dynamic savings decisions in agricultural environments with incomplete markets we develop a methodology for examining savings behavior in rural areas of developing countries that explicitly incorporates the sequential decision process in agriculture the approach is used to examine the relative importance of alternative forms of savings in the presence and absence of formal financial intermediaries our results based on stage specific panel data from pakistan provide evidence that the presence of financial intermediaries importantly influences the use of formal savings and transfers for income smoothing we also find that there are significant biases in evaluations of the savings income relationship that are inattentive to the within year dynamics of agricultural production

infrastructure and development a critical appraisal of the macro level literature this survey reviews the existing macro level empirical literature on the link between infrastructure and development outcomes in a critical light after providing a general framework that casts the relevant terms of the controversy on the real effect of infrastructure on growth in the context of an aggregate production function it signals what are the relevant empirical questions to be addressed this guides the systematic review of a number of empirical studies and the discussion of the main econometric challenges to the identification of the effect of infrastructure on output and productivity finally building on related research in particular in contract theory and political economy the paper spells out several promising research avenues

renegotiation of concession contracts in latin america evidence from the water and transport sectors abstract high rates of contract renegotiation have raised serious questions about the viability of the concession model to attract private participation in infrastructure in developing countries after extending in reduced form a standard regulation model in which renegotiation occurs due to the imperfect enforcement of concession contracts we use a unique data set of 307 concessions awarded in latin america from 1989 to 2000 covering the sectors of transport and water to analyze the determinants of this high incidence of renegotiations of infrastructure contracts we look in details at the impact on the probability of renegotiation of a concession of regulatory institutions institutional features economic shocks and of the characteristics of the concession contracts themselves we then derive some policy implications of our work

toward a theory of regulation for developing countries following jean jacques laffont s lead the efficient operation and expansion of infrastructures in developing countries is crucial for growth and poverty reduction however recent reforms aimed at improving the performance of these sectors have had limited success evidence suggests that in many instances this was because the traditional regulatory theory relied on by policymakers was not suitable for the institutional context in developing countries this article surveys more recent theoretical work focusing on problems with regulation in these countries at the heart of the survey is the work of jean jacques laffont who in the last decade of his life set about developing a theoretical framework for regulation in developing countries we consider the implications of his work which focused on the key institutional limitations faced in developing countries we then discuss where experience suggests that there are important omissions from this modeling bringing in extensions and alternative approaches pursued by other authors we conclude by summarizing the key ways in which regulatory policy will be different when institutions are weak overall we find that an understanding of the institutional context and its implications are crucial when designing a regulatory framework for developing countries

dynamic input decisions in econometric production models this study develops an econometric methodology for estimating dynamic production models with sequential intermediate input decisions two problems arise in the study of intermediate inputs intermediate input decisions may be endogenous to final output and intermediate inputs are likely to be correlated with each other and other variables making identification and estimation difficult the econometric model measures the productivity of intermediate inputs taking into account the farmer s sequential input decisions and input productivity differences during the growing season a multistage cobb douglas model of wheat response to irrigation water is used to illustrate the proposed methods

testing the stochastic structure of production a flexible moment based approach conventional production function specifications are shown to impose restrictions on the probability distribution of output that cannot be tested with the conventional models these restrictions have important implications for firm behavior under uncertainty a flexible representation of a firm s stochastic technology is developed based on the moments of the probability distribution of output these moments are a unique representation of the technology and are functions of inputs large sample estimators are developed for a linear moment model that is sufficiently flexible to test the restrictions implied by conventional production function specifications the flexible moment based approach is applied to milk production data the first three moments of output are statistically significant functions of inputs the cross moment restrictions implied by conventional models are rejected

concessions of infrastructure in latin america government led renegotiation this paper analyzes government led renegotiations in infrastructure concession contracts in latin america based on the same sample used in guasch laffont and straub 2003 to examine firm led renegotiations after extending the theoretical framework to a multiple period context in which both pareto improving and rent shifting renegotiations at the initiative of the government can occur we develop an original instrumental variable strategy to address the issue of contract endogeneity and derive empirical results while some of the main insights concerning the importance of having a regulator in place when awarding concessions and the fragility of price cap regulatory schemes are unchanged significant differences arise with respect to the effect of investment and financing as well as the corruption variables we provide evidence that a good regulatory framework is especially important in contexts with weak governance and political opportunism copyright 2007 john wiley sons ltd

privatization in latin america what does the evidence say privatization is under attack criticisms run from corrupt deals to abuse of market power and social welfare losses we evaluate the empirical record on privatization relying on recent comprehensive studies from latin america the paper presents four main results first the increased profitability of privatized firms is not explained by sample selection biases second in the quest to identify the sources of increased profitability after privatization we find little evidence that validates concerns of generalized market power abuses exploitation of workers and lack of fiscal benefits third the manner in which privatization is carried out matters transparency and homogeneity in procedures speed and limited restructuring prior to privatization lead to better outcomes and less room for corruption and discretion finally privatization s success is enhanced by two complementary policies deregulation or reregulation of industries previously shielded from competitive forces and an effective corporate governance framework that facilitates privatized firms access to capital at lower cost overall the empirical record shows that privatization leads to increased profitability and productivity firm restructuring fiscal benefits output growth and even quality improvements most cases of privatization failure can be linked to poor contract design opaque processes with heavy state involvement lack of reregulation and a poor corporate governance framework

