the impact of uncertainty shocks in emerging economies abstract a recent strand of research proposes that sudden jumps in uncertainty generate rapid drops and recoveries in real macroeconomic variables that drive the business cycle using an empirical model we find substantial heterogeneity in reactions to these shocks across countries in comparison to the u s and other developed countries emerging economies suffer much more severe falls in investment and private consumption following an exogenous uncertainty shock take significantly longer to recover and do not experience a subsequent overshoot in activity we provide evidence that the dynamics of investment and consumption are correlated with the depth of financial markets we control for the potential role of a credit channel and estimate that it can account for up to one half of the increased fall in investment generated by uncertainty shocks among emerging economies with less developed financial markets in this context monetary and fiscal policy actions that alleviate the impact of credit constraints facing firms may reduce the impact of uncertainty shocks in these economies

the dynamics of international capital flows results from a dynamic hierarchical factor model abstract the present paper examines the degree of comovement of gross capital inflows which is a highly sensitive issue for policy makers we estimate a dynamic hierarchical factor model that is able to decompose inflows in a sample of 47 economies into i a global factor common to all types of flows and all recipient countries ii a factor specific to a given type of capital inflows iii a regional factor and iv a country specific component we find that the latter explains by far the largest fraction of fluctuations in capital inflows followed by regional factors which are particularly important for emerging markets fdi and portfolio inflows as well as bank lending to emerging europe the global factor however explains only a small share of the overall variation we also employ dynamic panel and time series regressions to explain the determinants of the estimated components the global factor is shown to reflect u s financial conditions

global financial shocks and foreign asset repatriation do local investors play a stabilizing role we study the dynamic response of gross capital flows in emerging market economies to different global financial shocks using a panel vector autoregressive pvar approach our focus lies primarily on the potentially stabilizing role played by domestic investors in offsetting the response of foreign investors to adverse global shocks we find that while foreign investors tend to retrench from emerging markets in response to global risk aversion and monetary policy shocks foreign asset repatriation by resident investors does not always follow suit local investors play a meaningful stabilizing role in the face of global risk aversion shocks with sizeable asset repatriation largely offsetting the retrenchment of non residents in contrast foreign investor retrenchment in response to global monetary policy shocks is not mirrored by asset repatriation finally we find robust evidence that positive global real shocks tend to have a positive impact on net capital inflows to emerging markets our results shed light on the likely impact of the fed s qe tapering on capital flows to emerging market economies

planning under incomplete information and the ratchet effect abstract central planning of production is usually performed under asymmetric information the firm in general has more information about its productive possibilities than the central planner from now on for short cp this justifies the use of incentives schemes in which the cp does not directly fix activity levels casual observation of such existing schemes suggests that the time dimensions is crucial for their working typically the cp revises the incentive scheme over time to take into account the information provided by the firm s performance managers of centrally planned economies as well as economists have long recognized that this revision induces firms to underproduce in order to avoid demanding schemes in the future this is the ratchet effect it is purpose of the present paper to study the ratchet effect under the non commitment assumption which we believe to be more realistic the inadequacy of conceptual tools made if difficult in the past to consider such an assumption now basic research on dynamic games with incomplete information recently resulted in new ideas which look particularly relevant for a theoretical analysis of the problem

dynamic procurement under uncertainty optimal design and implications for incomplete contracts we characterize the optimal dynamic contract for a long term basic service when an uncertain add on is required later on introducing firm risk aversion has two impacts profits for the basic service can be backloaded to induce cheaper information revelation for this service an income effect which reduces output distortions the firm must also bear some risk to induce information revelation for the add on this risk effect reduces the level of the add on but hardens information revelation for the basic service the interaction between these effects has important implications for the dynamics of distortions contract renegotiation and the value of incomplete contracts

