the transactions cost approach to vertical integration an empirical examination the transactions cost approach developed by coase and williamson provides a coherent framework for investigating the determinants of vertical integration in different industries empirical implications are developed and then tested using a cross section of firm level data pooled over different time periods the results tend to confirm hypotheses regarding the internal costs of management small numbers bargaining problems and the notion of the firm as suited to adaptive sequential decision making under conditions of uncertainty it rhile there exists an extensive literature on vy theoretical rationales for vertical integration surprisingly little is known about the importance of the different theories the empirical literature includes two types of studies case studies test the applicability of a particular theory to a single firm or industry e g armour and teece 1980 perry 1980 or monteverde and teece 1982a they are susceptible to bias in their choice of industry and the generality of their results cannot be established another category of studies examines a broad base of industries to determine the relationship between vertical integration and such variables as industry concentration average firm size and sales growth e g adelman 1955 gort 1962 and tucker and wilder 1977 the link between these studies and theories of vertical integration is generally left unclear 2 this study will adopt the strategy of investigating a broad base of industries but unlike earlier studies of this type will test empirical implications following from the transactions cost approach 3 this approach as developed by coase 1937 and williamson 1975 1979 provides a coherent framework for investigating determinants of vertical integration over different industries furthermore williamson has persuasively argued that transactions cost considerations underlie such prominent reasons for vertical integration as the elimination of monopoly distortions technical complementarities supply reliability and economies in the acquisition of information the transactions cost approach is summarized and implications are developed in the first section of this paper the implications are tested using firm level data pooled over time the empirical model is presented in the second section and the results are presented in the third section the model incorporates variables not included in previous studies of vertical integration such as measures of market risk and organizational structure the results tend to confirm hypotheses regarding internal costs of management small numbers bargaining problems and the notion of the firm as an institution suited to adaptive sequential decision making a summary of the results and conclusions are contained in the final section i the transactions cost approach arrow 1969 has defined transactions costs as the cost of organizing the economic system in attempting to translate this idea into a framework for explaining the organization of economic activity williamson and others have focused on the role of opportunism and the limited capability of individuals in processing information the choice of institutional alternative depends on minimizing the costs which arise in the presence of transaction specific investments and uncertainty while a wide variety of institutional alternatives exist a simple dichotomy is adopted here for the sake of tractability following coase transactions are classified according to whether they take place in the firm or across markets market alternatives become hazardous in recurring exchanges involving transaction specific capital and efficient information processing the firm then provides a received for publication november 21 1983 revision accepted for publication december 3 1984 rutgers university this paper is based on my dissertation i would like to thank my committee armen alchian harold demsetz david mayers fred weston and my chairman benjamin klein for their helpful comments recent versions of the paper also benefited from comments made by k chung d carlton d kaserman and anonymous referees i would also like to thank participants of the transactions cost workshop at the university of pennsylvania the usual disclaimer applies 1 recent summaries of the theoretical literature on vertical integration are in warren boulton 1978 and kaserman 1978 see levy 1981 1984 for discussion of this problem 3earlier studies by armour and teece 1980 and monteverde and teece 1982 a b have successfully employed the transactions cost approach to examine vertical integration in particular industries this study differs in that it adopts the transactions cost approach to test implications across industries

electricity fuel contracting relationships with coal and gas suppliers the growth of competition in the electricity generation industry along with changes in natural gas and coal regulation have led to renewed interest in the nature of efficient transactional arrangements for procuring coal and gas this study examines the evolution of major influences on the incentives for choosing among different transactional forms we find that the asset specificity hypothesis continues to be an important explanation for transactional arrangements in fuel acquisition the degree of asset specificity in a fuel supply arrangement is a function of technological factors of inherent market characteristics and of regulatory rules the expanding role of more flexible fuel supply arrangements in gas and to a lesser extent coal markets is a natural response to current regulatory and technological trends

on the patterns and wealth effects of vertical mergers we use industry commodity flows information to measure vertical relations in completed mergers from 1962 to 1996 almost one third of the mergers display vertical relatedness vertical merger activity is more intensive in the 1980s and 1990s and less so in the 1960s and the 1970s vertical mergers generate positive wealth effects that are significantly larger than those for diversifying mergers the wealth effects in vertical mergers are comparable to those in pure horizontal mergers

