sulfur dioxide control by electric utilities what are the gains from trade title iv of the 1990 clean air act amendments caaa established a market for transferable sulfur dioxide so2 emission allowances among electric utilities this market offers firms facing high marginal abatement costs the opportunity to purchase the right to emit so2 from firms with lower costs and this is expected to yield cost savings compared to a command and control approach to environmental regulation this paper uses econometrically estimated marginal abatement cost functions for power plants affected by title iv of the caaa to evaluate the performance of the so2 allowance market specifically we investigate whether the much heralded fall in the cost of abating so2 compared to original estimates can be attributed to allowance trading we demonstrate that for plants that use low sulfur coal to reduce so2 emissions technical change and the fall in prices of low sulfur coal have lowered marginal abatement cost curves by over 50 percent since 1985 the flexibility to take advantage of these chan

technical change uncertainty and investment the expected investment dynamics of the risk neutral firm is examined in the presence of uncertainty in the future evolution of the real wage and the stock of technical knowledge a model of the adjustment cost firm is developed that is characterized by quasi fixed factor augmenting technical change that is taken exogenously by the firm the effect of wage and technical change uncertainty on investment behavior is assessed using comparative stochastic dynamic analysis

revenue management with forward looking buyers a seller wishes to sell multiple goods by a deadline for example the end of a season potential buyers enter over time and can strategically time their purchases each period the profit maximizing mechanism awards units to the buyers with the highest valuations exceeding a sequence of cutoffs we show that these cutoffs are deterministic depending only on the inventory and time remaining in the continuous time limit the optimal mechanism can be implemented by posting anonymous prices when incoming demand decreases over time the optimal cutoffs satisfy a one period look ahead property and prices are defined by an intuitive differential equation

haggling over substitutes abstract using a model of substitutable goods i determine generic conditions on tastes which guarantee that fixed prices are not optimal the fully optimal tariff includes lotteries that is a profit maximising seller would employ a haggling strategy we show that the fully optimal selling strategy in a class of cases requires a seller to not allow themselves to focus on one good but to remain haggling over more than one good this throws new light on the selling strategies used in diverse industries these insights are used to provide a counter example to the no lotteries result of mcafee and mcmillan j econ theory 46 1988 335

durable goods monopolists durable goods monopolists face special problems because the sale of their products creates a secondhand market not controlled by the monopolist to the extent the monopolist is able to rent his product rather than sell it or to make binding promises about his future production such problems are ameliorated given the inability to do the above the monopolist is led to producing goods less durable than those produced by either competitive firms or monopolist returns a reverse averch johnson result that monopolist sellers may invest less in fixed costs including plant modernization and research and development than would the renters is shown it is also shown that even though sellers have less monopoly power than renters and nondurable goods monopolists it is possible that the seller will cause a greater deadweight loss than the other types of monopolies

bargaining and strikes strikes are generally regarded as an important economic phenomenon and yet good theoretical explanations of them are hard to come by the difficulty is to understand why rational parties should resort to a wasteful mechanism as a way of distributing the gains from trade why could not both parties be made better off by moving to the final distribution of surplus immediately or if it is uncertain to its certainty equivalent and sharing the benefits from increased production

bundling as an optimal selling mechanism for a multiple good monopolist abstract multiple objects may be sold by posting a schedule consisting of one price for each possible bundle and permitting the buyer to select the price bundle pair of his choice we identify conditions that must be satisfied by any price schedule that maximizes revenue within the class of all such schedules we then provide conditions under which a price schedule maximizes expected revenue within the class of all incentive compatible and individually rational mechanisms in the n object case we use these results to characterize environments mainly distributions of valuations where bundling is the optimal mechanism in the two and three good cases

the effect of bond rating changes on common stock prices abstract the evidence in this paper suggests that downgrades by both moody s and standard and poor s are associated with negative abnormal stock returns in the two day window beginning the day of the press release by the rating agency significant negative abnormal performance can still be detected after eliminating observations containing obvious concurrent potentially contaminating news releases there is little evidence of abnormal performance on announcement of an upgrade significant abnormal returns are associated with announcements of additions to the standard and poor s credit watch list if either a potential downgrade or a potential upgrade is indicated

