international technology transfer and the technology gap abstract we build a quality ladders product cycle model that explores how the quality of technology transferred through foreign direct investment fdi is linked to innovation and imitation when the absorptive capacity of ldcs is limited successful imitation of low quality levels makes fdi involving high quality levels possible through reduction of the technology gap a subsidy to imitation or a tax on low quality fdi production encourages imitation relative to innovation thus releasing the constraint faced by foreign firms seeking to produce in the south these forces that stimulate high quality fdi raise southern welfare through lower prices faster innovation and higher wages

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

did the federal trade commission s advertising substantiation program promote more credible advertising this paper examines the effects of the federal trade commission s advertising substantiation program developed in the early 1970s this program coupled changes in the legal definition of deception with more vigorous ftc enforcement the authors analyze changes in advertising intensity media choice media wealth and the progress of new entrants the evidence suggests that adoption of substantiation requirements increased the credibility of advertising copyright 1990 by american economic association

dynamic analysis of innovation and international transfer of technology through licensing abstract this paper develops a quality ladder type dynamic general equilibrium model with endogenous innovation and technology licensing as a major source of international technology transfer in developing countries examining the dynamic characteristics of the model fully we explore the short and long run effects of both an improvement in the probability of reaching a licensing agreement with a given effort and an increase in the license fee rate the model shows that the former promotes innovation and technology transfers in both the long and short run while the latter discourages them

endogenous market structures in international trade natura facit saltum abstract almost all of the large literature on international trade with imperfect competition assumes exogenous market structures the purpose of this paper is to develop a simple model that generates alternative market structures as nash equilibria for different parameterizations of the basic model equilibrium market structure is a function of the underlying technology familiar configurations such as a duopoly competing in exports or a single multinational producing in both markets arise as special cases small tax policy changes can produce large welfare effects as the equilibrium market structure shifts implying discontinuous jumps in prices quantities and profits

regulation and the theory of legislative choice the interstate commerce act of 1887 this article concerns the economic incidence of the interstate commerce act of 1887 ica our focus is the short haul pricing constraint a provision of the ica that prohibited railroads from charging higher rates to isolated primarily agrarian shippers than it charged to intercity shippers of similar commodities utilizing the event study methodology we find that the impending passage of the ica generated a distribution of abnormal returns to railroads and shipping firms that is consistent with the theoretical implications of our analysis of the short haul pricing constraint shpc however early interpretations of the shpc by the interstate commerce commission reduced some of the abnormal returns to railroads in a manner that is inconsistent with the hypothesis that the short haul pricing constraint was an important mechanism of early railroad regulation the analysis does support a multiple interest interpretation of the interstate commerce act and has implications for the positive theory of regulation

urban development in the united states 1690 1990 the united states transformed itself from a rural to an urban society over the last three cen turies after a century of unremarkable growth the pace of urbanization was historically un precedented between the nineteenth and the early twentieth centuries in the twentieth century the urban population continued to increase but in a much more dispersed manner as the sub urban population increased throughout these developments cities also exhibited considerable variation in their population sizes this paper finds that the pace and pattern of u s urban development are explained by changes in regional comparative advantage and in economies in transportation and local public goods which in turn were determined by the changes in the economic structures of cities this paper also finds that cities varied considerably in size because the larger cities reduced market transaction costs associated with coordinating greater geograph ic division of labor

the multinational firm direct investment is incorporated into a simple general equilibrium model of international trade the analysis focuses on an attempt to endogenize the internalization decision it is argued that a reasonable approach assumes that arm s length contracts must be simple so that complex arrangements require internalization the model relates direct investment to the degree of underlying uncertainty and to fundamental trade determinants such as relative factor endowments the behavior of the model contrasts sharply with that of the markusen helpman model which takes internalization for granted

contracts intellectual property rights and multinational investment in developing countries abstract the policy debate between multinational firms favoring strong contract law and host country governments who often oppose such protection motivates the paper local agents managers learn the multinational s technology and can defect to start a rival firm contract enforcement including binding the multinational itself makes the multinational better off outcomes for the host country are more complex depending on mode switches induced by enforcement if enforcement induces the multinational to switch from exporting to local production welfare improves if local production was occurring anyway enforcement may result in the loss of rents to local agents and lower welfare

