environmental policy instruments in an international duopoly with feedback investment strategies abstract this paper analyses the effects of the environmental policy instruments taxes and standards on the investment behaviour of firms in the context of an international duopoly two production factors are considered the capital stock and a polluting input the government of each country values high profits for its firm and a good environmental quality through standards on the polluting input firms get commitment on output which is not the case under taxes standards thus seem a better environmental policy instrument because for the same use of the polluting input taxes lead the duopolists to higher investment with lower profits this result was derived in a two stage game model it was confirmed in a differential game model with open loop strategies the paper shows that in a differential game model with feedback strategies an effect occurs that counteracts the first effect the cause of this is that taxes induce substitution between capital and the polluting input the conclusion is that under taxes firms invest more due to the absence of commitment but invest less due to substitution between the inputs the net effect depends on the values of the parameters taxes are better than standards for low rates of depreciation and discount for low investment costs and for high productivity of capital

environmental regulation technological diversity and the dynamics of technological change inducing technological progress is an important objective of environmental regulation we investigate under which conditions regulation induced technological progress pursues the best technological option we analyze a setting with vertical and horizontal technological progress cost uncertainty time limited patent protection and a case that is typical for some emissi4on intensive industries like electricity generation or the chemical industry under taxes and standards only the current least cost technology is used and developed implying a lock in into a possibly inferior technology tradable permits yield slower progress but can facilitate the simultaneous development of technologies rendering lock ins less likely

effects of free choice among public schools in this paper i investigate the impact of a programme in tel aviv israel that terminated an existing inter district busing integration programme and allowed students free choice among public schools the identification is based on difference in differences and regression discontinuity designs that yield various alternative comparison groups drawn from untreated tangent neighbourhoods and adjacent cities across identification methods and comparison groups the results consistently suggest that choice significantly reduces the drop out rate and increases the cognitive achievements of high school students it also improves behavioural outcomes such as teacher student relationships and students social acclimation and satisfaction at school and reduces the level of violence and classroom disruption

equilibrium pollution taxes in open economies with imperfect competition abstract this paper argues that imperfect competition in global markets creates a strategic interaction between governments that can lead to the inefficient distortion of pollution taxes this distortion can be decomposed into a rent capture effect and a pollution shifting effect the rent capture effect lowers equilibrium taxes as each country attempts to gain a competitive advantage over its trading partner and thereby capture foreign rent through net exports the pollution shifting effect raises equilibrium taxes as each country attempts to transfer production and its associated pollution to the other country this effect vanishes if pollution is perfectly transboundary because shifted pollution causes as much damage to the domestic environment as does domestic pollution the net effect on symmetric equilibrium taxes is negative except in the special case of perfect competition with no transboundary pollution in this case the two effects are mutually offsetting and the nash equilibrium is efficient when pollution is at least partially transboundary there also arises the usual transboundary externality and this reinforces the negative net strategic effect giving rise to equilibrium taxes that are lower than what is globally efficient

financial institutions and the financial crisis in east asia abstract this paper investigates institutional reasons for the soft budget constraint problem and how the soft budget constraint problem creates conditions which may result in a financial crisis as a consequence of soft budget constraints bad projects do not stop bad loans accumulate and banks and depositors do not receive bad news on time poorly informed depositors are then likely to herd to overinvest when there is no bankruptcy frenzy and they are likely to herd to panic when bankruptcy occurs crash which may be the result of excessive bad loans that are also a consequence of soft budget constraints in contrast under hard budget constraints information is disclosed quickly regarding liquidation better informed investors are then less likely to herd wrongly

second best taxation for a polluting monopoly with abatement investment abstract this paper characterizes the optimal tax rule to regulate a polluting monopoly when the firm has the possibility of investing in an abatement technology and the environmental damages are caused by a stock pollutant the optimal policy is given by the stagewise feedback stackelberg equilibrium of a dynamic policy game between a regulator and a monopolist the regulator playing as the leader chooses an emission tax to maximize net social welfare and the monopolist acting as the follower selects the output and the investment in abatement technology to maximize profits we find that the optimal tax has two components the first component is negative and equal to the gap between the marginal revenue and the price caused by the firm market power the second component is given by the difference between the social and private shadow prices of the pollution stock considering a linear quadratic model we show that if marginal environmental damages are constant the difference between social and private shadow prices is positive and the optimal policy consists of taxing emissions at a constant rate if the marginal damages are large enough however if the marginal environmental damages are increasing the numerical exercises carried out show that this difference is negative at the steady state and the optimal policy gives the firm a subsidy when approaching the steady state regardless of the importance of the environmental damages this result is explained by the negative effect that abatement technology accumulation has on the tax finally it can be pointed out that although both models yield different predictions about the sign of the optimal policy the dynamics is globally stable for both cases

