a dynamic tiebout theory of voluntary vs involuntary provision of public goods this paper considers a dynamic model of tiebout like migration between communities that utilize distinct allocation procedures for public goods at issue is whether voluntary or compulsory procedures are more likely to prevail over time we model infinitely lived individuals who make repeated sequential location decisions over one of two communities each community uses a distinct mechanism for allocating public goods the first is one in which contributions are given voluntarily by the citizenry of the community the second is a compulsory scheme by which individuals are taxed proportionately to wealth with the tax determined by a majority vote opportunities to accumulate wealth exist via accumulation of public capital the markov perfect equilibria of the dynamic game are studied our main result shows that when accumulated wealth converges to a steady state individuals locational choices eventually select the involuntary provision mechanism this holds despite the fact that unanimous location in the voluntary provision community may in many cases remain as a nash equilibrium of the static game each period we also describe conditions under which voluntary provision survives these conditions require that accumulation of capital fails to decrease wealth dispersion over time the results are shown to be consistent with findings relating inequality to school choice

the feldstein hoiroka puzzle across countries this article tests the feldstein hoiroka puzzle for a sample of 49 countries from two angles that of co movements in the saving investment series and the magnitude of the saving retention coefficient src the overall conclusion we obtain from the results of three different cointegration tests leaves no room for puzzle in the majority of the countries included in the sample on the other hand various statistical tests applied to the srcs show that there are significant differences among the high income middle income and low income country groups with regards to the salient aspects of capital mobility first there are significant differences in the average srcs of the country groups second the srcs are differently distributed around their means among the country groups the results yielded by a third test dictate that future research should pay more attention to the underlying distribution of the srcs within country groups when testing the country size argument

organisational and spatial determinants of the multi unit firm evidence from the french industry galliano d and soulie n organizational and spatial determinants of the multi unit firm evidence from french industry regional studies this article aims to analyse the factors internal characteristics spatial and industrial environments that determine the existence of multi unit firms and the intensity of their organizational fragmentation at a national scale the empirical models are based on individual data on all french industrial firms collected by the french national institute of statistics the results show the importance of internal characteristics scale economies specific assets as research and development and advertising skill level etc in organizational choice they also highlight the major role played by multi location and by the spatial profile of the firms on the intensity of their fragmentation galliano d and soulie n

tests for parameter instability in regressions with i 1 processes this article derives the large sample distributions of lagrange multiplier lm tests for parameter instability against several alternatives of interest in the context of cointegrated regression models the fully modified estimator of phillips and hansen is extended to cover general models with stochastic and deterministic trends the test statistics considered include the supf test of quandt as well as the lm tests of nyblom and of nabeya and tanaka it is found that the asymptotic distributions depend on the nature of the regressor processes that is if the regressors are stochastic or deterministic trends the distributions are noticeably different from the distributions when the data are weakly dependent it is also found that the lack of cointegration is a special case of the alternative hypothesis considered an unstable intercept so the tests proposed here may also be viewed as a test of the null of cointegration against the alternative of no cointegration the tests are applied to three data se

volunteer work and club size nash equilibrium and optimality the non cooperative provision of public goods is analyzed in the context of a two stage game in which club size is determined endogenously equilibrium club size and voluntary labour supply are shown to be inefficient the impact of optimally chosen fiscal policies using simple instruments is studied when agents do not derive non pecuniary benefits from volunteer work lump sum grants can be used to implement the first best equal treatment allocation but private provision is fully crowded out otherwise it is found that simple fiscal instruments cannot implement the first best equal treatment allocation unless club size is directly regulated

patterns of internationalisation of corporate technology location vs home country advantages given the trends towards increasing globalisation of markets and of production the globalisation of technology remains a subject of considerable interest to analysts and policy makers in the 1990s this paper provides some new empirical observations for debate and discussion on the patterns of technological activities of large firms outside their home countries it is based on a systematic analysis of the us patenting activities of 220 of the most internationalised firms in terms of their technology in the 1990s although firms are active outside their home countries in the high technology fields such as computers pharmaceuticals telecommunications image and sound and materials quite a sizeable proportion of their foreign activities are concerned with process and machinery technologies moreover a comparison of the technological advantage of the company at home and the advantage of the location shows that in a large majority of cases firms tend to locate their technology abroad in their core areas where they are strong at home these results suggest that adapting products and processes and materials to suit foreign markets and providing technical support to off shore manufacturing plants remain major factors underlying the internationalisation of technology they are also consistent with the notion that firms are increasingly engaging in small scale activities to monitor and scan new technological developments in centres of excellence in foreign countries within their areas of existing strength however there is little evidence to suggest that even these most internationalised firms routinely go abroad to compensate for their weakness at home