input use decisions with greater information on crop conditions implications for insurance moral hazard and the environment emerging precision agriculture technologies allow farms to make input decisions with greater information on crop conditions this greater information occurs by providing improved predictions of crop yields using remote sensing and crop simulation models and by allowing farms to apply inputs within the growing season when some crop conditions are already realized we use a stylized model with uncertainty in yield and price to examine how greater information on crop conditions i e a forecast affects input use for insured and uninsured farms we show that moral hazard decreases farms apply more inputs as the forecast accuracy improves when the forecast indicates good yields and vice versa when the forecast indicates bad yields in the long run moral hazard decreases in response to an improvement in forecast accuracy even though moral hazard decreases in the long run indemnity payments are likely to increase in the long run driven by the increase in moral hazard when the forecast indicates bad crop conditions we use the results of our model to discuss the potential impact of different technologies and types of inputs on the federal crop insurance program and the environment

an equilibrium selection theory of monopolization we develop a duopoly model in which firms compete for the market e g investing in process innovation or product development as well as in the market e g setting quantities or prices competition for the market generates multiple equilibria that differ in the firms investment levels relative size and profitability we show that monopolization that affects competition in the market can act as an equilibrium selection device in competition for the market in particular it eliminates equilibria that are undesirable for the monopolizing firm while not generating new equilibria this result complicates the task of determining whether a firm s dominance in a given market is the result of fair competition or unlawful monopolization we discuss a number of implications for antitrust policy and litigation and illustrate these by means of two well known antitrust cases

alternating bid bargaining with a smallest money unit abstract in a seminal paper ariel rubinstein has shown that impatience implies determinateness of the two person bargaining problem in this note we show that this result depends also on the assumption that the set of alternatives is a continuum if the pie can be divided only in finitely many different ways for example because the pie is an amount of money and there is a smallest money unit any partition can be obtained as the result of a subgame perfect equilibrium if the time interval between successive offers is sufficiently small we also show that for a fixed discount rate all subgame perfect equilibrium payoffs of the discrete game converge to the solution obtained by rubinstein if the smallest money unit tends to zero

the firm as a nexus of treaties part 1 knowledge its acquisition sharing and or asymmetry the participatory generation of information rents and the theory of the firm masahiko aoki common knowledge and the co ordination of economic activities jacques cremer profit sharing information and employment matti pohjola part 2 vertical integration and the strategic management of the enterprise what is vertical integration michael h riordan vertical integration transaction costs and learning by using kurt lundgren the firm as a nexus of internal and external contracts torger reve part 3 issues of labour organization the viability of worker ownership an economic perspective on the political structure of the firm henry hansmann intellectual skill and the role of employees as constituent members of large firms in contemporary japan kazuo koike the implicit contract for corporate law firm associates ex post opportunism and ex ante bonding robert h mooking part 4 finance and the political structure of the firm capital structure as a mechanism of control a comparison of financial systems erik berglof long term contracts in financial markets hakan lindgren the principle of external accountability in competitive markets herbert gintis union militancy and plant designs kar ove moene can transaction cost economics explain trade associations marc schneiberg and j rogers hollingsworth

renegotiation and information revelation over time the case of optimal labor contracts the paper analyzes the issue of commitment in grossman and hart s model of optimal labor contracts under asymmetric information about firm profitability we extend their framework by allowing employment to vary over time at equidistant intervals when both parties can precommit ex ante not to renegotiate the contract this replicates the grossman hart outcome each subperiod when precommitment is not possible information revealed through the contract can create pareto improving renegotiation opportunities and the issue of optimal information revelation arises the paper analyzes the impact of ex post pareto improving renegotiations on the optimal contract

winners and losers from the privatization and regulation of utilities lessons from a general equilibrium model of argentina a computable general equilibrium cqe model is used to estimate the macroeconomic and distributional effects of the privatization and regulation of utilities in argentina begun in 1989 based on data available after the privatization that indicate different kinds of efficiency gains in electricity gas water and telecommunications both the privatization and effective regulation are estimated to yield significant macroeconomic benefits gains from the privatization accrue mainly to high income classes while gains from the effective regulation of newly privatized utilities accrue mainly to low income classes computable general equilibrium cge estimates of overall employment effects suggest that privatization was not a major contributor to the dramatic rise in unemployment in argentina between 1993 and 1995 this rise was more likely due to the tequila effect of an interest rate shock

too small to be beautiful the farm size and productivity relationship in bangladesh this paper examines the agricultural productivity farm size relationship in the context of bangladesh features of bangladesh s agriculture help overcome several limitations in testing the inverse farm size productivity relationship in other developing country settings a stochastic production frontier model is applied using data from three rounds of a household panel survey to estimate simultaneously the production frontier and the technical inefficiency functions the correlated random effects approach is used to control for unobserved heterogeneous household effects methodologically the results suggest that the stochastic production frontier models that ignore the inefficiency function are likely mis specified and may result in misleading conclusions on the farm size productivity relationship empirically the findings confirm that the farm size and productivity relationship is negative but with the inverse relationship diminishing over time total factor productivity growth driven by technical change is found to have been robust across the sample across farm size groups the relatively larger farmers experienced faster technical change which helped them to catch up and narrow the productivity gap with the smaller farmers