the cost structure of american research universities 1597 this study estimates translog variable cost functions for 147 american doctorate granting universities accounting for three major products of these institutions undergraduate and graduate instruction and research explicit measures of research output and quality are employed evidence is found for considerable economies of scale for the average institution as well as economies of scope related to the joint production of undergraduate and graduate instruction the public or private ownership of an institution is not significant for the explanation of variable costs the intensity of state regulation in the public sector does not have a significant impact on production efficiency copyright 1991 by mit press

the politician and his banker should the european union grant state aid through an institution like the european investment bank this paper evaluates the efficiency of different measures for granting state aid we use a theoretical model with firms that differ in their creditworthiness and compare different types of subsidies with indirect subsidization through public banks we find that in a large parameter range the politician prefers public banks to direct subsidies because they avoid windfall gains to entrepreneurs and they economize on screening costs for similar reasons they may increase social welfare relative to subsidies one important prerequisite for this result is that public banks must not be allowed to fully compete with private banks however from a welfare perspective a politician uses public banks inefficiently often

transboundary pollution in the black sea comparison of institutional arrangements this paper analyses the transboundary pollution between romania and ukraine coastal states along the black sea and studies the welfare consequences of institutional arrangements for controlling this problem to achieve this goal we use a dynamic and strategic framework we compare in terms of total welfare for two countries a first best case with three different institutional arrangements the non cooperative game of countries the uniform emission policy and the constant emission policy as proposed by the black sea commission our findings indicate that the non cooperative game provides a better level of total welfare than the other rules

why trading speed matters a tale of queue rationing under price controls we show that queue rationing under price controls is one driver of high frequency trading uniform tick sizes constrain price competition and create rents for liquidity provision particularly for securities with lower prices the time priority rule allocates rents to high frequency traders hfts because of their speed advantage an increase in relative tick size defined as uniform tick sizes divided by security prices increases the fraction of liquidity provided by hfts but harms liquidity we find that the message to trade ratio is a poor cross sectional proxy for hfts liquidity provision stocks with more liquidity provided by hfts have lower message to trade ratios received september 15 2015 editorial decision october 7 2017 by editor robin greenwood

energy crises and change of technology a production model is formulated for the finnish metal product and machinery industry for studying energy crises related structural changes two models are estimated a partial static equilibrium model where capital is treated as a fixed input in the short run and a dynamic model where adjustment costs of the capital input are taken into account alternative hypotheses of structural change are formulated as gradual parameter shifts the results show that some of the energy related parameters have changed over time also the contributions of parameter changes and variations in the average values of the variables on the changes in the energy demand elasticities are studied the most important effect is the strengthening of the energy saving bias in technical change

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

modelling the transition from school and the demand for training in the united kingdom this paper analyses the choices made by school leavers and the demand for training in the youth labour market using a large cross section database on all school leavers in lancashire in 1991 we model using a multinomial logit their first destination six months after the end of compulsory schooling we model six choices outcomes non vocational continuing education vocational continuing education youth training employment with on the job training employment with general skills training and unemployment our results show that the first destination from school is affected by a range of individual school and local labour market variables in addition to academic ability we report three effects that are not well known a young person is more likely to leave school the bigger the school the lower its academic performance and the lower his or her expected lifetime earnings our results might be interpreted as evidence of a segmented youth labour market it is also inappropriate to model the decision to stay on in continuing education as a simple binary choice

