bargaining in the shadow of power abstract often a bargainer can use some form of power legal military or political to impose a settlement how does the outside option of being able to impose a settlement albeit at some cost affect the bargaining and how does the probability that the bargaining will break down vary with the distribution of power between the bargainers these questions are examined by adding the option of imposing a settlement to rubinstein s game of dividing a pie each actor can accept an offer make a counteroffer or try to impose a solution imposing a settlement is however costly and each bargainer has private information about its cost journal of economic literatureclassification number c72

bargaining and waiting until recently the final word on bargaining with full information had been rubinstein s 1982 seminal work which concluded that an agreement will be reached immediately and the first mover will have the advantageous share rubinstein s model was one of alternating offers made at fixed time intervals many variations of the model have emerged and until recently they mainly focus on asymmetric information with some having the uninformed agent making all the offers the conclusion from examining these variations is that the equilibrium is highly sensitive to the exact specification of the institutional structure in more recent work perry and reny 1990 perry and reny 1993 sakavics 1993 and nickerson sadanand and sadanand 1994 endogenize the structure of the bargaining by allowing the order and timing of play to be determined endogenously the first three papers endogenous structure models deal with the full information setting and the last is an asymmetric information model 2 in addition to the exogenously given minimum reaction time for responding to offers made by the other player the endogenous structure models introduce the important innovation of an exogenous waiting time a time between a player s offer and his next offer they also allow players to make simultaneous offers which sakovics later disallows the findings in this recent literature are rather startling i the waiting time has a profound impact the longer the time the greater the share the player can command 3 ii the consequence of simultaneous offers is multiple equilibria when the reaction time is zero a continuum of shares lying between the two unique rubinstein shares can result and additional continua of shares arise with delayed agreement when the reaction times are positive iii equilibrium paths are almost exclusively characterized by simultaneous offers in this paper we examine the question of simultaneous offers and reconcile the conflict between the infrequency of simultaneous offers in real life bargaining and their prevalence in the endogenous structure models we

bargaining and learning while fighting much of the existing formal work on war models the decision to go to war as a game ending costly lottery this article relaxes this assumption by treating war as a costly process during which the states run the risk of military collapse the model also allows for uncertainty over either the cost of fighting or the distribution of power the analysis makes four contributions to the growing costly process literature i the present model provides a more general treatment of the learning process that occurs when states are uncertain about the distribution of power ii it explicitly compares the bargaining and learning processes for the two different sources of uncertainty iii it suggests a way to empirically distinguish wars arising from these two sources and iv it shows that the equilibrium dynamics of informational accounts of war may be quite sensitive to the underlying bargaining environment through which information is conveyed

foundations of dynamic monopoly and the coase conjecture subgame perfect equilibria are characterized for a market in which the seller quotes a price each period assume zero costs positive interest rate continuum of buyers and some technical conditions if buyers valuations are positive then equilibrium is unique buyers strategies are stationary and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere otherwise a continuum of stationary equilibria can exist but at most one with analytic strategies coase s conjecture is verified for stationary strategies reducing the period length drives all prices to zero or the least valuation connections to bargaining models are described journal qf economic literature classification

the power to hurt costly conflict with completely informed states according to common explanations of war since war is costly and risky rational states have incentives to strike a bargain and avoid conflict war is then the result of private information about capabilities or resolve and incentives to misrepresent this information or inability to make credible commitments fearon 1995 this article presents another rationalist explanation which does not depend on either of these mechanisms by modeling warfare as a costly bargaining process the paper demonstrates that inefficient fighting can occur in equilibrium under very general assumptions favoring peace specifically it is assumed that peace can be supported in equilibrium and that fighting brings no benefits to either state only costs despite the fact that there exist many agreements that pareto dominate the final settlement states are unable to agree to them and fighting can occur in equilibrium the equilibrium is driven by the ability of states to impose costs on their opponent and bear costs the power to hurt the opponent establishes a range of acceptable settlements and the existence of such a range makes inefficient equilibria possible the article suggests that 1 states may fight if they believe that seeking peace means accepting an unpalatable settlement and 2 a diminished ability to hurt the enemy is a major reason for war termination historical examples are provided to illustrate these results

the principle of convergence in wartime negotiations if war results from disagreement about relative strength then it ends when opponents learn enough about each other learning occurs when information is revealed by strategically manipulable negotiation behavior and nonmanipulable battlefield outcomes i present a model of simultaneous bargaining and fighting where both players can make offers and asymmetric information exists about the distribution of power in the markov perfect sequential equilibrium making and rejecting offers has informational value that outweighs the one provided by the battlefield however states use both sources of information to learn and settle before military victory the principle of convergence posits that warfare ceases to be useful when it loses its informational content and that belief in defeat victory is not necessary to terminate initiate hostilities thus the standard puzzle in international relations that seeks to account for prewar optimism on both sides may not be that relevant

war is in the error term at least since thucydides students of international relations have sought rational explanations for the advent of war rationalist explanations assume purposive action states are said to make reasoned decisions about the use of force although rationalist explanations have proven persuasive durable and offer the basis for cumulative theorizing they also imply substantial limits on what we can know about war i show that the most general rationalist explanation for war also dictates that the onset of war is theoretically indeterminate we cannot predict in individual cases whether states will go to war because war is typically the consequence of variables that are unobservable ex ante both to us as researchers and to the participants thinking probabilistically continues to offer the opportunity to assess international conflict empirically however the realization that uncertainty is necessary theoretically to motivate war is much different from recognizing that the empirical world contains a stochastic element accepting uncertainty as a necessary condition of war implies that all other variables however detailed the explanation serve to eliminate gradations of irrelevant alternatives we can progressively refine our ability to distinguish states that may use force from those that are likely to remain at peace but anticipating wars from a pool of states that appear willing to fight will remain problematic for example we may achieve considerable success in anticipating crises but our ability to predict which crises will become wars will probably prove little better than the naive predictions of random chance the need for uncertainty to account for war means that the same conditions thought to account for war must also exist among states not destined to fight otherwise states themselves will differentiate between opponents in a way that either removes the motives for war or restores uncertainty it has long been accepted that social processes possess an element of uncertainty but the centrality of uncertainty to rationalist explanations for war means that the advent of war is itself stochastic war is literally in the error term

