effects of profitability and liquidity on r d intensity japanese and u s companies compared this study investigates the proposition that japanese companies have a greater propensity than u s companies to sustain commitment to r d in the face of fluctuating profits and liquidity the anal

democracy and macroeconomic performance in underdeveloped countries an empirical analysis in this study the author examines how inflation and economic growth differ in more and less democratic regimes and in new and mature democracies the analysis is based on a panel research design featuring annual data from a large sample of underdeveloped countries and two way fixed effects regression analysis the author s central finding is that more democratic countries have higher inflation and slower growth than less democratic countries inflation apparently is higher than more democratic countries mainly because they have higher fiscal deficits and faster wage growth this higher inflation marginally reduces economic growth in these countries the author also finds that new and mature democracies do not have significantly different inflation and growth rates the findings suggest that unrestrained political participation and the resulting demands placed on state officials undermine democratic performance

democracy and economic growth a meta analysis despite a sizeable theoretical and empirical literature no firm conclusions have been drawn regarding the impact of political democracy on economic growth this article challenges the consensus of an inconclusive relationship through a quantitative assessment of the democracy growth literature it applies meta regression analysis to the population of 483 estimates derived from 84 studies on democracy and growth using traditional meta analysis estimators the bootstrap and fixed and random effects meta regression models it derives several robust conclusions taking all the available published evidence together it concludes that democracy does not have a direct impact on economic growth however democracy has robust significant and positive indirect effects through higher human capital lower inflation lower political instability and higher levels of economic freedom democracies may also be associated with larger governments and less free international trade there also appear to be country and region specific democracy growth effects overall democracy s net effect on the economy does not seem to be detrimental

ownership structure and ceo compensation implications for the choice of foreign market entry modes drawing on agency theory corporate governance and international business literatures we develop arguments relating equity ownership structures and ceo compensation mix to a firm s choice of foreign market entry modes based on a sample of 432 foreign market entries by 118 non diversified firms in the us manufacturing sector between 1991 and 1998 our findings indicate that greater equity ownership by institutional shareholders and inside directors is positively associated with a preference for full control entry modes in addition our results suggest that ceos with a greater proportion of pay tied to firm long term performance are more inclined to choose full control entry modes over shared control modes

the two freedoms economic growth and development an empirical study log linear methods are applied to categorical data containing economic freedom political freedom the level of income and the rate of economic growth for a panel of about 100 countries from 1975 to 1992 the main results are given economic freedom the rate of economic growth is independent of political freedom and the level of income given the level of income political freedom is independent of economic freedom and the growth rate the analysis suggests the fundamental effects of economic freedom in fostering economic growth and a high level of income as the condition of a high degree of political freedom

competing models of international lending activity abstract four competing models of the world bank s lending to developing countries are constructed and econometrically estimated by pooled time series and cross section data the analysis suggests that a model combining economic and political determinants performs best besides per capita income inflation balance of payment and budget deficit external debt and past growth political determinants such as the capitalist climate or political instability are also important as well as a recipient country s former status as a colony or dominion this politico economic model is successfully used to forecast the distribution of ibrd loans and ida credits among the developing countries

the impact of the timing of patents on innovation performance abstract in the context of industry standard setting firms face the strategic decision of whether to move faster than competitors or wait for more information that reduces uncertainty these decisions are even more challenging if there are multiple standards and if there are benefits to belonging to more than one standard this paper examines the effect of the timing of patents on a firm s innovation performance the strategic logic of real options posits that patent timing is determined by the tension between the value of preemption and the value of waiting we analyze 680 dvd disc patents in dvd patent pools to test the effect of the timing of patents on innovation performance consistent with real options logic under high uncertainty the later the timing of the patent the higher the innovation performance while under low uncertainty there is an early mover advantage

conditions for government support of private research and development abstract based on a model by joglekar and hamburg this article examines the problem of identifying conditions for government support of private resource allocation to r d the behavioral assumptions of the original model are modified in two ways first the impact of a matching behavior only with respect to applied research and development on the relation between individually optimal spending and pareto optimal spending is examined the results are largely the opposite of the findings of joglekar and hamburg for investment in basic research second the assumption of a competitive orientation for both kinds of research is integrated into the model the results show the possibility of overinvestment in basic research this leads to the conclusion that the industry s behavior must be considered very carefully when government support instruments are implemented

business unit strategy and changes in the product r d budget this study of changes in product r d intensity in business units supplements past studies by including two major classes of independent variables which have not been examined previously the competitive strategy of the business and role of the business in the overall corporate portfolio multiple regression analysis is used on a sample drawn from the pims data base the results suggest that r d decisions in growth businesses are responsive to competition evolving strategies and intra firm resource flows in mature businesses a pattern of stability and r d equilibrium is evident even in the face of changes by competitors managerial implications are noted