the coase conjecture need not hold for durable good monopolies with depreciation abstract we consider the optimal sales policy for a monopoly seller of a durable good in a non stationary rational expectations equilibruim with replacement sales we show that coase s conjecture that the monopolist will sell the competitive stock as period length approaches zero may not hold under these assumptions

evaluating the food and agriculture act of 1977 with firm quadratic risk programming federal agricultural commodity programs generally have been assumed to reduce the income risk for farm firms but limited empirical research exists on this proposition this paper presents a study of the impact of the food and agriculture act of 1977on income risk for a representative farm in georgia the model is used to derive an e v frontier for a firm not participating in the program and for the same firm that is participating in the program results indicate that participation dominates nonparticipation except for higher level of expected net income

is it punishment sovereign defaults and the decline in trade sovereign defaults are associated with declines in defaulting countries trade are these declines the result of trade sanctions as the trade sanctions argument of sovereign borrowing would suggest we devise an empirical strategy to evaluate this issue based on the idea that if trade sanctions are causing the declines bilateral trade with creditor countries should fall more than trade with other countries we find that this is not the case the analysis does not yield much evidence of broader punishment strategies including a league of major creditors either these results contradict the predictions of the trade sanctions theory of sovereign borrowing

foundations of dynamic monopoly and the coase conjecture subgame perfect equilibria are characterized for a market in which the seller quotes a price each period assume zero costs positive interest rate continuum of buyers and some technical conditions if buyers valuations are positive then equilibrium is unique buyers strategies are stationary and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere otherwise a continuum of stationary equilibria can exist but at most one with analytic strategies coase s conjecture is verified for stationary strategies reducing the period length drives all prices to zero or the least valuation connections to bargaining models are described journal qf economic literature classification

intertemporal price discrimination with two products we study the two product monopoly profit maximization problem for a seller who can commit to a dynamic pricing strategy we show that if consumers valuations are not strongly ordered then optimality for the seller can require intertemporal price discrimination the seller offers a choice between supplying a complete bundle now or delaying the supply of a component of that bundle until a later date for general valuations we establish a sufficient condition for such dynamic pricing to be more profitable than mixed bundling so we show that the established no discrimination across time result does not extend to two product sellers under standard taste distributions

optimal selling strategies when to haggle when to hold firm a seller encountering risk neutral buyers one at a time should if commitments are feasible quote a single take it or leave it price to each this strategy is superior to any other for finite or infinite buyer populations whether there is learning or the distribution of buyer prices is known at the outset with one object for sale or many although haggling may offer advantages in terms of price discrimination these gains are more than offset by the losses it generates by encouraging buyers to refuse purchases at high prices

a more general theory of commodity bundling this paper extends the standard model of bundling as a price discrimination device to allow products to be substitutes and for products to be supplied by separate sellers whether integrated or separate firms have an incentive to introduce a bundling discount when demand for the bundle is elastic relative to demand for stand alone products product substitutability typically gives an integrated firm a greater incentive to offer a bundle discount relative to the model with additive preferences while substitutability is often the sole reason why separate sellers wish to offer inter firm discounts when separate sellers coordinate on an inter firm discount they can use the discount to overturn product substitutability and relax competition

international shock transmission after the lehman brothers collapse evidence from syndicated lending after lehman brothers filed for bankruptcy in september 2008 cross border bank lending contracted sharply to explain the severity and variation in this contraction we analyze detailed data on cross border syndicated lending by 75 banks to 59 countries we find that banks that had to write down sub prime assets refinance large amounts of long term debt and experienced sharp declines in their market to book ratio transmitted these shocks across borders by curtailing their lending abroad while shocked banks differentiated between countries in much the same way as less constrained banks they restricted their lending more to small borrowers

on crises contagion and confusion abstract since the tequila crisis of 1994 1995 the asian flu of 1997 and the russian virus of 1998 economists have been busy producing research on the subject of contagion yet few studies have examined empirically through which channels the disturbances are transmitted if there are indeed fundamental reasons for the spillovers we observe we attempt to fill this gap by analyzing how both trade links and the largely ignored financial sector links influence the pattern of fundamentals based contagion we examine the role of international bank lending the potential for cross market hedging and bilateral and third party trade in the propagation of crises

