repeated moral hazard and contracts with memory the case of risk neutrality we consider a repeated moral hazard problem where both the principal and the wealth constrained agent are risk neutral in each of two periods the agent can exert unobservable effort leading to success or failure incentives provided in the second period act as carrot and stick for the first period so that the effort level induced in the second period is higher after a first period success than after a failure if renegotiation cannot be prevented the principal may prefer a project with lower returns i e a project may be too good to be financed or similarly an agent can be overqualified this article offers a new perspective on dynamic moral hazard problems consider a riskneutral principal who can hire a risk neutral but wealth constrained agent the agent can exert unobservable effort which increases the likelihood of success in the one shot problem there is a well known trade off between effort incentives and rent extraction which leads to a downward distorted effort level compared to the first best solution we extend the standard model by assuming that there is a second period in which the principal can make an investment to continue the project and the agent can again exert unobservable effort it turns out that there are several interesting insights that so far have escaped the literature on repeated moral hazard which was focused on the case of risk averse agents in particular if the principal can commit not to renegotiate the second period incentives can be used to partially circumvent the limited liability constraint in the second period the principal induces the agent to choose a particularly high effort level following a first period success and a particularly low effort level following a first period failure the prospect of a higher second period rent following a first period success motivates the agent to exert more effort in the first period i e rents in the second period act as reward and punishment for the first period it should be emphasized that we assume no technological impact of a first period success or failure on the second period technology nevertheless an optimal dynamic contract exhibits memory hence if an outsider observed today a principal agent pair that was successful and another identical pair that was not successful he would be right to predict that the first pair also is more likely to succeed tomorrow in other words a serial correlation across periods which we sometimes refer to as a hot hand effect is generated endogenously merely based on incentive considerations 2

the public private wage differential in a poor urban economy the occupational structure of wages is generally more compressed in high than in low income countries the role of non market forces in determining the structure of wages is of interest for reasons of allocative efficiency as well as for distributional concerns this paper considers how wage differentials may be generated between the public and private sectors of a developing economy data from a 1971 household survey of the tanzanian urban wage labor force are used to determine the pattern of wage differences across employer groups after standardizing by worker characteristics public sector employees are found to have earned a substantial wage premium over workers employed in the private sector the non market character of these differentials is examined in light of a number of hypotheses on public sector wage determination

an empirical analysis of wage dispersion and efficiency wages the main purpose of this study is to examine inter industry wage differentials in sweden after controlling for individual and job characteristics the results indicate that these differentials are substantial the ranking of the differentials was stable over time while the dispersion of wage premiums fell by 50 per cent during the period 1968 81 a period of strong efforts to reduce wage dispersion in sweden the relation between industry wage premiums and a number of industry characteristics is also examined along with new evidence which is in line with the shirking model hypothesis on the relation between wages and worker control

training and employee mobility in the british private and public sectors the realization of the value of training for employees can take time as the training contributes dynamically to an extended development process this research examines the empirical returns to training in three post training situations when the employee remains in the same job and with the same employer when the employee transfers to a different job but remains with the same employer internal mobility and when the employee moves to a different employer external mobility panel data and fixed effects fe methodology are used to quantify the joint effects of in job training and mobility while minimizing the potentially biasing effect of unobserved ability in a period when public sector employment in britain was contracting sharply the short term returns to training are nonetheless greater in the public sector while the medium term returns for both public sector and private sector employees depend on remaining within sector the general specific training mix institutional influences adverse selection and the concept of transferable training all contribute to interpretation

factors determining the location decisions of spanish mnes an analysis based on the investment development path on the basis of theoretical assumptions approached via the investment development path idp this study examines the most important factors for and against the location decisions in foreign direct investment taken by multinational enterprises considering host countries at very different stages of economic development latin american and european union countries we carry out different kinds of analysis on a sample of 103 firms belonging to a medium sized country that has recently achieved the status of developed country the results reveal that the importance that home country firm managers give to diverse location factors depends to a certain extent on the stage that each group of host countries has reached in the idp in line with prior research we find that firm managers consider mainly the group of factors associated with strategic asset seeking when deciding to locate their investments in the group of more developed countries european union in contrast our results show that when these firm managers choose the group of less developed countries latin america social and cultural factors play a more determinant role thus suggesting the importance of historical and cultural ties between the home and host countries

an institution based view of international business strategy a focus on emerging economies leveraging the recent research interest in emerging economies this perspective paper argues that an institution based view of international business ib strategy has emerged it is positioned as one leg that helps sustain the strategy tripod the other two legs consisting of the industry and resource based views we then review four diverse areas of substantive research 1 antidumping as entry barriers 2 competing in and out of india 3 growing the firm in china and 4 governing the corporation in emerging economies overall we argue that an institution based view of ib strategy in combination with industry and resource based views will not only help sustain a strategy tripod but also shed significant light on the most fundamental questions confronting ib such as what drives firm strategy and performance in ib

the role of the desire for union status in the decision to enter local government job queues the us evidence following a two stage bivariate probit approach this study estimates local government and union job queues in a simultaneous equations framework by relaxing the restrictive assumption of independence between the worker s queuing and the employer s hiring decisions it overcomes a major limitation of most of the earlier job queue estimates the results indicate that the worker s queuing decision for local government jobs in the united states is determined partly by the desire for unionized employment the converse however is not true seniority with the current employer emerges as a significant determinant of both workers queuing and employers hiring decisions furthermore local governments act as model employers by being more likely to hire minorities and females from the pool of job applicants

why federal workers don t quit quit rates in the federal government are abnormally low some economists and the federal government itself have taken this to mean that federal wages are too high this paper provides an alternative explanation it shows that the timing of compensation across a career as well as its level affect quit rates pensions in particular impose large penalties on workers who quit early and the portion of federal pay in the form of pensions is very high this feature of the federal pay structure may explain its abnormally low quit rate as a general proposition quit rates are poor indices for judging pay adequacy