private transfers borrowing constraints and the timing of homeownership the 1991 italian survey of household income and wealth contains retrospective information on intergenerational transfers this information is used to estimate the impact of transfers on the saving time required to purchase a house it is found that transfers have a small impact on saving time and that after receiving a transfer households purchase considerably larger homes the results have implications for the debate about the source of the relation between aggregate saving and growth

returns to regionalism an analysis of nontraditional gains from regional trade agreements the past decade has witnessed a renewed interest in regional trade agreements with many policymakers and academics seeming to believe that these provide more than the traditional gains from trade this article examines several possible benefits that regional trade agreements may confer on their partners including credibility signaling bargaining power insurance and coordination it assesses the necessary conditions for each possible channel to work gives stylized examples of specific types of policy where the benefit might be applicable examines cases where the explanation might be relevant and discusses their overall plausibility it concludes by examining the north american free trade agreement and the europe agreements

european union developing country ftas overview and analysis this paper explores the complex structures of recent free trade agreements ftas between the european union and developing countries surveys the main factors determining their economic effects and presents quantitative simulations of the effects of these agreements limitations of product coverage substantially reduce the potential benefits of the agreements compared to full bilateral free trade while only the mexico chile and turkey agreements have trade related commitments which are wider and deeper than the preferential reduction in tariffs in the case of egypt existing levels of protection mean that it is moving toward regional free trade with many domestic distortions still in place producing a significant loss for the egyptian economy

black hole tariffs and endogenous policy theory political economy in general equilibrium preface acknowledgments list of results 1 a preview of the results 2 endogenous policy theory a diagrammatic approach part i endogenous policy theory with specific factors the theory of industry tariffs in partial equilibrium 3 the probabilistic voting model of political efficiency and powerless politicians 4 endogenous lobbying theory and the contribution specialization theorem 5 endogenous tariff theory 6 the power function model of endogenous industry lobbying 7 three simple tests of the stolper samuelson theorem 8 the invisible foot and the waste of nations lawyers as negative externalities part ii endogenous policy theory in general equilibrium a long run theory of national tariff levels 9 the 2 x 2 x 2 x 2 model of endogenous redistribution theory 10 a prisoner s dilemma theory of endogenous protection the leontief model 11 the compensation effect and the multiple equilibrium trap 12 increasing returns to politics and factor endowments economic development and brazilian vitality versus the indian disease 13 endogenous protection in the united states 1900 88 14 a cobb douglas model 15 black hole tariffs 16 the endowment effect cross national evidence on endogenous tariffs part ii postscript 17 the senile industry argument for protection 18 optimal obfuscation and the theory of the second worst the politically efficient policy mathematical appendices references author index subject index

r d management and corporate financial policy the hypothesis that firms simultaneously determine their research and development investment dividend and new debt policies generally is substantiated in the financial literature the determinants of research and development dividend investment and financing decisions of 140 firms are estimated econometrically during the 1978 1982 period management gains insights into the interactions of pursuing research and development expenditures paying dividends and undertaking investments

a theory of political transitions we develop a theory of political transitions inspired by the experiences of western europe and latin america nondemocratic societies are controlled by a rich elite the initially disenfranchised poor can contest power by threatening revolution especially when the opportunity cost is low for example during recessions the threat of revolution may force the elite to democratize democracy may not consolidate because it is redistributive and so gives the elite an incentive to mount a coup highly unequal societies are less likely to consolidate democracy and may end up oscillating between regimes and suffer substantial fiscal volatility

why is there no revolution in north korea the political economy of revolution revisited the paper critically assesses the acemoglu robinson approach to revolutions as it is focused on inequality of wealth or income rather than on collective action problems we show that income inequality is not a sufficient and not even a necessary condition for a revolution to occur rather a necessary condition for a revolution is that any subpopulation can expect net benefits from it for which inequality is not a precondition as a result a certain structure of commitment devices or their absence rather than inequality is crucial for explaining why revolutions sometimes occur and sometimes not

trade and trade policy with imperfect competition the case of identical products and free entry abstract this paper analyses intra industry trade between economies containing an imperfectly competitive industry in which firms produce a homogeneous output production is subject to increasing returns to scale and there is free entry and exit of firms trade is shown to unambiguously increase welfare by reducing the degree of monopoly in each market and increasing firm size the effects of differences in technology and endowments on the pattern of trade and welfare are examined import tariffs are shown to raise welfare in the country employing the tariff and the welfare implications of various types of industry subsidy are examined

