new technology adoption in us telecommunications the role of competitive pressures and firm level inducements in this study we examine the reasons for the differential adoption levels of a new technology that of electronic switching across firms in the us telecommunications industry using theoretical postulates from the market structure inducements approach to firm behavior and the behavioral theory of the firm we propose that the incentives to adopt a new technology are positively related to the competitive pressures faced by a firm in its micro market negatively related to past levels of performance and positively related to slack availability our sample consists of 40 of the largest firms in the industry we use firm level data collected for the years 1973 1978 1981 1984 and 1987 and the results indicate strong support for our proposition our findings show that in general market effects via the mechanism of competitive pressures generated are strong in explaining inter firm variations in levels of technology adoption in the period since moves to deregulate the industry began however the firm level effects are equally strong if not stronger in explaining such variations both in the period leading up to the commencement of deregulatory moves and also immediately thereafter

the speed of the invisible hand abstract very little attention has been devoted to incorporating dynamic elements into empirical models of market structure and performance consequently there has been little progress in settling the issue of whether the market structure profits relationship is more than just a temporary phenomenon in this study an estimation equation is developed which allows for incomplete adjustment of past profits from expected future profits where expected profits depends on present and expected future changes in market structure the model is estimated pooling panel data across industries the findings indicate that adjustment to abnormal profits is relatively quick market share adjustments are non instantaneous and that inclusion of industry specific effects is important the results suggest that previous studies are susceptible to specification bias from omitted variables

domestic responses to capital market internationalization under the gold standard 1870 1914 the internationalization of capital markets that occurred during the era of the classical gold standard 1870 1914 was part of a broader set of trends that threatened to drain local markets from capital and channel that capital to the national financial center and from there toward other national financial centers still internationalization was neither inevitable uniform nor irreversible but was a political choice informed by redistributional considerations between rival domestic interests and decided by politically dominant coalitions the domestic institutional structure in each country determined the composition of the politically dominant coalition decentralized structures allowed potential losers to curb public policies favorable to capital market internationalization whereas centralized structures allowed expected winners to promote such policies as a result economies with centralized states ended up being the most dependent on the international capital market whereas economies with decentralized states took a less active part in the globalization of finance

the mass political economy of capital controls this article examines mass public opinion toward international financial market regulations known as capital controls conventional wisdom maintains that most voters do not pay attention to or c

power and the control of capital this essay reviews three recent books on the political economy of finance in postcolonial asia and latin america and suggests a framework for examining the relationship between political power and varying patterns of control over investment resources the stress is on the constraints different controllers of capital can impose on state leaders the conditions under which policymakers can subvert these constraints and how conflicts within the state over the trajectory of policy are mediated by who or what supplies critical investment resources and the institutional channels through which the resources flow

how do crises lead to change liberalizing capital controls in the early years of new order indonesia how do crises lead to change rationalist approaches to the question that emphasize inexorable structural responses and the pursuit of distributive preferences by newly dominant coalitions are inadequate because they obscure the social mediation of material events and the pervasive uncertainty that follows destabilization of the precrisis status quo the latter constrains actors from fully grasping their distributive preferences until uncertainty is reduced persuasion emerges as a key mechanism of change although constructivist approaches emphasize persuasive practices they have yet to adequately specify the scope conditions underpinning the selection of new ideas this article goes beyond much of the constructivist focus on domestic legitimacy and static notions of resonance by emphasizing external credibility and dynamic processes of resonance building by norm entrepreneurs the author specifies four features what he calls the four cs of crisis resolution that shape the process of idea selection carriers composition crossover appeal and credibility developing these arguments in the case of the early years of new order indonesia the article suggests that whenever a prominent and cohesive group of advocates promotes an idea that has sufficient ideational and distributive appeal and the endorsement of external actors whose seal of approval is perceived as important intersubjective belief change and thus institutional and policy change is more likely

external debt capital flight and political risk abstract this paper explains the simultaneous occurence of large external debts private capital outflows and low domestic capital formation we consider a general equilibrium model in which two government types with conflicting distributional goals randomly alternate in office uncertainty over the fiscal policies of future governments generates capital flight and small domestic investment and induces the government to overaccumulate external debt the model also predicts that left wing governments are more inclined to restrict capital outflows than right wing governments finally we examine how political uncertainty affects the risk premium and how debt repudiation may occur after a regime change

