested in the policy prescriptions

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

green lobbies and transboundary pollution in large open economies abstract we employ a common agency model of policy making to examine how green lobbies affect the determination of trade and environmental policies in two large countries that are linked by trade flows and transboundary pollution we show that the impact of green lobbying on environmental policy outcomes depends crucially on the prevailing trade regime cooperative or non cooperative on whether environmental agencies act in a unilateral or coordinated manner and on the size of the emission leakages and transboundary spillovers under free trade a unilateral increase in pollution taxes reduces domestic emissions at the cost of increased foreign emissions in this case if the emission leakages and the associated transboundary spillovers are large enough green lobbying can create a bias towards lower pollution taxes

location and the multinational enterprise in the early development of the international business field the focus of attention moved from the country level to the firm level and interest in location issues declined more recently firm based research has itself become increasingly concerned with the study of firm location interactions when examining two way knowledge flows or spillovers between multinational enterprises mnes and other actors in specific locations the diversity or heterogeneity of firms matters as does the diversity of locational environments the localization of knowledge sources depends on mne group level strategies for growth and organizational decentralization on subsidiary level evolution towards local competence creating efforts and on the development of suitable business networks within locations mnes now have a greater potential to benefit from a synergistic locational portfolio of complementary sources of knowledge the locational composition of the international network for knowledge sourcing of a given mne depends upon the extent of institutional compatibility between the locations in which the mne is active this compatibility between locations in turn affects the capacity of the mne to become an insider in local business systems and to influence the local institutional environment

multinationals and economic geography location technology and innovation the article reviews the book multinationals and economic geography location technology and innovation by simona iammarino and philip mccann

information costs and location of fdis within the host country empirical evidence from italy the literature on foreign direct investments fdis has analysed the location strategies of multinational enterprises across national borders but there have been few studies of location decisions by foreign investors within the borders of a single country the paper argues that the driving factors of these location choices have differing influences on indigenous and foreign investors specifically foreign investors suffer from a condition of adverse asymmetry in information costs compared to insiders thus foreign investors decisions on the location of their activities within a host country mainly reflect a rational responses to the existence of information costs

consumption and capital market imperfections an international comparison the excess sensitivity of consumption to current income fluctuations is higher in countries where consumers borrow less low levels of consumer debt can result either from capital market imperfections or from a low demand for loans the evidence suggests that the former view is more appropriate than the latter and thus supports the hypothesis that excess sensitivity may be attributed to liquidity constraints rather than to other factors copyright 1989 by american economic association

international aspects of pollution control pollution is a by product of production is only gradually dissolved by the environment and crosses national borders the market outcome ignores the adverse effects of pollution and thus yields higher levels of output and pollution than would prevail under a supranational social planner which does care about pollution in practice governments often do not cooperate and this leads to outcomes of pollution and production in between the market outcomes and the outcomes under supra national social planning absence of precommitment leads to lower emission charges less cleaning up activities and more pollution appropriate levels of emission charges under the various outcomes are a result of this analysis attention is also paid to investment in clean technology the debate between optimists who believe that higher production is compatible with sound environmental policy and pessimists can be analysed in this way