intertemporal price discrimination structure and computation of optimal policies we study a firm s optimal pricing policy under commitment the firm s objective is to maximize its long term average revenue given a steady arrival of strategic customers in particular customers arrive over time are strategic in timing their purchases and are heterogeneous along two dimensions their valuation for the firm s product and their willingness to wait before purchasing or leaving the customers patience and valuation may be correlated in an arbitrary fashion for this general formulation we prove that the firm may restrict attention to cyclic pricing policies which have length at most twice the maximum willingness to wait of the customer population to efficiently compute optimal policies we develop a dynamic programming approach that uses a novel state space that is general capable of handling arbitrary problem primitives and that generalizes to finite horizon problems with nonstationary parameters we analyze the class of monotone pricing policies and establish their suboptimality in general optimal policies are in a typical scenario characterized by nested sales where the firm offers partial discounts throughout each cycle offers a significant discount halfway through the cycle and holds its largest discount at the end of the cycle we further establish a form of equivalence between the problem of pricing for a stream of heterogeneous strategic customers and pricing for a pool of heterogeneous customers who may stockpile units of the product this paper was accepted by yossi aviv operations management

spread the news the impact of news on the european sovereign bond markets during the crisis we investigate how news affected domestic interest spreads vis a vis germany and how it propagated to other countries during the recent crisis period thereby distinguishing between the so called giips countries and other european countries we make original use of the eurointelligence newsflash to construct news variables based on the amount of news that is released on a country on a given date we find that more news on average raises the domestic interest spread of giips countries since september 2009 in addition we find that it leads to an increase in the interest spreads of other giips countries the magnitude of this effect is related to cross border bank holdings a split of news into bad and good news shows that the upward pressure on domestic and foreign interest spreads is driven by bad news we also find spillovers of bad news from giips countries onto non giips countries however the magnitude of these spillovers is substantially smaller than that to other giips countries

currency crashes in emerging markets an empirical treatment we use a panel of annual data for over 100 developing countries from 1971 through 1992 to characterize currency crashes we define a currency crash as a large change of the nominal exchange rate that is also a substantial increase in the rate of change of nominal depreciation we examine the composition of the debt as well as its level and a variety of other macroeconomic factors external and foreign crashes tend to occur when output growth is low the growth of domestic credit is high and the level of foreign interest rates are high a low ratio of fdi to debt is consistently associated with a high likelihood of a crash

global transmission channels for international bank lending in the 2007 09 financial crisist abstract during a financial crisis credit provision by international banks may be affected by three global channels changes in willingness to lend from increased economic uncertainty in funding availability from interbank liquidity markets and in solvency from weakened balance sheets in this paper we examine the extent to which each channel affected bank lending in developing countries during the global financial crisis of 2007 09 we find evidence that the liquidity and uncertainty channels were important although lending sensitivity to these channels remained unchanged during the crisis we also find heterogeneity in the lending behavior of european versus u s banks

optimal bundling and pricing under a monopoly contrasting complements and substitutes from independently valued products we develop an analytical model of contingent valuations and address two questions of import to a monopolist i should a given pair of complements or substitutes be sold separately pure components together pure bundling or both mixed bundling and at what prices ii how do optimal bundling and pricing strategies for complements and substitutes differ from those for independently valued products we find that the combination of marginal cost levels and the degree of complementarity or substitutability determines which of the three bundling strategies is optimal complements and substitutes should typically be priced higher than independently valued products

