a switching regression model for wage determinants in the public and private sectors of a developing country governments in less developed countries face severe budgetary constraints given that public sector employment is a large part of modern sector employment the government wage bill h as come under increased scrutiny the central question is how do gove rnment wages compare with those in the private sector in this paper the authors develop and estimate a model to answer this question an important aspect of this model is the endogenous treatment of sector choice the estimation results full information maximum likelihood sound a strong warning against the use of ordinary least squares est imates that are based on sector specific samples data are from the i vory coast copyright 1988 by mit press

an exclusive country club the effects of the gatt on trade 1950 94 using data on bilateral trade flows from both before and after world war ii this article examines the impact of the general agreement on tariffs and trade on trade between its members and on the system of interwar trade blocs it shows that the distribution of the benefits produced by the gatt was much more highly skewed than conventional wisdom assumes the article also shows that the gold commonwealth reichsmark and exchange control blocs exerted positive and significant effects on trade after 1945 the authors attribute these effects to the bargaining protocol that governed successive rounds of gatt negotiations the signature element of the postwar trade regime

optimal public sector wages i build a dynamic stochastic general equilibrium model with search and matching frictions to determine the optimal public sector wage policy public sector wages are crucial in achieving efficient allocation of jobs high wages induce too many unemployed to queue for public sector jobs in turn raising unemployment the optimal wage depends on the frictions in the two sectors following technology shocks public sector wages should be pro cyclical and deviations from the optimal policy significantly increase the volatility of unemployment

racial differences in the employment policy of state and local governments the case of male workers although increased political participation of minorities has been an important aspect of the civil rights movement few studies have examined the effect of race based political participation on employment discrimination a number of studies provide evidence that minorities earn significantly less than comparably skilled whites in the federal government and that less wage discrimination exists in the federal sector 3 11 15 borjas argues and provides empirical support that this results from a vote maximizing government that uses its hiring decisions to mollify an electorate with a taste for discrimination 6 7 while borjas provides a valuable framework to analyze government employment policy he overlooks the interaction between public and private sector hiring decisions and excludes state and local government employees slgs that account for four fifths of public sector employment in this paper i extend the analysis by not only incorporating state and local government but also by modeling public and private sector interactions rather than adopting a taste for discrimination to explain racial patterns in public wages and employment i develop a public choice model where racial constituencies compete for economic rents from the provision of local public goods estimates of the black white wage differential for male workers in each state are found to be consistently smaller for state and local government than the private sector i show that this finding is consistent with the hypothesis of a vote maximizing government responding to the political clout of rent seeking racial interest groups in particular this paper provides the first evidence that racial groups may raise their relative wage in the public sector by increasing their voter participation relative to other racial groups i also argue that the apparent joint effect of segregation and relative political participation on the relative wage distinguishes the hypothesis of competition for local public goods from its alternatives in addition the incorporation of a publicprivate sector interaction suggests that the private sector wage differentials are not simply passed forward to the public sector in the theoretical model i hypothesize that two racial interest groups black and white compete for government employment as a means of determining the allocation of local public goods

sheltered labor markets public sector employment and socioeconomic returns to education of arabs in israel this study expands the theoretical discussion of ethnic economies by focusing on public sector employment and the role the state plays in affecting the socioeconomic fortunes of ethnic minorities the authors argue that under certain circumstances public sector employment helps ethnic minorities attain higher socioeconomic rewards the findings of the study indicate that arab employees in israel receive higher returns to education in the ethnic labor market compared with the dominant market and in the public sector rather than the private sector the latter result also holds true when arab workers are compared to jews revealing the benefits derived from the sheltered labor market

the concentration of capabilities and international trade over the course of the previous two decades political scientists have become increasingly interested in the relationship between international politics and global trade much of the literature on this topic centers on the effects of a hegemonic distribution of power on commerce hegemonic stability theorists argue that hegemony is a necessary condition for the existence of a liberal economic order and that in the absence of a hegemon a liberal international economy is particularly difficult to establish and maintain however a growing number of theoretical and empirical critiques have been leveled against the gemonic stability theory and the issue of whether hegemony helps shape patterns of global trade continues to be the topic of heated debate