foreign investment and technology transfer a simple model abstract this paper develops a model in which international technology transfer through foreign direct investment emerges as an endogenized equilibrium phenomenon resulting from the strategic interaction between subsidiaries of multinational corporations and host country firms the model explicitly recognizes two types of costs the costs to the multinational of transferring technology to its subsidiaries and the learning costs of domestic firms the analysis points to the importance of the learning efforts of host country firms in increasing the rate at which mncs transfer technology the paper also explores some of the reasons why learning investment in host country firms may be suboptimal

informative advertising with differentiated products in this paper we study the role of promotional expenditures by sellers in a model of product differentiation advertising conveys full and accurate information about the characteristics of products heterogeneous consumers who have no source of information other than advertisements seek to purchase the products that best fit their needs despite the roles played by advertising in improving the matching of products and consumers and in increasing the elasticity of demand faced by each firm we find that the market determined levels of advertising are excessive given the extent of diversity in the market we derive a promotional equilibrium based on a specific information transmission technology paying explicit attention to the structure of consumer information and its impact on firms demand curves this allows us to study the effects of changes in the advertising technology including an increased ability to target messages to specific groups of consumers on the equilibrium in the product market we find that decreased advertising costs may reduce profits by increasing the severity of price competition

incomplete contracts and the product cycle the incomplete nature of contracts governing international transactions limits the extent to which the production process can be fragmented across borders in a dynamic general equilibrium ricardian model of north south trade the incompleteness of international contracts is shown to lead to the emergence of product cycles because of contractual frictions goods are initially manufactured in the north where product development takes place as the good matures and becomes more standardized the manufacturing stage of production is shifted to the south to benefit from lower wages following the property rights approach to the theory of the firm the same force that creates product cycles i e incomplete contracts opens the door to a parallel analysis of the determinants of the mode of organization the model gives rise to a new version of the product cycle in which manufacturing is shifted to the south first within firm boundaries and only at a later stage to independent firms in the south relative to a world with only arm s length transacting allowing for intrafirm production transfer by multinational fi rms is shown to accelerate the shift of production towards the south while having an ambiguous effect on relative wages the model delivers macroeconomic implications that complement the work of krugman 1979 as well as microeconomic implications consistent with the findings of the empirical literature on the product cycle

imperfect information and the equitability of competitive prices in many markets sellers have imperfect information about the costs of sales to different buyers and the pattern of competitive pricing depends on the information available in order to analyze the equity implications of public policies requiring information suppression non utilitarian measures of the horizontal and vertical dimensions of pricing inequity caused by cross subsidization are proposed and examined better information generally reduces vertical inequity but if information about buyers is initially poor additional imperfect information may increase horizontal inequity if information is initially good more information generally lowers both dimensions of inequity

the boundaries of multinational enterprises and the theory of international trade this paper begins with a review of empirical evidence on multinational firms conceptual underpinnings of a theory are developed relying in particular on the notion of knowledge capital as a mobile joint input into geographically separated production facilities this idea is embedded in a simple two country general equilibrium model that supports multinational production in equilibrium under conditions consistent with the empirical evidence the final section examines internalization and shows why certain properties of knowledge capital also imply a preference for transferring technologies internally within the firm rather than through arm s length markets

intellectual property rights and foreign direct investment abstract this paper develops a product cycle model with endogenous innovation imitation and foreign direct investment fdi we use this model to determine how stronger intellectual property rights ipr protection in the south affects innovation imitation and fdi we find that stronger ipr protection keeps multinationals safer from imitation but no more so than northern firms instead the increased difficulty of imitation generates resource wasting and imitation disincentive effects that reduce both fdi and innovation the greater resources absorbed in imitation crowd out fdi reduced fdi then transmits resource scarcity in the south back to the north and consequently contracts innovation