modelling embedded risk in peasant agriculture methodological insights from northern malawi abstract using a linear programming model of farming systems in northern malawi the conditions under which peasant farm household models may need to allow for embedded risk are investigated tactical sequential responses to uncertainty are found to be more important to labour scarce households with limited access to capital and to credit markets compared with semi sequential programming discrete stochastic programming dsp provided more efficient solutions for problems involving embedded risk there may be intuitive advantages in presenting results from dsp models in terms of a semi sequential strategy

the transition of punjab agriculture a choice of technique approach the introduction of modern crop varieties in punjab india led to rapid income growth adoption rate and level of the new varieties is examined using a choice of technique approach in which techniques of production are identified by crop variety season of growth and method of production modeling the dynamic effects of technology resource availability and incentives reveals a consistent picture of the transition process the results show the importance of incentives and availability of quasi fixed inputs such as irrigation fertilizers and roads by the late 1970s the long run aggregate supply elasticity was between 1 3 1 5

infrastructure privatization and changes in corruption patterns the roots of public discontent abstract this paper offers a theory of how the degree of corruption that prevails in a society responds to changes in the ownership structure of major public service providers we show that there are cases in which privatization even though it fosters investments in infrastructure also opens the door to more corruption the public dissatisfaction towards privatization is then crucially affected by the changes in the degree and pattern of corruption our model thus helps understand the seemingly paradoxical situation prevailing in latin america where most studies find that privatizations have been efficiency enhancing and have fostered investments and at the same time popular dissatisfaction with the process is extremely high especially among the middle class we show that this line of explanation is consistent with the evidence from surveys in the region

monopoly and soft budget constraint a benevolent government may decide to subsidize an unprofitable monopoly whose profits do not capture all the social surplus from its production anticipating this the firm may underinvest in order to become unprofitable and extract state subsidies the resulting welfare loss may exceed by many times the deadweight cost of monopoly pricing committing the firm to a price ceiling may soften its budget constraint and thus reduce welfare competition can harden budget constraints in industries in which free entry is socially excessive

on the form of transfers to special interests an important question in political economy concerns the form of transfers to special interests the chicago view is that political competition leads politicians to make such transfers efficiently the virginia position is that lack of information on the part of voters leads politicians to favor inefficient sneaky methods of redistribution this paper analyzes the form of transfers in a model of political competition in which politicians have incentives to make transfers to special interests it shows that when voters have imperfect information about both the effects of policy and the predispositions of politicians inefficient methods of redistribution may be employed

green revolution and labour demand in rice farming the case of central luzon 1966 90 while the adoption of modern rice varieties mvs increased labour requirements for crop care and other activities it might have induced the adoption of labour saving technologies thus whether the net impact of mv adoption on labour demand is significantly positive is still debated in the green revolution literature using farm level survey data collected in central luzon from 1966 to 1990 this study estimated simultaneously the labour saving technology adoption and the labour demand functions we found among other things that mvs increased labour demand significantly without inducing the widespread adoption of labour saving technologies

the benefits of privatization evidence from mexico critics of privatization often argue that its benefits come at a high cost to society the authors test the validity of this criticism for mexico s privatization program one of the world s largest case by case programs assessing the performance of newly privatized firms in such areas as profitability and efficiency they find that these firms quickly close the gap with their peers in the private sector their findings suggest that the firms profit gains come from productivity gains 52 percent layoffs 33 percent and higher prices 15 percent

rationalizable strategic behavior the notion of equilibrium proposed by nash 19 has come to play a dominant role in economic applications of noncooperative games while analyses of nash equilibria have unquestionably contributed to our understanding of economic behavior it would be unreasonably optimistic to maintain that nash solved the problem of noncooperative strategic choice there is a small literature beginning with ellsberg 6 and a much larger oral tradition which argues that nash behavior is neither a necessary consequence of rationality nor a reasonable empirical proposition in this paper i take the view that although there may be various reasons why an agent might select a nash strategy the notion of an equilibrium has little intrinsic appeal within a strategic context when an agent reaches a decision in ignorance of the strategies adopted by other players rationality consists of making a choice which is justifiable by an internally consistent system of beliefs rather than one which is optimal post hoc this point of view is not original indeed most serious justifications of the nash hypothesis embrace such an approach arguing that agents will expect the game to yield a nash outcome and consequently will choose their equilibrium strategies nevertheless when we think in terms of maximizing utility subject to expectations rather than realizations it becomes clear that the nash hypothesis far from being a consequence of rationality arises from certain restrictions on agents expectations which may or may not be plausible depending upon the game being played we are then quite naturally led to ask are there any restrictions of individuals expectations and hence choices which are required by rationality alone rather than by subjective plausibility this paper is concerned with defining justifying characterizing and refining a criterion for rational strategic choice which i label rationalizability

