occupational choice and the process of development this paper models economic development as a process of institutional transformation by focusing on the interplay between agents occupational decisions and the distribution of wealth because of capital market imperfections poor agents choose working for a wage over self employment and wealthy agents become entrepreneurs who monitor workers only with sufficient inequality however will there be employment contracts otherwise there is either subsistence or self employment thus in static equilibrium the occupational structure depends on distribution since the latter is itself endogenous we demonstrate the robustness of this result by extending the model dynamically and studying examples in which initial wealth distributions have long run effects in one case the economy develops either widespread cottage industry self employment or factory production employment contracts depending on the initial distribution in the other example it develops into prosperity or stagnation

collateral in credit rationing in markets with imperfect information note in their 1981 article joseph stiglitz and andrew weiss analyze adverse selection and incentive effects in the loan market the models considered are based on two crucial assumptions borrowers are subject to limited liability and lenders cannot distinguish borrowers projects of different risk stiglitz and weiss show that a bank that raises its interest rate may suffer adverse selection because only risky borrowers will be willing to borrow at the higher rate thus lenders may choose not to raise the interest rate to eliminate excess demand resulting in the possibility of a credit rationing equilibrium stiglitz and weiss also consider briefly the role of collateral in such credit rationing models they conclude that lenders may choose not to use collateral requirements as a rationing device an increase in collateral requirements like an increase in the interest rate potentially leads to a decrease in the lender s expected return on loans because of resulting adverse incentive and selection effects the purpose of this note is to further investigate the role of collateral in these models stiglitz and weiss discussion in section iii establishes that adverse selection effects can result from increases in collateral when borrowers are risk averse i will show by returning to a model they discussed earlier in section i that the adverse selection effects can also occur when borrowers are risk neutral stiglitz and weiss outline a model to consider the use of collateral as a rationing device section iii in that model all potential borrowers face the same array of risky projects each potential borrower chooses at most one of those projects to undertake the individuals are by assumption risk averse with decreasing absolute risk aversion and possess different amounts of initial wealth thus choice of project if any to undertake and the method of finance selffinance from initial wealth or loan finance will differ from one individual to the next stiglitz and weiss show that among those who undertake risky projects and who choose borrowing as the method of finance wealthier individuals undertake riskier projects an increase in collateral has two effects on the market for loans those individuals who remain in the market will choose to undertake less risky projects and those individuals who drop out of the market are less wealthy low risk borrowers if the second effect is sufficiently strong then increased collateral requirements will mean decreased expected returns for the lender thus a credit rationing equilibrium may occur since lenders may not choose to use collateral requirements or the interest rate to eliminate excess demand the adverse selection effect just described does not occur in this model if the individuals are risk neutral consequently the potential for a credit rationing equilibrium is limited to cases where borrowers are risk averse to see that increases in collateral requirements can also result in adverse selection if borrowers are risk neutral consider the model stiglitz and weiss used to analyze the adverse selection effects of increases in the interest rate section i pp 395 99 it differs from the section iii model discussed above in three ways first borrowers are risk neutral second all projects ar loan financed the analogy to the section iii model is that no individuals have sufficient wealth to self finance projects third in the section

market structure and price cost margins in philippine manufacturing industries we test the hypothesis that variations in industry price cost margins pcm performance are explained by sellers various structure and conduct variables such as sellers concentration i e hhi for value added capital output ratio barrier to entry industry demand growth rate import penetration export share and degree of foreign participation multinational in four digit philippines standard industrial classification manufacturing industries the statistical analyses are a series of multiple regression equations relating the pcm to the previously mentioned explanatory variables estimation results show a generally positive relationship between sellers concentration capital intensity degree of foreign participation and the pcm industry growth rate may either increase or reduce pcm imports and exports lower pcm

special interest group perspective before and after the clayton and federal trade commission acts the performance of prices and output is explored for the period 1904 1925 the 11 years before and after passage of the clayton and federal trade commission acts hereinafter clayton ftc acts in the usa in 1914 and compared with performance for 1890 1901 the 11 year period prior to and following the passage of the sherman act while proponents of the sherman act and the clayton ftc acts claim that they serve the public interest the empirical results suggests that they appear as susceptible to the influence of special interest groups as any other public policy

