parents discount rates for child quality contemporary discussions of economic growth make human capital or knowledge accumulation its primary engine 25 human capital as the lead component of the stock of wealth defines a developed economy becker and murphy 4 show that human capital both increases and is increased by the scope of the market its rate of return rises with the size of its stock 5 human capital also plays significant roles in models of human fertility choice 40 population and environmental degradation 11 34 capital mobility 3 and endogenous technological progress 33 a substantial portion of an adult s human capital is accumulated during childhood children as children however cannot independently contract for the resources required to support investments in this human capital though nearly every society grants parents wide discretion about the nurture they provide their children little is understood about what motivates investment by one generation in another the relative importance of different investment modes or the discount rates which parents apply whatever the motivation and the mode because of the long time span between birth and adulthood parents discount rates potentially exert great leverage upon the investment decisions they make for their children knowledge of these discount rates is a prerequisite to acquiring an improved understanding of the internal decision processes of the household a collective decision unit which economics mostly treats as a black box 1 important policy questions as well as scientific accuracy and logical consistency demand knowledge of the discount rates parents apply to investments in their children healthier better educated and wealthier children have a better chance in life but there is no evident reason to suppose that intrafamily discount rates are socially optimal 2 many of the private reactions and behaviors which reinforce or temper the intended effects of public policies are internal to the household when these intended effects have a substantial temporal dimension parental discount rates will be influential for example increased public investments in children can be neutralized

dynamics of niche width and resource partitioning this article examines the effects of crowding in a market center on rates of change in organizational niche width and on organizational mortality it proposes that although firms with wide niches benefit from risk spreading and economies of scale they are simultaneously exposed to intense competition an analysis of organizational dynamics in automobile manufacturing firms in france germany and great britain shows that competitive pressure not only increases the hazard of disbanding but also prompts organizational transformations that give rise to processes of resource partitioning emphasizing the content process distinction in conceptualizing organizational change the article finds that the process effect of changes in niche width and position increases mortality hazards we discuss our findings in light of the processes investigated by the ecological theories of density dependence resource partitioning and structural inertia and point to the theoretical links that help to integrate these theories

valuing morbidity from wildfire smoke exposure a comparison of revealed and stated preference techniques estimating the economic benefits of reduced health damages due to improvements in environmental quality continues to challenge economists we review welfare measures associated with reduced wildfire smoke exposure and a unique dataset from california s station fire of 2009 allows for a comparison of cost of illness coi estimates with willingness to pay wtp measures the wtp for one less symptom day is estimated to be 87 and 95 using the defensive behavior and contingent valuation methods respectively these wtp estimates are not statistically different but do differ from a 3 traditional daily coi estimate and 17 comprehensive daily coi estimate jel q51 q53

learning to carry the cat by the tail firm experience disasters and multinational subsidiary entry and expansion we investigate whether firm experience with discontinuous risks particularly high impact disasters that are episodic and difficult to anticipate moderates the relationship between disasters foreign entry and expansion decisions using a panel data set with 57 500 observations from 106 large european multinational corporations and their subsidiaries operating across 109 countries from 2001 to 2007 we find that although discontinuous risk was negatively related to firm entry and expansion firms that had experience with high impact disasters were more likely to expand in countries experiencing disasters

spend it like beckham inequality and redistribution in the uk 1983 2004 a main activity of the state is to redistribute resources standard political economy models predict that a rise in inequality will lead to more redistribution this paper shows that for the uk in the period 1983 2004 a plausibly exogenous rise in income inequality has not been associated with increased redistribution we explore this example of the paradox of redistribution using attitudinal data we show that standard political economy models of the individual demand for redistribution do have explanatory power but that other attitudes and beliefs are also very important moreover these attitudes and beliefs change quite quickly so are very important in explaining variation in the demand for redistribution

place space and geographical exposure foreign subsidiary survival in conflict zones this study focuses on the role of geography in foreign subsidiary survival in host countries afflicted by political conflict we argue that survival is a function of exposure to conflicts and depends on the characteristics of place the conflict zone and space geographic concentration and dispersion of other home country firms the roles of place and space are explored using street level analysis of geographic information systems data for 670 japanese multinational enterprises mne subsidiaries in 25 conflict afflicted host countries over 1987 2006 through dynamic modeling of conflict zones as stretchable and shrinkable places relative to subsidiary locations we develop a means of characterizing a foreign subsidiary s exposure to multiple threats in its geographic domain our results show that greater exposure to geographically defined threats in both a static and a dynamic sense reduces the likelihood of mne survival the findings indicate moreover that both concentration and dispersion with other firms affect survival however the effects depend on where the firm is spatially located whether the firm is in a conflict zone and with whom home country peers or sister subsidiaries

risk self protection and ex ante economic value abstract we develop three propositions about the ex ante value of reduced risk if there is a continuous outcome distribution and if self protection influences outcome probability and severity then 1 unobservable utility terms cannot be eliminated from the ex ante value expressions 2 knowledge of the convexity or the nonconvexity of dose response functions is insufficient to sign changes in these expressions and 3 self protection expenditures need not be a lower bound measure of these expressions therefore many restrictions applied in recent empirical work on the economic value of risk changes are not immediately transferable to settings where endogenous risks prevail

