ict use competitive pressures and firm performance in mexico this paper presents a set of stylized facts on the relation between information and communications technology ict use firm performance and competition taking advantage of a novel firm level data set on information and communications technology for mexico the study finds that firms facing higher competition appear to have more incentives to increase their use of information and communications technology accordingly although there is indeed a positive relation between information and communications technology use and firm performance this effect is greater for firms that face higher competition pressures which is consistent with the theoretical predictions of the trade induced technical change hypothesis

pillage and property this paper introduces a class of coalitional games called pillage games as a model of hobbesian anarchy any coalition can pillage costlessly and with certainty any less powerful coalition power is endogenous so a pillage game does not have a characteristic function but pillage provides a domination concept that defines a stable set which represents an endogenous balance of power every stable set contains only finitely many allocations and can be represented as a farsighted core additional results are obtained for particular games including the game in which the power of each coalition is determined by its total wealth

productivity differences across employers the roles of employer size age and human capital recent research using longitudinal microeconomic databases on businesses and individuals has uncovered tremendous heterogeneity across businesses even within narrowly defined industrial sectors we observe large differences in the levels and growth rates of inputs outputs and productivity across workers even controlling for demographic characteristics wage and employment outcomes vary a great deal and there are sizable worker flows across jobs in the economy these worker flows are closely connected to firm outcomes reflecting in large part the ongoing shift in resources from less productive to more productive employers the primary message is that the continual process of matching and sorting as businesses and workers seek their niches is heterogeneous with experimentation learning and selection all playing important roles understanding the connection between the matching and sorting of businesses and workers is at the very heart of the overlap between industrial organization and labor economics however due to the paucity of data linking businesses and workers at the micro level we know relatively little about these interactions although a large empirical literature suggests that worker outcomes are associated with firm characteristics notable examples are firm size wage effects compensating wage differentials and interindustry wage differentials very little is known about the converse the process by which business outcomes are associated with the characteristics of their employees there are a number of questions associated with this process do employers choose different modes of production resulting in skill segregation as suggested by the sorting and assignment hypotheses in michael kremer 1993 and michael sattinger 1993 or do all firms in a given industry select roughly the same workforce composition how do employers change their workforce composition either to accommodate demand shocks or to experiment with new modes of production in turn what is the connection between these different decisions regarding workforce composition and observable business outcomes such as survival growth and productivity in this short paper our empirical objectives are relatively modest compared to these broad research questions our focus is to provide an initial investigation into the connection between a key measure of firm performance labor productivity and the composition of the firm s workforce as measured by observable worker characteristics we exploit longitudinal matched employeremployee micro data developed under a recent pilot project at the u s census bureau our data set contains longitudinal information on key outcomes of the businesses as well as many of the basic demographic characteristics for the universe of workers at these businesses although longitudinal matched employer employee micro data have been developed in a variety of countries over the last decade or so see john abowd and francis kramarz 1999 ours is the first large scale micro level data set in the united states that allows the investigation haltiwanger department of economics university of maryland college park md 20742 u s bureau of the census and nber lane department of economics american university washington dc 20016 and u s bureau of the census spletzer bureau of labor statistics 2 massachusetts ave n e washington dc 20212 we thank adela luque and javier miranda for superb research assistance and charles brown and marilyn manser for comments on an earlier draft this research was conducted at the center for economic studies at the u s bureau of the census while the second author was an american statistical association census bureau fellow the analysis and results are attributable to the authors and do not necessarily reflect concurrence of the institutions they represent

do too many cooks always spoil the stew an experimental analysis of rent seeking and the role of a strategic buyer laboratory methods are used to evaluate the effects of institutional arrangements and rent defending activity on rent seeking auction outcomes in part nash equilibrium predictions are a useful behavioral guide as predicted more rents are dissipated in perfectly discriminating auctions where the high bidder wins than in lotteries where relative bids determine the chance of winning also as predicted the introduction of a rent defending buyer reduces social costs nevertheless the social costs of rent seeking consistently exceed predicted levels moreover individual bidding especially by buyers deviates markedly from nash predictions

bargaining in the shadow of power abstract often a bargainer can use some form of power legal military or political to impose a settlement how does the outside option of being able to impose a settlement albeit at some cost affect the bargaining and how does the probability that the bargaining will break down vary with the distribution of power between the bargainers these questions are examined by adding the option of imposing a settlement to rubinstein s game of dividing a pie each actor can accept an offer make a counteroffer or try to impose a solution imposing a settlement is however costly and each bargainer has private information about its cost journal of economic literatureclassification number c72

an experimental investigation of asymmetric contests abstract contest theory has been used in industrial organization to describe phenomena like r d races or efforts to defend a monopoly position when pricing behavior is constrained by regulators competition can also take the form of a contest this paper reports on an experimental test of the effects of asymmetry in the tullock contest success function both the simultaneous move and sequential move frameworks are considered despite high levels of overbidding across the different conditions the introduction of asymmetries in the contest function generates experimental behavior on aggregate qualitatively consistent with the theoretical predictions at the individual level behavior seems divided into those subjects who bid very high amounts and those who bid very low amounts