design and rating of risk contingent credit for balancing business and financial risks for kenyan farmers abstractweather related agricultural risks and limited access to credit are serious impediments to agricultural productivity and growth in developing countries this paper describes a novel insuran

occupational choice and dynamic incentives we study an overlapping generations version of the principal agent problem where incentive contracts are determined in general equilibrium all individuals are workers when young but have a choice between becoming entrepreneurs or remaining workers when old imperfections in the credit market give rise to rents in entrepreneurial activities involving capital these rents motivate poor young agents to work hard and save to overcome the borrowing constraints with a labour market that is subject to moral hazard the increased effort raises social welfare policies that reduce credit market imperfections or redistribute income may reduce welfare by dampening this effect

the proper scope of government theory and an application to prisons when should a government provide a service in house and when should it contract out provision we develop a model in which the provider can invest in improving the quality of service or reducing cost if contracts are incomplete the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee has however the private contractor s incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on noncontractible quality the model is applied to understanding the costs and benefits of prison privatization

the allocation of credit and financial collapse this paper examines the allocation of credit in a market in which borrowers have greater information concerning their own riskiness than do lenders it illustrates that 1 the allocation of credit is inefficient and at times can be improved by government intervention and 2 small changes in the exogenous risk free interest rate can cause large discontinuous changes in the allocation of credit and the efficiency of the market equilibrium these conclusions suggests a role for government as the lender of last resort

collusion analysis of the alabama liquid asphalt market the alabama liquid asphalt market in the usa is examined over the period 1961 1978 for evidence of activity consistent with collusion some 14 conditional collusion facilitating factors that could influence a market s tendency towards collusion not all equally important or necessarily in agreement with every other factor were considered while some of these factors are controversial and can help or harm a collusion the net balance of factors and all of the important factors and evidence pointed towards being consistent with a conspiracy while not examined as extensively it was also found that the circumstantial evidence in the market was also consistent with collusion this article suggests a procedural methodology for initiation and resolution of suspected collusion for determining appropriate damages while the precise law and damages allowed will be country specific the general methodology should have wide application in many countries whose laws attempt to foster and preserve competition and pun

entrepreneurship financiership and selection we develop an equilibrium model of the market for entrepreneurial finance in which all agents have some personal wealth and a project whose quality is their private information all agents choose whether to invest either as entrepreneurs or financiers or to invest in storage technology we find that a binding economy level wealth constraint which renders credit scarce can create advantageous selection where productive agents become entrepreneurs and unproductive agents become their financiers if funding is easier to obtain entrepreneurship also attracts unproductive agents in our model individual wealth and entrepreneurship are positively negatively correlated if financial market participation is complete incomplete

symbiosis vs crowding out the interaction of formal and informal credit markets in developing countries abstract it is a common observation in many developing countries that enterprises are active borrowers in both formal and informal credit markets we propose a model in which the formal sector s superior ability in deposit mobilization is traded off against the informational advantage that lenders in the informal sector enjoy the formal sector can screen borrowers by providing only partial financing for projects thereby forcing borrowers to resort to the informal sector for the remainder of the loan we use the model to predict how the market structure responds to changes in the environment and we consider the policy implications of various forms of government intervention

a political economy theory of partial decentralization we revisit the classic problem of tax competition in the context of federal nations and derive a positive theory of partial decentralization a capital poor median voter chooses to use redistributive capital taxes to provide public goods the expectation of high capital taxes however results in a small capital stock which lowers returns to redistribution the median voter therefore wants to commit to a lower level of capital taxes she does so by setting a partial degree of decentralization in the constitution the equilibrium degree of decentralization balances the positive effect of tax competition on capital taxes with the loss in redistribution that results we show that the degree of decentralization is nonmonotonic in inequality increasing in the redistributive efficiency of public good provision and decreasing in capital productivity when public goods are heterogeneous in their capacity to transfer funds all voters agree that goods with high redistributive capacity should be decentralized