a switching regression model for wage determinants in the public and private sectors of a developing country governments in less developed countries face severe budgetary constraints given that public sector employment is a large part of modern sector employment the government wage bill h as come under increased scrutiny the central question is how do gove rnment wages compare with those in the private sector in this paper the authors develop and estimate a model to answer this question an important aspect of this model is the endogenous treatment of sector choice the estimation results full information maximum likelihood sound a strong warning against the use of ordinary least squares est imates that are based on sector specific samples data are from the i vory coast copyright 1988 by mit press

the relative pay of public and private sector employees 1970 1984 this paper provides a more accurate picture of the changes that have taken place in the r elative pay of public and private sector employees than has hitherto been revealed changes in effective hourly rates of pay which abstra ct from changes in both the age and occupation composition of the wor kforce are used as the basis against which movements in the public p rivate sector pay differential are assessed copyright 1987 by oxford university press

good times bad times postwar labor s share of national income in capitalist democracies this article returns to a classic question of political economy the zero sum conflict between capital and labor over the division of the national income pie a detailed description of labor s shar

energy investment risk assessment for nations along china s belt road initiative abstract overseas energy investment as an effective way of securing energy supply is being favored by the world s leading energy consuming countries however energy investment has the potential high risk on multiple forms including political and regulatory risk currency liquidity and refinancing risk as well as resource risk and so on to effectively evaluate overseas energy investment risk this study proposed a new indicator system from six dimensions furthermore a fuzzy integrated evaluation model based on the entropy weight was constructed to rate the energy investment risk for 50 nations along china s belt road initiative the findings indicate that resource potential and chinese factors have become the main determinant of energy investment risk while environmental constraints and political risk should also be considered for investing decisions in conclusion saudi arabia united arab emirates pakistan kazakhstan and russia are the most ideal choices for china s energy investment balancing resource potential and investment environment

compensating differentials and self selection an application to lawyers this paper models individual choice between two types of jobs as dependent on the difference in potential earnings and on preferences for nonpecuniary the model leads to simultaneous estimation of earnings and job choice functions in a manner that takes account of self selection of individuals into the sector of highest utility an application to lawyers choosing between private and public interest law casts doubt on the notion that public interest lawyers are accepting substantially lower earnings by virtue of their choice an impression derived from estimation of earnings functions without accounting for self selection the estimation technique also takes proper account of the choice based nature of the sample which appears to be important

political instability pro business market reforms and their impacts on national systems of innovation abstract we investigate the impacts of political instability and pro business market reforms on national systems of innovation nsi across a range of developing and developed countries evidence suggests that national systems of innovation are most likely to flourish in developed politically stable countries and less likely to prosper in historically unstable countries while research has shown that pro business market reforms can be a valuable policy instrument to boost economic development in less developed countries the extent to which these reforms affect a country s innovativeness has been neglected in the literature in particular the degree to which pro business market reforms may compensate for political instability when it comes to fostering national systems of innovation remains under researched our findings support established arguments concerning the strong influence of political instability on inputs to national innovation systems we find however mixed effects for pro business market reforms while results indicate a negative direct influence on nsi they consistently show a strong moderating effect that counterbalances the negative impact of political instability especially in those developing country environments where science and technology are lagging these results provide important implications for policymakers as well as for our understanding of emerging and transition economies and national technological capability

wage differentials between the public and private sectors abstract public sector employment and the tax pressure has grown very rapidly in denmark in recent years this paper discusses a new policy option for government using its role as a dominant employer to reduce relative public sector wages the paper contains an empirical analysis of wage differences between the public and the private sectors in denmark using a longitudinal data set covering the years 1976 1985 fixed effect regressions show that a wage twist policy of this type has been used in these years one of the consequences of a wage twist policy in the public sector is recruitment and retention problems for public employees

union nonunion wage differentials in the public administration educational and private sectors 1970 1983 over the past thirty years union membership and bargaining activity in the united states has been declining in the private sector and rising in the public sector the authors use two large micro databases to estimate changes in the union wage premium among public administration education and private sector workers for the decade of the 1970s and early 1980s their empirical analysis indicates that the union relative wage effects continue to be lower in the public sector than in the private sector despite the relative gains in public sector union membership and bargaining activities copyright 1987 by mit press

democracy economic development and income inequality most cross national tests of inverse association between democracy and inequality have operationalized the concept of democracy by measuring its level at a single point in time more compelling theoretical arguments can be made for causal relationships that operate over time between 1 a country s years of democratic experience and income inequality and 2 income inequality and the stability of democracy continuous and qualitative measures of years of democratic experience are estimated to have a significant negative impact on income inequality independent of economic development and other control variables for a sample of 55 countries a very strong inverse correlation is also observed between income inequality and regime stability for a sample of 33 democracies this association holds independent of economic development which is found to have no direct effect on democratic stability after controlling for income inequality

infrastructure and public utilities privatization in developing countries should governments in developing countries promote private ownership and deregulated prices in noncompetitive sectors or should they run publicly owned firms and regulate prices at the expense of rents to insiders a theoretical model is used to answer these normative questions the analysis focuses on the tradeoff between fiscal benefits and consumer surplus during privatization of noncompetitive sectors privatization transfers control rights to private interests and eliminates public subsidies yielding benefits to taxpayers at the cost of increased prices for consumers in developing countries where budget constraints are tight privatization and price liberalization may be optimal for low profitability industries but suboptimal for more profitable industries and once a market has room for more than one firm governments may prefer to regulate the industry without a credible regulatory agency regulation is achieved through public ownership

a comparison of the plant location strategies of foreign and domestic manufacturers in the u s several studies have investigated that locational strategies of multinationals across national borders but there have been very few investigations of the locational strategies of multinational and international firms within the borders of a given nation the influx of foreign manufactures into the u s in the seventies and eighties provided a unique opportunity to study their locational strategies within the u s which because of its spatial diversity and size permits identifiable patterns to emerge in the locational strategies of manufacturers