individual risk attitudes measurement determinants and behavioral consequences this paper studies risk attitudes using a large representative survey and a complementary experiment conducted with a representative subject pool in subjects homes using a question asking people about their willingness to take risks in general we find that gender age height and parental background have an economically significant impact on willingness to take risks the experiment confirms the behavioral validity of this measure using paid lottery choices turning to other questions about risk attitudes in specific contexts we find similar results on the determinants of risk attitudes and also shed light on the deeper question of stability of risk attitudes across contexts we conduct a horse race of the ability of different measures to explain risky behaviors such as holdings stocks occupational choice and smoking the question about risk taking in general generates the best all round predictor of risky behavior

the transatlantic productivity gap is r d the main culprit the literature has pointed to different causes to explain the productivity gap between europe and united states in the last decades this paper tests the hypothesis that the lower european productivity performance in comparison with the us can be explained not only by a lower level of corporate rd however using different estimation techniques the r d coefficients for the us firms always turn out to be significantly higher to see to what extent these transatlantic differences may be related to the different sectoral structures in the us and the eu we differentiated the analysis by sectors the result is that both in manufacturing services and high tech sectors us firms are more efficient in translating their r d investments into productivity increases

assessing output performance of information technology service industries productivity innovation and catch up abstract the purpose of this paper is to assess the output performance of information technology it service industries of twelve organization of economic cooperation and development oecd countries over the years from 2000 to 2011 we use malmquist productivity index mpi as the performance metric and stochastic production frontier spf as the measurement approach we then decompose mpi into two ingredient components that represent technological change for innovation capability and efficiency change for catch up effort it is found that the it service industries display an impressive annual rate of 7 4 for productivity growth during the study period the parametric decomposition of mpi unveils that almost all of the productivity growth observed is enabled by technological advance made to the production process by it service providers while efficiency change has little effect moreover each country s it service industry demonstrates a distinctive pattern relating to the three measures of productivity growth technological change and efficiency change this observation suggests that each country s it service industry possesses certain strengths that become the sources of its competitive advantage and there are weaknesses that could be targets for performance improvement based on our empirical results we offer practical implications and identify future research topics for performance evaluation of it service and other industries

computing productivity firm level evidence we explore the effect of computerization on productivity and output growth using data from 527 large us firms over 1987 1994 we find that computerization makes a contribution to measured productivity and output growth in the short term using one year differences that is consistent with normal returns to computer investments however the productivity and output contributions associated with computerization are up to five times greater over long periods using five to seven year differences the results suggest that the observed contribution of computerization is accompanied by relatively large and time consuming investments in complementary inputs such as organizational capital that may be omitted in conventional calculations of productivity the large long run contribution of computers and their associated complements that we uncover may partially explain the subsequent investment surge in computers in the late 1990s

the strategic equivalence of rent seeking innovation and patent race games abstract we establish the strategic equivalence of a variety of rent seeking contests innovation tournaments and patent race games the results allow us to disentangle negative and positive externalities and to apply theorems and results intended for rent seeking games to other games and vice versa we conclude with several examples that highlight the practical utility of our results

perspectives on the new architecture for the us national accounts paul samuelson once called the national income and product accounts nipas one of the great inventions of the twentieth century he was right it is difficult to imagine modern economics and even public discourse on the economy without them the nipas and related accounts provide the basic set of estimates on a wide range of economic variables of interest to economists citizens policymakers firms investors workers and consumers they enforce important economic and statistical properties and reveal at least retrospectively and historically many of the most important features of the evolution of the economy in short it would be difficult to imagine where our understanding of recent economic events and economic history would be without the nipas the nipas are based on an analytical framework and innumerable decisions on how to categorize economic activities and how to measure variables of interest doing so requires many judgments and in an economy that evolves rapidly a willingness to reconsider those judgments fortunately in most major statistical agencies around the world especially in the united states including the bureau of economic analysis bea a high level of professionalism has led to many improvements and to making most of the historical time series consistent with the new measures one important example is the reclassification of software as investment some of those judgments are large some negligible some fundamental e g the decisions

the costs of conflict abstract violent conflict destroys resources it generates destruction costs these costs have an important effect on individuals decisions to cooperate or conflict we develop two models of conflict one in which conflict s destruction costs are independent of individuals investments in arms the tools of conflict and another in which conflict s destruction costs depend on those investments our models demonstrate that when conflict s destruction costs are arms dependent conflict is more costly making cooperation more likely we test this prediction with a laboratory experiment in which subjects first choose how heavily to invest in arms and then choose whether to cooperate or conflict in an environment where interaction is repeated in one set of treatments conflict s destruction costs are arms independent in another they are arms dependent our experimental results support our models predictions compared to when conflict s destruction costs are arms independent when those costs are arms dependent cooperation increases by nearly a third

