government deficits the real interest rate and ldc debt on global crowding out abstract the paper uses a three regions model of global saving investment balance to present a global crowding out interpretation of present economic trends the model builds on data which point to a possible shortage of savings explosive growth of social expenditures structural public sector deficit in north and south changes of the age pyramid real wage rigidity in many industrial countries

subsidizing health insurance for low income adults evidence from massachusetts how much are low income individuals willing to pay for health insurance and what are the implications for insurance markets using administrative data from massachusetts subsidized insurance exchange we exploit discontinuities in the subsidy schedule to estimate willingness to pay and costs of insurance among low income adults as subsidies decline insurance take up falls rapidly dropping about 25 percent for each 40 increase in monthly enrollee premiums marginal enrollees tend to be lower cost indicating adverse selection into insurance but across the entire distribution we can observe approximately the bottom 70 percent of the willingness to pay distribution enrollees willingness to pay is always less than half of their own expected costs that they impose on the insurer as a result we estimate that take up will be highly incomplete even with generous subsidies if enrollee premiums were 25 percent of insurers average costs at most half of potential enrollees would buy insurance even premiums subsidized to 10 percent of average costs would still leave at least 20 percent uninsured we briefly consider potential explanations for these findings and their normative implications

microeconomic adjustments in uruguay during 1973 1981 the interplay of real and financial shocks abstract this paper uses the financial statements of industrial firms to develop an integrated firm s eye view of the changes in the uruguayan economy during 1973 1981 in the first of three subperiods 1973 1975 real financial costs were very negative and tended to offset low returns on operating assets during 1976 1978 the dismantling of interest rate controls increased real financial costs but other factors increased the returns on operating assets more rapidly during 1979 1981 financial costs jumped enough to more than absorb increases in gross earnings which were probably due to argentine demand the rates of earning and capital formation were highest among exporters in the second subperiod when a major export promotion program was in place this pattern was reversed in the third subperiod as the promotion programs were dismantled and real currency appreciation seemed to squeeze gross earnings of exportables relatively more this unequal squeezing was probably due to redundant tariff and other protection for import competing producers

learning and the time interdependence of costa rican exports abstract exports may enhance learning through production induced learning by doing learning to export by doing and flows of information from customers we provide evidence on the learning effects of export destination for costa rica for 1955 through 1980 we examine granger causality results and export trends to determine relationships between exports to the central american common market cacm the rest of the south and the north increasing exports to the cacm appear to promote learning in machinery leather and intermediate manufactures we also find that the cacm redirects some exports away from northern markets probably with damaging consequences

defence procurement and industrial structure in the u k defence ministries being monopsonists with considerable regulatory authority have the power to shape the electronics aerospace and engineering industries that supply them this paper uses the u k experience to investigate whether and how the government should influence industrial structure after reviewing market structure and policy it provides a quantitative measure of the impact of the new more competitive procurement practices on the size distribution of contracts and assesses the role of policy on the likely evolution of the structure of the european arms industry

the economic impact of a foreign debt bail out for private firms in ecuador in this article the effect of ecuador s general foreign debt conversion programme on private firms financial position is analysed the programme called the sucretizacion was similar to programmes implemented by many heavily indebted countries after the debt crisis began i concentrate on the sucretizacion s implicit transfer from the government to firms arguing that it was large but unnecessary very few firms would have gone bankrupt because of their devaluation induced foreign exchange losses what is more i find no evidence that firms receiving these transfers used them to strengthen their balance sheets

how could the south respond to secular stagnation in the north developed countries face the risk of a sustained lack of aggregate demand i e secular stagnation demand oriented growth models emphasizing the balance of payments constraint raise concerns about attendant adverse growth impacts on developing countries from reduced export growth these concerns are well founded albeit less serious than the simplest version of these models would imply relaxing their assumptions and emphasizing cumulative causation forces from domestic demand growth and relative price effects indicates how changed policies can maintain rapid growth while reducing the import content of demand crucial is investment that reduces gaps between the composition of domestic production and domestic demand and emphasizes sectors with cumulative causation effects combined with incomes policy and capital account management drawing down excessive foreign exchange reserves and obtaining concessionary loans from development banks can finance required capital goods imports enhanced south south integration may be an important complement for small countries

