reputational concerns with altruistic providers we study a model of reputational concerns when doctors differ in their degree of altruism and they can signal their altruism by their observable quality when reputational concerns are high following the introduction or enhancement of public reporting the less altruistic bad doctor mimics the more altruistic good doctor otherwise either a separating or a semi separating equilibrium arises the bad doctor mimics the good doctor with probability less than one pay for performance incentive schemes are unlikely to induce crowding out unless some dimensions of quality are unobservable under the pooling equilibrium a purchaser can implement the first best quality by appropriately choosing a simple payment scheme with a fixed price per unit of quality provided this is not the case under the separating equilibrium therefore policies that enhance public reporting complement pay for performance schemes

money barter and the optimality of legal restrictions we examine a decentralized monetary economy in which households can use a means of exchange barter or gold other than fiat money the alternative means of exchange may drive out money even if monetary exchange pareto dominates legal restrictions prohibiting other means of exchange may therefore be necessary with stochastic preferences households may use barter to supplement monetary purchases when they have an unexpectedly high demand however this may drive down the value of money in all states so low that households are again better off with fiat money alone the paper provides both stochastic and nonstochastic examples in which eliminating markets for goods or assets that compete with fiat money improves welfare

a walrasian theory of money and barter we study a barter economy in which each good is produced in two qualities and no trader can distinguish between the qualities of those goods he neither consumes nor produces we show that in competitive equilibrium there exists a unique good the one for which the discrepancy between qualities is smallest that serves as the medium of exchange this good mediates every trade equilibrium is inefficient because production of the medium would be lower if it were not for its mediating role introducing fiat money enhances welfare by eliminating this distortion however high inflation drives traders back to the commodity medium

multiple and pairwise non nested tests of the influence of taxes on money demand the minimal computational requirements of the linear embedding techniques initiated by davidson and mackinnon 1981 accommodate multiple and binary tests of autoregressive non nested regression models with different dependent variables the small sample adjustments of fisher and mcaleer 1981 effectively reduce the size of the p tests for our models our application to transactions demand for money models supports the holmes and smyth 1972 hypothesis that pre tax variables are preferred to gnp in m1 money equations

purchasing health care services from providers with unknown altruism cost sharing rules for paying physicians have been advanced as a way of generating incentives for the provision of quality care while recognizing their potential negative effects on production efficiency however the optimal sharing rate typically depends on the degree to which the physician acts in the interest of the patient what we identify as the physician s altruism since the degree of altruism is likely to vary across physicians and to be private information the standard rules for setting the cost sharing rate are unlikely to be optimal this paper derives conditions for the optimal non linear cost sharing mechanism in the presence of asymmetric information about altruism and shows how it can sometimes be implemented through a menu of linear cost sharing schemes the model can be used to rationalize the design of the fund holder system for general practictioners that operated in the 1990s in the united kingdom

barter and monetary exchange under private information the authors develop a model of production and exchange with uncertainty concerning the quality of commodities and study the role of fiat money in ameliorating frictions caused by private information the model is specified so that without private information only high quality commodities are produced and there is no welfare gain from using money with private information there can be equilibria and sometimes multiple equilibria where low quality commodities are produced and money can increase welfare money works by promoting useful production and exchange in efficient monetary equilibria agents adopt strategies that increase the probability of acquiring high quality output copyright 1994 by american economic association

financial crisis gender and power an analytical framework abstract this paper begins to remedy the neglect of gender aspects of financial crises by exploring a suggestive microfoundational model of unequal gender power and cost bearing in a borrower household this model shows that financial market liberalization can assess women s access to formal sector employment and encourage the growth of household credit both for a household enterprise and for the acquisition of labor saving household assets the price of these gains however is greater household risk because of greater cash flow dependence and financial fragility a financial crisis can force the household to bear heavier adjustment costs than would otherwise be felt and these costs may well be borne disproportionately by women who become more economically vulnerable as a result

financial repression and firm self financing of investment empirical evidence from brazil analysis of 86 brazilian manufacturing firms operating during a period marked by some degree of financial repression demonstrates that investment spending influences the liquid asset holdings of firms this self finance motive is weaker than the transactions motive but in general remains statistically significant across a variety of model specifications small firms are more likely than large firms to finance investment spending through accumulation of liquid assets contrary to the complementarity hypothesis however there is some evidence that firms treat liquid assets and capital as substitutes specification tests comparing the shaw hypothesis with the mckinnon hypothesis weakly favour the complementarity model

