some macroeconomic implications of alternative compensation systems a basic theme of this paper is the idea that some structural reform of employee compensation arrangements is necessary to make reasonable price stability compatible with reasonably full employment in this view even the best designed macroeconomic policies are much too aggregative to get at the heart of the stagflation problem the ultimate solution involves going inside the workings of a modern capitalist economy and correcting the underlying structural flaw directly on the level of the individual firm stagflation represents an especially intractable policy dilemma for macroeconomics without a decisive tendency of the economic system to remain near full employment there is a strong prima facie case for fighting recessions by exogenously stimulating aggregate demand but the usual keynesian expansionary policies tend to impart an inflationary inertia that is difficult to choke off and of course the basic strategy for fighting inflation is to cool down the economy by restrictive monetary and fiscal policy thereby increasing unemployment and closing the viscous circle because the practical macroeconomic policies for dealing with unemployment and inflation are so diametrically opposed stagflation is a pervasive structural problem when for whatever reason there is basically an unfavourable short run tradeoff between unemployment and inflation economic policy tends to vacillate between expansion of demand to fight unemployment and restriction of demand to fight inflation polarising the electorate and distracting society from dealing effectively with its underlying real economic problems even the difficulty of attaining external balance in foreign accounts is largely a spillover into the international payments arena of an inability to achieve an acceptable internal balance between full employment and price stability this paper takes what might be called a comparative systems approach to the problem of stagflation at the heart of modern industrial capitalism is an incredibly complicated system of overlapping monopolistic competitors 2 a starting point for the paper is the realisation that the coordination difficulty which can cause some systems to suffer involuntary unemployment is not inherent in laissez faire private enterprise per se it is closely tied to one particular property of a conventional wage payment system namely compensation of each firm s employees is stuck to an outside numeraire whether money or a cost of

optimal incentive schemes when only the agents best output matters to the principal standard principal agent models assume that the principal s payoff is a function of the total output of all agents in many real world situations however the principal s payoff is based solely on the best of the agents outputs e g the first agent to make an innovation the most creative advertising campaign or the cheapest product design the results obtained from such a model differ from the standard results in a number of respects for instance even when identical agents perform identical tasks the optimal incentive scheme will often differ across agents also the principal may want to increase the variance of the agents output or reduce the correlation of output across agents even when the agents are risk averse

the unbalanced uruguay round outcome the new areas in future wto negotiations the uruguay round involved a grand north south bargain the north reduced import barriers particularly in textiles and agriculture the south adopted new domestic regulations in such areas as services and intellectual property changes that would lead to increased purchases from the north in mercantilist economics apples for apples imports for imports in real economics apples for oranges the authors argue that while the north s reduction of import barriers benefits both the north and the south the new domestic regulations adopted by countries of the south could prove costly to those countries to begin with the regulations will be expensive to implement and while the cost side of their impact is secured by a legal obligation in the case of intellectual property rights for example the cost is higher prices for patented goods the benefits side is not so secured

unemployment profit sharing and japan s economic success abstract in this paper we examine the economic effects of profit sharing in a duopoly model where one firm engages in sharing profits with its union while the other firm does not the results show that profit sharing i reduces wages demanded by the unions ii tends to increase employment of the profit sharing firm and to increase employment in the entire industry and iii tends to increase the joint welfare of the profit sharing firm and the profit sharing union these results seem to suggest that the japanese success may be partly attributable to their informal profit sharing scheme

distorted agricultural incentives and economic development asia s experience earnings from farming in many low income countries have been depressed by a pro urban bias in own country policies as well as by governments of richer countries favouring their farmers with import barriers and subsidies both sets of policies reduce national and global economic welfare the rapid development of many asian emerging economies has been accompanied by a gradual reduction in their anti agricultural policies but many distortions remain and some countries have moved from negative to positive assistance for farmers following the earlier examples of first japan and then korea and taiwan drawing on results from a new multi country research project this paper examines the extent of these changes relative to those of other developing countries over the past five decades it concludes by pointing to prospects for further policy reform in asia

distributional effects of wto agricultural reforms in rich and poor countries rich countries agricultural trade policies are the battleground on which the future of the wto s troubled doha round will be determined subject to widespread criticism they nonetheless appear to be almost immune to serious reform and one of their most common defenses is that they protect poor farmers the authors findings reject this claim the analysis uses detailed data on farm incomes to show that major commodity programs are highly regressive in the united states and that the only serious losses under trade reform are among large wealthy farmers in a few heavily protected subsectors in contrast analysis using household data from 15 developing countries indicates that reforming rich countries agricultural trade policies would lift large numbers of developing country farm households out of poverty in the majority of cases these gains are not outweighed by the poverty increasing effects of higher food prices among other households agricultural reforms that appear feasible even under an ambitious doha round achieve only a fraction of the benefits for developing countries that full liberalization promises but protect u s large farms from most of the rigors of adjustment finally the analysis indicates that maximal trade led poverty reductions occur when developing countries participate more fully in agricultural trade liberalization

