should finland and sweden form a monetary union aims to shed light on the choice of exchange rate system facing finland and sweden by using theories of optimum currency areas as framework review of theories dealing with optimum currency areas relationship of finland and sweden and between these two countries and other industrial countries advantages of a finnish swedish monetary union over membership within the european monetary union

does decentralization contribute to efficiency evidence from oecd countries abstractthis article provides evidence on the relationship between fiscal decentralization and technical efficiency we begin the first stage of this study with a data envelopment analysis to obtain technical efficiency estimates for a sample of 23 oecd countries over the period 1992 2009 in a second stage we explore the effects of fiscal decentralization and other control variables on technical efficiency the results including all the control variables reveal a statistically significant negative relationship between fiscal decentralization of public expenditure and technical efficiency

coalition and party formation in a legislative voting game we examine a legislative voting game where decisions are being made over both ideological and distributive dimensions and legislators preferences are separable over the two dimensions in equilibrium legislators prefer to make proposals for the two dimensions together rather than offering sequential proposals on the two dimensions separately the equilibria exhibit interaction between the ideological and distributive dimensions and in any equilibrium there is a positive probability that a proposal is made and approved which excludes the median legislator as defined over the ideological dimension in contrast with a game where no distributive decision is being made moreover in any stationary equilibrium there is more than one ideological decision that has a positive probability of being proposed and approved we show that legislators can gain from forming political parties and consider examples where predictions can be made about the composition of parties we discuss the impact of political parties on the outcome

ceo compensation and bank efficiency an application of conditional nonparametric frontiers the paper investigates in a dynamic context the effect of chief executive officer ceo bonus and salary payments on banks technical efficiency levels our methodological framework incorporates the latest developments on the probabilistic approach of efficiency measurement as introduced by b din et al 2012 we apply time dependent conditional efficiency estimates to analyse a sample of 37 us banks for the period from 2003 to 2012 the empirical evidence reveals a non linear relationship between ceo bonus and salary payments and banks efficiency levels more specifically it is reported that salary and bonus payments affect differently banks technological change and technological catch up levels finally the empirical evidence suggests that higher salary and bonus payments are not always aligned with higher technical efficiency levels

statistical inference for aggregates of farrell type efficiencies in this study we merge results of two recent directions in efficiency analysis research aggregation and bootstrap applied as an example to one of the most popular point estimators of individual efficiency the data envelopment analysis dea estimator a natural context of the methodology developed here is a study of efficiency of a particular economic system e g an industry as a whole or a comparison of efficiencies of distinct groups within such a system e g regulated vs non regulated firms or private vs public firms our methodology is justified by the neoclassical economic theory and is supported by carefully adapted statistical methods copyright 2007 john wiley sons ltd

self selection of emigrants theory and evidence on stochastic dominance in observable and unobservable characteristics the roy model has more precise predictions about the self selection of migrants than previously realised the conditions shown to result in positive or negative selection in terms of expected earnings also imply a stochastic dominance relationship between the earnings distributions of migrants and non migrants we test these predictions using the danish full population administrative data we find strong evidence of positive self selection of emigrants in terms of pre emigration earnings and residual earnings the income distribution for the migrants almost stochastically dominates the distribution for the non migrants decomposing the self selection in total earnings reveals that unobserved abilities play the dominant role

staunching emigration from east germany age and the determinants of migration following the unification of germany in 1990 eastern wages and unemployment both rose rapidly i demonstrate that rising wages reduced eastern emigration greatly while rising unemployment had little effect this reflects the behavior of the young who are very sensitive to source region wages and relatively insensitive to source unemployment i show that most of the effect of source unemployment comes from the contemporaneous effect on those laid off who are more likely to be older i find that compared to stayers young emigrants are much more skilled older emigrants are slightly more skilled and commuters are not more skilled as measured by education and pre move wages my conclusions are based on a comparison of results from aggregate inter state migration data and individual data from the eastern sample of the german socio economic panel for 1990 2000 jel j61 p23