structural factors in the economic reforms of china eastern europe and the former soviet union reform in china and russia jeffrey sachs and wing thye woo china s experience does not show that gradual reform is superior to the shock therapy undertaken in eastern europe and the former soviet union eefsu differing performance primarily reflects different economic structures prior to reform china was a peasant agricultural society eefsu was urban and overindustrialized in both jobs in state enterprises were so heavily subsidized that workers refused to move to new industries elsewhere even when productivity in the latter was much higher in eefsu the large state sector impeded structural adjustment curtailing subsidies would have produced many losers who used their power to resist this outcome failure to curtail subsidies then cut off the potential supply of labour and other factors to new emerging firms china s state enterprises have not performed as well as the rest of the chinese economy and do not explain its success rapid growth was possible because the large agricultural sector contained vast surplus labour and did not enjoy subsidies and soft budget constraints once constraints on migration across regions and jobs were removed this labour was available to fuel expansion in new industries unlike the distributional conflict in eefsu in china reallocation of labour allowed all groups to gain in both partial liberalization also unleashed macroeconomic pressures manageable in china because of rapid growth and adequate monetary policy but explosive in much of eefsu because of deeper structural problems and gross monetary mismanagement

liberalisation and r d in network industries the case of the electricity industry abstract electricity sector liberalisation has coincided with a significant decline in r d spending this paper reviews the industrial organisation literature on r d and innovation to explore the likely causes of the decline in r d spending in the electricity sector meanwhile r d productivity and innovative outputs in utilities and equipment suppliers appear to have improved however a lasting decline in r d expenditure can have a negative long term effect on technological progress and innovation in the sector we conclude that the decline in r d could have been predicted from the literature we also discuss the need to reorient the post liberalisation technology policy

administrative control buyer concentration and price cost margins steven h lustgarten 1975 and others have presented evidence that concentrated buyers lower the price cost margins of sellers but theory predicts that buyer concentration is positively correlated with administrative control of transactions this paper shows that administrative control is responsible for the observed effect of buyer concentration when a proxy for administrative control is included in lustgarten s model buyer concentration becomes insignificant copyright 1989 by mit press

business political power the case of taxation we examine contending views about the forms and mechanisms of business power in u s politics by estimating time series models explaining taxation and redistribution taxation and redistribution constitute strong cases for theories about business and class power since all firms have an interest in reducing taxation we find that changes in corporate taxation and in redistribution between capital gains income and earned income and between corporate taxation and individual taxation are strongly influenced by political partisanship with democratic administrations increasing the tax burden on firms and their owners how far corporations engage in electoral financing measured through the establishment of corporate political action committees is also influential the models show some evidence consistent with the understanding of class power conceptualized by bowles gordon and weisskopf and the presence of election cycle effects but inconsistent with implications arising from the structural dependence of the state on capital and asset concentration in the largest corporations as a mechanism of class power

economic growth strategies the effects of ideological partisanship on interest rates and business taxation in the united states we reformulate the partisanship thesis in light of four claims leveled against it the reformulated version ideological partisanship is based upon the theory that similar rates of economic growth may follow from the different use of policy instruments owing to their role as determinants of investment and growth interest rates business taxation rates and the redistribution of the tax burden between capital gains and earned income are examined we advance models that take into account other views of politics beside the partisan one and test for political influences the united states is characterized by very pronounced partisan differences in national economic policy with democratic administrations seeking to promote growth through a consumption driven while republican administrations promote an investment driven strategy democratic administrations also seek to shift the tax burden toward corporations and owners of capital these findings are examined in light of the comparative political economy literature we conclude that the forms and institutional foundations of left partisan policies differ among democratic capitalist countries

a new index of vertical integration some estimates for uk manufacturing abstract this paper proposes a new method for measuring the degree of vertical integration within a firm or industry it is based on the magnitude of intra firm flows of output across industries relative to the magnitude of market transactions while data on intra firm flows are often sketchy or non existent we show how they may be imputed indirectly from standard input output tables and information on market shares of firms across industries estimates are reported and analysed for uk manufacturing in 1986 for 79 industries and their leading firms thereby providing the first known comprehensive picture of vertical integration in the united kingdom

power and the control of capital this essay reviews three recent books on the political economy of finance in postcolonial asia and latin america and suggests a framework for examining the relationship between political power and varying patterns of control over investment resources the stress is on the constraints different controllers of capital can impose on state leaders the conditions under which policymakers can subvert these constraints and how conflicts within the state over the trajectory of policy are mediated by who or what supplies critical investment resources and the institutional channels through which the resources flow