the attack and defense group contests best shot versus weakest link this study analyzes a group contest in which one group defenders follows a weakest link whereas the other group attackers follows a best shot impact function if we fully characterize the nash and coalition proof equilibria and show that with symmetric valuation the coalition proof equilibrium is unique up to the permutation of the identity of the active player in the attacker group with asymmetric valuation it is always an equilibrium for one of the highest valuation players to be active it may also be the case that the highest valuation players in the attacker group free ride completely on a group member with a lower valuation however in any equilibrium only one player in the attacker group is active whereas all the players in the defender group are active and exert the same effort we also characterize the nash and coalition proof equilibria for the case in which one group follows either a best shot or a weakest link but the other group follows an additive if jel c72 d70 d72 d74 h41

comparing virtue consequentialist and deontological ethics based corporate social responsibility mitigating microfinance risk in institutional voids due to the nature of lending practices and support services offered to the poor in developing countries portfolio risk is a growing concern for the microfinance industry though previous research highlights the importance of risk for microfinance organizations not much is known about how microfinance organizations can mitigate risks incurred from providing loans to the poor in developing countries further though many microfinance organizations practice corporate social responsibility csr to help create economic and social wealth in developing countries the impact of such csr practices remains an underdeveloped area of inquiry we use a normative ethics lens to develop an ethics based csr theory that differentiates between three forms of ethics based csr virtue consequentialist and deontological we argue that while all three forms can help mitigate risk virtue ethics based csr is potentially the most useful form of csr toward mitigating microfinance portfolio risk we test our hypotheses using a sample of microfinance organizations from across the world our findings suggest that virtue ethics based csr is not just an important philosophical paradigm it can actually help mitigate microfinance portfolio risk when implemented in practice

a general model of rent seeking for public goods this paper generalizes the model of collective rent seeking over a public good expanding the rent seeker s consumption bundle to include preferences over the public good and a private good our results suggest collective rent seeking is positively related to group size although free riding exists within a group there is not a one for one tradeoff in addition rent seeking increases with wealth finally total effort expended by both groups increases if either group increases in membership size except in the case of an extremely lopsided contest the key condition underlying these results is that the marginal utility of the public good is not inversely related to the private good

asymmetric all pay auctions with incomplete information the two player case abstract we prove existence and uniqueness of bayesian equilibrium for a class of generally asymmetric all pay auctions with incomplete information due to its importance in applications some prominence is given to the first price all pay auction for which a detailed characterization of equilibrium and an approximation to equilibrium of its well studied complete information version are supplied furthermore we relate our uniqueness result to the well known multiplicity of equilibria in the war of attrition second price all pay auction which emerges as a limit point of the class of two player auction games considered journalof economic literature classification numbers d44 c62 c72

the macroeconomic implications of profit sharing some empirical evidence the macroeconomic implications of profit sharing some empiricals paper attempts an empirical assessment of weitzman s proposition that profit sharing provides an antidote to stagflation taking japan as an example of a profit sharing economy the author shows that it does not have either lower cyclical variability of output or lower inflation than other industrial countries the authors then reject the propositions that in a profit sharing economy 1 aggregate demand shocks have a smaller effect on output deviations and 2 import price shocks and wage push have a smaller effect on inflation therefore one should be wary of the claim that the japanese case supports weitzman s model copyright 1987 by royal economic society

circumvention of trade defence measures and business ethics with the rise of globalization the debate around free trade versus fair trade and liberalism versus protectionism has become increasingly complicated at times the regulations of the world trade organization seem to pit developed markets against emerging markets as governments attempt to expand international trade while at the same time protecting local industry to this end antidumping measures have been extensively developed as a way to block foreign low cost goods often produced in emerging countries from entering domestic markets in response some exporters have begun to circumvent these antidumping measures using strategies such as transhipment assembly operations and slightly modified products while previous studies have addressed the ethical aspects of antidumping measures this study will focus on the ethics of circumvention strategies with a special focus on the theories on legal compliance and specifically civil disobedience and conscientious evasion

implementation of ururguay round commitments the development challenge at the uruguay round developing countries took on unprecedented obligations not only to reduce trade barriers but to implement significant reforms both of trade procedures e g import licensing procedures customs valuation and of many areas of regulation that establish the basic business environment in the domestic economy e g technical sanitary and phytosanitary standards sps intellectual property law implementing such reforms are investment decisions in that implementation will require purchase of equipment training of people establishment of systems of checks and balances etc this will cost money and the amounts of money involved are substantial based on world bank project experience in the areas covered by the agreements an entire year s development budget is at stake in many of the least developed countries least developed country institutions in these areas are weak and would benefit from strengthening and reform however the authors analysis indicates that the world trade organization wto obligations reflect little awareness of development problems and little appreciation of the capacities of the least developed countries to carry out the functions that sps customs valuation intellectual property etc regulations address the content of these obligations can be characterized as the advanced countries saying to the others do it my way the authors touch at the beginning on another important point because of their limited capacity to participate in the uruguay round negotiations the wto process has generated no sense of ownership of the reforms to which wto membership obligates them from their perspective the implementation exercise has been imposed in an imperial way with little concern for what it will cost how it will be done or if it will support their development efforts this abstract was borrowed from another version of this item