public sector wage policy and labor market equilibrium a structural model we develop and estimate a structural model that incorporates a sizable public sector in a labor market with search frictions the wage distribution and the employment rate in the public sector are taken as exogenous policy parameters overall wage distribution and employment rate are determined within the model taking into account the private sector s endogenous response to public sector employment policies job turnover is sector specific and transitions between sectors depend on the worker s decision to accept alternative employment in the same or different sector by comparing the value of employment in the current and prospective jobs the model is estimated on british data by a method of moments we use the model to simulate the impact of various counterfactual public sector wage and employment policies

government employment and the provision of fringe benefits this study uses individual level data from the united states to examine the influence of government employment on the provision of five major fringe benefits four of the five benefits are more likely to be provided to government workers than to their private sector counterparts unlike wage comparisons which typically find substantial overpayment only for federal workers the findings suggest that past wage differentials underestimate the true compensation advantage enjoyed by government workers

what has 20 years of public private pay gap literature told us eastern european transitioning vs developed economies this paper surveys the literature on public private sector pay differentials based on 20 years of research in transitioning countries of eastern europe ee and compares the results with estimates obtained from developed market economies the majority of empirical studies from ee economies found evidence of public sector pay penalties during the period of economic transition from a communist to market based economy in developed economies however the average differential is usually around zero or positive the public sector pay inequality reducing effect relative to the private sector is greater in transitioning economies than in developed economies nevertheless there is evidence that the sign of the public sector pay gap as well as the relative public sector pay distribution change with the progress of economic transition towards those usually observed in developed economies different pay setting arrangements between private and public sectors and competition for workers seem to be major arguments for the existence of systematic pay differences between the two sectors

politics and perceived country creditworthiness in international banking this paper marks a departure from most previous studies of country creditworthiness in international banking because it incorporates systematically generated quantitative indicators of political instability in the analysis the authors empirically test for the effects of political instability on perceived country creditworthiness using data on thirty heavily indebted developing countries for the period 1967 86 in addition to economic factors they examine the effects of three types of political instability regime change political legitimacy and armed conflict the authors also distinguish between proximate instability and chronic instability they find significant effects of proximate instability particularly in governmental regime on indicators of countries perceived creditworthiness copyright 1990 by ohio state university press

extending the bargaining power model explaining bargaining outcomes among nations mnes and ngos participants in international bargaining include different types nation states mnes ngos and multilateral organizations and different numbers of these actors our theoretical contribution is to extend the bargaining power paradigm with a framework that models bargaining in this complex environment as a network the configuration of supports and constraints among all participating actors in the bargaining environment is captured in the structure of the network antecedents of an actor s bargaining influence in the network include the actor s basis of power network position bargaining outcome preferences and motivation to influence bargaining the network bargaining power nbp model uses network theory to build upon and integrate insights from previous literature in a way that allows us to simultaneously apply these different insights to explain bargaining outcomes these insights include effects of coalitions strategies of less powerful actors leveraging more powerful allies integration of international and domestic politics and applicability to mne related issues beyond fdi finally we illustrate nbp in a scenario of privatized utilities in the dominican republic in which the bargaining power outcome predicted by nbp differs from that of the canonical bargaining power perspective

the impact of journals and authors on international business research a citational analysis of jibs articles in this paper we use citational analysis to examine the influence of individuals and disciplines on international business research we collected citational data over the ten year period 1984 to 1993 from every issue of the journal of international business studies we found that management economics marketing and finance disciplines have had significant influence on international business research and identified researchers such as dunning porter vernon casson rugman and hofstede as having made significant contributions to international business research

u s foreign direct investment in latin america and the caribbean a case of remittances and market size abstractthis article investigates the effect of remittances on u s foreign direct investment fdi flows to latin america and the caribbean lac it covers 26 countries for the period 1983 2010 the results show a positive and significant impact of remittances on u s fdi flows however this effect depends upon the level of gross domestic product gdp per capita of the host country on average the results show that increasing remittances by one standard deviation increases u s fdi flows by 0 44 percent a year also host country demand positively affects u s fdi flows which supports the market size hypothesis

joint venture formation of very large multinational firms large firms differ from smaller firms in many aspects in this research note we investigate the relationship between the size of firm and the characteristics of equity joint ventures ejvs empirically we found that very large firms are more likely to have a higher equity stake in their ejvs seek alignment with other foreign firms engage in global industries and invest in large scale ejvs than smaller firms they are also less affected by the risk conditions of the host country empirical testing is based on a sample of 1 298 foreign ejvs in the people s republic of china between 1981 and 1998 interesting differences also exist among firms that are based in the u s japan and europe

internal labor markets and worker rents abstract we show that establishing an internal labor market by offering combined contracts across hierarchy levels strictly dominates external recruitment when workers are homogeneous the reason is that only an internal labor market can exploit higher tier rents for incentive provision on lower tiers given unobservable heterogeneity of workers relying on an internal labor market has the further advantage of improving the selection of high ability workers for higher ranks which is complemented by rent based incentive schemes however observable worker heterogeneity gives rise to a trade off between incentive and selection issues and may lead to ports of entry on higher tiers of the hierarchy

does economic diplomacy work a meta analysis of its impact on trade and investment we review the literature on economic diplomacy and provide a meta analysis of 32 empirical studies published in 1986 2011 that deal with the trade and investment impact of economic diplomacy embassies consulates other diplomatic facilities investment and export promotion offices trade and state visits controlling for differences in research design methodology time frame and manner of data we find a positive and significant effect of economic diplomacy on international economic flows with the exception of state visits and that this is true in a sample of 627 t statistics analysed with ols and for a larger sample of 963 reported significance levels analysed with logit thus illustrating robustness with respect to sample and estimation technique our analyses show that reported effects of economic diplomacy on trade and investment in individual studies are sensitive to model specification the primary studies that investigate only one source country are less likely to report significant positive effects compared to other sciences economic studies are less likely to report significantly positive effects of economic diplomacy primary studies lump embassies and consulates general into one indicator miss that these instruments differ significantly embassies consulates and agencies should thus be included as separate instruments in future research