inequality of opportunity in egypt the article evaluates the contribution of inequality of opportunity to earnings inequality in egypt and analyzes its evolution across three time periods and different population groups it provides parametric and nonparametric estimates of a lower bound for the degree of inequality of opportunity for wage and salary workers on average the contribution of opportunity shaping circumstances to earnings inequality declined from 22 percent in 1988 to 15 percent in 2006 levels of inequality of opportunity were fairly stable while earnings differentials widened markedly leading to a decline in the share of inequality attributable to opportunities father s background and geographic origins had the largest effect on earnings although the impact of mother s education has risen in recent years the degree of inequality of opportunity did not differ significantly by gender or rural urban area although the incidence was lower for men and for rural areas the results indicate an increase in inequality of opportu

a retrospective look at the u s productivity growth resurgence it is widely recognized that information technology was critical to the dramatic acceleration of u s labor productivity growth in the mid 1990s this paper traces the evolution of productivity estimates to document how and when this perception emerged early studies concluded that information technology was relatively unimportant only after the massive information technology investment boom of the late 1990s did this investment and underlying productivity increases in the information technology producing sectors come to be identified as important sources of growth although information technology has diminished in significance since the dot com crash of 2000 and observed growth rates have slowed recently we project that private sector productivity growth will average around 2 4 percent per year for the next decade only moderately below the average of the post 1995 period

do we have a new e conomy used properly the term new e conomy is warranted since 1995 there has been a wave of innovation associated with both the production and use of information technology that has been translated into improved us economic performance in particular there has been a substantial acceleration in trend total factor productivity growth most of this acceleration actually took place outside of the computer sector almost none of the acceleration was cyclical there is now clear supportive evidence of an acceleration of productivity in service industries that are major purchasers of information technology such as finance and wholesale and retail trade these gains reflect not only increased investment in information technology but also complementary innovations in business organization and policy to be sure as evidenced by recent financial market volatility there have been speculative excesses but these should not obscure the fundamental gains that have been made this abstract was borrowed from another version of this item

information technology and growth the rapid diffusion of information technology it is a direct consequence of the swift decline in the price of computer related equipment which has led to a vast and continuing substitution of it equipment for other forms of capital and labor this substitution generates substantial returns for the economic agents who undertake it investments and restructure their activities in order to increase the role of it there is little evidence however that substitution is accompanied by technical change as this term is used by economists while this appears highly paradoxical to technologists who think of substitution of a more it intensive mode of production for a less itintensive mode as a change in technology it is entirely consistent with the economic framework developed by robert m solow 1957 what do economists mean by technical change and how could this exclude the substitution of a more it intensive production process for one that is less it intensive substitution represents movement along a given production function while technical change corresponds to a shift in the production function substitution takes place if the introduction of computer intensive equipment produces benefits that are fully captured or internalized by the users of it and their suppliers technical change occurs only if more

alliances in the shadow of conflict victorious alliances often fight about the spoils of war this article presents an experiment on the determinants of whether alliances break up and fight internally after having defeated a joint enemy first if peaceful sharing yields an asymmetric rent distribution this increases the likelihood of fighting in turn anticipation of the higher likelihood of internal fight reduces the alliance s ability to succeed against the outside enemy second the option to make nonbinding nonaggression declarations between alliance members does not make peaceful settlement within the alliance more likely third higher differences in the alliance players contributions to alliance effort lead to more internal conflict and more intense fighting

are workers paid their marginal products status is like coase s social costs a reciprocal phenomenon given that one person s gain in status can occur only at the expense of a loss in status for others and that workers are free to choose their coworkers it follows that the competitive wage structure within a firm must be one in which individual wage differences understate individual differences in marginal products the purpose of this paper is to examine a variety of empirical evidence that relates to this proposition about the firm s internal wage structure the paper is organized as follows section i briefly summarizes the theoretical considerations that govern competitive wage determination when status matters to people and firms are viewed as voluntary associations of workers section ii then confronts the predictions of section i by examining pay and productivity schedules for a group of sales occupations for which these schedules are relatively easily observed section ii also examines the relationship between wages and productivity for a sample of university professors an occupation in which individual productivity differences are for a variety of obvious reasons relatively more difficult to measure all of the evidence examined is consistent with the hypothesis that within firms wage rates vary substantially less than do individual productivity values section iii discusses additional observations and evidence that bear on this same hypothesis it suggests that the implicit market for status may strongly influence the ways in which firms are organized to carry out the tasks they perform section iv concludes by considering the claim that egalitarian internal wage structures arise because of equity considerations it argues that the concept of equity appears very closely linked to the concept of status and suggests a strategy for assigning monetaty value to the equity considerations that so often dominate public policy decisions

information decisions and productivity on board computers and capacity utilization in trucking productivity reflects not only how efficiently inputs are transformed into outputs but also how well information is applied to resource allocation decisions this paper examines how information technology has affected capacity utilization in the trucking industry estimates for 1997 indicate that advanced on board computers obcs have increased capacity utilization among adopting trucks by 13 percent these increases are higher than for 1992 suggesting lags in the returns to adoption and are highly skewed across hauls the 1997 estimates imply that obcs have enabled 3 percent higher capacity utilization in the industry which translates to billions of dollars of annual benefits jel d24 l92 o33 o47