a critical appraisal of mckinnon s complementarity hypothesis does the real rate of return on money matter for investment in developing countries this is the post print version of the final paper published in world development the published article is available from the link below changes resulting from the publishing process such as peer review editing corrections structural formatting and other quality control mechanisms may not be reflected in this document changes may have been made to this work since it was submitted for publication copyright 2009 elsevier b v

the stability of the m2 demand function evidence from an error correction model this note presents an error correction model of m2 demand the chow test indicates that the m2 demand function is stable over the sample period 1953q1 to 1991q2 copyright 1993 by ohio state university press

evolutionary efficacy of a pay for performance scheme with motivated agents the paper studies the short run and long run effects of the introduction of a team oriented pay for performance p4p payment scheme when agents may differ in their degree of intrinsic motivation toward the job suppose that new potential employees were able to assess the expected pay offs of current workers then they may modify their approach to work in order to follow the employee type that earned the highest expected pay off we show that the definition of the scheme needs to take into consideration the effects produced on the evolution of the motivation of new generations in particular the desirability and success of a p4p scheme strongly depend on the way incentives are allocated to the members of a team on the power of the quality related financial incentive and on the economic and social context in which the scheme is introduced the analysis is in part motivated by the introduction in uk in 2004 of a p4p scheme for family practitioners in the uk quality and outcomes framework qof and of a new system of assessing the quality of academic research completed in 2014 research excellence framework ref

contracting for health services when patient demand does not reflect quality this paper analyses contracts to keep down costs while maintaining quality of health services when patient demand does not reflect quality there is then a natural role for forms of contract that have emerged during the reforms of the nhs in britain that differ from pure fixed price or cost reimbursement contracts the optimal form depends on whether the provider is entirely self interested or benevolent in having genuine concern for patient welfare with fully benevolent providers there are roles for block and cost and volume contracts with partially benevolent providers some degree of cost sharing is typically optimal

financial development and poverty reduction can there be a benefit without a cost abstract this article investigates how financial development helps to reduce poverty directly through a distributional effect beyond its indirect effect through economic growth the results obtained with data for a sample of developing countries from 1966 through 2000 suggest that the poor benefit from the ability of the banking system to facilitate transactions and provide savings opportunities through the mckinnon conduit effect but to some extent fail to reap the benefit from greater availability of credit moreover financial development is accompanied by financial instability which is particularly detrimental to the poor nevertheless the benefits of financial development for the poor outweigh the cost

financial liberalization in india and a new test of the complementarity hypothesis abstract this article reappraises the financial repression hypothesis for india in light of the partial liberalization of the financial sector in the early 1990s using for the first time state of the art multivariate cointegration and vector error correction models vecm from this more robust testing procedure we find that for the indian economy over the sample period 1951 99 money and capital are complementary suggesting that higher real interest rates will further raise the demand for money and lead to higher levels of investment furthermore testing for a structural break in the early 1990s to coincide with the liberalization of the financial sector in india suggests that these reforms have not significantly changed the complementary relationship between money and capital the policy implication is that further financial liberalization maybe required in india to enhance investment and economic growth

public sector banking efficiency and economic growth in india abstract this paper develops a framework that integrates harrod domar growth model and mckinnon shaw hypothesis via molho s dynamic adjustment mechanism the model is used to determine the impact of bank nationalization through aggressive bank branch expansion programs and priority sector credit allocation on india s financial savings investment productivity and gdp the empirical findings indicate that the bank nationalization policy has been a mixed blessing the aggressive bank branch program since 1969 resulted in an increased in savings investment productivity of capital and gdp however the priority sector credit allocation policy did not fully achieve its desired goals