establishment size public administration and government wage differentials abstract this study presents new and more comprehensive estimates of government wage differentials they improve on previous estimates by including the influence of establishment size and by estimating separate differentials for public administrators and non administrators these improvements result in a more complex set of differentials and a more sophisticated understanding of government wage patterns

the public pay gap in britain small differences that don t matter the existing literature on inequality between private and public sectors focuses on cross section differences in earnings levels forward looking agents however care about income and job mobility too which we show are substantially different between the two sectors using data from the bhps we estimate a model of income and employment dynamics allowing for unobserved heterogeneity in the propensity to be employed in eitherjob sector we detect a positive average public premium both in income flows and in the present discounted sum of future income flows we also find that income inequality is lower but more persistent in the public sector there is an ongoing debate as to whether public sector workers experience better or worse pay conditions than their private counterparts a recurring message in the recent literature is that although raw differences can be large most are likely to reflect differences in the composition of the workforce both in terms of observed characteristics such as age and education and in terms of unobserved characteristics nevertheless a look at labour markets in the two sectors suggests that individuals do perceive some differences between the sectors katz and krueger 1991 document the fact that blue collar workers are willing to queue to obtain public sector jobs whereas highlyskilled workers are notoriously hard to recruit and retain in the public sector the focus of most of the literature on public pay gaps is on cross section differences in earnings levels 2 yet the public private differences are arguably equally marked in terms of income mobility income volatility and job loss risk than in terms of mean income levels public sector employers are widely perceived to offer more job security 3 there is also plentiful evidence of relative wage compression in the public sector moreover as we shall point out public sector incomes are substantially more persistent over time than private sector incomes the motivating point of this article is that forward looking agents are likely to care about income and job mobility as well as income levels so that a more general assessment of the existence and magnitude of a public premium should be based on

the central government private sector wage differential since ehrenberg and schwarz 1986 there has been a plethora of articles investigating the relationship between public and private sector wages this article examines part of this post 1986 literature by reviewing articles that examine central government private sector wage differentials in sum most articles find that there is a premium paid to central government workers although the premium has declined in recent years in developing countries however the differential is usually negative women and minorities tend to do better in the public sector relative to their private sector counterparts the evidence on union premiums between sectors is mixed although the premium tends to be higher in the private sector however public sector union workers do not do much better than private sector union members the magnitude of all of the wage differentials discussed are sensitive to the estimation technique and data source used the most common explanation for the public sector wage premium is economic rent accruing to government workers although the public sector wage determination literature suggests that the differential is due to returns to political and vote producing activities not relevant in the private sector

determinants of foreign investment of u s advertising agencies this paper investigates the impact of several factors on the foreign investment of u s advertising agencies by using the theories on the determinants of foreign direct investment by manufacturing firms for the two years examined the hypotheses about the impact of host country market size host country geographic proximity firm size firm s international operations experience oligopolistic reaction and presence of home country customers abroad are all confirmed this paper also investigates the impact of oligopolistic reaction among the top ten and the second ten largest agencies and finds a stronger impact for the former

public and private sector wages interactions in a general equilibrium model it is common wisdom that public sector wages are not determined in the same way as private sector wages at the same time the empirical evidence available for oecd countries finds a strong positive correlation between public and private sector wages in this paper we develop a model that is consistent with a political economy view of the determination of public sector wages and employment while being consistent with the said empirical evidence public finance constraints are crucial in booms governments expand employment and wages while in downturns lack of tax revenues forces the government to cut back the wage bill

examining equality between public and private sector wage distributions i introduction institutional political and economic factors all contribute to the determination of public sector wages for example the public sector is almost the only place in many advanced economies where unions continue to have a significant presence and an influential voice in setting wages and conditions of work political factors such as desiring to be a good employer may also influence the public sector wage structure as a good employer governments may offer low skilled workers higher rates of pay than they might get in the private sector on the other hand the public sector may be adverse to paying very skilled workers high rates of pay if the public does not like to see public sector workers earning too much economic factors such as spending and tax receipt limits can also affect the wage structure in the public sector all of these factors could make the public sector labor market be less efficient than that of the private sector from an economic perspective if government workers are paid more than private sector workers ceteris paribus then taxes are being wasted if private sector workers are paid more than government workers governments cannot recruit and retain appropriately skilled and productive workers to make the wage structures comparable many countries use surveys to ascertain the prevailing earnings levels for jobs in the private sector that are similar to public sector jobs however as fogel and lewin 1974 and gregory 1990 point out these survey methods are fraught with biases that may affect comparability of wages indeed there is little empirical evidence that wages between the two sectors are equal bender 1998 and gregory and borland 1999 survey the current literature on public private wage differentials and report that most studies find that central governments pay more on average compared to the private sector even after controlling for differences in the productive characteristics of workers furthermore as elliott et al 1999 find comparability in pay is currently important in the debates over public sector pay reform particularly in europe the institutional and political factors outlined above are waning in importance and economic considerations are seemingly coming to the fore because of perceptions of the overpayment of public sector workers and the desire to cut government wage bills politicians in these countries are devising policies to align average rates of pay by slowing the relative rate of public sector wage growth the policies should be different however if wage distributions are not the same indeed there is some evidence that the distributions differ as found in the double imbalance concept articulated by schager 1993 katz and krueger 1993 and elliott and duffus 1996 this imbalance is characterized by public sector workers at the lower end of the occupational hierarchy receiving the largest wage premia and workers at the upper end earning less than their private sector counterparts if the distributions are incomparable ceteris paribus mandating equal average rates of pay growth will not ensure comparability policies aimed at realigning wage structures at the ends of the distribution should then be followed to promote comparability this article compares public and private sector wage distributions and examines the extent to which focusing exclusively on differences in mean wages obscures the true nature of the wage relativities data from the british social change and economic life initiative sceli are employed to investigate comparability this data set is well suited for a comparability study given the range of personal and job characteristics that control for differences in public and private sector jobs moreover the data were collected in 1986 before substantial reform of public sector pay in the united kingdom reviewed in bender and elliott 1999 this offers a test to see if the reform policies were appropriate to promote wage comparability