information power and war ultimatum bargaining models of international interactions suggest that when conflict is costly and the actors are fully informed the probability of conflict goes to zero however conflict occurs with some positive probability when the challenger is uncertain about the defender s reservation value i employ a simple ultimatum game of bargaining to evaluate two traditional power centric theories of world politics balance of power and power transition theory the formal and empirical analyses demonstrate that as states approach power parity information asymmetries are greatest thus enhancing the probability of militarized conflict uncertainty is a central cause of conflict emergence and is correlated with the distribution of observable capabilities recognizing the relationship between the distribution of power and the uncertainty offers a more sophisticated interpretation of power centric explanations of world politics

the level and distribution of global household wealth the level of average household wealth in all countries is estimated via the determinants of assets and debts for 39 countries which have balance sheet or survey data the distribution of wealth in all countries is inferred from information on the pattern of wealth ownership for 20 countries covering 59 of world population combining the level and distribution figures suggests that median global wealth was ppp 8 635 in the year 2000 and that ppp 518 361 was needed to belong to the top percentile the top decile owned 71 of world wealth and the global gini value was 0 802

egalitarianism and competitiveness competition is a cornerstone of economic life some environments are however more competitive than others and individuals are often confronted with the decision whether to self select into a competitive environment an important example is occupational choice a self employed lawyer is in constant competition for clients whereas a lawyer working as a civil servant in a public authority is not likewise some people vigorously compete for promo tion to better paid jobs associated with a high prestige while others don t understanding who self selects into competitive environments and who shies away from them is thus important in this paper we test the hypothesis that individu als with a preference for egalitarian outcomes are more reluctant to self select into competitive environments our hypothesis is based on i the observation that payoff inequalities among winners and losers arise as a natural by product of competition and ii the empirical literature showing that a nonnegligible share of children and adults is willing to incur costs to reduce earnings inequalities see e g christopher dawes et al 2007 ernst fehr helen bernhard and bettina rockenbach 2008 we analyze data from several economic experiments implemented in a household survey study with mothers of preschool children we

distributional preferences and competitive behavior we study experimentally the relationship between distributional preferences and competitive behavior we find that spiteful subjects react strongest to competitive pressure and win in a tournament significantly more often than efficiency minded and inequality averse subjects however when given the choice between a tournament and a piece rate scheme efficiency minded subjects choose the tournament most often while spiteful and inequality averse subjects avoid it when controlling for distributional preferences risk attitudes and past performance the gender gap in the willingness to compete is no longer significant indicating that gender related variables explain why twice as many men as women self select into competition

conflict as a part of the bargaining process this paper investigates the use of conflict as a bargaining instrument it first revises the arguments explaining the role of confrontation as a source of information and its use during negotiations then it offers evidence illustrating this phenomenon by analyzing a sample of colonial and imperial wars the second part of the paper explores a bargaining model with one sided incomplete information parties can choose the scope of the confrontation they may want to engage in an absolute conflict that terminates the game or a limited conflict that only introduces delay and conveys information about the eventual outcome of the absolute one it is shown that confrontation has a double edged effect it may paradoxically open the door to agreement when the uninformed party is so optimistic that no agreement is feasible but it can also create inefficiency when agreement is possible but the informed agent has an incentive to improve her bargaining position by fighting

approaches to inequality of opportunity principles measures and evidence we put together the dierent conceptual issues involved in measuring inequality of opportunity discuss how these concepts have been translated into computable measures and point out the problems and choices researchers face when implementing these measures our analysis identies and suggests several new possibilities to measure inequality of opportunity the relevance of the conceptual issues and modelling choices are illustrated with ndings from the empirical literature on income inequality of opportunity

measuring poverty in a growing world or measuring growth in a poor world the extent to which growth reduces global poverty has been disputed for 30 years although there are better data than ever before controversies are not resolved a major problem is that consumption measured from household surveys which is used to measure poverty grows less rapidly than consumption measured in national accounts in the world as a whole and in large countries particularly india china and the united states in consequence measured poverty has fallen less rapidly than appears warranted by measured growth in poor countries one plausible cause is that richer households are less likely to participate in surveys but growth in the national accounts is also upward biased and consumption in the national accounts contains large and rapidly growing items that are not consumed by the poor and not included in surveys so it is possible for consumption of the poor to grow less rapidly than national consumption without any increase in measured inequality current statistical procedures in poor

technical change sectoral dislocation and barriers to labor mobility factors behind the great recession abstract the global financial and economic crisis which began in late 2007 great recession is the worst international crisis since 1929 great depression and still affects many countries this paper attempts to determine if the theory of extended crises presented by delli gatti et al 2012 is consistent with empirical evidence the analysis is carried out using two approaches the first part of the paper is purely descriptive and is dedicated to a comparison between structural differences and different patterns of development in six countries france germany italy spain uk and us using data on the major world economies klems and stan since 1970 we show that the fundamentals behind the extended crisis theory apply to these economies we focus particularly on italy germany and the us among large economies italy is one of the most affected and still not recovering even though the italian financial sector appeared to have been less exposed to the 2008 shock than other countries the crisis in italy could be directly connected to the failure of the italian economy to move to an economic system based on more skill intensive production in particular in the service sector as in the us the us financial sector was extremely exposed to the 2008 sub prime crisis but us economy recovered much faster than in many european countries germany is the leading european economy generally considered in european public debate as the example to be followed in the last part of the paper the analysis is broadened involving more countries in a panel analysis approach different specifications of panel probit logit models are presented in a first attempt to investigate the roles of both structural features and financial shock in explaining the extent of the crisis in different countries

