bank reserve requirements as an impediment to signaling bank reserve requirements as an impediment to signaling effective legal reserve requirements may hamper the private capital market s ability to price bank deposits in the model developed here the market has less information about bank assets than the banks have and a bank can therefore signal its superior information through its choice of excess reserves mandatory reserves can inhibit such signaling and therefore result in inefficient deposit pricing i introduction although the basic of fractional reserve banking were explained by edgeworth 1888 the rationale for legal reserve requirements as well as the details of their design have continued to evolve and the impetus for reform has been gathering momentum in recent years the time honored liquidity motivations as well as the more contemporary monetary control consideration have been widely debated and while the latter remains popular increasing skepticism has been expressed by benston 1978 greenbaum and kanatas 1982 laurent 1979 1981 robertson and phillips 1974 and starleaf 1975 among others like many of these papers this one questions the benefits of reserve requirements whereas most dispute their value as a monetary policy instruments however a new argument presented here shows that reserve requirements may subvert efficient deposit pricing and thereby aggravate asset quality and bank solvency problems the argument relates to the recent proposal that the private capital markets should play an expanded role in monitoring the exposure of banks we examine the potential of a commercial bank s excess reserves to signal asset quality in an environment without deposit insurance the results apply so long as deposit insurance remains incomplete and where the risk of each bank s assets is a priori unknown to all except the bank in such a setting the efficient pricing of deposit depends on a depositor s ability to ascertain the risk characteristics of the bank s assets it is shown that excess reserves can signal the unknown risk and thus resolve the informational asymmetry the ability to signal using excess reserves varies inversely however with reserve requirements thus reserve requirements may impede the ability of excess reserves to inform market participants reserve requirements are likely to impede signaling when i loan rates and reserve requirements are high or ii reserve requirements are low but a bank s deposit base is large reserve requirements are unlikely to impede signaling when banks are similar in their asset characteristics the underlying intuition is discussed in section iii excess reserves based signaling may be important because of its potential in facilitating the private sector s monitoring of banks we show that any effort to expand the private market s monitoring of bank asset quality through more accurate deposit pricing presupposes an appropriate regulatory milieu exposing large depositors to losses may be a precondition for expanding the role of the private capital markets but this analysis indicates that reserve requirements and or inappropriate discount window pricing can subvert such efforts the potential for conflict between the federal reserve focusing on monetary policy and the deposit insurers seeking to mitigate their monitoring burden and exposure is palpable thus the model clarifies the conditions necessary to engage the private market in monitoring bank asset quality through deposit pricing these requirements are formidable and the interdependence of regulatory constraints used for monetary policy and bank soundness purposes could frustrate programs based on piecemeal reform the model posits a risk neutral two period economy where each bank issues deposits and makes risky loans at the outset although asset quality varies across bank the choice of assets is not endogenous this is an important simplification since in general a bank s asset choice will impinge on the posited signaling problem

optimal selling strategies when buyers may have hard information abstract consider a revenue maximizing seller who can sell an object to one of n potential buyers each buyer either has hard information about his valuation i e evidence that cannot be forged or is ignorant the optimal mechanism is characterized it turns out that more ignorance can increase the expected total surplus even when the buyers are ex ante symmetric the object may be sold to a buyer who does not have the largest willingness to pay nevertheless an additional buyer increases the expected total surplus in the symmetric case whereas more competition can be harmful if there are ex ante asymmetries

size r d productivity and decision styles we extend the size innovation debate by incorporating decision making style as a relevant factor in the innovation process we propose that the size of firms affects the scale and quality of product innovation through the adoption of different decision making styles using the literature on cognition we conceptualize decision making style as the degree to which firms rely on analytical information for decision making during the r d process using longitudinal data of spanish firms we show that as firms increase in size they rely more extensively on analytical decision tools for the innovation activity additionally we show that the size of firms is negatively related to product innovation productivity in terms of scale and positively related to the quality and that these relationships are mediated by firms reliance on analytical decision making style we discuss theoretical and managerial implications for innovation research and practice