partial indexation trend inflation and the hybrid phillips curve abstract this note proposes a full description of the calvo price setting model based on partial prices indexation and studies the interaction between partial indexation and trend inflation we show that using a hybrid version of the phillips curve partly decreases the risks of overestimate due to the omission of trend inflation

implementation and imbalance dealing with hangover from the uruguay round the uruguay round agreements impose bound obligations to implement but provide only unbound promises of assistance is there a legal solution within the wto legal system i e can implementation assistance be made a legal obligation the author concludes that the doha negotiations on trade facilitation and on aid for trade demonstrate that such a legal arrangement cannot be constructed this is not however a problem the international community has provided extensive trade related assistance through bilateral and multilateral development agencies regarding the overall uruguay round imbalance developing countries gave more than they got failure of the international community to acknowledge that the imbalance stems in major part from the wto agreement on intellectual property trips has retarded a general making up

negotiation of profit sharing contracts in industry we examine the properties of profit sharing in a game theoretic oligopoly model of industry profit sharing contracts are viewed as a means of strategic commitment not as an internal incentive system in our model firms choose a contract subject to the employees participation constraint in a first stage and compete on the output market in a second stage we show that the choice of a profit sharing contract by each firm is a non cooperative equilibrium in the case of cournot competition the game under study has the structure of the prisoners dilemma the case of price competition on the output market leads to somewhat different conclusions

pay and employment determination in britain what are labour contracts really like the recent growth of unemployment in western economies has prompted new research on the workings of the labour market there has been much interest in particular in the questions what determines the level of real pay and why is it apparently so insensitive to changes in aggregate demand and unemployment european economists now find it hard to take seriously the notion still taught to many undergraduate that wages are determined by the intersection of demand and supply curves roughly half of all british employees belong to trade unions a much higher percentage have their pay fixed by some kind of collective bargain in this country it is negotiations not impersonal com petitive markets which decide what most of us will be paid the difficult problem is that of how to understand this process or to put it differently of how to think up the right model of the world

profit sharing in a unionised economy with imperfect competition abstract this paper sets up a simple model of a unionised economy and shows that the introduction of profit sharing unambiguously reduces the unemployment rate the result arises because unions are assumed to care about the employment of their members but cannot bargain over employment directly profit sharing reduces the perceived cost in terms of worker income foregone of increasing employment in the firm in the economy as a whole the equilibrium unemployment rate falls

responsibility in paradise the adoption of csr tools by companies domiciled in tax havens in contrast to the recent rise to economic importance of offshore finance centres ofcs the topic of taxation has so far created little interest among scholars of corporate social responsibility csr this paper makes two contributions to addressing this lacuna applying a range of influential normative theories of ethics it first offers an ethical evaluation of tax havens second the paper examines what use large firms that are headquartered in two ofcs bermuda and the cayman islands make of formal csr tools the emerging duplicity in tax haven based companies professing social responsibility highlights once more the political nature of csr where at least some firms and or industries can successfully limit government power to enact regulation as well as shape the discourse around csr the study of csr in ofc based firms thus calls into question the usefulness of the often quoted definition of csr as going beyond the law

favoritism in asymmetric contests head starts and handicaps abstract i examine a contest with identity dependent rules in which contestants are privately informed and ex ante heterogeneous a contestant may suffer from a handicap or benefit from a head start the former reduces the contestant s score by a fixed percentage the latter is an additive bonus although total effort increases if the weak contestant is favored with a head start the optimal use of handicaps is not as clear cut depending on the nature of the asymmetry it may or may not be optimal to handicap the strong contestant moreover it is generally optimal to combine the two instruments for instance when contestants are sufficiently heterogeneous the weak contestant should be given both a head start and a handicap it may also be possible to induce higher effort and at the same time make both contestants better off ex ante

a model of a team contest with an application to incentives under list proportional representation abstract we develop a model of a team contest for multiple indivisible prizes team members exert costly effort to improve their team s success we analyze two intrateam allocation rules under a list rule prizes are allocated according to a predetermined list under an egalitarian rule prizes are allocated according to a fair lottery we show that which allocation rule maximizes team success depends on the degree of complementarity between members efforts and the convexity of the individual cost of effort function we then apply the model to the context of elections under proportional representation with both open and closed lists we derive conditions under which closed lists generate stronger incentives than open lists our results offer a rationale for the lack of evidence on the negative incentive effects of closed lists

profit sharing in british industry 1865 1913 abstract this paper examines the history of profit sharing in britain between 1865 and 1913 some 300 schemes were introduced during the period and these were intended both to raise labour productivity and to improve industrial relations in the firms concerned these schemes appear to have added significantly to the wages of eligible workers but were frequently given up after a period of experiment analysis of the survival rate of schemes indicates an important role for the type of scheme by method of payment and the size of firm but suggests that the probability of abandonment increased with the duration of the scheme