industrial concentration and price cost margin of the indonesian food and beverages sector this article investigates trends in industrial concentration and its relationship with the price cost margin in 54 subsectors of the indonesian food and beverages sector in the period 1995 to 2006 this study uses firm level survey data provided by the indonesian bureau of central statistics bps classified at the five digit international standard industrial classification isic level the results show a significant increase in industrial concentration in 1995 to 1999 which coincided with the period of the economic crisis in indonesia after 1999 the industrial concentration exhibits a slightly decreasing long term trend furthermore the industrial concentration for all subsectors tends to converge to the same value in the long run additionally results show that higher industrial concentration yields a higher price cost margin finally the introduction of the competition law in 1999 has slightly lowered industrial concentration and the price cost margin

do political parties matter evidence from u s cities are cities as politically polarized as states and countries no is the answer from our regression discontinuity design analysis which shows that whether the mayor is a democrat or a republican does not affect the size of city government the allocation of local public spending or crime rates however there is a substantial incumbent effect for mayors we investigate three mechanisms that could account for the striking lack of partisan impact at the local level and find the most support for tiebout competition among localities within metropolitan areas

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

the poor are twice cursed wealth inequality and inefficient credit market abstract this paper investigates the role of unobservable wealth differences on credit market equilibrium given there is also asymmetric information concerning effort preferences and choices in equilibrium poor but able entrepreneurs may subsidise the rich and incompetent or be excluded as a result investment may exceed or fall short of the optimal level low inequality may deliver conditions for perfect screening and an efficient level of investment the equilibrium with cross subsidisation is consistent with otherwise puzzling empirical observations

market dynamics and dichotomy evidence from taiwanese manufacturing in taiwan a dichotomous market structure is closely related to the progress of economic development the purpose of the present article is to examine the market dynamics and dichotomous nature of taiwanese manufacturing a model of dynamic adjustment of industry structure is considered when both the speed of adjustment and the long run market concentration are allowed to vary across industries we use 118 four digit manufacturing industries for empirical analysis of our models spanning between 1981 and 1991 empirical findings show that both the speed of adjustment and long run industry concentration are predominantly determined by minimum efficient scale the speed of adjustment is much faster in a small open economy like taiwan compared to mature economies like the us and australia in addition the dichotomous nature of the market is supported in our findings for both periods viz 1981 1986 and 1986 1991 albeit weaker for the later period

applied welfare economics with discrete choice models economists have been paying increasing attention to the study of situations in which consumers face a discrete rather than a continuous set of choices such models are potentially very important in evaluating the impact of government programs upon consumer welfare but very little has been said in general regarding the tools of applied welfare economics indiscrete choice situations this paper shows how the conventional methods of applied welfare economics can be modified to handle such cases it focuses on the computation of the excess burden of taxation and the evaluation of quality change the results are applied to stochastic utility models including the popular cases of probit and logit analysis throughout the emphasis is on providing rigorous guidelines for carrying out applied work this abstract was borrowed from another version of this item

repossession and the democratization of credit we exploit a 2004 credit reform in brazil that simplified the sale of repossessed cars used as collateral for auto loans we show that the reform expanded credit to riskier self employed borrowers who purchased newer more expensive cars the legal change has led to larger loans with lower spreads and longer maturities although the credit reform improved riskier borrowers access to credit it also led to increased incidences of delinquency and default our results shed light on the consequences of a credit reform and highlight the crucial role that collateral and repossession play in the liberalization and democratization of credit

industrial concentration and competition in malaysian manufacturing industrial concentration is the most widely studied area among various elements of market structure in the industrial organization literature this paper is a first attempt to analyse the determinants of changes in industry concentration over time in the case of malaysia using a partial adjustment model a cross sectional analysis is carried out against a sample of manufacturing industries between 1986 and 1996 domestic factors in influencing competition e g capital intensity advertising intensity and market size are found to be significant in most cases to explain the level of concentration considering variable rate of adjustment of concentration an increase in labour productivity of large firms and high entry rates are found to be significant for faster adjustment towards equilibrium level compared with other developed countries the annual rate of structural adjustment is found to be slow in the case of malaysian manufacturing