when does it pay to get informed a repeated principal agent problem where both sides start out symmetrically uninformed about a productivity related parameter and where the principal has the option to costlessly learn this parameter is analyzed typically the principal delays the acquisition of information to avoid costly signaling if the learning decision of the principal is observable by the agent the expected delay is longer than if it is unobservable the discrepancy is due to the ability of the principal to avoid costly signaling when he is known to be uninformed

buyer optimal learning and monopoly pricing this paper analyzes a bilateral trade model where the buyer s valuation for the object is uncertain and she observes only a signal about her valuation the seller gives a take it or leave it offer to the buyer our goal is to characterize those signal structures which maximize the buyer s expected payoff we identify a buyer optimal signal structure which generates i efficient trade and ii a unit elastic demand furthermore we show that every other buyer optimal signal structure yields the same outcome as the one we identify in particular the same price

incentives for motivated agents under an administrative constraint consider an agent who has an expertise in producing a non marketable good this good is valued by a single principal and there is a verifiable measure of the agent s performance crucially the agent is intrinsically motivated due to warm glow altruism in addition the agent s budget which is controlled by the principal must not be less than the monetary performance cost faced by the agent this gives rise to a limited liability constraint it also restricts the agent s ability to under report costs in such environment we determine the link between the agent s budget and performance our results come in contrast to the received solution of the principal agent problem and to most in the literature on mission motivated organisations and public services provision

optimal procurement contracts with pre project planning the paper studies procurement contracts with pre project investigations in the presence of adverse selection and moral hazard to model the procurer s problem we extend a standard sequential screening model to endogenous information acquisition with moral hazard the optimal contract displays system atic distortions in information acquisition due to a rent effect adverse selection induces too much infor mation acquisition to prevent cost overruns and too little information acquisition to prevent false project cancellations moral hazard mitigates the distortions related to cost overruns yet exacerbates those related to false negatives the optimal mechanism is a menu of option contracts that achieves the dual goal of providing incentives for information acquisition and truthful information revelation

the size distribution of innovating firms in the uk 1945 1983 a survey of 4 378 significant innovations shows that firms with fewer than 1 000 employees commercialized a much larger share than is indicated by their share of r and d expenditures innovations per employee have been consistently above average in firms with more than 10 000 employees and have become so in firms with fewer than 1 000 intersectoral variation in the size distribution of innovating firms can be explained as a function of r and d based technological opportunities and of technological ease of entry by user firms with principal activities outside the sector copyright 1987 by blackwell publishing ltd

inter industry technology flows in the united states abstract this paper presents for the u s economy a technology flows matrix tracing 1974 industrial r d expenditures from their industries of origin to industries in which the use of resulting products and processes was anticipated the distinction between origin and using industries is crucial to understanding the links between r d and productivity growth a regression analysis reveals high social rates of return and substantial productivity impacts from r d attributed to industries of use

a literature based innovation output indicator abstract this paper presents an application of a recently developed method for measuring innovative activity in a national economy based on new product announcements in trade and technical journals the literature based innovation output indicator is not meant to capture all aspects of innovation or to substitute for other indicators but is seen as a useful addition to the range of indicators available the method is described in detail and then applied to the uk a sample of 941 innovations is constructed and then subjected to analysis the results suggest that the method is a useful and relatively reliable way of measuring the degree of radicalness of innovations being generated and of surveying their distribution across sectors across firm size and across firms which are uk owned or foreign owned the method captures product innovations well but captures process innovations less well the results for the uk suggest that the more radical innovations come disproportionate from companies based outside the uk innovations originating inside the uk are skewed towards product differentiation there is also some evidence that smaller companies produce a slightly higher than average share of the more radical innovations the paper suggests that this small scale testing of this indicator has produced promising results and that there would be benefits to the policy community from establishing it on a permanent basis

incentive mechanisms for environmental protection under asymmetric information a case study the purpose of this paper is to compare the performance of some instruments of environmental policy using data for a coal fired power plant each decentralized scheme coverages towards the social optimum chosen by a regulator we look at the performance of a changing tax rate on emission of an announcement of the tax formula of an announcement of the tax formula with a tax refund possibility and of a tax cum subsidy scheme our emphasis is on full information concerning the tax and subsidy formulas and on the opportunity for the firm to optimize intertemporally we also test two performance schemes which combine social optimal pricing with optimal abatement decisions our interest is to compare the speed of convergence of the schemes the monetary side payments subsidy bonus required and to look for self financing schemes