safe nests in global nets internationalization and appropriability of r d in wireless telecom this paper documents the case of the wireless telecom industry to bring new empirical evidence to the debate on the internationalization of research and development r d activities us patent statistics on the four industry leaders ericsson motorola nokia and qualcomm illustrate the growing trend of the internationalization of r d over the 1990s yet we show that the most critical r d projects related to the development of wireless standards remain homebound the paper then leverages qualitative data collected through interviews with informed managers to provide a fresh interpretation for the homeboundedness of critical industrial r d the stickiness of core r d projects to domestic locations is related not only to organizational inertia and the unripe maturation of subsidiaries as suggested by prior literature but particularly to the headquarters centralization of intellectual property ip management which offers a high level of appropriability of r d results the unequal distribution of appropriability across corporate r d networks is at the base of the formation of safe nests domestic r d centers that are sheltered from the forces of globalization because they offer a desirable setting for the exploitation of technologies deriving from a stronger coordination of inventive activities with the management of ip

inequality and club formation abstract we study the relationship between social segmentation and income inequality by means of the economic theory of clubs with private provision of the club good after having characterized the core partition of society in clubs and investigating its characteristics we show how the clubs sizes depend on income distribution and compare segmentation profiles arising in societies characterized by different inequality patterns

are saving and investment cointegrated another look at the data abstract in his paper are saving and investment co integrated economics letters 27 pp 31 34 miller finds that u s saving and investment rates were cointegrated during the post wwii fixed exchange rate regime and not cointegrated during the flexible exchange rate regime miller did not take into account the fact that both of these rates have non zero means once this is taken into account i find that his results no longer hold i also find that the levels of saving and investment are not cointegrated during either the fixed or flexible exchange rate regimes these findings cast doubt on whether or not this technique can shed light on international capital mobility

on the growth of foreign affiliates multinational plant networks joint ventures and flexibility we take a flexibility perspective to analyse employment growth in a large sample of japanese manufacturing affiliates in nine asian countries during the years leading up to and into the asian financial crisis 1995 1999 we find that joint ventures are less flexible than wholly owned affiliates in responding to changing environmental conditions in the focal country and underperform in high growth environments multinational enterprises mnes use the flexibility created by their multinational plant network to adjust affiliate employment in response to labour cost changes in other countries in which they operate plants however no evidence was found that the presence of joint ventures in multinational plant networks reduces this network flexibility our findings suggest that more research is needed on the heterogeneous responses of mnes and their affiliates to changing economic environments

prior to reshoring a duration analysis of foreign manufacturing ventures this paper throws light on the determinants of the duration of manufacturing offshore experiences by us and european firms prior to reshoring by applying survival analysis to a dataset of 249 offshoring experiences terminated with a relocation to the home country region we estimate the effects of different groups of survival determinants results highlight that contextual factors such as the industry the home country the host country and the size of the firm significantly affect the duration of offshoring experiences the likelihood of termination is in fact higher for the electronics and automotive industries for small firms for firms headquartered in europe and for offshoring to asia the analysis of the motivations for reshoring shows that quality issues experienced offshore emerge as the key factor giving rise to shorter offshore stays based on these empirical findings a set of testable propositions is developed in particular we conjecture that the likelihood of termination of offshore manufacturing and the return to the home country may be accelerated by technology based industries small firm sizes shrinking cost differentials and the psychic distance between home and host country the organizational archetypes and quality related motivations

capital mobility in the world economy an alternative test abstract this paper proposes a new measure and test of international capital mobility in order to investigate capital flows we utilize a small open economy version of campbell and mankiw s nber macroeconomic annual 1989 185 216 permanent income model our capital mobility measure focuses on the correlation between the country s consumption and net output instead of the correlation between domestic saving and domestic investment proposed by feldstein and horioka economic journal 90 1980 314 329 the model is estimated for 11 oecd countries the results suggest that the null hypothesis of perfect capital mobility cannot be rejected for more than a half of these countries on the other hand some kind of capital mobility constraints are detected for several countries including the united states and japan

the breakup of nations a political economy analysis this paper develops a model of the breakup or unification of nations in each nation the decision to separate is taken by majority voting a basic trade off between the efficiency gains of unification and the costs in terms of loss of control on political decisions is highlighted the model emphasizes political conflicts over redistribution policies the main results of the paper are i when income distributions vary across regions and the efficiency gains from unification are small separation occurs in equilibrium and ii when all factors of production are perfectly mobile all incentives for separation disappear i introduction following the demise of communism the entire map of europe from the atlantic coast to the urals is being redrawn and issues of separation unification and the redrawing of borders are yet again at the forefront of european concerns many of the issues raised by this process are primarily of a political cultural or linguistic nature however there are also economic considerations that bear on this problem the objective of this paper is to analyze some important economic and political determinants of the process of unification and separation of democratic nations the starting point of our analysis is to suppose that from an economic efficiency point of view separation of nations is never desirable a unified nation is always more efficient since free trade among regions is guaranteed duplication costs in defense and law enforcement are avoided and local public goods provision such as transportation and communication networks or common standards can be coordinated furthermore any benefits of decentralization that might be obtained in a world with several nations may also be achieved within a unified nation by replicating the administrative structure of the world with several