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

a critical exploration of sponsorship infrastructure and new organizations this research focuses on the effects of public sponsorship and regional infrastructure on the emergence and survival of new organizations propositions are tested regarding the joint effects of sponsorship and infrastructure on industrial development in a randomly selected sample of fourteen regions the data include six measures of infrastructure sponsorship as measured by the total dollars spent for economic development and their individual and joint effects on the number of firms and employees in high technology industries for the years 1965 1970 1975 1980 and 1984 this preliminary analysis suggests that variation in the infrastructure and level of sponsorship within a region is related to the birth and survival of new organizations

does democracy cause innovation an empirical test of the popper hypothesis abstract democratic countries produce higher levels of innovation than autocratic ones but does democratization itself lead to innovation growth either in the short or in the long run the existing literature has extensively examined the relationship between democracy and growth but seldom explored the effect of democracy on innovation which might be an important channel through which democracy contributes to economic growth this article aims to fill this gap and contribute to the long standing debate on the relationship between democracy and innovation by offering empirical evidence based on a data set covering 156 countries between 1964 and 2010 the results from the difference in differences method show that democracy itself has no direct positive effect on innovation measured with patent counts patent citations and patent originality

new evidence on the relationship between democracy and economic growth it is often maintained that democracy is a luxury which comes at a price in terms of subsequent slower increases in national living standards however various recent cross section studies on economic growth have found evidence that lack of civil and political liberties is negatively correlated with economic growth using a new measure of democracy which is based upon the number of years that a country can be regarded as a democracy the robustness of this relationship is examined both direct and indirect effects of lack of democratic liberties are analysed our main conclusion is that the relationship between democracy and economic growth is not rubust

government introduced price distortions and growth evidence from twenty nine developing countries from the time adam smith s wealth of nations was published in 1776 until today the role of the state in the economic affairs of nations has been probably one of the most debated subject matters not only among economists but also among other social scientists a free competitive market and pricing system has since been recognized as a crucial factor in the allocation of resources indeed in the economic development of nations at the national as well as international levels there is a growing interest in the role of governmental policies in particular those policies that directly or indirectly influence the working of the market mechanism and the incentive system in the context of nations economic growth an example of the growing interest is the rather unequivocal focus placed in recent years by the world bank and the international monetary fund imf on the need for liberal competitive and outward looking policies in promoting economic growth in developing countries an area of particular concern has been that of the government introduced price distortions in several developing nations historically speaking such policies have grown over time as a part of the so called grand socialistic and planned economic policies and programs undertaken by several developing nations since they attained political independence these nations embarked upon such policies in pursuance of the promises that were made by their political leaders during their freedom movements against the colonial powers the imposition of controls by governments over domestic prices interest rates wages foreign trade and exchange rates for example has caused severe distortions in the economies of these nations and such distortions are not without bearing on economic growth according to the world bank 1983 2 coun

influence of industry r d intensity on corporate product diversification interaction effect of free cash flow this study analyzes the effect of industry r d intensity on the degree of product diversification and examines the interaction effect of free cash flow on the previous relationship at the current time in large us firms using the s p 500 sample we found support for the hypothesis that industry r d intensity has a positive impact on the degree of product diversification on the contrary this study has found partial support for the hypothesis that free cash flow positively affects the previous relationship copyright 2006 oxford university press

economic integration and rules of origin under international oligopoly free trade agreements ftas have rules of origin roos to prevent tariff circumvention by firms of non member countries this paper points out that in imperfectly competitive markets roos have another role overlooked in the existing literature instead of focusing on the impacts of roos in the intermediate good markets we draw our attention to the final good markets to examine the effects of roos we find that under some conditions roos benefi tb othfirms at the expense of consumers under some other conditions roos benefi tt hefirm producing outside the fta and hurt the firm producing inside the fta

a homogeneous industry model of resource allocation to basic research and its policy implications in a recent paper we showed that unaided industry allocation to basic inappropriable research is suboptimal and that in stimulating this allocation provision of government seed money is generally counterproductive while the provision of matching subsidies is not cost efficient here we consider a special case of the model developed in the earlier paper i e we now consider a homogeneous industry and investigate the effects of several relevant factors upon an industry s allocation of resources to basic research an extensive numerical example is presented that helps to verify and to interpret the model in realistic terms our findings question the validity of a number of popular beliefs about the need for government support of basic research in various types of industries for example contrary to popular belief the greater the risk aversion displayed by member firms in an industry the lesser may be the need for government support of its basic research also the larger the number of firms in an industry the greater may be the need for government support of that industry s basic research

