agriculture and the transition to the market agricultural sectors in eastern and central europe are large so that changes in producer prices farm employment and land ownership affect substantial numbers of people in the past food in the region was politicized for decades governments of eastern european countries and the ussr offered their citizens stable subsidized food prices and a steadily improving diet in an effort to demonstrate the superiority of communism over capitalism during the transition the context has changed but food remains politicized many consumers in the region are ill prepared to pay the real costs of food which are quite high the task of reducing those costs will be difficult involving restructuring of farms and fostering competition in processing and distribution management of the agricultural transition will affect the political sustainability of the process and influence agriculture s contribution to the growth of emerging market economies although the agricultural sector of eastern and central europe is large soviet agriculture dwarfs it in its impact on the region and the world a positive program to stop the decline in soviet agriculture could contribute to economic growth and political stability failure to remedy the fundamental flaws in soviet agriculture will speed the country s slide into poverty and ethnic turmoil and undermine the efforts of central and eastern europeans to succeed

revisiting the role of education for agricultural productivity while the majority of micro studies finds that rural education increases agricultural productivity various recent cross country regressions analysing the determinants of agricultural productivity were only able to detect insignificant or even surprising negative effects of schooling in this paper we argue and show that this failure to find a positive impact of education in the international context is rather a data problem related to the use of enrolment and literacy indicators using a panel of 95 developing and middle income countries from 1961 to 2002 together with the newest version of the barro lee educational attainment dataset we show that education indeed has a highly significant positive effect on agricultural productivity which is robust to changes in the control variables and in the econometric methods applied distinguishing between different levels of education further reveals that only primary and secondary schooling have significant positive impacts while tertiary education remains insignificant finally the effect of education is estimated separately for countries with different income levels results indicate that the coefficient of the education variable remains insignificant for countries from the poorest three income quintiles while it is positive and highly significant for the richest two quintiles this finding can be interpreted as support for the prominent argument claiming that education leads to higher agricultural productivity only in the presence of rapid technical change where education will help farmers to adjust more readily to the new opportunities

privatization deregulation and capital accumulation author affiliation gerhard glomm department of economics indiana university wylie hall room 105 bloomington in 47405 usa gglomm indiana edufabio mendez department of economics walton college of business room 402 university of arkansas fayetteville ar 72701 usa fmendez uark edu corresponding author acknowledgment we are grateful to b ravikumar rowena pecchenino jeffrey wooldridge felix rioja stefan krause and seminar participants from the economics department at emory university for useful observations we are also grateful to cristian opazo and javier reyes for their assistance and to the editor and two anonymous referees for helpful comments 1 introductionsince the early 1980s many countries have privatized and deregulated intermediate goods industries such as gas electricity or telecommunications that had traditionally been run by public monopolies the european union eu for example has adopted aggressive policies toward the elimination of monopolies in the telecommunication market and conducted a general privatization program whose sales receipts amounted to more than 3 of gdp between 1985 and 1995 constantinou and lagoudakis 1996 parker 1998 in other regions of the world countries like australia chile brazil argentina and the united states have implemented similar policies vickers and yarrow 1991 winston 1993 van der vlies 1996 while there is a large literature studying the microeconomic effects of privatization and deregulation the long run macroeconomic effects of such types of reforms have been subject to relatively less scrutiny in this paper we use a model of capital accumulation in order to investigate the long run effects of privatization and deregulation this paper complements a small literature that includes parente and prescott 1999 2000 schmitz 2001 and herrendorf and teixeira 2004 parente and prescott 1999 2000 and herrendorf and teixeira 2004 study the impact of monopoly rights on long run levels of income and find that the effect is large the latter authors find for example that monopoly rights can reduce aggregate income in the long run by a factor of seven schmitz 2001 uses a two sector model to calculate the impact of government production of investment goods on long run levels of labor productivity he finds that government production can lower labor productivity levels in the long run by about 30 our approach differs from herrendorf and teixeira 2004 who infer the extent of monopoly power from differentials in the relative prices of nontradeables instead we take the approach that monopoly power is likely to arise and exist in the public production of intermediate goods such as public utilities or telecommunication and that the size of these sectors relative to the rest of the economy can be directly estimated see world bank 1995 our approach also differs from schmitz 2001 in a fundamental way because he abstracts completely from the issue of monopoly rights in his model the only difference between the public and private production is that the government is endowed with a less productive technology than the private sector the long run income gains from privatization and deregulation in our paper are similar in magnitude to those found in schmitz 2001 in our base case calculation the long run income gain of changing from a public sector monopoly to a competitive market with private firms is 18 these welfare gains can be larger when there has been relatively low governmental investment in the public sector capital and when the elasticity of substitution between the intermediate input and physical capital is small like schmitz 2001 we view our results as less pertinent for rich economies like the united states where public sector involvement in intermediate good production is relatively small rather we view the results of our model as being applicable mostly to least developed countries ldcs such as egypt where governments typically play a large role in intermediate goods production

privatization public offerings and political objectives this paper empirically analyses the political and economic objectives underlying privatization on the stock market particularly the factors of sips underpricing are explained and the study analyses whether the change of political parties in government play a role on the issue the paper has two main findings first larger initial returns occurred in the early stages of privatization second the change of government from left wing to right wing did not lead to significantly higher levels of underpricing the results show that governments are quite pragmatic with respect to underpricing maximizing proceeds from sips shows to be more important than ideological differences between parties in government

linking risk aversion time preference and fertilizer use in burkina faso this paper investigates whether burkinabe maize farmers fertilizer use decisionsare correlated with their risk and time preferences we conducted a survey and a se ries of hypothetical experiments on a sample of 1 500 farmers we find that morepatient farmers do use more fertilizer but it is only because they plant more maize afertilizer intensive crop rather than because they use more fertilizer per hectare ofmaize planted conversely we find no statistically significant link between risk aver sion and fertilizer use we use a simple two period model which suggests that riskaversion may indeed have an ambiguous effect on fertilizer use