intellectual property rights licensing and innovation in an endogenous product cycle model abstract we develop a dynamic general equilibrium model of the product cycle to study the effects of stronger intellectual property rights iprs in the south on the incentives of firms in the north to innovate and to license advanced technologies innovation and licensing are random processes requiring resources stronger iprs increase the licensor s share of rents and reduce the costs of licensing contracts thus the returns to both licensing and innovation would rise while additional resources would be available for r d in consequence innovation and technology transfer would rise however the effect of stronger iprs on relative wages between regions is ambiguous

licensing versus direct investment a model of internalization by the multinational enterprise a firm must decide whether to serve a foreign market by exporting building a foreign branch plant or licensing the production to an existing foreign producer the existence of reputations implies that any licensing agreement must provide a licensee with the incentive to maintain the reputation this creates a motive for the firm to internalize transactions by building a branch plant i e by becoming a multinational the model reflects a more general notion that the inability of the firm to control a licensee s agent s actions can provide incentives for multinational activity the paper explores the determinants of the firm s mode of operation as well as the consequences of certain government policies

the human capital approach to black white earnings inequality some unsettled questions the persistence of earnings differences between blacks and whites in the united states has been a topic that has received a substantial amount of attention in both theoretical and empirical research in economics the differential in earnings typically is tied to racial differences in human capital accumulation this paper advances a systematic critique of the human capital approach to black white inequality inadequacies are identified in human capital theory as a general theory of inequality as well as a specific theory of racial inequality the critique suggests that a serious analysis of the black white earnings gap will require an entirely new approach to the study of racial income inequality

the political economy of truth in advertising regulation during the progressive era abstract this paper explores the origins and effects of truth in advertising regulation during the progressive era was advertising regulation adopted in response to rent seeking on the part of firms that sought to limit the availability of advertising as a competitive device or was advertising regulation desired because it furnished a mechanism through which firms could improve the credibility of advertising we find the available evidence to be more consistent with the latter hypothesis

international technology transfer with an information asymmetry and endogenous research and development abstract in this paper an information asymmetry concerning technology type and the cost of operating across national boundaries interact with location considerations to determine whether international technology transfer occurs via the export of goods subsidiaries or licensing it is shown that market share restrictions and per unit royalties can signal technology type and make licensing the most attractive option in addition it is shown that policies which restrict the mode of technology transfer do not necessarily reduce the amount of research and development undertaken

innovation intellectual property rights and economic development a unified empirical investigation two important strands of literature investigate the way the effect of intellectual property rights ipr on innovation depends on either the initial ipr level or the level of economic development we expand on this by studying their joint effect in a single unified empirical framework we find that the effect of ipr on innovation is more complex than previously thought displaying important nonlinearities depending on the initial levels of both ipr and per capita gdp the policy implications of this are examined and include the conclusion that a single global level of ipr is in general sub optimal

will affirmative action policies eliminate negative stereotypes a key question concerning affirmative action is whether the labor market gains it brings to minorities can continue without it becoming a permanent fixture in the labor market the authors argue that this depends on how the policy affects employers beliefs about the productivity of minority workers they study the joint determination of employer beliefs and worker productivity in a model of statistical discrimination in job assignments the authors prove that even when identifiable groups are equally endowed ex ante affirmative action can bring about a situation in which employers correctly perceive the groups to be unequally productive ex post copyright 1993 by american economic association

technology transfer under asymmetric information licensing contracts for newly patented innovations are observed to vary along several dimensions including the form and size of the payment to the inventor fixedfee versus some output based royalty the degree of exclusivity and the division of rents in this article we show that theform of the contract can be explained by two problems in technology exchange the superiority of a licensor s precontractual information about the economic value of the innovation and thefact that sharing this information with the licensee mayfacilitate imitation we show that a licensor signals her technology type with an output based payment or royalty and may leave some of the rents with the licensee conditions under which exclusive license contracts linear and nonlinear and nonexclusive linear contracts are used to transfer technology are identified