the chilling trade effects of antidumping proliferation advocates of antidumping ad laws downplay their negative effects by arguing that the trade flows that are subject to ad are small and their distortions negligible but while the adverse effect of ad on product level trade has long been established the question remains whether there are trade effects at the aggregate level the recent proliferation wave of ad laws and their use provides us with a unique policy change to estimate the true trade effects of adopting and enforcing ad laws for this purpose we estimate the effect of ad on bilateral trade flows between the new adopters of ad laws and their trade partners using a gravity model of annual observations 1980 2000 our estimates show that ad has trade chilling effects on aggregate import volumes but the impacts are heterogeneous across sectors we find that new tough users experience a chilling of their aggregate imports of 14 billion us a year or 5 9 as a result of ad measures for some countries like mexico and india the dampening effects of ad laws on trade flows are found to substantially offset the increase in trade volumes derived from trade liberalization

the max min group contest weakest link group all pay auction we investigate a group all pay auction in which each group s effort is represented by the minimum among the effort levels exerted by the group members and the prize is a group specific public good we fully characterize the symmetric equilibria for two groups there are four types of equilibria the pure strategy equilibria in which all active players exert the same effort the semi pure strategy equilibria in which the players in a group play the same pure strategy whereas those in the other group play the same mixed strategy the nondegenerate mixed strategy equilibria with continuous support and the nondegenerate mixed strategy equilibria with discontinuous support we then analyze a general contest with n groups

oligopoly profit sharing contracts and the firm s systematic risk abstract this article examines the properties of wage and profit sharing contracts in a model of oligopoly with capital market equilibrium while profit sharing contracts dominate market wage contracts profit sharing also reduces the firm s cost of equity capital under fairly broad conditions of oligopoly by enforcing lower costs in exchange for a pre determined share of cash flows to workers this form of operational leverage both reinforces the classical effect of market power on systematic risk and the impact of profit sharing on the corporate finance of the firm as previously suggested by ichino 1994 european economic review 38 1411 1422

endogenous sharing rules in collective group rent seeking this paper examines the possibility of endogenous determination of intra group sharing rules in a collective group rent seeking game collective group rent seeking is considered as a two stage nash cournot game in which sharing rules are determined prior to individual decision on voluntary contribution the solution is subgame perfect and is obtained by backward induction in competition between two groups of the same size the nash equilibrium sharing rule of each group is to distribute rent to each according to relative effort total rent seeking outlays in this case are equal to those obtained by tullock 1980 when more than two groups compete for a rent the sharing rule based on relative effort is again likely to be the nash equilibrium strategy of each group the amount of total rent seeking outlays is also equal to that in tullock 1980 in a nutshell the rent is substantially dissipated if sharing rules are endogenously determined

collective rent dissipation the theory of rent seeking was initiated by tullock 1967 1980 followed by krueger 1974 and posner 1975 and more recently extended in various directions by allard 1988 appelbaum and katz 1986a b c gradstein and nitzan 1989 hillman and katz 1984 1987 hillman and samet 1987 hillman and riley 1989 katz et al 1990 long and vousden 1987 ursprung 1990 and varian 1989 the purpose of this paper is to extend this theory by introducing the possibility of collective group rent seeking with voluntary individual decisions regarding their extent of participation in the collective rent seeking efforts

why should trade negotiators negotiate about in recent years there have been growing demands to make trade liberalization contingent on adoption of common labor and environmental standards the straightforward economic answer is that this makes little sense neither the gains from trade nor the gains from appropriate regulation are compromised if other countries impose standards that are weaker than your own it is possible to offer second bet economic rationales for harmonization but these are empirically unconvincing the only serious argument in favor or regulation is political that regulation which is in the national interest may not be politically feasible unless other countries do the same

is profit sharing participation evidence on alternative firm types from west germany abstract systematic differences are reported in the structural and performance characteristics of firms in subsamples based on a profit sharing and b participation in control employee involvement in decision making moreover whereas group b firms tend to conform to a theoretical participatory stereotype group a firms do not the coincidence of profit sharing and participation in control in a given firm is not surprisingly quite low these results cast doubt on current theoretical and policy arguments concerning productivity gains dependent on the joint use of participation and profit sharing but indicate that one precondition for weitzman type macro economic benefits of profit sharing in the absence of participation may be present

food safety issues trade and wto rules a developing country perspective the sps agreement and the related wto dispute settlement mechanism are an important first step in strengthening the global trade architecture bringing in greater transparency and orderly conditions to world food trade however implementation of the new trade rules has turned out to be a more complex task than the traditional market access issues handled by the wto several factors including inadequate financial and technical resources have constrained devel oping countries from becoming effective participants in the implementation process and there is widespread suspicion that sps regulations are being used as hidden protectionist devices by developed countries however despite all the problems some developing countries have been quite successful in penetrating developed country food markets they have done so by accepting the consumer preferences and standards in quality sensitive high income markets and implementing domestic supply side measures while making full use of available international assistance initiatives developing countries should view the task of complying with sps standards not just as a barrier but also as an opportunity to upgrade quality standards and market sophistication in the food export sector