dynamic analysis on market structure of china s coal industry abstract according to industrial organization theory market structure is a crucial factor to market performance based on the var model and the data from 1994 to 2014 we revealed the dynamic response route of the market structure to these factors and the change process of contribution rate of these factors to the market structure it shows that market structure is inertial adjustment technology advance and industry policy have continuous effects on improvement of market concentration ratio market size and production scale have sustained negative effects on market concentration ratio fixed capital has barrier effect which is mainly the entry barrier effect at the beginning and then the exit barrier effect continues to play a leading role therefore the government has no need to introduce special policies to encourage merger or expansion on the capacity as enterprises would do it spontaneously it is necessary to make market access system stricter to improve exit compensation mechanism and to promote technological innovation all these policies need dynamic adjustment based on the stages of economic cycle

is relationship lending special evidence from credit file data in germany the german financial market is often characterized as a bank based system with strong bank customer relationships the corresponding notion of a housebank is closely related to the theoretical idea of relationship lending it is the objective of this paper to provide a direct comparison between housebanks and normal banks as to their credit policy therefore we analyze a new data set representing a random sample of borrowers drawn from the credit portfolios of five leading german banks over a period of five years we use credit file data rather than industry survey data and thus focus the analysis on information that is directly related to actual credit decisions in particular we use bank internal borrower rating data to evaluate borrower quality and the bank s own assessment of its housebank status to control for information intensive relationships the major results of our study support the view that housebanks are able to establish a distinct behavioral pattern consistent with the idea of long term commitment we find that housebanks do provide liquidity insurance in situations of unexpected deterioration of borrower ratings with respect to loan pricing we find no evidence for intra or intertemporal price differentiation related to housebanking

contractual structure and wealth accumulation can historical wealth distributions affect long run output and inequality despite rational saving convex technology and no externalities we consider a model of equilibrium short period financial contracts where poor agents face credit constraints owing to moral hazard and limited liability if agents have no bargaining power poor agents have no incentive to save poverty traps emerge and agents are polarized into two classes with no interclass mobility if instead agents have all the bargaining power strong saving incentives are generated the wealth of poor and rich agents alike drift upward indefinitely and history does not matter eventually d31 d91 i32 o17 q15

the effects of redistributive taxation in credit markets with adverse selection abstract this paper studies the effects of redistributive taxation in credit markets with adverse selection and shows that there exists a range of taxes that creates pareto improvements relative to the zero tax market allocation by increasing aggregate investment for sufficiently high taxes an increase in the safe interest rate can be accompanied by an increase in investment

excessive public employment and rent seeking traps we propose a model where the size of the public sector and aggregate output are interrelated through the occupational choice of agents who differ in their skill level and degree of public mindedness when the public sector attracts bureaucrats with low degree of public service motivation they will use their position to rent seek by employing an excessive number of unskilled workers this leads to an equilibrium with relatively high unskilled wages which lowers profits and deters entrepreneurship conversely an equilibrium with a lean public sector and greater private economic activity arises when public service motivated agents populate the state bureaucracy these agents exert high effort and employ a limited number of unskilled workers our model also shows that a bloated public sector with high wages may be supported by the unskilled agents

race segregation and postal employment new evidence on spatial mismatch abstract the spatial mismatch hypothesis posits that employment decentralization isolated urban blacks from work opportunities this paper focuses on one large employer that has remained in the central city over the twentieth century the u s postal service we find that blacks substitute towards postal work as other employment opportunities leave the city circa 1960 the response is particularly strong in segregated areas where black neighborhoods are clustered near the central business district furthermore this pattern only holds for non mail carriers many of whom work in central processing facilities more recently the relationship between black postal employment and segregation has declined suggesting that spatial mismatch has become less important over time

economic impacts of new unionization on private sector employers 1984 2001 economic impacts of unionization on employers are difficult to estimate in the absence of large representative data on establishments with union status information estimates are also confounded by selection bias because unions could organize at highly profitable enterprises that are more likely to grow and pay higher wages using multiple establishment level data sets that represent establishments that faced organizing drives in the united states during 1984 1999 this paper uses a regression discontinuity design to estimate the impact of unionization on business survival employment output productivity and wages essentially outcomes for employers where unions barely won the election e g by one vote are compared with those where the unions barely lost the analysis finds small impacts on all outcomes that we examine estimates for wages are close to zero the evidence suggests that at least in recent decades the legal mandate that requires the employer to bargain with a certified union has had little economic impact on employers because unions have been somewhat unsuccessful at securing significant wage gains