sudden stops are global and local investors alike the main goal of this paper is to characterize the determinants of sudden stops caused by domestic vis a vis foreign residents are the decisions of domestic investors to invest abroad or of foreign investors to cut off funds from the domestic economy governed by the same set of determinants given the distribution of different types of sudden stop episodes over time and its different macroeconomic consequences the authors argue that the determinants may not be alike using an effective sample of 82 countries with annual information over the period 1970 2007 the analysis finds that global investors are less likely to stop bringing their capital when their economy is growing and the world interest rate is lower domestic agents are more willing to invest abroad if the macroeconomic performance of the domestic economy is poor high inflation the financial system is weak and there are high external savings current account surpluses increasing financial openness makes the domestic country more vulnerable to sudden stops caused by either local or global investors finally countries with higher shares of foreign direct investment are less prone to inflow driven sudden stops whereas the opposite holds for outflow driven sudden stops

news and monetary shocks at a high frequency a simple approach we develop a simple approach to identify economic news and monetary shocks at a high frequency the approach is used to examine financial market developments in the united states following the federal reserve s may 22 2013 taper talk suggesting that it would begin winding down its quantitative easing program our findings show that the sharp rise in 10 year treasury bond yields immediately after the taper talk was largely due to monetary shocks with positive economic news becoming increasingly important in subsequent months

incentives for monitoring quality we analyze a procurement problem in which the quality of the delivered product can be observed perfectly by the buyer and supplier but may not be verifiable i e may not be observable to any third party we present a set of plausible conditions under which the equilibrium welfare of both the buyer and supplier is higher when quality is verifiable than when it is unverifiable the welfare gain for the privately informed supplier arises even when the buyer has all the bargaining power thus the interests of the buyer and supplier coincide with regard to whether delivered quality should be made verifiable

a panel data analysis of the fungibility of foreign aid the donor community has been increasingly concerned that development assistance intended for crucial social and economic sectors might be used directly or indirectly to fund unproductive military and other expenditures the link between foreign aid and public spending is not straightforward because some aid may be fungible this article empirically examines the impact of foreign aid on the recipient s public expenditures using cross country samples of annual observations for 1971 90 for the base sample of 14 developing countries it finds that aid is not fungible at the aggregate level and there is no associated tax relief increasing the number of countries however makes aid fungible moreover results based on the main sample indicate that aid is fungible in three out of five sectors examined developing country governments receiving earmarked concessionary loans for agriculture education and energy reduce their own resources going to these sectors and use them elsewhere only loans to the transport and communication sector are fully spent on the purposes intended by donors because most aid appears to be fungible the rate of return on a specific donor funded project tells little about the impact of that assistance a better approach may be to tie foreign aid to an overall public expenditure program that provides adequate resources to crucial sectors

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had

extracting information or resource the hotelling rule revisited under asymmetric information we characterize the optimal extraction path when a concessionaire has private information on the initial stock of resource under asymmetric information a virtual hotelling rule describes how the resource price evolves over time and how extraction costs are compounded with information costs along an optimal extraction path in sharp contrast with the case of complete information elds which are heterogeneous in terms of their initial stocks follow di erent extraction paths some resource might be left unexploited in the long run as a way to foster incentives the optimal contract may sometimes be implemented through royalties and license fees with a market of concessionaires asymmetric information leads to a virtual her ndahl principle and to a new form of heterogeneity across active concessionaires under asymmetric information the market price converges faster to its long run limit exhibiting more stability

intraregional spillovers in south america is brazil systemic after all the high business cycle correlation between brazil the large neighbour in south america and other countries in the region has been a frequent source of concern for policymakers as it has been viewed as evidence of the large influence of the former country on its neighbours this paper studies the importance of such influence documenting trade linkages over the last two decades and quantifying spillover effects in a vector autoregression setting we find that after controlling for common external factors spillovers from brazil are only relevant for southern cone economies especially mercosur s members and peru but not for the rest of south america and these findings are consistent with the extent of trade linkages between these countries we find also that spillovers can take two different forms the transmission of brazil specific shocks and the amplification of global shocks through their impact on brazil s output finally we also find suggestive evidence that depreciations of brazil s currency may not have significant impact on output of its key trading partners

the voracity effect abstract we analyze an economy that lacks a strong legal political institutional infrastructure and is populated by multiple powerful groups powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock in equilibrium this leads to slow economic growth and a voracity effect by which a shock such as a terms of trade windfall perversely generates a more than proportionate increase in fiscal redistribution and reduces growth we also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks jel f43 o10 o23 o40