when do power shifts lead to war we present and test a choice theoretic model of war decisions during shifts in power the model assumes a rising state that overtakes a declining state in capabilities in equilibrium the declining state yields at a critical point in the transition war can occur only before that critical time power shifts are more likely to lead to war as the challenger becomes more risk acceptant the declining state more risk averse the expected costs of war decrease the rising state s dissatisfaction with the status quo increases and during periods of equality between the two sides the rate of growth of the rising state s capabilities and the transition point do not affect the probability of war all these hypotheses are supported by an empirical analysis of all major power dyads since 1815 we also find that expected support from allies must be included in the calculation of a nation s capabilities the implications of the model for theories of hegemonic decline and war are discussed

labour productivity in spain 1977 2002 this study examines the evolution of labour productivity across spanish regions during the period from 1977 to 2002 applying the kernel technique we estimate the effects of the transition process on labour productivity and its main sources we find that spanish regions experienced a major convergence process in labour productivity mostly driven by human capital in the 1977 1993 period conversely the dynamics of investment in physical capital appear to be neutral with respect to the transition dynamics of labour productivity finally from 1995 to 2002 no dynamic processes seemed to have taken place spanish regions exhibit a persistent relative position with established convergence clubs the human capital effect is less important and the investment in physical capital seems not to have a triggering effect on labour productivity growth

interdependent preferences and the competitive wage structure this article shows by example that when workers care about relative income and are free to choose their coworkers the equilibrium distribution of wages within firms must be less dispersed than the corresponding distribution of marginal products an implicit market for within firm status is shown to produce welfare gains by sorting workers among firms in accordance with how much they are willing to pay for high rank the resulting equilibrium pareto dominates allocations in which each worker is paid his marginal product

asymmetric tournaments equal opportunity laws and affirmative action some experimental results this paper assesses whether affirmative action programs and equal opportunity laws affect the output of economic agents more precisely we find that equal opportunity laws and affirmative action programs always benefit disadvantaged groups equal opportunity laws also increase the effort levels of all subjects and hence the profits of the tournament administrator usually the firm the effects of affirmative action programs depend on the severity of a group s cost disadvantage when the cost disadvantage is severe these programs significantly increase effort levels and hence profits the opposite is true when the disadvantage is slight

peace war and the balance of power every possible relation between the distribution of power and the likelihood of war has been defended somewhere in the literature on international politics war is least likely if power is distributed equally war is least likely if power is distributed unequally and the distribution of power has no effect on the likelihood of war i try to settle this dispute by examining the effect of expectations about the outcome of war on the choice between war and negotiation i argue that each of these mutually contradictory propositions can be derived from some plausible set of premises and thus that which one is correct depends on which set of premises best describes a situation the most important factors affecting the relation between the distribution of power and the likelihood of war are 1 whether the terms of a compromise agreement that might be accepted in lieu of war affect the distribution of power between the antagonists and therefore the probability that the agreement will be enforced and 2 how many states interests will be affected by the outcome

offshoring bias in u s manufacturing in this paper we show that the substitution of imported for domestically produced goods and services often known as offshoring can lead to overestimates of u s productivity growth and value added we explore how the measurement of productivity and value added in manufacturing has been affected by the dramatic rise in imports of manufactured goods which more than doubled from 1997 to 2007 we argue that analogous to the widely discussed problem of outlet substitution bias in the literature on the consumer price index the price declines associated with the shift to low cost foreign suppliers are generally not captured in existing price indexes just as the cpi fails to capture fully the lower prices for consumers due to the entry and expansion of big box retailers like wal mart import price indexes and the intermediate input price indexes based on them do not capture the price drops associated with a shift to new low cost suppliers in china and other developing countries as a result the real growth of imported inputs has been understated and if input growth is understated it follows that the growth in multifactor productivity and real value added in the manufacturing sector have been overstated we estimate that average annual multifactor productivity growth in manufacturing was overstated by 0 1 to 0 2 percentage point and real value added growth by 0 2 to 0 5 percentage point from 1997 to 2007 moreover this bias may have accounted for a fifth to a half of the growth in real value added in manufacturing output excluding the computer and electronics industry

paradox lost firm level evidence on the returns to information systems spending the productivity paradox of information systems is is that despite enormous improvements in the underlying technology the benefits of is spending have not been found in aggregate output statistics one explanation is that is spending may lead to increases in product quality or variety which tend to be overlooked in the aggregate statistics even if they increase output at the firm level furthermore the restructuring and cost cutting that are often necessary to realize the potential benefits of is have only recently been undertaken in many firms our study uses new firm level data on several components of is spending for 1987 1991 the dataset includes 367 large firms which generated approximately 1 8 trillion dollars in output in 1991 we supplemented the is data with data on other inputs output and price deflators from other sources as a result we could assess several econometric models of the contribution of is to firm level productivity our results indicate that is spending has made a substantial and statistically significant contribution to firm output we find that the gross marginal product mp for computer capital averaged 81 for the firms in our sample we find that the mp for computer capital is at least as large as the marginal product of other types of capital investment and that dollar for dollar is labor spending generates at least as much output as spending on non is labor and expenses because the models we applied were similar to those that have been previously used to assess the contribution of is and other factors of production we attribute the different results to the fact that our data set is more current and larger than others explored we conclude that the productivity paradox disappeared by 1991 at least in our sample of firms