valuing reduced morbidity a household production approach individuals frequently apply a household technology to combine public and private goods in the production of nonmarket commodities for final consumption hori 9 demonstrates that in these situations market prices of private goods together with production function parameters may encode enough information to value both public goods used as inputs and nonmarket final consumption commodities although this valuation methodology is objective and market based it seldom has been applied for three reasons first underlying technical relations either are unknown or data needed to estimate them are unavailable second even if relevant technical information is at hand the consumer s budget surface in commodity space may not be differentiable when joint production and other complicating factors are present as a consequence the commodity bundle chosen is consistent with an infinite number of marginal rates of substitution and values of public goods and nonmarket commodities remain unknown third joint production and nonconstant returns to scale also pose serious difficulties when taking the closely related valuation approach of estimating the area behind demand curves for private good inputs and final consumption commodities 2 this paper presents a unique application of the household production approach to valuing public goods and nonmarket commodities which allows for certain types of joint production and addresses key problems identified by previous authors technical relationships are estimated between health attributes private goods and air quality data used in the analysis are drawn from a special survey designed to implement the household production approach econometric estimates allow for censored dependent variables and cross equation error correlations in panel data using tobit models with individual specific variance components key results are 1 attempts

managing the mne subsidiary advancing a multi level and dynamic research agenda abstract multinational enterprise mne subsidiaries abroad are important organizations in their own rights they typically hold some of the mne s most critical resources and operate at the forefront of complex international environments in this review we identify and organize theoretical and empirical research on subsidiary management based on over 600 articles in leading academic journals we develop a conceptual framework that integrates complementary streams of theoretical and empirical research with the subsidiary as its focal unit of analysis in particular we review six lines of research on subsidiary scope practices knowledge management engagement with local market and nonmarket actors performance and individuals within subsidiaries we highlight theoretical perspectives that have contributed to and been advanced by research on mne subsidiaries based on the review we explore future research agendas linking the contemporary research themes with two main thrusts first subsidiary management is a multi level phenomenon that would benefit from more microfoundational research second subsidiary management operates at key interfaces of technology paradigm shifts and of disruptions in the political and institutional environment research into the dynamics of subsidiary management would thus enhance our understanding of international business in a volatile global economy

divestment response to host country terrorist attacks inter firm influence and the role of temporal consistency abstract host country terrorism poses extreme uncertainty to mnes foreign operations however little is known about how mnes respond to host country terrorist attacks and how they make the related decisions drawing on the research on mnes responses to exogenous shocks and the inter firm imitation literature we argue that mnes obtain relevant information from peers actions under terrorist attacks to inform their own responses thus mnes are more likely to divest under host country terrorist attacks when peers also divest furthermore the impact of peers divestments on focal mnes divestments is magnified by the temporal consistency in peers behavioral pattern under terrorist attacks as temporal consistency reduces inferential difficulties empirical evidence based on 93 fortune us companies and their 8698 foreign subsidiaries over 2005 2015 support our hypotheses our study extends the literature on mnes responses to host country exogenous shocks and on inter firm imitation by demonstrating the social amplification of terrorism threat and the role of temporal consistency in inter firm imitation under extreme uncertainty practically we stress that mne executives should always consider their firms idiosyncratic situations when modeling peer mnes actions and be mindful that they are especially likely to imitate peers temporally consistent behaviors under extreme uncertainty

measuring benefits from air pollution control where do we stand measuring the benefits from reduced morbidity this paper presents a simple model of preventive health care similar to that of grossman 1972 and uses the model to define what a person would pay for a change in air quality the model assumes that one can build up resistance to acute illnes by increasing his stock of health capital however health capital decays at a rate which depends on air pollution for acute illness willingness to pay as derived from the model is greater than the benefit estimate computed using the damage function approach to illustrate the size of this discrepancy estimates of willingness to pay are computed using data from the michigan panel study of income dynamics the case for government providing information about risks rests secure in the theory of public goods informational scale economies and problems of dissemination conceivably call for a principal agent relationship in which certain types of decisions are delegated to the agency however the setting of standards and prohibitions is too simplistic it seldom recognizes that personal action tends to interact with and partially offset them 8 references

the advantages of contingent valuation methods for benefit cost analysis the preceding is a taxonomic discussion of some reasons why contingent market methods may often be a superior means of generating data with which to value non market commodities we have argued that economists have erred in viewing the situations these methods posit as necessarily fictional that the data generated by the methods may for non marketed goods and the activities with which they are associated accord more closely with the conditions of received economic theory that the methods can make it easier to remove the difficulties of estimation and interpretation introduced by confounding variables and that they often permit one to deal more readily with phenomena that have not been in the range of historical experience nevertheless whatever the advantages a major disadvantage remains until detailed analytical knowledge is acquired of the manner in which expectations are formed there exists no way to refute empirical propositions established from contingent markets nevertheless the previously mentioned south coast air basin experiment where the bids obtained for clean air conformed fairly closely to the values implied in a residential property value study suggest that contingent valuations have a basis in the real decision processes of consumers

terrorism and international business a research agenda terrorism threatens international business ib through its direct and indirect effects as governments tighten security at public sites businesses have become more attractive terrorist targets with important implications for the operations and performance of multinational firms while terrorism has been substantially studied in other fields there has been little scholarly research to address terrorism and the distinctive challenges that it poses for ib in this article we conceptualize terrorism in relation to ib we provide background on the dimensions and effects of terrorism and develop a theoretical grounding for terrorism research by drawing on the literature from ib economics political science and other fields after discussing findings from the literature review we offer a comprehensive agenda for future research regarding the relationship between terrorism and ib our agenda emphasizes the effects of terrorism organizational preparedness company strategy and performance global supply chain and distribution channels and human resource issues our review helps establish a baseline for future empirical research consistent with the early stages of research ib scholars are encouraged to offer useful perspectives and effective solutions that shed needed light on terrorism and help reduce its destructive effects for ib and multinational firms