adverse selection and renegotiation in procurement as was shown by dewatripont optimal long term contracts are generally not sequentially optimal the parties ex post renegotiate them to their mutual advantage this paper fully characterizes the equilibrium of a simple two period procurement situation and studies the extent to which renegotiation reduces ex ante welfare i a central result is that like in the non commitment case the second period allocation is optimal for the principal conditionally on his posterior beliefs about the agent ii the first period allocation exhibits an increasing amount of pooling when the discount factor grows iii with a continuum of types it is never optimal to induce full separation the paper also analyzes whether renegotiated long term contracts yield outcomes resembling those under either unnegotiated long term contracts or a sequence of short term contracts and it links the analysis with the multiple unit durable good monopoly problem

can the world cut poverty in half how policy reform and effective aid can meet international development goals abstract poverty in the developing world will decline by about one half by 2015 if the trends of the 1990s persist most of this poverty reduction will occur in asia however while poverty will decline only slightly in africa effective aid could make a contribution to greater poverty reduction in lagging regions even more potent would be significant policy reform in these countries we develop a model of efficient aid in which flows respond to policy improvements that create a better environment for poverty reduction and effective aid we investigate scenarios of policy reform and efficient aid that point the way to how the world can cut poverty in half in every major region

the dynamics of incentive contracts the paper studies a simple two period principal agent model in which the principal updates the incentive scheme after observing the agent s first period performance the agent has superior information about his ability the principal offers a first period incentive scheme and observes some measure of the agent s first period performance cost or profit which depends on the agent s ability and unobservable first period effort the relationship is entirely run by short term contracts in the second period the principal updates the incentive scheme and the agent is free to accept the new incentive scheme or to quit the strategies are required to be perfect and updating of the principal s beliefs about the agent s ability follows bayes rule the central theme of the paper is that the ratchet effect leads to much pooling in the first period first for any first period incentive scheme there exists no separating equilibrium second when the uncertainty about the agent s ability is small the optimal scheme must involve a large amount of pooling the paper also gives necessary and sufficient conditions for the existence of partition equilibria and looks at the effect of cost uncertainty

aid policies and growth the authors of this paper use a new database on foreign aid to examine the relationships among foreign aid economic policies and growth of per capita gdp in panel growth regressions for 56 developing countries and 6 four year periods 1970 93 they find that the policies that have a great effect on growth are those related to fiscal surplus inflation and trade openness they construct an index for those three policies and have that index interact with foreign aid they have instruments for both aid and aid interacting with policies they find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies in the presence of poor policies aid has no positive effect on growth this result is robust in a variety of specifications which include or exclude middle income countries include or exclude outliers and treat policies as exogenous or endogenous they examine the determinants of policy and find no evidence that aid has systematically affected policies either for good or for ill they estimate an aid allocation equation and show that any tendency for aid to reward good policies has been overwhelmed by donors pursuit of their own strategic interests in a counterfactual they reallocate aid reduce the role of donor interests and increasing the importance of policy such a reallocation would have a large positive effect on developing countries growth rates

ethnicity and development in africa a reappraisal 131 enroll while membership is an entitlement that can be activated the entitlement is restricted by family membership as in other developing regions formal institutions are weak in modern africa and persons therefore tend to organize economic relationships through social institutions one way of augmenting the stock of capital is through education another is through migration to the city to a great degree it is families who organize the flow of resources that promote both urban migration and the acquisition of skills recognizing the central role of families in the formation of capital one can achieve a better grasp of the relationship between modernization and ethnicity to a significant degree modernization is achieved through the process of human capital formation this process is privately organized that is to say it is organized by families families organize the flow of resources between generations and sectors thus promoting the acquisition of skills and urban migration and thus the modernization of societies it is by stabilizing the contract between generations within family units that ethnic groups facilitate the process of investment to illustrate i use data collected from a village in luapula province zambia which supplies labor to the mining centers of zambia and congo when conducting my field work i focused on links between town and country and found that the income rural dwellers derived from town varied systematically with the structure size age composition and education of their families the coefficients in the remittance function suggested that an additional child yields on average 3 23 kwacha in the form of financial those who study modern africa commonly highlight three features its poverty its instability and its ethnic diversity whether in lurid popularizations e g robert kaplan 1994 or in social scientific research e g william easterly and ross levine 1997 but see also paul collier and a hoeffler 1998 scholars reason that africa is poor because it is unstable and that its instability derives from its ethnic complexity ethnicity thus lies it is held at the root of africa s development crisis this essay critiques the conventional wisdom by mounting an alternative interpretation using both qualitative and quantitative data from africa this article argues that