commitment through renegotiation proof contracts with third parties the paper analyzes contracts as means of strategic commitment that is commitment against outside parties to the agreement it considers the example of an incumbent firm which enters a contractual relationship with its workers in order to deter entry it assumes away the possibility for the parties to precommit not to make pareto improving renegotiations of the agreement once entry has taken place under symmetric information the contract is thus found to be useless for entry deterrence if the incumbent firm or workers possess some private information excessive post entry production levels can however be sustained ex post since output reductions may not be incentive compatible while information asymmetries are usually welfare decreasing when the goal is optimal risk sharing they can thus be welfare improving for the contracting parties when commitment against outsiders is the goal of the contract the role of the renegotiation process as a constraint on sustainable agreements is stressed in the paper and the general relevance of strategic contractual commitment is discussed

strategic trade policy design with asymmetric information and public contracts this paper examines strategic trade policy under asymmetric information with publicly observable contracts we analyse both the cases of unilateral and bilateral intervention we find that the requirement of incentive compatibility undermines the strategic precommitment effect when public funds are costly even with no restrictions on the form of the policies second when firms sell substitute goods the introduction of a rival interventionist government may reduce the cost of informational rents to each government third it turns out that under bilateral intervention there exists a continuum of symmetric equilibria with levels of output and corresponding levels of welfare in the exporting countries which can be ranked the requirement of ex post participation constraints for the firm limits the set of subsidies which can be offered to the firm in particular under bilateral intervention the equilibrium levels of output which are implemented under adverse selection are below their values under ex ante uncertainty i e below the equilibrium levels of output which are achieved when firms sign their contracts before the realization of their costs ever since the inception of research on strategic trade policy with the seminal paper by brander and spencer 1985 economists have been warning that the informational requirements of rent shifting policies are enormous and unlikely to be met in practice because the policy recommendations are highly sensitive to the particularities of the market in response a number of recent papers have begun to address the specific ways that informational failures affect policy and to modify policy recommendations to take such failures into account this paper analyses the implications of asymmetric information for strategic trade policy under both unilateral and bilateral intervention our complete information benchmark is a simple trade policy designed to shift rents similar to brander spencer two firms are competing in a third country and receive export subsidies from their respective governments however we place no restrictions on the form of these export policies previous literature has shown that under complete information a large number of outcomes may be sustained as equilibria of delegation games such as this moreover the introduction of uncertainty about the state of nature on the part of both

why is it so difficult trade liberalization under the doha agenda many explanations have been offered for the current difficulties of the world trade organization wto in fact the system appears to have managed many of these challenges reasonably well including the increase in the number of members its mediaeval decision making procedures the changing geopolitical environment the rapid growth of preferential trade arrangements ptas the complexity of its agreements and concerns about erosion of unilateral preferences by contrast the near exhaustion of the traditional fuel of industrial country non agricultural tariffs the increasing importance of non trade concerns and incomplete adjustment to a new multi polar negotiating system appear to be important factors requiring further examination

private information group contests best shot competition abstract we model competing groups when players values for winning are private information each group s performance equals the best effort best shot of its members and the group with the best performance wins the contest at the symmetric equilibrium of symmetric contests increasing the number of competing teams may increase or decrease each team s performance but it unambiguously increases the overall expected best shot depending on the elasticity of the distribution of players values individual team and contest performance may increase or decrease with team size considering just two competing groups that differ only in size we show members of the smaller group use the more aggressive strategy but depending on the nature of uncertainty either team may be more likely to win more generally when teams value cdfs differ increasing one team s size decreases increases that team s chance of winning if its value cdf is elastic inelastic

a theory of affirmative action in college admissions i introduction race conscious preferential admissions have been widely practiced by selective colleges and universities to enhance minority representation in higher education for example the college of arts and sciences at the university of michigan automatically added 20 points out of a possible 150 points to a minority applicant s score in its rating system harvard university has an unofficial lift scheme which also targets minority applicants however controversy has surrounded affirmative action ever since its inception for instance california texas and florida have already terminated the use of race conscious admissions at state funded institutions this debate culminated in the recent supreme court ruling regarding admissions procedures at the university of michigan which endorsed admissions rules that took into account race as a qualifying characteristic unfortunately positive studies on this issue have been scarce relative to the high profile of the debate according to holzer and neumark 1999 theoretical studies of the efficiency of affirmative action on education are virtually nonexistent some have argued that affirmative action is merely a patronage program and necessarily results in mediocracy rather than meritocracy in the debate on affirmative action practices in college admissions a major criticism is that affirmative action designed to create diversity comes at the cost of academic quality a competing view offered by those opposed to affirmative action is that it weakens school applicants incentives to achieve academic excellence for instance justice thomas wrote in his opinion in grutter v bollinger that there is no incentive for the black applicant to continue to prepare for the lsat once he is reasonably assured of achieving the requisite score supporters of this practice tend to emphasize the importance of diversity and the positive influence of diversity on the pedagogical environment steele 1990 these views however do not fully recognize the incentive structure behind affirmative action admissions rules it is unclear how a college admissions rule affects high school students incentives to achieve academic excellence which adds to their human capital stock and future productivity the process of college admissions by and large resembles a contest in which contestants exert costly effort in order to win a limited number of prizes in the context of college admissions to compete for a limited number of seats in the incoming class college candidates have to present their academic credentials such as gpa and sat score to the admissions officer to win the seat high school students have to invest in their human capital which improves the academic performance whereas the academic investments are costly and nonrefundable regardless of the outcome for example the tuition the money spent on books the salary paid to tutors the time and energy and so on all of these features may be approximated by an all pay auction mechanism we propose a simple theoretical framework that models the process of college admissions as an all pay auction to investigate two major questions is there any theoretical rationale for an affirmative action admissions rule how do such rules affect college candidates incentives to invest in academic effort two candidates one a minority and the other a nonminority simultaneously choose their academic efforts human capital investments to compete for a seat in a college we show that an academic quality oriented college prefers to adopt an admissions rule that scales up the test score of the minority relative to the nonminority although this rule is designed purely to maximize the expected academic quality of the incoming class it turns out to favor the minority and create ethnic diversity we show that the unique equilibrium affirmative action admissions rule creates a positive cross group interaction between college candidates incentives to make educational effort