will a second mouse get the cheese learning from early entrants failures in a foreign market we examine the conditions that can facilitate or hinder the effectiveness with which a new entrant learns from the failures of prior entrants by analyzing the experiences of 822 japanese subsidiaries in china founded between 1979 and 2000 our conceptual arguments and empirical findings demonstrate that learning from the failure experiences of prior entrants increases a new entrant s survival chances when entering china further we find that the value of this learning is less effective when there is a greater level of heterogeneity in the causes of these failures however this learning is more effective when a new entrant s parent firm has ownership ties with investors who had ventures that failed previously in china

benefits and costs of food safety regulation abstract this paper begins with a review of the concepts and methods that can be used to quantify the benefits and costs of food safety regulations on the cost side where research is only beginning to emerge this paper also provides an analytical framework for measurement of the costs of statutory regulations in the form of design and performance standards this paper also discusses the use and limitations of currently available benefit and cost information for quantitative regulatory impact assessment using the assessment of the mandatory haccp and pathogen reduction regulations in the united states as an example the paper concludes with suggestions for future research on quantifying benefits and costs of food safety regulations

managerial cognition and the mimetic adoption of market positions what you see is what you do managers planning to abandon a market position need to find a promising alternative and face a choice of inventing a new market position or entering an existing one the great uncertainty on the consequences of different actions leads them to rely on other organizations for information on how to compete making adoption of existing market positions likely their wish to avoid direct rivalry and maximize growth leads them to seek out information on new market positions with few incumbents as a result recently innovated market positions are mimetically adopted by organizations that can easily observe previous adoptions and see them as relevant to their market situations increasing the market differentiation this theory is tested and supported by analysis of the spread of new radio formats in the united states 1998 john wiley sons ltd

parental behavior and the value of children s health a health production approach data on individual children and on sibling pairs are used to examine how family resource allocations affect children s health and to estimate willingness to pay for reduced acute illness in children results highlight the importance of accounting for the endogeneity of child health and suggest that children with greater stocks of health capital whose parents invest in preventive and remedial medical care experience fewer days of illness estimated willingness to pay to avoid one day of illness induced school loss is about 100 to 150 a range broadly consistent with limited prior evidence but sub stantially more than unit values applied in recent policy analyses all else equal willingness to pay is higher among single parents and for uninsured children and the estimated income elasticity is only 0 14 implied aggregate benefits of reductions in children s sick time associated with air pollution control may be substantial

strategic reference point theory how can executives achieve a match between expected external environmental conditions and internal organizational capabilities that facilitates improved performance this paper argues that a firm s choice of reference points can help achieve strategic alignment capable of yielding improved performance and potentially even a sustainable competitive advantage building upon prospect theory and other relevant theoretical perspectives the strategic reference point srp matrix is developed a firm s srp consists of three dimensions internal capability external conditions and time a theory is developed which posits an optimal srp structure and propositions are offered which articulate the expected relationships between the srp strategic choice behavior and firm performance the paper closes with some suggestions for using strategic reference points in both research and practice

defensive technology and welfare analysis of environmental quality change with uncertain consumer health impacts measuring the ex post losses from environmental quality change is an important issue when environmental contamination creates health risks liability is assigned and private compensation efforts are required this paper proposes a methodology for measuring the ex post welfare impact of environmental quality change using market behavior from defensive expenditures conditions under which a defensive technology can provide a bound on welfare estimates are identified

learning from age difference interorganizational learning and survival in japanese foreign subsidiaries this paper extends research on experiential learning of foreign subsidiaries by exploring the temporal conditions under which a foreign subsidiary can benefit from the experience of its sister subsidiaries building upon organizational evolution and learning literature we propose that differences in entry timing among sister subsidiaries provide structural conditions that bound the opportunities for inter subsidiary learning we argue that different entry cohorts of sister subsidiaries are beneficial to a focal subsidiary as they provide non redundant complementary experience from their different operational stages and ignite the motivation to learn our empirical analysis of japanese foreign subsidiaries provides strong evidence that survival is enhanced by the experience of different entry cohorts of sister subsidiaries but not by that of similar cohorts qualitative evidence also shows that multiple channels of experience exchange across sister subsidiaries lead to actual learning we further show that the survival benefit derived from different cohorts is contingent on the level of environmental change as well as on the level of experience of the focal subsidiary and its parent firm our research highlights the importance of temporal heterogeneity in the internationalization process and offers implications for the temporal strategy of multinational companies

an economic analysis of air pollution and health the case of st louis a health oriented choice model is developed in which individuals are viewed as producers of health and good health is desired for both consumption and investment purposes individuals are able to adjust their consumption of medical care in order to defend against reductions in air quality a compensating variation type marginal willingness to pay expression is derived for improved air quality and the model is tested using cross sectional data on employed adult residents of st louis missouri estimates of marginal willingness to pay for the average employed person are derived for a 30 reduction in ozone these values range from 18 45 to 24 48 per year