multi battle contests abstract we study equilibrium in a multistage race in which players compete in a sequence of simultaneous move component contests players may win a prize for winning each component contest as well as a prize for winning the overall race each component contest is an all pay auction with complete information we characterize the unique subgame perfect equilibrium analytically and demonstrate that it exhibits endogenous uncertainty even a large lead by one player does not fully discourage the other player and each feasible state is reached with positive probability in equilibrium pervasiveness expected effort in the component contests may be non monotonic in the closeness of the race and realized individual effort may exceed the value of the prize by a factor that is proportional to the maximum number of stage victories required

disentangling the incentive and entrenchment effects of large shareholdings this article disentangles the incentive and entrenchment effects of large ownership using data for 1 301 publicly traded corporations in eight east asian economies we find that firm value increases with the cash flow ownership of the largest shareholder consistent with a positive incentive effect but firm value falls when the control rights of the largest shareholder exceed its cash flow ownership consistent with an entrenchment effect given that concentrated corporate ownership is predominant in most countries these findings have relevance for corporate governance across the world

on international compensations for environmental stocks this paper sheds some light on the possible implications of compensations which are paid for the maintenance of an environmental stock it shows that serious complications can arise if the resource owner may influence the compensation price strategically if the incentive to raise the compensation price dominates the preservation incentive the steady state stock falls short from that which is voluntarily held whether compensation policies can neglect this feature depends crucially on the institutional setting which determines the compensation price

military capabilities and escalation a correction to bueno de mesquita morrow and zorick bueno de mesquita morrow and zorick analyze the evolution of crises as a two sided incomplete information game in order to illuminate the relationship between observable military capabilities and the escalation of a dispute to armed conflict i show that an error in the derivation of the equilibria invalidates their conclusions and i offer a few suggestions on how to model the evolution of crises as incomplete information games

introduction unipolarity state behavior and systemic consequences the united states emerged from the 1990s as an unrivaled global unipolar state this extraordinary imbalance has triggered global debate governments and peoples around the world are struggling to understand to how an american centered unipolar system operates and to respond to it what is the character of domination in a unipolar distribution to what extent can a unipolar state translate its formidable capabilities into meaningful influence will a unipolar world be built around rules and institutions or be based more on the unilateral exercise of unipolar power scholars too are asking these basic questions about unipolarity and international relations theory the individual contributions develop hypotheses and explore the impact of unipolarity on the behavior of the dominant state on the reactions of other states and on the properties of the international system collectively they find that unipolarity does have a profound impact on international politics international relations under conditions of unipolarity force a rethinking of conventional and received understandings about the operation of the balance of power the meaning of alliance partnerships the logic of international economic cooperation the relationship between power and legitimacy and the behavior of satisfied and revisionist states

do intergovernmental organizations promote peace a basic debate in world politics involves the impact of intergovernmental organizations igos on international conflict liberals functionalists and others see igos as capable of transforming global anarchy while realists emphasize the essential irrelevance of igos in managing such fundamental processes as war and peace recent quantitative studies also yield disparate conclusions depending on particular econometric assumptions implying variously that igos foster pacific relations among states have no impact on dispute behavior or even increase dispute propensity at least part of the problem is a lack of theoretical and empirical specificity the authors apply bargaining theory to develop a middle path between the realist and liberal perspectives only some igos those with security mandates and the most sophisticated institutional structures are likely to influence dispute behavior the authors combine the theory with two improvements in research design first igos vary in capability mandate and cohesion the authors construct a dataset of igo institutional heterogeneity and member cohesiveness second states join igos for reasons that are not unrelated to why states fight the authors control for the level of international involvement among countries and find support for their arguments in initial tests

persistent fighting and shifting power three striking features about both interstate and civil war are 1 there are often periods of persistent fighting 2 fighting commonly ends in negotiated settlements as well as in militarily decisive outcomes and 3 fighting sometimes recurs this article links these features to shifts in the distribution of power and to the fact that one of the functions of fighting is to forestall adverse shifts the analysis centers on a simple model of state consolidation the equilibrium displays these features fighting occurs when the distribution of power is shifting rapidly the factions avoid fighting and cut deals when the distribution of power shifts slowly or is stable fighting resumes if the distribution of power again begins to shift rapidly the analysis also shows that state consolidation can occur without fighting if the process is sufficiently slow fighting now rather than later can also reduce the total cost of fighting

a model of spoils politics accounts of state failure in the developing world frequently highlight a logic of spoils politics in which a government and an opposing faction vie for control of the state and the accompanying spoils attempts to buy the opposition off play a key role in this logic and an informational problem often complicates these efforts because of limited transparancy the government generally has a better idea about the actual size of the spoils than the opposition does we formalize this aspect of spoils politics as a signaling game in which the government has private information about the size of the spoils and tries to co opt the opposition by offering a share of the spoils the opposition can accept the offer or reject it by fighting consistent with the strong empirical finding that the probability of civil war is higher when income is low the probability of breakdown increases as the size of the spoils decreases we also study the effects of uncertainty the opposition s military strength the cost of fighting and power sharing agreements on the probability of fighting

growth deforestation and the efficiency of the redd mechanism this paper assesses the long term impacts of an international transfer called the reduced emissions from deforestation and degradation redd mechanism which aims at preserving tropical forests of the recipient economy this two sector economy faces a dilemma between economic growth and deforestation the rural sector can substitute reproducible capital for agricultural land whereas the manufacturing sector only requires capital the model shows that the redd mechanism has a non monotonic effect on steady state welfares for low transfer schemes the agricultural output increases with the transfer even though less land is under cultivation for high transfer schemes the increase in the transfer may not offset the decrease in the agricultural output the open loop symmetric nash equilibrium in a dynamic deforestation game predicts that redistributing the transfer among a finite number of producers is less efficient in reducing deforestation than in the social optimum

deforestation and development in a small open economy abstract our economy faces world prices and starts with a large endowment of land in forest and a small endowment of land in agriculture clearing of forested land yields marketable timber and a unit of land for agriculture early the high price of agricultural land drives the clearing process later the profit from marketing timber from the cleared land drives the process dates of phase transitions are endogenous we also set out a submodel of perpetual cyclic clearing and reforesting and show that it when cyclical harvesting regrowing is optimal the extent of clearing can be relatively large

uncertainty shifting power and appeasement great britain faced an immensely complicated strategic problem in the 1930s and important aspects of it can be stylized as a situation in which a state that is declining in power is unsure of the aims of a rising state if those aims are limited then the declining state prefers to appease the rising state s demands rather than go to war to oppose them if however the rising state s demands are unlimited then the declining state prefers fighting and given that the declining state is becoming weaker over time it prefers fighting sooner rather than later if there is to be a war this situation creates a trade off the earlier a state stands firm the stronger it will be if war ensues but the higher the chance of fighting an unnecessary war in equilibrium the declining state generally tries to appease the rising state by making a series of concessions