gaussian demand and commodity bundling in an important and widely cited essay adams and yellen 1976 examine the use of package selling as a price discrimination device they consider a monopolist producing two goods with constant unit costs and facing buyers with diverse tastes the marginal utility of a second unit of either good is assumed to be zero for all buyers the two goods are independent in demand for all buyers so that any buyer s reservation price for the first unit of either good is independent of the market price of the other thus the maximum amount any buyer would pay for a bundle consisting of one unit of each good is the sum of the two reservation prices and buyers are completely described by the values of those two prices 2 resale markets are assumed away in order to obtain comparative results for alternative pricing strategies the distribution of reservation prices in the adams yellen framework is assumed to be bivariate normal implications of gaussian demand are explored pure bundling is shown to operate by reducing buyer diversity thus facilitating the capture of consumers surplus it generally makes buyers worse off than unbundled sales it is more profitable if average reservation prices are high enough mixed bundling combines advantages of both pure bundling and unbundled sales and it is generally strictly more profitable than either bundling which treats goods symmetrically seems most attractive under symmetric reservation price distributions i am indebted to severin borenstein for superb research assistance to the ford motor company for research support through a grant to m i t and to the harvard economics department for housing me as a visiting scholar while most of this research was performed of course only i can be held responsible for this essay s shortcomings 1 the first clear recognition of this possibility seems to have been by stigler 1968 but also see burstein 1960 2 paroush and peles 1981 relax the assumption that consumers purchase at most one unit of each good but they consider only two types of buyers both with linear demand functions they retain the assumption that demands are independent for all buyers telser 1979 and phillips 1981 use different frameworks to analyze bundling policies spence 1980 explores the relation between bundling across commodities as here and bundling multiple units of the same

modelling uk inflation 1875 1991 uk inflation has varied greatly in response to many economic policy and exchange rate regime shifts two world wars and two oil crises as well as legislative and technological changes inflation is modelled as responding to excess demands from all sectors of the economy goods and services factors of production money financial assets foreign exchange and government deficits equilibrium correction terms are developed for each of these over the sample indicator variables and commodity prices capture turbulent years variables representative of most theories of inflation matter empirically yielding an eclectic model inconsistent with any single cause explanation copyright 2001 john wiley sons ltd

economic performance through time prize lecture to the memory of alfred nobel december 9 1993 this abstract was borrowed from another version of this item

does high public debt consistently stifle economic growth a critique of reinhart and rogoff we replicate reinhart and rogoff 2010a and 2010b and find that selective exclusion of available data coding errors and inappropriate weighting of summary statistics lead to serious miscalculations that inaccurately represent the relationship between public debt and gdp growth among 20 advanced economies over 1946 2009 countries with public debt gdp ratios above 90 averaged 2 2 real annual gdp growth not 0 1 as published the published results for i median gdp growth rates for the 1946 2009 period and ii mean and median gdp growth figures over 1790 2009 are all distorted by similar methodological errors although the magnitudes of the distortions are somewhat smaller than with the mean figures for 1946 2009 contrary to reinhart and rogoff s broader contentions both mean and median gdp growth when public debt levels exceed 90 of gdp are not dramatically different from when the public debt gdp ratios are lower the relationship between public debt and gdp growth varies significantly by period and country our overall evidence refutes rr s claim that public debt gdp ratios above 90 consistently reduce a country s gdp growth

when is price discrimination profitable we consider a general model of monopoly price discrimination and characterize the conditions under which price discrimination is and is not profitable we show that an important condition for profitable price discrimination is that the percentage change in surplus i e consumers total willingness to pay less the firm s costs associated with a product upgrade is increasing in consumers willingness to pay we refer to this as an increasing percentage differences condition and relate it to many known results in the marketing economics and operations management literatures

strong duality for a multiple good monopolist we characterize optimal mechanisms for the multiple good monopoly problem and provide a framework to find them we show that a mechanism is optimal if and only if a measure derived from the buyer s type distribution satisfies certain stochastic dominance conditions this measure expresses the marginal change in the seller s revenue under marginal changes in the rent paid to subsets of buyer types as a corollary we characterize the optimality of grand bundling mechanisms strengthening several results in the literature where only sufficient optimality conditions have been derived as an application we show that the optimal mechanism for n independent uniform items each supported on c c 1 is a grand bundling mechanism as long as c is sufficiently large extending pavlov s result for two items pavlov 2011 at the same time our characterization also implies that for all c and for all sufficiently large n the optimal mechanism for n independent uniform items supported on c c 1 is not a grand bundling mechanism

the timing of sales this paper presents a model of intertemporal price discrimination a fixed number of sellers produce a homogeneous good consumers with different preferences enter the market in each period and leave when they make a purchase the sellers typically vary their prices over time charging a high price in most periods but occasionally cutting the price to sell to a large group of customers with a low reservation price in some equilibria all stores lower their price at the same time and to the same level