the international entrepreneurial dynamics of accelerated internationalisation the initial stages of internationalisation prior to firms having established their definitive sources of advantage remain the relatively unexplored area of the international business ib literature at these early stages where firms are seeking to establish themselves and new multinational firms are appearing to exploit new opportunities created by globalisation the entrepreneurial aspects of internationalisation come to the fore in this paper we aim to delineate an emerging field of ib scholarship we use the appearance of international new ventures and the phenomenon of accelerated internationalisation that they feature to identify a set of issues that has slipped through the net of some of the existing ib frameworks we propose that the salient features of accelerated and early internationalisation by the newly internationalising firm are best captured in a framework that is found at the intersection of entrepreneurial and internationalisation perspectives which we propose be known as international entrepreneurial dynamics we discuss such a framework in terms of entry points and pathways mapped by firms as they probe the ib arena and the key factors that impinge on behaviour and strategic choices in line with recent developments in the entrepreneurship literature these are grouped into three milestones of entrepreneurial processes that extend across national boundaries 1 the discovery of new opportunities 2 the deployment of resources in the exploitation of these opportunities and 3 the engagement with competitors implications for mne and internationalisation theory are discussed

the impact of family income on child achievement evidence from the earned income tax credit comment abstract in a recent article in the american economic review dahl and lochner 2012 use changes in the earned income tax credit to estimate the causal effect of family income on child achievement their instrumental variable iv estimates imply that a 1 000 increase in income raises combined math and reading test scores by about 6 percent of a standard deviation i document a variable coding error correcting this error reduces the iv estimates by 32 percent correcting this error does not change the qualitative conclusions of the study jel h24 h31 i21 i38 j13

to be different or to be the same it s a question and theory of strategic balance this paper addresses the performance consequences of firm level strategic similarity past research observed that firms face pressures to be different and to be the same by differentiating firms reduce competition by conforming firms demonstrate their legitimacy both reduced competition and legitimacy improve performance this paper begins building a theory of strategic balance by synthesizing the differentiation and conformity perspectives the theory directs attention to intermediate levels of strategic similarity where firms balance the pressures of competition and legitimation empirical support for the theory is found in a longitudinal study of commercial banks several suggestions for developing a theory of strategic balance conclude the paper the theory s major implication is that firms should be as different as legitimately possible copyright 1999 john wiley sons ltd

willingness to pay for ozone control inferences from the demand for medical care abstract the paper applies a discrete choice version of the household production approach to the valuation of nonmarket goods willingness to pay for tropospheric ozone control is estimated using medical care demand under assumptions of input necessity and weak complementarity in example calculations individuals living in high ozone areas are willing to pay over 170 annually for an environment in which ozone concentrations never exceed 12 pphm willingness to pay figures are two to four times larger than medical expense savings caused by the same ozone reductions estimates obtained are compared with results of previous studies and proposed ozone control measures are discussed

action characteristics as predictors of competitive responses a central question in competitive dynamics is whether a competitive response can be predicted this study links various characteristics of actions with the total number and the time lag of competitors responses the hypothesized relationships were tested with a sample of competitive moves among u s airlines the results suggested that responses are influenced by the characteristics of the actions that evoked them specifically the total number of competitors affected by an action and the importance to these competitors of the markets under attack by the action increase the number of competitive responses strategic as opposed to tactical actions or actions which require substantial implementation efforts reduce the number and delay the timing of rivals counteractions finally contrary to prediction competitors who have a high stake in the markets under attack by a competitive move react slowly

averting expenditure and the cost of pollution the paper considers the relationship between the willingness to pay for environmental quality and averting expenditures that is the costs of measures undertaken in efforts to counteract the consequences of pollution the models used assume perfect mobility among locations with different levels of environmental quality the major results are i averting expenditures are not in general a good measure of willingness to pay 2 averting expenditures are not always even a lower bound on willingness to pay 3 even when averting expenditures are a lower bound the difference between the level of such expenditures and willingness to pay carmot be attributed to the unavertible aesthetic consequences of pollution for almost every kind of environmental unpleasantness we face there are averting expenditures we can make to reduce and sometimes completely remove the damage for air pollution house paint air conditioners soap for water pollution wells bottled water purifiers for noise pollution storm windows thicker walls economists have long been aware that averting behavior is both possible and practiced and they have often suggested that expenditures on such behavior can be used as a measure of the costs imposed on society by various forms of pollution the literature on this subject is difficult to characterize but to the extent that a consensus has been reached it is that averting expenditures provide a lower bound estimate of the total costs imposed by pollution and the divergence between averting expenditures and the total costs of pollution arises from the fact that some consequences of pollution e g the simple unpleasantness of breathing dirty air cannot be averted 2 3 in this note we develop two simple models of the response of utility maximizing consumers to small changes in the level of pollution which they face in the first model we assume that environmental quality is desired solely because it reduces the need for averting expenditure we show that 1 the level of averting expenditure may be either a lower bound or an upper bound estimate of the consumer s