divided majority and information aggregation theory and experiment this paper studies theoretically and experimentally the properties of plurality and approval voting when a majority gets divided by information imperfections the majority faces two challenges aggregating information to select the best majority candidate and coordinating to defeat the minority candidate under plurality the majority cannot achieve both goals at once under approval voting it can welfare is strictly higher because some voters approve of both majority alternatives in the laboratory we find i strong evidence of strategic voting and ii superiority of approval voting over plurality finally subject behavior suggests the need to study equilibria in asymmetric strategies

constituency interests and delegation in european and american trade policy trade policy in the eu and the united states is to a large extent delegated to executive agents existing explanations claim that legislators delegate because they wish to liberalize but are unable to achieve this on their own the authors show that legislators delegate powers to obtain foreign market access for exporters and protection for import competing interests confronted with heterogeneousdemands from both groups principals delegate to two sets of agents to confer concentrated benefits on these constituencies and install control to avoid concentrated losses while maintaining the flow of resources from lobbying the authors derive the empirically observable implication that with the increase in the share of tradables in the overall economy delegation as well as control should steadily increase with time they then test the validity of this proposition for u s trade policy since 1916 and for european trade policy since 1958

bureaucratic discretion or congressional control regulatory policymaking by the federal trade commission this paper extends stigler and peltzman s approach to regulation by incorporating a legislature the model yields comparative statics results and hence testable implications the paper then tests between two opposing approaches about regulatory agency behavior the first assumes agencies operate independently of the legislature and hence exercise discretion the second assumes that congress controls agency decisions the recent behavior of the federal trade commission provides the empirical setting substantial evidence is found for the specific predictions of the model including the hypothesis of systematic congressional influence over ftc decisions

the new economics of organization over the last ten years or so an important new approach to the study of organizations has emerged within economics it is perhaps best characterized by three elements a contractual perspective on organizational relationships a theoretical focus on hierarchical control and formal analysis via principal agent models this paper provides political scientists with an overview of the new economics of organization and explores its implications for the study of public bureaucracy so far positive political theory has not contributed much to our understanding of public bureaucracy in part this is due to the unsympathetic treatment that rational modeling and most other modes of quantitative analysis have long received from students of public administration the other side of the coin however is that positive theorists have not made much of an effort to develop theories of bureaucracy their concerns have centered around two basic mechanisms of social choice voting and markets and they have devoted little systematic attention to a third mechanism that is clearly important for understanding how societies and other aggregates make collective decisions this third and relatively unexplored mechanism is hierarchy movement toward a positive theory of hierarchies would fill a serious gap in the social choice literature while at the same time making a theoretical contribution that strikes to the essence of public bureaucracy indeed of all organizations in fact significant steps toward a positive theory of hierarchies have very recently been taken but by economists not political scientists in small numbers of course economists made contributions to the study of public bureaucracy some time ago with the pioneering works of downs 1967 tullock 1965 and niskanen 1971 but this new wave of theoretical work is different it is already a large complex body of literature that is the focus of innovation and excitement among a growing number of economists and it reflects an unusual degree of theoretical coherence and cumulative effort work in this tradition tends to receive orientation from a distinctive economic approach to the analysis of organizations an approach perhaps best characterized by three elements a contractual perspective on organizational relationships a focus on hierarchical control and formal analysis via principal agent models this approach has emerged from recent attempts to move beyond the neoclassical theory of the firm which assumes away all organizational considerations to a theory of economic organizations that can explain why firms corporations and other enterprises behave as they do propo

intergenerational transfers of public sector jobs a shred of evidence on nepotism the attractiveness of public sector jobs in italy may induce parents working in this sector to use their positions and the network of relationships to favor their sons daughters in gaining access to public sector jobs we verify whether children of public employees effectively enjoy an advantage estimating a model of the probability of working in the public sector controlling for individual characteristics and labor market conditions we show that if the father is a public employee the probability of his child working in the same sector is increased by a huge 44 this advantage is larger for low ability individuals stayers and southern italian residents we interpret these findings as evidence of nepotism in public employment