the welfare effects of trade and capital market liberalization treatise on the welfare effects of trade and capital market liberalization consquenses of the capital account liberalization in the presence of trade restrictions specifies on the liberalization of trade in the presence of foreign borrowing constraints proves superiority of gradual liberalization of trade to an abrupt liberalization

the political economy of the euro crisis this article introduces the special issue on the political economy of the euro crisis which aims to improve our understanding of the causes consequences and implications of the highly unusual nature of this crisis a financial crisis among developed countries within a supranational monetary union the article provides a brief chronology of the crisis discusses its underlying causes and reviews the ways in which comparative and international political economy can help us understand the crisis the article then discusses the individual and collective contributions of the articles in the special issue and discusses possible future research paths on the political economy of the euro crisis we conclude with a brief discussion of how a political economy perspective informs our understanding of the long term prospects for the eurozone and european integration

financial interdependence and the state international monetary relations at century s end as the twentieth century draws to a close one can find sharply contrasting views among leading scholars on almost every key issue in positive international political economy how strong are international as opposed to domestic influences on policy how important are issues of national security high politics versus economic considerations low politics what role do institutions international and domestic play in influencing and constraining the behavior of governments why is international cooperation rare but not unheard of the list goes on and on

the determinants of technology adoption the case of the banking firm using data on the adoption of automatic teller machines by firms in the banking industry this study examines the relationship between the decision to adopt new technology and its determinants since banking firms differ considerably in terms of the competitive environments in which they operate focusing on this one innovation in this industry allows a stronger test of the relationship between market structure and the adoption of new technology than has been previously conducted using a failure time estimation procedure we find that larger banks and banks operating in more concentrated local banking markets register a higher conditional probability of adopting this new technology all else equal we also find that other results are consistent with the underlying model and that the bank s regulatory environment shapes its adoption decision in plausible ways

marketing the third world the contradictions of portfolio investment in the global economy abstract while international portfolio investment pi in emerging markets has flourished during the 1990s the macroeconomic and political dilemmas introduced into these site economies by this development have not been adequately explored this paper presents a keynesian analysis of the effects of these inflows the paper argues that a dependence on pi can constrain the autonomy of macroeconomic policy and introduce increased risk in site economies the paper then applies this framework to recent mexican experience the paper concludes with a call for aggressive management of portfolio investment and outlines some measures toward this end

who recovers first banking crises resolution in developing countries this article evaluates conditions that facilitate banking crises resolution using data from 67 developing countries from 1980 to 1995 in particular the author examines explanatory variables under three categories external macroeconomic constraints the role of the international monetary fund imf and domestic political conditions the principal results of the analyses are twofold first imf credits decrease the probability of resolving banking crises this result holds controlling for potentially confounding variables and in a test for endogeneity second the decisiveness of a political regime significantly influences the probability of emerging from systemic distress specifically in cases of moderate banking distress decisiveness facilitates resolution of crisis but during periods of severe crises less decisive governments i e governments constrained by accountability groups are likely to recover more quickly than are those with less constrained executives

a failure inducement model of research and development expenditure abstract empirical evidence for the schumpeterian suggestion of a positive relationship between profitability and innovative effort is slim in fact the opposite is often suggested an alternative failure inducement hypothesis argues that firms make innovative efforts when performance falls below a minimum threshold resulting in a negative relationship between profitability and r d expenditures data on r d expenditures in italian industry in the early 1980s a period of severe economic crisis show that both hypotheses are relevant for firms whose profits are well above or well below average respectively

the benefit of crises for economic reforms when expenditures consistently outrun revenue the resulting inflation may have the effect of convincing the public and government that taxes must be raised to finance public investment in the advanced industrial countries income taxation and big spurts in taxation generally have become possible only under the impact of major emergency and crisis mostly in wartime in a number of developing countries in