the welfare effects of trade and capital market liberalization treatise on the welfare effects of trade and capital market liberalization consquenses of the capital account liberalization in the presence of trade restrictions specifies on the liberalization of trade in the presence of foreign borrowing constraints proves superiority of gradual liberalization of trade to an abrupt liberalization

strategic responses to defence sector restructuring an analysis of lancashire based companies this paper investigates the factors affecting the likelihood of lancashire based companies involved in defence production pursuing strategic responses to defence sector restructuring data covering 100 lancashire based companies form the lancashire defence survey database which is analysed results of the data analysis are of interest to organizations involved in local economic development policy making they suggest that the effects of restructuring are most profound in large core defece companies most directly involved in defence production other effects are passed on to companies that carry out subcontracting but there is less evidence of strategies being implemented in response to structural change among these companies company size product type and degree of defence dependency are uncovered as significant factors influencing whether a strategic response is instigated

the empirical modelling of nie exports an evaluation of different approaches this article investigates the current debate regarding the robustness of estimates of export demand and supply elasticities for ldcs and nies obtained by recent empirical studies the empirical findings reported in the article suggest that price elasticities of demand are indeed low and that there are strong and significant income effects on export demand furthermore using a variety of modelling approaches we demonstrate that the choice of estimation method and normalisation need not lead to drastically different conclusions regarding the size of the price elasticity of demand for nie exports whilst this points against the small country assumption usually made regarding ldc nie exports we argue that the preferred development strategy for ldcs need not necessarily be an inward oriented one this is because the large estimated income market growth elasticities in the demand equations may be due to the presence of supply side influences which have been the focus of attention of the new theories of i

a firm level chronicle of financial crises in the southern cone abstract this paper chronicles the recent emergence of financial crises in the southern cone countries of south america relying on firm level panel data major changes in the macro and regulatory environments are linked to changes in firms earnings streams and financial structures for each country a boom phase a squeeze phase and a bust phase are identified it is argued that the proximate cause of this pattern was wild fluctuation in the expected real return on financial assets though no formal model is developed it is suggested that these swings were due to the system of incentives created by rapid banking sector deregulation cum exchange rate based stabilization policies

microeconomic adjustments in chile during 1977 1981 the importance of being a grupo abstract this paper uses the financial statements of industrial firms to provide an integrated firm level view of the changes in the chilean economy during 1977 1981 both real side and financial shocks had major effects on the performance of some types of firms exportable goods producers did relatively poorly in real activities for reasons probably tied to chile s real prolonged exchange rate appreciation import competing firms that began the period with high protection did even worse apparently reflecting the larger change in their output prices as protection was dismantled the reforms thus shifted demand away from industries least in line with the country s comparative advantage but they also hurt exportables the very sector authorities intended to promote on the financial side the highly positive real cost of peso borrowing reduced industrial profits considerably a handful of powerful conglomerates grupos generated large but presumably unrealized capital gains by investing in the securities of related enterprises such activities allowed them to offset relatively poor returns on real operations and their ownership of the country s major banks allowed them to consolidate control of a large volume of assets with debt finance these two results explain why the grupos were suddenly in considerable financial difficulty when the chilean boom ended in 1982

have north south growth linkages changed abstract this paper provides econometric evidence suggesting that the traditional tradebased business cycle linkages between the north and the south have changed many countries in the south particularly in asia appear to have become more resilient to cyclical movements in the north and play a more significant role in sustaining global activity a number of factors may have contributed to these changes improved domestic policies and more open trade and exchange regimes closer financial linkages with the north and a substantial increase in capital flows a marked rise in intraregional trade and greater diversification of the exports of the south