spice price spikes simulating impacts of saffron price volatility in a gendered local economy wide model summary access to international markets provides smallholders with unprecedented opportunities but also exposes them to world market whims we use a local economy wide impact evaluation lewie model to analyze how the recent global saffron price variability affected morocco s taliouine taznakht region a specialized agro export economy with a stark gender division of labor prices of saffron increased by 71 per year over the 2007 09 period before falling quickly back to their trend our modeling approach allows us to simulate such shocks and evaluate impacts not only on producers but also on the local economies around them in our simulations positive price shocks and increases in productivity both cause large reallocations of labor resources particularly for female workers at harvest time we use monte carlo simulations to evaluate how saffron price variance affects the economy female wage income is especially sensitive to global price variability a 100 increase in saffron price variance leads to 133 increase in female wage income variance but only 36 for males accounting for general equilibrium effects is critical for understanding the ramifications of exposure to export price volatility in poor economies

seasonal labor utilization in agriculture theory and evidence from agrarian households in india this paper develops and tests a dynamic stochastic model of seasonal labor demand of farm households in a developing country seasonality in agriculture is modeled as a dynamic two stage process planting and harvesting with sequential dependence of decisions yield risk is an important determinant of behavior in the planting stage only the proposed model is estimated using plot specific cross section time series data from india consistent estimates of the male and female labor demand functions in the planting and harvesting stages are obtained by panel data econometric methods that control for the nonseparability of the model

the new economics of regulation ten years after the new economics of regulation is an application of the principal agent methodology to the contractual relationship between regulators and regulated firms after a critique of the traditional paradigms of regulation from the point of view of information economics a canonical model of regulation under asymmetric information is developed a survey of the main results obtained in the new economics of regulation is then provided in particular concerning the implementation of optimal contracts by a menu of linear contracts the dichotomy between pricing and cost reimbursement rules the auctioning of incentive contracts the dynamics of contracting under limited commitment and the hierarchical problems in regulation empirical implications are then discussed and avenues of further research are described in the conclusion

marketing reforms market development and agricultural production in china abstract chinese agricultural reforms have consisted of two transitional stages initially decollectivization in the late 1970s followed by market liberalization in the mid 1980s while much research has been conducted on the initial stage of increasing the incentives for farmers in collective cultivation little quantitative evidence exists on how marketing reforms and the development of rural markets has affected agricultural production decisions using more accurate and disaggregated measures of the reform and market development components of liberalization than previous research this study examined the effects of these liberalization policies on the agricultural production decisions in shaanxi province procurement quota levels were found to be positively associated with the area planted to grain crops thus quotas represent an effective way of increasing grain production and thereby also a means of achieving food self sufficiency which remains an important policy objective for the chinese government the involvement of state grain stations in free market grain trade and the expansion of rural markets has increased the area planted to the two potential cash crops soybeans and wheat and reduced the sown area of the subsistence crop corn reflecting the reduced need to plant corn as a self insurance mechanism for smoothing consumption an increase in procurement quotas increases fertilizer use on grain crops due to the policy of linking quotas to access to below market priced fertilizer but decreases the use of labor which shifts to other more profitable enterprises market development has increased these off farm employment opportunities and the earnings associated with them thereby promoting the shift of labor out of crop production and increased the use of fertilizer which has also become more available

rationalizable strategic behavior and the problem of perfection this paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game from the rationality of the players and from the information they possess the answer is summarized in a solution concept called rationalizability strategy profiles that are rationalizable are not always nash equilibria conversely the information in an extensive form game often allows certain unreasonable nash equilibria to be excluded from the set of rationalizable profiles a stronger form of rationalizability is appropriate if players are known to be not merely rational but also cautious what constitutes rational behavior in a noncooperative strategic situation this paper explores the issue in the context of a wide class of finite noncooperative games in extensive form the traditional answer relies heavily upon the idea of nash equilibrium nash 17 the position developed here however is that as a criterion for judging a profile of strategies to be reasonable choices for players in a game the nash equilibrium property is neither necessary nor sufficient some nash equilibria are intuitively unreasonable and not all reasonable strategy profiles are nash equilibria the fact that a nash equilibrium can be intuitively unattractive is well known the equilibrium may be imperfect introduced into the literature by selten 20 the idea of imperfect equilibria has prompted game theorists to search for a narrower definition of equilibrium while this research some of which will be discussed here has been extremely instructive it remains inconclusive theorists often agree about what should happen in particular games but to capture this intuition in a general solution concept has proved to be very difficult if this paper is successful it should make some progress in that direction the other side of the coin has received less scrutiny can all non nash profiles really be excluded on logical grounds i believe not the standard justifications for considering only nash profiles are circular in nature or make gratuitous assumptions about players decision criteria or beliefs the following discussion of these points is extremely brief due to space constraints more detailed arguments may be found in pearce 18