incumbent employees resistance to implementing privatization policy abstract the recent anti privatization trend in latin america france and south africa is a reminder that employees resist privatization because pre privatization firms tend to be over manned and to pay excessive wages we study the effect of employees resistance on the successful implementation of privatization in a stylized model in which the government interacts with employees of an unknown type the analysis clarifies some of the difficulties associated with the implementation process furthermore although common sense dictates that the government negotiates with the employees before finding an outside buyer we show that sometimes it is better off contacting an investor first

brazilian privatization in the 1990s abstract this paper makes a partial assessment of the brazilian privatization program in the 1990s the article focuses mainly on the fiscal impact of asset sales which we argue has been relatively small we conclude that the failure of the governments attemps has reduced the fiscal benefits of privatization and inhibited the goverment s capacity to impose limits on buyers who have increased their market power through the acquisition of state owned enterprises in practice the main objective of the privatization program has been to highlight the commitment to market orieted reforms in a certain sense privatization has created its own logic beyond its original objectives

the roles of risk and ambiguity in technology adoption we study the impacts of risk and ambiguity aversion on the adoption of new technologies specifically genetically modified gm corn and soy seeds we conduct experiments measuring risk and ambiguity aversion with midwestern grain farmers risk aversion has only a small impact on the timing of adoption of gm soy while ambiguity aversion has a large impact speeding up farmer adoption of gm corn we hypothesize that this unusual finding is due to the fact that gm corn often contains an insect resistance trait which reduces the ambiguity of pest damages for adopters gm soy never contains this insect resistance trait this highlights the importance of distinguishing between risk and ambiguity when studying the effects of aversion to uncertainty on adoption of new technologies

mixed markets and crime abstract this paper specifies and solves a two stage game theoretic model of a mixed market for crime control in the first stage of the model private targets and the government choose levels of policing in the second stage criminals choose targets and the severity of the crimes that they commit the paper s key results are as follows first private policing can both divert crime to targets that lack private protection and also increase the severity of the crime that these less protected targets suffer second an increase in private policing reduces the aggregate expenditure on traditional policing this is an instance of a political incentive externality where private policing affects the objective function of the government specifically it reduces the level of traditional policing that is consistent with the samuelson condition for efficient provision of a public good third the substitution of private for public policing carries with it a change in the technology of policing in effect private policing leads to a shift from enforcement and punishment towards monitoring and target hardening this in turn may lead to an increase in the severity of crime fourth the mixed policing equilibrium is inefficient and in some situations mixing may reduce the utility of all targets

risk aversion and credit constraints in farmers decision making a reinterpretation in 1976 the agricultural development council sponsored a conference on risk uncertainty and agricultural development which has been summarised in a volume edited by james roumasset jean marc boussard and inderjit singh 1979 the volume provides an excellent review of the state of the art at that time however as discussed in the summary chapters of that volume there were few theoretical empirical or policy issues on which clear conclusions could be reached on the basis of knowledge then available in the intervening years progress has been made on a number of issues as a result of both empirical investigations and theoretical advances this paper concentrates on advances which have relevance to the controversy about the relative roles of risk aversion and credit constraints in limiting farmers investment levels especially for purchased inputs such as seeds or fertilizers in particular we review recent experimental studies on the extent of risk aversion among farmer populations in developing

rate base selection and the structure of regulation this article investigates the role played by rate base valuation rules in the context of rate of return regulation it shows 1 that there is nothing inherently fair about any particular valuation rule 2 that properly interpreted rate bases represent promises of future returns 3 that valuation rules can be fairly selected from a very broad class and 4 that once this is recognized rate of return regulation represents a highly effective and flexible means of avoiding the dynamic consistency problems associated with repeated regulatory reviews in addition the article investigates the nature of optimal rate base valuation rules

on the structural interpretation of the smets wouters risk premium shock this article shows that the risk premium shock in smets and wouters 2007 can be interpreted as a structural shock to the demand for safe and liquid assets such as short term u s treasury securities several implications of this interpretation are discussed

a method for taking models to the data abstract this paper develops a method for combining the power of a dynamic stochastic general equilibrium model with the flexibility of a vector autoregressive time series model to obtain a hybrid that can be taken directly to the data it estimates this hybrid model via maximum likelihood and uses the results to address a number of issues concerning the ability of a prototypical real business cycle model to explain movements in aggregate output and employment in the postwar us economy the stability of the real business cycle model s structural parameters and the performance of the hybrid model s out of sample forecasts

privatization policy in an international oligopoly this paper studies privatization policy in an international oligopoly the argument that equal treatment of foreign investors will be detrimental to domestic welfare by shifting profits from domestic to foreign firms is shown to be less relevant in privatization auctions than in greenfield fdi models since these profi ts hifts are partly paid for by the foreign firms in the bidding competition effects of local equity requirements trade and investment policies are also studied it is for instance shown that small local equity requirements are likely to be beneficial but large ones are counterproductive by preventing welfare enhancing foreign acquisitions

the impact of ownership on price setting in retail energy markets the german case abstract this paper analyzes whether public ownership has an impact on providers price setting under the assumption of more efficient energy provision which benefits customers a large number of former energy monopolists have been privatized in line with the liberalization of energy markets in germany at the end of the 1990s however current re municipalizations are justified by similar arguments in the public debate based on a dataset on the ownership structure of energy providers we find that public property or private property itself is not the decisive factor for lower retail and wholesale prices rather a high ownership concentration leads to low prices regardless of the type of owner as public investors often seek total ownership of a provider households which are less willing to switch benefit at least indirectly from public ownership tests for robustness of our results applying different owner and concentration measures confirm the results independently from the underlying estimation specification

dynamic revenue estimation this paper considers the question of adopting dynamic revenue estimation methods which would incorporate the predicted macroeconomic effects of policies it describes the current revenue estimation process and how these estimates are used in the formation of policy it then evaluates this process as an exercise in forecasting considering not only its methodology but also its performance this evaluation illustrates some of the difficulties that would accompany attempts to use dynamic methods finally the paper relates the choice among different revenue estimation procedures to the political process and the use to which the revenue estimates are put