valuing public goods a comparison of survey and hedonic approaches although the theory of public goods has progressed rapidly since paul samuelson s seminal article the empirical measurement of the value of demand for public goods only recently has received increased attention perhaps the best known and most widely accepted empirical approach has been the use of hedonic prices wherein for example it is assumed that either wages or housing values reflect spatial variation in public good characteristics of different communities this indirect approach based on theoretical work of charles tiebout kelvin lancaster sherwin rosen and others has proven quite successful among public goods or bads which have been valued using the hedonic approach are climate i hoch air pollution robert anderson and thomas crocker d harrison and d rubinfeld social infrastructure r cummings et al and other community characteristics such as noise level j nelson and ethnic composition ann schnare an alternative approach is to directly ask households or individuals to state their willingness to pay for public goods using survey techniques despite arguments that strategic bias will invalidate survey results there exists the need for an alternative to the hedonic approach as an example consider the case of a remote and unique scenic vista valuable to recreators which is threatened by air pollution from a proposed coal fired plant a typical situation in the western united states although it is possible in principle to impute the value of clean air and visibility from the relative decline in local visitation which might follow construction of a power plant information on the value of visibility at the site is needed prior to construction for socially optimal decision making on plant location and pollution control equipment the hedonic approach is unavailable both because the scarcity of local population as opposed to recreators makes use of wage or property value data impossible and because scenic vistas may themselves be unique for these reasons a randall et al first applied survey methods for valuing visibility and other environmental effects of large coal fired power plants in the four corners region of new mexico since this initial application the survey approach has been widely used to value environmental commodities where market data for hedonic analysis is difficult to acquire see for example brookshire ives and schulze rowe et al brookshire et al other early attempts to value public goods using the survey approach include r davis peter bohm and j hammack and g brown although results of using the survey approach for estimating the value of public goods appear to be internally consistent replicable and consistent with demand theory see schulze et al little work on external validation has been reported thus the purpose of this paper is to report on an experiment designed to validate the survey approach by direct comparison to a hedonic property value study the los angeles metropolitan area was chosen for the experiment because of the well defined air pollution problem and be assistant professor university of wyoming assistant professor university of missouri rolla associate professor university of wyoming and professor university of wyoming respectively the research reported here was funded under a grant methods development for assessing air pollution control benefits from the u s environmental protection agency we would like to give special thanks to alan carlin and shelby gerking for their helpful suggestions and contributions additional helpful comments were received from a myrick freeman iii john tschirhart and james murdoch all conclusions are of course our sole responsibility

parental altruism and child lead exposure inferences from the demand for chelation therapy we use parents decisions to treat their children s body burdens of lead to infer parental ex ante willingness to pay for reduced burdens willingness to pay is estimated with a data set containing 256 observations the data were originally gathered to assess the impact of children s body lead burdens upon their intellectual and behavioral development our results indicate that parental ex ante willingness to pay for a 1 percent reduction in child body lead burden exceeds the estimated ex post savings in medical treatment and compensatory education costs caused by the same reduction

getting to know you a theory of strategic group identity this paper develops a theory of strategic group identity that explains how strategic groups emerge in an industry and how they can affect firm behaviors and outcomes in so doing it provides a theoretical basis for the existence of strategic groups we argue that managers cognitively partition their industry environment to reduce uncertainty and to cope with bounded rationality social learning theory and social identification theory are used to describe how cognitive groups coalesce into meaningful substructures and how a group level identity emerges we describe the ways in which macro level factors condition the development of groups and their identities we introduce the notion of a strong identity which characterizes any group sufficiently recognized and attended to by members to affect individual action groups with weak identities are no more than transient agglomerations of firms and do not exist in any meaningful sense these ideas are developed into propositions that describe the conditions under which groups with strong identities are likely to emerge a second set of propositions describes their transformation over time identity strength is linked to both positive and negative outcomes in a final set of propositions we show how strategic groups with strong identities can affect firm performance resolving a longstanding problem which has plagued strategic groups research and conclude by suggesting some approaches for measurement and future research 1997 by john wiley sons ltd

transforming disadvantages into advantages developing country mnes in the least developed countries we analyze the advantages and disadvantages of developing country multinational enterprises mnes in comparison with developed country mnes developing country mnes tend to be less competitive than their developed country counterparts partly because they suffer the disadvantage of operating in home countries with underdeveloped institutions we argue that this disadvantage can become an advantage when both types of mne operate in countries with difficult governance conditions because developing country mnes are used to operating in such conditions the empirical analysis shows that although developing country mnes rarely appear among the largest mnes in the world they are more prevalent among the largest foreign firms in the least developed countries ldcs especially in ldcs with poorer regulatory quality and lower control of corruption

offshore pariahs small island economies tax havens and the re configuration of global finance the stock of wealth held offshore is estimated at us 6 trillion many small island economies sies host offshore finance centers and some sies are highly dependent upon offshore finance extreme examples have over 90 of government revenues derived from finance sector activities since 1998 a series of international initiatives have been launched to combat harmful tax practices money laundering and inadequate financial regulation these initiatives will transform the economies of many sies this paper explores the dependence of many sies upon offshore finance and the barriers to diversification arising from their smallness and unique political economies

adaptation as information restriction the hot stove effect individuals and social systems are often portrayed as risk averse and resistant to change such propensities are characteristically attributed to individual organizational and cultural traits such as risk aversion uncertainty avoidance discounting and an unwillingness to change this paper explores an alternative interpretation of such phenomena we show how the reproduction of successful actions inherent in adaptive processes such as learning and competitive selection and reproduction results in a bias against alternatives that initially may appear to be worse than they actually are in particular learning and selection are biased against both risky and novel alternatives because the biases are products of the tendency to reproduce success that is inherent in the sequential sampling of adaptation they are reduced whenever the reproduction of success is attenuated in particular when adaptation is slowed made imprecise or recalled less reliably the propensity to engage in risky and new activities is increased these protections against the error of rejecting potentially good alternatives on inadequate experiential evidence are costly however they increase the likelihood of persisting with alternatives that are poor in the long run as well as in the short run