financial development theories and recent experience for many years practising development econo mists made pronouncements on the importance of developing the financial sector to accelerate eco nomic growth based on slender theoretical grounds indeed the vast bulk of theoretical work relating financial conditions to economic development published before 1973 detected possibilities for negative or at best neutral effects of financial development on income levels john maynard keynes 1936 argues that liquidity preference tended historically to push the real interest rate above its full employment equilibrium level as a result income falls to equate saving and investment plans keynes suggests that liquidity preference and hence the real interest rate can be reduced by financial repression in the form of interest rate ceilings or a gesellian stamp tax on money james tobin 1965 shows that a larger ratio of money to physical capital in household portfolios reduces the capital labour ratio and hence per capita incomes even when the economy is operating at full employment by reducing preference for money in favour of physical capital financial repression can raise the capital labour ratio and accelerate economic growth during the transition to a new higher level of per c pi a incomes in tobin s model economic growth and inflation are positively related because higher inflation reduces the demand for money more recently a school of neo structuralist economists proffers models in which liberalization and devel opment of the formal financial system can produce both higher inflation and lower economic growth

monitoring of performance in organizational contracting the case of defense procurement this paper contains an agency theoretic analysis of procurement contracts in which the government designs optimal linear contracts for a risk averse supplier in the presence of moral hazard private information and imperfect monitoring optimal contracts deviate from first best risk sharing the direction of the deviation depends on the relative severity of the moral hazard and private information problems and on the precision of the monitor in contrast to the usual result in the moral hazard literature the government may in some cases prefer that the effort of the supplier be taxed choice of the precision of the monitor and the categories of costs covered by the monitor are also studied

trade as the engine of growth in developing countries revisited economic growth in developed countries since the mid 1970s the only way to keep the engine of ldc growth beating at a satisfactory rate so the argument goes is to turn to an alternative source of fuel this lewis argues lies in trade among the developing countries which he asserts can take up the slack left by mdcs more developed countries as mdcs slow down 1980 p 560 pessimism about demand for ldc exports in developed countries markets is a recurrent theme in the development literature also familiar is the approach taken by lewis to dismiss past successes of ldcs in world trade by declaring the alleged engine of past growth to be no longer operating satisfactorily the intellectual foundations of the import substitution strategy laid in the 1950s by prebisch myrdal and most importantly nurkse rested on similar grounds arguing that the demand for periphery countries exports in the 20th century is far weaker than it was in the 19th century trade was dismissed as an engine of growth a function nurkse alleged it had served in the 19th century the solution prescribed in the 1950s was to look inward in effect to scrap the trade engine altogether lewis remedy coming two decades later when most importsubstitution possibilities in many ldcs have been all but exhausted retains the trade engine but seeks an alternative source of fuel to drive it the classic critique by irving kravis 1970 of nurkse s thesis of trade as a faltering engine of growth showed that export expansion did not serve in the nineteenth century to differentiate successful from unsuccessful countries p 850 this followed from two findings first that successful 19th century countries showed few signs of export dominated growth second that unsuccessful periphery countries enjoyed export expansion in the second half of the 19th century of the same order of magnitude as the temperate regions of recent settlement this led kravis to conclude that a more warranted metaphor

take up and targeting experimental evidence from snap this paper develops a framework for evaluating the welfare impact of various interventions designed to increase take up of social safety net programs in the presence of potential behavioral biases we calibrate the key parameters using a randomized field experiment in which 30 000 elderly individuals not enrolled in but likely eligible for the supplemental nutrition assistance program snap are either provided with information that they are likely eligible provided with this information and also offered assistance in applying or are in a status quo control group only 6 percent of the control group enrolls in snap over the next 9 months compared to 11 percent of the information only group and 18 percent of the information plus assistance group the individuals who apply or enroll in response to either intervention receive lower benefits and are less sick than the average enrollee in the control group the results are consistent with the existence of optimization frictions that are greater for needier individuals suggesting that the poor targeting properties of the interventions reduce their welfare gains