using stock price information to regulate firms this paper examines the role of the information contained in stock prices in the regulation of privatized firms stock prices contain noisy but unbiased information about firm s future prospects that regulators can use to decide on some regulatory policies the main argument developed is that the observation of stock price movements reduces the incentives of regulators to develop their own monitoring technologies and can allow them to commit to relatively lighthanded regulations this protects firm s investments in cost reduction activities and can increase ex ante welfare this article is concerned with the analysis of the interactions between the public listing of regulated companies and their regulation the central idea is that public listing modifies the information structure of regulators and thus the regulation implemented some evidence can motivate this view

a new theory of equilibrium selection for games with complete information abstract in an earlier paper the author proposed a new theory of equilibrium selection for games with complete information in this paper he proposes an extension of this theory to games with incomplete information a mathematical model is suggested for measuring the strength of the incentives that each type of any player has to use any particular strategy in the case he represents this player in the game then these incentive measures are used for estimating the theoretical probability for any given nash equilibrium to emerge as the outcome of the game the solution of the game is defined as the nash equilibrium with the highest theoretical realization probability when this equilibrium is unique the problems posed by non uniqueness are also discussed journal of economic literature classification numbers c72

privatizing highways in latin america fixing what went wrong revolution in the way highways are provided took place in latin america in the 1990s when more than fifty projects mainly in argentina brazil chile colombia and mexico were privatized using build operate and transfer bot contracts the so called lost decade of the 1980s resulted in low investment in infrastructure and inad equate maintenance and it created a major highway deficit across latin america this deficit together with chronic budgetary problems led gov ernments to embrace a scheme in which the private sector financed urgently needed infrastructure investments thereby freeing up public resources for projects in other priority areas 1 this paper draws some lessons based on the evidence accumulated to date in particular we show that policymakers face unpleasant choices when considering how to provide highways in the future the evidence suggests that private financing of new highways freed up fewer resources than expected in several cases public funds were diverted to bail out fran chise holders in financial trouble 2 government guarantees for private highway franchises also added to the fiscal burden and such guarantees

understanding the soft budget constraint we propose a clarification of the notion of a soft budget constraint a concept widely used in the analysis of socialist transitional and market economies our interpretation is broad enough to embrace most existing approaches to soft budget constraint phenomena and provides a classification of their causes and consequences in light of this interpretation we then review the theoretical literature on the subject and compare it with those on other dynamic commitment problems in economics

running to keep in the same place consumer choice as a game of status if individuals care about their status defined as their rank in the distribution of consumption of one positional good then the consumer s problem is strategic as her utility depends on the consumption choices of others in the symmetric nash equilibrium each individual spends an inefficiently high amount on the status good using techniques from auction theory we analyze the effects of exogenous changes in the distribution of income in a richer society almost all individuals spend more on conspicuous consumption and individual utility is lower at each income level in a more equal society the poor are worse off

when information dominates comparison abstract we propose a micro econometric evaluation of the relation between life satisfaction and income distribution using a balanced panel survey of the russian population russian longitudinal monitoring survey rlms running from 1994 to 2000 covering 4685 individuals we show that in the context of the very volatile russian environment hirschman s q j econ 87 1973 544 tunnel effect conjecture seems to be confirmed variables reflecting income distribution do not influence satisfaction through social comparisons individuals rather seem to use their informational content in order to form their expectations the reference group s income thereby exerts a positive influence on individual satisfaction which contrasts with other studies on the subject inequality indices do not affect individual welfare

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

equilibrium selection in sequential games with imperfect information abstract games with imperfect information often feature multiple equilibria which depend on beliefs off the equilibrium path standard selection criteria such as passive symmetric or wary beliefs rest on ad hoc restrictions on beliefs we propose a new selection criterion that imposes no restrictions on beliefs we select the action profile that is supported in equilibrium by the largest set of beliefs we conduct an experiment to compare the predictive power of the existing and our novel selection criteria in an application on vertical multi lateral contracting we find that our criterion outperforms the other selection criteria

using shadow wages to estimate labor supply of agricultural households with few exceptions most studies of the labor demand and supply decisions of agricultural households in developing countries have relied on the empirical advantages of separability given the questionable nature of some of the assumptions sufficient for separability i apply a recent methodology that accounts for the simultaneity between the production and consumption decisions of a farm household using data from rural india direct estimates of the marginal productivities shadow wages of family male and female labor are derived from a cobb douglas agricultural production function the estimated shadow wages and income are then used as regressors in a structural model of labor supply

green investment and coordination failure an investors perspective abstract to achieve the goal of keeping global warming well below 2 c private investors have to shift capital from brown to green infrastructures and technologies and provide additional green investment in this paper we present a game theoretic perspective on the challenge of triggering such investments the question of climate change mitigation is often related to the prisoner s dilemma a game with one nash equilibrium however the authors perceive investment for mitigation and adaptation as a coordination problem of selecting among multiple equilibria to illustrate this we model a non cooperative coordination game related to the stag hunt with a brown equilibrium with lower payoffs that can be achieved single handedly and a green equilibrium with higher payoffs that requires coordination as multiple experiments show in such games actors often fail to coordinate on a payoff dominant equilibrium due to uncertainty thus we discuss how uncertainty could be reduced along two options one that concerns a change in the payoff structure of the game and another that concerns subjective probabilities