landlords and farmers implications of disparities in bargaining power for tenancy in agriculture abstract the equilibrium allocation of owner operated and rental land in the agricultural sector is examined given risk averse agents risky returns and asset price risk the model is extended to account for disparities in bargaining power among landlords and farmers in the absence of disparities the competitive equilibrium allocation satisfies the general conditions for optimal risk sharing with an adjustment factor similar to the optimal hedge ratio differences in bargaining power result in deviations from the optimal risk sharing conditions numerical simulations of tenancy structure are conducted for a developed agricultural economy exposed to various forms of risk estimates of parameter values representing the riskiness of returns and asset prices in this study are based on vector auto regressive techniques the simulations show that a substantial reduction of the rental ratio is obtained in a situation where farmers are equally or more risk averse than landlords consequently the results indicate that the importance of the tenancy institution as a risk sharing mechanism is severely mitigated in the presence of asset price risk risky returns relatively risk averse farmers and disparities in bargaining power

interactions between investment timing and management effort under asymmetric information costs and benefits of privatized firms abstract in this paper we examine the interactions between investment timing and management effort in the presence of asymmetric information between the owner and the manager where the manager has an informational advantage we find that investment timing is later under asymmetric information than under full information implying a decrease in the value of equity option however in order to minimize any distortion under underinvestment management effort is greater under asymmetric information than under full information we show that there are trade offs in the efficiencies of investment timing and management effort under asymmetric information these results fit well with the findings of past empirical studies concerning the costs and benefits of privatized firms

farm productivity and efficiency in rural bangladesh the role of education revisited this article reassesses the debate over the role of education in farm production in bangladesh using a large dataset on rice producing households from 141 villages average and stochastic production frontier functions are estimated to ascertain the effect of education on productivity and efficiency a full set of proxies for farm education stock variables are incorporated to investigate the internal as well as external returns to education the external effect is investigated in the context of rural neighbourhoods our analysis reveals that in addition to raising rice productivity and boosting potential output household education significantly reduces production inefficiencies however we are unable to find any evidence of the externality benefit of schooling neighbour s education does not matter in farm production we discuss the implication of these findings for rural education programmes in bangladesh

the british electricity experiment the privatization of the electricity supply industry esi in britain which began 1990 is in itself an unremarkable event much of the esi is privately owned in several european countries and in the united states and the u k privatization program has embraced utilities since 1984 when british telecom was privatized the thing that is remarkable about recent policy toward the industry is the radical nature of the regulatory reform accompanying privatization a vertically integrated administered generation and transmission structure was replaced overnight on march 31 1990 by one that is deintegrated and market based generation and transmission have been separated and there has been an attempt to establish competition in generation a number of countries have been moving gradually in the direction of encouraging competition but nowhere else have such dramatic changes been implemented so quickly

agricultural trade and investment opportunities in eastern europe and the former soviet union discussion agricultural economists are frequently involved in advising decision makers directly or indirectly on how the market system might disentangle the interrelatedness of havel s set of problems as empiricists we view natural experiments as observations upon which we test theoretically generated hypotheses the penn gady peyton and ohannesian pgpo papers can be viewed as observations of how their or

government s credit rating concerns and the evaluation of public projects we study how considerations regarding the credit rating of the government s debt affect privatization policy credit market discipline presses the government to put more weight on the monetary aspect of public projects relative to their social benefits as the anticipated income increases its creditors confidence in its ability to repay debt yet several informational problems undermine this discipline leading to a costly downgrading of the credit rating dynamic inconsistency occurs when the monetary to social benefi tt radeoff is made only after the credit market has priced government s debt such as in the decision of the toll on a road projects are operated with an excessive emphasis on social benefits adverse selection occurs when the government has private information regarding a prospective project s characteristics such as anticipated traffic project selection is tilted towards those with high social benefits and low monetary benefi ts we study the possible roles for privatization to alleviate these informational problems and evaluate the regimes with and without the option for privatization

endogenous asset ownership structures in deregulated markets abstract this paper determines the equilibrium ownership structure in an emerging market deregulated by a joint privatization and investment liberalization it is shown that bidding competition in the privatization stage is not sufficient for reaching an efficient equilibrium market structure competition in the ensuing entry stage is also required otherwise one firm can induce another to take the role of the weak firm in the subsequent product market competition by making concessions in the bidding in the privatization auction it is also shown that employment guarantees may help the buyer of the privatized firm abstain from investing and thus create a less competitive market structure

public private mixed delivery and information effects this paper analyses public private mixed delivery of essential public services under price regulation a private firm may have lower production costs and can potentially provide a performance benchmark for a public firm a public firm may offer higher quality service and can reveal the production cost of the private firm to the regulator however this paper shows that public private mixed delivery does not always dominate public delivery or private delivery mixed delivery is optimal only when i the cost uncertainty of the private firm is large ii the managerial incentive problem of the public firm is large and iii the performances of the public and private firms are highly correlated

state owned and privately owned firms an empirical analysis of profitability leverage and labor intensity for some it is an article of faith that governmentowned firms must be less efficient or at least less profitable than privately owned firms maxim boycko et al 1996 argue that politicians cause government owned firms to employ excess labor inputs anne o krueger 1990 suggests that such firms may be pressured to hire politically connected people rather than those best qualified to perform desired tasks more generally government owned firms are thought to forgo maximum profit in the pursuit of social and political objectives such as wealth redistribution in addition the residual cash flow claims of these firms are not readily transferable like the shares of a private corporation this impairs residual claimant incentives to monitor managers and ultimately degrades firm performance as a consequence one expects government owned firms to be technically less efficient and therefore less profitable than private firms the implication is that in competitive markets without significant externalities private ownership is the superior organizational form the view that government firms are inherently less efficient than private ones however remains controversial among economists john vickers and george yarrow 1991 among others point out that agency problems arise in private firms as well as public ones in most large private corporations managers own little of the stock because monitoring managers is costly a divergence arises between their objectives and those of private shareholders private shareholders typically hold a small stake in any one firm and it may not pay any shareholder to bear the cost of monitoring management it follows from this discussion that whether government firms are more or less efficient than private firms is primarily an empirical issue to date the body of empirical evidence is mixed in this paper we report further empirical evidence on the relative efficiency of public and private enterprises we build on previous work by studying larger samples over longer time periods and by allowing for additional factors that influence firm performance in particular our analysis controls for time series variation in the general level of economic activity that may otherwise confound performance comparisons between government and private firms 2 we approach the issue in two different ways first using accounting numbers we conduct a large sample cross sectional comparison of government owned and privately owned corporations this comparison is similar in design to that of boardman and vining 1989 but our sample is three times the size of theirs and includes three