financial market development and trade openness evidence from emerging economies international trade is said to be the engine of economic growth despite an enormous effort to explain this phenomenon the relationship between financial market development and trade openness and integration into the world economy is still an enigma this article investigates the relationship between financial market development and trade openness to do this we develop a long run and short run model a bounds testing approach to cointegration for 18 emerging economies over the period 1980 to 2011 estimates from all models show that financial market development including both the stock market and the banking sector has significant effect on trade openness in both short run and long run phenomena in the majority of countries despite many similarities among emerging economies additional evidence suggests that the link between either stock market development or banking sector development with trade openness works via each country s specific structure

profit or patients health benefit exploring the heterogeneity in physician altruism abstract this paper investigates physician altruism toward patients health benefit using behavioral data from hennig schmidt et al s 2011 laboratory experiment in the experiment medical students in the role of physicians decide on the provision of medical services the experimental setup allows us to identify the influence of profits and patients health benefit on the choice of medical treatment we estimate physician altruism the weight individuals attach to patients health benefit by fitting mixed logit and multinomial logit regression models to the experimental data estimation results provide evidence for physician altruism we find however substantial variation in the degree of physician altruism we also discuss some implications of our results for the design of physician payment schemes in the light of the theoretical literature

on the reinterpretation of money demand regressions a stylized fact concerning estimated money demand relationships is that lagged dependent variables have high explanatory power and large estimated coefficients which is hard to explain at a theoretical level marvin s goodfriend 1985 suggests that this may be due to the presence of serially correlated measurement errors in the independent variables the author demonstrates how consistent estimates of the short run demand function can be obtained even if the goodfriend hypothesis is accepted and also how the hypothesis might be tested application of the suggested test using the goldfeld 1973 data set leads to decisive rejection of the hypothesis copyright 1994 by ohio state university press

barter in the us economy a macroeconomic analysis in this paper a statistical model is developed to examine the determinants of the growing level of barter transactions in the us although a barter system is believed to be pareto inferior to a money system recent statistics of the estimated level of barter transactions in the us show a rapidly growing interest by large corporations as well as individuals in this type of trade the primary obstacle in empirical research in this area is the difficulty of measuring the size of barter transactions here data from barter exchange organizations are used to test the significance of several variables the ordinary least squares and cointegration and error correction models are employed as two alternative empirical techniques to analyse the data the results support the counter cyclical arguments as well as the inflation factor however the notion of tax evasion as a motive in organized barter receives only a partial support

production function with electricity consumption and policy implications in portugal using a sample of quarterly data we investigate the effect of electricity consumption capital formation and financial development on economic growth in portugal a positive negative shock of electricity consumption is estimated to have increased decreased economic growth economic growth is positively affected by positive shock stems in capital a positive negative shock in financial development declines increases economic growth these findings reveal that a portugal is still an energy dependent economy b energy is one of the major inputs for economic growth and development c a conservation energy policy should not be implemented because energy is an important driver of growth d economic growth enhances capital formation and not the opposite hence it appears more relevant to boost economic growth before enhancing capital formation e financial development does not appear to be an important catalyst for economic growth findings also highlight f the relevance of the recent energy policy implemented in portugal and g the need to limit energy imports by means of producing electricity through renewable energy to reduce the external debt level in portugal especially after the 2008 crisis

internal funds and corporate investment in india abstract several economists have argued that capital markets in less developed countries are fragmented fragmented capital markets retard the efficient allocation of resources and force business firms to rely on internal sources of funds using firm level data the authors examine the importance of the accelerator internal funds and depreciation for investment by manufacturing firms in india the results indicate that internal funds and depreciation have significant explanatory power in a sales accelerator model of investment and that there exists heterogeneity among firms in the link between internal funds and investment in particular internal funds are relatively more important for large firms and firms that produce luxury goods

the financial repression liberalization debate taking stock looking for a synthesis financial repression and liberalization became the object of fierce debates between academics and policy makers since the early 1970s as of the late 1980s financial liberalization became also part of the structural adjustment programs sponsored by the international monetary fund and the world bank however the literature on financial repression and liberalization remains controversial on its theoretical conclusions and policy implications given its importance for both the theory and policy of economic development and growth this paper looks for a possible synthesis after reviewing the theoretical contributions and empirical studies under the headings of the mckinnon shaw and new structuralists models the survey concludes that a new synthesis might be found in the post keynesian attempt to take an institutional perspective within a globalised financial and economic environment

