wage indexation and the time consistency of government policy this paper concerns the role of wage indexation as a mechanism for enabling an economy to achieve outcomes that would not otherwise be time consistent the desirability of indexation depends on the size of real and nominal shocks and on a policymaker s incentives for short run inflation surprises policymakers incentives to utilize wage indexation are examined and it is found that weak policymakers are more likely to choose wage indexation hence in an electoral equilibrium voters may choose a policymaker who cares more about unemployment than inflation but who chooses wage indexation to commit to low inflation copyright 1995 by the editors of the scandinavian journal of economics

the american business cycle continuity and change in recent decades the american economy has experienced the worst peace time inflation in its history and the highest unemployment rate since the great depression these circumstances have prompted renewed interest in the concept of business cycles which joseph schumpeter suggested are like the beat of the heart of the essence of the organism that displays them in the american business cycle some of the most prominent macroeconomics in the united states focuses on the questions to what extent are business cycles propelled by external shocks how have post 1946 cycles differed from earlier cycles and what are the major factors that contribute to business cycles they extend their investigation in some areas as far back as 1875 to afford a deeper understanding of both economic history and the most recent economic fluctuations seven papers address specific aspects of economic activity consumption investment inventory change fiscal policy monetary behavior open economy and the labor market five papers focus on aggregate economic activity in a number of cases the papers present findings that challenge widely accepted models and assumptions in addition to its substantive findings the american business cycle includes an appendix containing both the first published history of the nber business cycle dating chronology and many previously unpublished historical data series

strategic information disclosure the case of multi attribute products with heterogeneous consumers we examine the incentives for firms to voluntarily disclose otherwise private information about quality attributes of differentiated products in particular we focus on the case of differentiated products with multiple attributes and consumers that are heterogeneous in their preferences over these attributes we show that there exist certain configurations of consumer preferences under which a firm producing a high quality product even with zero costs of disclosure may choose not to reveal the quality of its product this failure of firms to voluntarily disclose the quality of their products will arise when providing consumers with more information results in more elastic demands for these products which in turn triggers more intensive price competition and leads to lower prices and profits for all firms as a result the equilibrium in which disclosure is voluntary may diverge from that in which disclosure is mandatory

a comparative study of efficiency in european banking this paper investigates whether there has been an improvement in and convergence of productive efficiency across european banking markets since the creation of the single internal market using efficiency measures derived from dea estimation the determinants of european bank efficiency are evaluated using the tobit regression model approach the established literature on modelling the determinants of bank efficiency is then extended by recognizing the problem of the inherent dependency of dea efficiency scores when used in regression analysis to overcome the dependency problem a bootstrapping technique is applied overall the results suggest that since the eu s single market programme there has been a small improvement in bank efficiency levels although there is little evidence to suggest that these have converged the results also suggest that inference on the determinants of bank efficiency drawn from non bootstrapped regression analysis may be biased and misleading

product differentiation and profitability an asymmetric model the purpose of this paper is to develop a model of product differentiation in which there is an asymmetry namely that some customers are easier to serve than others it turns out that profits are negatively related to difficulty of service and that profits and market share are negatively related the results of this model are used to shed light on some aspects of the collusion versus differential efficiency debate and are also compared with vertical product differentiation models copyright 1990 by blackwell publishing ltd

a fresh look at the productivity and efficiency changes of uk airlines this article uses the bootstrapped malmquist index methodology to measure and test the extent of efficiency and productivity changes in the uk airline sector the aim of the bootstrap method is to overcome the statistical limitations of the data envelopment analysis dea method generally used to measure the distance functions of the malmquist index in applying the method we use input output data on a sample of major uk airlines for the period 2004 2007 results showed that most airlines have witnessed significant decrease in their productivity efficiency scale and technology measures using a second stage tobit regression this article attributed the sources of productivity and efficiency changes to factors such as stage length load factor and airline size this article also discussed the negative impacts of oil price using illustrations from the uk and other international airlines

chapter 4 competitive marketing strategies game theoretic models publisher summary this chapter reviews the key developments in the understanding of competitive marketing strategies product price advertising and distribution competition are all addressed while the emphasis is on models the chapter surveys the empirical literature as well there is a significant amount of empirical work to report but the ratio of theoretical to empirical work is nevertheless unpleasantly large much progress has been made in the last ten years or so in the study of competitive marketing strategies most of this chapter has been theoretical using simple models of firm and consumer behavior these models serve the function of demonstrating rigorously the existence of certain effects factors which need to be considered in analyzing real world competition