intimidation linking negotiation and conflict challenger demands a resource from defender in each period challenger chooses whether to attack if attacked defender chooses whether to concede the resource forever each player might be committed to ghting until victory before con ict begins defender can make nitely many offers con ict begins if challenger rejects all offers in equilibrium all offers except the last are unacceptable negotiation cannot eliminate con ict because a larger offer makes con ict increasingly attractive for challenger if negotiation fails prolonged con ict can happen in equilibrium even when uncertainty is vanishingly small we provide comparative statics regarding the probability and length of con ict

environmental degradation in developing countries households and the reverse environmental kuznets curve abstract we propose an alternative explanation for the inverted u shape relationship between income and environmental degradation in developing countries production and consumption patterns of rural households are the main cause of environmental damage with a conventional household model we demonstrate that the so called environmental kuznets curve may arise when the restrictive assumption of a set of perfect markets for factors and commodities is relaxed depending on the criterion or indicator that is used to represent environmental pressure however we demonstrate that the reverse may also hold this finding highlights the importance of selecting the appropriate dependent variable in regression analyses

who gets credit the behavior of bureaucrats and state banks in allocating credit to chinese state owned enterprises abstract using a sample of chinese state owned enterprises spanning 1980 to 1994 we investigate the factors that determine the sources of finance for firm level fixed investment including retained earnings bank finance and government transfers direct government transfers were not significantly associated with profitability throughout the period in contrast bank finance was positively linked to both profitability and some types of reform reforms that enabled managers to self select and thus expose themselves and their employees to greater risk were positively associated with acquiring bank finance the association between bank finance and profitability weakened in the 1990s as banks increasingly assumed bailout responsibility

booming sector and de industrialisation in a small open economy this paper presents a theoretical analysis of the dutch disease the phenomenon whereby a boom in one traded goods sector squeezes porfitability in other traded goods sectors both by directly bi

agreement without peace international mediation and time inconsistency problems mediation has competing short and long term effects in the short run the actors are better able to identify and settle on a mutually satisfying outcome in the long run mediation can create artificial incentives that as the mediator s influence wanes and the combatants demands change leave the actors with an agreement less durable than one that would have been achieved without mediation this article tests the observable implications from this logic using a set of international crises from 1918 to 2001 the results reconcile findings in the previous literature that inconsistently portray the effectiveness of mediation

bargaining with durable offers and endogenous timing abstract the timing structure of a bargaining game is crucial in the static bargaining model of j nash 1953 econometrica 21 128 140 any division of the surplus is a possible equilibrium in the alternating offer model of a rubinstein 1982 econometrica 50 97 109 there is a unique subgame perfect nash equilibrium spne this paper takes a step toward endogenizing the timing of offers by expanding the strategy space to include the duration of the offer and permitting but not imposing simultaneous moves we find that virtually any division is a possible spne whenever simultaneous accept reject decisions are permitted

deforestation and the environmental kuznets curve an institutional perspective institutions for secure property rights and better environmental policies for moving the system towards a sustainable growth path can reduce the height of an environmental kuznets curve ekc relationship between income and deforestation this study examines the impact of these specific institutional factors on the ekc relationship for deforestation across latin american african and asian countries the factors related to agricultural production population economy and governmental policies of each country are hypothesised to affect deforestation results of the latin american countries show significant evidence of an ekc relationship for deforestation and also relevance of the institutional factors to reduce the rate of deforestation improvements in institutions for secure property rights and better environmental policies can thus significantly reduce the rate of deforestation without hindering the level of economic growth evidence also suggests that the effect of agricultural production on deforestation could be halted by strengthening institutional factors there was found to be complementarity between the institutional factors and forest sector polices and an additive effect between the institutional factors and forest products export promotion policies which could also eventually reduce the rate of deforestation

reason and war a new specification of the expected utility model of international conflict places expected utilities within a polar coordinate system treats thirdparty choices in a manner more consistent with classical forms estimates the expected utilities derived from not challenging existing policies more fully represents the expected costs of conflict and normalizes expected utilities regardless of system size by assuming that the probability of escalation of a dispute increases monotonically with leaders expectations of gain we derive continuous functions for the probabilities of war intervention violence and peace the revised theory significantly improves our ability to discriminate between violent and nonviolent disputes and between violent disputes that escalated to warfare and those that did not in europe between 1816 and 1970 in this essay

forest resource depletion soil dynamics and agricultural productivity in the tropics abstract a two sector dynamic model for agriculture and forestry is proposed agricultural yields are a function of the rate of deforestation the forest stock and purchased inputs we examine the impact of changes in the social discount rate net returns to agriculture and direct marginal benefits of the forest stock benefits on the optimal deforestation path under the assumption of a quadratic agricultural yield function finally steady state comparative static analysis is conducted

explaining forest transitions the role of governance abstract we analyze how governance may influence competing land uses for forests and thus the occurrence of forest transitions across different low and middle income countries we develop a model of competing land uses that allows for governance to impact the risk of future versus current agricultural and forested land allocations the resulting hypothesis on the relationship between governance and the likelihood of a forest transition is then tested using cross country data the empirical analysis offers strong support for the competing land use framework and indicates that rule of law forest policy and regulatory quality influence forest transitions these findings inform not only the ongoing debate on forest transitions but also policy options for managing such transitions in developing economies

politics and the effectiveness of foreign aid abstract critics of foreign aid programs have long argued that poverty reflects government failure in this paper i test predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes i find that aid does not significantly increase investment nor benefit the poor as measured by improvements in human development indicators but it does increase the size of government the impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive but liberal political regimes and democracies ceteris paribus have on average 30 lower infant mortality than the least free regimes this may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs an implication is that short term aid targeted to support new liberal regimes may be a more successful means of reducing poverty than current programs

politics at the water s edge parties voters and the use of force abroad this article examines the effects of party politics and presidential election cycles on u s recourse to force abroad i analyze a game theoretic model to generate predictions about these effects in the unique time consistent equilibrium outcome of the one shot game policy varies across political parties in a subgame perfect equilibrium outcome of the repeated game the use of force is invariant to the partisan composition of government in neither case does policy respond to the electoral cycle an empirical analysis supports the predictions of the repeated game between 1870 and 1992 u s recourse to force abroad responds neither to partisan politics nor to the domestic political calendar it responds only to changes in u s power status and to the advent of general wars