national capital city location and subsidiary portfolio expansion the negative effect of geographic distance to the capital city at inception on the speed of subsequent investments a multinational enterprise develops its subsidiary portfolio by investing in new foreign markets and subsequently pursuing further investments within these host countries we find that firms which locate their first equity investment closer to the national capital city can subsequently expand their subsidiary portfolio within the host country at a higher speed this effect is particularly strong in emerging economies further analyses of various contingencies support the robustness of our findings we discuss different theoretical mechanisms which could cause these effects in particular face to face interactions with governmental actors and opportunities to develop political connections our research contributes to the literature on internationalization processes by analyzing how the initial location choice affects the development of the subsidiary portfolio

on the evaluation of government programs to reduce environmental risk this paper attempts to identify the correct benefit measure for a government project which might reduce the subjective probability of an environmental risk to health the evaluation of government projects whose costs or benefits are uncertain occupies a considerable literature including arrow and lind fisher and graham the value of reducing the probability of an adverse state outcome has been examined by cook and graham and more recently by gallagher and smith in the latter two papers it was assumed that the individual at risk had access to perfect insurance or contingent claims markets in such a perfect world the value of reducing the probability of an adverse state could be bounded by measures which cook and graham referred to as ransom and compensation and which gallagher and smith show to correspond to the more traditional hicksian notions of compensating and equivalent variation if the assumption of perfect contingent claims markets does not hold it is not possible to set upper and lower bounds on the value of reducing the probability of an adverse state while general forms of health insurance are available to individuals at risk from an environmental hazard specific policies do not allow for the continuous adjustment reallocation of wealth assumed to occur when the individual has access to perfect markets in the next section a more plausible model is constructed it assumes that the individual has a finite set of self protective actions which he or she may take in response to a risk to future health in addition the government may undertake a project to reduce the risk to health it is assumed that both the selfprotective action and the government project have the ability to influence the subjective personal probability of the future states continued good health or ill health there are three major conclusions which emerge from this model a the value of the government project is an option price graham which may be zero or positive if positive the benefits from the project may take the form of cost savings risk probability reduction or both b the value of the government project is dependent on the set of self protective actions and may change as new actions become available or the effectiveness of existing actions is reassessed by the individual c the method of contingent valuation in theory would appear capable of eliciting the proper option price estimates for the project s value to the individual it is even possible to distinguish between the value attributable to cost savings and risk reduction in the next section i present the model and demonstrate the above conclusions in the final section an assessment is made of the in

estimation of state dependent utility functions using survey data surveys of individual s risk dollar trade offs illuminate not only the local trade off rates but also can be used to address more fundamental questions about the structure of utility functions this largely unexplored empirical area is investigated by developing an econometric technique to estimate utility functions based on survey data on risk dollar trade offs for minor health effects the empirical tests indicate that for all but one of the temporary health effects considered consumers treat injuries as tantamount to a drop in income implying that the health impact does not alter the structure of the utility function in a fundamental way copyright 1991 by mit press

valuation of pollution abatement benefits direct and indirect measurement abstract this paper deals with the valuation of benefits especially morbidity reduction associated with air pollution abatement two approaches are employed these are direct contingent valuation as gauged by willingness to pay and indirect valuation through the effect of changes in the provision of a public good clean air upon the demand for two market goods housing and medical services both empirical analyses are based on the same set of individuals from a sample survey of households in the city of haifa in israel this strategy enabled the derivation of comparable individual valuations the paper then proceeds to compare and evaluate the estimates of welfare changes obtained under these two distinct approaches

international experience and fdi location choices of chinese firms the moderating effects of home country government support and host country institutions we examine the extent to which chinese government support of foreign direct investment fdi projects and host country institutional environments interact with prior entry experience by chinese firms and how this interrelationship affects fdi undertaken by chinese firms we hypothesize that home country government support and well established host country institutions enhance organizational capabilities to take risks in fdi as such they reduce the need to accumulate experiential knowledge and capabilities relating to entering host countries based on prior entry experience in a particular country when undertaking follow up investment projects using a unique hand collected panel data set of chinese publicly listed firms during 2002 2009 we find that home government support and well developed host country institutions reduce the importance of prior entry experience and significantly increase the likelihood of fdi entry into a host country further from our subsample analyses we identify differences between entering developed and developing host countries in terms of the impact of home country government support and quality of host country institutions our findings help explain the puzzle concerning why emerging economy firms have rapidly internationalized in a short period of time and do not follow the pattern predicted by classical ib theories

terrorism and the world economy abstract it has been argued that terrorism should not have a large effect on economic activity because terrorist attacks destroy only a small fraction of the stock of capital of a country see e g becker g murphy k 2001 prosperity will rise out of the ashes wall street journal october 29 2001 in contrast empirical estimates of the consequences of terrorism typically suggest large effects on economic outcomes see e g abadie a gardeazabal j 2003 the economic cost of conflict a case study of the basque country american economic review 93 113 132 the main theme of this article is that mobility of productive capital in an open economy may account for much of the difference between the direct and the equilibrium impact of terrorism we use a simple economic model to show that terrorism may have a large impact on the allocation of productive capital across countries even if it represents a small fraction of the overall economic risk the model emphasizes that in addition to increasing uncertainty terrorism reduces the expected return to investment as a result changes in the intensity of terrorism may cause large movements of capital across countries if the world economy is sufficiently open so international investors are able to diversify other types of country risks using a unique data set on terrorism and other country risks we find that in accordance with the predictions of the model higher levels of terrorist risks are associated with lower levels of net foreign direct investment positions even after controlling for other types of country risks on average a standard deviation increase in the terrorist risk is associated with a fall in the net foreign direct investment position of about 5 of gdp the magnitude of the estimated effect is large which suggests that the open economy channel impact of terrorism may be substantial