employment and wage effects of privatisation evidence from hungary romania russia and ukraine we use longitudinal methods and universal panel data on 30 000 initially state owned manufacturing firms in four transition economies to estimate the impacts of privatization on employment and wages the results in all four countries consistently reject job losses and they never imply large wage cuts from privatization to either foreign or domestic owners the domestic privatization estimates are close to zero for employment while for wages they are negative but small in magnitude estimated foreign privatization effects are nearly always positive and sometimes large for both outcome variables we find that the negligible consequences of domestic privatization result from effects on scale productivity and costs that are large but offsetting in hungary and romania and from small effects of all types in russia and ukraine the positive employment outcome of foreign ownership results from a substantial scaleexpansion effect that dominates the productivity improvement effect and the positive wage outcome from productivity improvement dominating the cost reduction effect

using stated preferences and beliefs to identify the impact of risk on poor households abstract whilst the importance of uncertainty in shaping economic behaviour of poor households is widely acknowledged empirically identifying the impact of risk is difficult by using data on risk preferences and perceptions of risk collected through hypothetical questions in combination with more traditional measures of a household s ability to deal with risk this article identifies the impact of risk on production decisions it shows both that data on stated preferences and beliefs can be usefully utilised to explain household behaviour and that risk has a significant impact on the production decisions of poor households

econometric estimation of producers risk attitudes general methods are proposed for the identification and econometric estimation of the parameters of the distribution of risk attitudes in a producer population the proposed methods also provide the basis for the development of statistical tests of model specification and of behavioral hypotheses econometric risk attitude estimation is shown to be possible under less restrictive conditions than previously believed a moment based version of the general model is applied to indian data and the econometrically estimated risk attitudes are presented and compared to experimental results for a similar group of producers

behavior of the firm under regulatory constraint a recent article by akira takayama discusses an earlier paper by harvey averch and leland l johnson on fair rate of return regulation of public utilities although takayama p 255 agrees with averch and johnson s general conclusions that a firm will tend to increase its investment with the introduction of an active constraint on its rate of return he criticizes the a j argument as being confusing ambiguous and in error takayama then attempts a clarification and presents a new formulation which leads to the a j result quoted above this comment will discuss several of takayama s criticisms in addition to showing that the so called a j effect cannot be derived from the basic assumptions made by both averch and johnson and takayama 1 we will show that the very assumptions used to prove the a j effect by defining the region of x require an assumption that the a j effect exists in the first place

ownership and firm innovation in a transition economy evidence from china we examine innovation performance of firms in a transition economy from an ownership perspective we focus specifically on the relationship between ownership structures and firm innovation performance drawing on data from 548 chinese firms we find volume of patent registration to be most strongly influenced by foreign ownership in the firm along with firm affiliation within a business group the influence of state and institutional ownership on innovation performance is positive but lagged contrary to expectations insider ownership leads to lower innovation performance and concentrated ownership has no significant impact our study has two principal contributions firstly we utilize a comprehensive treatment of ownership characteristics overcoming weakness in previous studies that have used a more narrow focus on ownership type secondly we contribute to understanding of how firms in transition economies build indigenous capabilities for innovation by drawing attention to the interplay of foreign and domestic control of agents innovation

reform in eastern europe how can the new governments of eastern europe succeed in moving from centrally planned to freemarket economies this incisive report identifies and describes the major policy choices to be made and discusses what will work and what will not reform in eastern europe provides a comprehensive easily read statement of reform policy that stands in the mainstream of modern western economics based on their experience with stabilization policies in other countries the authors show how eastern europe can reduce unemployment during the painful adjustment process create effective and socially acceptable mechanisms to subject enterprises to market discipline and replace barter trade under cmea with market based international trade

productivity growth in pre 1990 mongolian agriculture spiralling disaster or emerging success the reasons for the spectacular collapse of so many centrally planned economies are a source of ongoing debate in this paper we use detailed farm level data to measure total factor productivity tfp changes in mongolian grain and potato farming during the 14 year period immediately preceding the 1990 economic reforms we measure tfp growth using stochastic frontier analysis sfa and data envelopment analysis dea methods our results indicate quite poor overall performance with an average annual tfp change of 1 7 in grain and 0 8 in potatoes over the 14 year period however the pattern of tfp growth changed substantially during this period with tfp growth exceeding 7 per year in the latter half of this period this suggests that the new policies of improved education greater management autonomy and improved incentives which were introduced in final two planning periods in the 1980s were beginning to have a significant influence upon the performance of mongolian crop farming crown copyright c 2002 published by elsevier science b v all rights reserved

the pitfalls of water privatization failure and reform in malaysia summary this paper examines why private participation in infrastructure ppi in water continues to be promoted despite poor results in developing countries it argues that the main characteristics of infrastructure discourage private investment and necessitate state subsidies which dilute private risks and incentives and facilitate rent seeking as a result ppi is characterized by public financing selective private investments and inconclusive efficiency gains this is reflected globally and in malaysia where ppi continues to be promoted because it provides captive rents the political factors that drive ppi invariably compromise institutional solutions as malaysia s water sector reforms illustrate