sectoral patterns of technical change towards a taxonomy and a theory abstract the purpose of the paper is to describe and explain sectoral patterns of technical change as revealed by data on about 2000 significant innovations in britain since 1945 most technological knowledge turns out not to be information that is generally applicable and easily reproducible but specific to firms and applications cumulative in development and varied amongst sectors in source and direction innovating firms principally in electronics and chemicals are relatively big and they develop innovations over a wide range of specific product groups within their principal sector but relatively few outside firms principally in mechanical and instrument engineering are relatively small and specialised and they exist in symbiosis with large firms in scale intensive sectors like metal manufacture and vehicles who make a significant contribution to their own process technology in textile firms on the other hand most process innovations come from suppliers these characteristics and variations can be classified in a three part taxonomy based on firms 1 supplier dominated 2 production intensive 3 science based they can be explained by sources of technology requirements of users and possibilities for appropriation this explanation has implications for our understanding of the sources and directions of technical change firms diversification behaviour the dynamic relationship between technology and industrial structure and the formation of technological skills and advantages at the level of the firm the region and the country

the innovative performance of in house and contracted r d in terms of patents and utility models abstract the standard empirical framework for analysing the r d patents relationship is widened both by examining the different role of in house and contracted r d in the innovative performance of firms and by considering patents and utility models counts as measures of innovation output patents and utility models are considered to approximate for significant and incremental innovations respectively applying count data econometrics to a panel data set of spanish manufacturing firms surveyed in the period 1990 1996 a transcendental production function is estimated which allows for non constant elasticities of the r d inputs the results indicate that significant innovations are mainly gestated in house whereas contracted r d seems more orientated towards innovations of incremental nature

non commitment in performance evaluation and the problem of information distortions abstract auditing is modeled in a sequential game without commitment the manager must decide whether and where to audit a worker s output taking into account all interim information he has obtained the worker will work just hard enough and show it to divert the manager from making an audit or cover up withholding information about his work to make an audit more difficult this usually raises the costs of setting work incentives so incentives are softened sometimes drastically moreover when a worker s on the job information is valuable for entrepreneurial decisions work incentives must be softened to improve the internal flow of information

pre emptive patenting joint ventures and the persistence of oligopoly abstract gilbert and newbery 1982 have examined pre emptive patenting and the persistence of monopoly the present paper considers pre emptive patenting when there are several incumbent firms rather than just one it is shown why the incumbent oligopolists behaving non cooperatively might fail to deter entry this suggests that a joint venture in r and d might be a useful entry deterring device insofar as it pools the incumbents incentives to prevent entry this is indeed the case for small innovations but for large innovations the formation of a joint venture weakens the incumbents incentive to innovate by removing the competitive stimulus between them

endogenous information and stochastic contracts abstract a growing literature analyzes revenue maximizing contracts for situations in which agents can acquire private information before they decide whether to join the contract it is conjectured that the results also apply to the more natural scenario where information can be acquired either before or after signing this paper shows that in fact the latter scenario is more favorable for the principal using stochastic contracts she can induce information acquisition with some probability and yet appropriate the generated surplus

information gathering externalities for a multi attribute good most goods and services vary in numerous dimensions customers choose to acquire information to assess some characteristics and not others their choices affect firms incentives to invest in quality and so lead to indirect externalities in consumers choices we characterize a model in which a monopolist invests in the quality of a product with two characteristics and consumers are heterogeneous ex ante consumers do not internalize their influence on the firm s investment incentives when choosing which information to acquire cheaper information affects consumers information gathering and thereby firm investment this can paradoxically reduce consumer surplus profits and welfare

gathering information before signing a contract after being offered a contract an agent has the possibility to observe the state of nature this enables him to refuse the contract in unfavorable states but burdens him with an observation cost the authors show that the principal offers a contract in which the agent has no incentive to observe the state of nature and they explore its terms later they show that the principal finds it profitable to organize competition between several agents even though he has monopoly power and can push a single agent down to his reservation utility copyright 1992 by american economic association