distributional conflict and jurisdictional organization abstract this paper explores the endogenous formation of jurisdictions assuming the political process is a costly fight to acquire shares of the gnp pie in such a setting the stability of a unified jurisdiction is not necessarily determined by the preferences of the richest member region we also show that a system of federalism is especially significant in ameliorating distributional competition and conflict less resources are spent in aggregate on appropriative activities under a hierarchical system of federalism than in a unified jurisdiction with a single central government

conflict and rent seeking success functions ratio vs difference models of relative success the rent seeking competitions studied by economists fall within a much broader category of conflict interactions that also includes military combats election campaigns industrial disputes lawsuits and sibling rivalries in the rent seeking literature each party s success pi which can be interpreted either as the probability of victory or as the proportion of the prize won has usually been taken to be a function of the ratio of the respective resource commitments alternatively however pi may instead be a function of the difference between the parties commitments to the contest the contest success function csf for the difference from is a logistic curve in which as is consistent with military experience increasing returns apply up to an inflection point at equal resource commitments a crucial flaw of the traditional ratio model is that neither onesided submission nor two sided peace between the parties can ever occur as a cournot equilibrium in contrast both of these outcomes are entirely consistent with a model in which success is a function of the difference between the parties resource commitments

contests with group specific public goods and complementarities in efforts abstract this paper starts from the observation that in public goods group contests group impact can in general not be additively decomposed into some sum of functions of individual efforts we use a ces impact function to identify the main channels of influence of the elasticity of substitution on the behavior in and the outcome of such a contest we characterize the nash equilibria of this game and carry out comparative static exercises with respect to the elasticity of substitution among group members efforts if groups are homogeneous i e all group members have the same valuation and efficiency within the group the elasticity of substitution has no effect on the equilibrium for heterogeneous groups the higher the complementarity of efforts of that group the lower the divergence of efforts among group members and the lower the winning probability of that group this contradicts the common intuition that groups can improve their performance by solving the free rider problem via higher degrees of complementarity of efforts

the effects of farm subsidies on farm exports in the united states we estimate the elasticity of u s farm exports to u s farm subsidies using a gravity model of state level farm exports to 100 major trading destinations for the period 1999 to 2011 our identification strategy exploits the within state variation that is free of endogeneity bias in the levels and trends of farm subsidies and farm exports we find that a 1 decrease in farm subsidies would reduce u s farm exports by 0 40 per annum this equivalently means that the complete abolishment of the farm subsidy program would reduce u s farm exports by approximately 15 3 billion per year importantly we document robust evidence that amber box subsidy programs such as counter cyclical payments and marketing loan gains have the strongest effect on farm exports while green box subsidy payments such as direct payments have negligible effects finally subsidy payments affect exports only in agricultural commodities not in livestock our subsidy elasticity estimates are statistically significant stable and economically meaningful and are vitally needed by u s and global policymakers in the face of critical domestic and international developments

collective action and the group size paradox according to the olson paradox larger groups may be less successful than smaller groups in furthering their interests we address the issue in a model with three distinctive features explicit intergroup interaction collective prizes with a varying mix of public and private characteristics and nonlinear lobbying costs the interplay of these features leads to new results when the cost of lobbying has the elasticity of a quadratic function or higher larger groups are more effective no matter how private the prize with smaller elasticities a threshold degree of publicness is enough to overturn the olson argument and this threshold tends to zero as the elasticity approaches the value for a quadratic function we also demonstrate that these results are true irrespective of whether we examine group sizes over the cross section in some given equilibrium or changes in the size of a given group over different equilibria

welfare costs of the u s antidumping and countervailing duty laws abstract the antidumping ad and countervailing duty cvd laws in the united states have become the most pervasive form of import relief sought by domestic producers this paper estimates the collective economic effect of the hundreds of active u s ad cvd orders using a computable general equilibrium model we estimate that the collective net economic welfare cost in 1993 of these orders to be 4 billion this welfare estimate is sensitive to various modeling assumptions which are explored in the paper with the implementation of the uruguay round agreements the ad cvd laws remain one of the costliest programs restraining u s trade