distinguished lecture on economics in government the new economy post mortem or second wind there was an acceleration of u s productivity after 1995 investment in information technology hardware and software contributed importantly to this but was not its sole cause in part heavy it investment perhaps overinvestment was the result of the booming economy and cheap capital besides it the expansion of productive firms boosted productivity together with the competitive pressure this put on other firms to innovate and improve productivity growth has been surprisingly strong in 2001 and the likely trend for the future is in the range of 2 2 to 2 7 percent a year the economy should get a second wind

relative standing comparisons risk taking and safety regulations abstract we study the question of how relative standing comparisons or status seeking influence risk taking when utility is separable in consumption and status the following results apply with non systematic risks more concern for status leads to more less risk taking when in a sense made precise in the paper the utility function is less more concave in status than in pure consumption with systematic risk risk taking always increases with the concern for status however status seeking always implies socially excessive risk taking thus suggesting a role for public regulation of risky choices

might makes rights a theory of the formation and initial distribution of property rights this paper is a theoretical and empirical investigation into the formation and initial distribution of property rights violence is singled out as a major constraint on this formation process its role is explicitly modeled in a choice theoretic framework and some of the implications are tested using data collected from contracts written during the california gold rush of 1848

auctionin entry into tournaments a research tournament model with heterogeneous contestants is presented for a large class of contests the optimal number of competitors is two this insight makes designing the tournament easier and highlights the importance of selecting highly qualified contestants while customary uniform price and discriminatory price auctions are intuitively appealing mechanisms for solving this adverse selection problem in practice they generally will not be efficient mechanism for selecting contestants instead we propose an alternative auction format that is equally simple to implement and efficiently selects the most qualified contestants to compete regardless of the form of contestant heterogeneity

inequality of opportunity in earnings and assets in egypt by most available measures the level of inequality in the mena region including egypt is considered relatively low this regularity applies to both inequality of outcomes as well as inequality o

deception and misreporting in a social program we investigate empirically the extent of misreporting in a poverty alleviation program in which self reported information followed by a household visit is used to determine eligibility in the model we propose and estimate underreporting may be due to a deception motive and overreporting to an embarrassment motive we find that underreporting of goods and desirable home characteristics is widespread and that overreporting is common with respect to goods linked to social status larger program benefits encourage underreporting and discourage overreporting we also estimate the costs of lying and embarrassment for different goods and show that the embarrassment cost for lacking a good is proportional to the percentage of households who own the good jel d01 i32 i38 c25

comparing bargaining solutions in the shadow of conflict how norms against threats can have real effects abstract in many economic environments agents make costly and irreversible investments in guns that may enhance their respective threat payoffs but also shrink the utility possibilities set in such settings with variable threats and a variable utility possibilities set it becomes possible to rank different bargaining solutions in terms of efficiency we compare bargaining solutions within a class in which the influence of the threat point on the bargaining outcome varies across solutions under symmetry we find that the solution in which the threat point is least influential the equal sacrifice solution pareto dominates the other solutions since the equal sacrifice solution puts the least weight on the threat point norms against threats that can be seen in many seemingly rhetorical pronouncements in adversarial relations can mitigate some of the costs of conflict and therefore have efficiency enhancing effects journal of economic literature classification numbers c72 c78 d30 d70 d72 k42

favorites and underdogs strategic behavior in an experimental contest conflicts between favorites and underdogs are everyday phenomena we examine their strategic behavior in an experimental contest and find behavior partially consistent with predictions favorites given a first mover advantage do overcommit effort relative to nash underdogs often select the best response effort level given the favorite s move overall dissipation of the prize was significantly higher with the strategic commitment relative to nash

voting and the economic cycle sophisticated voters assess incumbent competence by filtering out economic cycles which they do not like from trend growth which they do naive voters on the other hand respond only to raw economic growth this implies that voting in the aggregate should respond asymmetrically to the economic cycle upswings are rewarded by the naive but punished by the sophisticated downswings are punished by all voters using an established dataset of over 400 general elections we find that the incumbent vote share a responds differently to trend growth than to the cycle b does not respond significantly to positive variation in the economic cycle and c responds significantly and negatively to negative realizations in the economic cycle in contrast to standard formulations of the grievance asymmetry this asymmetric vote response is found to be independent of trend growth

bargaining in the shadow of war when is a peaceful resolution most likely this article derives the optimal bargaining strategies of the belligerents when each side has private but incomplete information about the expected outcome of a war should it take place i show that the aggressor s demand curve can be below the defender s offer curve that wars are possible even when both sides are jointly pessimistic and that the relative cost of a war can radically alter the types of disputes that end in war a simple diagram provides the intuition for most of the major propositions