information provision before a contract is offered this paper considers an agency model in which the agent can update the principal s belief before the contract is offered we identify that the agent who has a bad potential to perform the task has a small chance to receive information rent but if he receives it he receives a large amount thus the agent may choose to provide more information that shifts the principal s belief to the negative direction if the prior belief is optimistic

the strategic value of partial vertical integration we investigate the strategic incentives for partial vertical integration namely partial ownership agreements between manufacturers and retailers when retailers privately know their costs and engage in price competition with differentiated goods the partial misalignment between the profit objectives within a partially integrated manufacturer retailer hierarchy implies a higher retail price than under full integration this information vertical effect translates into a competition horizontal effect the partially integrated hierarchy s commitment to a higher price induces the competitor to increase its price which strategically relaxes competition our analysis provides implications for vertical merger policy and theoretical support for the recently documented empirical evidence on partial vertical acquisitions

on the marshall jacobs controversy it takes two to tango the literature is inconclusive as to whether marshallian specialization or jacobian diversification externalities favour regional innovativeness the specialization argument poses that regional specialization towards a particular industry improves innovativeness in that industry regional specialization allows for knowledge to spill over among similar firms by contrast the diversification thesis asserts that knowledge spills over between firms in different industries causing diversified production structures to be more innovative building on an original database we address this controversy for the netherlands we thereby advance on the literature by providing a two level approach at the region s and the firm s level at the regional level we compare specialized with diversified regions on numbers of accommodated innovators at the firm level we establish causalities between externalities and degree of innovativeness the results unambiguously suggest marshallian externalities specialized regions accommodate increased numbers of innovating firms and consistently incumbent firms innovativeness increase with regional specialization once the product has been launched innovators in diversified jacobian regions appear to be more successful in commercial terms than innovators in specialized marshallian regions

the value of ignorance this article provides a new perspective on the information structure of an agent in a standard model of adverse selection before the contracting takes place the agent has the opportunity to gather private information on a relevant parameter that affects final payoffs i allow for the possibility that the agent remains uninformed with some probability the agent s optimal choice of information structure is derived and it is shown that in the case of two states of nature the possibility of remaining ignorant has a positive strategic value for the agent since a poor information structure generates strategic benefits there will be no equilibrium in which the agent is perfectly informed even if additional information is costless at the margin

endogenous private information structures we formally incorporate the option to gather information into a game and thus endogenize the information structure we ask whether models with exogenous information structures are robust with respect to this endogenization any nash equilibrium of the game with information acquisition induces a nash equilibrium in the corresponding game with an exogenous structure we provide sufficient conditions on the structure of the game for which this remains true when nash is replaced by sequential we characterize the sequential nash equilibria of games with exogenous information structures that can arise as a sequential nash equilibrium of games with endogenous information acquisition

ignorance in a multi agent setting abstract i extend the demski and sappington 1984 model to the case where the agents are with some exogenous probability ignorant i show that an ignorant agent either is not exposed to risk or he receives a lower transfer when the other agent is the informed type the principal wants to discourage choosing the contract designed for an ignorant agent

an evolutionary pattern of innovation diffusion the case of flexible automation abstract the aim of this paper is to provide evidence supporting an evolutionary model of the process of innovation diffusion relying on an extensive field study the paper analyses the pattern of adoption of the entire set of innovations deriving from the flexible automation paradigm on the part of a large sample of italian metalworking firms owing to the relevance of the technology examined and to the size of the sample the case illustrates quite representatively the dynamics of the early stage of development of radical and complex innovations the main results of the paper confirm the importance of firm size and market structure to explain the characteristics of the innovation diffusion process at the same time they emphasize that the localized search procedures on the part of potential users involve a step by step approach to adoption namely the technological and organizational profile of firms turns out to play a decisive role in favouring diffusion moreover empirical support is provided for the existence of persistent market disequilibria along the diffusion paths witnessed by the extent of the retrofitting phenomenon