employers and the welfare state the political economic organization of firms and social policy in contemporary capitalist democracies the authors argue that the organization of employers shapes social policy support among firms and in turn affects social policy outcomes specifically the authors argue that the centralization and cohesion of employer groups and economic cooperation across enterprises positively affects social welfare provision empirically the authors assess the impacts of business organization on social welfare effort in 15 developed democracies between the 1970s and 1990s the authors also provide analysis of the impact of employer organization on active labor market policy the authors find that the organization of employers is one of the most important determinants of overall social welfare effort the authors also find that employer organization affects the development of active labor market policies and it influences the degree to which social democratic parties pursue active labor market programs the authors conclude with a discussion of the findings implications for theories of social corporatism and the w

limits on authoritarian imposition of policy failed ecuadoran military populism in comparative perspective does regime type affect policy outcomes do authoritarian regimes have greater policy discretion than democratic regimes the empirical evidence is ambiguous using two cases of failed military populism in ecuador the author argues that two authoritarian characteristics lack of participation in decision making and nonmobilization frustrated implementation of import substitution policies ironically groups expected to benefit most industrialists and urban workers provided the principal opposition although the regime needed their cooperation to implement policy neither group had assurance that its interests were protected thus political alliances require more than an exchange of policies for support regimes must make their commitments credible by permitting the participation in decision making and mobilization of groups whose cooperation is needed for policy implementation this conclusion is supported by a comparison to peru where a military regime encountered similar obstacles and argentina where

vertical integration in the u s pulp and paper industry 1900 1940 a transaction cost model of vertical integration is tested based on detailed descriptions of every pulp and paper mill operating in the united states between 1900 and 1940 this study contributes to the literature on integration through the use of a large disaggregated database that allows identification of individual mills over time vertical integration of pulp and paper production is found to be positively associated with regional concentration paper mill capacity and production of standardized grades of paper over time new entrants behaved differently than established mills because few mills switched between integration and specialization once established copyright 1994 by mit press

electoral business cycles in oecd countries studies of oecd countries have generally failed to detect real economic expansions in the pre election period casting doubt on the existence of opportunistic political business cycles we develop a theory that predicts a substantial portion of the economy experiences a real decline in the pre election period specifically the political uncertainty created by elections induces private actors to postpone investments with high costs of reversal the resulting declines referred to as reverse electoral business cycles are larger the more competitive the electoral race and the greater the polarization between major parties we test these predictions using quarterly data on private fixed investment in ten oecd countries between 1975 and 2006 the results suggest that reverse electoral business cycles exist and as expected depend on electoral competitiveness and partisan polarization moreover simply by removing private fixed investment from gross domestic product gdp we uncover robust evidence of opportunistic cycles

state revenue extraction from different income groups variations in tax progressivity in the united states 1916 to 1986 we examine the conditions that affected the progressivity of the individual income tax in the united states between 1916 and 1986 a multivariate time series analysis shows how macroeconomic conditions state imperatives the organizational capacities of social classes and political conditions have affected the progressivity and the symbolic component of the income tax progressivity is measured by the difference between the effective tax rates paid by moderate income and very high income families the symbolic component of this tax is measured by the difference between the nominal tax rate and effective income tax rate paid by very high income families the results reveal that changes in tax progressivity are due largely to macroeconomic and state fiscal conditions such as unemployment economic development and budget deficits although the organizational capacities of social classes and political conditions such as labor organization and political participation also have effects changes in progressivity are due primarily to adjustments in the rates paid by very high income families however the impacts of these conditions on tax progressivity changed somewhat when the federal income tax was transformed into a mass tax during world war il finally political conditions have a relatively greater effect on the symbolic component of the income tax than on progressivity overall this analysis supports a structural theory of the state in which the influences of politics and social classes on revenue extraction are circumscribed by macroeconomic and state fiscal conditions

uncertainty irreversibility and the likelihood of entry an empirical assessment of the option to defer abstract recent work in the real options approach to investment has argued that firms face significant opportunity costs when entry costs are largely irreversible and these costs equal the value of an option to defer investment this study seeks to examine empirically these claims by investigating the interactive effects of uncertainty and irreversibility on the likelihood of entry into new business by diversified firms we investigate both industry and firm specific factors influencing the degree of investment irreversibility in general we find support for the notion that real option value affects the likelihood of entry