aggregation of economic growth rates and of its sources abstract in this paper we consider the question of measuring aggregate economic growth and its sources we derive a theoretically justified solution for aggregating across firms industries countries etc growth rates and their sources within the framework of solow s 1957 growth accounting method the resulting aggregation scheme turns out to be quite intuitive and in fact the one that is sometimes used in practice but with theoretical justification missing and so the main value of our work is that our formal derivations show under what conditions this scheme has economic theory justification we also provide a small empirical illustration of our method on the real data set and show how different the conclusions can be depending on the aggregation scheme used

voting blocs party discipline and party formation abstract i study the strategic incentives to coordinate votes in an assembly coalitions form voting blocs acting as single players and affecting the policy outcome in an assembly with two exogenous parties i show how the incentives to accept party discipline depend on the types of the agents the sizes of the parties and the rules the blocs use to aggregate preferences in a game of fully endogenous party formation i find sufficient conditions for the existence of equilibria with one bloc two blocs and multiple blocs

technological change technological catch up and capital deepening relative contributions to growth and convergence we decompose labor productivity growth into components attributable to 1 technological change shifts in the world production frontier 2 technological catch up movements toward or away from the frontier and 3 capital accumulation movement along the frontier the world production frontier is constructed using deterministic methods requiring no specification of functional form for the technology nor any assumption about market structure or the absence of market imperfections we analyze the evolution of the cross country distribution of labor productivity in terms of the tripartite decomposition finding that technological change is decidedly nonneutral and that both growth and bipolar international divergence are driven primarily by capital deepening jel o30 o47 d24

a nested logit migration model with selectivity in this paper we specify a multiple choice migration model with selectivity we estimate this model using observations on individuals drawn from the 1971 census of venezuela there are two main innovations in this paper we apply a correction for the presence of selectivity in wage equations in the context of a multiple choice migration model and we apply a less restrictive technique for modelling multiple discrete choices than in previous studies we study the choices of individuals among 23 states of venezuela each individual is observed to have chosen one state so one wage is observable per person our hypothesis is that individuals choose where to locate on the basis of an evaluation of costs and benefits associated with choosing each state we measure the benefits associated with choosing a given state by means of the wage a person could earn in this state since we observe only one wage for each person we have to impute the unobserved wages for the states this person did not choose in order to study the role of wages in migration however it is possible that unobserved factors which affect both an individual s choice of location and his wages may result in sample selection bias if we try to estimate state specific wage equations by ols on the basis of the self selected samples we apply an estimator proposed by lee 1983 to estimate state specific wage equations free from sample selection bias the wage equations permit us to investigate whether individuals who choose particular states earn different wages from observationally identical individuals drawn from the population at random in the context of a developing country where internal migration flows are large evidence on the selectivity of migration will enhance our understanding of an important labor market adjustment mechanism evidence that people who choose particular locations earn more in those locations than would observationally identical individuals drawn at random from the population positive selection will suggest that migration decisions are made according to the principle of comparative advantage in modelling the choice of location we test whether subsets of states are more highly similar to each other than to other states unobserved similarities between states may arise because of similar amenities or economic conditions which are not otherwise explicitly controlled for in the model we implement the

multiple comparisons with the best with economic applications in this paper we discuss a statistical method called multiple comparisons with the best or mcb this paper is meant to introduce mcb to economists we discuss possible uses of mcb in economics the application that we treat in most detail is the construction of confidence intervals for inefficiency measures from stochastic frontier models with panel data we also consider an application to the analysis of labour market wage gaps copyright 2000 john wiley sons ltd

self enforcing voting in international organizations some international organizations are governed by unanimity rule some others by a majority system still others have moved from one system to the other over time the existing voting models have a difficult time explaining the observed variation in governance mode and in particular the widespread occurrence of the unanimity system we present a model whose main departure from standard voting models is that there is no external enforcement mechanism each country is sovereign and cannot be forced to follow the collective decision or in other words the voting system must be self enforcing the model yields unanimity as the optimal system for a wide range of parameters and delivers rich predictions on the variation in the mode of governance both across organizations and over time we thank james anderson matt jackson francois maniquet guido tabellini and jean tirole for very helpful comments arnaud costinot provided excellent research assistance we also bene