specialization and size of technological activities in industrial countries the analysis of patent data abstract the determinants and direction of the technological specialization of advanced countries are investigated in this paper using patent counts and citations as technology indicators during the 1980s international patenting increased more rapidly than the resources devoted to r d indicating a globalization of technology markets paralleled by a growing degree of sectoral specialization of countries innovative activities a clear cut inverse relationship between countries technological size measured by cumulative r d expenditure and degree of specialization has been found only large countries can afford to spread their activities across most technological fields while small and medium sized countries are to some extent forced to specialize in more narrow niches some methodological aspects in the use of patenting as an internationally comparable indicator are also discussed considerable differences emerged between patent specialization profiles in the internal and in external markets firms tend to protect their internal market through patenting also in fields where they do not excel at the international level leading to a smoother specialization profile

the effect of minimum wages on immigrants this study examines how minimum wage laws affect the employment and earnings of low skilled immigrants and natives in the united states minimum wage increases might have larger effects among low skilled immigrants than among natives because on average immigrants earn less than natives due to lower levels of education limited english skills and less social capital results based on data from the current population survey for the years 1994 2005 do not indicate that minimum wages had adverse employment effects among adult immigrants or natives who did not complete high school however low skilled immigrants may have been discouraged from settling in states that set wage floors substantially above the federal minimum

a contest with the taxman the impact of tax rates on tax evasion and wastefully invested resources abstract we develop a moral hazard model with auditing where both the principal and the agent can influence the probability that the true state of nature is verified this setting is widely applicable for situations where fraudulent reporting with costly state verification takes place however we use the framework to investigate tax evasion we model tax evasion as a concealment detection contest between the taxpayer and the authority we show that higher tax rates cause more evasion and increase the resources wasted in the contest additionally we find conditions under which a government should enforce incentive compatible auditing in order to reduce wasted resources

tariff regulation with energy efficiency goals we study the optimal tariff structure that could induce a regulated utility to promote energy efficiency by its customers given that it is privately informed about the effectiveness of its effort on demand reduction the regulator should optimally offer a menu of incentive compatible two part tariffs if the firm s energy efficiency activities have a high impact on demand reduction the consumer should pay a high fixed fee but a low per unit price approximating the tariff structure to a decoupling policy which strengthens the firm s incentives to pursue energy conservation instead if the firm s effort to adopt energy efficiency actions is scarcely effective the tariff is characterized by a low fixed fee but a high price per unit of energy consumed thus shifting the incentives for energy conservation on consumers the optimal tariff structure also depends on the cost of the consumer s effort in case the consumer can also adopt energy efficiency measures and on the degree of substitutability between the consumer s and the firm s efforts

using cost observation to regulate firms the paper emphasizes the use of accounting data in regulatory or procurement contracts when the supplier 1 has superior information about the cost of the project and 2 invests in cost reduction the main result states that under risk neutrality the supplier announces an expected cost and is given an incentive contract linear in cost overruns this optimal contract moves toward a fixed price contract as the announced cost decreases an investment choice is then introduced and the use of a rate of return regulation is studied

currents and sub currents in innovation flows explaining innovativeness using new product announcements the creation of new knowledge is a haphazard process not every sector in an economy is equally involved the effect of industry structure on innovativeness has been a focus of attention for a long time by both academics and policymakers in a much quoted article using unique data new product announcements acs and audretsch acs z j audretsch d b 1988 innovation in large and small firms an empirical analysis american economic review 78 4 678 690 identified several characteristics of industry structure and their effects on innovativeness by analyzing a new and more consciously compiled database we re examine their original claims our results largely support their findings industry concentration and degree of unionization for instance hamper innovation skilled labor promotes it our findings diverge in one significant respect from theirs we suggest that the large firms do not contribute more to an industry s innovativeness than small firms at the industry level we find strong support for the schumpeter mark i perspective of creative destruction by small firms rather than creative accumulation by large firms in addition we show that less dedicated innovators prove more susceptible to firm external industry factors than more committed innovators an unfavorable competitive environment decreases the likelihood that less successful innovators will announce new products c 2008 elsevier b v all rights reserved