the indirect approach to trade liberalization dynamic consideration on liberalization cum stabilization policies in latin america abstract recent experience of some latin american countries has shown that a switch to an outward oriented development strategy involves difficult adjustment problems these problems may overburden the economy s adjustment capacity when the heritage of an extended period of import substitution has to be overcome together with severe macroeconomic imbalances when these conditions apply priority should be given to the elimination of the anti export bias even at the expense of new temporary export subsidies and of the macroeconomic disturbances before trade liberalization in the proper meaning of the word would have to be realized

the credit consequences of unpaid medical bills abstract this paper quantifies the costs of leaving medical bills unpaid and what these costs imply for the value of health insurance to beneficiaries we argue that a large fraction of unpaid medical bills is sent to third party collections and reported to credit bureaus with detrimental effects on patients credit outcomes combining a large panel of credit records with data on credit offers we find that the aca medicaid expansion reduced newly reported medical collections by 5 89 billion and led to better terms of credit we find that the financial benefits of medicaid at least double when including this indirect credit channel

chaotic dynamics in credit constrained emerging economies abstract this paper analyzes the role of financial development as a source of endogenous instability in small open economies by assuming that firms face credit constraints our model displays a complex dynamic behavior with high period cycles or even chaotic dynamic patterns for intermediate values of the parameter representing the level of financial development of the economy we derive sufficient conditions for global stability and we prove that chaos appears via a border collision bifurcation the basic implication of our model is that economies experiencing a process of financial development are more unstable than both very underdeveloped and very developed economies

microeconomic adjustments in argentina during 1976 1981 the importance of changing levels of financial subsidies abstract this paper uses the financial statements of argentine industrial firms to study the micro level impact of recent liberalization and reform attempts the main lesson is that extremely large subsidies were provided to the industrial sector by way of negative effective financial costs these negative costs appeared first in the late 1970s because of real currency appreciation and unconstrained access to foreign credit then again in 1981 because of an exchange insurance program we also find that the argentine government s announced intention to promote exporting activities did not translate into relatively favorable product market conditions for exporting firms to the contrary the real currency appreciation squeezed exporters profits while redundant tariff protection insulated import competing firms from world competition at least until 1980

a unified welfare analysis of government policies we conduct a comparative welfare analysis of 133 historical policy changes over the past half century in the united states focusing on policies in social insurance education and job training taxes and cash transfers and in kind transfers for each policy we use existing causal estimates to calculate both the benefit that each policy provides its recipients measured as their willingness to pay and the policy s net cost inclusive of long term impacts on the government s budget we divide the willingness to pay by the net cost to the government to form each policy s marginal value of public funds or its mvpf comparing mvpfs across policies provides a unified method of assessing their impact on social welfare our results suggest that direct investments in low income children s health and education have historically had the highest mvpfs on average exceeding 5 many such policies have paid for themselves as governments recouped the cost of their initial expenditures through additional taxes collected and reduced transfers we find large mvpfs for education and health policies amongst children of all ages rather than observing diminishing marginal returns throughout childhood we find smaller mvpfs for policies targeting adults generally between 0 5 and 2 expenditures on adults have exceeded this mvpf range in particular if they induced large spillovers on children we relate our estimates to existing theories of optimal government policy and we discuss how the mvpf provides lessons for the design of future research

