competing models of international lending activity abstract four competing models of the world bank s lending to developing countries are constructed and econometrically estimated by pooled time series and cross section data the analysis suggests that a model combining economic and political determinants performs best besides per capita income inflation balance of payment and budget deficit external debt and past growth political determinants such as the capitalist climate or political instability are also important as well as a recipient country s former status as a colony or dominion this politico economic model is successfully used to forecast the distribution of ibrd loans and ida credits among the developing countries

black hole tariffs and endogenous policy theory political economy in general equilibrium preface acknowledgments list of results 1 a preview of the results 2 endogenous policy theory a diagrammatic approach part i endogenous policy theory with specific factors the theory of industry tariffs in partial equilibrium 3 the probabilistic voting model of political efficiency and powerless politicians 4 endogenous lobbying theory and the contribution specialization theorem 5 endogenous tariff theory 6 the power function model of endogenous industry lobbying 7 three simple tests of the stolper samuelson theorem 8 the invisible foot and the waste of nations lawyers as negative externalities part ii endogenous policy theory in general equilibrium a long run theory of national tariff levels 9 the 2 x 2 x 2 x 2 model of endogenous redistribution theory 10 a prisoner s dilemma theory of endogenous protection the leontief model 11 the compensation effect and the multiple equilibrium trap 12 increasing returns to politics and factor endowments economic development and brazilian vitality versus the indian disease 13 endogenous protection in the united states 1900 88 14 a cobb douglas model 15 black hole tariffs 16 the endowment effect cross national evidence on endogenous tariffs part ii postscript 17 the senile industry argument for protection 18 optimal obfuscation and the theory of the second worst the politically efficient policy mathematical appendices references author index subject index

governing adaptation super 1 to remain competitive an organization must both respond to information about its environment and coordinate its activities we analyse how the allocation of decision rights within an organizational hierarchy influences the organization s ability to solve such problems of coordinated adaptation when information is both soft and distributed inside the organization and the organizational participants behave strategically the results show that contrary to the common intuition the performance differential between centralized and decentralized decision making is non monotone in the importance of coordination further both these common structures are dominated by asymmetric structures in sufficiently asymmetric environments such as a small division developing a new product in the presence of a large division with an established product finally if the incentive conflicts between the participants can be made sufficiently small centralized decision making is always dominated by decentralized decision making copyright 2008 wiley blackwell

government introduced price distortions and growth evidence from twenty nine developing countries from the time adam smith s wealth of nations was published in 1776 until today the role of the state in the economic affairs of nations has been probably one of the most debated subject matters not only among economists but also among other social scientists a free competitive market and pricing system has since been recognized as a crucial factor in the allocation of resources indeed in the economic development of nations at the national as well as international levels there is a growing interest in the role of governmental policies in particular those policies that directly or indirectly influence the working of the market mechanism and the incentive system in the context of nations economic growth an example of the growing interest is the rather unequivocal focus placed in recent years by the world bank and the international monetary fund imf on the need for liberal competitive and outward looking policies in promoting economic growth in developing countries an area of particular concern has been that of the government introduced price distortions in several developing nations historically speaking such policies have grown over time as a part of the so called grand socialistic and planned economic policies and programs undertaken by several developing nations since they attained political independence these nations embarked upon such policies in pursuance of the promises that were made by their political leaders during their freedom movements against the colonial powers the imposition of controls by governments over domestic prices interest rates wages foreign trade and exchange rates for example has caused severe distortions in the economies of these nations and such distortions are not without bearing on economic growth according to the world bank 1983 2 coun

network externalities and universal service obligation in the internet abstract this article examines the shape of network externalities for the broadcasting services that can be offered by the internet it argues that because of these network externalities the marginal value of an added participant to the network could be quite high as the percentage of the population that is connected approaches 100 lessons are drawn for the desirability of a universal service obligation for the internet and it is shown that it is preferable to subsidize the senders of broadcasting messages rather than the receivers

the law of the few the law of the few refers to the following empirical phenomenon in social groups a very small subset of individuals invests in collecting information while the rest of the group invests in forming connections with this select few in many instances there are no observable dierences in characteristics between those who invest in information and those who invest in forming connections this paper shows that the law of few naturally emerges in environments with identical rational agents we develop a strategic game in which players have the opportunity to invest in collecting information as well as in investing in bilateral connections with others we find that every strict equilibrium of this game exhibits the law of the few we also show that this pattern of social dierentiations is ecient in some cases