the economics of large scale infrastructure fdi the case of project finance in this paper a theoretical framework is developed to explain why multinational enterprises invest in infrastructure through the mode of project finance pf instead of using corporate finance infrastructure assets are susceptible to creeping expropriation from host governments and to hold up from concentrated suppliers buyers corporate finance based foreign direct investment fdi cannot fully mitigate these threats however pf based fdi through strategic use of capital structure chiefly high leverage and syndicate structure of debt improves the bargaining position of firms in ex post recontracting negotiations high leverage precommits cash flows serves as a monitoring and early warning mechanism that reveals creeping expropriation induces lenders to join renegotiations and reduces reported net profits the syndicate structure of debt creates a reputation effect for host countries high debt shields wealth from concentrated suppliers buyers while separate incorporation in pf allows suppliers buyers to hold equity stakes this theoretical framework is tested by assembling a database of 200 investments worth 159 97 billion by 167 firms in 128 countries over 17 years sample selection bias is controlled for through heckman probit specification the hypothesis that pf based fdi helps mitigate hold up from concentrated suppliers buyers finds strong support while the hypothesis that pf mitigates country risk finds limited support

does the organization of capital matter employers and active labor market policy at the national and firm levels does the organization of business matter for social policy development in the advanced capitalist democracies conventional welfare state analysis has given this significant question scant attention we argue however that the representational power of business coordination across business interest units and integration of associations in corporatist policy making forums or what we call the social corporatist organization of business should result in greater support and participation by employers in social policy formation and implementation we test our arguments with models both of 1980 98 pooled time series data on withinand across country variation in spending on active labor market programs and of extensive firm level survey data from denmark and the united kingdom we find that the centralization and coordination of employers as well as the integration of employer organizations in corporatist policy making forums are strongly associated with shares of national income devoted to active labor market policy we find moreover that the degree of employer organization conditions active labor market policy responses to de industrialization and increases in general unemployment at the firm level membership in an employer association has a significant positive effect on employer participation in active labor market programs in corporatist denmark but not in the pluralist united kingdom

cooperation and political economic performance in affluent democratic capitalism research on comparative political economic performance has traditionally followed two separate tracks one concerned with collective economic gain growth and efficiency and the other focused on distribution and redistribution cooperative institutions offer a key to understanding cross national variation among the affluent capitalist democracies in both facets of political economic performance these institutions cluster along two dimensions neocorporatism and firm level cooperation pooled time series analysis for 18 nations over 1960 89 suggests that 1 neocorporatism is a major source of distributive redistributive policies and outcomes and of several sources of collective gain 2 firm level cooperation is a key contributor to economic growth

central banks at war war is expensive troops must be equipped and weapons must be procured when the enormous borrowing requirements of war make the sovereigns credibility problem more difficult central banks enhance a government s ability to borrow by being the sole direct purchaser of government debt the central bank increases the effective punishment that can be imposed on the government for defaulting on the marginal lender this increases lenders confidence that the government will be punished in case of default making lenders willing to purchase the debt at a lower rate of interest the sovereign dependent on the low borrowing costs offered by the central bank has an incentive to retain the bank data covering the nineteenth and early twentieth centuries reveal that possessing a central bank lowers the sovereign s borrowing costs particularly during times of war

make buy or ally a transaction cost theory meta analysis since the publication of williamson s markets and hierarchies many empirical articles have investigated the tenets of transaction cost theory using meta analytic techniques we quantitatively syn

political regimes and economic growth arguments that relate regimes to growth focus on property rights pressures for immediate consumption and the autonomy of dictators while everyone seems to agree that secure property rights foster growth it is controversial whether democracies or dictatorships better secure these rights the main mechanism by which democracy is thought to hinder growth is pressure for immediate consumption which reduces investment only states that are institutionally insulated from such pressures can resist them and democratic states are not the main argument against dictatorships is that authoritarian rulers have no interest in maximizing total output these views are summarized in turn