contracting with externalities and outside options this paper proposes a model of multilateral contracting where players are engaged in two parallel interactions they dynamically form coalitions and play a repeated normal form game with temporary and permanent decisions we show that when outside options are independent of the actions of other players all markov perfect equilibrium without coordination failures are efficient regardless of externalities created by interim actions otherwise in the presence of externalities on outside options all markov perfect equilibrium may be inefficient this formulation encompasses many economic models and we analyze the distribution of coalitional gains and the dynamics of coalition formation in four illustrative applications

deregulation vertical unbundling and the performance of china s large coal fired power plants article i nfo in 2003 china s integrated electricity utility the state power corporation spc was unbundled and dism antled into five generation groups and two grid companies in an effort to increase competition and improve ef ficiency in this paper we study the impact of this deregulation reform on the operational efficiency for a balanced panel of 34 large power plants for the period 1997 2010 we find that on average these power plants have converged to the technological frontier over the sample period controlling for substantial heterogeneity in the technical profile we also find that the unbundling reform has boosted productivity of china s large thermal power plants however the presumably differential impacts of the reform on the previously spc managed power plants and the independent power producers in our sample are insignificant

endogenous formation of coalitions the formation of coalitions is a fundamental problem in game theory by a coalition is meant a group of players e g economic or political agents which decide to act together as one unit relative to the rest of the players this includes the instances of syndicates unions cartels blocks political parties parliamentary coalitions etc we would like to emphasize that forming a coalition does not eliminate the individual players as decision makers in all interactions with the other players coalition members act as one unit it may be useful to think of a representative agent taking their place 2 however this arrangement will continue only as long as each player finds it desirable to act this way further bargaining occurs among the members of each coalition on how to divide what they obtained together thus the existence of coalitions implies that the interactions among the players will be conducted on two levels first among the coalitions and second within each coalition most of the existing models in economics and game theory assume that the coalition structure is given exogenously instead we try here to obtain it as an endogenous outcome of our model namely we want to be able to predict which coalitions will in fact form in each given situation 3 our theory combines two kinds of game theoretic concepts value and stability the basic idea is first to evaluate the players prospects in the various coalition structures and then based on these values to find which ones are stable we will call this value coalition structure value or cs value for short the reason we are considering coalition structures i e partitions of the set of players into disjoint coalitions rather than just coalitions is that in general players may find it to their advantage to join forces in some situations and to act separately in others all depending on the way the other participants are organized this implies that both the value and the stability concepts should depend on the entire coalition structure the cs value we analyze in this paper was first developed by owen 7

school quality and returns to education of u s immigrants using the u s labor market as a common point of reference this article investigates the influence of source country school quality on the returns to education of immigrants based on 1980 and 1990 census data we first estimate country of origin specific returns to education results reveal that immigrants from japan and northern europe receive high returns and immigrants from central america receive low returns next we examine the relationship between school quality measures and these returns holding per capita gdp and other factors constant immigrants from countries with lower pupil teacher ratios and greater expenditures per pupil earn higher returns to education

testing for efficiency catching up we used advances in data envelopment analysis dea techniques to examine efficiency scores and investigate the issue of convergence and divergence in a cross country analysis specifically we used bootstrapping techniques to examine a data set of 52 developed and developing countries we found that when using the standard dea model some of the results were not robust further we broke the sample into groups to examine club convergence we found that efficiency scores were significantly different between groups and that there was some evidence of convergence of efficiency scores within each group

party formation in single issue politics we study the implications of economies of party size in a model of party formation we show that when the policy space is one dimensional candidates form at most two parties this result does not depend on the magnitude of the economies of party size or sensitively on the nature of the individuals preferences it does depend on our assumptions that the policy space is one dimensional and that uncertainty is absent we study how modifications of these assumptions affect our conclusions