monetization financial liberalization and economic development barter sector in 1954 55 the monetized sector contributed 69 to the net national product of india the share of the monetized sector increased to 78 6 of the net national product by 1974 75 during this period the explicit objective of monetary policy in india was to help accelerate the pace of economic development in an environment of reasonable price stability there are several versions of the financial liberalization hypothesis but the one put forward by ronald mckinnon is chosen here because of its succinctness and easy amenability to empirical verification 2 mckinnon s theory in essence deals with the effect of financial liberalization on the accumulation of capital through a policy of high real interest rates this formulation has been made operational by estimating the response of real demand for money balances and private investment to alternative rates of return under the implicit assumption that these are the only two alternative forms of assets held by the private sector 3 all this is predicated on the assumption that the effective limitation on the rate of real capital formation is the supply of real savings and not the inadequate willingness to invest most underdeveloped countries have a significant barter sector a reduction in the share of the barter sector can help to further accelerate the accumulation of capital in a barter system a good share of the factors of production is tied up in distribution away from production to achieve the double coincidence required in such a system with the

competition and incentives with motivated agents a unifying theme in the literature on organizations such as public bureaucracies and private nonprofits is the importance of mission as opposed to profit as an organizational goal such mission oriented organizations are frequently staffed by motivated agents who subscribe to the mission this paper studies incentives in such contexts and emphasizes the role of matching the mission preferences of principals and agents in increasing organizational efficiency matching economizes on the need for high powered incentives it can also however entrench bureaucratic conservatism and resistance to innovations the framework developed in this paper is applied to school competition incentives in the public sector and in private nonprofits and the interdependence of incentives and productivity between the private for profit sector and the mission oriented sector through occupational choice jel d23 d73 h41 l31 the late twentieth century witnessed a historic high in the march of market capitalism with unbridled optimism in the role of the profit motive in promoting welfare in the production of private goods moreover this generated a broad consensus on the optimal organization of private good production through privately owned competitive firms when it comes to the provision of collective goods no such consensus has emerged debates about the relative merits of public and private provision still dominate this paper suggests a contracting approach to the provision of collective goods it focuses on two key issues how to structure incentives and the role of competition between providers at its heart is the idea that organizations that provide collective goods cohere around a mission 2 thus production of collective goods can be viewed as mission oriented

the stability of long run money demand in five industrial countries abstract this study provides strong evidence for the stability of long run demand functions for narrowly defined money m1 in five industrial countries u s japan canada u k and west germany using post war quarterly data evidence of stability is examined using two different estimation techniques and through a formal test of parameter constancy designed specifically for cointegrating vectors in the majority of these countries the key to stability is the imposition of a unitary long run income elasticity that is rarely rejected by the data

an analysis of the demand for cash balances by the manufacturing firms in a developing economy abstract using cross section data this paper presents the results of an evaluation of the role of cash balances as a factor input in india s manufacturing industries by using a three factor translog cost function for each of the major industries along with duality theory it was possible to estimate the allen partial elasticities of substitution and the own price elasticities of demand for each factor input three significant conclusions are drawn a cash balances and labor are predominantly substitutes and cash balances and capital are by and large complementary implications of this for choice of techniques is analyzed b the interest elasticity of demand for cash varies with industry from 0 0013 to 0 4756 c separability tests indicate that omitting cash balances from the production function would involve a misspecification of the latter

the effect of barter on the demand for money an empirical analysis abstract the impact of barter on the m2 money demand for the u s is explored the results show that in addition to the traditional explanatory variables the level of barter must be included in the estimates of the demand for money

paying for performance and motivation crowding out abstract we investigate how prices affect output when publicly funded providers differ in altruism and enjoy being perceived as good and not as greedy a higher price increases output for low and high altruism providers intermediate altruism providers do not respond or reduce output