operational research in education operational research or techniques have been applied from the early stages of the discipline to a wide variety of issues in education at the government level these include questions of what resources should be allocated to education as a whole and how these should be divided amongst the individual sectors of education and the institutions within the sectors another pertinent issue concerns the efficient operation of institutions how to measure it and whether resource allocation can be used to incentivise efficiency savings local governments as well as being concerned with issues of resource allocation may also need to make decisions regarding for example the creation and location of new institutions or closure of existing ones as well as the day to day logistics of getting pupils to schools issues of concern for managers within schools and colleges include allocating the budgets scheduling lessons and the assignment of students to courses this survey provides an overview of the diverse problems faced by government managers and consumers of education and the or techniques which have typically been applied in an effort to improve operations and provide solutions

institutions of higher education as multi product firms economies of scale and scope a multiple output cost function is estimated for institutions of higher education in the united states employing data for 1981 82 the authors flexible fixed cost quadratic function includes three outputs undergraduate teaching graduate teaching and research grants and one input price average faculty salaries results indicate the existence of scope economies at least up to a point for both public and private institutions of higher education ray economies of scale are more pronounced in the private sector and product specific economies of scale are observed only in the public sector for research and graduate teaching copyright 1989 by mit press

economic adjustment and political forces poland since 1970 postwar poland has experienced relatively great economic instability and recurring political upheavals at least by east european standards recent dramatic developments include a severe economic crisis following an extended period of spectacular growth the collapse of the once popular leadership of edward gierek the creation of the first independent trade unions under a communist regime and the replacement of party with military rule bear witness to the severity of poland s political disruptions have economic or political factors caused the economic crisis which are the critical factors escalating internal political tensions and enormous external political pressures have caused poland s current economic collapse preventing the successful implementation of adjustment policies the underlying sources of these political forces namely worker disillusionment with communist practices and confrontational relations between the superpowers have not eased to date the current malaise is likely to continue for some time

tests of the chronic shortage hypothesis the case of poland in the analysis of econometric disequilibrium models it is common to test the n ull hypothesis of equilibrium against the disequilibrium alternat ive this paper tests the null hypothesis of all excess demand tha all observations correspond to positive excess demand against the alternative that permits excess demand of either sign the auth ors use a test due to rogers 1984 which their monte carlo experime nts suggest performs well in small samples as well as a quasi like lihood ratio test which is a suggestive heuristic procedure the da ta are from the aggregate consumption goods market in poland 1955 80 and the paper is thus a test of j kornai s assertion that chroni c shortage characterizes such cpes the results conclusively reject the all excess demand hypothesis for the polish case and the rogers test promises to be of considerable practical use copyright 1988 by mit press

comparing school ownership performance using a pseudo panel database a malmquist type index approach in this paper we propose a different way of using the malmquist index that allows us to further analyze the relative performance divergences between two groups of decision making units dmus over time when only a pseudo panel database is available to do this we extend the camanho and dyson 2006 one period malmquist type index cdmi for a pseudo panel database with a new pseudo panel malmquist index ppmi to illustrate the methodology we apply it to examine how the performance gap between public and private government dependent secondary schools in the basque country spain performed across three pisa waves 2006 2009 and 2012 the results suggest that performance is persistently and significantly higher for private government dependent schools than for public schools

nonparametric analysis of educational costs abstract traditional economic analyses of the public sector that assume cost minimization are not consistent with political models of bureaucracy if costs are not minimized then estimated cost functions will be biased the purpose of this paper is to provide a flexible nonparametric technique based on farrell type efficiency measures to estimate public sector costs standard indices need to be modified to fit the special nature of public sector service provision which is characterized by an influence of exogenous variables on cost a useful by product is an index of environmental harshness faced by local governments for illustrative purposes this technique is applied to a sample of new york state school districts it is found that nearly 64 of districts are cost inefficient spending on average 1200 per pupil above the cost minimizing level in addition it is estimated that the average school district faces environmental cost of over 1700 per pupil

estimating most productive scale size using data envelopment analysis abstract the relation between the most productive scale size mpss for paparticular input and output mixes and returns to scale for multiple inputs multiple outputs situations is explicitly developed this relation is then employed to extend the applications of data envelopment analysis dea introduced by charnes cooper and rhodes ccr to the estimation of most productive scale sizes for convex production possibility sets it is then shown that in addition to productive inefficiencies at the actual scale size the ccr efficiency measure also reflects any inefficiencies due to divergence from the most productive scale size two illustrations of the practical applications of these results to the estimation of most productive scale sizes and returns to scale for hospitals and stem electric generation plants are also provided emphasize the advantage of this method in examining specific segments of the efficient production surface