output spillovers from changes in sovereign credit ratings this research examines how a sovereign rating revision of one country influences the economic growth rates of other countries rating revisions have significant output spillover effects a one notch upgrade downgrade prompts on average a significant downward revision of about 0 03 0 07 in the consensus forecast of annual economic growth rates of other countries in the two month period after the event the spillovers are transmitted through direct and indirect trade and financial linkages between event and non event countries the evidence indicates that a predominance of differential common spillovers leads upgrades downgrades to produce adverse output effects for other countries

funding growth in bank based and market based financial systems evidence from firm level data the authors investigate whether firms access to external financing to fund growth differs between market based and bank based financial systems using firm level data for forty countries they compute the proportion of firms in each country that relies on external finance and examine how that proportion differs across financial systems they find that the development of a country s legal system predicts access to external finance and that stock markets and the banking system have different effects on access to external markets the development of securities markets is related more to the availability of long term financing whereas the development of the banking sector is related more to the availability of short term financing they find no evidence however that firms access to external financing is predicted by an index of the development of stock markets relative to the development of the banking system

durable goods monopoly with entry of new consumers this paper analyzes a model of a dynamic monopolist who produces at constant unit cost each period a new cohort of consumers enters the market each entering cohort is identical consumers within a cohort have different tastes for the good my main results are if players are sufficiently patient any positive average profit less than the maximum feasible level can be attained in a subgame perfect equilibrium in the subset of subgame perfect equilibria in which players use stationary strategies the seller cannot make sales at prices significantly greater than the lowest willingness to pay when period length goes to zero and the seller attains the maximum profit when commitment is feasible by charging the same static monopoly price in every period this paper analyzes a model of a dynamic monopolist who operates in a market in which there is a regular flow of new consumers the seller produces a durable good at constant unit cost each period a new cohort of consumers enters the market consumers wish to buy exactly one unit of the item but are willing to wait resales are not allowed each entering cohort is identical

capital control liberalization and stock market development the authors address two questions what happens to stock market size liquidity volatility and integration with world capital markets after capital controls are liberalized and what is the relationship between those indicators of stock market development and regulations about information disclosure accounting standards and investor protection an analysis of data on stock markets in 16 developing countries suggests the following a stock markets become larger more liquid more integrated internationally and more volatile after controls on capital and dividend flows are liberalized b easy access to information about firms is positively associated with the size and liquidity of stock markets and c countries that officially establish internationally accepted accounting standards and laws to protect investors do not have substantially better functioning stock markets than countries that do not adopt those official standards

the value of purchase history data in target marketing an important aspect of marketing practice is the targeting of consumer segments for differential promotional activity the premise of this activity is that there exist distinct segments of homogeneous consumers who can be identified by readily available demographic information the increased availability of individual consumer panel data open the possibility of direct targeting of individual households the goal of this paper is to assess the information content of various information sets available for direct marketing purposes information on the consumer is obtained from the current and past purchase history as well as demographic characteristics we consider the situation in which the marketer may have access to a reasonably long purchase history which includes both the products purchased and information on the causal environment short of this complete purchase history we also consider more limited information sets which consist of only the current purchase occasion or only information on past product choice without causal variables proper evaluation of this information requires a flexible model of heterogeneity which can accommodate observable and unobservable heterogeneity as well as produce household level inferences for targeting purposes we develop new econometric methods to implement a random coefficient choice model in which the heterogeneity distribution is related to observable demographics we couple this approach to modeling heterogeneity with a target couponing problem in which coupons are customized to specific households on the basis of various information sets the couponing problem allows us to place a monetary value on the information sets our results indicate there exists a tremendous potential for improving the profitability of direct marketing efforts by more fully utilizing household purchase histories even rather short purchase histories can produce a net gain in revenue from target couponing which is 2 5 times the gain from blanket couponing the most popular current electronic couponing trigger strategy uses only one observation to customize the delivery of coupons surprisingly even the information contained in observing one purchase occasion boasts net couponing revenue by 50 more than that which would be gained by the blanket strategy this result coupled with increased competitive pressures will force targeted marketing strategies to become much more prevalent in the future than they are today