technology development mode a transaction cost conceptualization technology alliances have emerged in the past decade as a significant mode for the development of innovation the present research assesses the factors explaining whether firms will engage in such technology alliances or utilize the more traditional mode of internal r d the hypotheses stem from a transaction cost conceptualization results suggest that firms which pursue technology alliances are likely to have less commitment to product category specific assets to face higher technological uncertainty to be more capable at measuring innovation performance to have more successful technology alliance experiences and to compete in lower growth product categories 1998 john wiley sons ltd

explaining capital account liberalization in latin america a transitional cost approach in the past three decades governments around the world have lowered barriers to international capital flows this movement is widely attributed to the forces of globalization as developed nations moved toward relative convergence on international financial openness yet developing nations with much to gain from openness to foreign investment moved only hesitantly and inconsistently in this direction analysis of two decades of capital account liberalization in latin america and the oecd reveals that nations in latin america with weaker domestic financial sectors face higher risks of transitional dislocations following liberalization and move less aggressively toward openness in the oecd by contrast financial weakness is associated with greater movements toward capital account opening as transitional costs are lower and governments are better equipped to ameliorate them examination of the transitional costs of liberalization thus helps to explain how market pressures may impede rather than promote market oriented reform in latin america

the impact of competition on make or buy decisions evidence from the spanish local tv industry this paper empirically investigates whether changes in product market competition affect firm boundaries exploiting regulation induced shocks to entry barriers and differences in regulation enforcement across cities to obtain exogenous variation in competition we establish a negative causal effect of competition through reduced entry barriers and a larger number of rival firms on vertical integration in the setting of the spanish local television industry between 1995 and 2002 data and the online appendix are available at https doi org 10 1287 mnsc 2016 2633 this paper was accepted by bruno cassiman business strategy

oligopsony power asset specificity and hold up evidence from the broiler industry in this article we look for empirical evidence of hold up in broiler industry production contracts by using the cross sectional national survey of broiler growers first we focus on the problem of under investment and hypothesize that the degree of agent s grower s under investment systematically depends on the principal s integrator s market power and the level of asset specificity second we provide an indirect test of hold up by looking at the grower contract payoffs as a function of the frequency of the housing facilities upgrade requests and the principal s market power the results show moderate empirical support for the presence of hold up

knowledge market failure and the multinational enterprise a comment the purpose of this note is to comment briefly on two papers published in this journal kogut and zander 1993 and love 1995 kogut and zander k z argue that market failure is not necessary to explain the existence of multinationals or indeed any firm love argues that the existence of a firm necessarily reflects a market failure but that opportunism is not necessary for market failure to occur i have problems with the logic of both papers

room to move international financial markets and national welfare states a central research question in international political economy concerns the influence of financial markets on government policy outcomes to what extent does international capital mobility limit government policy choices i evaluate the relationship between international financial markets and government policy outcomes with a focus on the government bond market in developed democracies evidence includes interviews with financial market participants and a cross sectional time series analysis of the determinants of interest rates this evaluation suggests that governments of developed democracies face strong but narrowly defined financial market pressures financial market participants are concerned with a few macroeconomic policy indicators including inflation rates and government deficit gdp ratios but not with micropolicy indicators such as the distribution of government spending across functional categories in these areas governments retain policymaking autonomy i conclude by exploring the role of financial market influences within domestic politics and offering suggestions for further research

the making of policy institutionalized or not this paper develops a framework for analyzing different policymaking styles their causes and their consequences in latin america finding that lower institutionalization and greater use of alternative political technologies apts are more likely the lower the cost of using these technologies the higher the potential damage they can cause the lower the wealth of the economy and the more asymmetric the distribution of de jure political power moreover strategic complementarity exists in the use of alternative political technologies for instance bribes by the rich and protests by the poor are likely to be countervailing forces and will both occur in polities with weaker political institutions

governance and uncertainty the trade off between administrative control and commitment this study elaborates upon the motives for initiating equity based collaborations vs acquisition of another firm already having a desired technology we characterize both minority direct investments and joint ventures as options to defer either internal development or acquisition of a target firm in domains where learning about growth opportunities dominates investment activity this incremental mode of governance economizes on the cost of committing resources to a technology with an uncertain value using a sample of 402 transactions in the biotechnology industry we find strong support for the theoretical model the findings suggest that the cost of commitment in the face of technological uncertainty may offset the administrative benefits of hierarchical governance 1998 john wiley sons ltd