migration amongst the batswana the present study undertakes analysis of the effects of employment probabilities and wage alternatives on migration decisions in the context of botswana adopting micro level data both to estimate a multinomial migration function and to develop prediction equations for wages and likelihood of employment data are from the 1978 1979 national migration survey the factors that influence rural batswana adults to remain at home migrate to town on a short or long term basis move to another rural area or emigrate to south africa are examined consideration is given to the effects of employment alternatives on the rate of internal migration and the selectivity of movements with respect to personal household and locational factors excerpt

human capital and convergence a production frontier approach using nonparametric production frontier methods we decompose labor productivity growth into components attributable to technological change shifts in the world production frontier technological catch up movements toward or away from the frontier and physical and human capital accumulation movements along the frontier we find that 1 technological change is decidedly nonneutral 2 productivity growth is driven primarily by physical and human capital accumulation 3 the increased international dispersion of productivity is explained primarily by physical capital accumulation and 4 international polarization the shift from a unimodal to a bimodal distribution is brought about primarily by efficiency changes technological catch up

endogenous parties in an assembly in this article i show how members of an assembly form voting blocs strategically to coordinate their votes and affect the policy outcome chosen by the assembly in a repeated voting game permanent voting blocs form in equilibrium these permanent voting blocs act as endogenous political parties that exercise party discipline in a stylized assembly i prove that the equilibrium parties must be two small polarized voting blocs one at each side of the ideological divide

how important is human capital for development evidence from immigrant earnings this paper offers new evidence on the sources of cross country income differences it exploits the idea that observing immigrant workers from different countries in the same labor market provides an opportunity to estimate their human capital endowments these estimates suggest that human and physical capital account for only a fraction of cross country income differences for countries below 40 of the us output per worker less than half of the output gap relative to the us is attributed to human and physical capital

coalition formation with binding agreements we study coalition formation in real time a situation in which coalition formation is intertwined with the ongoing receipt of pay offs agreements are assumed to be permanently binding they can only be altered with the full consent of existing signatories for characteristic function games we prove that equilibrium processes whether or not these are history dependent must converge to efficient absorbing states for three player games with externalities each player has enough veto power that a general efficiency result can be established however there exist four player games in which all markov equilibria are inefficient from every initial condition despite the ability to write permanently binding agreements copyright 2007 wiley blackwell

relative sources of european regional productivity convergence a bootstrap frontier approach enflo k and hjertstrand p relative sources of european regional productivity convergence a bootstrap frontier approach regional studies this paper addresses the issue of western european regional productivity growth and convergence by means of data envelopment analysis dea decomposing labour productivity into efficiency change technical change and capital accumulation the decomposition shows that most regions have fallen behind the production frontier in efficiency and that capital accumulation has had a diverging effect on the labour productivity distribution using bootstrapping methods the paper also accounts for the inherent bias and the stochastic elements in the efficiency estimation it is found that the relative ranking of the efficiency scores remains stable after the bias correction even after controlling for spatially correlated measurement errors and that the dea successfully identifies the regions on the production frontier as significantly more efficient than other regions enfl

a noncooperative theory of legislative coalitions this noncooperative theory is based on a model that incorporates an institutional structure that reflects the sequential process of agenda formation and voting in a legislature that has the task of allocating particularistic benefits among legislative districts the theory is intended to identify the incentives for the formation of proposal coordinating coalitions as a function of characteristics of the political system and the rules that govern agenda formation coalition proposals allocate all the benefits to their districts and whenever the coalition has discipline or controls the chair it will be of minimal winning size when proposals are governed by a closed rule when coalition discipline is absent and the chair is neutral the coalition will be comprised of approximately 70 of the legislature a legislative rule that allows amendments may result in larger coalitions coalition composition is also considered

parties as political intermediaries this paper argues that parties regulate competition among like minded factions so as to enhance reputation building by and voter trust in the politicians standing for a given cause while intra and interparty competition contributes to keeping politicians on their toes unbridled competition may encourage politicians to challenge good platforms and to wage competition along socially suboptimal dimensions for example by privileging form over content the paper builds a simple model of intraparty competition and studies whether various hierarchical or democratic party institutions constitute an efe cient form of party governance the paper shows that intraparty disagreements when they occur hurt the party s position in the general election but that their possibility enhances party image and that parties must be able to avoid behind the scene allocations of portfolios and spoils in order to be credible last it analyzes the impact of political polarization and interparty competition on the choice of party governance