demand for grazing on public lands a disequilibrium approach a demand function for grazing on western public rangelands is estimated since the federal government sets the grazing fee and rations the quantity of animal unit months aums a disequilibrium market model is developed the estimate of own price elasticity of demand 0 178 suggests a 0 82 percent revenue gain for a 1 percent fee increase results show that most western states experienced excess supply of aums since the mid 1980s suggesting a relatively high fee the levels of demand and effective supply vary substantially across states this implies that state or region specific factors should be incorporated in setting the grazing fee

the economics of schooling production and efficiency in public schools n recent years public and professional interest in schools has been heightened by a spate of reports many of them critical of current school policy these policy documents have added to persistent and long standing concerns about the cost effectiveness and fairness of the current school structure and have made schooling once again a serious public issue as in the past however any renewed interest in education is likely to be short lived doomed to dissipate as frustration over the inability of policy to improve school practice sets in this frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools although the educational process has been extensively researched clear policy prescriptions flowing from this research have been difficult to derive 2 there exists however a consistency to the research findings that does have an immediate application to school policy schools differ dramatically in quality

quasi markets and social policy introduction j le grand w bartlett the theory of quasi markets w bartlett j le grand quasi markets contracts and quality in health and social care the us experience c propper quasi markets and the nhs reforms l harrison w bartlett quasi markets and the reform of community care l hoyes r means quasi markets and educational reforms w bartlett the quasi market in social housing g bramley quasi markets and regulation c propper quasi markets and social policy the way forward j le grand w bartlett references index

choice competition and pupil achievement choice and competition in education have recently found growing support from both policy makers and academics yet evidence on the actual benefits of market orientated reforms is at best mixed moreover although the economic rationale for choice and competition is clear in existing work there is rarely an attempt to distinguish between the two concepts in this paper we study whether pupils in primary schools in england with a wider range of school choices achieve better academic outcomes than those whose choice is more limited and whether primary schools facing more competition perform better than those in a more monopolistic situation in simple least squares regression models we find little evidence of a link between choice and achievement but uncover a small positive association between competition and school performance yet this could be related to endogenous school location or pupil sorting in fact an instrumental variable strategy based on discontinuities generated by admissions district boundaries suggests that the performance gains from greater school competition are limited only when we restrict our attention to voluntary aided schools which have more freedom in managing their governance and admission practices do we find some evidence of a positive causal link between competition and pupil achievement jel i20 h70 r5

socialist economics the disequilibrium school and the shortage economy the economics literature about behavior and policy in the stylized socialist economy has passed through three main phases the first phase emanated essentially from the barone lange von mises debate before world war ii its main focus was on how a socialist economy could operate efficiently in the absence of markets and private property the second phase occurring mostly since world war ii has been concerned primarily with coming to grips with the organization institutions and planning process of economies that profess to have realized some form of the ideal socialist economy several writers have sought to generalize on the basis of these empirical features without really aiming at a rigorous formal theory of the various agents in a centrally planned economy the third phase has occurred since the mid 1970s when some began to work out propositions on and formalize models of micro and macroeconomic behavior in stylized centrally planned economies and sought to buttress their theoretical approach with macroeconometric measurements that have since been used as a platform for formulating policy recommendations there have been three main strands in this third type of inquiry ickes 1984

do peer groups matter peer group versus schooling effects on academic attainment this paper estimates an educational production function educational attainment is a function of peer group parental input and schooling conventional measures of school quality are not good predictors for academic attainment once we control for peer group effects parental qualities also have strong effects on academic attainment this academic attainment is a then a key determinant of subsequent labour market success as measured by earnings the main methodological innovation in this paper is the nomination of a set of instruments very broad regions of birth which as a whole pass close scrutiny for validity and permit unbiased estimation of the production function

the cyclical nature of markups in canadian manufacturing a production theory approach in this paper the effects of cost and demand characteristics on the magnitude and cyclical behaviour of markups in canadian manufacturing are measured within a production theory framework price to marginal cost ratios for various manufacturing industries are computed and the impact art their secular and cyclical trends from changes in capacity utilization scale economies variable input prices import competition unemployment and other exogenous market and technological determinants are explored using adjusted markup indexes and elasticities the measured price margins seem weakly procyclical further evaluation of the determinants of these cycles suggests that the procyclical nature of markups is primarily related to exogenous factors affecting costs such as energy price shocks and that cost characteristics underlying scale economies provide a countercyclical influence that counteracts the profitability arising from markups