strategic delay in bargaining this paper analyses a bargaining model with incomplete information in which the time between offers is an endogenous strategic variable we find equilibria involving a delay to agreement that is due to the use of strategic time delay by bargainers to signal their relative strength under some specifications of the parameters delay is present in the unique sequential equilibrium whose beliefs satisfy one intuitive restriction this delay does not vanish as the minimal time between offers becomes small

a signaling theory of consumer boycotts abstract we present a theory that explains the prevalence of consumer boycotts in our model a firm does not know how concerned consumers are about the firm s misconduct because it is only optimal for the firm to alter its behavior if consumers are very concerned consumers have an incentive to overstate their concern by boycotting the firm we show that free riding problems do not preclude such boycotting in fact in each equilibrium boycotting occurs with positive probability and the firm always caters to the demands of those who boycott should boycotting ensue

uncertainty and incentives in crisis bargaining game free analysis of international conflict we study two different varieties of uncertainty that countries can face in international crises and establish general results about the relationship between these sources of uncertainty and the possibility of peaceful resolution of conflict among our results we show that under some weak conditions there is no equilibrium of any crisis bargaining game that has voluntary agreements and zero probability of costly war we also show that while uncertainty about the other side s cost of war may be relatively benign in peace negotiations uncertainty about the other side s strength in war makes it much more difficult to guarantee peaceful outcomes along the way we are able to assess the degree to which particular modeling assumptions found in the existing literature drive the well known relationship between uncertainty the incentive to misrepresent and costly war we find that while the theoretical connection between war and uncertainty is quite robust to relaxing many modeling assumptions whether uncertainty is about costs or the probability of victory remains important

frontiers and sustainable economic development exploiting new resource frontiers such as agricultural land and mineral reserves is a fundamental feature of economic development in poor economies yet frontier based development is symptomatic of a pattern of economy wide resource exploitation in developing economies that a generates little additional economic rents and b what rents are generated are not being reinvested in other sectors such development is inherently unsustainable the following paper explains this phenomenon and provides evidence that long run expansion of agricultural land and oil and natural gas proved reserves across poor economies is associated with lower levels of real income per capita the paper proposes a frontier expansion hypothesis to explain why the structural economic dependence of these economies on frontier land expansion and resource exploitation is not conducive to sustained long run growth the key to sustainable economic development in poor economies will be improving the economic integration between frontier and other sectors of the economy targeting policies to improved resource management in frontier areas and overcoming problems of corruption and rent seeking in resource sectors

national animosity and cross border alliances we extend the cross border strategic alliance knowledge base by introducing dyad specific antagonism animosity between nation pairs and hold that the formation and the type of firm level cross border alliances are nontrivially impacted by conflicting relations and animosity between their home nations we examine the formation of alliances between firms among nation dyads with and without a history of conflicts the frequency and magnitude of conflicts increase the perception of likelihood of opportunism and dyad specific risks materially affect the context in which firms make alliance decisions as animosity between two nations increases the number and the probability of forming alliances within the dyad the nations form decreases conditional on the expected number of alliances increased antagonistic actions of nations outside the dyad and dissimilarity in the historical conflicts that each nation has engaged in outside the dyad i increase the number of equity alliances and ii decrease the number of nonequity alliances as a proportion of total alliances we find positive main effects of learning to contract through prior experience only for equity vs nonequity alliances the reputation effects of antagonism based on relationships with nations outside of the dyad negatively moderate the positive learning effects of prior equity alliance experience abstract from author

the armed peace a punctuated equilibrium theory of war according to a leading rationalist explanation war can break out when a large rapid shift of power renders unbelievable a rising state s promise to compensate its declin ing opponent causing the latter to attack preventively this mechanism does not provide a complete and coherent explanation of war because it does not specify how inefficient fighting resolves this commitment problem we present a complete information model of war as a sequence of battles and show that although opportunities for a negotiated settle ment arise throughout the very desirability of peace creates a commitment problem that undermines its likelihood because players have incentives to settle as soon as possible they cannot credibly threaten to fight long enough if an opponent launches a surprise at tack this decreases the expected duration and costs of war and causes mutual deterrence to fail fighting s sheer destruction improves the credibility of these threats by decreasing the benefits from continuing the war equilibrium fighting may involve escalating costs that exceed the value of the stakes by the time peace is negotiated and that leave both players worse off than when the war began

bargaining orders in a multi person bargaining game abstract this paper studies a complete information bargaining game with one buyer and multiple sellers of different sizes or bargaining strengths the bargaining order is determined endogenously with a finite horizon there is a unique subgame perfect equilibrium outcome in which the buyer purchases in order of increasing size from the smallest to the largest with an infinite horizon if the sellers have sufficiently different sizes there is a unique equilibrium outcome which has the same bargaining order if the sellers have similar sizes with an infinite horizon there may be multiple equilibrium outcomes with different bargaining orders

dividend policy creditor rights and the agency costs of debt we show that country level creditor rights influence dividend policies around the world by establishing the balance of power between debt and equity claimants creditors demand and managers consent to a more restrictive payout policy as a substitute for weak creditor rights in an effort to minimize the firm s agency costs of debt using a sample of 120 507 firm years from 52 countries we find that both the probability and amount of dividend payouts are significantly lower in countries with poor creditor rights a reduction in the creditor rights index from its highest value to its lowest value implies a 41 reduction in the probability of paying a dividend and a 60 reduction in dividend payout ratios these results are robust to numerous control variables sample variations model specifications and alternative hypotheses we also show that the agency costs of debt play a more decisive role in determining dividend policies than the previously documented agency costs of equity overall our findings contribute to the growing literature arguing that creditors exert significant influence over corporate decision making outside of bankruptcy

signalling in a dynamic labour market this paper analyzes a multiperiod version of the spence job market signalling model in which workers cannot commit to an education choice and firms make wage offers at any point in time the dynamic competition combined with the incomplete information yield a multiplicity of sequential equilibria including ones that sustain implicit collusion even though the length of the game is finite emphasis is placed on equilibria that satisfy the independence of never weak best response criterion of kohlberg and mertens 1986 it is shown that in the limit as the time between offers tends to zero any such equilibrium results in expectation in the unique stable outcome of the static spence model