productivity growth technical progress and efficiency change in industrialized countries this paper analyzes productivity growth in 17 oecd countries over the period 1979 1988 a nonparametric programming method activity analysis is used to compute malmquist productivity indexes these are decomposed into two component measures namely technical change and efficiency change we find that u s productivity growth is slightly higher than average all of which is due to technical change japan s productivity growth is the highest in the sample with almost half due to efficiency change jel c43 d24 in this paper we apply recently developed

an interpretation of the effects of age on migration nordic migrants choice of settlement in sweden a model of the relationship between age and migration is developed and applied to data concerning migrants from other scandinavian countries who settled in sweden between 1968 and 1985 the author shows how changes in swedens domestic economic conditions and distance determine the probability for settlement in any of its 24 provinces for migrants of different ages the results show that in the integrated nordic labor market wages at destination do not explain differences in migrants settlement behavior across ages instead they suggest that the major factors to explain the differences are the labor market situation for the different age groups and distance excerpt

party governance and ideological bias abstract informed opinions are essential to a good functioning of democratic institutions political intermediaries such as parties make up the free riding voters informational deficit public opinion and voting outcomes are shaped by those parties whom the voters trust the credibility of parties is fashioned by their internal organization the paper investigates one aspect of party governance namely the allocation of control rights over platform design the party s leadership either selects a platform or simply recommends a platform for adoption by the rank and file under the latter democratic institution the leadership has no formal authority but for informational and procedural reasons may still have substantial real control over the final platform depending on the congruence between leadership and rank and file in particular the rank and file is generally more concerned with the ideological content of the platform than the leadership who is motivated by the benefits from electoral office the paper argues that in centrist parties the high congruence of interest between the rank and file and office seekers leads to systematic rubberstamping of the leadership s electoral platforms the resulting weak internal control mechanism hurts party credibility

determinants of migration in the nordic labor market migration flows in the integrated nordic labor market are heavily dominated by finnish migration to sweden differences in migration behavior across the nordic populations are identified elasticities of migration are obtained from a logistic human capital model estimated as seemingly unrelated regressions differences in migration behavior are shown to exist but the elasticities are not systematically higher for the finns as could be expected the domination of finnish migration to sweden is instead explained by real wage differences and since these have narrowed major migration flows should not be expected in the future unless large differences in labor market performance arise excerpt

returns to investment in education a global update the author updates compilations of rate of return estimates to investment in education published since 1985 and discusses methodological issues surrounding those estimates some key patterns among the three main levels of education primary education continues to exhibit the highest social profitability in all world regions private returns are considerably higher than social returns because of the public subsidization of education the degree of public subsidy increases with the level of education which is regressive social and private returns at all levels generally decline by the level of a country s per capita income overall the returns to female education are higher than those to male education but at individual levels of education the pattern is more mixed the returns to the academic secondary school track are higher than the vocational track since unit cost of vocational education is much higher and the returns for those who work in the private competitive sector of the economy are higher than in the public noncompetitive sector and the returns in the self employment unregulated sector of the economy are higher than in the dependent employment sector controversies in the literature are discussed in the light of the new evidence the undisputable and universal positive correlation between education and earnings can be interpreted in many ways the causation issue on whether education really affects earnings can be answered only with experimental data generated by randomly exposing different people to various amounts of education given the fact that moral and pragmatic considerations prevent the generation of such pure data researchers have to make do with indirect inferences or natural experiments some have been attempted the author looks at the research on overeducation or surplus schooling the conclusions reinforce earlier patterns they confirm that primary education continues to be the number one investment priority in developing countries they also show that educating females is marginally more profitable than educating males that the academic secondary school curriculum is a better investment than the technical vocational tract and that the returns to education obey the same rules as investment in conventional capital that is they decline as investment is expanded