r d appropriability opportunity and market structure new evidence on some schumpeterian hypotheses one of the largest bodies of literature in the field of industrial organization is devoted to the interpretation and testing of several hypotheses advanced by joseph schumpeter 1950 concerning innovation and industrial market structure one set of hypotheses focuses on the role of firm size as a determinant of r d spending and the rate of technological advance another set focuses on the effect of market concentration on r d and technological advance in this paper we reexamine the latter set of hypotheses at the industry level using new data on r d appropriability and technological opportunity collected by levin et al 1984 in a survey of r d executives in 130 industries

the distribution of income in a despotic society a distribution of income between rulers and subjects can be derived as an equilibrium of violence rather than from considerations of marginal products of owned factors of production society is organized in ranks and the occupants of each rank are provided with incomes just sufficient that obedience is preferable to rebellion to incorporate such considerations into a model it is necessary to recognize phenomena that are normally excluded from economic analysis combat the mortality rate from natural causes and from violence as a component of the utility function and a rudimentary technology of control

cultural and institutional determinants of economic growth a cross section analysis economic growth rates for the period 1968 1987 are analyzed for ninety countries culture political and economic arrangements and personal freedoms are statistically significant determinants of growth personal freedom is shown to be a normal good whose demand might be affected by cultural influences democracies raise personal freedoms ceteris paribus and consequently grow more quickly than non democratic regimes evidence is found for the convergence hypothesis other things equal lower income countries grow more rapidly than higher income countries

an evaluation of federal policy instruments to stimulate basic research in industry a model of the resource allocation behavior of a group of firms demonstrates that unaided industry allocation to basic inappropriable research is suboptimal furthermore provision of seed money is generally counterproductive while the provision of a matching subsidy is not very cost efficient in increasing the allocation innovative policy alternatives are proposed

conditions for government support of private research and development abstract in a recent paper brockhoff and warschkow 1993 attempt to extend joglekar and hamburg s work under alternative behavioral assumptions joglekar and hamburg 1986 brockhoff and warschkow mainly obtain results that are opposite to joglekar and hamburg s findings unfortunately as shown below brockhoff and warschkow s model is flawed because 1 it is inconsistent with joglekar and hamburg s assumption that firms are individually rational and 2 it misrepresents the concept of pareto optimality consequently brockhoff and warschkow s conclusions cannot be seen as valid

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

industry concentration and allocation of resources to basic research while the mainstream of western economic thought believes in competitive markets the schumpeterian school considers concentrated industry to be the ideal vehicle for the advancement of industrial technology empirical evidence on the schumpeterian hypothesis that a concentrated industry allocates relatively more resources to its research and development rd joglekar p m hamburg 1987 industry resource allocation to basic research under normally distributed benefits decision sci winter 1 24 who showed that industries consisting of smaller numbers of firms allocate relatively greater amounts of resources to their basic research than industries consisting of larger numbers of firms extending joglekar and hamburg s models here we find that when two industries consist of the same number of firms in most cases a heterogeneous industry falls as short of its pareto optimal investment in basic research as its comparable homogeneous counterpart numerical examples suggest that in some cases concentrated heterogeneous industries may do worse policy implications of the results as well as directions for further research are discussed

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

religion terrorism and public goods testing the club model abstract can rational models once theological explanations are discredited explain why certain radical religious rebels are so successful in perpetrating suicide attacks the fundamental barrier to success turns out not to be recruiting suicide attackers there is a rational basis for volunteering rather the barrier is the danger of other operatives defecting a club model portraying voluntary religious organizations as efficient providers of local public goods explains how they weed out potential defectors by requiring sacrifices as signals of commitment they are thereby able to succeed in risky terrorist attacks the model has testable implications for tactic choice and damage achieved by clubs and other rebel organizations data spanning a half century on both terrorists and civil war insurgents much from middle east sources and israel palestine reveal that a missions organized by radical religious clubs that provide benign local public goods are both more lethal and are more likely to be suicide attacks than missions organized by other terrorist groups with similar aims and theologies and b suicide attacks are chosen when targets are hard i e difficult to destroy our results suggest benign tactics to counter radical religious terrorism and insurgency

endogeneous protection factor returns and resource allocation we consider a heckscher ohlin samuelson trade model with two lobbies representing the interests of factor owners and two political parties the lobbies contribute resources to politics equating their returns to political and economic activity at the margin while the parties maximize their probability of election trading off general voter dissatisfaction with protection against the electioneering resources that favorable policies attract from the lobbies the equilibrium level of protection of a factor and its expected rate of return increase with its relative endowment if this relative endowment is high low then the factor will be better worse off than under free trade but at intermediate factor endowment ratios both factors will be worse off under parameter changes making lobbies more sensitive to the commodity price the lobbies contribute more resources to politics and can both be worse off even though the parties are proposing lower trade distortions