avoiding some costs of inflation and crawling toward hyperinflation the case of the brazilian domestic currency substitute the pattern of a classical hyperinflation is an acute acceleration of the inflation level accompanied by rapid substitution away from domestic currency until the real plan 1 july 1994 however brazil experienced inflation levels well above 1000 a year since 1988 without entering the classical hyperinflation path two elements played key roles in differentiating the brazilian case from the classical hyperinflations indexation and the provision of a reliable domestic currency substitute i e the provision of liquidity to interest bearing assets this paper claims that the existence of this domestic currency substitute was the main source of both the inability of the brazilian central bank to fight inflation and of the unwillingness of brazilians to face the costs of such a fight the provision of the domestic currency substitute through the banking sector is modeled and the main macroeconomic consequences of this monetary regime are derived those are the lack of a nominal anchor for the price system due to the passive monetary policy and the non controllability of seigniorage unlike traditional models of hyperinflations

macroeconomic policy in a two party system as a repeated game this paper considers the interaction of two parties with different objectives concerning inflation and unemployment and rational and forward looking wage setters if discretionary policies are followed an economic cycle related to the political cycle results in equilibrium this cycle is significantly different from the traditional political business cycle reputational mechanisms due to the repeated interaction of the two parties and the public or commitments to a common policy rule can improve upon the discretionary outcome by reducing or eliminating the magnitude of the economic fluctuations

debt restructuring with a public good endogenous government expenditure is introduced into lucas and stokey s 1983 model of optimal wage taxation so long as the government can precommit to taxes or to expenditures a debt maturity structure that keeps the value of the debt invariant to interest rate changes will make the optimal policies time consistent in the absence of partial precommitment debt restructuring cannot enforce time consistency but it can still limit the costs of time inconsistency numerical examples show 1 average debt is smaller than under the precommitment solution 2 the debt structure is much longer than under partial precommitment and 3 restricting the government to one period debt overstates the welfare losses from time inconsistency

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

cost differences and survival in declining industries a case for picking winners abstract in this paper we examine the relationship between firms cost structures and the order of exit from declining industries we distinguish between two fundamental causes of demand decline namely a shrinkage of the consumer base and a decrease in consumers willingness to pay we show that it is not necessarily best to be small and flexible the order of exit in a market driven outcome depends on the manner in which demand shrinks we find that from a welfare perspective the order of exit determined by market forces is not necessarily desirable however simple rules for picking winners based on current unit cost profitability or productive efficiency do not provide sound guidance for policy

price matching policy and the principle of minimum differentiation this paper shows that if duopolists are allowed to choose their product locations a price matching policy and their prices sequentially and independently both tacit collusion and minimum differentiation occur copyright 1995 by blackwell publishing ltd

measuring efficiencies and returns to scale of nippon telegraph telephone in production and cost analyses this article provides a theoretical framework related to data envelopment analysis dea in which an analytical relationship among eight different efficiency concepts is defined and explored in terms of production and cost analyses this article extends the theoretical basis into the measurement of scale economies se and returns to scale rts a unique feature of the se rts measurement is that the proposed approach is based upon the measurement regarding not only production activity but also cost performance as an important case study this article applies the dea based approach to measure the eight efficiency concepts and se rts of nippon telegraph telephone ntt this study finds that ntt has maintained high se and increasing rts in the operations of 39 annual periods from 1953 through 1992

exchange rate policy and wage formation in an economy with many trade unions abstract exchange rate policy may confront governments with an important credibility problem while there is usually a long run gain from abstaining from devaluations there may also be a short run benefit from a devaluation this short run benefit may cause expectations of future devaluations resulting in wage and price rises that make the expectations self fulfilling this issue is analysed within a model with many trade unions if the government pursues a non devaluation policy the trade unions gain from voluntary wage restraint however if the non devaluation policy isn t credible the cooperation on wage restraint may break down

union wage setting and exchange rate policy the performance of an optimally managed float is compared with that of a credibly fixed exchange rate in a small open economy framework where wages are set by a monopoly union two key results emerge first a sufficient condition for the managed float to outperform a fixed rate is that the union be no less inflation averse than society second introducing an inflation target into the central bank s loss function ensures the superiority of the managed float regardless of the weight attached to inflation by the union both results reflect the sensitivity of the union mark up to the policy regime

time consistent collection of optimal seigniorage a unifying framework this paper reviews the existing literature on the time consistency problem of seigniorage collection when monetary policy is determined by optimal taxation considerations it develops a unifying accounting framework and suggests a general measure for seigniorage which encompasses the standard measures employed in the literature in addition the ex ante optimal solution to the optimal taxation problem is derived and interpreted in relation to the ramsey principle we show that the different recommendations of the public finance literature i e the friedman rule of optimal deflation moderately positive inflation and seigniorage maximizing inflation are specific solutions to the optimal taxation problem the paper continues with a formal illustration of the time consistency problem of the ex ante optimal policy and the characterization of the time consistent solution under discretion as possible solutions to the time consistency problem we consider reputational forces institutional reforms that establish central bank independence and specific ways of asset and debt management in particular it is formally shown that a modified version of the asset and debt management scheme suggested by persson persson and svensson is not only necessary but also sufficient for optimality although this did not hold in their model