overview and summary this symposium analyzes the recent liberalization and stabilization attempts in chile argentina and uruguay attempts remarkable for their speed and coverage to bring these analyses together in one volume seems natural because the three experiences were so similar all three countries started with highly protected economies inflation balance of payments crises widespread government intervention and production systems in considerable disarray all three countries launched liberalization policies that spanned commodity and factor markets and all three followed the same path toward stabilization the battle against inflation was first based on control of the money supply then the exchange rate was used to reduce inflationary expectations the initial results were as remarkable as the reforms inflation was reduced fiscal deficits were controlled and growth was restored but in the early 1980s all three countries were again in crisis the objective of the reforms was to realize the gains from better allocations of resources and investment this objective was to be achieved by moving to market regulated economies one intention was to eliminate the traditional bias against exports and thus to spur the growth of exports which required an increase in the effective exchange rate for exportables and a decrease in that for import competing sectors a second intention was to deregulate interest rates and foreign capital inflows and thus to provide more credit to activities with the highest returns the motive here is to draw the lessons for other developing countries confronting liberalization and stabilization problems why did these unusual experiments fail to what extent did various parts of the packages succeed or fail was the failure due to external events or to bad policies were the institutional arrangements for deregulation appropriate the introduction to part i presents some analytical issues that arise from the experiences of the three countries it addresses the general issue of opening an economy to trade and to flows of foreign capital and the related issues of sequencing and policy coordination it also explores differences in the speed of adjustment in labor and commodity markets and the implications of these differences for the design of macroeconomic policy the other papers in part i explain and evaluate the macroeconomic performance of the liberalization and stabilization policies in each country first each paper describes the reforms and in an appendix provides a chronology of the many reforms perhaps the place to start for the uninitiated reader the descriptions are accompanied by summaries of the authorities intentions when the reforms were launched the approach to implementation is also addressed when it gave rise to policy reversals and conflicting signals second the papers construct stylized analytical frameworks to help interpret the macroeconomic outcome of the liberalization and stabilization policies in each country these frameworks help to draw the stylized outcomes of the reforms the papers in part ii rely on financial statements to analyze the adjustments by firms the data span the period covered by the reforms in each country and provide the basis for simple statistical models groups of firms exporters vs

the political economy of financial internationalization in the developing world in the last decade a growing number of developing countries have opened their financial systems by liberalizing capital flows and the rules governing the international operations of financial intermediaries one explanation of this rush toward greater financial internationalization is that increasing interdependence generates domestic and foreign political pressures for capital account liberalization while we find evidence for that hypothesis we find that the proximate cause in developing countries more frequently is found in balance of payments crises politicians perceive that financial openness in the face of crisis can increase capital inflows by indicating to foreign investors that they will be able to liquidate their investments and by signaling government intentions to maintain fiscal and monetary discipline the argument is explored through case studies of chile indonesia mexico and south korea

explaining capital account liberalization in latin america a transitional cost approach in the past three decades governments around the world have lowered barriers to international capital flows this movement is widely attributed to the forces of globalization as developed nations moved toward relative convergence on international financial openness yet developing nations with much to gain from openness to foreign investment moved only hesitantly and inconsistently in this direction analysis of two decades of capital account liberalization in latin america and the oecd reveals that nations in latin america with weaker domestic financial sectors face higher risks of transitional dislocations following liberalization and move less aggressively toward openness in the oecd by contrast financial weakness is associated with greater movements toward capital account opening as transitional costs are lower and governments are better equipped to ameliorate them examination of the transitional costs of liberalization thus helps to explain how market pressures may impede rather than promote market oriented reform in latin america

on the competitive pressure created by the diffusion of innovations abstract we consider the decision of a dominant firm to adopt a sequence of potential cost reducing innovations where the latest technology adopted diffuses to a competitive fringe at an exogenous rate with price competition on the product market the leader optimally spaces apart the adoption dates of successive innovations so the industry is characterized by schumpetarian cycles of alternating innovation and diffusion an increase in the rate of diffusion has ambiguous effects on innovative activity and up to a point hastens the pace of innovation these results may however be reversed in the case of quantity competition

a dynamic analysis of the adoption of a new technology the case of optical scanners two p roportional hazard models are used to investigate the differingeffects of marke t structure variables on the conditional probabilityof a firm initially adoptin g the new technology of optical scanners as the innovation spreads through the f ood store industry during the early stage leading firms with large average sto re size which are not members of chains and which operate in less concentrated m arkets with higher incomes and wage rates tend to adopt scanners sooner later on differences in seller concentration market share and size become less impo rtant as other firms follow prior adoptions copyright 1987 by mit press