rational investor sentiment in a repeated stochastic game with imperfect monitoring we consider a repeated stochastic coordination game with imperfect public monitoring in the game any pattern of coordinated play is a perfect bayesian nash equilibrium moreover standard equilibrium selection arguments either have no bite or they select an equilibrium that is not observed in actual plays of the game we give experimental evidence for a unique equilibrium selection and explain this very robust finding by equilibrium selection based on behavioral arguments in particular focal point analysis probability matching and overconfidence our results have interesting applications in finance because the observed equilibrium exhibits momentum reversal and excess volatility moreover the results may help to explain why technical analysis is a commonly observed investment style

the noncooperative transportation problem and linear generalized nash games abstract we extend the classical transportation problem from linear optimization and introduce several competing forwarders this results in a noncooperative game which is commonly known as linear generalized nash equilibrium problem we show the existence of nash equilibria and present numerical methods for their efficient computation furthermore we discuss several equilibrium selection concepts that are applicable to this particular nash game

water for life the impact of the privatization of water services on child mortality while most countries are committed to increasing access to safe water and thereby reducing child mortality there is little consensus on how to actually improve water services one important proposal under discussion is whether to privatize water provision in the 1990s argentina embarked on one of the largest privatization campaigns in the world including the privatization of local water companies covering approximately 30 percent of the country s municipalities using the variation in ownership of water provision across time and space generated by the privatization process we find that child mortality fell 8 percent in the areas that privatized their water services and that the effect was largest 26 percent in the poorest areas we check the robustness of these estimates using cause specific mortality while privatization is associated with significant reductions in deaths from infectious and parasitic diseases it is uncorrelated with deaths from causes unrelated to water conditions

should african rural development strategies depend on smallholder farms an exploration of the inverse productivity hypothesis in africa most development strategies include efforts to improve the productivity of staple crops grown on smallholder farms an underlying premise is that small farms are productive in the african context and that smallholders do not forgo economies of scale a premise supported by the often observed phenomenon that staple cereal yields decline as the scale of production increases this paper explores a research design conundrum that encourages researchers who study the relationship between productivity and scale to use surveys with a narrow geographic reach when policy would be better served with studies based on wide and heterogeneous settings using a model of endogenous technology choice the authors explore the relationship between maize yields and scale using alternative data since rich descriptions of the decision environments that farmers face are needed to identify the applied technologies that generate the data improvements in the location specificity of the data should reduce the likelihood of identification errors and biased estimates however the analysis finds that the inverse productivity hypothesis holds up well across a broad platform of data despite obvious shortcomings with some components it also finds surprising consistency in the estimated scale elasticities

household composition labor markets and labor demand testing for separation in agricultural household models this paper tests the separation of farm labor supply and labor demand decisions using the observation that household composition is an important determinant of farm labor use with nonseparation after assessing the conditions under which the test has power against several alternatives an empirical model is developed to test the proposition that farm employment is independent of family composition the model is estimated on a data set from rural java the null hypothesis that farm labor allocation decisions are independent of household structure is not rejected the results are robust to different specifications of the labor demand function copyright 1992 by the econometric society

contract renegotiation and coasian dynamics consider a long term relationship between a seller and a buyer whose valuation for a per period service or a durable good is private as trade progresses the valuation will be partially revealed and it may be impossible for the parties to commit ex ante not to take advantage of this we analyse this situation first by supposing that the parties can sign a sequence of short term contracts and secondly by supposing that they can sign a long term contract but cannot commit not to renegotiate it later we find a close relationship in the second case between the optimal long term contract and the non commitment outcome in the standard coasian durable good model our results also have implications for hidden information principal agent models

corruption in procurement and public purchase abstract the paper studies capture and extortion in public purchase it shows that capture yields a dead weight loss while extortion does not based on the calibration of the model the total cost of capture is between 1 2 and 2 88 times the amount of the bribes the theoretical analysis focuses on capture fight the legal framework that emerges from the normative analysis involves open tender for larger purchases and no monitoring for the smaller ones the rule is independent of a country s characteristics large public purchases should hence be ruled by international legislation for markets of medium range national legislation differs when susceptibility to corruption rises there is a shift from the capture to the extortion regime

credit and efficiency in centralized and decentralized economies we study a credit model where because of adverse selection unprofitable projects may nevertheless be financed indeed they may continue to be financed even when shown to be low quality if sunk costs have already been incurred we show that credit decentralization offers a way for creditors to commit not to refinance such projects thereby discouraging entrepreneurs from undertaking them initially thus decentralization provides financial discipline nevertheless we argue that it puts too high a premium on short term returns the model seems pertinent to two issues soft budget constraint problems in centralized economies and differences between anglo saxon and german japanese financing practices