robust financial contracting and the role of venture capitalists we derive a role for inside investors such as venture capitalists in resolving various agency problems that arise in a multistage financial contracting problem absent an inside investor the choice of securities is unlikely to reveal all private information and overinvestment may occur an inside investor however always makes optimal investment decisions if and only if he holds a fixed fraction contract where he always receives a fixed fraction of the project s payoff and finances that same fraction of future investments this contract also eliminates any incentives of the venture capitalist to misprice securities issued in later financing rounds in this article we develop a model of financial contracting with multiple investment decisions and show how conflicts of interest and informational asymmetries can be effectively resolved by an inside investor i e an investor who not only provides capital but also works closely with the firm monitors it frequently and is generally very well informed about the firm s prospects and investment opportunities venture capitalists are obvious examples of inside investors and their function has been an important motivation for this article banks especially in japan and germany are also involved in monitoring and can be viewed as playing the role of inside investors in this article we examine the potential benefits of inside investors in a context where there are no restrictions beyond limited liability on the type of financial contracts that can be written we address a basic financial contracting problem involving an entrepreneur who has an idea for a project but does not have sufficient capital to fund it an important assumption is that there are several stages in the project s development and that a decision must be made at each stage whether the project should be continued or abandoned if the project is continued the amount of additional capital to be invested must also be determined we assume that the entrepreneur as an insider observes private information about the project s profitability at each stage this information is not

the value of school facility investments evidence from a dynamic regression discontinuity design author s cellini stephanie riegg ferreira fernando rothstein jesse abstract despite extensive public infrastructure spending surprisingly little is known about its economic return in this paper we estimate the value of school facility investments using housing markets standard models of local public goods imply that school districts should spend up to the point where marginal increases would have zero effect on local housing prices our research design isolates exogenous variation in investments by comparing school districts where referenda on bond issues targeted to fund capital expenditures passed and failed by narrow margins we extend this traditional regression discontinuity approach to identify the dynamic treatment effects of bond authorization on local housing prices student achievement and district composition our results indicate that california school districts underinvest in school facilities passing a referendum causes immediate sizable increases in home prices implying a willingness to pay on the part of marginal homebuyers of 1 50 or more for each 1 of capital spending these effects do not appear to be driven by changes in the income or racial composition of homeowners and the impact on test scores appears to explain only a small portion of the total housing price effect c 2010 by the president and fellows of harvard college and the massachusetts institute of technology

the role of entrepreneurial passion in the formation of students entrepreneurial intentions entrepreneurial passion has been suggested as an entrepreneur s central characteristic theorized to affect a host of entrepreneurial behaviours considering the theory of planned behaviour tpb

redistributive public employment abstract politicians may use disguised redistributive policies in order to circumvent opposition to explicit tax transfer schemes first we present a theoretical model that formalizes this hypothesis next we provide evidence consistent with the prediction of the model namely that in u s cities politicians use public employment as such a redistributive device we find that city employment is significantly higher in cities where income inequality and ethnic fragmentation are higher

empirical evidence on a special interest group perspective to antitrust while the antitrust laws claim to serve the public interest they are as susceptible to the influence of special interest groups as are any public policies this paper extends the empirical literature regarding the special interest theory of antitrust our additional empirical evidence addresses some of the shortcomings in previous approaches in particular we conduct a more rigorous statistical examination this paper separates two crucial issues first what happened to prices and output from 1880 to 1900 prior to and following passage of the sherman act in 1890 second what do these empirical results mean for the origin history and development of antitrust