privatization and efficiency in a differentiated industry we consider a market in which a public firm competes against private ones and ask what happens when the public firm is privatized in the short run privatization is harmful because prices rise the disciplinary role of the public firm is lost in the long run privatization leads to further entry the net effect is beneficial if consumer preference for variety is not too weak a sufficient statistic for the social surplus to be higher in the long run is that the public firm makes a loss this suggests that profitable firms should not necessarily be privatized

monetary policy analysis with potentially misspecified models abstract the paper proposes a novel method for conducting policy analysis with potentially misspecified dynamic stochastic general equilibrium dsge models and applies it to a new keynesian dsge model along the lines of christiano eichenbaum and evans jpe 2005 and smets and wouters jeea 2003 we first quantify the degree of model misspecification and then illustrate its implications for the performance of different interest rate feedback rules we find that many of the prescriptions derived from the dsge model are robust to model misspecification jel classification c32 key words bayesian analysis dsge models model misspecification 1 introduction the quantitative evaluation of monetary policy rules plays an important role in the design of stabilization policies much of the recent debate about optimal monetary policy rules has been carried out with new keynesian dynamic stochastic general equilibrium dsge models see woodford 2003 dsge models have the advantage that one can explicitly assess the effect of policy regime changes on expectation formation and decision rules of private agents yet until recently these models were scarcely used by central banks because they were perceived as being inferior to less structural model in terms of fit recent work by christiano eichenbaum and evans 2005 and smets and wouters 2003 has changed this perception these papers show that the fit of large scale new keynesian dsge models is comparable to that of more heavily parameterized models as a consequence a number of central banks have begun to show interest in these models as tools for quantitative policy analysis despite the success in improving the empirical performance of dsge models misspecification remains a concern as shown in del negro schorfheide smets and wouters 2004 accounting for misspecification and model uncertainty in general is an important aspect of the assessment of monetary policies after all it has long been recognized that model and parameter uncertainty affects optimal policies e g brainard 1967 chow 1975 and craine 1979 1 this paper proposes a new method for taking model misspecification into account when assessing the performance of alternative interest rate feedback rules we apply this approach to evaluate different policies in the context of a new keynesian dsge model including the estimated volcker greenspan rule a natural approach in the presence of model uncertainty is to evaluate policy rules within all the model specifications that are under consideration in choosing the best performing rule one can either follow a bayesian route assigning probabilities to models and minimizing the overall posterior expected loss alternatively one can follow a minimax strategy by adopting a policy that minimizes the worst case loss across models the literature contains numerous applications of these ideas e g mccallum 1988 levin wieland and williams 1999 2003 rudebusch 2001 2003 onatski and stock 2002 onatski and williams 2003 brock durlauf and west 2004 cogley and sargent 2005 and hansen and sargent 2005 all these papers differ with regard to the type of models included in the model set and the formulation of the decision problem that leads to the choice of a preferred policy our analysis differs from previous work with respect to the method that is used to construct a model set and assign probabilities to these models so that a bayesian calculation of posterior expected performance is possible we start from a dsge model in which monetary policy is modelled through an interest rate feedback rule the dsge model imposes cross coefficient restrictions on a vector autoregressive representation of the data while we are assuming that the data obey a vector autoregressive law of motion we allow for potential deviations from the cross coefficient restrictions at the same time we maintain the assumption that monetary policy follows the same interest rate rule as in the dsge model

locus of control and technology adoption in developing country agriculture evidence from ethiopia abstract we investigate the implication of farmers locus of control on their technology adoption decisions our empirical analysis is based on two longitudinal surveys and hypothetical choice exercises conducted on ethiopian farmers we find that locus of control significantly predicts farmers technology adoption decisions including use of chemical fertilizers improved seeds and irrigation we show that individuals with an internal locus of control have higher propensity of adopting agricultural technologies we observe these empirical regularities in both datasets and for both revealed measures of farmers technology adoption decisions as well as farmers hypothetical demand for agricultural technology the results hold even in a more conservative fixed effects estimation approach assuming locus of control as time variant and dynamic behavioral trait these findings provide behavioral and psychological explanations for the low rates of adoption of profitable agricultural technologies in sub saharan africa our results highlight that improving farmers non cognitive skills locus of control may facilitate technology adoption and agricultural transformation more generally the results suggest that anti poverty policies that only focus on relaxing short term external constraints including physical access to markets and technologies may not sufficiently alleviate agricultural underinvestment

investment shocks and business cycles abstract the origins of business cycles are still controversial among macroeconomists this paper contributes to this debate by studying the driving forces of fluctuations in an estimated new neoclassical synthesis model of the u s economy in this model most of the variability of output and hours at business cycle frequencies is due to shocks to the marginal efficiency of investment imperfect competition and to a lesser extent technological frictions are the key to their transmission although labor supply shocks explain a large fraction of the fluctuations in hours at very low frequencies they are irrelevant over the business cycle this finding is important because the microfoundations of these disturbances are widely regarded as unappealing

financing infrastructure in developing countries this article develops a theoretical framework to analyse options for financing infrastructure in developing countries we build a basic model that gives motivations for using a combination of public finance private debt and private equity the model is then extended in a number of ways to examine factors that are important for developing countries we focus in particular on key institutional weaknesses that are often important for infrastructure investment overall we show that such weaknesses can be key in determining financing choices but that they do not all push in the same direction financing schemes must therefore be adapted to consider the institutional limitations that are most pertinent in any given context

wealth risk and activity choice cattle in western tanzania abstract imperfect credit markets force households to use their savings for investment profitable activities often require lumpy investments limiting entry by poorer households resulting in increasing welfare differences in tanzania cattle are a profitable but lumpy investment and a liquid asset for consumption smoothing richer households own substantial cattle herds while poorer households specialize in low return low risk activities a dynamic programming model and simulations are presented to analyze entry into asset accumulation under income risk the evidence suggests that households with lower endowments are less likely to own cattle and returns to their endowments are lower