financial development and the instability of open economies this paper introduces a framework for analyzing the role of financial factors as a source of instability in small open economies our basic model is a dynamic open economy model with a tradeable good produced with capital and a country specific factor we also assume that firms face credit constraints with the constraint being tighter at a lower level of financial development a basic implication of this model is that economies at an intermediate level of financial development are more unstable than either very developed or very underdeveloped economies this is true both in the sense that temporary shocks have large and persistent effects and also in the sense that these economies can exhibit cycles thus countries that are going through a phase of financial development may become more unstable in the short run similarly full capital account liberalization may destabilize the economy in economies at an intermediate level of financial development phases of growth with capital inflows are followed by collapse with capital outflows on the other hand foreign direct investment does not destabilize

income and price elasticities for exports of developing countries income and price elasticities for non oil exports of non opec developing countries play an imp ortant role in the development of policy responses to the debt crisis these elasticities are estimated for the major standard internation al trade classification commodity groups based on two stage least sq uares and quarterly data for 1973 to 1984 the income elasticity for non oil exports ranges between 1 4 and 1 9 the analysis also tests t he properties of the error term the dynamic specification and para metric stability the sensitivity of the results is assessed using sh iller s lags and band spectrum estimation copyright 1988 by mit press

an analysis of the disaggregated manufacturing exports of the asian nies to eec usa and japan this paper examines the export performance of the four asian newly industrialized economics nies by modelling their bilateral export flows to three main oecd blocks the usa japan and the european community our estimated export demand models reveal interesting asymmetries between these three areas of destination which do not emerge from previous aggregate empirical studies of nie export performance

external shocks financial reforms and stabilization attempts in uruguay during 1974 1983 abstract this paper interprets and evaluates uruguay s reforms emphasizing the outcome of financial reforms and attempts to bring down inflation it is shown that domestic interest rate deregulation and the removal of prohibition towards holding dollar denominated assets led to a rise in the ratio of financial assets in gdp and to a shift towards dollar denominated assets causes of the persistent and large spread between peso and dollar interest rates adjusted for the preannounced rate of devaluation tablita are examined the discussion of the stabilization program during 1979 1982 and its aftermath in 1983 shows that setting the tablita at less than the difference between internal and external inflation led to severe imbalances because of remaining redundant protection and price stickness the real exchange rate appreciated sharply for a prolonged period and the trade balance widened until the stabilization episode ended with capital flight when doubts set in about the sustainability of the tablita

demand and supply factors in the determination of nie exports a simultaneous error correction model for hong kong this paper considers the issue of whether a small developing economy such as hong kong faces a perfectly elastic demand for its exports of manufactured goods we construct a simultaneous demand and supply system which is estimated using full information maximum likelihood methods and which allows us to clearly identify demand and supply factors in determining export volumes and prices our empirical findings differ from previous studies conducted with this data set in that they suggest that even a small dynamic newly industrialized economy such as hong kong may not face infinitely elastic demand for its manufactured goods we also advance some reasons to explain why the small country assumption may not be applicable in the case of most industrialized economies

trade and structural change nics and next tier nics as transitional economies abstract the paper finds a strong association between rapid change in the sectoral composition of output and exports structural change and rapid export growth in the newly industrializing countries capital formation appears to be encouraged in dynamic economies by the underpricing of investment goods vis a vis consumption and government goods within these economies also the underpricing of investment goods in dynamic economies is relatively greater than in less dynamic economies whereas other research has found low price distortion to be associated with high growth and an outward rather than an inward looking orientation these associations are seriously challenged and more caution is urged in reaching generalized conclusions

import competition from developed and developing countries separate demand equations for imports from less developed countries ldcs and imports from developed countries dcs were estimated for each of eleven representative product groups imports were found to compete quite readily with domestically produced goods with plausible own price and cross price elasticities whereas the quantity of each type of import was found to be quite responsive to changes in the price of us home goods each appears to be less sensitive to the price of the alternative import an explanation that is consistent with this observation and that finds support from detailed industry information is that dcs and ldcs supply goods that are at different stages in the product or technology cycle whereas us producers compete in all submarkets this suggests that trade creation rather than trade diversion provides the predominant inroad for ldcs into the us market 25 references 3 tables