the globalization of liberalization policy diffusion in the international political economy one of the most important developments over the past three decades has been the spread of liberal economic ideas and policies throughout the world these policies have affected the lives of millions of people yet our most sophisticated political economy models do not adequately capture influences on these policy choices evidence suggests that the adoption of liberal economic practices is highly clustered both temporally and spatially we hypothesize that this clustering might be due to processes of policy diffusion we think of diffusion as resulting from one of two broad sets of forces one in which mounting adoptions of a policy alter the benefits of adopting for others and another in which adoptions provide policy relevant information about the benefits of adopting we develop arguments within these broad classes of mechanisms construct appropriate measures of the relevant concepts and test their effects on liberalization and restriction of the current account the capital account and the exchange rate regime our findings suggest that domestic models of foreign economic policy making are insufficient the evidence shows that policy transitions are influenced by international economic competition as well as the policies of a country s sociocultural peers we interpret the latter influence as a form of channeled learning reflecting governments search for appropriate models for economic policy

unemployment in open economies the impact of trade finance and european integration this article compares variations in the level of unemployment in four small open economies austria belgium the netherlands and sweden rather than focusing on the political institutional differences between these four countries the article examines international economic variables such as the role of the european monetary system the structure of foreign trade and linkages to international markets to understand the greater deterioration of employment in belgium and the netherlands in turn the decision to join the european community and to seek firmer integration into financial markets is attributed to the relatively greater influence of banking capital or the financial sector in the systems of economic policy making of belgium and the netherlands the article concludes that the detachment of the austrian and swedish economies from the european experience in economic integration has greatly helped the social democrats in these countries in fulfilling their promises of full employment

can foreign stock investors influence policymaking foreign portfolio stock investors fpsis often attach political criteria to their investment choices sometimes in the hope of pressuring policymakers in boycotted markets to adjust their policies

capital mobility and coalitional politics authoritarian regimes and economic adjustment in southeast asia this article investigates the coalitional bases of authoritarian rule to explain striking variation in adjustment policy to the asian financial crisis in indonesia and malaysia given currency depreciation with financial sector fragility holders of mobile assets prefer to maintain an open capital account while owners of fixed assets and labor favor restrictions of capital mobility to facilitate expansionary macroeconomic policies differences in adjustment policy across the two countries reflect differences in the political coalitions supporting the authoritarian regimes these findings illuminate the nature of political conflict during financial crises and show how a nuanced view of the coalitions supporting authoritarian rule can yield powerful insights into the political economy of authoritarianism and economic adjustment in a global economy

innovation and technical change abstract in previous work it was established that the u k tractor industry was characterised by a high degree of technical change and that this was brought about by a process of more or less continuous incremental innovation what was lacking was an analysis of how much technical change had been introduced and an indication of the role played by technical change in determining the performance of the u k tractor industry internationally this paper concludes that on the average technical change in the industry had increased by as much as 150 percent during the years 1959 1977 though there is some indication that the rate of change might now be slowing somewhat in order to determine the relative importance of technical change a method was developed to operationalise the distinction between price and non price competition as well as the idea of intrinsic technical and associative non technical factors as constituents of the latter based on cross sectional data for the year 1978 it has been possible to show that british manufacturers tend to produce moderately priced tractors of low to medium technical sophistication that german manufacturers produced the most technically sophisticated tractors that the italian manufacturers are not generally more sophisticated technically than the british producers except with respect to their development of four wheel drive and that comecon based producers combine a very low price with some degree of technical sophistication finally it has been possible to show that the tractors with the highest sales are among the less sophisticated in each of the power ranges investigated and that new entrants used technical sophistication as an element of their entry strategy the answer to the question of what allows the market leader to be market leader required the development of measures for associative non price factors such as the availability of a dealer network brand loyalty resale prices of tractor models etc by performing a regression analysis on these measures along with previously derived measures of quality adjusted price and relative technical sophistication it has been possible to show that market leadership is achieved as a result of a balance of a number of factors the most important of which are the size of the dealer network warrants cost advertising technical sophistication and price