standing tiebout on his head tax capitalization and the monopoly power of local governments much of the public finance literature argues that localgovernments behave competitively due to residents ease of exitand entry the model presented here challenges this widespreadconclusion though it is costless to relocate to anotherlocality the presence of tax capitalization makes it impossiblefor land owners to avoid monopolistic pricing of public servicesby moving land owners can only choose between paying the taxdirectly or paying it indirectly in the form of a lower sale valuefor their housing if they exit in consequence the only realcheck on local governments comes through imperfectly functioningelectoral channels

survival at the center the stability of minimum differentiation abstract we model a hotelling market with multidimensional product differentiation in an evolutionary framework both evolutionary stability in the sense of schaffer 1989 and stochastic stability following kandori et al 1993 young 1993 are analyzed it is shown that firms move towards the center in product space i e a principle of minimum differentiation on all dimensions of the product space applies

monetary institutions monopolistic competition unionized labor markets and economic performance recent literature on the interactions between labor unions and monetary institutions features either a supply or a demand channel of monetary policy but not both this leads to two opposing views about the effects of central bank conservativeness we evaluate the relative merits of those conflicting views by developing a unified framework we find that i the effect of conservativeness on employment depends on unions relative aversion to unemployment versus inflation and ii for plausible values of this relative aversion and more than one union social welfare is maximized under a highly conservative central bank we also evaluate the effects of centralization of wage bargaining and product market competition on unemployment and inflation

time consistency indexation and the costs of inflation abstract we examine the effects of indexation measures on inflation costs of inflation and economic welfare within the barro gordon journal of political economy 1983 91 589 610 model the main result is that wage indexation in addition to making the phillips curve steeper also reduces the marginal cost of inflation which is inflationary

central bank independence and output variability abstract the benefit of greater central bank independence is the reduction in inflation that should result from the mitigation of a country s time consistency problem the cost of greater independence is the loss of discretionary monetary policymaking and consequent increase in output variability empirically however there is no correlation between output variability and central bank independence a possible explanation for this lack of correlation is that countries which are more likely to have lower output variability are also more likely to choose to have an independent central bank this hypothesis is tested using data for 44 countries while the evidence is weakly consistent with this hypothesis this does not seem sufficient to explain the zero correlation between output variability and central bank independence

asymmetric equilibria in spatial competition abstract the main purpose of this paper is to study the impact of consumer concentration around the market center on the equilibrium locations of location price games in the case of symmetric triangular density it is shown that no symmetric equilibrium exists however we demonstrate the existence of asymmetric equilibria in pure strategies these equilibria are also characterized our secondary purpose is to study the sequential entry of two firms when the location space is not restricted to the market space this leads us to uncover a substantial first mover advantage which has been neglected in the literature

is price flexibility stabilizing a broader perspective recent prewar postwar comparisons of united states macroeconomic performance have produced a number of stylized facts about differences in the cyclical behavior of real activity and prices across the two periods 1 among them are two that have attracted special attention the stability of real aggregate activity measured by the variance of its cyclical component has been greater in the postwar period than in the prewar period and wages and prices have been less flexible in the postwar period than in the prewar period 2 in the standard keynesian paradigms wage and price rigidity are the cause of output and employment fluctuations taken together then the observations of greater stability and reduced wage and price flexibility have puzzled some economists and prompted a reconsideration of the relationship between the flexibility of the price system and macroeconomic stability a series of recent papers3 reassesses the relationship between price flexibility and

the use of bootstrapped malmquist indices to reassess productivity change findings an application to a sample of polish farms this article assesses the extent to which sampling variation affects findings about malmquist productivity change derived using data envelopment analysis dea in the first stage by calculating productivity indices and in the second stage by investigating the farm specific change in productivity confidence intervals for malmquist indices are constructed using simar and wilson s 1999 bootstrapping procedure the main contribution of this article is to account in the second stage for the information in the second stage provided by the first stage bootstrap the dea ses of the malmquist indices given by bootstrapping are employed in an innovative heteroscedastic panel regression using a maximum likelihood procedure the application is to a sample of 250 polish farms over the period 1996 to 2000 the confidence intervals results suggest that the second half of 1990s for polish farms was characterized not so much by productivity regress but rather by stagnation as for the determinants of farm productivi

competition in the presence of individual demand uncertainty this article offers a tractable model of oligopolistic competition in differentiated product markets characterized by individual demand uncertainty the main result shows that in equilibrium firms offer advance purchase discounts and that these discounts are larger than in the monopolistic benchmark competition reduces welfare by increasing the fraction of consumers who purchase in advance that is without full knowledge of their preferences