the institutional foundations of hegemony explaining the reciprocal trade agreements act of 1934 in 1930 congress approved the highly restrictive smoot hawley tariff the textbook case of pressure group politics run amok four years later congress passed the reciprocal trade agreements act rtaa surrendering much of its tariff making authority to a policy process in which internationalists had increasing influence while the united states had used reciprocity to expand exports before the stick of discriminatory treatment took precedence over the carrot of liberalizing concessions with the transfer of tariff making authority to the executive the united states could make credible commitments and thus exploit its market power to liberalize international trade despite later modifications the rtaa set the fundamental institutional framework for trade politics

male female supply to state government jobs and comparable worth the proportion of women in state government jobs and applicant pools is well explained by a model emphasizing supply side factors relative to men women s supply is least sensitive to wages in predominantly male jobs and most sensitive to wages in predominantly female jobs these results suggest that comparable worth policies that shift relative pay toward traditionally female jobs and away from traditionally male jobs will increase the proportion of females in male dominated female dominated and total state government jobs the implication is that supply side responses need not prevent comparable worth pay adjustments from raising total female compensation

rules or politics an empirical analysis of itc anti dumping decisions this research analyzes the international trade commission s anti dumping decisions from 1980 to 1986 the results suggest that commissioners use criteria consistent with the instructions set forth in u s legislation the analysis also indicates that political variables help predict commissioner decisions petitions involving senate oversight committee members constituencies may be systematically favored in the process evidence of possible bias toward less developed country exports is presented as well the methodology also yields estimates of commissioner specific fixed effects

the political economy of benefits and costs a neoclassical approach to distributive politics this essay offers a rational political explanation for the notorious inefficiency of pork barrel projects with an optimization model of legislative behavior and legislative institutions the model emphasizes the economically arbitrary from a welfare point of view importance of the geographic incidence of benefits and costs owing to the geographic basis for political representation we explore the implications of a legislator s objective function and derive conditions under which a representative legislature will select an omnibus of projects each of which exceeds the efficient scale

transmission of risk averse behavior in small firms small sized firms are typically more entrepreneurial and engage in more innovation and risk taking behavior for that reason they are considered the engines of future economic growth one policy for stimulating such activity is to provide government contracts for small firms however such contracts as typically written result in increased risk averse behavior on the part of small firms out of a desire by government officials to shift the risk to the firms this in turn results in a reduced level of innovative and entrepreneurial activity to eliminate the disincentive to engage in innovation and entrepreneurial activity government needs to bear the risk associated with such contracts one possible solution given the natural risk aversion of elected officials is to engage in a portfolio approach to small firm contracts by which the government can diversify away some of the risk

the kennedy round evidence on the regulation of international trade in the united states the purpose of this paper is to analyze and provide empirical evidence regarding the regulation of international trade flows our goal is to provide an explanation of the changes in the interindustry pattern of trade restrictions which emerged from the kennedy round of tariff negotiations the principal conclusion of the analysis is that the pattern of protection which resulted from the kennedy round was shaped to minimize the domestic political disruption resulting from liberalization industries which faced significant import threats and whose characteristics enhanced their potential political influence were able to maintain tariff protection in the face of overall liberalization the potential impact of the agreed upon tariff reductions was partially undermined by the introduction of offsetting nontariff trade barriers ntbs in addition ntbs were introduced systematically in industries that were becom

why are wages cyclical in the 1970 s this article investigates cyclicality in real wages between 1969 and 1982 using panel study of income dynamics data there is little evidence that movements in and out of the labor market induced aggregate wage cyclicality during these years however cyclicality in the movement of workers between heterogeneous labor market sectors affected aggregate wage cyclicality while sector location is important sector selectivity is not correlated with wages yet even within sectors cyclicality is present in real wages over this time period and is the result of cyclicality in overall wage levels as well as in the coefficients associated with particular worker characteristics

an analysis of workers choice between employment in the public and private sectors this paper estimates the extent to which workers with different personal characteristics are likely to be employed in the public versus the private sector the author develops a reduced form two wa

divided government and u s trade policy theory and evidence if different parties control the u s congress and white house the united states may maintain higher import protection than otherwise this proposition follows from a distributive politics model in which congress can choose to delegate trade policymaking to the president when the congressional majority party faces a president of the other party the former has an incentive to delegate to but to constrain the president by requiring congressional approval of trade proposals by up or down vote this constraint forces the president to provide higher protection in order to assemble a congressional majority evidence confirms that 1 the institutional constraints placed on the president s trade policymaking authority are strengthened in times of divided government and loosened under unified government and 2 u s trade policy was significantly more protectionist under divided than under unified government during the period 1949 90