agricultural reform in developing countries reflections for eastern europe the reform of formerly centrally planned economies involves freeing the price system developing a competitive environment and privatizing many of the state owned or controlled assets and services while simultaneously generating the social economic and legal infrastructure that undergrids a market economy this paper takes an important look at what the reforming countries of eastern europe can and cannot learn from the developing countries including discussions on a reforming prices b credit financial institutions and marketing boards c property rights land tenure and privatization d research extension and technology and e efforts to remediate environmental degradation a central dilemma in the reform of the eastern european economies is the tension between commitment and flexibility western technical assistance and international financial help can be effective only if professionals of the east and west work together as this is a process of joint learning not a pure transfer of knowledge

the first privatisation selling soes and privatising public monopolies in fascist italy 1922 1925 italy s first fascist government applied a large scale privatisation policy between 1922 and 1925 the government privatised the state monopoly of match sale eliminated the state monopoly on life insurances sold most of the state owned telephone networks and services to private firms reprivatised the largest metal machinery producer and awarded concessions to private firms to build and operate motorways these interventions represent one of the earliest and most decisive privatisation episodes in the western world while ideological considerations may have had a certain influence privatisation was used mainly as a political tool to build confidence among industrialists and to increase support for the government and the partito nazionale fascista privatisation also contributed to balancing the budget which was the core objective of fascist economic policy in its first phase

economic perspectives on privatization despite being one of the most fundamental issues in political economy the question of the appropriate boundary between public and private enterprise received relatively little attention in mainstream economic analysis until quite recently in the 1980s however programs of ownership reform were started in many developed and developing countries dramatic though some of these policies have been they are likely to be overshadowed in the 1990s by even greater privatization in the reforming socialist economies the opening sections of this paper are organized around three broad and interrelated questions how does ownership matter for the efficiency of enterprise performance what is the role for privatization in financing public debts and deficits what are the distributional and political implications of privatization finally we examine privatization in practice in three countries britain chile and poland

risk attitudes and economic well being in latin america abstract a common conjecture in both the theoretical and policy literatures on development is that people remain poor because they are too impatient and risk averse to accumulate the resources needed to improve their well being the empirical literature however suggests that this conjecture is far from proven we sample more than 3000 participants drawn representatively from six latin american cities and find little correlation between baseline risk aversion and well being measured as an index of eight outcomes we do however find that measures of ambiguity aversion loss aversion and the willingness to take advantage of a risk pooling scheme all correlate with well being participants who are ambiguity averse loss averse and who react conservatively in the risk pooling condition all have significantly lower scores on our well being index these results are robust to the inclusion of a variety of important controls like human capital accumulation and access to credit

the financial and operating performance of privatized firms during the 1990s this study compares the pre and postprivatization financial and operating performance of 85 companies from 28 industrialized countries that were privatized through public share offerings for the period from 1990 through 1996 we document significant increases in profitability output operating efficiency and dividend payments and significant decreases in leverage ratios for our full sample of firms after privatization and for most subsamples examined capital expenditures increase significantly in absolute terms but not relative to sales employment declines but insignificantly combined with results from two previous directly comparable studies these findings strongly suggest that privatization yields significant performance improvements during the past two decades the privatization of state owned enterprises has moved from being a radical almost desperate policy initiative of the thatcher government in britain to being an accepted economic policy for governments of all ideological stripes according to gibbon 1998 860 billion has been raised by governments worldwide through privatizations with the bulk of this total coming since 1987 and at least one commentator roche 1996 predicts that no less than 6 trillion will be raised through privatizations over the next two decades in 1997 alone sales of public enterprises totaled a record 161 billion worldwide with more than 110 billion of the total coming during the second half of the year and 1998 s total of almost 140 billion indicates that the pace shows no sign of slackening as we approach a new millennium

full privatization through controlling rights transfer in china the extent of its success this article investigates the effect of the second step of privatization in china which is full privatization through controlling rights transfer after share issue partial privatization it finds that fully privatized firms perform worse than state controlled enterprises expropriation by private block shareholders is greater than that by state block shareholders furthermore increase in expropriation is negatively related to performance change the results suggest that full privatization may not yield the expected efficiency gains in transition economies with weak legal system they also emphasize the importance of preventing private block shareholders from exploiting minority shareholders in the process of full privatization

a dynamic model of privatization with endogenous post privatization performance this paper presents a dynamic model of privatization driven by improved institutional protection of private property rights and constrained by the buyer s financial constraints government ownership is more efficient than private ownership when private property rights are insecure improved institutional protection of property rights over time creates the need to privatize the buyer s financial constraints affect the timing of privatization causing the firm s post privatization performance either to improve or to deteriorate in the short run financial constraints also have the possibility of inducing an underpricing phenomenon during privatization where the firm is priced below both what the buyer is willing to pay and the buyer s ability to pay faster institutional development calls for earlier privatization but it also has the potential to either create or exacerbate deadweight losses associated with inefficient privatization a host of empirically testable implications are derived copyright wiley blackwell

selecting structural innovations in dsge models dynamic stochastic general equilibrium dsge models are typically estimated assuming the existence of certain structural shocks that drive macroeconomic fluctuations we analyze the consequences of estimating shocks that are nonexistent and propose a method to select the economic shocks driving macroeconomic uncertainty forcing these nonexisting shocks in estimation produces a downward bias in the estimated internal persistence of the model we show how these distortions can be reduced by using priors for standard deviations whose support includes zero the method allows us to accurately select shocks and estimate model parameters with high precision we revisit the empirical evidence on an industry standard medium scale dsge model and find that government and price markup shocks are innovations that do not generate statistically significant dynamics

motivating wealth constrained actors we examine how owners of productive resources e g public enterprises or financial capital optimally allocate their resources among wealth constrained operators of unknown ability optimal allocations exhibit 1 shared enterprise profit the resource owner always shares the operator s profit 2 dispersed enterprise ownership resources are widely distributed among operators of varying ability 3 limited benefits of competition the owner may not benefit from increased competition for the resource and sometimes 4 diluted incentives for the most capable more capable operators receive smaller shares of the returns they generate implications for privatizations and venture capital arrangements are explored