computers obsolescence and productivity this paper develops a new technique for measuring the effect of computer usage on u s productivity growth standard national income and product accounts nipa measures of the computer capital stock which are constructed by weighting past investments according to a schedule for economic depreciation the rate at which capital loses value as it ages are shown to be inappropriate for growth accounting because they do not capture the effect of a unit of computer capital on productivity this is due to technological obsolescence machines that are still productive are retired because they are no longer near the technological frontier and anticipation of retirement affects economic depreciation using a model that incorporates obsolescence alternative stocks are developed that imply a larger computer usage effect this effect together with the direct effect of increased productivity in the computer producing sector accounted for the improvement in u s productivity growth over 1996 1998 relative to the

rationalist explanations for war realist and other scholars commonly hold that rationally led states can and sometimes do fight when no peaceful bargains exist that both would prefer to war against this view i show that under very broad conditions there will exist negotiated settlements that genuinely rational states would mutually prefer to a risky and costly fight popular rationalist and realist explanations for war fail either to address or to explain adequately what would prevent leaders from locating a less costly bargain essentially just two mechanisms can resolve this puzzle on strictly rationalist terms the first turns on the fact that states have both private information about capabilities and resolve and the incentive to misrepresent it the second turns on the fact that in specific strategic contexts states may be unable credibly to commit to uphold a mutually preferable bargain historical examples suggest that both mechanisms are empirically plausible

designing multiperson tournaments with asymmetric contestants an experimental study is the right amount of effort exerted in multiperson tournaments where contestants have two different levels of initial endowments termed favorites and underdogs we develop theoretical predictions for the level of effort and the effect of varying the prize structure we test these predictions for three person tournaments using an economic experiment in a social environment where contest outcomes are publicly announced we find that both favorites and underdogs overexert effort relative to the theoretical point predictions moreover in the treatment with two favorites and one underdog favorites increase their effort when the number of prizes is increased from one to two contrary to the theory prediction we show that a generalized model that allows for psychological losses from losing for favorites and psychological gains from winning for underdogs because of social comparisons tracks the experimental results better than the standard theoretical model this paper was accepted by peter wakker decision analysis

conflict settlement and the shadow of the future abstract we examine a conflictual setting in which adversaries cannot contract on an enforcement variable arms and where the future strategic positions of adversaries are very different when there is open conflict than when there is settlement we show that as the future becomes more important in this setting open conflict becomes more likely than settlement we demonstrate the theoretical robustness of this finding and test it in a laboratory experiment as predicted we find that subjects are more likely to engage in destructive conflict as the future becomes more important

bargaining and conflict with up front investments how power asymmetries matter abstract we examine settings such as litigation labor relations or arming and war in which players first make non contractible up front investments to improve their bargaining position and gain advantage for possible future conflict bargaining is efficient ex post but we show that a player may prefer conflict ex ante if there are sufficient asymmetries in strength there are two sources of this finding first up front investments are more dissimilar between players under conflict and they are lower than under bargaining when one player is much stronger than the other second the probability of the stronger player winning in conflict is higher than the share received under nash bargaining we thus provide a rationale for conflict to occur under complete information that does not depend on long term commitment problems greater balance in institutional support for different sides is more likely to maintain peace and settlements

competition imitation and growth with step by step innovation is more intense product market competition and imitation good or bad for growth this question is addressed in the context of an endogenous growth model with step by step innovations in which technological laggards must first catch up with the leading edge technology before battling for technological leadership in the future in contrast to earlier schumpeterian models in which innovations are always made by outsider firms who earn no rents if they fail to innovate and become monopolies if they do innovate here we find first that the usual schumpeterian effect of more intense product market competition pmc is almost always outweighed by the increased incentive for firms to innovate in order to escape competition so that pmc has a positive effect on growth second that a little imitation is almost always growth enhancing as it promotes more frequent neck and neck competition but too much imitation is unambiguously growth reducing the model thus points to complementary roles for competition anti trust policy and patent policy

does the new economy measure up to the great inventions of the past abstract during the four years 1995 99 u s productivity growth experienced a strong revival and achieved growth rates exceeding that of the golden age of 1913 72 accordingly many observers have declared the new economy to be an industrial revolution even more important than the second industrial revolution of 1860 1900 which made the golden age of productivity growth possible this paper dissects the recent productivity revival subtracts out a cyclical component and concludes that there is no revival of the productivity growth trend in the 88 percent of the private economy lying outside of the durables manufacturing sector the paper explains this surprising finding by pointing to limitations in computers and the internet in comparison with the great inventions of the past

mediation and peace this article applies mechanism design to the study of international conflict resolution standard mechanisms in which an arbitrator can enforce her decisions are usually not feasible because disputants are sovereign entities nevertheless we find that this limitation is inconsequential despite only being capable of making unenforceable recommendations mediators can be equally effective as arbitrators by using recommendation strategies that do not reveal that one player is weak to a strong opponent a mediator can effectively circumvent the unenforceability constraint this is because these strategies make the strong player agree to recommendations that yield the same payoff as arbitration in expectation this result relies on the capability of mediators to collect confidential information from the disputants before making their recommendations simple protocols of unmediated communication cannot achieve the same level of ex ante welfare as they preclude confidentiality