government wage differentials a sample selection approach this paper uses the econometrics of sample selection to estimate the net wage differential between workers in the public and private sectors of the united states the results indicate workers self select by systematically locating in the sector which offers them the higher expected wage as a consequence previous research based on the assumption of random allocation between sectors is subject to serious specification bias the present estimation indicates government workers are slightly underpaid taking into account their observed characteristics and the selection process

domestic content legislation house voting and the economic theory of regulation house voting on domestic content legislation provides a rare opportunity to examine the political economy of protectionism with respect to a particular issue rather than by using the traditional interindustry approach the results indicate that a representative s vote in favor of the content legislation and the intensity of the legislator s preferences are positively related to the importance of the auto and steel industries in the representative s district an increasing unemployment rate campaign contributions from labor groups affiliation with democratic party and a liberal ideology despite ideology s statistical significance the results suggest this variable can be disregarded because neither the predictive accuracy nor the explanatory power of the model is improved by its inclusion the estimates also provide insights concerning the impact of changes in the independent variables upon voting patterns

u s politics and greater regulation of inward foreign direct investment an analyst of u s foreign economic policy observes that each wave of antiforeign sentiment associated with the surge of foreign direct investment fdi coming into the united states washes ashore a flotsam of restrictive and exclusionary laws that recedes slightly or becomes buried and forgotten in the sand only to advance again with a new wave during the late 1980s the controversy generated by the sharp rise of japanese acquisitions in the united states washed ashore the latest flotsam of regulatory measures and further advanced the tangle of rules and regulations targeting inward foreign direct investment ifdi of the various types of fdi the present study is concerned mainly with the policy change toward foreign investment in an already established domestic business this type of investment often involves merger or acquisition and is distinct from a greenfield investment where the foreign investor establishes from scratch a new business in the host economy

transition to entrepreneurship from the public sector predispositional and contextual effects studies of career dynamics implicitly claim that government employees are not entrepreneurial utilizing longitudinal data from the u s panel study for income dynamics we investigate the reasons for the low rate of entrepreneurship from the public sector we conjecture that it is due to labor market matching processes and the bureaucratic nature of public organizations and bureaucratization of individuals our life course analysis identifies labor market matching as a major determinant nonentrepreneurial types choose public sector employment we also uncover tenure and context effects which decrease and increase the hazard rate of entrepreneurial exit respectively whereas the former effect points toward adaptation and internal labor market sorting the latter draws attention to exits due to frustration

electoral cycles and international policy cooperation abstract this paper analyzes the interaction between domestic politics and international policy coope ration as a two level repeated prisoners dilemma at the domestic level two party competition generates an electoral cycle in monetary growth inflation and real output at the international level the policymakers desire to promote domestic expansion by depreciating the currency gives rise to an inflationary bias in monetary growth a move towards international cooperation reduces the inflationary bias but may increase the amplitude of the electoral cycle moreover international cooperation may not be desirable for one of the domestic parties nevertheless domestic and international cooperation may be jointly sustained by the credible threat of a reversion to the regime under which the destabilizing effect of domestic politics is at a maximum

ideas institutions and american trade policy nowhere is america s hegemonic decline more evident than in changing trade patterns the united states trade balance a measure of the international demand for american goods is suffering historic deficits lowered demand for american goods has led to the under utilization of both labor and capital in a growing number of traditionally competitive american industries conversely americans taste for foreign goods has never been so great japanese cars european steel third world textiles to name a few are as well produced as their american counterparts and arrive on the u s market at a lower cost

delegation as commitment the case of income tax audits in this article we study the value of delegating authority over income tax audit policy arising from the incompleteness of contracts consider a utilitarian government whose ability to commit is limited to aggregate dimensions of its audit policy as publicly verifiable information about detailed allocations of audit budgets is not available we show that the welfare level associated with the full commitment solution can be attained by delegating authority over audit policy to a manager the latter is offered a simple incentive scheme based only on the aggregate variables which are publicly observable in contrast if the government retains authority direct commitment to these same variables does not allow the full commitment welfare level to be achieved thus despite sharing a common informational basis delegation may perform better than centralized arrangements in the presence of incomplete contracts