from global savings glut to financing infrastructure summary samama and joseph stiglitz this paper proposes an institutional solution that can help unlock the flow of low yielding long term savings towards high return infrastructure investments the solution is to transform public private partnerships ppps in infrastructure as well as the classic model of multilateral development banks instead of thinking of ppps as bilateral contracts between a private concession operator and a government agency we argue that they should be conceived as partnerships that also involve a development bank and long term institutional investors as partners we propose a new model for development banks which is to transform them into originate and distribute banks for ppp infrastructure projects the new model allows them to conserve their valuable capital and leverage their expertise and capabilities by making them available to long term institutional investors

estimation of dsge models when the data are persistent dynamic stochastic general equilibrium dsge models are often solved and estimated under specific assumptions as to whether the exogenous variables are difference or trend stationary however even mild departures of the data generating process from these assumptions can severely bias the estimates of the model parameters this paper proposes new estimators that do not require researchers to take a stand on whether shocks have permanent or transitory effects these procedures have two key features first the same filter is applied to both the data and the model variables second the filtered variables are stationary when evaluated at the true parameter vector the estimators are approximately normally distributed not only when the shocks are mildly persistent but also when they have near or exact unit roots simulations show that these robust estimators perform well especially when the shocks are highly persistent yet stationary in such cases linear detrending and first differencing are shown to yield biased or imprecise estimates

success and failure of reform insights from the transition of agriculture this paper analyzes the linkages between the reform strategies in transition countries and economic performance the authors focus on agriculture because of the sharpness of the policy changes fundamental differences among countries and relative simplicity of agricultural relationships the authors document post reform performance in the transition countries of asia and europe the authors show how a pricing reform and subsidy reductions b land rights reform and policies that affect farm restructuring and c the presence institutions that facilitate exchange either markets or market substitutes affect output and productivity the paper ends with general lessons on reforms and transition

time to change what to sow risk preferences and technology adoption decisions of cotton farmers in china this paper examines the role of individual risk attitudes in the decision to adopt a new form of agricultural biotechnology in china i conducted a survey and a field experiment to elicit the risk preferences of chinese farmers who faced the decision of whether to adopt genetically modified bt cotton a decade ago in my analysis i expand the measurement of risk preferences beyond expected utility theory to incorporate prospect theory i find that farmers who are more risk averse or more loss averse adopt bt cotton later farmers who overweight small probabilities adopt bt cotton earlier

the role of education in facilitating risk taking and innovation in agriculture the impact of education on farmers attitudes toward endogenous risk measured using an attitude survey instrument is estimated with household data from rural ethiopia education of the household head is found to decrease risk aversion next the effects of education and risk attitudes on technology adoption are estimated schooling encourages farmers to adopt innovations whereas risk aversion reduces the probability of adoption thus we find that schooling encourages innovation a potentially risky undertaking not only directly but also indirectly through its effect upon attitudes toward risk to the extent that educated farmers are early innovators and are copied by those with less schooling as other research on the same data has shown the reduction of riskaversion not only has private benefits for those with education but also may have externality benefits

nonstructural risk attitude estimation this paper presents an econometric approach to risk attitude estimation that does not require joint estimation of the structure of the firm s technology and input decision rules the nonstructural approach replaces optimal input choice with the assumption that farmers optimally manage their portfolios of productive activities by thus shifting the focus from the detailed production decisions of the farm manager to the net returns of the whole farm operation the modeling problem is simplified the nonstructural approach is used to estimate risk attitudes in three indian villages the results are compared to previous experimental and econometric estimates from the same villages

state market civil institutions the case of eastern europe and the soviet republics abstract the transition tasks facing the countries of central and eastern europe are monumental the public sector will play a dominant role during the transition process available evidence suggests that orthodox prescriptions for public sector reform cannot be effectively implemented without an underlying constitution and a legal and regulatory infrastructure lri a well designed constitution and lri instill confidence and policy credibility with perfectly rational expectations and confidence in the constitution and lri the sequence of reforms matters little future reforms are perfectly anticipated today and agents act as though the reforms will occur with certainty short of such confidence reforms need to be simultaneously pursued on many fronts the most important activity is to redefine the role of the state setting a constitution that clearly defines and secures basic political civil and economic freedoms and designing an lri that creates a fertile environment for a vibrant market economy

privatization strategic foreign direct investment and host country welfare recent evidence shows that developing countries and transition economies are increasingly privatizing their public firms and at the same time experiencing rapid growth of inward foreign direct investment fdi we show that there is a two way causality between privatization and greenfield fdi privatization increases the incentive for fdi which in turn increases the incentive for privatization compared to the situation of no fdi the optimal degree of privatization depends on the cost difference of the firms and on the foreign firm s mode of entry

implications of alternative options for future levels of support for agriculture in central and eastern europe in the process of political economic and social transformation since 1989 agriculture in the central and eastern european countries the ceecs is undergoing dramatic changes privatization and decollectivization of farms not yet completed in all ceecs are creating a completely new structure of the farming industry buckwell replacement of central planning by market forces has uprooted commercial relationships between farms and upstream and downstream industries and has caused problems in input supplies to and marketing opportunities for agriculture brooks et al the persistence of monopoly structures in the food chain has resulted in high marketing margins depriving farms of some of the revenues they could earn in a more competitive economy ivanova et al oecd 1995a a significant decline in domestic food demand and even more pronounced shrinking export demand from other countries in the former council of mutual economic assistance above all the former soviet union have grossly reduced the size of the market to which ceec agriculture can sell jackson and swinnen karp and stefanou in addition to these and other fundamental changes in the economic environment of agriculture in the ceecs agricultural support as provided by domestic and trade policies has kept changing during the transformation process swinnen in the prereform period agriculture was heavily subsidized in most ceecs when the reforms began most ceecs rapidly began to open up their markets liberalize prices and eliminate subsidies as a result support to agriculture declined drastically real producer prices for farm products dwindled and farm incomes decreased at the same time and as a consequence of these changes in the economic environment agricultural output in the ceecs dropped in the process farmers began to lobby for more support and governments in most ceecs responded positively to these political demands they introduced policies such as intervention purchases guaranteed minimum prices higher tariffs variable levies export subsidies and input and credit subsidies as a result agricultural support which had declined sharply during the early stages of the transition process is on the rise again in many ceecs for example the net producer subsidy equivalent pse in poland s agriculture fell from 36 in 1986 to minus 18 in 1990 and rose again to positive 16 in 1993 oecd 1995b when ceec governments began to intervene again in agricultural markets to provide more support to their farmers one of the explanations they gave for this change in policy direction was that they had to prepare for joining ultimately the european union eu and hence that they needed to harmonize their policies with the common agricultural policy cap of the eu swinnen indeed some of the agricultural policy measures introduced in recent years in the ceecs resemble though often only vaguely the policies that have been employed by the cap for a long time no timetable has so far been set for eastern enlargement of the eu nor is it clear in which sequence the individual