optimal capital structure and bankruptcy choice dynamic bargaining versus liquidation abstract we model a firm s optimal capital structure decision in a framework in which it may later choose to enter either chapter 11 reorganization or chapter 7 liquidation creditors anticipate equityholders ex post reorganization incentives and price them into the ex ante credit spreads using a realistic dynamic bargaining model of reorganization we show that the off equilibrium threat of costly renegotiation can lead to lower leverage even with liquidation in equilibrium if reorganization is less efficient than liquidation the added option of reorganization can actually make equityholders worse off ex ante even when they liquidate on the equilibrium path

forest conservation in costa rica when nonuse benefits are uncertain but rising stochastic dynamic programming is used to investigate optimal holding of primary tropical forest in humid costa rica when future nonuse benefits of forest conservation are uncertain and increasing the quasi option value of maintaining primary forests is included as a component of investment in natural capital although the impact of uncertainty on conservation incentives is substantial our results indicate that a rising trend in future benefits and compensation by the international community for beneficial spillovers are more important factors in determining optimal holdings of forest stocks without compensatory payments however further deforestation may be warranted

when do power shifts lead to war we present and test a choice theoretic model of war decisions during shifts in power the model assumes a rising state that overtakes a declining state in capabilities in equilibrium the declining state yields at a critical point in the transition war can occur only before that critical time power shifts are more likely to lead to war as the challenger becomes more risk acceptant the declining state more risk averse the expected costs of war decrease the rising state s dissatisfaction with the status quo increases and during periods of equality between the two sides the rate of growth of the rising state s capabilities and the transition point do not affect the probability of war all these hypotheses are supported by an empirical analysis of all major power dyads since 1815 we also find that expected support from allies must be included in the calculation of a nation s capabilities the implications of the model for theories of hegemonic decline and war are discussed

bargaining with incomplete information an infinite horizon model with two sided uncertainty the resolution of any bargaining conflict depends crucially on the relative urgency of the agents to reach agreement and the information each agent has about the others preferences this paper explores within the context of an infinite horizon bargaining model with two sided uncertainty how timing and information affect the rational behaviour of agents when commitment is not possible since the bargainers are uncertain about whether trade is desirable they must communicate some of their private information before an agreement can be reached this need for learning due to incomplete information about preferences results in bargaining inefficiencies trade often occurs after costly delay thus the model provides an explanation for the inefficient bargaining behaviour that appears to occur often in practice

peace war and the balance of power every possible relation between the distribution of power and the likelihood of war has been defended somewhere in the literature on international politics war is least likely if power is distributed equally war is least likely if power is distributed unequally and the distribution of power has no effect on the likelihood of war i try to settle this dispute by examining the effect of expectations about the outcome of war on the choice between war and negotiation i argue that each of these mutually contradictory propositions can be derived from some plausible set of premises and thus that which one is correct depends on which set of premises best describes a situation the most important factors affecting the relation between the distribution of power and the likelihood of war are 1 whether the terms of a compromise agreement that might be accepted in lieu of war affect the distribution of power between the antagonists and therefore the probability that the agreement will be enforced and 2 how many states interests will be affected by the outcome

are there negative returns to aid the world bank report assessing aid assumes that an inflow of aid above a certain level starts to have negative effects in this analysis we empirically test this assumption we find evidence for negative returns to aid at high levels of aid inflows however the results are sensitive to both the countries included in the sample and model specification moreover the turning point above which aid starts to have a negative effect on growth seems to be much higher than assumed in the background calculations for assessing aid

stability and the distribution of power the relation between stability and the distribution of power is an important and long debated problem in international relations theory the balance of power school argues that an even distribution of power is more stable while the preponderance of power school argues that a preponderance of power is more stable empirical efforts to estimate this relation have yielded contradictory results this essay examines the relation between stability and the distribution of power in an infinite horizon game theoretic model in which two states are bargaining about revising the international status quo the states make offers and counteroffers until they reach a mutually acceptable settlement or until one of them becomes so pessimistic about the prospects of reaching an agreement that it uses force to impose a new settlement the equilibrium of the game contradicts the expectations of both schools and offers an explanation for the conflicting empirical estimates in the model stability is greatest when the status quo distribution of benefits reflects the expected distribution of benefits that the use of force would impose

the economics of early warfare over land abstract we investigate the incidence of early warfare among foragers and farmers in prehistory our focus is specifically on conflict over land food is produced using inputs of labor and land and the probability of victory in a conflict depends on relative group sizes the group sizes are determined by individual migration and malthusian population dynamics both factors result in larger populations at better sites which deters attack there are two necessary conditions for warfare high enough individual mobility costs and large enough shocks to the relative productivities of the sites together these conditions are sufficient in particular technological or environmental shocks that alter the productivities of sites can trigger warfare but only if individual agents do not change sites in response these results are consistent with evidence from archaeology and anthropology

aid policies and growth the authors of this paper use a new database on foreign aid to examine the relationships among foreign aid economic policies and growth of per capita gdp in panel growth regressions for 56 developing countries and 6 four year periods 1970 93 they find that the policies that have a great effect on growth are those related to fiscal surplus inflation and trade openness they construct an index for those three policies and have that index interact with foreign aid they have instruments for both aid and aid interacting with policies they find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies in the presence of poor policies aid has no positive effect on growth this result is robust in a variety of specifications which include or exclude middle income countries include or exclude outliers and treat policies as exogenous or endogenous they examine the determinants of policy and find no evidence that aid has systematically affected policies either for good or for ill they estimate an aid allocation equation and show that any tendency for aid to reward good policies has been overwhelmed by donors pursuit of their own strategic interests in a counterfactual they reallocate aid reduce the role of donor interests and increasing the importance of policy such a reallocation would have a large positive effect on developing countries growth rates

power transitions and great power war from westphalia to waterloo this study extends recent research on the power transition and hegemonic stability theory to the preindustrial era it improves on the original power transition theory by relaxing an assumption and by extending the empirical domain unlike the original power transition theory the revised version is not restricted to the period after the industrial revolution and can therefore be applied to the preindustrial era this study examines the empirical record prior to the industrial revolution to see whether the power transition and hegemonic stability theory holds for that period the data for 1648 to 1815 indicate strong support for the power transition contention that a rough equality of power between rival sides increases the likelihood of war that is when the challenging great power with its allies support catches up with the dominant power great power war is most likely

investor protection and corporate governance recent research has documented large differences among countries in ownership concentration in publicly traded firms in the breadth and depth of capital markets in dividend policies and in the access of firms to external finance a common element to the explanations of these differences is how well investors both shareholders and creditors are protected by law from expropriation by the managers and controlling shareholders of firms we describe the differences in laws and the effectiveness of their enforcement across countries discuss the possible origins of these differences summarize their consequences and assess potential strategies of corporate governance reform we argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank centered and market centered financial systems