tax avoidance and the deadweight loss of the income tax traditional analyses of the income tax greatly underestimate deadweight losses by ignoring its effect on forms of compensation and patterns of consumption the full deadweight loss is easily calculated using the compensated elasticity of taxable income to changes in tax rates because leisure excludable income and deductible consumption are a hicksian composite good microeconomic estimates imply a deadweight loss of as much as 30 of revenue or more than ten times harberger s classic 1964 estimate the relative deadweight loss caused by increasing existing tax rates is substantially greater and may exceed 2 per 1 of revenue

lower tax progression longer hours and higher wages the impact of tax reforms that decrease income tax progression is analysed in an equilibrium search model with wage bargaining and endogenous individual working hours working hours are either bargained together with the hourly wage case 1 or determined solely by workers after bargaining over the wage case 2 in both cases reducing tax progression increases working hours of employed and more interestingly unambiguously increases wages and unemployment wages and unemployment rise more and working hours and production less in case 1 compared to case 2 probably making case 2 countries best suited for such tax reforms

cooperative and noncooperative protection against transferable and filterable externalities given self protection from an undesirable environmental externality we examine under several conditions the efficiency properties of cooperative and noncooperative behavior we demonstrate that if self protection can transfer the externality to another agent then noncooperative behavior will lead to overprotection if self protection filters or dilutes the externality then noncooperation leads to underprotection in addition overprotection will worsen if an agent with more relative power is allowed a first mover advantage or if the damage function is elastic and transferability is uncertain finally a reduction in uncertainty about transferability will accentuate overprotection if the damage function is inelastic our results suggest that coordination of protection activities among agents will enhance the overall gains from environmental policy in the european single internal market of 1992 coordination minimizes the costs of environmental protection thereby reducing the public credibility of its foes

valuing morbidity an integration of the willingness to pay and health status index literatures placing dollar values on human health has long been a controversial aspect of policy analysis and remains difficult given the relatively small number of morbidity valuation studies available by combining both the economic and health literature this paper offers an alternative approach to morbidity valuation and provides estimates for a wide range of short term health conditions

confidence in imitation niche width strategy in the uk automobile industry our study examines the imitation behavior of uk automobile manufacturers from 1894 to 1981 and supports previous studies on interorganizational imitation by showing that manufacturers tend to imitate other manufacturers that are similar we also find that the degree of confidence manufacturers have in their imitating behavior affects the intensity of that behavior where an organizations confidence is determined by the variance of the routines used by its reference group and the number of firms in the reference group our results show that 1 manufacturers whose reference groups showed large variance in niche width changes during the previous year are less likely to imitate the mean of those changes 2 manufacturers who have large reference groups are more likely to imitate the changes and 3 the negative effect of variance on the imitating behavior is strengthened as the number of reference organizations increases

dodging bullets the heterogeneous effect of political violence on greenfield fdi the relationship between political violence and greenfield foreign direct investment is contingent on the type of violence characteristics of the investment receiving sector and extent to which the investing firm is geographically diversified this paper presents an analysis with a dynamic fixed effects model for a panel of 90 developing countries from 2003 to 2012 the analysis shows that nationwide political conflict is negatively associated with total and non resource related greenfield foreign direct investment but not with resource related greenfield foreign direct investment the insensitivity to political conflict of multinational firms in the resource sector is associated with the high profitability of natural resource extraction and the companies geographic constraints on location choice during the period of estimation in the non resource sector the less geographically diversified firms are most sensitive to the risk of conflict

experiential knowledge and costs in the internationalization process using a behavioral approach this study identifies and delineates components of experiential knowledge in the internationalization process three hypotheses are developed and tested they center around the lack of knowledge in the areas of foreign business foreign institutions and firm internationalization as well as the effect that this lack of knowledge has on managers perceived cost in the internationalization process with the help of a lisrel based structural model the three hypotheses are tested on a sample of 362 service firms the analysis shows that lack of internationalization knowledge has a strong impact on the lack of both business and institutionalization but there is no direct effect of lack of internationalization knowledge on perceived cost of internationalization

fiscal incentives and policy choices of local governments evidence from china abstract this paper examines how fiscal incentives affect the policy choices of local governments in the context of china based on exogenous changes in the intergovernmental revenue sharing scheme we construct a simulated instrumental variable to resolve the endogeneity problem we find evidence that local governments shifted their efforts from fostering industrial growth to urbanizing china i e to developing the real estate and construction sectors when their retention rate of enterprise tax revenue was reduced the increase from the new revenue source compensated for half of the losses in revenue that resulted from the reassignment of fiscal rights the reassignment had also the effect of retarding the industrial growth of domestically owned firms in particular