pressure groups and experts in environmental regulation we study a problem of adverse selection in the context of environmental regulation where the rm may suffer from a certain degree of ignorance about its own type in this framework we analyze the impact on the regulatory process of the presence of informed third parties we study and compare the role of environmentalists and of unbiased experts our analysis allows us to support the spirit of the actual e u legislation concerning the assessment of the impact of public and private projects on the environment and provides insights about the potential role of interested parties as information providers in a regulatory process jel classi cation d82 l51

a technology gap approach to why growth rates differ abstract this paper contains a discussion and test of the technology gap approach to development and growth the basic hypotheses of the theory are tested on pooled cross sectional and time series data for 25 industrial countries for the period 1960 1983 the sample includes in addition to 19 oecd countries 6 of the most important industrial economies from the non oecd area the findings of the paper confirm that there exists a close correlation between the level of economic development measured as gdp per capita and the level of technological development measured through r d or patent statistics furthermore for the group of 25 countries as a whole technology gap models of economic growth are found to explain a large part of the actual differences in growth rates both between countries and periods as expected both the scope for imitation growth in innovative activity and efforts to narrow the gap investment appear as powerful explanatory factors of economic growth however when the non oecd countries and later usa and japan are removed from the sample the explanatory power of the technology variables especially growth in innovative activity diminishes

sectoral patterns of production and use of innovations in the uk 1945 1983 abstract based on information on more than 4000 innovations commercialised in the uk between 1945 and 1983 we analyse sectoral patterns and trends in the production and use of innovations a few core sectors chemical mechanical instruments and electronic are of major importance in the production of technology that gets used over a much wider range of sectors including those outside manufacturing similar sectoral patterns of production and use exist in the uk and usa the trend over time in the uk has been toward greater sectoral interdependence in technology and a higher share of uses outside manufacturing reflecting the growth and spread of the electronic based technological cluster any understanding of the nature determinants and dynamics of intersectoral differences in patterns of production and use of technology will require an integration into empirical and theoretical analysis of the characteristics of innovating firms

preemptive patenting and the persistence of monopoly this article takes a different tack and inquires whether institutions such as the patent system create opportunities for firms with monopoly power to maintain their monopoly power the results apply to other situations such as brand identification spatial location and capacity expansion which share the characteristic that early or preemptive actions may lower the returns to potential competitors

cartel enforcement with uncertainty about costs what cartel agreements are possible when firms have private information about production costs in order for a cartel agreement to work it must take into account the incentives for firms to misrepresent their cost information and it must provide sufficient reward so that no firm wishes to defect for private cost uncertainty we characterize the set of cartel agreements with side payments that can be supported as bayesian nash equilibria we show that if defection results in either cournot or bertrand competition the incentive problems in large cartels are severe enough to prevent the cartel from achieving the monopoly outcome in contrast with common cost uncertainty the incentive problems become less severe in large cartels allowing perfect collusion

involuntary unemployment and worker self selection abstract consider a firm that lacks information about the reservation wage or ability of any specific worker but is aware that workers with higher reservation wages tend to be more able on average we show that under a simple condition that the efficiency wage exceeds the lowest reservation wage the optimal hiring policy for the firm involves 1 no wage discrimination and 2 rationing of jobs when demand for its product is low the result also extends to the case where hours of work are variable provided each worker is most productive when working a strictly positive number of hours per week

information and bargaining in the hold up problem this article incorporates an information structure with partial information into the canonical hold up problem the optimal information structure balances the tradeoff between ex ante efficiency the information rent effect and ex post efficiency the bargaining disagreement effect with one shot bargaining it occurs at an intermediate level of information asymmetry when there is repeated bargaining it is attained with perfect asymmetry asymmetric information the parameter that is frequently ignored in the literature turns out to be an important welfare instrument for the hold up problem our results therefore provide a basis for institutional design regarding the optimal control of information flow