measuring teaching efficiency in higher education an application of data envelopment analysis to economics graduates from uk universities 1993 data envelopment analysis dea is applied to 2547 economics graduates from uk universities in 1993 in order to assess teaching efficiency following a methodology developed by education economics 10 2 2002 183 207 each individual s efficiency is decomposed into two components one attributable to the university at which the student studied and the other attributable to the student himself from the former component a measure of each institution s teaching efficiency is derived and compared to efficiency scores derived from a conventional dea applied using each economics department as a decision making unit dmu the results suggest that efficiencies derived from deas performed at an aggregate level include both institution and individual components and are therefore misleading thus the unit of analysis in a dea is highly important moreover an analysis at the individual level can give institutions insight into whether it is the students own efforts or the institution s efficiency which are a constraint on increased efficiency this has implications for the choice of strategy for improving efficiency

investment in capital assets and economic performance the u s chemicals and primary metals industries in transition the effects of market and technological conditions on the investment and markup behavior of firms and their resulting impacts on economic performance are closely interrelated and complex in this article determinants of and linkages among these are explored for two industries with very different performance records and development patterns over the past three decades the chemicals and primary metals industries lnvestment decisions for general capital investments as distinguished from high tech capital are explicitly modeled as responses to adjustment costs this allows investment patterns capacity utilization and their determinants across capital assets to be examined and their linkages with productive and financial performance to be identified

combining the assumptions of variable and constant returns to scale in the efficiency evaluation of secondary schools our paper reports on the use of data envelopment analysis dea for the assessment of performance of secondary schools in malaysia during the implementation of the policy of teaching and learning mathematics and science subjects in the english language ppsmi the novelty of our application is that it makes use of the hybrid returns to scale hrs dea model this combines the assumption of constant returns to scale with respect to quantity inputs and outputs teaching provision and students and variable returns to scale vrs with respect to quality factors attainment levels on entry and exit and socio economic status of student families we argue that the hrs model is a better informed model than the conventional vrs model in the described application because the hrs technology is larger than the vrs technology the new model provides a tangibly better discrimination on efficiency than could be obtained by the vrs model to assess the productivity change of secondary schools over the years surrounding the introduction of the ppsmi policy we adapt the malmquist productivity index and its decomposition to the case of hrs model

financial structure and reforms in central and eastern europe in the 1980s abstract the paper analyzes the evolution of the financial structure of the countries of central and eastern europe during the 1980s in these countries the financial system is assigned a limited and mostly passive function this needs to be seen in the context of the allocative system of centrally planned economies where the transfer of financial resources between sectors is largely performed directly by the state through the price system taxes and subsidies the analysis focuses specifically on hungary poland and czechoslovakia the development of their financial structure is assessed through a number of quantitative indicators we find that the partial economic and financial reforms introduced in hungary and poland before 1989 did not substantially modify the role and performance of the financial system whose size in relation to the real economy remained modest at the same time however the reforms exacerbated some of the distortions of the planned system and generated larger macroeconomic imbalances the effects of which tend to cloud the interpretation of financial indicators at the end of 1980 the banking systems of hungary and poland although formally decentralized continued to allocate credit mostly according to automatic criteria and had virtually no experience in assessing and monitoring borrowers and investment projects in this respect they differed little from that of czechoslovakia which remained based on the classic model of a single state bank

federalism and the soft budget constraint the government s incentives to bail out inefficient projects are determined by the trade off between political benefits and economic costs the latter depending on the decentralization of government two effects of federalism are derived first fiscal competition among local governments under factor mobility increases the opportunity costs of bailout and thus serves as a commitment device the competition effect second monetary centralization together with fiscal decentralization induces a conflict of interests and thus may harden budget constraints and reduce inflation the checks and balance effect the authors analysis is used to interpret china s recent experience of transition to a market economy copyright 1998 by american economic association

inflation or monetary overhang planners preferences in china two models based on utility maximization of economic planners are developed to explain the stock of households money holdings and rate of open inflation in china for the period 1954 85 planners preferences are found to be biased in favour of monetary overhang this bias was reinforced when the bargaining strength of planners vis a vis households was weakened and during the post mao reform period this could help to explain the increase in the value of rents and level of corruption during the reform period