are low skill public sector workers really overpaid a quasi differenced panel data analysis public private sectoral wage differentials have been studied extensively using quantile regression techniques these typically find large public sector premiums at the bottom of the wage distribution this may imply that low skill workers are overpaid prompting concerns over efficiency we note several other potential explanations for this result and explicitly test whether the premium varies with skill using australian data we use a quasi differenced generalized method of moments gmm panel data model which has not been previously applied to this topic internationally unlike other available methods this technique identifies sectoral differences in returns to unobserved skill it also facilitates a decomposition of the wage gap into components explained by differences in returns to all observed and unobserved skills and by differences in their stock we find no evidence to suggest that the premium varies with skill one interpretation is that the compressed wage profile of the public sector ind

an assessment of the measurement of performance in international business research a sizeable body of international business ib research is devoted to building knowledge about the determinants of organizational performance a key precursor to accurately diagnosing why some organizations succeed in the international marketplace while others struggle is operationalizing performance appropriately yet to date no systematic investigation has considered how well ib research measures performance we examine the measurement of performance in 96 articles published in the academy of management journal administrative science quarterly journal of marketing journal of marketing research journal of international business studies management science organization science a nd thestrategic management journal between 1995 and 2005 the findings reveal that most studies do not measure performance in a manner that captures the multifaceted nature of the construct we describe the implications of these results and offer suggestions for improving future practice journal of international business studies 2008 39 1064 1080

fringe benefits and labor mobility interindustry factor mobility is a crucial determinant of the income distribution effects of exogenous changes in relative commodity prices this examination of interindustry variation in wages and profits using data from manufacturing industries from

a new look at debt rescheduling indicators and models this paper presents logit and discriminant models of debt rescheduling the models incorporated new short term debt data and variables representing economic shocks the 30 country database covered the period from 1975 to 1982 and contained the largest number of debt rescheduling observations of any previous database because of the new indicators and more recent data the models captured the effects of the changes that have occurred in the world economy since the oil price shocks and the period of rapid debt accumulation by the developing countries compared to the earlier research models the models have proven to be efficient in forecasting debt reschedulings

the effect of political events on united states direct foreign investment a pooled time series cross sectional analysis this paper examines the effect of political events on the manufacturing direct foreign investment mdfi decisions of u s multinational corporations the relationship between political events and nonpolitical factors and mdfi is investigated through regression analysis of pooled time series 21 years and cross sectional 24 countries data and through various tests of the homogeneity of the relationship across groups of countries the study finds that the relationship between political events in mdfi is different for less developed countries as opposed to developed countries for the less developed countries both inter nation and intra nation conflict and cooperation affect mdfi in contrast u s mdfi in developed countries appears to be affected only by inter nation conflict and cooperation

estimation of the us federal job queue in the presence of an endogenous union queue past research on the federal sector job queue fails to incorporate the important role of unioniz ation we estimate a two stage bivariate probit in which the willingness of a worker to queue for a union job enters the estimation of the federal queue we demonstrate that the failture to implement our approach may lead to the inappropriate conclusion that there does not exist a federal queue in the us labour market we identify the characteristics that lead workers to seek employment in the federal sector and as a byproduct also provide independent confirm ation of the presence of a queue for union jobs ability in bivariate probit models to examine job queues abowd and farber 1982 use poirier s technique and find evidence of a queue of workers waiting for union jobs they estimate separate equations determining which character istics make a worker more likely to enter the queue and which characteristics make a worker more likely to be chosen from the queue indeed farber 1983 leigh 1985 and heywood 1990 have all reaffirmed the existence of a union queue under varying degrees of partial observability recently venti 1987 krueger 1988 and heywood and mohanty 1990 have examined whether or not a queue exists for federal government jobs while this research confirms the existence of a federal queue it fails to incorporate the earlier research indicating the presence of a union queue indeed none of the authors controls for any dimension of unionization in the federal queue esti mates this failure is problematic for several related reasons first heywood and mohanty 1994 demonstrate that statistical confirmation of a federal job queue is highly sensitive to specification particularly the inclusion or exclusion of specific variables 2 second the federal sector is far more heavily unionized than the private sector see freeman 1986 1988 ichniowski 1988 and reder 1988 thus if the earlier research is correct and workers do queue for union

the effects of real wages and labor productivity on foreign direct investment the volume of foreign direct investment fdi both into and out of the united states has grown rapidly in the past several decades theoretically labor costs in both source and host countries could be important determinants of these flows but thus far no consistently significant effects have been reported for fdi flows between the u s and other industrialized countries in this paper i estimate equations for u s fdi flows to and from five other industrialized countries the explanatory variables include both source and host country real wages and labor productivity but to put my work in perspective i shall first in section ii discuss recent literature in the area then section iii briefly discusses a theoretical model to highlight the possible effects of the labor variables the empirical procedure and results are presented in section iv and a summary in section v

solar power investment in north africa reducing perceived risks abstract climate protection targets for mid century imply a need to scale up european renewable power production to a level that may exceed the available land area within europe s borders one attractive solution from a cost and feasibility perspective is the development of large scale concentrating solar power plants in north africa and the middle east however these developments are seen by many people as risky in terms of both european energy security and in terms of the risks faced by project developers in this paper we focus on the latter of theses issues first we examine the risks that project developers are most concerned about and identify these as being associated not with terrorism and rogue state behavior but rather with corruption and inefficient and unpredictable bureaucracies second we identify a range of policy approaches that can reduce these risks either by mitigating their consequences or by seeking to eliminate their underlying causes third we investigate the financial benefits of taking such steps to reduce or eliminate investment risks we find the potential savings to european electricity consumers to exceed 200 billion