the effect of minimum wages on immigrants employment and earnings this study examines how minimum wage laws affect the employment and earnings of low skilled immigrants and natives in the u s minimum wage increases might have larger effects among low skilled immigrants than among natives because on average immigrants earn less than natives due to lower levels of education limited english skills and less social capital results based on data from the current population survey for the years 1994 2005 do not indicate that minimum wages have adverse employment effects among adult immigrants or natives who did not complete high school however low skilled immigrants may have been discouraged from settling in states that set wage floors substantially above the federal minimum jel classifications j23 j38 j15

optimal control of acid rain in a federation with decentralized leadership and information abstract we examine some aspects of the acid rain problem in the european union acid rain is a by product of electricity production and the eu is a federal system characterized by decentralized leadership that is regional governments are leaders and the center is a common follower regional governments design environmental policies and the center designs an interregional income redistribution policy in a setting with decentralized information information is decentralized in that an upwind regional power plant is privately informed about its technology we show that the subgame perfect equilibrium of a game with decentralized leadership and information is constrained socially optimal

coordination and externalities abstract we analyze the gains of coordinating decisions in a regulatory framework in which agents are sovereign and tax inducements are socially costly we consider a general multi agent situation with externalities among agents incomplete information and type dependent reservation utilities when the regulator optimally leaves informational rents to the most efficient agents centralized coordination reduces global activity coordination induces more activity when the principal optimally leaves rents to the most inefficient agents last if we impose budget balance our mechanism can also be interpreted as the optimal auction of a public good with congestion externalities journal of economic literatureclassification numbers d62 d82 l51

how labor market policies shape immigrants opportunities when it comes to unemployment and labor force participation rates immigrants do better in the united states than in most other countries in 2005 for example the foreign born had average unemployment of 4 6 percent in the u s well below native born workers 5 2 percent u s immigrants also had higher participation rates the american experience stands in stark contrast to many other developed nations in france and germany for example the foreign born typically have jobless rates twice as high as native born workers and lower participation rates what accounts for these differences most studies attribute poor labor market outcomes to the immigrants themselves their education levels language skills inexperience family composition and reasons for migrating immigrant characteristics surely matter but so do the host country s labor market institutions and policies

the impact of technological innovation on international trade patterns the evidence reconsidered abstract this paper presents some new evidence in relation to the role of technical change in particular industrial innovation on the international competitiveness of the various oecd countries its originality consists primarily of a using a technology output indicator to measure technological performance b presenting and comparing various measures of trade and technological performance for each individual oecd country with the exception of iceland c analysing at a relatively high level of product industry disaggregation the relationship between export performance and technological performance at the same time the very limited scope of the paper has to be emphasized a the analysis is purely static all the evidence presented relates to one year 1977 b most of the results obtained are preliminary and should be further substantiated by more detailed empirical and theoretical research c as a consequence little attention has been paid to policy implications which it was felt could only be discussed properly in a later stage the paper consists of four sections a brief review of the state of the art section 1 a discussion on definitions of technology intensity section 2 the development of the best technology output indicator section 3 and the empirical analysis itself section 4 the following most important results emerge from these various sections a there are serious shortcomings in using average technology intensity as bench mark for classifying products or industries in technology intensive or nontechnology intensive categories b there is a substantial difference between technology intensity as measured on the basis of a technology input proxy rd c yet as between countries the most traditional output and input indicators the number of patents granted and the amount spent on rd d foreign patenting in particular foreign patenting in the united states figs 1 and 2 section 3 is a more reliable technology output proxy than domestic patenting e in terms of technological comparative advantage as opposed to technology intensity it is the small oecd countries as opposed to the large ones which seem to base their trade comparative advantage on technological comparative performance table 7 section 4 1 f at the individual industry level it is found that i for most technology intensive industries defined however in a less restrictive way than us r d intensities a close relation exists between technological performance and export performance and ii that as compared to other country specific resource variables technological performance is the most important trade explanatory variable its elasticity increasing with the technology intensity of industries tables 11 and 12 section 4 2 space constraints prevented us from presenting the data in relation to the inter industry and inter country analysis these can however be obtained from the author