governance and competence how can they be combined transaction cost economics faces serious problems concerning the way it deals or fails to deal with bounded rationality the efficiency of outcomes trust innovation learning and the nature of knowledge the competence view yields an alternative perspective on the purpose and boundaries of the firm however the competence view cannot ignore issues of governance and in spite of serious criticism transaction cost economics yields some useful concepts to deal with them this paper aims to contribute to the development of theory and empirical research that connects governance and competence perspectives copyright 2004 oxford university press

transaction cost economics and cross national patterns of industrial conflict a comparative institutional analysis at the core of a capitalist system is an implied coalition between labor and capital built upon a system of exchange and compromise without capital the material condition upon which labor s interests are realized would be impossible likewise without labor s consent to exchange wages for future investment capital could not procure the profits and savings necessary for its reproduction and transformation organizing stable and cost efficient class coalitions has long been recognized as not merely an economic priority but a political challenge yet some democracies have met this challenge more successfully than others for the student of comparative political economy an enduring question remains why the present study is an attempt to provide an answer that complements and integrates the more common macroand microanalytic studies of industrial conflict it is argued here that a useful approach is to explicate some of the major microeconomic dynamics that condition exchanges between labor and capital and to demonstrate how institutional devices designed to accommodate political representation and conflict resolution facilitate or impede the process of class compromise by employing the logic of transaction cost economics the analysis highlights the comparative institutional elements fundamental to economizing on the costs of exchange shaping consensus within a political economy s industrial relations system the resulting transaction cost efficiency model of industrial conflict specifies the ex ante cost factors price margin of transaction and the institutional control of bounded rationality and the ex post cost factors legislative polarized pluralism executive hegemony and the frequency of general elections central to the process of building and sustaining class coalitions the model is tested on data drawn from 19 democracies covering the years 1965 83 use of simulation models reveals the relative trade offs associated with different patterns of ex ante and ex post cost structures

campaign contributions as a commitment device we explore the idea that the influence of interest groups in elections may have positive economic effects since the investment decisions of firms determine economic growth and employment voters have a common interest in making their governments commit to policies that encourage private investments however governments may renege on promises for economic stability and choose excessively leftist policies campaign contributions by firms tend to restrain the scope for such opportunism and provide a commitment device this is achieved if firms after the policy is chosen contribute to the governing party or to its rivals

the structure of class conflict in democratic capitalist societies the article presents a theory of class conflict between workers and capitalists who pursue their material interests under a form of societal organization that combines private ownership of instruments of production with representative political institutions there exist economic and political conditions under which both classes would simultaneously choose courses of action that constitute a class compromise workers consent to the institution of profit and capitalists to democratic institutions through which workers can effectively press claims for material gains when these conditions hold and a compromise is in force the role of the state consists in institutionalizing coordinating and enforcing the terms of a compromise that represents the preferences of workers as well as capitalists the combination of private ownership of the instruments of production with representative political institutions based on widespread suffrage constitutes a compromise between workers who consent to the private appropriation of profit by owners of capital and capitalists who accept the democratic institutions through which workers can make effective claims for an improvement of their material conditions this form of societal organization was con

taxation corporate financial policy and the cost of capital the cost of capital plays an important role in the allocation of resources among competing uses in a decentralized market system the purpose of this paper is to organize and present what is known and what is hypothesized about the effects of taxation on the incentive to invest via the cost of capital taking full account of important issues that arise independently from the question of taxation included in the analysis is a discussion of empirical findings about the interaction of inflation and taxation in influencing the incentive to invest and a treatment of taxation and uncertainty this abstract was borrowed from another version of this item

politics and the structural dependence of the state in democratic capitalist nations i explore empirically a central claim of the structural dependence thesis namely that capitalists ability to disinvest fundamentally conditions policy choices in democratic capitalist systems utilizing time series data for 16 affluent democracies from 1965 to 1984 i find that indeed low rates of business investment are associated with reductions in corporate tax burdens and that these reductions are more pronounced in periods of economic crisis moreover low rates of capital formation engender cuts in personal income taxes during periods of economic stress however i also find that the magnitude of responsiveness of taxation to low rates of investment is relatively small and that analyses of the political context of investment and taxation indicate that governments have choices the responsiveness of corporate tax burdens to capital formation may under some governments be part of a policy mix designed to maintain adequate investment and to address the demands of core constituencies