balance of power and the propensity of conflict we study the role of an imbalance in fighting strengths when players bargain in the shadow of conflict our experimental results suggest in a simple bargaining game with an exogenous mediation proposal the likelihood of conflict is independent of the balance of power if bargaining involves endogenous demand choices however the likelihood of conflict is higher if power is more imbalanced even though endogenous bargaining outcomes reflect the players unequal fighting strengths strategic uncertainty causes outcomes to be most efficient when power is balanced in turn the importance of exogenous mediation proposals depends on the balance of power

capabilities uncertainty and resolve a limited information model of crisis bargaining this paper presents and solves a crisis bargaining game under limited information the sides alternate offers from three possible offers with war and its costs starting if the target s counteroffer is rejected the equilibrium of the model falls into four different cases these four cases are analyzed to determine how the sides communicate through their offers and how the costs of war initial beliefs misperceptions and distribution of capabilities drive the probabilities of a crisis and war the model demonstrates a joint selection bias misspecification problem in empirical studies of crises arising from the unobservable nature of beliefs several empirical studies of crisis bargaining are discussed in the light of this methodological problem new patterns of evidence are found that support the presence of the selection problem and their conclusions are reexamined

insecure resources bilateral trade and endogenous predation a game theoretic analysis of conflict and trade this article analyzes how interstate conflict over resources affects the incentives to trade and how greater trade openness affects the endogenous decisions of arming by enemy countries we identify conditions under which there is trade between two adversary countries and show that each adversary s arming affects domestic welfare in three different ways the first is an export revenue effect which increases welfare because arming causes export revenue to go up i e there is an arming induced terms of trade improvement the second is a resource predation effect which increases welfare because arming increases the appropriation of a rival country s resource input to produce a consumption good the third is an output distortion effect which reduces welfare because arming lowers the domestic production of civilian goods based on these effects we show circumstances in which greater trade openness reduces the intensity of arming we also discuss the implications of resource security asymmetry for conflict and trade

learning and shifts in long run productivity growth abstract an extensive literature has analyzed the macroeconomic effects of shocks to the level of aggregate productivity however there has been little corresponding research on sustained shifts in the growth rate of productivity in this paper we examine the effects of shocks to productivity growth in a dynamic general equilibrium model where agents do not directly observe whether shocks are transitory or persistent we show that an estimated kalman filter model using real time data describes economists long run productivity growth forecasts in the united states extremely well and that filtering has profound implications for the macroeconomic effects of shifts in productivity growth

equilibrium in the jungle in the jungle power and coercion govern the exchange of resources we study a simple stylized model of the jungle that mirrors an exchange economy we de ne the notion of jungle equilibrium and demonstrate that a number of standard results of competitive markets hold in the jungle jel classi cation c7 d4 s477 b201

innovation and productivity growth the puzzle confronting economists has been that the rate of growth of output that was being observed has been much larger than the rate of increase in the principal resources that were being measured it is now clear that this puzzle is of our own making because we have been using measures of capital and labor which had been refined and narrowed in ways that excluded many of the improvements that have been made in the quality of these resources theodore w schultz 1962

dynamic linkages between diffusion of information communication technology and labour productivity in south asia at present diffusion of information communication technology ict is a significant area of concern for sustainable development and growth of a country regions with abundant labour such as south asia require significant improvements in the diffusion of ict to achieve higher productivity for their labour which in turn can increase the pace of economic growth in this context the objective of this study is to investigate whether ict could be used to improve labour productivity for countries in south asia this study first investigates the general status of diffusion of ict among south asian countries the initial results based on descriptive statistics indicate that there is a significant gap among the south asian countries with maldives having the highest ict facilities second using robust panel data methodologies this study concludes that south asia s drive for higher productivity of its abundant labour force can substantially be improved in the long run by increasing diffusion of ict in the prese

the transatlantic productivity gap a survey of the main causes abstract during the last 2 decades europe s economy experienced a productivity slowdown whereas the united states us economy exhibited a marked acceleration the result is that since the early 1990s the relative productivity levels between the two regions have continuously diverged leading to a transatlantic productivity gap much of the explanation for this is the strong performance of the us in the so called new economy or knowledge economy and in particular the underinvestment in r d and as a result productivity and innovation has been at the forefront in the european policy agenda however various explanations for the us european union transatlantic productivity gap suggest that the picture is rather more complex than simply the effects on or the result of particular technology driven sectors

last place aversion evidence and redistributive implications we present evidence from laboratory experiments showing that individuals are last place averse participants choose gambles with the potential to move them out of last place that they reject when randomly placed in other parts of the distribution in modified dictator games participants randomly placed in second to last place are the most likely to give money to the person one rank above them instead of the person one rank below last place aversion suggests that low income individuals might oppose redistribution because it could differentially help the group just beneath them using survey data we show that individuals making just above the minimum wage are the most likely to oppose its increase similarly in the general social survey those above poverty but below median income support redistribution significantly less than their background characteristics would predict jel codes h23 d31 c91