an information good market with symmetrical externalities in 3 the author investigated how an information good is supplied from its owner to users through trades in a case where all the traders are located at geographically separated points and thus a transmission of the good implies certain costs and moreover its external effects are negligibly small in general however information goods possess negative external effects as seen from the following suppose a firm possessing a new technology gains a profit by monopolistically utilizing it once this technology is known to and used by other firms the firm can no longer enjoy its monopolistic position and might incur a significant loss of profit the aim of this paper is to analyze how a concealable information good with external effects is diffused from its monopolistic owner to demanders through trades generally information goods have their own peculiar properties among them we suppose in this paper the following typical ones the first one is a possibility of free replication namely each trader can replicate the good as many times as he wants without any cost immediately after he obtains it each replica is supposed to be exactly the same as the original good the second one is an indivisibility which implies that each trader gains a benefit just from one unit of the good the third one is an irreversibility in trading the good in the case of trading ordinary goods it would be possible for a buyer to return the good to a seller by cancelling the trade for information goods however this would not be possible since a buyer may replicate it immediately after he purchases because of free replication namely a seller must refuse a buyer s proposal to return it since a buyer might already have its replica the fourth one is a negative external effect mentioned above namely a benefit brought by the good is affected by how the good is possessed among other traders and if some trader newly gets it then the benefit for each possessor is decreased throughout this paper we further assume that costs for transmitting the good are negligibly small a new process for producing chemical products a new computer program and so on are information goods which we have in mind for further description of information goods refer to 1 2 and 5 here we remark that in the case of trading such an information good it might occur from free replication that once each demander owns the good he will

communication networks externalities and the price of information information goods or information for short play an essential role in modern economies we consider a trading framework where information has some idiosyncratic value for each consumer exerts externalities and can be freely replicated and transmitted through links in a communication network prices paid for information are determined via the asymmetric nash bargaining solution with endogenous disagreement points this decentralized approach leads to unique prices and payoffs in any exogenous network we use these payoffs to find connection structures that emerge under different externality regimes in pre trade network formation stage an application to citation graphs results in eigenvector like measures of intellectual influence

migration and the evolution of conventions we study an evolutionary model where agents are locally matched to play a symmetric coordination game opportunities to adjust strategy and location arrive asynchronously and infrequently and cannot be coordinated our results on the short run co existence of different conventions and long run efficiency depend upon a condition on off equilibrium payoffs introduced by aumann in a pure coordination game efficient and inefficient conventions may co exist at different locations in the short run and inefficient conventions are stochastically stable in a stag hunt game there is neither short run coexistence nor long run inefficiency

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

cheap talk with two audiences these problems have in common a simple structure an informed sender says something to two interested but uninformed receivers who then take actions based on their beliefs these actions affect the sender as well as the receivers in this paper we study how costless nonverifiable claims cheap talk can affect these beliefs and hence the actions and how the incentives for truthful revelation to one receiver are affected by the presence of the other we then ask how welfare is affected by whether claims are made in public or in private as some of the above examples suggest public messages may be more credible than private messages addressed to either audience one possibility is that the presence of one audience can discipline the sender s relationship with the other we call this one sided

political regimes and economic growth arguments that relate regimes to growth focus on property rights pressures for immediate consumption and the autonomy of dictators while everyone seems to agree that secure property rights foster growth it is controversial whether democracies or dictatorships better secure these rights the main mechanism by which democracy is thought to hinder growth is pressure for immediate consumption which reduces investment only states that are institutionally insulated from such pressures can resist them and democratic states are not the main argument against dictatorships is that authoritarian rulers have no interest in maximizing total output these views are summarized in turn

strategic communication networks in this paper we consider situations in which individuals want to choose an action close to others actions as well as close to a payoff relevant state of nature with the ideal proximity to the common state varying across the agents before this coordination game with heterogeneous preferences is played a cheap talk communication stage is offered to players who decide to whom they reveal the private information they hold about the state the strategic information transmission taking place in the communication stage is characterized by a strategic communication network we provide a direct link between players preferences and the strategic communication network emerging at equilibrium depending on the strength of the coordination motive and the prior information structure equilibrium strategic communication networks are characterized in a very tractable way and compared in term of efficiency in general a maximal strategic communication network may not exist and communication networks cannot be ordered in the sense of pareto however expected social welfare always increases when the communication network expands strategic information transmission can be improved when group or public communication is allowed and or when information is certifiable