endogenous r d and foreign direct investment in international oligopolies abstract this paper examines the impact of the firms mode of foreign expansion on the incentive to innovate as well as the effects of r d activities and technological spillovers on the firms international strategy we consider a two country imperfect competition model where the firms face three different type of decisions how to expand abroad how much to spend on r d and how much to sell in each market market structure is endogenously determined as the equilibrium solution of a three stage game it is shown that the firm that invests more in research is the one which is a mne while the rival is an exporter the results indicate that there is a positive relationship between multinational expansion and r d investment and that in turn investment in research increases the likelihood of multinational expansion the value of the spillover parameter can also be an important determinant of firms international strategy

statistical discrimination with peer effects can integration eliminate negative stereotypes we introduce peer effects in the costs of human capital acquisition into a model of statistical dis crimination in labour markets this creates a link between the level of segregation in social networks and racial disparities in job assignment and wages we show that this relationship is characterized by disconti nuities there is a threshold level of segregation below which negative stereotypes become unsustainable and steady state skill levels can change dramatically this change can work in either direction skill levels may either rise or fall in both groups vvtiich of these outcomes arises depends on the population share of the disadvantaged group and on the distribution of the costs of human capital investments we also examine the effects of affirmative action policies in the presence of peer effects and provide conditions under which such policies eliminate negative stereotypes

imperfect signalling affirmative action and black white wage differentials the existence of black white wage differentials has received considerable attention in the economics literature imperfect information provides the underpinning of several models which attempt to explain such differentials 1 2 3 4 11 arrow s work for example shows that when screening is costly and expectations of productivity differ across groups wages may differ between individuals with identical productivity 2 3 borjas and goldberg point out that biased screens may lead to wage differentials even when the two groups have identical distributions of productivity 4 it is important to note that these differentials arise in the absence of discriminatory tastes among market participants other researchers have investigated the impact of affirmative action programs on minority majority wage differentials welch indicates the kinds of wage differences which can arise under certainty about productivity levels 12 lazear demonstrates that the apparent narrowing of blackwhite differentials under affirmative action may well be an illusion due to the failure to measure non pecuniary income in the form of on the job training 7 while these models provide an appealing explanation of the main outlines of minoritymajority wage differentials they do not explain another stylized fact which has been observed recently a study of academicians revealed that black males with a number of publications earned more than their white counterparts whereas black male academics with no publications earned less than comparable whites 5 olneck showed that in terms of occupational status the return to college graduation was higher for non whites than for whites but the return to secondary education was lower 6 159 90 similarly while the income of college educated black males rose relative to that of whites of similar qualifications between 1967 and 1978 the income of less educated black males fell relative to that of their white counterparts over the same period sowell has argued that this skewing of the relative distributions is a result of affirmative action programs 9 10 although the quotas seem to increase the demand for minority workers their legislative framework increases the

multinationals multi plant economies and the gains from trade a general equilibrium model of a multinational enterprise based on economies of multi plant operation is developed these economies are modelled as arising from the existence of a joint input whose productivity in each production facility is independent of the number of facilities maintained by a firm the multinational thus offers the world increased technical efficiency by eliminating the duplication of the joint input that would occur with independent national firms since this technical efficiency may come at the expense of increased market power the full determinants of home country host country and world welfare are considered

intellectual property rights and the mode of technology transfer abstract transferring technology in an environment where patent protection is uncertain can pose significant risks to an innovating firm s ability to appropriate rents this paper incorporates asymmetric information in a screening game where the innovating firm has the choices of licensing a new product at arm s length to a foreign firm exporting it or licensing it to a subsidiary subsidiary production avoids the risk of imitation but involves higher costs for the innovating firm the gains to the southern country from the lack of intellectual property right protection may be offset by strategic behavior by northern firms who opt for technology transfer via subsidiary or monopoly production

innovation foreign direct investment and growth direct foreign investment is incorporated in a dynamic general equilibrium model with endogenous technological change in contrast to recent endogenous growth approaches i allow for geographical separation of the innovation and production of newly developed goods firms acquire specific knowledge through r d investment in the more developed country and use their specific asset to establish a production plant in the low cost country foreign direct investment is accompanied by interregional spillovers of knowledge from the more to the less advanced country i derive a steady state equilibrium with active innovation and production activities in the high technology sector in both countries furthermore the implications of factor flow liberalization as well as of industrial policies are investigated