game theory and the spiral model when one state engages in a military buildup other states sometimes take this as a sign that it is more aggressive or expansionist than they previously thought some argue that such increases in mutual suspicion can drive arms races and even lead to war psychological bias is often invoked to explain this pattern of growing suspicions leading to hostility this article presents an incomplete information model of an arms race and investigates when escalations should rationally generate increased fears and when in order to reduce such fears security seekers can refrain from building it shows that escalations rationally provoke fear even in the absence of bias and that weak states and states facing high costs of arms racing and war will be especially likely to refrain from building as a way of signaling benign intentions

entitled to work urban property rights and labor supply in peru this brief summarizes the results of a gender impact evaluation study entitled entitled to work urban property rights and labor supply in peru new legal rights were issued in 1996 project teams providing titling service through 2003 in peru the study observed that between 1996 and 2003 the peruvian government issued property titles to over 1 2 million urban households the largest titling program targeted at urban squatters in the developing world this paper examines the labor market effects of increases in tenure security resulting from the program pre program squatters in program neighborhoods were significantly more likely to report improved tenure security by 60 percent similarly program participants were 18 8 percentage points less likely to report a high likelihood of eviction or invasion and 18 8 percentage points more likely to report that their dwelling was currently very secure from eviction or invasion the likelihood of working inside the home significantly falls by 11 6 percentage points for the average squatter family with two program periods

waiting for news in the market for lemons econometrica vol 80 no 4 july 2012 1433 1504 waiting for news in the market for lemons b y b rendan d aley and b rett g reen 1 we study a dynamic setting in which stochastic information news about the value of a privately informed seller s asset is gradually revealed to a market of buyers we con struct an equilibrium that involves periods of no trade or market failure the no trade period ends in one of two ways either enough good news arrives restoring confidence and markets reopen or bad news arrives making buyers more pessimistic and forcing capitulation that is a partial sell off of low value assets conditions under which the equilibrium is unique are provided we analyze welfare and efficiency as they depend on the quality of the news higher quality news can lead to more inefficient outcomes our model encompasses settings with or without a standard static adverse selection problem in a dynamic setting with sufficiently informative news reservation values arise endogenously from the option to sell in the future and the two environments have the same equilibrium structure k eywords dynamic games adverse selection information economics signaling 1 introduction c onsider an entrepreneur who is interested in selling her company due to liquidity constraints naturally she is better informed than the market about her company s fundamentals she would like to sell yet there is no reason she is forced to do so on any given day nor can she commit to delaying trade with every passing day that she retains ownership she gains or loses the day s profit and maintains the option to sell the next day if trade is in fact delayed then the market may learn about the value of the firm by observing cash flows investments customer base and so forth herein lies the key innovation of this paper we introduce an exogenous public information process news into a model of such settings we then study the implications for trading behavior efficiency and welfare we model the environment as a game played in continuous time where a risk neutral seller faces a competitive market there is common knowledge of gains from trade but the seller is privately informed about the asset s value i e her type which may be either high or low at each point in time prior to trade the seller receives offers from the market if an offer is accepted then the trade is consummated and the game ends if all offers are rejected then the seller consumes the type dependent flow payoff endowed by the asset contemporaneously information about the seller s type is publicly revealed we are grateful to a co editor and three anonymous referees for helpful comments and sug gestions we are greatly indebted to jeremy bulow michael harrison and andrzej skrzypacz for useful conversations comments and encouragement special thanks also to peter demarzo johannes horner ilan kremer jon levin paul milgrom yuliy sannikov bob wilson and sem inar participants at chicago chicago gsb duke mit kellogg nyu penn stanford olin wharton unc yale and the 7th annual duke northwestern texas io theory conference 2012 the econometric society doi 10 3982 ecta9278

bargaining with surplus destruction in a two player alternating offer bargaining model if one player can destroy the surplus to be allocated then the value to bargain for is endogenous except at the beginning even with complete information the model has perfect equilibria with delayed agreement and or surplus destruction the model therefore explains inefficiency and destruction that may appear irrational we characterize the set of equilibrium payoffs and its limiting be haviour as the time between offers vanishes real time delay remains possible even in the limit we also consider the case of surplus destruction that is exogenously limited by the

on delay in bargaining with one sided uncertainty recently attention has been given to a model of two person bargaining in which the parties alternate making offers and there is uncertainty about the valuation of one party the purpose of the analysis has been to identify delay to agreement with a screening process where agents with relatively lower valuations distinguish themselves by waiting longer to settle we point out a fundamental difficulty with this program by demonstrating that the assumptions used in the literature allow for delay only in so far as the time between offers is significant

aid and growth what does the cross country evidence really show abstract we examine the effects of aid on growth in cross sectional and panel data after correcting for the possible bias that poorer or stronger growth may draw aid contributions to recipient co

a methodology to estimate impacts of domestic policies on deforestation compensated successful efforts for avoided deforestation redd climate change mitigation would benefit from reduced emissions from deforestation and degradation redd in developing countries the redd mechanism is in charge of distilling the right incentives for fostering forest conservation with appropriate compensation of foregone revenues which in turn is related to avoided deforestation how many hectares of forests are saved although any prediction of deforestation rates i e business as usual scenarios is challenging and any negotiated target is subject to political influence these two ways have been prioritirized so far in other words proposals have focused on a baseline or cap and trade approach which relevance is questionable because resulting financial compensations are subject to unfairness if estimations of avoided deforestation are not reliable rather than considering overall deforestation predicted and observed we argue that a redd mechanism would gain from linking compensations to real efforts that developing countries implement for slowing deforestation rates this would provide more efficient incentives to design and enforce suitable policies and measures the methodology we present to measure these efforts labeled compensated successful efforts is based on the rationale that overall deforestation is due partly to structural factors and partly to domestic policies and measures this typology differs from others presented in the literature such as proximate underlying causes or economic institutional factors using an econometric model our approach estimates efforts that are i independent of structural factors economic development population initial forest area agricultural export prices ii estimated ex post at the end of the crediting period and iii relative to other countries in order to illustrate the methodology we apply the model to a panel of 48 countries asia latin america africa and four periods between 1970 and 2005 we conclude on the feasibility to estimate avoided deforestation using the compensated successful efforts approach in addition to being conservative from an environmental perspective this approach guarantees fairness by accounting for dramatic changes during the commitment period