horizon problem and firm innovation the influence of ceo career horizon exploitation and exploration on breakthrough innovations abstract building on labor market evaluations and legacy conservation motivation perspectives we propose a mechanism to explain the relationship between ceo career horizons and breakthrough innovations using 10 year panel data from 681 u s firms we find that firms that have a ceo with a short career horizon tend to produce fewer breakthrough innovations we also find that the relationship between ceo career horizon and breakthrough innovation is partially mediated by r d spending and also moderated by organizational learning behavior exploration vs exploitation this study highlights how a ceo s motivation to protect success in the short term affects the firm s innovativeness

the institutional framework and economic development the compound growth rates of per capita output and farrell type efficiency measures for 115 market economies over the period 1960 80 were compared with measures of political civil and economic liberty it was found that the institutional framework has significant and large effects on the efficiency and growth rate of economies politically open societies which subscribe to the rule of law to private property and to the market allocation of resources grow at three times the rate and are two and one half times as efficient as societies in which these freedoms are abridged

african political systems typology and performance this article proposes an historically oriented typology of contemporary african political systems the polyarchic the socialist the civil authoritarian and the praetorian their performance after independence is evaluated then in terms of gross national product gnp per capita growth improvements in the physical quality of life indicators of dependence and normative standards closer analysis reveals a differentiated pattern that contradicts many commonly held assumptions concerning the developmental advantages of civil or military authoritarian rule in third world countries thus polyarchic systems fare quite well both in terms of gnp growth and the improvement of the basic quality of life they also have the best record concerning normative standards protection of civil liberties and freedom from political repression socialist systems show a poorer performance in terms of economic growth but have a good record in improving the living conditions of a larger part of the population especi

bilateral free trade agreements and customs unions the impact of the eu republic of south africa free trade agreement on botswana the eu has indicated that after 2008 its trade relationships with developing countries will be dominated by the development of preferential trade agreements although not a consequence of the cotonou agreement the free trade agreement between the eu and the republic of south africa eu rsa fta is clearly one of the first fruits of this approach to trade relationships however there is no evidence that the design of the eu rsa fta incorporated a comprehensive general equilibrium evaluation of the agreement for either the signatories or the other southern african nations the analyses reported here indicate that while the eu rsa fta may substantially benefit the signatories there are appreciable negative impacts for other states especially the rsa s immediate neighbours moreover the reluctance of the eu to fully liberalise trade in food and agriculture commodities results in a major reduction in the benefits for the rsa without ameliorating substantively the adverse implications for other nations

the politico economic behavior of authoritarian governments the study of the interaction between the economic and political behavior of governments in democratic western capitalist countries has yielded many insights in the three decades since anthony downs an economic theory of democracy was published in 1957 similarly the study of the overt political component of the economic decision making process in authoritarian eastern centrally planned economies has attained a great degree of refinement in the post stalin era for most countries in the world however neither model democratic curn capitalist nor authoritarian curn centrally planned applies very well rather there is a third type more or less authoritarian curn more or less capitalist which reasonably describes a large number of developing countries it is likely that the behavior of these countries governments will not be well explained by models which fit the other two types the purpose of this paper is to propose a framework in which the economic decisions of authoritarian governments can be analyzed without assuming that the government is the only economic agent thus in basically capitalist countries where elections are not the means by which power is validated and transferred 1 the political economic behavior of government an individual s first formal exposure to economics is usually a principles text in early chapters of most of them the economic system is described as being determined by the interaction among three groups of economic agents households firms and governments the latter which only began to be considered an economic agent of important status with the advent of keynesian analysis is in such texts initially accorded a place of equality with the other two but soon is presumed to behave entirely differently while households and firms exhibit maximizing behavior in their own self interest the government s economic actions are motivated by a desire to stabilize and

democracy dictatorship and decision costs this paper tries to help bridge the inductive and the deductive traditions in the study of democracy i identify two empirical patterns which i call the paradox of conflict and the paradox of decision importance more conflict ridden societies are both less likely to be democracies and when democratic more likely to be consensual rather than majoritarian similarly important revolutionary regime transforming decisions are less likely to be democratic but when democratic they are more likely to be consensual i use a decision cost minimizing model of democracy to explain those patterns the model is developed out of the metaphor of institutions as decision producing firms attempting to maximize quality and minimize cost of those decisions its main intellectual source is the transaction cost minimizing view of organizations but the formalism owes most to buchanan and tullock s calculus of consent