note competitive price and positioning strategies brand positioning and brand pricing are important strategic decisions for marketing managers such decisions are interrelated and depend upon competitive brand positions and prices however any unilateral decisions may encourage repositioning and price adjustment by competitors thus leading to either new market equilibria or a price positioning war this paper examines such price and positioning decisions in a competitive environment by extending the defender consumer model to more complex equilibria we assume that the brands are already in the market and that positions are sticky in the sense that brands cannot leapfrog one another among the insights for such incumbent brands are if prices are symmetric and held constant firms seek to reposition toward the center of the market but price advantages by central firms can mediate that central tendency such that an equilibrium exists with positive profits if brand positions are held constant the nash equilibria for prices exist and are unique and category profits the sum of brand profits are maximized for maximum brand differentiation for two and three brand markets the subgame perfect nash equilibrium where positioning decisions are made with foresight on the price equilibria causes firms to unilaterally seek maximum brand differentiation but for four or more brands greater foresight and or cooperation appears necessary to reach the point of maximum brand differentiation these results apply where the defender consumer model is an exact description of consumer response and where the competitive reaction assumptions hold in any empirical situation such forces might be softened resulting in differentiated but not maximally differentiated brands

price cap regulation incentives and quality the case of brazilian telecommunications abstract this paper reviews the incentive properties of yardstick schemes with special reference to quality performance and to the economic foundations and practical applications of data envelopment analysis dea the core of the paper is related to the construction of synthetic relative efficiency scores for quality which were obtained for brazilian local telephony over the period 1998 2002 the telecommunications industry in brazil has been characterized by the recent implementation of price cap regulation the evidence indicates substantial quality underperformance with some improvements towards the end of the period the efficiency scores obtained based on the flexible dea approach suggest that adjustment factors should be used in the productivity offset of the price cap rule so as to provide premiums for superior quality performance in terms of lower x factors the dea based yardstick procedure can provide a practical alternative to monitoring a series of specific quality indicators in terms of a set of penalties for underperformance the composite quality indicators do not rule out the identification of optimal adjustments recommended for individual indicators

divestiture of nippon telegraph and telephone this article discusses whether the japanese government should break up ntt nippon telegraph telephone in 1995 as the u s federal government compelled at t american telephone telegram to break itself into toll and local telephone companies in 1984 the divestiture of ntt has long been a major industrial policy issue in japan since the common carrier was privatized in 1985 the governmental decision to divest it may influence not only the japanese telecommunications infrastructure but also the global telecommunications and information industries in the world where many common carriers are now facing an environmental change from regulation to competition a unique feature of this study is that it employs eight different estimation techniques to obtain a cost function of ntt so that this research avoids a methodological bias occurring in many empirical studies this study confirms that ntt has maintained cost subadditivity but it has failed to establish the status of a natural monopoly in the observed time period however it also finds that the ntt divestiture will not produce a price reducing benefit to japanese telecommunications consumers this research result will serve as empirical evidence for guiding the governmental review of this large scale industrial policy issue in japan

fiscal restraints and voter welfare this paper explores the logic of fiscal restraints in a political agency model with both moral hazard and adverse selection the role of the political process is both to discipline incumbents who may act against the public interest and to sort in those politicians who are most likely act in voters interests we use the model to examine the optimality of inefficient taxation limits on the size of government increasing transparency and yardstick competition some conclusions are surprising for example we show that some forms of fiscal restraint can only be desirable when incumbents are sufficiently likely to be benevolent

the indexation of wages and bonds in brazil this paper analyses the dynamic relationship between the degrees of indexation of wages and public bonds in brazil a simple model is constructed to show that both degrees of indexation are determined simultaneously we apply cointegration techniques and estimate error correction representations to assess the temporal causality between them our results provide empirical support for the existence of simultaneity in the degrees of indexation in brazil in the period 1980 93

goods diversion and repressed inflation notes on the political economy of price liberalization most analyses of parallel markets in centrally planned systems focus on queue rationing as the mechanism whereby state sector goods become available for second economy resale this article takes into account employee diversion of goods as a second channel through which merchandise can move to private markets diversion of goods tends to temper the adverse distributional consequences of price liberalization as repressed inflation increases more goods are diverted out of the state sector and the likelihood that an individual will be made worse off by a transition of free prices is diminished

deadweight costs and the size of government abstract we provide a model for analyzing effects of the tax system and spending programs on the determination of government spending and taxpayer welfare an improvement in the efficiency of either taxes or spending would reduce political pressure for suppressing the growth of government and thereby increase total tax revenue and spending we demonstrate the similarity of the political responses to revenue shocks spending shocks changes in tax efficiency and changes in spending program efficiency empirical analysis of oil shocks intergovernmental grants and other autonomous changes in taxes or spending indicates that cause and effect is not only from spending to tax structures

persistence of dollarization after price stabilization credit contracts in developing countries are often denominated in foreign currencies even after many of these economies succeeded in controlling inflation this paper proposes a new interpretation of this apparent puzzle based on the demand for insurance against real shocks the fact that devaluations occur more frequently in adverse states of the world provides a motive for holding dollar assets this approach implies a complementarity between the optimal monetary policy and the currency denomination of contracts when a large proportion of liabilities is denominated in a foreign currency the optimal exchange rate volatility is low which reinforces the demand for dollar assets