corruption trade and resource conversion abstract recent evidence suggests that special interest groups significantly affect tropical deforestation through lobbying we develop an open economy model in which resource conversion is determined by a self interested government that is susceptible to the influences of the political contributions it receives from the profit maximizing economic agent responsible for land conversion we investigate the effects of lobbying on the cumulative level of resource conversion and examine how trade policy influences the distortions created by political corruption we derive testable predictions that are analyzed through a panel analysis of cumulative agricultural land expansion over 1960 99 for low and middle income tropical countries our findings suggest that increased corruption and resource dependency directly promote land conversion whereas rising terms of trade reduce conversion

capabilities perception and escalation the evolution of crises depends upon interpreting intentions under uncertainty we model crises as a game of two sided incomplete information players are uncertain about their own payoffs from war because of differences between observable and actual capabilities we derive four hypotheses testing them against crises in europe between 1815 and 1970 we show a nonmonotonic relationship between ex ante observable capabilities and the likelihood of violence in a crisis as well as the ex ante likelihood of a negotiated settlement we answer five questions 1 how do differences in observable capabilities between rivals influence the likelihood of a crisis and the escalation to violence 2 how do intangible capabilities alter the effects of observable capabilities on the likelihood of conflict and violence 3 what do national leaders learn from the responses of their adversaries in crises 4 under what conditions can deterrence succeed 5 under what conditions are the strong likely to give in to the weak or vice versa in a crisis

family control and loan collateral evidence from china using a sample of 612 listed chinese non soes from 2006 to 2009 we show that the use of collateral is higher in family controlled firms this effect is more pronounced when family firms have a larger control ownership wedge family representation in management and are led by a descendant chairman ceo we further document that having multiple large shareholders paying higher dividends having completed the split share structure reform and being located in provinces with more competitive credit markets can mitigate the incentive of controlling families to engage in expropriation and reduce the level of collateral required overall we contend that in china the risk of expropriation associated with family control leads to an increased credit risk and in turn higher collateral being required by banks

modelling land use deforestation and policy a hybrid optimisation heterogeneous agent model with application to the bolivian amazon abstract we introduce a hybrid simulation model simpachamama designed to explore the complex socio environmental trade offs of alternative policy bundles and policy sequencing options for stemming deforestation and reducing poverty in tropical countries designed and calibrated to the initial conditions of a small forest village in rural bolivia the model consists of a an optimising agricultural household module of heterogeneous agents that make individually optimal land use decisions based on factor endowments and market conditions b an encompassing general equilibrium shell module that endogenously determines wages and links the agricultural labour market and rural urban migration rates and c a novel user controlled policy maker module that allows the user to make real time choices over a variety of public and environmental policies that in turn impact land use welfare and migration over a 20 year simulation period the results highlight trade offs between reductions in deforestation and improvements in household welfare that can only be overcome either when international redd payments are offered or when decentralized deforestation taxes are implemented the sequencing of policies plays a critical role in the determination of these results

agricultural expansion and deforestation modelling the impact of population market forces and property rights abstract this paper compares four different modelling approaches to agricultural expansion and deforestation and explores the implications of assumptions about the household objectives the labour market and the property rights regime a major distinction is made between population and market based explanations many of the popular policy prescriptions are based on the population approach assuming subsistence behaviour and limited market integration within a more realistic particularly for the long term effects market approach well intentioned policies such as agricultural intensification programmes may boost deforestation many forest frontier contexts are also characterized by forest clearing giving farmers land rights deforestation becomes an investment to the farmer and a title establishment strategy land titling and credit programmes may therefore increase deforestation

reputation in bargaining and durable goods monopoly this paper analyzes durable goods monopoly in an infinite horizon discrete time game we prove that as the time interval between successive offers approaches zero all seller payoffs between zero and static monopoly profits are supported by subgame perfect equilibria this reverses a well known conjecture of coase alternatively one can interpret the model as a sequential bargaining game with one sided incomplete information in which an uninformed seller makes all the offers our folk theorem for seller payoffs equally applies to the set of sequential equilibria of this bargaining game

does family ownership structure affect investment cash flow sensitivity evidence from italian smes abstractthe aim of this article is to investigate whether family control family management and family ownership concentration affect the investment cash flow sensitivity of small and medium sized enterprises smes by analysing a sample of italian smes for the period 2004 2013 i find that family owned businesses are significantly associated with higher investment cash flow dependence this relation however is found to be driven by two distinct factors i the presence of a highly concentrated family ownership ownership concentration channel and ii the active involvement of the family in the business family management channel

delay in trade networks we study decentralized markets involving producers and consumers that are facilitated by middlemen we do this by analyzing a noncooperative networked bargaining game we assume a complete information setup wherein all the agents know the structure of the network the values of the consumers and the transaction costs involved but allow for some search friction when either producers or consumers trade with middlemen in such a setting we show that sunk cost problems and a heterogeneous network can give rise to delay or failure in negotiation and therefore reduce the total trade capacity of the network in the limiting regime of extremely patient agents we provide a sharp characterization of the trade pattern and the segmentation of these markets

challenges for a sustainable resource use uncertainty trade and climate policies we integrate new challenges to thinking about resource markets and sustainable resource use policies in a general framework the challenges emerging from six papers that jeem publishes in a special issue are i demand uncertainty and stockpiling ii international trade and resource dependence iii deforestation and iv intertemporal effects of climate change policies green paradox we discuss new insights and results on these issues by fitting them into the hotelling model of non renewable resource depletion

foreign transfers and tropical deforestation what terms of conditionality the purpose of this paper is to propose a nonparametric interest rate term structure model and investigate its implications on term structure dynamics and prices of interest rate derivative securities the nonparametric spot interest rate process is estimated from the observed short term interest rates following a robust estimation procedure and the market price of interest rate risk is estimated as implied from the historical term structure data that is instead of imposing a priori restrictions on the model data are allowed to speak for themselves and at the same time the model retains a parsimonious structure and the computational tractability the model is implemented using historical canadian interest rate term structure data the parametric models with closed form solutions for bond and bond option prices namely the vasicek 1977 and cir 1985 models are also estimated for comparison purpose the empirical results not only provide strong evidence that the traditional spot interest rate models and market prices of interest rate risk are severely misspecified but also suggest that different model specifications have significant impact on term structure dynamics and prices of interest rate derivative securities