pricing network effects the increase in the information that firms can collect or purchase about network effects across consumers motivates two important questions how does a firm s pricing strategy react to detailed information on network effects are the availability and use of such information beneficial or detrimental to consumer surplus we develop a model in which a monopoly sells a network good and price discriminates based on information about consumers influence and consumers susceptibility to influence the monopoly optimally offers consumers price discounts for their influence and charges price premia for their susceptibility the price premia and the price discounts are simple functions of the pattern of network effects we determine under which conditions relative to uniform price consumer surplus increases and we characterize the value of information on network effects for the monopoly

endogeneous protection factor returns and resource allocation we consider a heckscher ohlin samuelson trade model with two lobbies representing the interests of factor owners and two political parties the lobbies contribute resources to politics equating their returns to political and economic activity at the margin while the parties maximize their probability of election trading off general voter dissatisfaction with protection against the electioneering resources that favorable policies attract from the lobbies the equilibrium level of protection of a factor and its expected rate of return increase with its relative endowment if this relative endowment is high low then the factor will be better worse off than under free trade but at intermediate factor endowment ratios both factors will be worse off under parameter changes making lobbies more sensitive to the commodity price the lobbies contribute more resources to politics and can both be worse off even though the parties are proposing lower trade distortions

the institutional framework and economic development the compound growth rates of per capita output and farrell type efficiency measures for 115 market economies over the period 1960 80 were compared with measures of political civil and economic liberty it was found that the institutional framework has significant and large effects on the efficiency and growth rate of economies politically open societies which subscribe to the rule of law to private property and to the market allocation of resources grow at three times the rate and are two and one half times as efficient as societies in which these freedoms are abridged

the politico economic behavior of authoritarian governments the study of the interaction between the economic and political behavior of governments in democratic western capitalist countries has yielded many insights in the three decades since anthony downs an economic theory of democracy was published in 1957 similarly the study of the overt political component of the economic decision making process in authoritarian eastern centrally planned economies has attained a great degree of refinement in the post stalin era for most countries in the world however neither model democratic curn capitalist nor authoritarian curn centrally planned applies very well rather there is a third type more or less authoritarian curn more or less capitalist which reasonably describes a large number of developing countries it is likely that the behavior of these countries governments will not be well explained by models which fit the other two types the purpose of this paper is to propose a framework in which the economic decisions of authoritarian governments can be analyzed without assuming that the government is the only economic agent thus in basically capitalist countries where elections are not the means by which power is validated and transferred 1 the political economic behavior of government an individual s first formal exposure to economics is usually a principles text in early chapters of most of them the economic system is described as being determined by the interaction among three groups of economic agents households firms and governments the latter which only began to be considered an economic agent of important status with the advent of keynesian analysis is in such texts initially accorded a place of equality with the other two but soon is presumed to behave entirely differently while households and firms exhibit maximizing behavior in their own self interest the government s economic actions are motivated by a desire to stabilize and

democracy dictatorship and decision costs this paper tries to help bridge the inductive and the deductive traditions in the study of democracy i identify two empirical patterns which i call the paradox of conflict and the paradox of decision importance more conflict ridden societies are both less likely to be democracies and when democratic more likely to be consensual rather than majoritarian similarly important revolutionary regime transforming decisions are less likely to be democratic but when democratic they are more likely to be consensual i use a decision cost minimizing model of democracy to explain those patterns the model is developed out of the metaphor of institutions as decision producing firms attempting to maximize quality and minimize cost of those decisions its main intellectual source is the transaction cost minimizing view of organizations but the formalism owes most to buchanan and tullock s calculus of consent

the economics of special interest politics the case of the tariff this paper investigates the interaction of politicians and special interest lobbies the goal is to model the equilibrium levels of redistributive policies such as taxes subsidies tariffs and regulatory decisions the model is applied throughout to the setting of tariffs by contributing to political campaigns special interest lobbies generate economic returns higher tariffs generate revenue for import competing industries through higher product prices higher milk support prices raise dairy farm income and so forth the lobby invests to maximize these net economic returns in evaluating their chances of election politicians weigh the favorable effects of special interest money against the unfavorable association with the lobby and the social cost of the redistributive policy section i explores the lobby s problem it describes a formalization of mancur olson s discussion of the voluntary provision of public goods and optimal contributions by lobbies to political campaigns section ii describes determination of the equilibrium tariff positions of each politician in a political campaign