multiproduct monopoly commodity bundling and correlation of values through what selling strategy can a multiproduct monopolist maximize his profits when his knowledge about individual consumers preferences is limited one possibility extensively studied in the context of a single good monopoly is to use quantity dependent pricing as a means of discriminating among customers with differing tastes see for example oi 1971 and maskin and riley 1984 an alternative technique for price discrimination first suggested by stigler 1968 and analyzed further by adams and yellen 1976 is for the monopolist to package two or more products in bundles rather than selling them separately through a series of examples adams and yellen illustrate that bundling can serve as a useful price discrimination device even when all consumers willingnesses to pay for each of the goods individually are unaffected by whether they are also consuming the other product a typical example is illustrated in figure i adapted from figure iv in adams and yellen where there are two goods three consumers ab c who consume at most one unit of each good with reservation values for each good that are independent of whether the other good is consumed and zero costs of production there a bundle offered at a price of 100 fully extracts all potential surplus which would be impossible pricing the goods independently unfortunately though these authors do not provide any general characterization of the circumstances in which bundling is actually a multiproduct monopolist s optimal strategy their examples however such as figure i create the impression that the profitable use of bundling

revenue and cost uncertainty generalized mean variance and the linear complementarity problem comment in articles including one in this journal quirino paris 1978 1979 adapted the symmetric quadratic programming structure of cottle to handle limiting stochastic inputs in a way analogous to stochastic revenues within the last decade several researchers have employed the method kramer mcsweeny and stavros kms mcsweeny and kramer and mcsweeny applied this method to soil conservation decisions in the presence of both output price and input availability risk shortle and stefanou recently extended the method to include dynamics for soil conservation decisions paris and easter easter and paris and easter used a further result of this method to make the application of chance constraints to asymmetric quadratic meanvariance analysis more manageable paris s technique deals with inputs with uncertain availabilities such as field hours kms ground water for irrigation paris 1979 family labor paris 1978 and rainfall these inputs are not readily traded on an open market and their availability is difficult to supplement with additional purchases inputs with uncertain availability may be viewed as inputs that were endowed prior to production but yield an uncertain flow of services during the production period in most agricultural settings these inputs are possible limits to production paris s technique represents an effort to incorporate the uncertainty of these input supplies into the optimal planning model concerns about paris s method have been raised for example see mccarl or falatoonzadeh conner and pope this comment examines the appropriateness of the risk adjustment term for the stochastic inputs in paris s constraint and shows this term is inappropriately signed this will be established for a single stochastic input model for the general model and by a comparison to chance constraints the single stochastic input case

sequentially optimal mechanisms this paper establishes that posting a price in each period is a revenue maximizing allocation mechanism in a finite period model without commitment a risk neutral seller has one object to sell and faces a risk neutral buyer whose valuation is private information and drawn from an arbitrary bounded subset of the real line the seller has all the bargaining power she designs a mechanism to sell the object at t but if trade does not occur at t she can propose another mechanism at t 1 we show that posting a price in each period is an optimal mechanism a methodological contribution of the paper is to develop a procedure to characterize optimal dynamic incentive schemes under non commitment that is valid irrespective of the structure of the agent s type 2006 the review of economic studies limited

output spillovers from fiscal policy in this paper we estimate the cross country spillover effects of government purchases on output for a large number of oecd countries following the methodology in auerbach and gorodnichenko 2012a b we allow these multipliers to vary smoothly according to the state of the economy and use real time forecast data to purge policy innovations of their predictable components we also consider the responses of other key macroeconomic variables our findings suggest that cross country spillovers have an important impact and also confirm those of our earlier papers that fiscal shocks have a larger impact when the affected country is in recession

durable good monopolies with rational expectations and replacement sales a monopoly producer of a durable good is examined under the previously uninvoked assumption that the good depreciates and hence that replacement sales must occur if a fixed stock of the good is to be maintained we find two ways in which the no depreciation result that the monopoly will always at least eventually produce a stock equal to that produced by a competitive market may not hold if the length of the trading period is nonzero the limiting stock produced by the firm will be lower than the competitive stock to ensure the profitability of future replacement sales if the firm is able to constrain its production capacity it may choose a constraint that always binds in the sense that it will be impossible for the firm to achieve a stock equal to the competitive stock