can foreign aid accelerate stabilization this paper studies the effect of foreign aid on economic stabilization following alesina and drazen 1991 we model the delay in stabilizing as the result of a distributional struggle reforms are postponed because they are costly and each distributional faction hopes to reduce its share of the cost by outlasting its opponents in obstructing the required policies since the delay is used to signal each faction s strength the effect of the transfer depends on the role it plays in the release of information we show that this role depends on the timing of the transfer foreign aid decided and transferred sufficiently early into the game leads to earlier stabilization but aid decided or transferred too late is destabilizing and encourages further postponement of reforms

incentive regulatory policies the case of public transit systems in france we assess the empirical relevance of the new theory of regulation using a principal agent framework to study the regulatory schemes used in the french urban transport industry taking the current regulatory schemes as given the model of supply and demand provides estimates for the firms inefficiency the effort of managers and the cost of public funds it allows us to derive the first best and second best regulatory policies for each network and compare them with the actual situation in terms of welfare loss or gain fixed price policies lie between fully informed and uninformed second best schemes cost plus contracts are dominated by any type of second best contract from these results we may conjecture that fixed price contracts call for better informed regulators

what does the show case show evidence of and lessons from adjustment in uganda abstract uganda is often seen as an african show case for the beneficial effects of structural adjustment high growth rates have been combined with a high degree of ownership of the reforms at the same time critics have pointed to continued aid dependence and limited growth of the important agricultural export sector the contribution of this paper to this debate is three fold first ownership has not always been exemplary and is still fragile in some respects second although aid has indeed been important for bringing about high growth aid dependence has diminished over time third there have been real supply responses from the agricultural export sector

monopolistic screening under learning by doing this article investigates the design of incentives in a dynamic adverse selection framework where agents production technologies display learning effects and agents learning rates are private knowledge in a simple two period model with full commitment available to the principal we show that whether learning effects are over or underexploited crucially depends on whether more effcient agents also learn faster so costs diverge through learning effects or whether it is the less effcient agents who learn faster so costs converge we further show that an overexploitation of learning effects can occur also if the full commitment assumption is relaxed

the macroeconomic impact of development aid a critical survey the early literature explained aid s macroeconomic impact in the context of the dual gap model showing a clear link between aid and growth many now believe that the empirical evidence shows there to be no such relationship this paper critically reviews the different theoretical perspectives the dual gap model the savings debate recipient fiscal response and aid as dutch disease and the empirical debates on aid savings and growth the basis for denying a relationship between aid and growth is shown to be weak though more recent areas of research offer promising directions for future work

aid and the dutch disease macroeconomic management when everybody loves you abstract countries that undertake serious and sustained programs of stabilization and structural adjustment should expect to attract significant new inflows of capital from donor countries and international institutions while apparently beneficial those flows can work at crosspurpose with other goals of the policy reforms in particular abundant foreign exchange loans can force an appreciation of the real exchange rate often through domestic inflation rather than a nominal appreciation in addition since the government is almost always the recipient of these loans it can crowd out the private sector if it increases its aggregate demand for domestic goods and services if the crowding out is accomplished by tight monetary policy it will fall primarily on private investment rather than consumption this paper shows that both of these problems have surfaced in ghana a country that has become a favorite of donors after demonstrating a serious commitment to policies promoted by the world bank and international monetary fund the paper also suggests modifications in macroeconomic policy that would help lower inflation and boost private investment