up the average cost curve inefficient entry and the new protectionism abstract a two country model is developed in which each country produces one good with increasing returns the goods being perfect or imperfect substitutes with cournot nash behavior and free entry certain restrictive trade policies have effects opposite to their favorable effect under noentry assumptions import tariffs and export subsidies lead to inefficient entry that raises rather than decreases the average production cost of and price charge by the domestic industry with negative welfare consequences we argue that these predictions of our model are closely consistent with extensive canadian data on entry exit and firms responses to trade liberalization

can gender parity break the glass ceiling evidence from a repeated randomized experiment this paper studies whether the gender composition of recruiting committees matters we make use of the unique evidence provided by spanish public examinations where the allocation of candidates to evaluating committees is random we analyse how the chances of success of 150 000 female and male candidates for positions in the four main corps of the spanish judiciary from 1987 to 2007 were affected by the gender composition of their evaluation committee we find that a female male candidate is significantly less likely to be hired whenever she he is randomly assigned to a committee where the share of female male evaluators is relatively greater evidence from multiple choice tests suggests that this is due to the fact that female majority committees overestimate the quality of male candidates

quality ladders and product cycles we develop a two country model of endogenous innovation and imitation in order to study the interactions between these two processes firms in the north race to bring out the next generation of a set of technology intensive products each product potentially can be improved a countably infinite number of times but quality improvements require the investment of resources and entail uncertain prospects of success in the south entrepreneurs invest resources in order to learn the production processes that have been developed in the north all r d investment decisions are made by forward looking profit maximizing entrepreneurs the steady state equilibrium is characterized by constant aggregate rates of innovation and imitation we study how these rates respond to changes in the sizes of the two regions and to policies in each region to promote learning

explaining differences in job retention between alien and nonalien workers after an in company training this study focuses on the job retention of unemployed workers after they attended a subsidized in company training programme in flanders using a new large scale dataset of the flemish labour exchange we look for differences in the probability of employment between aliens and nonaliens during the 36 months following their on the job training we further investigate whether differences persist after controlling for several socio economic characteristics and labour market related variables estimating a modified probit model we find that on average being an alien lowers the probability of employment after training by approximately 15 this effect reduces to 10 when controlling for other variables the effect of education on a trainee s employment chances differs for aliens and nonaliens aliens have a markedly lower return on investment in education good language skills and a longer in company training period also increase employment probability but more so for aliens other control variables do not

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

uncertainty hiring and subsequent performance the nfl draft in this article we analyze the impact of uncertainty on the hiring process we show the connection between models of statistical discrimination where uncertainty can work against groups that have less reliable indicators of future productivity and models of option value where uncertainty about future productivity can be beneficial for these groups these models generate hypotheses about the relationship between ex ante hiring patterns and ex post productivity this is applied to the market for nfl football players we provide various estimates of nfl success which suggest that statistical discrimination and option value influence choices in this market

the origins of the blue sky laws a test of competing hypotheses abstract between 1911 and 1931 47 of the 48 states adopted state securities or blue sky laws this paper employs an event history analysis to analyze public interest public choice and ideological explanations for the enactment of blue sky laws the data suggest that the decision to adopt a blue sky law was heavily influenced by the strength of progressive lobbies however the type of law adopted was more strongly influenced by the prevalence of small banks that faced competition for depositors funds from securities salesmen i also provide evidence that more stringent blue sky laws increased small bank profits

how do foreign patent rights affect u s exports affiliate sales and licenses abstract this paper analyzes how foreign patent rights fprs affect us exports affiliate sales and licenses our approach is distinctive in three ways we apply ownership location and internalization concepts to link fprs with servicing decisions we account for the simultaneity of servicing decisions we estimate the relative effects of fprs on exports affiliate sales and licenses empirical findings show strong fprs increase us affiliate sales and licenses particularly across countries with strong imitative abilities further fprs have a larger effect on us knowledge transferred outside the country and firm relative to knowledge located inside the country and internalized inside the firm