credibility capital controls and the ems abstract a common rationale for membership in an exchange rate arrangement such as the european monetary system ems is that may enhance the credibility of a central bank s commitment to stable monetary growth in this paper we consider this idea in the lightof two other features of the ems namely the existence of exchange rate bands on the ongoing liberalization of capital controls we find that capital controls themselves affect credibility in a way that depends on the exchange rate bands we also show that it is difficult to reconcile the non zero width of the bands with the credibility based interpretation of the ems

america s historical experience with low inflation the inflation of the 1970s was a marked deviation from america s typical peacetime historical pattern as a hard money country we should expect america to continue to be a hard money low inflation country in the future at least in peacetime the low rate of future inflation that we thus forecast changes the balance of macroeconomic risks and opportunities the risk of debt deflation mediated recessions is somewhat higher because a low trend rate of goods and services price index inflation somewhat increases the chances of deflation but it does not raise such risks as much as one might think the failure of the fisher effect to hold empirically means that a low inflation era will in all likelihood be a high real interest rate era but such high real interest rates do not appear to significantly discourage investment or growth

privatization of nippon telegraph and telephone was it a good policy decision nippon telegraph and telephone ntt corporation was privatized in 1985 under the economic assertion that a public enterprise is less efficient and less profitable than a private enterprise this assertion is referred to as the property right theory in economics and it is used as a theoretical rationale for privatizing publicly owned organizations this article empirically examines the economic assertion by comparing ntt s performance before and after its privatization data envelopment analysis dea is used as the research tool in this study which confirmed the economic assertion in terms of production based efficiency measures but it cannot find any major difference in its cost reducing corporate efforts thus this study presents serious management problems occurring within the ntt s partial privatization the partial privatization is now prevailing in the telecommunications industry all over the world this article also discusses the japanese business environment which makes ntt managerially ineffective under its public private joint ownership

assessing school efficiency in portugal using fdh and bootstrapping this study explores a new data set that contains information both on inputs and outputs for a sample of portuguese secondary schools an fdh reference technology is used to determine radial technical efficiency scores and slacks although it is known that there is no reason to assume convexity in the study of education efficiency frontiers this is the first study ever to use fdh at the school level effectively relaxing the convexity assumption a two stage approach is used whereby the significant environmental variables that explain fdh efficiency scores and slacks are identified for the purpose of statistical inference the first application of the bootstrapping algorithms suggested by simar and wilson 2003 is conducted the study concludes that the unemployment rate access to health care services adult education and living infrastructures are determinants of school efficiency the differences between the coast and the interior of portugal seem to be more relevant as far as school efficiency is

collusive conduct in duopolies multimarket contact and cross ownership in the mobile telephone industry the deregulation of the telecommunications industry has resulted in a variety of industry structures which have been created in hopes of increasing competition one example is the licensing of cellular telephone services in the united states where the fcc created duopolies in which two firms were granted licenses to compete in strictly defined product and geographic markets taking advantage of the unique regulatory environment we test to what degree duopolistic competition leads to competitive market outcomes we find that cross ownership and multimarket contact are important factors in explaining non competitive prices

the technical efficiency of schools in chile this paper assesses the technical efficiency of schools in chile which is defined as the capacity of schools to generate the maximum output academic achievement given the quantity of inputs they use two alternative methodological approaches for measuring efficiency are used i estimation of a stochastic production frontier and ii data envelopment analysis dea which allows identification of the efficient production frontier of the schools analysed nonparametrically each of these techniques has advantages and limitations which are discussed in the paper they lead however to the same conclusions when a sample of 2000 schools is analysed the results obtained provide interesting points for educational policy discussion in chile

centralised wage setting inflation contracts and the optimal choice of central banker the paper examines the appropriate design of central banking institutions in an economy in which the nominal wage is set by an inflation averse monopoly union as a positive mark up over its market clearing value the analysis considers both the optimal choice of central banker and the potential role for a linear inflation contract the optimal set of arrangements is a central banker who attaches less significance to inflation than does society combined with an inflation contract where the value of the contract parameter is related to the union s degree of inflationaversion following the important contribution of rogoff 1985 the appointment of a conservative central banker has been widely accepted as a potential albeit partial solution to the time inconsistency problem associated with discretionary policy making in placing a greater weight on inflation than does the government and society as a whole in the setting of monetary policy the central bank s temptation to create inflation surprises is reduced this then leads to a lower inflation rate in equilibrium than would otherwise prevail whilst in rogoff s stochastic framework this reduction in the inflationary bias has to be weighed against an increase in output variability the appropriate choice of central banker ensures a net improvement in welfare an important feature of rogoff s model is the assumption of an atomistic labour market in which nominal wages embodied in single period contracts reflect interaction between agents who hold no market power such a representation of the labour market also characterises most subsequent extensions of rogoff s analysis e g lohmann 1992 and waller 1992 however a number of recent papers in considering the time inconsistency issue have employed the assumption of unionised wage setting assuming either an allencompassing monopoly union or alternatively a number of individual unions each of which has a non negligible impact on macroeconomic variables examples include agell and ysander 1993 bleaney 1996 cubitt 1992 1995 horn and persson 1988 hutchison and walsh 1998 and skott 1997 these contributions have examined the implications of the assumed labour market imperfection from a variety of perspectives but only those of bleaney and skott directly consider its consequences for the appropriate specification of central bank objectives in what follows we explore the significance of unionised wage setting for