on the inefficient extraction of rents by dictators most countries in the world are governed by autocracy that is some form of one man rule be it monarchy or dictatorship dictatorship is a prevalent form of autocracy with a majority of the world s population living under this type of rule yet when analyzed from an economic point of view dictatorships do not appear to be efficient they are not efficient in social terms and more strangely they do not appear to be efficient from the dictator s viewpoint take one example in bulandia a fictitious country a general from the army overthrows the government and establishes himself as the supreme leader he promptly places those who helped him in the revolution in key government positions as well as granting them favors in the business world such positions and favors are considered rewards for supporting the revolution they can be considered a cost of the revolution suppose the general appoints his brother an air force colonel as head of the newly established national mining industry his brother having no background in business or engineering is to say the least not the most qualified man for the job but it is assumed that he must be granted the position in order to maintain a stable coalition he must be paid off if this is the only problem the payoff why does the dictator use such an inefficient method of pay off why doesn t he for example have the industry managed by a foreign mining company which can actually generate profits and then use these profits to

when does a firm disclose product information a firm chooses a price and the product information it discloses to a consumer whose tastes are privately known we provide a necessary and sufficient condition on the match function for full disclosure to be the unique equilibrium outcome whatever the costs and prior beliefs about product and consumer types it allows for products with different qualities as well as some horizontal match heterogeneity with independently distributed product and consumer types full disclosure is always an equilibrium and a necessary and sufficient equilibrium condition is that all firm types earn at least the full disclosure profit

demand uncertainty incomplete markets and the optimality of rationing abstract when the arrival of traders at the market is stochastic and it is impossible for traders who might arrive to meet ex ante then walrasian spot market clearing presents consumers with price risk and is typically not pareto optimal instead with an indivisible good and a divisible numeraire the first best can be achieved by an exchange selling raffle tickets at a fixed price when only spot market trading is feasible and consumers cannot commit to pay unless they purchase the indivisible good efficiency implies price fixing with rationing potential disadvantages of black markets and scalping are discussed journal of economic literatureclassification numbers d45 d52 d8

the political economy of development a cross national causality test of development democracy growth hypothesis the empirical investigation of the development democracy growth hypothesis estimates positive correlations and causal associations between development and democracy and democracy and growth among the preconditions for the emergence of democracy market and culture show strong and highly significant positive effects which are largely transmitted directly development affects democracy directly and indirectly via education and investment the positive causal association between democracy and growth is transmitted both directly and indirectly via labor and welfare accordingly the hypothesized compatibility between economic development and political democracy is confirmed while rejecting the trade off between political democracy and economic growth

a penny for your quotes patent citations and the value of innovations the use ofpatents in economic research has been seriously hindered by the fact that patents vary enormously in their importance or value and hence simple patent counts cannot be informative about innovative output the purpose of this article is to put forward patent counts weighted by citations as indicators of the value of innovations thereby overcoming the limitations of simple counts the empirical analysis of a particular innovation computed tomography scanners indeed shows a close association between citation based patent indices and independent measures of the social value of innovations in that field moreover the weighting scheme appears to be nonlinear increasing in the number of citations implying that the informational content of citations rises at the margin as in previous studies simple patent counts are found to be highly correlated with contemporaneous rd however here the association is within afield over time rather than cross sectional

is there a relationship between economic conditions and political structure the results of this investigation into the relationship between political environment and economic well being are both disappointing and encouraging phone is the only measure of economic well being which is unambiguously and positively associated with democracies why this is true remains a mystery the two reasons discussed earlier are both plausible as in a third namely increasing availability of telephones reduces the costs of organizing special interest groups to the extent that active participation of special interests is a necessary condition for the emergence or continuation of democratic government telephones per capita will be related positively to the incidence of democracy

competition in transactions mechanisms the emergence of price competition abstract this paper models competition between firm market makers there are two goods a divisible numeraire and an indivisible good produced by firms the set of active consumers is random all consumers are identical conditional on arriving at the market first firms produce output equivalently install capacity and commit to a transactions mechanism next nature chooses the set of consumers at the market and each active consumer commits to visit a single firm all equilibria involve all firms choosing a fixed price thus price competition is derived not assumed journal of economic literature classification numbers d43 d83 l13

democracy and development a theoretical framework a simple framework is set up to discuss the relationship between democracy material welfare and development democracy is regarded both as a good in its own right and as an input in the production of material welfare the optimum level of democracy is then related to the level of development at the optimum point the marginal cost of democracy in terms of foregone output is positive and growth is a decreasing function of the level of democracy deviations from the optimum path are described as either repressive or populist democratization is not unambiguously an optimal response to exogenous shocks

political systems and distortions an empirical study this paper studies empirically why price distortions are more prevalent in some countries than in others we find no significant difference between democracies and dictatorships but frequent regime changes reduce distortions political systems factional subordinate that encourage redistributive activities rda tend to have more distortions allowing for different effects of rda in democracies and dictatorships there is a positive and significant effect of rda on distortions in dictatorships in democracies distortions destroying lobbying seems more important since no significant relation between rda and distortions can be found