on the inefficient extraction of rents by dictators most countries in the world are governed by autocracy that is some form of one man rule be it monarchy or dictatorship dictatorship is a prevalent form of autocracy with a majority of the world s population living under this type of rule yet when analyzed from an economic point of view dictatorships do not appear to be efficient they are not efficient in social terms and more strangely they do not appear to be efficient from the dictator s viewpoint take one example in bulandia a fictitious country a general from the army overthrows the government and establishes himself as the supreme leader he promptly places those who helped him in the revolution in key government positions as well as granting them favors in the business world such positions and favors are considered rewards for supporting the revolution they can be considered a cost of the revolution suppose the general appoints his brother an air force colonel as head of the newly established national mining industry his brother having no background in business or engineering is to say the least not the most qualified man for the job but it is assumed that he must be granted the position in order to maintain a stable coalition he must be paid off if this is the only problem the payoff why does the dictator use such an inefficient method of pay off why doesn t he for example have the industry managed by a foreign mining company which can actually generate profits and then use these profits to

the economics of special interest politics the case of the tariff this paper investigates the interaction of politicians and special interest lobbies the goal is to model the equilibrium levels of redistributive policies such as taxes subsidies tariffs and regulatory decisions the model is applied throughout to the setting of tariffs by contributing to political campaigns special interest lobbies generate economic returns higher tariffs generate revenue for import competing industries through higher product prices higher milk support prices raise dairy farm income and so forth the lobby invests to maximize these net economic returns in evaluating their chances of election politicians weigh the favorable effects of special interest money against the unfavorable association with the lobby and the social cost of the redistributive policy section i explores the lobby s problem it describes a formalization of mancur olson s discussion of the voluntary provision of public goods and optimal contributions by lobbies to political campaigns section ii describes determination of the equilibrium tariff positions of each politician in a political campaign

the effects of trade policies for fresh fruit and vegetables of the european union abstract this paper examines the economic effects of the trade policies for fresh fruit and vegetables adopted by the european union eu after the uruguay round agreement on agriculture uraa the new import regimes are based on entry prices that in effect work as minimum prices at the same time the eu has signed trade preference agreements particularly with southern mediterranean countries that are important suppliers of fruit and vegetables to the eu the management of the import regime is a balance between two conflicting objectives to support internal producers and to preserve trade flows from preferred countries on the side of export subsidies to handle the reduction commitments under the uraa the eu has introduced rationing trough tender procedures the analysis shows that such subsidies do not seem able to boost the exports of eligible products therefore eu policy makers should ask whether the eu should continue to offer such subsidies

the political economy of development a cross national causality test of development democracy growth hypothesis the empirical investigation of the development democracy growth hypothesis estimates positive correlations and causal associations between development and democracy and democracy and growth among the preconditions for the emergence of democracy market and culture show strong and highly significant positive effects which are largely transmitted directly development affects democracy directly and indirectly via education and investment the positive causal association between democracy and growth is transmitted both directly and indirectly via labor and welfare accordingly the hypothesized compatibility between economic development and political democracy is confirmed while rejecting the trade off between political democracy and economic growth

why did the west extend the franchise democracy inequality and growth in historical perspective during the nineteenth century most western societies extended voting rights a decision that led to unprecedented redistributive programs we argue that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution political transition rather than redistribution under existing political institutions occurs because current transfers do not ensure future transfers while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution our theory also offers a novel explanation for the kuznets curve in many western economies during this period with the fall in inequality following redistribution due to democratization i introduction the nineteenth century was a period of fundamental political reform and unprecedented changes in taxation and redistribution britain for example was transformed from an oligarchy run by an elite to a democracy the franchise was extended in 1832 and then again in 1867 and 1884 transferring voting rights to portions of the society with no previous political representation the decades after the political reforms witnessed radical social reforms increased taxation and the extension of education to the masses moreover as noted by kuznets inequality which was previously increasing started to decline during this period the gini coefficient for income inequality in england and wales had risen from 0 400 in 1823 to 0 627 in 1871 but fell to 0 443 in 1901 two key factors in the reduction in inequality were the increase in the proportion of skilled workers williamson 1985 and the redistribution of income toward the poorer segments of the society for example taxes rose from 8 12 percent of national product in 1867 to 18 8 percent by 1927 and the progressivity of the tax system increased substantially see lindert 1989