does inequality cause inflation the political economy of inflation taxation and government debt a democratic society in which the distribution of wealth is unequal elects political parties that are likely to represent the interests of poor people it is in the interests of the clientele of the resulting governments to attempt to levy inflation taxes in order to erode the real value of debt service and redistribute from the rich to the poor consequently inequality and high levels of nominal government debt sow the seeds for inflation some cross country evidence for this proposition is provided

productivity change and its determinants among leading mobile operators in europe the european mobile telecommunications industry has seen increased competition and market saturation in recent years so improving productivity will become crucially important for mobile operators in the near future this study adopts a bootstrap malmquist index approach to estimate productivity change among a sample of 23 of europe s leading mobile operators over the 2008 to 2009 period using a second stage regression this article also analyses the determinants of productivity changes in terms of regulation competition and ownership structure the results show that mobile companies operating in countries that have recently joined the eu have a positive association with productivity change in contrast to their counterparts in south east europe concerning market competition the leading mobile operators that experience higher productivity changes operate in more concentrated markets the results also indicate that international mobile operators perform better in terms of productivity change than their

the advantage of tying one s hands ems discipline and central bank credibility abstract it is often argued that the ems is an effective disciplinary device for inflation prone countries in europe since it forces the respective policy makers to pursue more restrictive monetary policies than they would otherwise it is not clear however why these countries should submit themselves to such discipline this paper argues that to answer this question appropriately one must consider that ems membership brings potentially large credibility gains policy makers in inflation prone countries the reason is that not only it attaches an extra penalty to inflation in terms of real appreciation but makes the public aware that the policy maker is faced with such penalty and thus helps to overcome the inefficiency stemming from the public s mistrust of the authorities

time consistent policy and persistent changes in inflation abstract this paper presents a model of dynamically consistent monetary policy that explains changes in inflation over time in the model as in the postwar united states adverse supply shocks trigger increases in inflation high inflation persists until a tough policymaker causes a recession to disinflate the paper also proposes an approach to selecting a unique equilibrium in infinite horizon models of monetary policy

product differentiation with multiple qualities abstract we study subgame perfect equilibria of the classical quality price multistage game of vertical product differentiation each of two firms can choose the levels of an arbitrary number of qualities consumers valuations are drawn from independent and general distributions the unit cost of production is increasing and convex in qualities we characterize equilibrium prices and the effects of qualities on the rival s equilibrium price in the general model equilibrium qualities depend on what we call the spence and price reaction effects for any equilibrium we characterize conditions for quality differentiation

on the utilization of resources perspectives from the u s telecommunications industry the issue of resource utilization is important in the resource based stream of work since the ability of firms to utilize resources is a key indicator of their competitive abilities this paper specifies why some firms might be better at utilizing resources than others thereafter it demonstrates how to empirically ascertain differences in resource utilization patterns between firms using the u s telecommunications industry as a context the data envelopment analysis procedure dea which is a firm level resource utilization measure is used this procedure can be useful for the resource based approach research agenda since performance is measured in resource terms dea is applied to measure variations in different dimensions of resource utilization for the firms making up the local operating sector of the telecommunications industry the use of dea to guide empirical research and address theoretical issues within the resource based paradigm is illustrated using the resource utilization index for the telecommunications firms as the measure of strategic performance 1998 john wiley sons ltd

externalities from contract length an increase in the length of a firm s labor contract contributes to rigidity in the aggregate price level this increases the variance of aggregate demand but decreases the variance of other firms real wages under certain conditions the net effect is to increase the variance of other firms employment this negative externality implies that the equilibrium contract length in a decentralized economy is greater than the social optimum in other words wages are too rigid copyright 1987 by american economic association

changing productive efficiency in telecommunications in the united states abstract the issue explored is whether incentive regulation in the telecommunications industry in the united states has resulted in an increase in productive efficiency after providing an overview of the nature of incentive regulation the methodology for measuring the effects of incentive regulation on productive efficiency is reviewed this methodology is data envelopment analysis dea and allows for the measurement of both technical efficiency and allocative efficiency of individual local exchange carriers the results of empirically implementing the dea approach indicate that in the aggregate there is little change in technical efficiency in fact average technical efficiency in 1989 was the same as in 1998 next while outputs continued to grow at about their historical rate across lecs the sizeable increase in the two types of capital increased inputs well above their historical average rates for some lecs leading to short run allocative inefficiency on average however allocative efficiency shows no identifiable trend between 1988 and 1998 finally in the aggregate total economic efficiency what incentive regulation in the telecommunications industry in the united states was designed to promote does not have a demonstrable trend between 1988 and 1998