information aggregation in polls we study information transmission via polling a policymaker polls constitu ents who differ in their information and ideology to determine policy full rev elation is an equilibrium in a poll with a small sample but not with a large one in large polls full information aggregation can arise in an equilibrium where constituents endogenously sort themselves into centrists who respond truth fully and extremists who do not we find polling statistics that ignore strate gic behavior yield biased estimators and mischaracterize the polvs margin of error we construct estimators that account for strategic behavior finally we compare polls and elections jel c42 d83

communication and coordination in social networks i model people in a coordination game who use a communication network to tell each other their willingness to participate the minimal sufficient networks for coordination can be interpreted as placing people into a hierarchy of social roles or stages initial adopters then followers and so on down to late adopters a communication network helps coordination in exactly two ways by informing each stage about earlier stages and by creating common knowledge within each stage we then consider two examples first we show that low dimensional networks can be better for coordination even though they have far fewer links than high dimensional networks second we show that wide dispersion of insurgents people predisposed toward participation can be good for coordination but too much dispersion can be bad although collective action depends on both social structure and individual incentives these integral aspects have been formalized separately in the fields of social network theory and game theory by considering them together this paper engages the classic question of which structures are conducive to coordination and shows that structure and strategy are related in a mutually interesting way here we consider a coordination game in which each person wants to participate only if others participate social structure is thought of as a communication network by which people tell each other their willingness to participate each person knows whether her neighbours in the network are willing but does not know about anyone else our model is thus a game of incomplete information in which each person given his local knowledge decides whether to participate the main result is a characterization of the minimal sufficient networks for coordination in terms of a hierarchy of social roles or stages initial adopters then followers and so on down to late adopters for example a communication network helps coordination in exactly two ways by informing each stage about earlier stages and by creating common knowledge within each stage we also consider two simple examples first we show that low dimension or strong link networks can be better for coordination even though they have far fewer links than high dimension or weak link networks second we show that wide dispersion of insurgents people predisposed toward participation can be good for coordination but too much dispersion can be bad this paper is built on the assumption that the most basic and common mechanism for coordination is the i ll go if you go mechanism individuals first communicate with each other about their preferences and then each individual chooses whether to participate or not hence a person s participation depends on what he knows about his neighbours it does not depend solely on their participation itself either through learning adaptation or social influence the physical analogies of contagion or diffusion are not

price versus production postponement capacity and competition this article presents a comparative analysis of possible postponement strategies in a two stage decision model where firms make three decisions capacity investment production inventory quantity and price typically investments are made while the demand curve is uncertain the strategies differ in the timing of the operational decisions relative to the realization of uncertainty we show how competition uncertainty and the timing of operational decisions influence the strategic investment decision of the firm and its value in contrast to production postponement price postponement makes the investment and production inventory decisions relatively insensitive to uncertainty this suggests that managers can make optimal capacity decisions by deterministic reasoning if they have some price flexibility under price postponement additional postponement of production has relatively small incremental value therefore it may be worthwhile to consider flexible ex post pricing before production postponement reengineering while more postponement increases firm value it is counterintuitive that this also makes the optimal capacity decision more sensitive to uncertainty we highlight the different impact of more timely information which leads to higher investment and inventories and of reduced demand uncertainty which decreases investment and inventories our analysis suggests appropriateness conditions for simple make to stock and make to order strategies we also present technical sufficiency and uniqueness conditions under price postponement these results extend to oligopolistic and perfect competition for which pure equilibria are derived interestingly the relative value of operational postponement techniques seems to increase as the industry becomes more competitive

a decentralized model of information pricing in networks we propose a recursive method of pricing an information good in a network of holders and demanders of this good the prices are determined via a unique equilibrium outcome in a sequence of bilateral bargaining games that are played by connected agents if the information is a homogenous non depreciating good without network effects we derive explicit formulae which elucidate the role of the link pattern among the players particularly we find out that the equilibrium price is intimately related to the existence of cycles in the network it is zero if a cycle covers the trading pair and it is proportional to the direct and indirect utility that the good generates otherwise

formation of buyer seller trade networks in a quality differentiated product market we examine the formation of buyer seller links when exchange can take place only if such a link exists sellers produce products of different qualities and multiple sellers can form a sellers association to pool their customers setting uniform prices buyers form trade links with individual sellers or sellers associations we show which buyer seller links will form and find the set of links that are stable and show how these links influence prices we also show that a trade network mismatch may occur where a high quality good remains unsold even without an economy wide excess supply of goods jel classification d40 d51 d82