rational and self fulfilling balance of payments crises speculative attacks on a pegged exchange rate must sometimes occur ifasset price paths are to be free of abnormal profit opportunities suchattacks are fully rational as they reflect the market s response to aregime breakdown that is inevitable the authors shows that under someexpectations about policy balance of payments crises can also be purely self fulfilling events in such cases even a permanently viableregime may collapse and the economy will possess multiple equilibriacorresponding to different subjective assessments of the probability ofa crisis the behavior of the domestic interest rate will naturally reflect the possibility of a speculative attack copyright 1986 by american economic association

international institutions and domestic compensation the imf and the politics of capital account liberalization certain governments have been faster than others in relaxing their restrictions on the cross border movement of capital how can we explain the timing and extent of financial liberalization across countries since the 1970s we argue that imf stabilizationprogramsprovideawindowofopportunityforgovernmentstoinitiatefinancialreforms butthatpolicymakers are more likely to seize this opportunity when welfare expenditures are high large loans from the imf shield policy makers from the costs of financial reform while welfare expenditures provide credibility to the government s ex ante promises of compensation to individuals who are harmed by the reforms we test this hypothesis on data for 87 countries from 1975 to 2002 we employ a spatial autoregressive error sample selection model which accounts for the nonrandom participation of countries in imf programs as well as the processes of international policy diffusion the results provide strong support for the interactive effect of imf programs and domestic welfare expenditures on financial liberalization

the diffusion of new technology and the market for an innovation this article shows that the diffusion of a capital embodied process innovation results from a pattern of decreasing incremental benefits and adoption costs for later adoptions strategic behavior is inessential to this finding we develop a method for comparing diffusion rates for different market structures in the capital equipment market we consider cases with market power on the seller s side of the market and on the buyers side of the market a case with no market power and the welfare optimal case we find that a joint venture adopts an innovation more slowly than other market regimes to protect existing capital investments and that the adoption rate is slower than is socially optimal a monopoly supplier on the other hand adopts at a rate faster than is socially optimal this result is usually also the case when there is no market power finally we show that the monopoly supplier accelerates adoptions faster than in the case where there is no market power but retards later adoptions market power thus makes a difference in diffusion rates and on which side of the market that power lies makes a considerable difference

on the diffusion of new technology a game theoretic approach this paper is an attempt at a rigorous albeit not exceedingly general analysis of the diffusion of new technology in particular consider an industry composed of two firms each using the current best practice technology the firms are assumed to be operating at nash equilibrium output levels generating a market price given demand and profit allocations when a cost reducing innovation is announced each firm must determine when if ever to adopt it based in part upon the discounted cost of implementing the new technology and in part upon the behavior of the rival firm if either firm adopts before the other it can expect to make substantial profits at the expense of the other firm on the other hand the discounted sum of purchase price and adjustment costs may decline with the lengthening of the adjustment period as various quasi fixed factors become more easily variable therefore although waiting costs the firm more in terms of foregone profits it may save money on the cost of purchasing the new technology thus the firm must weigh the costs and benefits of delaying adoption as well as take account of its rival s strategic behavior

a branch of economics is missing micro micro theory jn the life history of most sciences there are movements toward the study of larger aggregates or toward the detailed study of smaller and more fundamental units my impression is that in most fields the movement toward the study of more micro units has predominated yet in economics in the 1930 s the movement was in the macro direction both physics and biology in the last three decades have made great strides by studying smaller and smaller entitiesphysics by studying more minute fundamental particles and biology by studying the fundamental elements determining genetics in a general sense economics has not been moving in this direction although some work of this nature exists the purpose of this paper is to review some samples of the work that exists and to argue that this area must become a major field of economic research and study the question of how individuals in multiperson firms influence firm decisions seems like such a natural question to ask that it is amazing that it is not part of the formal agenda of economists as a profession of course it has been asked but not by present day economists in their professional capacity in other words micromicroeconomics has never become an established field for the most part theorists have not only not raised this question but they have continued to develop micro theory in such a way as to discourage economists from raising this question part of the reason for this lies in the maximizing and optimizing biases of conventional micro theory and part can be ascribed to the consequences of the long period required to refine the theory so that elements that did not fit the basic model were discarded