cheating in a duopoly supergame this paper examines an approach to oligopoly theory first proposed in a relatively neglected paper by georgej stigler i 964 suppose that the firms in an oligopoly have achieved tacitly or explicitly a collusive agreement and that open defection in a sense to be made more precise below does not pay given that the other firms observe the agreenient it pays any one of them to cheat that is to make secret price cuts to selected buyers in order to secure sales it may not otherwise have made stigler then sets out to define the likely extent of the gain a cheat can make without detection and to relate this to observable market parameters this would allow prediction of the probable incidence of cheating in a market and hence of the effectiveness of the collusive agreement stigler first argues that in a purely deterministic world there could be no scope for cheating each firm s sales could be fully anticipated and any deviation from the expected level would be immediate evidence of cheating which becomes in effect open defection implicit in this of course is the assumption that firms can observe each others outputs at negligible cost a reasonable assumption which will be maintained throughout the rest of this paper if the world is not in fact deterministic then scope for cheating may arise suppose that in each period any one buyer buys from any one seller with a probability between zero and one then each seller s sales in each period are a random variable and it is possible that a seller may attribute to chance a well above average sales level which in fact was due to cheating in deciding whether to accept this the other sellers are involved in hypothesis testing and the critical level of this test will determine how far a cheat dare go stigler s development of this idea in a formal model is open to a number of specific criticisms mckinnon i 966 criticized the excessively simplistic decision theoretic basis of stigler s model in deciding whether a rival has gained above average sales by cheating or simply by chance a firm is assumed to use a standard significance test with conventional critical levels the choice of which is entirely unexplained in the model there is also an unnecessary separation of tests according to the precise source of the buyers won by cheating previous customers of the cheat other firms customers or newly

a model of fiat money and barter abstract we present an infinite horizon model with capital in which fiat money and barter are two competing means of payment fiat money has value because barter is limited by the extent of a double coincidence of wants the pattern of exchange generally involves both money and barter we find that the chicago rule is sufficient for pareto efficiency while nominal interest smoothing is necessary for a specific utility function we provide a complete characterization of the patterns of exchange and calculate the range of inflation rates over which a stationary monetary equilibrium exists journal of economic literatureclassification numbers d51 e42 e52

financial development financial structure and domestic investment international evidence does it matter for domestic investment whether a country s financial system is bank based or stock market based this paper posits that financial intermediation affects domestic investment notably by alleviating financing constraints allowing firms to increase investment in response to increased demand for output the key result is that the structure of the financial system has no independent effect on investment in the sense that it does not enhance the response of investment to changes in output while financial development makes investment more responsive to output growth consequently rather than promoting a particular type of financial structure countries should implement policies that reduce transactions costs in financial intermediation and enforce creditor and investor rights this will facilitate the development of banks and stock markets which will stimulate domestic investment

building a bric stock market opening and investment finance in india since liberalization portfolio equity inflows have been a feature of india s improved growth performance in recent years this study examines a possible connection through the equity financing of capital formation by manufacturing firms emphasis is placed on the funding preferences of owner controlled enterprises with the empirical results connecting equity issues to the management of gearing and the availability of internal funds this context suggests strongly that equity and debt are complementary choices although two channels of influence macroeconomic and allocative combine to encourage investment spending with pro cyclical implications

delegation and firms ability to collude abstract in a model of repeated cournot competition under complete information we show that delegation has no effect on cartel stability if managers collude while it may hinder cartel stability when owners collude in setting the incentive schemes if owners can choose whether to delegate or keep control of their respective firms and both groups of individuals collude or play non cooperatively in their respective variables according to the level of intertemporal discount factor then if managers are not able to collude in output levels owners delegation decision is non monotone in the discount factor

international capital flows identifying the gender dimension abstract this paper explores the main issues involved in examining the gender impact of international capital flows to developing countries it argues that at the macroeconomic level women lose more than men from slow and or unstable economic growth financial crises and meltdowns and even more so the longer and deeper the economic downturn because without a social security system the family and women have many additional burdens women should formulate an agenda of their own with respect to international monetary reform and some proposals are outlined in this respect including those involving capital controls

cartel stability and product differentiation abstract this paper employs a supergame theoretic model of collusion to analyze the effects of different levels of product differentiation on cartel stability in contrast to earlier work the ability of the parties to reach an agreement is assumed here the focus is on how greater product homogeneity increases both the gain to cheating on a collusive agreement and the magnitude of the punishments that follow a defection the total effect on the likelihood a cartel is stable is therefore unclear two particular differentiated products models are then used to demonstrate that contrary to the conventional view greater homogeneity can reduce cartel stability