economic integration and political disintegration in a world of trade restrictions large countries enjoy economic benefits because political boundaries determine the size of the market under free trade and global markets even relatively small cultural linguistic or ethnic groups can benefit from forming small homogeneous political jurisdictions this paper provides a formal model of the relationship between openness and the equilibrium number and size of countries and successfully tests two implications of the model firstly the economic benefits of country size are mediated by the degree of openness to trade secondly the history of nation state creations and secessions is influenced by the trade regime

inequality neighbourhoods and welfare of the poor abstract this paper investigates how neighbourhood effects interacting with income inequality affect poor people s ability to access basic facilities like health care services schooling and so on we model this interaction by integrating consumers income distribution with the spatial distribution of their location and explore the consequences of an increase in income inequality or variations in the neighbourhood characteristics on the welfare of the rich and poor in general and their access to market in particular we find that in general the impact will be non monotonic owing to an interesting trade off between the provision effect and the price effect on the one hand there is the positive provision effect higher valuation of the rich attracts the supplier to enter into the neighbourhood allowing the poor who live sufficiently close by to access the service on the other hand there is the negative price effect the service provider charges a higher price higher is the income or larger is the proportion of the rich in the neighbourhood in the extreme there exists the possibility of complete exclusion of poor from the market the service provider caters only to the rich and the poor has absolutely no market access we have identified the higher income gap between rich and poor as the key factor that exposes the poor to this complete exclusion possibility

estimating saving investment correlations evidence for oecd countries based on an error correction model abstract saving investment correlations are important stylized facts in open economy macroeconomics and indicators of capital mobility they are best estimated by an error correction model ecm because an ecm is consistent with intertemporal general equilibrium models the ecm is a synthesis of previous approaches applying the ecm to the oecd countries we find that in general saving and investment are cointegrated the ecm is more powerful in detecting cointegration than the two step engle granger procedure estimates of the saving investment correlation are robust with respect to overdifferencing we find evidence of a large country effect and an increase in capital mobility within the oecd area

are saving and investment cointegrated an ardl bounds testing approach using the newly developed ardl bounds testing procedure we find that as implied by the intertemporal budget constraint u s saving and investment rates cointegrate in all sample periods considered our results also show that the saving investment correlation weakens after 1971 suggesting that the feldstein horioka approach provides an at least partially informative measure of capital mobility

equity and efficiency in human capital investment the local connection a general model of community formation and human capital accumulation with social spillovers and decentralized school funding is used to analyse the causes of economic segregation and its consequences for equity and efficiency significant polarization arises from minor differences in endowments preferences or access to capital markets this makes income inequality more persistent across generations but the same need not be true for wealth equilibrium stratification tends to be excessive resulting in low aggregate surplus whether state equalization of school resources can remedy these problems hinges on how purchased social and family inputs interact in education and in mobility decisions

current account solvency and the feldstein horioka puzzle in this paper we suggest an alternative explanation of the high cross section association between shares of saving and investment in gdp which feldstein and horioka 1980 interpret as evidence of low capital mobility in oecd countries saving and investment shares appear to be i i we show that a solvency constraint implies that the current balance is stationary and thus that saving and investment cointegrate with a unit coefficient irrespective of the degree of capital mobility it is this long run relation that the fh cross section regression captures econometric results for 23 oecd countries over the 1960 92 period are consistent with this explanation

strong tiebout equilibrium under restricted preferences domain abstract we investigate the existence and give a partial characterization of a strong tiebout equilibrium which consists of an endogenously formed partition of the individuals into disjoint jurisdictions with each jurisdiction producing and financing its own public goods and moreover there exists no group of individuals who can all benefit by establishing their own community in particular no single individual finds it desirable to migrate from his equilibrium jurisdiction the existence proof makes use of the notion of consecutive games which we introduce and show that for such games there always exists a partition with a nonempty core

who are the members of the international club this article proposes pragmatic methods that incorporate recent contributions to public good theory to identify the members of the international club and how they select new members this article also suggests simple applications to the recent problems in international clubs such as the euro and nato