home country political risk and foreign direct investment in the united states this study investigates the proposition that home country political risk factors influence outward foreign direct investment investment data from the u s department of commerce is used to model investment activity in the united states from various industrialized source countries foreign direct investment is regressed on home country domestic and international economic and political risk measures for the western industrial countries results indicate that investment activity from the ics in the u s is dependent on home country economic and political conditions

on the determinants of net foreign investment these models do not explain why investments in productive processes in any country exceed or fall short of the wealth of the residents of that country most existing models of portfolio choice and asset pricing make the key assumption of a given world market portfolio which implies that at any point in time net foreign investment itself is given 2 the present paper does not make this assumption this paper provides a simple model of net foreign investment in a world of perfect markets 3 the model has the useful property that production decisions are made simultaneously with portfolio choice decisions as in cox ingersoll and ross 1978 the central feature of the model is that technologies in use differ across countries it is assumed that pre existing capital can be shifted costlessly between countries production decisions in other words decisions about how the existing stock of capital is invested among available technologies determine net foreign investment in the home country however production decisions depend on the distribution of the returns to investments in various technologies whereas this paper analyzes an issue which has always been of considerable interest in the field of international finance it uses a different framework from that used in most of the literature on net capital flows it recognizes explicitly the role of risk as a determinant of net foreign investment 4 because political risk is not modeled explicitly this paper constitutes only a first attempt at understanding the determinants of net foreign investment political risk must play a significant role as a determinant of net foreign investment because net university of rochester i am grateful to the members of the international finance seminar at the university of rochester to jorge de macedo ron jones don lessard and especially pat reagan for useful conversations and comments and to the center for research in government policy and business for financial support net foreign investment in the domestic country is understood to mean the difference between total wealth invested in the domestic country and domestic wealth it follows that net foreign investment is a stock and not a flow international economists would call net foreign investment the

modelling international tourism and country risk spillovers for cyprus and malta abstract small island tourism economies sites are developing sovereign countries that rely on tourism as a source of exports and need a consistent inflow of foreign investment in order to facilitate economic growth access to international capital markets helps sites smooth out their consumption over time while absorbing adverse domestic production shocks this paper provides a comparison of tourism growth country risk returns and their associated volatilities or uncertainty for 2 sites namely cyprus and malta monthly data are available for both international tourist arrivals and composite country risk ratings compiled by the international country risk guide icrg for the period may 1986 to may 2002 the time varying conditional variances of tourism growth and country risk returns for the 2 sites are analysed using multivariate models of conditional volatility empirical results show that cyprus and malta are complementary destinations for international tourists changes to tourism patterns in cyprus lead to changes to tourism patterns in malta hence tour operators and national tourism promotion authorities in cyprus and malta should collaborate closely in marketing and promoting joint tourism products moreover foreign entities interested in investing in the tourism sectors of cyprus and malta should consider investment projects that span a long period of time the performance of the tourism sector and the associated composite risk are independent of each other for the two countries however there is a direct relationship between the tourism sectors of cyprus and malta and their respective country risk settings

a reexamination of the federal private wage differential in the united states the federal private wage differential is reexamined with recent data using specifications similar to those used in three previous studies i find that the federal private wage differential has narrowed since the 1974 79 period analyzed in those studies in addition i discover that wage differentials based on specifications used in the literature are biased upward because the previous studies did not control for detailed occupational and locational characteristics of workers corrected point estimates of the wage gap are much smaller than previous estimates in the literature differences in the gap across demographic groups occupations and locations are also discussed

gender the welfare state and public employment a comparative study of seven industrialized countries using data from the luxembourg income study lis the authors explore the influence of government employment on the gender gap in earnings in seven countries they address four questions on the effects of public sector employment on the gender gap in earnings 1 do governments offer jobs that are comparatively high paying 2 does public employment benefit some workers such as low paid workers more than others 3 are public sector employment advantages explained by differences in worker characteristics and the occupational mix 4 what is the effect of public employment its extent and its pay structure on gender gaps in wages the results indicate marked variation across liberal conservative and social democratic welfare states but reveal a number of uniformities as well in most of the seven countries in the sample public sector workers earn more on average than do workers in the private sector and most earnings advantages are concentrated on the low end of the earnings distribution the effect of public employment on the overall gender gap in wages is limited in most countries the authors discuss the implications of these results for theory and research on gender and the welfare state

the effect of unionism on fringe benefits this study analyzes the impact of unionism on fringes paid to production workers using data on individual establishments it compares fringe expenditures in establishments having the same level of compensation per hour and finds that unionism raises the share of compensation allotted to fringes particularly to pensions vacation pay and life accident and health insurance in addition since unionism also raises the straight time wage rate itself a prime determinant of expenditures on fringes unionism has a very sizeable impact on total fringe expenditures as well as on the fringe share of compensation the union fringe effect exceeds in percentage terms the union wage effect and is sufficiently large to suggest that standard union wage studies understate the union effect on total compensation the study also compares the fringe expenditures of production and non production workers within the same establishment controlling for within establishment pay policies the findings suggest that the pres

debt arrears in latin america do political variables matter political instability and debt problems characterise latin america in the last two decades this article estimated a logit model of debt arrears including economic as well as political variables our results suggested that both economic and political indicators affected debt repayment in latin america during 1971 86 we also cast a shadow on the viewpoint that authoritarian and military regimes have an advantage over democratically elected governments with regard to debt related issues