a tale of three countries italian spanish and swiss manufacturing operations in china in this paper the choice of joint venture versus wholly foreign owned enterprise wfoe made by italian spanish and swiss multinationals in china as shaped by the risk of dissipation of intangible assets is investigated probit estimates based on an entirely new firm level dataset constructed by the author show that wfoe is more likely to emerge when know how easily spills over namely for firms endowed with more intangible assets or belonging to high tech sectors in line with the theoretical expectations

sheepskin effects in the returns to education an examination of women and minorities recent confirmation of sheepskin effects in the returns to education for prime age white males has been taken as evidence of screening or signaling in the labor market the authors report evidence of sheepskin effects among women and minority males and demonstrate that they are somewhat smaller for lower diploma years but larger for higher diploma years than those of white males these are among the first broad based results confirming the frequent contention derived from signaling models that minorities have smaller returns to low productivity signals but larger returns to high productivity signals copyright 1991 by mit press

intellectual property protection and the industrial composition of multinational activity in a north south model with endogenous fdi we examine the impact of southern ipr protection on the mode and industrial composition of international technology transfer a novel feature of the model is that due to technological reasons industries differ with respect to their susceptibility to imitation in equilibrium licensing occurs in industries where the risk of imitation is low and fdi where it is of intermediate magnitude stronger iprs in the south i alter the industrial composition of multinational activity towards licensing at the expense of fdi ii reduce local imitation and iii increase licensing and to a lesser extent fdi

biased screening and discrimination in the labor market the traditional economic analysis of discrimination is based on gary becker s study of taste discrimination by employers employees and consumers more recent work by kenneth arrow 1972 1973 has attempted to interpret intergroup wage differences in an alternative framework as a rational reaction to uncertainty in labor markets his model of statistical discrimination demonstrates that when the screening process used to determine a worker s qualifications is costly and prior expectations of productivity differ across race or sex groups then wage differentials may arise between workers of identical productivity by implicitly assuming a perfect screening process arrow ignores a potentially important source of wage differentials namely the fact that the screening process might be a more reliable predictor of productivity for one group than for another our paper generalizes the arrow model in two ways first in contrast to arrow we assume that all groups have identical distributions of productivity secondly the screening process used by the firm to determine an applicant s productivity is biased in the sense that a members of various groups may pass the test in different proportions despite their identical productivity distributions and b the predictive power of the test might vary across groups our objective is to analyze the effects of these types of biases in the screening process on the wage differentials between different population groups

foreign direct investment and the nature of r d the authors find that the role foreign direct investment fdi plays in international technology transfer itt hinges on whether substitute channels of itt such as imitation exist for the host country if fdi is the sole channel of itt a faster flow of fdi to the south increases the rates of innovation imitation and itt so fdi generates dynamic benefits if fdi and imitation coexist as channels of itt however then fdi merely substitutes for imitation targeting northern firms a faster flow of fdi to the south then leaves the rates of innovation imitation and itt essentially unaffected so fdi generates mostly static benefits

stage dependent intellectual property rights inspired by the chinese experience we develop a schumpeterian growth model of distance to frontier in which economic growth in the developing country is driven by domestic innovation as well as imitation and transfer of foreign technologies through foreign direct investment we show that optimal intellectual property rights ipr protection is stage dependent at an early stage of development the country implements weak ipr protection to facilitate imitation at a later stage of development the country implements strong ipr protection to encourage domestic innovation therefore the growth maximizing and welfare maximizing levels of patent strength increase as the country evolves towards the world technology frontier and this dynamic pattern is consistent with the actual evolution of patent strength in china

licensing versus direct investment implications for economic growth we develop a symmetric two country model of foreign direct investment fdi that captures the internalization decision and its implications for both the rate and magnitude of innovations when mode choice licensing versus fdi is fixed a subsidy to multinational production increases the rate but decreases the size of innovations when mode can switch the rate and size of innovations both increase provided the subsidy is not too large although innovation size decreases for industries where firms already were choosing fdi innovation size increases for industries where firms switch from licensing to fdi because multinationals choose larger innovations than licensors 2002 elsevier science b v all rights reserved