competition and regulation in vertically related markets in an industry where naturally monopolistic and competitive activities are vertically related should the natural monopolist be allowed also to operate in the deregulated competitive sector unlike much of the literature on vertical integration this paper assumes that monopoly pricing behaviour is regulated and therefore the effect of vertical integration on the task of regulation is central to the analysis in the model there is both imperfect information and imperfect competition when vertical integration by the monopolist is allowed the regulator s task is made harder insofar as the monopolist has anticompetitive incentives to raise rivals costs on the other hand integration may lead to there being fewer firms in the deregulated sector and hence less duplication of fixed costs the overall welfare comparison between separation and integration is ambiguous as two simple examples illustrate various extensions to the analysis are also considered one of the central questions in debates on regulatory reform is how to organize industries that contain both naturally monopolistic and potentially competitive activities electricity transmission and distribution are characterized by natural monopoly cost conditions but electricity generation is not in the gas industry pipeline services may be naturally monopolistic but supply to larger customers is not in telecommunications natural monopoly is more a feature of local network operations than of long distance operations and is not present in apparatus manufacture and supply or in the provision of value added services in railways while the infrastructure of track and stations is naturally monopolistic the supply of train services might not be policy developments notably those associated with privatization in britain and deregulation in the united states have sometimes led to radical structural reform in these industries at t for decades a vertically integrated monopolist was required under the 1982 settlement of its long running antitrust case against the u s government to divest itself of its local network operations the central electricity generating board cegb in england and wales was restructured both vertically transmission grid activities were separated from generation and horizontally before privatization in 1990 1991 by contrast british telecom was privatized as a vertically integrated dominant firm bt now faces competition from mercury and others especially in the long distance market but its dominance of local network operations might affect competition there and in other areas such as apparatus supply the local network monopoly would of course have to be regulated in any event but its link via ownership to vertically related and potentially competitive activities poses additional regulatory questions many of the efforts of the regulatory body oftel notably in relation to interconnection between bt s and rivals 1 for a general account of the theory and british experience of regulatory reform in the utility industries

repeated interaction and the public provision of private goods the literature suggests that governments can use in kind transfers to design efficient and targeted redistribution schemes if individual incomes are not directly observable we investigate the extent to which the self selection property of in kind transfers carries through if redistributive transfers are made repeatedly in a two period setting the government may gain information about the individuals incomes in the first period and exploit this information for making targeted transfers in the second period this however also triggers changes in the individuals behavior if the government can commit to its future policy the least cost policy may involve randomization between cash and in kind transfers without commitment the dynamic setting works against the government s interest it may no longer be able to use in kind transfers to generate information about the individuals types jel classification h42 h2

investors facing opportunistic governments is it really good to know the market before investing when a government cannot commit to future policies investors face the risk of opportunistic behavior in addition to uncertain market conditions we show that although reducing market uncertainty is sometimes essential for investment it may aggravate problems of opportunism the better informed the investor is before investing the more information the government can infer from observing that investment takes place in turn enabling more efficient rent extraction this signaling effect can dominate if the investor receives too accurate information before investing the only equilibrium is the one in which no investment occurs jel classification d82 l51

pessimistic information gathering an agent gathers information on productivity shocks and accordingly produces on behalf of a principal information gathering is imperfect and whether it succeeds or not depends on the agent s effort contracting frictions come from the fact that the agent is pessimistic on the issue of information gathering and there are both moral hazard in information gathering private information on productivity shocks and moral hazard on operating effort an optimal menu of linear contracts mixes high powered productivity dependent screening options following good news with a fixed low powered option otherwise

analyzing literature based innovation output indicators the italian experience abstract this paper presents the results of a study on the product innovations introduced in the italian market in 1989 and reported in a selected number of trade journals the analysis of data collected by means of this literature based counting procedure confirms that r d oriented industries and large firms do not in italy have a marked competitive advantage in innovation the country appears to be instead characterized by a significant presence of consumer goods industries and small firms in innovation our data indicate a statistically significant association between trade competitiveness and strength in product innovation and show the comparatively higher capacity for product innovation of some of the industries in which italy achieves a positive performance in international trade moreover the presence of spillovers at the regional level from both private and public r d expenditures proves to be positively correlated with the development of product innovations finally small firms with fewer than 50 employees appear to be more innovative than is usually believed to be the case

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had