currency risk and country risk in international banking this paper focuses on the conditions under which banks are subject to currency and country risks on their dollar denominated loans to foreign firms and governments we conclude that currency risk is a function of the rates of domestic and foreign inflation deviations from purchasing power parity and the effect of these deviations on the firm s and the nation s dollar equivalent cash flows country risk is largely determined by the variability of the nation s terms of trade and the government s willingness to allow the national economy to adjust rapidly to changing economic fortunes banks typically try to cope with currency risk when lending to foreign firms and governments either by both denominating and funding their loans in the foreign currency or failing that by denominating their foreign loans in dollars the latter practice appears to protect the banks by shifting any risk associated with exchange rate fluctuations to the borrowers yet to the extent that changes in currency values affected the ability and or willingness of foreign borrowers to repay their dollar loans the exchange risk on these loans is converted into credit risk this is the element of currency risk referred to in the paper s title when the government is the borrower credit risk becomes country risk the objective of this paper is to explore the conditions under which banks are subject to currency and country risks on their dollar denominated foreign loans section i analyzes the sources of currency risk for firms while section ii extends the analysis to study the riskiness of dollar loans to foreign firms under several currency scenarios the political economic circumstances under which dollar loans to foreign governments could be subject to currency and country risk are the subject of section iii section iv discusses in more detail the various political and economic indicators of country risk section v summarizes the paper s key points

public private sector wage gap by gender in egypt evidence from quantile regression on panel data 1998 2018 abstract this paper estimates the public formal private wage gap in egypt using egypt labor market panel survey for the 20 year period of 1998 2018 for men and women separately we estimate the public formal private sector wage gap with wage equations including a public sector indicator both at the mean and at different quantiles of the conditional wage distribution using the panel feature of the data we also address the endogenous employment and the sector of employment selection issue and find a persistent public wage penalty for the males and public wage premium for the females except at the top even after controlling for the observable and the time invariant unobservable characteristics we further examine the public wage gap over time and in different sub samples by potential experience skill levels and regions generally the results are consistent with a decrease in the public wage gap for both men and women over the period considered we further provide evidence on the quality of workers we find that the public sector fails to attract better quality men throughout the conditional wage distribution while it manages to attract better quality women in the lower parts of the conditional wage distribution but not at the top all on the basis of time invariant unobservable attributes these results indicate concern for the efficient provision of public services

a switching regression model of public private sector wage differentials in peru 1985 86 this article examines the combined impact of the employment guarantee for graduates and public sector compensation policies on the egyptian labor market besides contributing to an unsustainable rate of growth in the government labor force these

diaspora interest in homeland investment this paper examines four diaspora communities resident in the united states that were targeted by their homelands as foreign investors during the 1990s the homelands comprise armenia cuba iran and palestine we pose the question what are the determinants of interest in homeland investment and can they be generalized across the four communities the paper explores concepts of ethnic advantage altruism homeland orientation and perceptions of business impediments as well as investigating the role of demographic factors regarding investment interest

state owned mncs and host country expropriation risk the role of home state soft power and economic gunboat diplomacy expropriation risk has a binding effect on foreign direct investment fdi however state owned multinational corporations may counter the monopoly power of the host state by leveraging the political influence of their home government the magnitude of this counter force we argue may vary depending on the strength of political relations between the home and host state and the level of economic dependence of the host country on the home market we find supporting evidence of our hypotheses using chinese firm level fdi information between 2003 and 2010

dyadic military conflict security alliances and bilateral fdi flows although multinationals operate under cross border jurisdictions the relevance of interstate security relations to international business has received little attention despite the impressive accumulation of knowledge in international business and international relations the two intellectual communities have largely ignored the insights from each other in this article we seek to bridge this gap we argue that interstate military conflict and security alliances as two central features of interstate security relations often change both government policies toward international business and investor expectations of political risk from the perspectives of both states and investors military conflict should reduce bilateral investment whereas security alliances increase it our empirical analysis applies the system gmm estimator to a gravity model of bilateral investment flows for 1117 directed dyads among 58 countries from 1980 to 2000 among 18 countries whose per capita real incomes remain consistently above 12 000 constant dollars the security factors do not affect bilateral investment in the high income low income dyads interstate military conflict and security alliances significantly influence bilateral investment as expected the findings depict two separate realms in which international politics does and does not interfere with international business helping us improve political risk assessments and understand the interactions between states and firms

a theory of migration as a response to occupational stigma a theory is developed of labor migration that is prompted by a desire to avoid social humiliation in a general equilibrium framework it is shown that as long as migration can reduce humiliation sufficiently migration will occur even between two identical economies migration increases the number of individuals who choose to perform degrading jobs and consequently migration lowers the price of the good produced in the sector that is associated with low social status moreover the greater an individual s aversion to performing degrading jobs the more likely it is that he will experience a welfare gain when the economy opens up

the management of political risk we explore a long standing prediction in the international business literature that managers subjective perceptions of political risk not just the level of risk are important for how firms manage political risk the importance attributed to political risk by corporate executives has increased over the last 15 years and our results show that political risk is now considered more important than commodity input risk our analysis suggests that nearly 50 of firms avoid not simply reduce foreign direct investment because of political risk using a unique survey based psychometric evaluation of manager risk aversion we show that firms with risk averse executives are more likely to avoid investment in politically risky countries a key implication of behavioral models this relation is economically stronger when agency problems are more likely to be severe for example when executives are less aligned with shareholder value maximization and when executives are younger and therefore might put their personal career concerns in front of shareholders interests while numerous studies have shown that political risk affects foreign direct investment using objective measures of such risk electoral uncertainty conflicts etc our study documents that executives subjective perceptions of political risk are also important for political risk management

public and private sector wages in the netherlands there is much debate in the netherlands about underpayment of public sector workers relative to private sector workers in this paper we analyze the wage structures in both sectors using an endogenous switching regression model unlike previous dutch studies we find that the earnings prospects of public sector workers are better in the public sector than in the private sector for private sector workers we find the exact opposite their earnings prospects are better in the private sector moreover the allocation over sectors points to comparative advantages

government wage differentials a sample selection approach this paper uses the econometrics of sample selection to estimate the net wage differential between workers in the public and private sectors of the united states the results indicate workers self select by systematically locating in the sector which offers them the higher expected wage as a consequence previous research based on the assumption of random allocation between sectors is subject to serious specification bias the present estimation indicates government workers are slightly underpaid taking into account their observed characteristics and the selection process