using cost observation to regulate firms the paper emphasizes the use of accounting data in regulatory or procurement contracts when the supplier 1 has superior information about the cost of the project and 2 invests in cost reduction the main result states that under risk neutrality the supplier announces an expected cost and is given an incentive contract linear in cost overruns this optimal contract moves toward a fixed price contract as the announced cost decreases an investment choice is then introduced and the use of a rate of return regulation is studied

penalizing success in dynamic incentive contracts no good deed goes unpunished we examine optimal dynamic incentive contracts when adverse selection and moral hazard problems are present we find that early success is optimally penalized in the sense that the agent who succeeds early subsequently faces a lower powered incentive contract penalizing success in this manner serves to limit the agent s initial incentive to understate his ability

long term contracting with markovian consumers to study how a firm can capitalize on a long term customer relationship we characterize the optimal contract between a monopolist and a consumer whose preferences follow a markov process the optimal contract is nonstationary and has infinite memory but is described by a simple state variable under general conditions supply converges to the efficient level for any degree of persistence of the types and along any history though convergence is history dependent in contrast as with constant types the optimal contract can be renegotiation proof even with highly persistent types these properties provide insights into the optimal ownership structure of the production technology

optimal resource royalties with unknown and temporally independent extraction cost structures the authors study optimal nonrenewable resource royalty contracts when the extracting agent has private information on costs this is a dynamic incentive problem in which the repeated relationship between the principal and the agent is constrained by initial reserves commitment is limited to one period and costs are intertemporally independent compared with full information extraction information asymmetry shifts production to the future when the optimal contract requires exhaustion in two periods when exhaustion by all types in two periods is not warranted the effect on the terminal period is ambiguous and the output of even the lowest cost firm is always distorted copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

monopoly regulation in the presence of consumer demand reduction abstract i study a monopoly regulation in the setting where consumers can engage in demand reducing investments i first show that when the regulator ignores the consumers investments the excess investment occurs next i analyze the case where the regulator takes consumers investments into account and compare the optimal policy under asymmetric information with the first best policy optimal policy results in higher average price higher level of consumer investment but lower prices for efficient firms compared to the first best

halving poverty by doubling aid is there reason for optimism this paper criticises the world bank as overly optimistic with respect to its ability to fine tune development aid and to focus it on countries with good policies rather than on countries with poor policies in order to raise its effectiveness it is shown that recipient regions showed very different patterns of aid inflows and economic growth in the past and that aid flows yielded the highest correlation to growth when their magnitudes shrank it is furthermore argued that categorising countries by quality of domestic policies is not only questionable at a given point of time especially in countries with failing governmental institutions and open borders as in many african countries it suffers also from incentive problems so that countries receiving more aid can become victims of changes in their domestic policies which are more permissive and etatist to the disadvantage of private agents the paper instead pleads for a shift to aid policies decoupled from country specifics and more oriented to fundamental beyond border problems of the well being of the poor an international endowment fund under supranational law should finance research and implementation of research findings related to common international goods as it was suggested by sachs concerning aids and tropical disease research

on aid growth and good policies this study provides a critical analysis of the growth regressions in burnside and dollar 2000 first we analyse the relationship between aid and government expenditure in a modified neo classical growth model one of the main results of the analysis is that while good policies spur growths they may at the same time reduce the effectiveness of foreign aid second we show that the econometric results in burnside and dollar emphasising the crucial role of interaction between aid and good policies in the growth process are fragile as they are extremely data dependent finally we demonstrate that the burnside and dollar data lend support to the idea that the association between aid and growth can be approximated by decreasing returns to aid this finding conforms well to regression results in other recent studies

learning by doing and dynamic regulation from experience regulated monopolists learn to employ cost reducing innovations we characterize the optimal regulation of an innovating monopolist with unknown costs regulatory policy is designed to minimize current costs of service while encouraging development of cost saving innovations we find that under optimal regulation i innovation is encouraged by light handed regulation allowing the monopolist to earn greater information rents while providing greater service ii innovation occurs in the absence of long term agreements when private information is recurring and iii innovation is more rapid in a durable franchise and the regulator prefers durable franchises for exploiting learning economies