comparative economic performance of conventional and profit sharing firms abstract this paper compares the various economic properties of conventional firms and profit sharing firms the properties contrasted include wage level employment output price total economic rents and industry efficiency the firms operate in an oligopolistic industry with a labor union in general profit sharing firms outperform non sharing firms however there exist counterexamples in which non sharing firms can outperform sharing firms to test the robustness of the results the analysis is conducted for a variety of oligopolistic industries quantity setting pricesetting and joint collusion

developing countries in the wto system applying robert hudec s analysis to the doha round in his 1987 developing countries in the gatt system robert hudec concluded that the identity of developing countries in the gatt system was primarily a matter of their demanding non reciprocal and preferential treatment developed countries responding grudgingly to those demands and that this situation had been unfruitful either to support developing country reforms or to discipline developed country restrictions aimed at developing countries hudec was pessimistic about the relationship becoming more productive but his expression of despair offered a glimmer of hope there are those who believe that the gatt has become so committed to the current policy that the only way to change it would be to start a new organization a new organisation was started the world trade organization but has the wto achieved what hudec hoped a new organisation might at the 1987 95 uruguay round developing country leaders acted as hudec had hoped they used international rules and bindings as leverage to support their own internally driven reforms to overcome generations of accumulated protection to lock in reforms against the backsliding that had undone previous reforms dealing with the uruguay round s unbalanced outcome and the overlapping implementation problem have shaped the doha round but the negotiations have misconceived and mismanaged both issues rather than seeking to identify their real economics the negotiations have gone back to the traditional idea of special and differential treatment perhaps the largest cost of this mismanagement is that in many developing countries the unilateral momentum for liberalisation has waned to the extent that the doha negotiations have drawn attention away from the domestic issues that were the basis of developing country liberalisation and enhanced the status of negotiators relative to the leaders who fought at home for reform they have contributed to that waning

rent seeking for pure public goods in this paper we present a formal analysis of rent seeking for public goods by two or more groups with different numbers of individuals we begin by considering equally wealthy groups under risk neutrality a case which constitutes our basic model several surprising and interesting results emerge from the analysis of this basic case the problem is then extended to deal with a groups with different wealth levels and b risk aversion this last extension brings about a further crop of interesting and useful results

the impact of eu export refunds on the african continent an impact assessment abstractthe eu s export refund policy has long been a source of controversy for its perceived impacts on third country markets however the eu commission maintain that these concerns are largely historic as cap reforms mean that export refunds are now used infrequently the purpose of this article is therefore to assess the impacts of refunds in the wake of the 2003 reform of the cap using two complementary analyses first an analysis using a computable general equilibrium model and second two case studies to assess the potential impact of export refunds in selected african developing countries

vertical coordination antitrust law and international trade this paper demonstrates that vertically aligned private or public organizations are capable of generating strategic trade advantage similar to that acquired through direct government export subsidization the model considers two forms of vertical coordination that lead to advantageous trade positions in international markets upstream vertical restraint and downstream equity sharing such practices are commonly employed both by state trading agencies and by private firms in nations with lenient antitrust laws the finding has important implications under new world trade organization wto rules intended to reduce government intervention in international transactions recent reforms in the wto favor nations that sanction highly refined vertical linkages between firms while nations with stringent antitrust legislation have an incentive to negotiate for greater harmonization of international laws

rent seeking with non identical sharing rules the primary object of this paper is to examine the role of differential sharing rules within a collective rent seeking setting on the possible non existence of nash equilibrium focusing on groups that distribute part of the rent equally among their members and the residual according to relative effort we show that in rent seeking societies applying the two polar sharing rules equilibrium never exists in the general case where groups apply different but not necessarily the polar sharing rules we study the relationship between group variability in distributing rents and the problem of non existence of equilibrium in the rent seeking game

profit sharing and welfare in an export subsidy game abstract this paper studies an export subsidy game in a duopoly in which one firm engages in sharing profits with its union in a non cooperative equilibrium of an export subsidy game without any cost advantage of firms the export subsidy to the profit sharing firm is smaller than the export subsidy to the non sharing firm and the output of the profit sharing firm is smaller than the output of the non sharing firm thus in an export subsidy game a profit sharing contract reduces the welfare in the country

special and differential treatment of developing countries in the wto moving forward after cancun the issue of special and differential treatment sdt for developing countries in the wto has become a source of tension in north south trade relations the absence of an effective sdt regime clearly contributed to the failure of the cancun ministerial meeting of the wto this paper argues for a new approach that puts the emphasis on efforts to improve the development relevance of wto rules and create mechanisms which allow greater differentiation across wto members in determining the applicability of wto disciplines complemented by non discriminatory liberalisation of trade in goods and services in which developing countries have an export interest the former is key in allowing the wto to expand its reach to new behind the border policies and the latter is important to establishing a development dimension in multilateral trade negotiations