dodging bullets the heterogeneous effect of political violence on greenfield fdi the relationship between political violence and greenfield foreign direct investment is contingent on the type of violence characteristics of the investment receiving sector and extent to which the investing firm is geographically diversified this paper presents an analysis with a dynamic fixed effects model for a panel of 90 developing countries from 2003 to 2012 the analysis shows that nationwide political conflict is negatively associated with total and non resource related greenfield foreign direct investment but not with resource related greenfield foreign direct investment the insensitivity to political conflict of multinational firms in the resource sector is associated with the high profitability of natural resource extraction and the companies geographic constraints on location choice during the period of estimation in the non resource sector the less geographically diversified firms are most sensitive to the risk of conflict

relative importance of political instability and economic variables on perceived country creditworthiness this paper examines the relative importance of political instability and economic variables on perceived country creditworthiness our results indicate that both political instability and economic variables are taken into account in evaluating country creditworthiness however it appears that bankers assign larger weight to economic variables hence it seems that the country creditworthiness perceptions are largely based on a country s economic performances which we except to reflect longer term political stability in addition the frequency of changes in the regime and armed conflict both proxying for political instability also affect the credit ratings

the power of the buckley and casson thesis the ability to manage institutional idiosyncrasies recent patterns of rapid internationalization in sectors characterized by strong public interest and both government and domestic capital constraints seem at first inconsistent with the drivers of internationalization identified by buckley and casson 1976 for manufacturing industries in the postwar era a more microanalytic perspective however identifies the ability to manage institutional idiosyncrasies as a firm level capability akin to research or advertising that can drive internalization across national borders and thereby internationalization these arguments are examined using evidence from the independent power production sector

an analysis of public and private sector wages allowing for endogenous choices of both government and union status a general selection model is estimated in which workers select across four labor markets private nonunion private union public nonunion and public union evidence is found of positive selection bias in the private nonunion sector and of negative selection bias in the public union sector union wage differentials in the public and private sectors as well as public private wage differentials are then calculated two different types of wage differentials are contrasted we discuss when it is appropriate to use each type of differential

the effects of tax competition when politicians create rents to buy political support abstract we set up a probabilistic voting model to explore the hypothesis that tax competition improves public sector efficiency and social welfare in the absence of tax base mobility distortions in the political process induce vote maximising politicians to create rents to public sector employees allowing tax base mobility may be welfare enhancing up to a point because the ensuing tax competition will reduce rents however if tax competition is carried too far it will reduce welfare by causing an underprovision of public goods starting from an equilibrium where tax competition has eliminated all rents a coordinated rise in capital taxation will always be welfare improving for plausible parameter values it will even be welfare enhancing to carry tax coordination beyond the point where rents to public sector workers start to emerge

minimum wages and excessive effort supply abstract it is well known that in static models minimum wages generate positive worker rents and consequently inefficiently low effort we show that this result does not necessarily extend to a dynamic context the reason is that in repeated employment relationships firms may exploit workers future rents to induce excessively high effort

the payment of public sector workers in the uk reconciliation with north american findings abstract in common with recent north american evidence the highest wage premiums for uk public sector workers are found in the lower tail of the wage distribution evidence of public sector underpayment at the opposite extreme of the earnings spectrum is also apparent

risk in international banking this paper differentiates between country risk the probability that a country will default on its obiigations and two forms of international banking risk 1 the extent to which a bank s foreign activities affect the cost of equity capital and 2 the extent to which a bank s foreign activities affect the probability of bankruptcy the paper focuses on the latter form of international banking risk using chebyshev s inequality it is pointed out that the risk of bankruptcy is influenced by the mean as well as the variance of the return distribution consequently restrictions on the international composition of a bank s portfolio may increase rather than reduce the probability of bankruptcy

public private wage differentials in haiti do public servants earn a rent abstract this study uses a newly collected data set on haiti where data are very limited to assess how individuals are selected into the public vs private sectors and to estimate public private sector wage differentials the central question is whether or not public servants are earning a rent the estimation procedure is an extension of heckman s 1979 sample selection technique to the case where two selection rules generate the sample the procedure first estimates by bivariate probit analysis the probability of employment in the public or private sector and then for those in the public sector the probability of employment in the state owned enterprises soes vs public administration wage functions are then estimated for all three sectors using the inverse mills ratios from reduced form probits selectivity bias is found to exist in one sector soes correction for this bias in the wage equations lowers the wage differentials between the soe and the private sector and the soe and public administration as is clearly demonstrated by the oaxaca decomposition of these estimated mean differentials nevertheless the corrected findings still indicate that the public sector especially the soes earn a sizable rent

job design with conflicting tasks reconsidered a principal wants two sequential tasks to be performed by wealth constrained agents suppose that there is an outcome externality i e a first stage success can make second stage effort more or less effective if the tasks are conflicting the principal s profit maximizing way to induce high efforts is to hire one agent to perform both tasks so that the prospect to get a larger second stage rent after a first stage success motivates the agent to work hard in the first stage in contrast when there is an effort externality i e first stage effort reduces or increases the probability of a second stage success then the principal prefers to hire two agents whenever the tasks are conflicting

sovereign default interest rates and political uncertainty in emerging markets abstract a large body of the empirical literature shows that high turnover rates length of tenure of policymakers and the degree of conflict within a country affects sovereign spreads debt and default rates we help to rationalize such claims by including these political features in a dynamic stochastic small open economy model of sovereign debt and default in this way we offer a complementary approach to the econometric analyses in the literature consistent with the data the quantitative analysis shows that politically unstable and more polarized economies experience higher default rates and larger level and volatility of sovereign interest rate spreads

constitutional rules reputation and sovereign debt abstract the inability of governments to pre commit to certian policies often results in pareto inefficient equilibria a policy is not time consistent if it requires a course of action that will subsequently become undesirable this paper examines the possibility of creating constitutional rules which can support sovereign debt contracts which would otherwise violate the requirement of time consistency the possibility of establishing international reputation with internal enforcement mechanisms is sensitive to the constitutional environment which will also determine the appropriate form of the constitutional rules