enterprise inequality and economic development we characterize an equilibrium development process driven by the interaction of the distribution of wealth with credit constraints and the distribution of entrepreneurial skills when efficient entrepreneurs are relatively abundant a traditional development process emerges in which the evolution of macroeconomic variables accord with empirical regularities and income inequality traces out a kuznets curve if instead efficient entrepreneurs are relatively scarce the model generates long run distributional cycles driven by the endogenous interaction between credit constraints entrepreneurial efficiency and equilibrium wages

aspiring to succeed a model of entrepreneurship and fear of failure fear of failure can dominate the choices of individuals we model its role in the decision to become an entrepreneur and subsequent investments made in pursuit of success using the framework of loss aversion we show that when an individual s threshold for success is sufficiently high fear of failure motivates additional investment when the threshold for success is equal to the foregone outside option on the other hand fear of failure is always de motivating finally regardless of the success threshold fear of failure is negatively associated with entry into entrepreneurship our findings highlight the importance of the interaction between the degree of fear of failure and the aspirations of the would be entrepreneur

too much investment a problem of asymmetric information this paper shows that under plausible assumptions the inability of lenders to discover all of the relevant characteristics of borrowers results in investment in excess of the socially efficient level raising the rate of interest above the free market level will restore optimality this conflicts with generally held views and is contrasted with the stiglitz weiss model it is shown that the assumptions which yield overinvestment support debt as the equilibrium method of finance however under the stiglitz weiss assumptions used to derive an underinvestment result equity is shown to be the equilibrium method of finance

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

unfair credit allocations this article investigates the impact of credit allocation on heterogeneous wealth entrepreneurs we show that with decreasing risk aversion and unobservable wealth poorer borrowers exert more effort as a consequence of endogenous adverse selection they are either excluded from the market or necessarily subsidize richer borrowers in a pooling equilibrium resulting in a paradoxical and inequitable redistribution alternatively a less likely separating equilibrium may occur in which poor types bear the entire weight of separation in the form of excess risk taking

collateral and rationing sorting equilibria in monopolistic and competitive credit markets the authors examine how market structure affects credit allocation under universal risk neutrality and asymmetric information about borrowers they consider both monopolistic and perf ectly competitive banks and examine the role of collateral in each ca se when a bank is a monopolist on the loan side they find collatera l is never used and asymmetric information results in reduced bank le nding under perfect competition collateral has a useful sorting rol e moreover rationing is possible even with collateral availability and perfectly elastic deposit supply in this setting the authors sh ow co signers are valuable social welfare properties of the monopoly and competitive equilibria are also compared copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

evaluation of credit guarantee policy using propensity score matching in this article we evaluate the effect of the credit guarantee policy by comparing a large sample of guaranteed firms and matched non guaranteed firms from 2000 to 2003 the sample firms are compared with respect to growth rates of different performance indicators including productivity sales employment investment r d wage level and the survival of firms in the post crisis period in order to avoid the selectivity problem propensity score matching methodologies are adopted results suggest that credit guarantees influenced significantly firms ability to maintain their size and increase their survival rate but not to increase their r d and investment and hence their growth in productivity moreover due to the adverse selection problem firms with lower productivity were receiving guarantees

sharing contracts marginalisation adverse selection and markup calculation this paper proposes a new approach to explain the dominance in the islamic banking market of markup contracts at the expense of sharing ones we show that the dual pricing practised in this market produces an additional or artificial dimension of adverse selection which is causing the sharing contracts marginalization we suggest specialized use of two islamic contractual categories as a device for eliminating artificial adverse selection we suggest also an endogenous calculation of the markup that is independent of the interest rate based on the financing cost unification this approach allows the deduction of default and liquidity risk premiums