market socialism a case for rejuvenation in this paper we will outline a feasible economic mechanism of competitive socialism our claim is that competitive markets are necessary to achieve an efficient and vigorous economy but that full scale private ownership is not necessary for the successful operation of competition and markets contrary to popular impression this claim has not yet been disproved by either history or economic theory it is the failure of both the political right and the left to disentangle the concepts of private ownership and the competitive market that has led to the premature obituaries for socialism in the second section we look at the question of the soft budget constraint as an agency problem under market socialism we then propose two variants of a bank centric system of insider monitoring as a viable solution to the agency problem the next section discusses the essential problem of political accountability and the difficulty of credible pre commitment in avoiding the soft budget constraint problem and suggests ways of minimizing this problem in our proposed system we then conclude by addressing some of the other standard objections to a proposal for market socialism

privatization and efficiency differentiating ownership effects from political organizational and dynamic effects this paper argues that the private public ownership factor should be differentiated from other factors that also influence the effect of privatization on efficiency this is empirically confirmed in a longitudinal study of 24 spanish firms for which several political and organizational factors are found to influence the estimated effects of privatization on efficiency the analysis of the timing of the effects reveals a strong significance for post privatization years 5 6 negative and 7 8 positive this suggests that the negative effect of these factors is transitional being eventually offset by the positive effects of the change to private ownership 2000 elsevier science b v all rights reserved jel classification l33

factors influencing the privatisation of urban solid waste collection in spain this paper analyses some of the organisational aspects of urban solid waste collection it starts by discussing some of the theoretical issues of contracting out then an explanatory model is spec

varieties of capitalism and the internationalization of state owned enterprises this article sheds light on how the internationalization of state owned enterprises is influenced by the state involvement in ownership and by the home country s institutional settings integrating international business literature with the debate on the varieties of capitalism we contend that state dominated enterprises internationalize more less than privately owned enterprises in coordinated liberal market economies whereas they exhibit an inconstant behavior in state influenced market economies our analysis on a sample of enterprises pertaining to 20 oecd countries supports our hypotheses this article adds to studies on the influence of institutions on firms internationalization and has implications for both managers and policymakers

privatization and economic growth an empirical investigation from a sample of developing market economies this paper explores the economic determinants of privatization programmes and the macroeconomic impact of this institutional reform on the growth rate of the gdp a sample of thirty five developing market economies is considered over the 1988 92 period probit and tobit models are used to identify the determinants of successful privatization programmes then regressions are run where probabilities probit and expected values tobit are successively included as additional regressors beside the potential influence of other economic policy variables a significant positive effect is highlighted giving evidence of the importance of divestiture the economic effect is found to be stronger when this institutional reform took place in industry or infrastructure

privatization financial development property rights and growth abstract this study analyzes how prevailing institutional arrangements i e property rights contracting rights political institutions and corporate governance practices affect privatized firms performance capital markets development and economic growth most of the studies surveyed show that privatization enhances privatized firms performance efficiency and profitability which percolates to economic growth privatized firms performed better in countries with better regulatory and legal frameworks partial privatization may be beneficial in countries with weak institutions namely the french civil law countries the stronger the economic and the governing institutions the easier it is for privatized firms to thrive and contribute to economic growth overall privatization allows firms to achieve improved efficiency while driving the development of the financial sector

privatization and foreign competition abstract this paper determines the equilibrium market structure in an international oligopoly where a state enterprise is sold at an auction the paper suggests that high greenfield costs and high trade costs do not necessarily induce foreign acquisitions in privatizations despite the fact that foreign firms would gain considerably from acquiring in such situations the reason is that domestic firms can then prevent foreign firms from becoming strong local competitors and thus their willingness to pay for the state assets is high

lab and life does risky choice behaviour observed in experiments reflect that in the real world risk preferences play a crucial role in a great variety of economic decisions measuring risk preferences reliably is therefore an important challenge in this paper we ask the question whether risk preferences observed in economic experiments reflect real life risky choice behaviour we investigate in a sample representative for a rural region of eastern uganda whether pursuing farming strategies with both a higher expected profit and greater variance of profits is associated with willingness to take risks in an experiment controlling for other determinants of risk taking in agriculture we find that risky choice behaviour in the experiment is correlated with risky choice behaviour in real life in one domain i e the purchase of fertiliser but not in other domains i e the growing of cash crops and market orientation more broadly our findings suggest that economic experiments may be good at capturing real world risky choice behaviour that is narrowly bracketed

an exogeneity test for a simultaneous equation tobit model with an application to labor supply a test of weak exogeneity in the simultaneous equation tobit model is proposed and illustrated using a female labour supply model estimated using cross section data the test statistic can be simply output from any standard tobit maximum likelihood package and is asymptotically efficient the procedure provides consistent estimators for the simultaneous tobit model whose asymptotic covariance matrix is a simple extension of the usual tobit formula we also provide the lagrange multiplier test of weak exogeneity this abstract was borrowed from another version of this item