preemption and rent equalization in the adoption of new technology we study the adoption of a new technology to illustrate the effects of preemption in games of timing we show that the threat of preemption equalizes rents in a duopoly but that this result does not extend to the general oligopoly game if the gain to preemption is sufficiently small then the optimal symmetric outcome which involves late adoption is an equilibrium this contrasts with reinganum s result that in precommitment equilibria there must be diffusion we develop a new and richer formalism for modeling games of timing which permits a continuoustime representation of the limit of discrete time mixed strategy equilibria

competition in the united states long distance telecommunications industry langdale j 1983 competition in the united states long distance telecommunications industry reg studies 17 393 409 entry of competition in the united states long distance telecommunications industry is examined in the context of changes in the economic technological and regulatory environment growth of large multi plant firms has led to a rapid growth of demand on intermetropolitan routes technological change and deregulation of the industry have lowered the barriers to entry in the long distance field geographical expansion of competitive services is discussed in relation to the structure of the urban hierarchy services are initially introduced in major metropolitan areas and then spread down the hierarchy in addition the spread of american telephone and telegraph s specialized business communications service dataphone digital service is examined

globalization taxation and burden shifting in latin america most researchers interested in the relationship between global markets and public policy focus on advanced industrial democracies in contrast we examine competing hypotheses as to globalization s effect on governments by expanding the scope of the discussion to include developing nations more specifically we investigate the relationship between international market integration and the evolving burden of taxation on capital as well as the subsequent response of markets to shifts in tax policy in latin america since the late 1970s consistent with our theoretical expectations we find that global market forces are more constraining vis a vis tax policy in latin america than in the world s wealthiest nations despite these market based pressures however national politics continue to influence tax policy in latin america in a manner consistent with findings on advanced industrial democracies as such developing nations continue to have some room to manipulate policy though within the context of a more strictly neoliberal context than their counterparts in advanced industrial democracies

capital account liberalization as a signal the authors present a model in which a government s current capital control policy signals future policies controls on capital outflows evolve in response to news on technology conditional on government attitudes toward taxation of capital when there is uncertainty over governmental types a policy of liberal capital outflows sends a favorable signal that may trigger a capital inflow this prediction is consistent with the experience of several countries that have liberalized their capital accounts copyright 1997 by american economic association

macroeconomic stability and the preferences of the fed a formal analysis 1961 98 the rate of inflation in the u s has declined from an average of 4 5 in the period 1960 79 to an average of 3 6 in 1980 98 between those two periods the standard deviations of inflation and the output gap have also declined these facts can be attributed to the interaction of three possible factors a shift in central bank preferences a reduction in the variability of aggregate supply shocks and a more efficient conduct of monetary policy in this paper we identify the relative roles of these factors our framework is based on the estimation of a small structural macro model for the u s economy jointly with the first order conditions which solve the intertemporal optimization problem faced by the fed overall our results indicate that the policy preferences of the fed and in particular the implicit inflation target have changed drastically with the advent of the volcker greenspan era in addition we find that the variance of supply shocks has been lower and monetary policy has been conducted more efficiently during this period

invested interests the politics of national economic policies in a world of global finance capital moves more rapidly across national borders now than it has in at least fifty years and perhaps in history this article examines the effects of capital mobility on different groups in national societies and on the politics of economic policymaking it begins by emphasizing that while financial markets are highly integrated within the developed world many investments are still quite specific with respect to firm sector or location it then argues that contemporary levels of international capital mobility have a differential impact on socioeconomic groups over the long run increased capital mobility tends to favor owners of capital over other groups in the shorter run owners and workers in specific sectors in capital exporting countries bear much of the burden of adjusting to increased capital mobility these patterns can be expected to lead to political divisions about whether or not to encourage or increase international capital market integration the article then demonstrates that capital mobility also affects the politics of other economic policies most centrally it shifts debate toward the exchange rate as an intermediate or ultimate policy instrument in this context it tends to pit groups that favor exchange rate stability against groups that are more concerned about national monetary policy autonomy and therefore less concerned about exchange rate stability similarly it tends to drive a wedge between groups that favor an appreciated exchange rate and groups that favor a depreciated one these divisions have important implications for such economic policies as european monetary and currency union the dollar yen exchange rate and international macroeconomic policy coordination