dynamic factor demands and the effects of energy price shocks a dynamic model is used to understand how sharp changes in energy prices affect investment behavior employment and energy use the authors discuss the theory behind their model selection model specifications estimation methods and data list parameter estimates and elasticities for the selected model and describe the simulations they conclude that 1 the data strongly reject the hypothesis of constant returns to scale within their specification of aggregate production 2 the data indicate adjustment costs on labor are small and 3 their results help reconcile some of the conflicting estimates of energy demand elasticities appearing in recent literature 23 references 3 figures 3 tables

hungary s transition to the market the case against a big bang hungary paul hare and tamas revesz among eastern european countries hungary s great advantage is that it began economic reforms in 1968 and slowly introduced the institutions of a market economy during the 1980s these measures laid the foundation for a gradual transition to the market without the need for any sharp break with the past policy mistakes were of course made the most serious extending over several years was the 1970s investment boom funded by foreign capital which contributed to hungary s large debt burden despite this the government accounts are not now in substantial deficit and the balance of payments on current account is in modest surplus nevertheless managing the external debt is now the most difficult of hungary s problems it is important that hungarian joint ventures and privatization are now attracting significant quantities of foreign capital given the quite rapid pace of liberalization since the late 1980s the government s commitment to further changes and a reasonably satisfactory macroeconomic balance though inflation is worrying there is no case for a big bang approach in hungary such a shock could only disrupt established market relationships and expectations with little benefit the most valuable forms of aid for hungary would be debt relief and unrestricted access for hungary s products to ec markets

could do better the effectiveness of incentives and competition in schools this paper studies the eects of incentive mechanisms and of the competitive environment on the interaction between schools and stu dents in a set up where their eort aects the students educational attainment we show that increasing the power of the incentive scheme and the eectiveness of competition may have the counterintuitive ef fect of lowering the students attainment in a simple dynamic set up where the reputation of the schools aects recruitment we show that increased competition leads to segregation of pupils by ability

rethinking internal labor markets new insights from a comparative perspective internal labor markets take different forms in the capitalist and the socialistfirm as the distinctive organizational problems in each economic system produce differing but comparable institutional solutions analysis of systemic uncertainties and the organizational responses of workers and managers yields a comparative model of mirrored opposition in economies in which the firm operates in a market environment systemic uncertainties regarding labor are reduced through internal bureaucratic rules operating according to a classificatory logic in the socialist economy by contrast where systemic uncertainties are produced by a bureaucratic environment the firm responds through internal market transactions based on affiliative ties the market like character of these internal mechanisms is brought into even sharper relief in an analysis of the recent establishment in hungary of semi autonomous subcontracting units inside the enterprise

ruble convertibility demand responsive exchange rates in a goal directed economy abstract this essay shows how the ruble can be made partially convertible without radically changing the soviet economic system it demonstrates that the necessary and sufficient conditions for trade enhancing convertibility merely require that incentive maximizing enterprises be permitted to engage in import and export activities and be authorized to participate in foreign currency auctions organized by the state additional conditions required for a significant improvement in foreign trade efficiency are then examined and it is shown that although numerous micro and macroeconomic disequilibria do pose difficulties partial ruble convertibility could improve east west trade efficiency if properly designed and implemented

capacity investment preemption and commitment in an infinite horizon model the commitment value of capacity is analyzed in an infinite horizon duopoly model the paper focuses on the role of alternative behavioral assumptions about the ability of firms to commit to investment paths each firm s investment strategy in a feedback nash equilibrium is shown to be a decreasing function of its rival s current capacity this creates an incentive for a firm to expand its capacity to preempt subsequent rival investment in a precommitment equilibrium there are no incentives to invest preemptively as a consequence steady state capacity levels are greater in a feedback nash equilibrium than in a precommitment equilibrium copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