valuing changes in health risks a comparison of alternative measures essential to efficient provision of health safety and the environment is correct valuation of risks to human health in a world of scarcity difficult decisions concerning tradeoffs between health and other desirables are unavoidable in this paper we develop a model of health investment under uncertainty which yields a general expression for values of changes in risks to human health the preference based values of morbidity risks and mortality risks are ex ante dollar equivalents of changes in expected utility associated with risk changes the preference based values are related to two alternative measures costs of illness and preventive expenditures which are thought to be lower bounds on the value of risk reductions we demonstrate that these alternative measures are not even special cases of the more general measure and that the size relationships among the three measures are complex also we derive the relationship between the willingness to pay for risk changes and the consumer surpluses associated with health changes which occur with certainty the next section contains a brief review of the approaches to valuing changes in health

the lulling effect the impact of child resistant packaging on aspirin and analgesic ingestions in 1972 the food and drug administration imposed a protective bottlecap requirement on aspirin and other selected drugs this regulation epitomizes the technological approach to social regulation the strategy for reducing children s poisoning risks was to design caps that would make opening containers of hazardous substances more difficult this engineering approach will be effective provided that children s exposure to hazardous products does not increase if however parents leave protective caps off bottles because they are difficult to open or increase children s access to these bottles because they are supposedly child proof the regulation may not have a beneficial effect indeed in this case there was no significant impact of the regulation on aspirin poisoning rates but there has been an alarming upward shift in the trend of analgesic ingestion rates since 1972 the source of this pattern appears to be attributable to a general reduction in parental caution with respect to such medicines which has had an adverse spillover effect on unregulated products the economic mechanisms involved can be best understood by considering the nature of individuals response to regulatory protection

public good valuation and intra family allocation i derive values of marginal changes in a public good for two person households measured alternatively by household member i s willingness to pay wtp for the good on behalf of the household wtp i h or by the sum of individual wtp values across family members wtp c households are assumed to allocate their resources in efficient nash bargains over private and common household goods wtp i h is then defined by trade offs between the public good and the household good and wtp c by trade offs of between the public good and private goods wtp i h is found to be higher lower than wtp c when member i has a relatively high low marginal valuation of the public good but tends on average to equal wtp c as a consequence individuals tend to represent households correctly on average when questioned about the household s wtp for a public good even when they are purely selfish and answer truthfully adding all members wtp answers on behalf of the household then leads to double counting pure and paternalistic altruism the latter attached to consumption of the public good move each member s wtp on behalf of the household closer to the true sum of individual wtp but only paternalistic altruism raises this sum

decomposing uncertainty and its effects on imitation in firm exit decisions this study examines the effects of different uncertainty types on interorganizational imitation in firm exit decisions we draw on herding models to conceptualize exit decisions as being based on a firm s private information which the firm updates with information inferred from observing the actions of others we posit that different types of uncertainty differentially affect this observational learning process in particular we propose that certain uncertainty types attenuate rather than foster observational learning and subsequent imitation we test this theory using a 29 year panel data set on the exit of private venture capital firms our results indicate that observational learning does influence imitation in firm exit decisions and they also suggest that a common belief that uncertainty enhances imitation does not apply to all types of uncertainty specifically we find that uncertainty fosters imitation only when it is idiosyncratic to the firm uncertainties that are common to all firms in contrast actually reduce reliance on observational learning by decomposing uncertainty into different types and explicating their effects on imitation we demonstrate that this relationship is more nuanced than previously assumed and in addition highlight the role of deliberate information processing in imitation

willingness to pay for lipid lowering a health production function approach this paper reports the results of an experiment of measuring willingness to pay wtp for lipid lowering wtp is derived from a theoretical model of health risk reductions using a health production function approach a survey of about 700 persons randomized into a lipid lowering trial in sweden is used to estimate wtp the willingness to give up time wtgt to take part in a lipid lowering programme is also measured in the survey to assess its relationship to wtp the response rates on the wtp and wtgt qusetions are 94 and 96 respectively and the patients are on average perpared to pay about skr 350 per month or devote about 5 h of leisure time per week to get normal lipid levels the correlation of wtp and wtgt is 0 45 and highly significant the results of regression of wtp and wtgt are in accordance with the theoretical predictions with a higher valuation for a greater perceived difference in health status with and without treatment the income elasticity is also positive as expected

governance infrastructure and us foreign direct investment this paper examines the statistical importance of governance infrastructure as a determinant of us foreign direct investment fdi in broad terms governance infrastructure represents attributes of legislation regulation and legal systems that condition freedom of transacting security of property rights and transparency of government and legal processes our econometric analysis uses a two stage estimation procedure in the first stage the probability that a country is an fdi recipient is estimated the results indicate that countries that fail to achieve a minimum threshold of effective governance are unlikely to receive any us fdi countries that receive no us fdi are typically countries that do not promote free and transparent markets that have ineffective governments and that often have legal systems that are not rooted in english common law in the second stage the analysis is restricted to those countries that did receive fdi flows the estimated equations focus on the determinants of the amount of fdi received given that a country is a recipient of us fdi governance infrastructure including the nature of the legal system is an important determinant of the amount received

the impact of family income on child achievement evidence from the earned income tax credit using an instrumental variables strategy we estimate the causal effect of income on children s math and reading achievement our identification derives from the large nonlinear changes in the earned income tax credit the largest of these changes increased family income by as much as 20 percent or approximately 2 100 between 1993 and 1997 our baseline estimates imply that a 1 000 increase in income raises combined math and reading test scores by 6 percent of a standard deviation in the short run test gains are larger for children from disadvantaged families and robust to a variety of alternative specifications jel h24 h31 i21 i38 j13