portfolio capital flows hot or cold a distinction is often made between short term and long term capital flows the former are deemed unstable hot money and the latter are deemed stable cold money using time series analysis of balance of payments data for five industrial and five developing countries we find that in most cases the labels short term and long term do not provide any information about the time series properties of the flow in particular long term flows are often as volatile as short term flows and the time it takes for an unexpected shock to a flow to die out is similar across flows long term flows are also at least as unpredictable as short term flows and knowledge of the type of flow does not improve the ability to forecast the aggregate capital account copyright 1995 by oxford university press

dynamic regulation of quality we develop a dynamic regulation model of quality provision where maintenance efforts and quality shocks have a durable impact when the regulator contracts with a sequence of agents asymmetric information can lead to overprovision of quality reflecting a dynamic rent extraction effect when the regulator contracts with a single agent the efficiency of their relationship depends on the regulator s ability to transfer rents across periods hiring a single agent with unlimited liability is socially preferable to hiring a sequence of agents even when no commitment is feasible by contrast shorter franchises are socially preferable if the agent has limited liability

the generalized war of attrition abstract we model a war of attrition with n k firms competing for n prizes in a natural oligopoly context the k 1 lowest value firms drop out instantaneously even though each firm s value is private information to itself in a standard setting context in which every competitor suffers losses until a standard is chosen even after giving up on its own preferred alternative each firm s exit time is independent both of k and of other players actions our results explain how long it takes to form a winning coalition in politics solving the model is facilitated by the revenue equivalence theorem jel d43 d44 l13 o30

aid instability as a measure of uncertainty and the positive impact of aid on growth this article contributes to the literature on aid and economic growth we posit that uncertainty measured as the instability of aid receipts will influence the relationship between aid and investment how recipient governments respond to aid and will capture the fact that some countries are especially vulnerable to shocks when we account for uncertainty which is negative and significant we find that aid has a significant positive effect on growth largely due to its effect on the volume of investment the finding that uncertainty of aid receipts reduces the effectiveness of aid is robust when the regression is estimated for the sub sample of african countries these findings hold although the effectiveness of aid appears weaker than for the full sample

politics and the effectiveness of foreign aid abstract critics of foreign aid programs have long argued that poverty reflects government failure in this paper i test predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes i find that aid does not significantly increase investment nor benefit the poor as measured by improvements in human development indicators but it does increase the size of government the impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive but liberal political regimes and democracies ceteris paribus have on average 30 lower infant mortality than the least free regimes this may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs an implication is that short term aid targeted to support new liberal regimes may be a more successful means of reducing poverty than current programs

aid and growth regressions this paper examines the relationship between foreign aid and growth in real gdp per capita as it emerges from simple augmentations of popular cross country growth specifications it is shown that aid in all likelihood increases the growth rate and this result is not conditional on good policy there are however decreasing returns to aid and the estimated effectiveness of aid is highly sensitive to the choice of estimator and the set of control variables when investment and human capital are controlled for no positive effect of aid is found yet aid continues to impact on growth via investment we conclude by stressing the need for more theoretical work before this kind of cross country regressions are used for policy purposes

do corrupt governments receive less foreign aid critics of foreign aid programs argue that these funds often support corrupt governments and inefficient bureaucracies supporters argue that foreign aid can be used to reward good governments this paper documents that there is no evidence that less corrupt governments receive more foreign aid on the contrary according to some measures of corruption more corrupt governments receive more aid also we could not find any evidence that an increase in foreign aid reduces corruption in summary the answer to the question posed in the title is no

incentives for conservation and quality improvement by public utilities the author examines the design of incentive programs to motivate regulated utilities to supply both basic service e g electricity supply local telephone service and service enhancements e g energy conservation services improved clarity and speed of voice communication the optimal regulatory programs are shown to vary greatly depending upon the information available to the regulator the price of the basic service may optimally be distorted above or below marginal cost to better motivate the supply of the service enhancement policy prescriptions are compared with current programs and proposals to promote energy conservation 35 refs 2 figs