optimal pollution standards and non compliance in a dynamic framework in this paper we present a stackelberg differential game to study the dynamic interaction between a polluting firm and a regulator who sets pollution limits overtime at each time the firm settles emissions taking into account the fine for non compliance with the pollution limit and balances current costs of investments in a capital stock which allows for future emission reductions we derive two main results first we show that the optimal pollution limit decreases as the capital stock increases while both emissions and the level of non compliance decrease second we find that offering fine discounts in exchange for firm s capital investment is socially desirable we numerically obtain the optimal value of such discount which crucially depends on the severity of the fine in the limiting scenario with a very large severity of the fine the optimal discount implies that no penalties are levied since the firm shows adequate adaptation progress through capital investment

slack shortage and discouraged consumers in eastern europe estimates based on smoothing by aggregation as a consequence of aggregation over markets the observed quantity may be less than the quantity demanded and less than the quantity supplied to deal with such situations a new technique is proposed for estimating demand and supply curves and the extent of shortage and slack the technique is applied to the consumption goods markets of czechoslovakia the german democratic republic hungary poland and yugoslavia it is found that shortage even corrected for a discouraged consumer effect is seldom as great as slack

the effect of competition on the efficiency of secondary schools in england abstract in this paper we calculate the technical efficiencies based upon multiple outputs school exam performance and attendance rates of all secondary schools in england over the period 1993 1998 we then estimate models to examine the determinants of efficiency in a particular year and the determinants of the change in efficiency over the period our results suggest that the greater the degree of competition between schools the more efficient they are the strength of this effect has also increased over time which is consistent with the evolution of the quasi market in secondary education competition is also found to be an important determinant of the change in efficiency over time there is however some evidence of conditional convergence between schools

incentives equality and contract renegotiations theory and evidence in the chinese banking industry renegotiation plays an important role in contract theory but the empirical study of renegotiation is almost non existent in the literature using a unique dataset from the chinese banking industry we find that the large majority of managerial incentive contracts are renegotiated after performances are realized we develop a model of contract renegotiation where supervisors and managers sign incentive contracts and then renegotiate them in the unique equilibrium of the model incentive contracts are almost always renegotiated ex post even though renegotiation is fully anticipated incentive contracts affect performance the predictions of the model find strong support from our empirical results

school quality and black white relative earnings a direct assessment the wage differential between black and white men fell from 40 percent in 1960 to 25 percent in 1980 it has been argued that this convergence reflects improvements in the relative quality of black schools to test this hypothesis we assembled data on pupil teacher ratios annual teacher pay and term length for black and white schools in the eighteen segregated states from 1915 to 1966 these data are linked to estimated returns to education for southern born men from different cohorts and states in 1960 1970 and 1980 improvements in the relative quality of black schools explain 20 percent of the narrowing of the black white earnings gap between 1960 and 1980

technological progress and factor utilization in eastern european economic growth frontier production functions are estimated for the industrial sector of four east european countries czechoslovakia the german democratic republic hungary and poland the estimates reveal that the slowdown in industrial growth in these countries is due to a decline in the efficiency or intensity of factor utilization rather than to declining rates of growth of technological progress in all countries changes in the efficiency of resource utilization are found to be more responsive to changes in macroeconomic policies than to economic reforms finally the amount of labor that could be displaced during cyclical downturns is estimated and found to imply potentially high levels of disguised unemployment copyright 1989 by the london school of economics and political science

federalism chinese style the political basis for economic success in china china s remarkable economic success rests on a foundation of political reform providing a considerable degree of credible commitment to markets this reform reflects a special type of institutionalized decentralization that the authors call federalism chinese style this form of decentralization has three consequences first it fosters competition not only in product markets but also among local governments for labor and foreign capital this competition in turn encourages local government experimentation and learning with new forms of enterprises regulation and economic relationships second it provides incentives for local governments to promote local economic prosperity finally it provides a significant amount of protection to local governments and their enterprises from political intrusion by the central government

a dynamic model of soft budget constraint abstract we study the soft budget constraint by dynamic models and conclude that the soft budget constraint originated in the investment activities do not match the profit function and policy burdens will intensify the soft budget constraint

the timing of elections in federations a disciplining device against soft budget constraints we introduce political economics into the soft budget constraint problem by asking if the timing of elections has the potential to harden budget constraints specifically we ask under which circumstances the soft budget constraint problem is worse with synchronized elections i e simultaneous central and regional office terms or with staggered elections i e terms of office that do not coincide we find that staggered elections clearly improve fiscal discipline at the local level as well as welfare