are saving and investment co integrated abstract the observation of a strong positive correlation between national saving and domestic investment rates calls into question the assumption of highly mobile international capital i re examine the question of a high correlation by considering the time series relationship between national saving and domestic investment rates in the u s using newly developed co integration techniques national saving and domestic investment appear to be co integrated prior to 1971 but appear not to be co integrated after 1971

government contracts and contractor behavior the u s government embraces the concepts of privatization and market competition but the realm of contracting shows that it has not always been able to put its principles into practice although the contracting system is supposed to be open and competitive in recent years the government has often awarded contracts with little or no competitive bidding has chosen to award mostly cost plus type contracts that force the government to assume more of the risk and lacked efficiency in monitoring and overseeing private contractors while the number and value of contracts have increased the workforce to oversee these contracts has been reduced preventing the government from adequately enforcing compliance with the contractors and the government has not made use of past performance evaluations in its contracting system private contractors that do business with the u s government are for the most part well established firms with ample resources and inside contacts many contracts are still being awarded on preferential treatment and to the larger and well established contractors

on the number and size of nations this paper studies the equilibrium determination of the number of countries in different political regimes and in different economic environments with more or less economic integration we focus on the trade off between the benefits of large jurisdictions and the costs of heterogeneity of large and diverse populations our model implies that i democratization leads to secessions ii in equilibrium one generally observes an inefficiently large number of countries iii the equilibrium number of countries is increasing in the amount of economic integration

government procurement and financial statement certification evidence from private firms in emerging economies in this paper we examine the monitoring role of government customers in emerging markets a setting where public procurement is significant but the procurement institutions are weak in these countries financial statement certifications could be an important mechanism for a private firm to facilitate contracting with governments employing a sample of private firms across 98 emerging economies we first document in depth private firm audit regulations for each country we find that firms are more likely to have financial statements certified by an external auditor when they have government contracts we further find that the association is less pronounced when governments have weaker monitoring incentives when suppliers are subject to monitoring from tax authorities or creditors when government contracting officials receive bribes and when government spending is less transparent we corroborate our inferences using the staggered adoption of an e procurement system to infer changes in governments monitoring incentives and several other robustness checks

vignettes on the world capital market this paper is motivated by a sense that we as a profession need to understand much better than we now do how the world capital market works we seem to be genuinely schizophrenic in the ways we build models many of them are closedeconomy models in which the rest of the world does not even appear yet others of them are models of the small open economy in which hardly any degree of freedom is left for economic policy to influence events lying behind the schizophrenia is i believe a genuine ignorance on our collective part of how the world capital market

the feldstein horioka puzzle revisited abstract this paper confirms the evidence that the feldstein horioka test does not reflect capital mobility in the real side world economy but only the variability between external and domestic saving

coming home and not moving in examining reshoring firms subnational location choices in the united states the relation between firm characteristics i e size and domestic location choice i e home state versus other of reshoring firms contingent on place i e labour cost innovation intensity

savings and investment in australia it has become popular to advocate tax reduction on the basis of promoting savings investment and ultimately economic growth the linkage between the variables is argued by various neoclassical growth models and is further suggested by recent studies which highlight the close association between domestic saving and investment rates the close association may allow for polices which alter domestic saving levels in order to alter domestic investment levels this interpretation however presumes an endogenous investment response equally likely theoretically is that the close association is maintained by movements in national savings the present paper explicitly examines the endogeneity of the australian saving and investment rates the results highlight the exogeneity of investment the results further suggest an endogenous response on the part of australia s saving rate the results may limit the potential benefits of these tax changes

heterogeneity stratification and growth macroeconomic implications of community structure and school finance this paper examines how socioeconomic stratification and alternative systems of education finance affect inequality and growth agents interact through local public goods or externalities school funding neighborhood effects and economywide linkages complementary skills knowledge spillovers sorting families into homogeneous communities often minimizes the costs of existing heterogeneity but mixing reduces heterogeneity faster integration therefore tends to slow down growth in the short run yet raise it in the long run a move to state funding of education presents society with a similar intertemporal trade off local and global complementarities play major roles in determining the efficient social and educational structures copyright 1996 by american economic association

the saving and investment nexus for china evidence from cointegration tests the saving and investment nexus as postulated by feldstein and horioka fh 1980 is revisited the saving investment correlation for china is estimated over the periods 1952 1998 and 1952 1994 the latter culminating in a period of fixed exchange rate regime amongst the key results it is found that saving and investment are correlated for china for both the period of the fixed exchange rate and the entire sample period with high saving investment correlation the results suggest that the chinese economy is in conformity with the fh hypothesis this is a valid outcome for in china capital mobility was fairly restricted over the 1952 1994 period as indicated by the relatively low foreign direct investment