seasonal rural labor markets and their relevance to policy analyses in developing countries abstract seasonality is a salient feature of rural livelihoods and particularly within agriculture the demand for labor varies with the seasons and weather in low income countries agriculture employs almost two thirds of the labor force and incomes from labor are a major determinant of welfare therefore an appropriate model representation of rural labor markets is critical when analyzing agricultural and food policies economy wide models are commonly used for ex ante policy analysis but have so far ignored the influence of seasonality implicitly assuming separability of seasonal labor demand and supply this study relaxes that assumption using a computable general equilibrium cge model calibrated to the bhutanese economy as an illustrative case using model setups with and without seasonal labor markets a cereal export ban of india is simulated leading to higher import prices for bhutan results demonstrate that neglecting the influence of seasons on rural labor markets systematically biases model results assuming homogeneity of labor units i e allowing substitution across seasons understates the impacts of policy changes on rural wage rates distorts households labor leisure trade off decisions and overstates agricultural supply response given the widespread use of economy wide models the results are important for understanding the implications of domestic and global policy changes for agriculture and welfare in developing economies

sequential decision making in production models single equation estimates of production models usually are justified by the assumption that production inputs are chosen as part of a one period decision problem yet most production decisions in agriculture are made sequentially in this paper the farmer s optimal input choices are modeled as optimal controls in a stochastic control problem a two period cobb douglas example is used to show that sequential solutions to production problems may yield models which require either single equation or simultaneous equation estimators functional separability stochastic specification and behavior under uncertainty are discussed in the context of dynamic production models

smoothing consumption by smoothing income hours of work responses to idiosyncratic agricultural shocks in rural india while research has demonstrated that farm households in developing economies are able to protect consumption from idiosyncratic crop shocks little evidence shows how this is achieved this paper examines the extent to which labor markets allow households to shift labor from farm to off farm employment and the extent to which such a shift explains the observed lack of correlation between consumption and idiosyncratic crop shocks the empirical analysis uses a novel measure of the idiosyncratic crop income shock which utilizes information on start of season cropping choices to more accurately estimate household expectations of weather

a theory of privatisation public enterprises around the world have proved to be highly inefficient primarily because they pursue strategies such as excess employment that satisfy the political objectives of politicians who control them privatization of public enterprises can raise the cost to politicians of influencing them since subsidies to private firms necessary to force them to remain inefficient are politically harder to sustain than wasted profits of the state firms in this way privatization leads to efficient restructuring of firms moreover privatization is more effective when combined with a tight monetary policy and when the new owners of firms are profit maximizing investors rather than their employees or even managers copyright 1996 by royal economic society

empirical evidence on satisfaction with privatization in latin america since the 1980s privatization of formerly state owned firms has been extensively implemented by governments across latin america despite the fact that most evaluations of the process fail to find significant adverse efficiency and welfare effects there has been a strong surge in public discontent with such policy in the region this paper performs a systematic empirical analysis of the determinants of such dissatisfaction using survey data from latinobarometro covering 17 countries over the period 1998 2008 complemented by country level data on macroeconomic political and institutional aspects as well as data on privatization dissatisfaction appears to respond to absolute and relative welfare effects and the authors find a robust u shaped effect in term of education and income levels with individuals in the middle of such distributions being more critical with the outcome of privatizations

production risk pesticide use and gm crop technology in south africa technology involving genetic modification of crops has the potential to make a contribution to rural poverty reduction in many developing countries thus far pesticide producing bacillus thuringensis bt varieties of cotton have been the main gm crops under cultivation in developing nations several studies have evaluated the farm level performance of bt varieties in comparison to conventional ones by estimating production technology and have mostly found bt technology to be very successful in raising output and or reducing pesticide input however the production risk properties of this technology have not been studied although they are likely to be important to risk averse smallholders this study investigates the output risk aspects of bt technology by estimating two flexible risk production function models allowing technology to independently affect the mean and higher moments of output the first is the popular just pope model and the second is a more general damage control flexible risk mode

household use of agricultural chemicals for soil pest management and own labor for yard work in spite of its potential health and environmental risks and contribution to agribusiness the use of agricultural chemicals for yard care has not been well studied in our discrete continuous choice model estimated with data from a national survey a household chooses how much money if any to initially spend on types of agricultural chemicals and applicators and how much time to subsequently spend on other yard work households in big cities or with large gardens are more likely to use organic chemicals the probability that a household chooses a mix of do it yourself and hired applications of synthetic chemicals increases with income age and the presence of preschoolers among households that apply only synthetic chemicals without hired help those with young children with higher incomes in big cities and with male heads spend more on the chemicals the time that such households spend on other yard work increases with expenditures on the chemicals cancellation of a pesticide registration might create an extra private cost for households with young children even though the ban might reduce external costs

corruption and inefficiency theory and evidence from electric utilities we investigate the determinants of the efficiency of firms with a focus on the role of corruption we construct a simple theoretical model where corruption increases factor requirements of firms because it diverts managerial effort away from factor coordination we then exploit a unique dataset comprising firm level information on 80 electricity distribution firms from 13 latin american countries for the years 1994 to 2001 as predicted by the model we find that more corruption in the country is strongly associated with more inefficient firms in the sense that they employ more inputs to produce a given level of output the economic magnitude of the effects is large the results hold both in models with country and firm fixed effects the results survive several robustness checks including different measures of output and efficiency and instrumenting for corruption other elements associated with inefficiency are public ownership inflation and lack of law and order but corruption appears to play a separate and more robust role