sequential bargaining with incomplete information this paper describes a simple two person two period bargaining game and solves it using the concept of perfect bayesian equilibrium in which the actions of each player convey information which is used by his opponent the paper examines the effects of changes in bargaining costs the size of the contract zone and the length of the bargaining process on such aspects of the solution as the probability of impasse and the likelihood of concessions the combination of information transfer and the lack of pre commitment embodied in perfectness yields many surprising results common perceptions about the effects of parameter changes on bargaining processes are suspect and should be checked in the particular game being discussed

investor protection optimal incentives and economic growth does investor protection foster economic growth to assess the widely held affirmative view we introduce investor protection into a standard overlapping generations model of capital accumulation better investor protection implies better risk sharing because of entrepreneurs risk aversion this results in a larger demand for capital this is the demand effect a second effect the supply effect follows from general equilibrium restrictions better protection i e higher demand increases the interest rate and lowers the income of entrepreneurs decreasing current savings and next period s supply of capital the supply effect is stronger the tighter are the restrictions on capital flows our model thus predicts that the positive effect of investor protection on growth is stronger for countries with lower restrictions cross country data provide support for this prediction as does the detailed examination of the growth experiences of south korea and india

why doesn t capital flow from rich to poor countries an empirical investigation we examine the empirical role of difierent explanations for the lack of ows of capital from rich to poor countries the lucas paradox the theoretical explanations include difierences in fundamentals across countries and capital market imperfections we show that during 1970i2000 low institutional quality is the leading explanation for example improving peru s institutional quality to australia s level implies a quadrupling of foreign investment recent studies emphasize the role of institutions for achieving higher levels of income but remain silent on the speciflc mechanisms our results indicate that foreign investment might be a channel through which institutions afiect long run development

the influence of rating levels and rating convergence on the spillover effects of sovereign credit actions abstract this paper assesses contagion and competition as alternative types of stock market spillovers arising from sovereign rating actions our research design is based on the premise that the type of spillover effects within and between groups of countries will be influenced by the sovereign rating level split ratings and the extent of rating convergence i e specific types of rating action will induce different and or stronger effects the results reveal a clear pattern whereby downgrades of high rated countries induce contagion to both high and low rated countries while downgrades of low rated countries reveal the opposite i e they induce competitive effects split ratings are found to intensify stock market spillover effects rating convergence divergence across similarly rated sovereigns has a meaningful influence on the spillover effects for the downgrades of high rated countries rating convergence mitigates the contagion effect to other high rated countries in the region but has very limited effect on the contagion to low rated countries for downgrades of low rated countries rating convergence strengthens the competitive effect on other low rated countries but has little effect on the competitive impact on high rated countries

do corrupt governments receive less foreign aid critics of foreign aid programs argue that these funds often support corrupt governments and inefficient bureaucracies supporters argue that foreign aid can be used to reward good governments this paper documents that there is no evidence that less corrupt governments receive more foreign aid on the contrary according to some measures of corruption more corrupt governments receive more aid also we could not find any evidence that an increase in foreign aid reduces corruption in summary the answer to the question posed in the title is no

bureaucratic corruption and endogenous economic growth there appears to be significant diversity in the incidence of bureaucratic corruption across countries at different stages of economic development and under different political and economic regimes little theoretical or empirical analysis has been offered however on the link between corruption government and growth the paper attempts to fill the void through equilibrium models of endogenous growth balanced growth is derived as a balancing act between accumulating human capital which engenders growth and accumulating political capital which mainly assures bureaucratic power the analysis focuses on the interplay between investment in these two types of capital and its implications for long term growth under alternative political regimes some propositions are tested and confirmed empirically

a programming model with stochastic technology and prices the case of australian agriculture risk associated with stochastic input output coefficients and prices is modeled in a programming specification based upon mean variance analysis and chance constrained programming the algorithm which exploits the features of minos a commercially available computer program is developed and applied to australian agriculture convergence of the algorithm is discussed with the data used the thirty runs of this problem achieved a fast convergence with no more than five cycles the model was used to derive supply response functions of export commodities of australian agriculture the relevant information was generated via parametric variations of prices selected according to a suitable experimental design