interstate commodity tax differentials and the distribution of residents abstract this paper considers the manner in which an unequal distribution of consumers affects the commodity tax policies of neighboring jurisdictions the paper uses a spatial model in which the residents of two states are distributed non uniformly and employs a variety of assumptions about the behavior of governments and firms throughout the paper shows that at a nash equilibrium in tax levels the sparsely populated state imposes a lower tax than does its densely populated neighbor the paper also demonstrates how equilibrium state taxes differ depending on whether firms employ marginal cost or profit maximizing pricing

optimal contract length in a reputational model of monetary policy we develop a reputational model of monetary policy with endogenous contract length in choosing contract length private sector agents trade off recontracting costs against the expected costs resulting from trading under contracts based on incorrect inflation expectations however due to an externality the private and socially optimal contract lengths differ when selecting individual contract length private agents do not consider the effect of contract length on the surprise inflation output trade off in a reputational model of monetary policy this results in an excessive equilibrium inflation rate the socially optimal outcome may be achieved by public policies that reduce recontracting costs

monetary policy and the timing of wage negotiations abstract in a model of long term labor contracts the simultaneous determination of the pattern of contract negotiation and the pattern of monetary policy intervention yields a nash equilibrium in which agents allow a discretionary role for policy the resulting pattern of negotiation depends on the stochastic nature of the system when all disturbances are aggregate in nature a synchronized pattern of negotiation is optimal regardless of the frequency of monetary policy intervention when both aggregate and relative disturbances affect the system a pattern of bunched negotiations can result with the authority intervening at dates away from the negotiation dates

service quality in brazilian mobile telephony an efficiency frontier analysis the mobile telephony sector is characterized by the dynamic interplay of rapid changes in technology and an apparently growing competition as indicated by the fierce nonprice competition and is yet associated with the entry of new operating companies in some cases in this context a relevant and neglected issue is the assessment of how service quality responded to an increasingly competitive environment this study utilizes data envelopment analysis to assess the quality efficiency of mobile telephony companies in brazil during the 2000 2003 period window analysis was conducted for the entire period taking as reference different quality indicators pertaining to different forms of complaints and calls completed and interrupted the efficiency measurement was made feasible by interpreting the indicators reflecting a positive dimension of quality as outputs and those reflecting negative aspects of quality as inputs given potential heterogeneities across firms that relate to the frequency band and to th

competitive positioning in markets with nonuniform preferences we investigate the nature of competitive equilibrium for brands competing in a multi attribute product space when consumer preferences for product attributes follow nonuniform distributions we establish subgame perfect equilibria in a two stage game where firms choose positions in the first stage and prices in the second stage two types of entry scenarios are investigated in the first the number of brands is given exogenously and all of them choose positions simultaneously in the second scenario firms enter in sequence and the early entrants can choose strategies to deter the entry of later entrants we find the equilibria for two three and four brands for consumer preferences that follow a beta distribution nonuniform distributions result in equilibrium configurations that are substantially different from those obtained for uniform consumer distributions in the two brands case for sufficiently concentrated distributions we find asymmetric position equilibria with one firm at the corner of the market and one firm at an interior position in the case of three brands for sufficiently concentrated preferences we find symmetric equilibria that do not yield maximal differentiation we also establish an equilibrium for the case of four competing brands in addition we characterize entry deterring positioning strategies and examine how they vary with the distribution of consumer preferences

optimal reform postponement abstract the postponement of a reform program recognized to be necessary to control inflation is examined as a decision in an optimal control framework with a deteriorating and increasingly costlier inflation it is found that reforms are both more likely to be implemented and more likely to fail as inflation rises factors suggesting improved future conditions for a reform such as the possibility of external aid induce further postponement indexation and any other measures that reduce the current costs of inaction have the same effect

the comparative productivity efficiency for global telecoms abstract this paper reconciles diverse efficiency measures to characterize the productivity efficiency of 39 forbes 2000 ranked leading global telecom operators productivity efficiency ratings should be considered as a key element for achieving greater business performance and better market position this study applies the data envelopment analysis dea approach with the classical radial measure a p efficiency measure and efficiency achievement measure respectively combining multiple outputs and inputs to measure the magnitude of performance differences between leading telecom carriers empirical results indicate that top ranked forbes telecom operators are not the same as those having top ranked ccr efficiency measures the results show that about 20 5 of forbes 2000 telecom operators are operating on the best practice frontier for ccr efficiency measure while only 7 7 match the efficiency achievement measure criteria this study also shows that asia pacific telecom operators have better productivity efficiency than those in europe and america but the differences are not significant another interesting find is that the state owned telcos as a group show a relatively higher scoring than the privatized telcos as a group because they maintain full service fixed line mobile and internet operations as compared to maintaining fixed only or mobile only operations except china but the differences are not significant it has been concluded that competition in the global telecom market will continue to be tied to the enhanced productivity efficiency