market structure and innovation a survey economics we all recite deals with allocation of limited resources towards satisfaction of unlimited wants resources are typically identified as land labor and capital plus a technology that determines their transformation into consumer goods disparity between the available goods and services and the desired gives rise to scarcity and the question of what how and for whom to produce the focus then shifts to description and evaluation of alternative resource allocation mechanisms for making the choices the pareto criterion by which an allocation of resources is deemed efficient if any reallocation improving the position of some individual worsens the position of others is a commonly employed gauge of a mechanism s performance in the absence of externalities increasing returns to scale and uncertainty a perfectly competitive market system yields a pareto optimal allocation of resources this underlies the view that individual self interest is compatible with society s interest the further conclusion that pareto optimality may not be achieved via the market system in the presence of monopoly elements provides an economic rationale for antitrust laws the objective of a resource allocation mechanism appears to be according to the analysis described above to make the best of available resources the alternative objective of relaxing constraints through expanding the resource base or developing new technology seems to be beyond its scope thus until rather recently technical advance had been regarded in the mainstream of economic theory as unmotivated by the quest for profits and substantially unaffected by resource allocation instead as j schmookler observed technology had been viewed as a parameter like the weather affecting the outcome of resource allocations but itself unaffected by them 84 1965 evidence that technological progress has significantly contributed to growth in productivity together with a substantial increase in research and development activity largely financed by government and carried out by industry see f machlup 51 1962 may have spurred reconsideration of this view once technical advance is regarded as an economic variable it is natural to in

is there a relationship between economic conditions and political structure the results of this investigation into the relationship between political environment and economic well being are both disappointing and encouraging phone is the only measure of economic well being which is unambiguously and positively associated with democracies why this is true remains a mystery the two reasons discussed earlier are both plausible as in a third namely increasing availability of telephones reduces the costs of organizing special interest groups to the extent that active participation of special interests is a necessary condition for the emergence or continuation of democratic government telephones per capita will be related positively to the incidence of democracy

an evaluation of federal policies concerning joint ventures for applied research and development current federal policies toward interfirm cooperation in research and development are designed to maximize society s use of available technology models of industry resource allocation behavior demonstrate that these policies are detrimental to the formation of risk sharing consortia for the development of new technology the reason is that current policies often deprive applied research and development activities of their appropriability analytical results suggest that if appropriability is maintained an underinvestment in applied research and development can be corrected in most cases simply by permitting firms to share the benefits and costs of projects in proportion to firms investments a permissive governmental posture may be particularly effective for industries consisting of a large number of firms with some firms relatively larger than others industries consisting of small numbers of relatively equal size firms may require government as a participant in consortia for applied research and development appropriable but risky r d activities

on democracy and debt as we explained there is really little a priori reasoning for a clear prediction that authoritarian regimes will incur more foreign debt in fact some other empirical literature reveals that such regimes will face a higher supply price for such debt anderson presents a study of a single year using an admittedly crude measure of authoritarianism that finds that such regimes do issue more debt

the effect of business interdependencies on product r d intensive business performance one of the major decisions that firms face regarding r d intensive businesses is a structural one establishing the appropriate level of internal strategic interdependency within and among business units the current discussion over the effectiveness of creating small independent and entrepreneurial venture units in multi business corporations is part of this larger structural concern the aim of the present research is to study the efficacy of different structural linkages for achieving market share and roi objectives in product r d intensive businesses the study focuses on interdependencies between business units in product r d intensive businesses that produce consumer products or industrial products a sample of 641 businesses 221 consumer products and 420 industrial goods is drawn from the pims data base a cluster analysis is run to identify natural groups of homogeneous businesses for each of the seven identified groups established suppliers fast movers high tech job shops stalled giants established diversifiers dominant specialists and laggers a multi way analysis of variance is performed to study the influence of various interdependencies measured in term of vertical integration shared facilities and shared marketing on two criteria of performance market share and roi the findings indicate first that the interdependencies required to achieve high performance are contingent upon the nature of the product r d intensive business and its environmental characteristics second for a given business configuration high performance interdependencies are influenced by the type of performance objectives selected by the business such as market share or profitability finally the results imply that a multi business corporation which possesses a portfolio of product r d intensive businesses probably requires a more diverse set of interdependencies than for example simply mainstream centralized industrial r d organization on the one hand and independent entrepreneurial units on the other hand effective competition for a firm with diverse r d intensive businesses may often call for a capability to support concurrently multiple levels of internal interdependencies and to reject create or modify this set of interdependencies as the situation warrants