introduction to development theory abstractthisarticle introduces the symposium on economic development theory 2007 elsevier inc all rights reserved jel classi cation o11 o12keywords development economics development economics a subject that studies institutions growth inequality and povertyin the developing world is a large lively and exciting area of research the objective of thissymposium is to put together some contributions in economic theory with a distinct focus ondevelopment questions much of early development economics as typi ed in the work of paul rosenstein rodan arthurlewis ragnarnurkse tiborscitovsky allynyoung gunnarmyrdal harveyleibenstein alberthirschman amartyasenandothers wastheoretical thoughnotnecessarilyinthesenseofformalmodel building theseauthorsallfelttheneedtobringnewconceptsintoeconomictheory ideas that would capture the essential features of underdevelopment and provide explanationsof the development process existing economic theory with its focus on competitive markets depersonalized exchange steady technical progress and balanced growth simply did not seemrightwhenmatchedwiththegroundrealitiesofunderdevelopment fragmented imperfect orjustplain missing markets highly personalized transactions in credit insurance or agrarian tenancy ambiguousornonexistentpropertyrights andwidespreadevidenceofpovertytrapsandhistoricallock ins a fair bit of modern economic theory was born in some of these early development writings young s article 40 on increasing returns was perhaps the rst systematic study of noncon vexities in economic growth rosenstein rodan s celebrated paper 32 on post war interven tion in europe provided a conceptual foundation for modern thinking on coordination failures

profitability concentration imports and exports the case of taiwan s midstream petrochemical industries based on an open economy oligopoly model causalities among domestic firms price cost margin pcm domestic concentration import and export shares are derived and a simultaneous equation system is established by utilizing the 1989 1997 data of taiwan s midstream petrochemical industries three stage least squares is used to estimate the system the empirical results confirm the derived results and demonstrate 1 there exist simultaneous relationships among domestic pcm domestic concentration import and export shares 2 import concentration affects domestic concentration positively but affects domestic pcm import and export shares negatively 3 diversifying international markets improves domestic firms pcm 4 domestic firms seem to be in a situation of collusion

self employment over the business cycle in the usa a decomposition entry rates into self employment increase during recessions and decrease during economic upswings i show that this is mostly explained by the higher unemployment rate during a recession together with the fact that at all times unemployed persons have a relatively high propensity to become self employed out of necessity i use econometric decomposition techniques to quantify these effects based on the monthly matched us current population survey before during and after the great recession i also document that the entry rate into self employment with unincorporated businesses strongly increased during the recession but not into self employment with incorporated businesses this highlights the association of unincorporated and incorporated self employment with necessity and opportunity entrepreneurship respectively the results are useful for policymakers and practitioners to understand forecast and act on the different types of self employment that can be expected over the business cycle there are also important implications for theories of the cyclicality of unemployment and entrepreneurship plain english summary self employment will increase during recessions when unemployment is high but it may not boost innovation during recessions increased unemployment underlies the higher entry rate into self employment our evidence is from representative survey data from the usa covering the great recession the upside is that self employment enables workers who lose their jobs to continue to work which can speed up the subsequent economic recovery thus public policy should enable people to start businesses however as during recessions the unemployed mostly start unincorporated businesses one cannot expect them to boost innovation as much as start ups during better economic times these insights also speak to the 2020 recession triggered by covid 19 if unemployment remains high after the relaxation of the lockdowns a rise can be expected especially in non innovative self employment thus the principal policy implication of this study is that policymakers should ensure that their expectations for new businesses started during deep recessions are realistic for the circumstances

assessing the efficiency of local open space provision abstract this paper tests the efficiency of local provision of land conservation i examine how housing prices which capitalize open space amenities and future tax obligations change after municipalities vote on referendums for conservation spending using a dynamic regression discontinuity based on voting outcomes results suggest that average housing prices increase about 0 68 1 12 for every 1000 per household of open space spending authorized which indicates inefficiency and underprovision of conservation i also examine tax capitalization and supply side explanations for estimated capitalization

credit market frictions and political failure we study how an excessively favorable regulatory environment for banks could arise even with a perfectly competitive credit market in a median voter world in our occupational choice model with heterogeneous wealth endowments market failure due to unobservability of entrepreneurial talent endogenously creates a misalignment between surplus maximizing reforms and reforms that are preferred by the median voter who is a worker this is in contrast to the world without market failure where the electorate unanimously vote in favor of surplus maximizing institutional reforms this paper illustrates how market failure could lead to political failure even in the benchmark political system that is free from capture by interest groups