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

on hotelling s competition with non uniform customer distributions abstract hotelling s competition in a two stage location price game is examined with increasing densities of consumers towards the centre it is shown that there is a range of rather even distributions for which firms locate at opposite ends of the market as the distribution becomes more concentrated duopolists will tend to move inside the market

two stage perfect equilibrium in hotelling s model hotelling i 929 suggests that his spatial competition model can be used to describe a wide range of differentiation problems he points to the selection of product variety within an industry as a potential application most of the subsequent work in his tradition has taken the equivalence of the two problems for granted in this note we look more closely at this equivalence we distinguish between two types of differentiated products according to the variety of preferences assumed with respect to those products building on this distinction we recognize that the demand faced by a firm locating on hotelling s line is analogous to the demand faced by a firm selecting a horizontally differentiated product it should be emphasized thus that the equivalence between the geographical and the product selection problem is by no means general and relies on specific assumptions about consumers preferences next we formulate a small model close to hotelling s one in which firms select a horizontally differentiated product within this model it will be shown that a pure strategy price equilibrium exists for every pair of products this statement is to be contrasted with the results of d aspremont et al i979 who have shown that in the original hotelling s setting an equilibrium fails to exist when firms are too close together 1 in addition we will examine the product selection problem faced by firms in a two stage game in the first stage each firm selects a product in the second stage the firm defines a price for its product we will seek the existence of a perfect equilibrium in this game a perfect equilibrium in this context can be viewed as a nash equilibrium in a game in which firms select a product aware of the non cooperative price equilibrium that will occur for each of their choices it will be shown that contrary to hotelling s principle the two firms will maximise their differentiation i e firms will locate at opposite ends of the market

fiscal inconsistencies and high inflation abstract this paper presents a simple model of steady state inflationary financing the discrepancy between the target level of spending and a fixed taxing capacity indicates the degree of fiscal pressures this variable need not be monotonically related to the measured deficit since actual expenditures are endogenous large fiscal inconsistencies generate unique steady states located on the bad side of the inflation tax laffer curve there high inflation may coexist with low observed deficits and the revenue constraint results in repressed spending such situations correspond qualitatively with the loss of control over fiscal policies typical of high inflation economies

credibility and the value of information transmission in a model of monetary policy and inflation abstract in this paper we solve for the optimal stackelberg policy in a model of credibility and monetary policy developed by cukierman and meltzer 1986 unlike the nash solution provided by cukierman and meltzer the dynamic optimization problem facing the monetary authority in this case is not of a linear quadratic form and certainty equivalence does not apply the learning behavior of the private sector regarding the policymaker s preferences becomes intimately linked with the choice of the optimal policy and cannot be separated as in the certainty equivalent case once the dual effect of the optimal stackelberg policy is recognized the monetary authority has an additional channel of influence to consider beyond that taken into account by suboptimal certainty equivalent nash policy rules unlike nash behavior the stackelberg solution implies no inflationary bias while being still weakly time consistent this makes the stackelberg solution credible with only stagewise precommitment of the policymaker in the absence of such a precommitment learning behavior of the private sector does not sufficiently inhibit the incentive of the monetary authority to cheat in this model despite the fact that this learning is explicitly recognized in the stackelberg solution

time inconsistency capital mobility and debt restructuring in a small open economy honest government announcements may not be credible governments may have incentives to change their plans when it is time to carry them out or in technical terms the plans may be time inconsistent a dramatic example is the reaction to a hostage crisis governments should announce they will never negotiate with kidnappers to prevent future abductions after the fact however there are strong incentives to break this promise to save the lives of hostages of course intelligent people understand this so without commitment no one expects time inconsistent policies to be undertaken and in general this represents a welfare loss hostage crises occur as shown by kydland and prescott 1977 and calvo 1978 credibility is a problem in tax policy in general governments have an incentive to change tax rates unexpectedly for example to exploit differences between ex ante and ex post elasticities take the taxation of capital ex ante optimal taxes are low to promote elastically supplied investment ex post the supply of capital is inelastic so optimal taxes are high of course if governments can change tax rates at any time then in order to be credible tax plans should be consistent with future incentives as with a hostage crisis this constraint in general represents a welfare loss in a more subtle way the taxation of labor and consumption is also in general time inconsistent optimal tax rates depend on endowments initial plus acquired for example as a rule tax rates should be high on complements to leisure and other endowments that can be directly consumed in a dynamic economy endowments change when assets are accumulated