the privatization of the fixed line telecommunications operator in oecd latin america asia and africa one size does not fit all summary this paper challenges the idea that there exists a unique model of reform for infrastructure sectors which is equally applicable across regions and countries and expected to yield similar outcomes we perform an empirical analysis of the impact of privatization of the fixed line activity of the traditional telecommunications operator on network expansion tariffs and labor efficiency in a 1985 2007 data set on a selection of 108 countries that we split into regional sub samples we find that the performance of privatization depends to a large extent on regional factors related to market profitability wealth and geography

the response of peasant farmers to price incentives the use and misuse of profit functions recent famines in chad ethiopia and the sudan have highlighted a major problem facing less developed countries how does an ldc become self sufficient in food production the answers to this question range from the narrowly defined economic one or economistic approach to the more widely based institutional reforms approach the former approach typified by say schultz 1964 or the world bank 1982 would emphasise the importance of mainly price incentives the latter approach as typified by myrdal 1968 in his monumental work asian drama would emphasise the importance of land reforms as a pre condition for agricultural development the debate has sometimes followed a misleading path and discussed whether peasants are rational or whether they are lazy inert tradition bound etc the aim of this article is to show that the use of profit functions to model peasant behaviour in ldcs is seriously flawed neo classical economic theory within which profit functions are embodied ignores the historical social institutional and political context within which peasant farmers operate peasant farmers do not operate in full blooded capitalist impersonal competitive input and output markets the article is structured as follows section ii outlines the profit function approach and section iii provides a survey and critique of applications of the profit function to ldc agriculture section iv concludes with some general remarks on analysing peasant behaviour in an alternative paradigm

mises hayek and corruption using the arguments of ludwig von mises and friedrich august von hayek i argue that private ownership solves the economic problem of corruption since private ownership discourages entrepreneurs from rent seeking and privately owned media provide objective and unbiased information to citizens any legal reform establishing and enforcement of private ownership also solves the corruption problem

tactical responses to seasonal conditions in whole farm planning in western australia abstract in dryland agricultural systems efficient farm management requires a degree of flexibility according to variations in climate from year to year tactical adjustments to the mix of farm enterprises can capitalize on good growing conditions and minimise losses under poor growing conditions in this paper a discrete stochastic programming model of dryland wheat sheep farms in western australia is used to identify optimal tactical adjustments to climate and to calculate the value of these tactical adjustments the model mudas includes nine discrete season types with a wide range of options for tactical adjustments in each in the standard model optimal tactical responses increase expected net cash surplus by approximately 22 relative to a fixed or inflexible strategy in most season types changes to the long term farm strategy are made on less than 10 of the farm area although in some seasons over 25 of the farm can require adjustments to the enterprise selected the benefits of flexibility are not evenly distributed across different season types but occur predominantly in the best and worst seasons the magnitude of benefits is affected differently by different commodity prices benefits of flexibility are due to capitalizing on knowledge about the greater volatility of profits from cropping than from livestock production deterministic models and even stochastic models which don t include activities for tactical adjustments miss this key feature of the system

estimation of area elasticities from a standard profit function this article demonstrates that both crop area and output elasticities can be calculated from a profit function a chambers just profit function which includes land allocations as quasi fixed factors is used to derive shadow price equations for each crop area allocation jointly solving these shadow price equations for crop area makes it possible to calculate individual crop area elasticities a profit function is specified to represent agricultural producers in the state of iowa shadow price equations are jointly estimated with output supply and input demand equations from these estimated equations we derive the individual crop area response and output response to a change in prices

the importance of seasonal variability and tactical responses to risk on estimating the economic benefits of integrated weed management seasonal variability is an important source of risk faced by farmers and regardless of an individual s attitude to risk there are options to tactically adjust production strategies as the outcomes of risk become known the objective of this article is to measure the economic benefits of alternative approaches to managing weeds one of the most serious production problems in australian cropping systems a bioeconomic model that combines weed biology crop growth and economics is developed to value the effects of seasonal variability and the role of tactical responses and sequential decision making in determining an optimal integrated weed management strategy this shows that there are substantial differences in the measured long term benefits from deterministic and stochastic simulations it is concluded that for research evaluation of technologies that involve complex biological and dynamic systems ignoring the impacts of seasonal variability responses to risk and sequential decision making can lead to an incorrect estimate of the economic benefits of a technology in this case study of optimal weed management strategies in australia the size of the error is high

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

consumption risk technology adoption and poverty traps evidence from ethiopia much has been written on the determinants of input and technology adoption in agriculture with issues such as input availability knowledge and education risk preferences profitability and credit constraints receiving much attention this paper focuses on a factor that has been less well documented the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests building on an explicit model this is explored in panel data for ethiopia historical rainfall distributions are used to identify the counterfactual consumption risk controlling for unobserved household and time varying village characteristics it emerges that not just ex ante credit constraints but also the possibly low consumption outcomes when harvests fail discourage the application of fertilizer the lack of insurance causes inefficiency in production choices