entrepreneurial talent occupational choice and trickle up policies we study market inefficiencies and policy remedies when agents choose their occupations and entrepreneurial talent is subject to private information untalented entrepreneurs depress the returns to entrepreneurship because of adverse selection the severity of this problem depends on the outside option of entrepreneurs which is working for wages this links credit product and labor markets a rise in wages reduces the adverse selection problem these multimarket interactions amplify productivity shocks and may generate multiple equilibria if it is impossible to screen entrepreneurs then all agents unanimously support a tax on entrepreneurs that drives out the less talented ones however if screening is possible e g if wealthy entrepreneurs can provide collateral for their loans then wealthy entrepreneurs do not support surplus enhancing taxes

the dynamics of the wealth distribution and the interest rate with credit rationing are uniquely determined and wealth dispersion among individuals or firms is irrelevant introducing credit rationing into the solow model modifies these conclusions multiple stationary interest rates and wealth distributions can exist because higher initial rates can be self reinforcing through higher credit rationing and lower capital accumulation the wealth accumulation process is ergodic in every steady state but wealth mobility is lower with higher steady state interest rates aggregate output is higher in steady states with lower interest rates because credit is better allocated short run interest rate or distribution shocks can be self sustaining and can have long run effects on output through the induced dynamics of the wealth distribution and credit rationing

the cleansing effect of recessions the authors investigate industry response to cyclical variations in demand production units that embody the newest process and product innovations are continuously being created and outdated units are being destroyed although outdated units are the most likely to turn unprofitable and be scrapped in a recession they can be insulated from the fall in demand by a reduction in creation the structure of adjustment costs plays a determinant role in the responsiveness of those two margins the calibrated model matches the relative volatilities of the observed manufacturing job creation and destruction series and their asymmetries over the cycle copyright 1994 by american economic association

theories of entrepreneurship innovation and the business cycle abstract this paper discusses several prominent economic theories which link entrepreneurs and their innovations to the creation and magnitude of business cycles i distinguish three broad classes of theories models of creative destruction models of innovation and implementation cycles and models of production under asymmetric information key insights of the theories are identified policy implications are drawn and suggestions for future research are proposed

wealth constraints lobbying and the efficiency of public allocation abstract in esteban and ray 1999 inequality public allocation and development mimeo we formalize a model in which individuals lobby before the government in order to benefit from some productivity enhancing government action infrastructures direct subsidies permissions in short the government honestly tries to allocate these permissions to the agents that will make the best use of them as revealed by the intensity of their lobbying if the marginal cost of resources varies with wealth the amount of information transmitted through lobbying will depend on the degree of inequality in this paper we summarize the main approach and examine the special case of equal wealth we show that the nature of signaling equilibria is critically affected by per capita wealth

effects of the customs union with the european union on the market structure and pricing behaviour of the turkish manufacturing industry turkey established a customs union with the european union in 1996 this study aims to analyse the effect of that customs union on the market structure and the pricing behaviour of the turkish manufacturing industry for the period 1994 to 2000 to that end the price cost mark up equation of 12 manufacturing industry sectors is estimated using the import and export ratios with european union countries together with control variables a second equation is also estimated for the concentration ratio index taking the trade ratios with european union countries as explanatory variables the estimation method is panel data covering eight years and 12 cross section units estimation outcomes indicate that the export and import ratios of trade with european union countries have a negative relation with the price cost mark up in the manufacturing sector it is concluded that increased imports with union countries have created a positive wealth and efficiency effect upon the turkish manufacturing industry due to f

the efficiency of local government the role of privatization and public sector unions abstract local governments spend roughly 1 6 trillion per year to provide a variety of public services ranging from police and fire protection to public schools and public transit however we know little about public sector s productivity in delivering key services public bus service represents a standardized output for benchmarking the cost of local government service provision among the top twenty largest cities there exists significant dispersion in the operating cost per bus mile with the highest being more than three times as high as the lowest using a regression discontinuity design we estimate the cost savings from privatization and explore the political economy of why privatization rates are lower in high cost unionized areas our analysis suggests that fully privatizing all bus transit would generate cost savings of approximately 5 7 billion or 30 of total u s bus transit operating expenses the corresponding increased use of public transit from this cost reduction would lead to a gain in social welfare of 524 million at minimum and at least 26 000 additional transit jobs