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

structural dependence of the state on capital a central claim of both marxist and neoclassical political theory is that under capitalism all governments must respect and protect the essential claims of those who own the productive wealth of society this is the theory of structural dependence of the state on capital using a formal model the internal logic and the robustness of the theory is examined we conclude that in a static sense the theory is false virtually any distribution of consumption between wage earners and owners of capital is compatible with continual private investment once an appropriate set of taxes and transfers is in place yet the state may be structurally dependent in a dynamic sense policies that once in place redistribute income without reducing investment do reduce investment during the period in which they are anticipated but not yet implemented

the dynamics of make or buy decisions abstract make or buy decisions are strategically important for business firms particularly when production and marketing of components involves specialized technology and assets recent theories of make or buy decisions compare the cost of administering transactions inside a firm and across markets in this paper we extend these theories to a dynamic market in which profit from the use of specialized assets declines over time due to entry and substitution of technology using optimal control theory we investigate the patterns of vertical integration under different parametric conditions we also prevent empirical evidence from time series and cross sectional data that lend support to the analytical results from the model

the political economy of high income taxation capital taxation path dependence and political institutions in denmark denmark s income tax burden as the percentage of gdp is larger than the total tax burden of the united states and it has increased further after 1980 how can this be explained given increasing tax competition and widespread views that strong reliance on regressive taxes was conducive to building and maintaining large tax and welfare states the article highlights three factors first large income taxes are feasible if the capital tax burden is moderated within the income tax second the effective capital income tax burden that had developed up to the early 1980s was extremely low so that subsequent tax reforms could cut marginal tax rates on mobile types of capital income while increasing tax revenue third drastic changes in the legal structure of the income tax and stability in aggregate tax policy outcomes were facilitated by proportional representation and legislative majority rule

globalization taxation and burden shifting in latin america most researchers interested in the relationship between global markets and public policy focus on advanced industrial democracies in contrast we examine competing hypotheses as to globalization s effect on governments by expanding the scope of the discussion to include developing nations more specifically we investigate the relationship between international market integration and the evolving burden of taxation on capital as well as the subsequent response of markets to shifts in tax policy in latin america since the late 1970s consistent with our theoretical expectations we find that global market forces are more constraining vis a vis tax policy in latin america than in the world s wealthiest nations despite these market based pressures however national politics continue to influence tax policy in latin america in a manner consistent with findings on advanced industrial democracies as such developing nations continue to have some room to manipulate policy though within the context of a more strictly neoliberal context than their counterparts in advanced industrial democracies

the origins of financial openness a study of current and capital account liberalization theory we assess the determinants of the national regulation of international finance or the comparative degree of national financial openness or closure hypotheses partisanship interacts with a nation s factor endowments to account in part for different international financial policies by governments of the same partisan hue methods we offer a quantitative measure of international financial openness or current and capital account regulation for 21 member countries of the organization for economic cooperation and development for 1950 88 we use regression analysis employing panel corrected standard errors to discover the determinants of financial openness results our main finding is that political partisanship substantially explains openness but does so in complex ways differences in both political institutional arrangements and types of political economy also account for part of the differences in international financial regulation

leading the left to the right populist coalitions and economic reform abstract democratic political parties with a history of commitment to statist economic policies face internal stresses when they come to power and preside over programs of wholesale economic liberalization how do such parties and coalitions avoid splintering and manage to maintain electoral support examining the recent experiences of argentina and mexico edward gibson suggests that one can understand these achievements by treating each party as a combination of two separate components performing distinct functions a metropolitan policy component and a peripheral or rural electoral component his framework travels well beyond latin america and helps illuminate the different politics underlying three recent waves of economic liberalization in sri lanka

the economic efficiency of backward vertical integration in the international petroleum refining industry a benefit of backward vertical integration in the petroleum refining industry is reduced uncertainly in the supply of crude oil for refining however there is no a priori reason to believe that refiners are more skilful in managing combined refining and crude oil production operations than are specialists in these functions using the concept of frontier production functions efficiency differences between firms with differing degrees of backward vertical integration are estimated backward vertical integration improves scale efficieny and reduces business risk significantly but it reduces both technical and overall economic efficiency this is the first comprehensive empirical test of the efficiency of vertical integration in the literature

economies of integration versus bureaucracy costs does vertical integration improve performance this study tested links between vertical integration cost structure and performance at the line of business level of analysis major findings were 1 vertical integration results in economies ev