political systems and distortions an empirical study this paper studies empirically why price distortions are more prevalent in some countries than in others we find no significant difference between democracies and dictatorships but frequent regime changes reduce distortions political systems factional subordinate that encourage redistributive activities rda tend to have more distortions allowing for different effects of rda in democracies and dictatorships there is a positive and significant effect of rda on distortions in dictatorships in democracies distortions destroying lobbying seems more important since no significant relation between rda and distortions can be found

democracy and development a theoretical framework a simple framework is set up to discuss the relationship between democracy material welfare and development democracy is regarded both as a good in its own right and as an input in the production of material welfare the optimum level of democracy is then related to the level of development at the optimum point the marginal cost of democracy in terms of foregone output is positive and growth is a decreasing function of the level of democracy deviations from the optimum path are described as either repressive or populist democratization is not unambiguously an optimal response to exogenous shocks

democratization or repression abstract regimes controlled by a rich elite often collapse and make way for democracy amidst widespread social unrest such regime changes are often followed by redistribution to the poor at the expense of the former elite we argue that the reason why the elite may have to resort to full scale democratization despite its apparent costs to themselves may be that lesser concessions would be viewed as a sign a weakness and spur further unrest and more radical demands the elite may therefore be forced to choose between repression and the most generous concession a transition to full democracy

effective protection and investment incentives in egypt and jordan during the transition to free trade with europe abstract this paper assesses the possible impact of a euro mediterranean agreement ema on egypt and jordan and identifies policy options that will increase the benefits of free trade with europe the extent to which these countries will benefit from an ema depends greatly on the investment response and thus on improvements in the investment climate the latter will be determined by many factors this paper focuses on three such factors the modalities of the tariff reduction strategy that will be pursued the extent to which transaction costs may be reduced and upgrading the quality and lowering the costs of intermediate service inputs through greater competition many of the policy and institutional changes that are required are not or are only in part covered by the ema

the eu s free trade agreements with developing countries a case of wishful thinking since the middle of the1990s the eu has vigorously pursued a policy of replacing non reciprocal preferences for the developing countries in the mediterranean latin america and with south africa with bilateral free trade agreements this article examines the content of these agreements and the empirical evidence on their likely effects and concludes that they are broad but shallow agreements the static effect are likely to be very small or negative while the potential dynamic gains are problematic especially regarding the concept of a lock in to trade liberalisation unless there are greater commitments to trade related issues by both sides and especially by the eu

democracy rent seeking public spending and growth abstract does democratization imply faster growth less corruption and less inefficiency past studies yield ambiguous results on the effects of democracy on economic performance and growth we develop a simple two sector endogenous growth model that shows both very young and mature democracies grow faster than countries in mid stages of democratization producing a u effect this effect results from the pattern of rent seeking as it diverts from the provision of public goods rent seekers act as monopolistic competitors initially more democracy increases their number raising aggregate rents however rents per rent seeker fall with the number of rent seekers due to this crowding effect and the increased competition among rent seekers aggregate rents fall in mature democracies thus rents show an inverted u effect in relation to democracy we find fairly robust supportive evidence for the latter

industry investment in basic research assuming interdependence of benefits from appropriable and inappropriable activities using a model of the resource allocation behavior of a group of firms joglekar and hamburg 1983 demonstrate that unaided industry allocation to basic research is suboptimal and that in stimulating this allocation provision of government seed money is generally counterproductive while the provision of matching subsidies is not cost efficient using basically the same model but focusing on the case of a homogeneous industry joglekar and hamburg 1986 further identify several industry characteristics that increase the degree of suboptimality of investment in basic research and consequently the need for government intervention joglekar and hamburg 1983 1986 assume that a firm s benefits from its investment in appropriable activities are independent of its benefits from the industry s total investment in the pertinent basic i e inappropriable research investment theory suggests that a firm s benefits often depend upon its investment portfolio and that an investment in basic research that is not supported by suitable investments in other activities e g plant and equipment personnel training etc may yield far smaller benefits than could be potentially obtained therefore in this paper i present a model that assumes such an interdependence of benefits i find that most of joglekar and hamburg s 1983 1986 conclusions are confirmed by the new model

political variables in cross country growth analysis the recent boom in cross country growth analysis has renewed the empirical interest in political sources of economic growth a large number of studies have tested political variables in growth regressions and a very heterogenous set of variables has been proposed to measure economically relevant differences in the political systems of countries this paper distinguishes five categories of relevant political variables democracy government stability political violence policy volatility and subjective perception of politics for each of these categories the specification testing method and results of the most relevant studies are presented and are critically discussed the paper concludes that measures of democracy are least successful and measures of policy volatility and subjective perception of politics most successful as explanatory variables in cross country growth regressions

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