strategic exploitation with learning and heterogeneous beliefs abstract we study the effect of learning with heterogeneous beliefs on the exploitation of a renewable common pool resource to that end we extend the great fish war model of levhari and mirman 1980 to a learning environment in which several agents interact strategically and learn about the distribution of the stochastic evolution of the resource we find that the effect of anticipation of learning with heterogeneous beliefs is twofold first the anticipation of learning makes future payoffs more uncertain which induces the agents to decrease present exploitation due to the precautionary motive second under heterogeneity of beliefs there is a differential informational externality that induces the agents to increase or decrease present exploitation we also perform a comparative analysis on the cournot nash equilibrium with learning by studying the effect of optimism and riskiness on resource exploitation

nonpoint source pollution taxes and excessive tax burden if a regulator is unable to measure firms individual emissions an ambient tax can be used to achieve the socially desired level of pollution with this tax each firm pays a unit tax on aggregate emissions in order for the tax to be effective firms must recognize that their decisions affect aggregate emissions when firms behave strategically with respect to the tax setting regulator under plausible circumstances their tax burden is lower under an ambient tax relative to the tax which charges firms on the basis of individual emissions firms may prefer the case where the regulator is unable to observe individual firm emissions even if this asymmetric information causes the regulator to tax each firm on the basis of aggregate emissions

bargaining in the shadow of war when is a peaceful resolution most likely this article derives the optimal bargaining strategies of the belligerents when each side has private but incomplete information about the expected outcome of a war should it take place i show that the aggressor s demand curve can be below the defender s offer curve that wars are possible even when both sides are jointly pessimistic and that the relative cost of a war can radically alter the types of disputes that end in war a simple diagram provides the intuition for most of the major propositions

rationalist explanations for war realist and other scholars commonly hold that rationally led states can and sometimes do fight when no peaceful bargains exist that both would prefer to war against this view i show that under very broad conditions there will exist negotiated settlements that genuinely rational states would mutually prefer to a risky and costly fight popular rationalist and realist explanations for war fail either to address or to explain adequately what would prevent leaders from locating a less costly bargain essentially just two mechanisms can resolve this puzzle on strictly rationalist terms the first turns on the fact that states have both private information about capabilities and resolve and the incentive to misrepresent it the second turns on the fact that in specific strategic contexts states may be unable credibly to commit to uphold a mutually preferable bargain historical examples suggest that both mechanisms are empirically plausible

power alliance and the escalation of international conflict 1815 1965 a considerable amount of the internationalpolitics literature attempts to explain international conflict on the basis of the distribution of power between and among nations there are however divergent views of this linkage one view argues that wars are most likely to take place between nations of similar power while another asserts that wars are most likely when power is unequal research seeking to explore this phenomenon has not investigated the capability augmenting effects

learning by doing and the dutch disease this paper develops a model of learning by doing and the dutch disease that extends the earlier literature in two ways first it is assumed that both the traded and the non traded sector can contribute to learning second it is assumed that there are learning spillovers between the sectors it is shown that within such a model a foreign exchange gift results in a real exchange rate depreciation in the long run due to a shift in the steady state relative productivity between the traded and the non traded sector in contrast to standard models of the dutch disease production and productivity in both sectors may go up or down the conditions for the different cases are worked out

conflicts over property rights and natural resource exploitation at the frontier abstract competition for land at the frontier is analyzed by considering a game between a first settler and a contestant although the first settler is the legitimate owner of a plot of land his remoteness from the government s administrative center makes it difficult to prove it this creates incentives for a contestant to dispute his claims both contenders will expend resources in order to secure ownership due to transport costs the more remote a plot of land is the lower its output value this tends to discourage appropriative activities land degradation is sometimes used as a substitute to appropriative activities a lower discount rate may encourage land degradation

capabilities uncertainty and resolve a limited information model of crisis bargaining this paper presents and solves a crisis bargaining game under limited information the sides alternate offers from three possible offers with war and its costs starting if the target s counteroffer is rejected the equilibrium of the model falls into four different cases these four cases are analyzed to determine how the sides communicate through their offers and how the costs of war initial beliefs misperceptions and distribution of capabilities drive the probabilities of a crisis and war the model demonstrates a joint selection bias misspecification problem in empirical studies of crises arising from the unobservable nature of beliefs several empirical studies of crisis bargaining are discussed in the light of this methodological problem new patterns of evidence are found that support the presence of the selection problem and their conclusions are reexamined

the balance of power in closely held corporations abstract we analyze a closely held corporation characterized by the absence of a resale market for its shares we show that the founder of the firm can optimally choose an ownership structure with several large shareholders to force them to form coalitions to obtain control by grouping member cash flows a coalition internalizes to a larger extent the consequences of its actions and hence takes more efficient actions than would any of its individual members the model has implications for the optimal bundling of cash flow and voting rights and for the optimal number and size of shareholders

wto challenges and efficiency of chinese banks after joining the world trade organisation wto in december 2001 china was given 5 years to completely open up its banking market for international competition chinese banks have been renowned for their mounting nonperforming loans and low efficiency despite gradual reforms the banking system is still dominated by state ownership and encapsulated monopolistic control how to raise efficiency is a key to the survival and success of domestic banks especially the state owned commercial banks two important factors may be responsible for raising efficiency ownership reform and hard budget constraints this article uses a panel data of 22 banks over the period 1995 to 2001 and employs a stochastic frontier production function to investigate the effects of ownership structure and hard budget constraint on efficiency empirical results suggest that nonstate banks were 8 18 more efficient than state banks and that banks facing a harder budget tend to perform better than those heavily capitalized by the

economic growth and liquidation of natural capital the case of forest clearance the importance of natural capital to economic systems is increasingly recognized previous empirical models of economic growth rates however have emphasized accumulation of physical and human capital this paper shows that the economic growth of over 70 countries has been positively affected by liquidation of one aspect of natural capital forests while controlling for factors typically associated with national growth rates the positive association was robust to additions of various covariates such as forest exports level of economic development agricultural area and geographical position these results suggest that conversion of forests has partially fuelled the economic expansion of countries

deforestation and agricultural productivity in the cote d ivoire an optimal control model is used to determine the optimal steady state forest stock in the cote d ivoire this stock is shown to increase with increases in the forestry returns relative to those in agriculture technological progress in agriculture and increases in the social discount rate serve to lower the optimal steady state forest stock based on an estimated aggregate yield function the optimal forest stock is shown to be most sensitive to changes in the social rate of discount assuming current 1985 technology deforestation appears socially optimal only for values of the discount rate greater than 8