the simple macroeconomics of profit sharing this paper is in the spirit of the temporary equilibrium approach to macroeconomics it basically extends that framework to cover a profit sharing system and then compares the macroeconomic characteristics with those of the more familiar wage system a first preliminary step is to demonstrate how a microeconomic model of monopolistic competition can be built up into a junior member of the keynesian macro family the methodology is to create from first principles including a careful formulation of a monopolistically competitive product market structurea natural underpinning for the standard aggregate demand specification the primary goal of the paper is to apply the integrated monopolistic competitionkeynesian type apparatus described above to investigate the macroeconomic properties of a profit sharing economy the existence of a consistent general framework covering both cases invites meaningful comparisons that indicate clearly why an economy based on profit sharing principles possesses natural immunity to stagflation by contrast the wage economya system we have largely accepted without critically examining its macroeconomic consequences is more prone to suffer from unemployment and inflation the policy implications for aggregate demand management in wage and share systems are analyzed and contrasted in writing this paper my philosophy has been to not shirk from using those reasonable parameterizations and functional forms which yield nice crisp results and permit me to focus sharply on the essential logic of basic issues it is certainly possible to present the main results in a somewhat more general formulation as the astute reader will appreciate but i fear only at some cost of distracting attention from those central features i wish to highlight

can the share economy conquer stagflation this paper analyzes weitzman s contention that a share economy will significantly improve the unemployment inflation tradeoff it is shown that the argument rests on a critical proposition that share contracts lead to labor s being in perpetual excess demand the basis of this proposition is challenged using a wide variety of models of the labor market the paper concludes that the microeconomics of share economies differs little from that of wage economies and that a widespread introduction of share contracts is unlikely to improve macroeconomic performance

how decoupled is the single farm payment and does it matter for international trade the extent to which decoupled agricultural support including the european union single farm payment sfp creates production incentives remains unclear we apply an extended version of the standard global trade analysis project model and generate a set of 21 databases that captures a comprehensive representation of domestic support by considering and modeling a range of different assumptions regarding the sfp s degree of decoupling we investigate the sfp s effect on the model s results the results of our analysis reveal substantially different effects that depend on the degree of decoupling and the findings can help validate trade analysis results particularly for developing countries

profit sharing in cournot oligopoly it has been argued that even if there are macroeconomic benefits individual firms will not switch from a conventional wage system to profit sharing we show that while true for a monopolist it does not generally hold under cournot oligopoly

effort levels in contests the public good prize case abstract we examine the equilibrium individual players groups and total effort levels expended in a contest where groups compete with one another to win a group specific public good prize and the players choose their effort levels simultaneously and independently

top guns may not fire best shot group contests with group specific public good prizes we analyze a group contest in which n groups compete to win a group specific public good prize group sizes can be different and any player may value the prize differently within and across groups players exert costly efforts simultaneously and independently only the highest effort the best shot within each group represents the group effort that determines the winning group we fully characterize the set of equilibria and show that in any equilibrium at most one player in each group exerts strictly positive effort there always exists an equilibrium in which only the highest value player in each active group exerts strictly positive effort however perverse equilibria may exist in which the highest value players completely free ride on others by exerting no effort we provide conditions under which the set of equilibria can be restricted and discuss contest design implications

steady state unemployment under profit sharing this paper demonstrates how asymmetric treatment of high seniority insider workers and non tenured outsiders gives rise to bad macroeconomic st eady states in a wage economy the framework uses a nash bargaining solution where workers may bargain over pay but firms control hiring profit sharing is then considered as an alternative payment mechanism having the automatically corrective incentive property that employers want to hire more outsiders given the assumptions of the model it is shown that widespread profit sharing results in lower unemployment and more output even though it is individually rational for insiders to prefer wages over profit shares copyright 1987 by royal economic society

technical regulations and specialization in international trade abstract it is widely acknowledged that while technical regulations can improve welfare and facilitate markets they can also impede trade the trade impeding effects of technical regulations are especially worrisome for developing countries they frequently lack the human and capital resources necessary to satisfy technical measures and thus are more likely to be excluded from markets by technical measures this paper uses highly disaggregated us data on agricultural mining and manufacturing imports to examine the impact of technical regulations on trade patterns using instrumental variables estimation to correct for the potential endogeneity of technical regulations the analysis suggests that technical regulations substantially impinge on poor countries exports their weaker capacities to satisfy technical regulations lead them to specialize away from industries with heavier regulatory burdens

saving two in a billion quantifying the trade effect of european food safety standards on african exports abstract a growing concern over health risks associated with food products has prompted close examination of sanitary and phytosanitary standards in industrialized countries this paper quantifies the impact of a new harmonized aflatoxin standard set by the eu on food exports from africa we employ a gravity model to estimate the impact of changes in differing levels of protection based on the eu standard in contrast to those suggested by international standards the analysis is based on trade and regulatory survey data for 15 european countries and nine african countries between 1989 and 1998 our results suggest that the implementation of the new aflatoxin standard in the eu will have a negative impact on african exports of cereals dried fruits and nuts to europe the new eu standard which would reduce health risk by approximately 1 4 deaths per billion a year will decrease these african exports by 64 or us 670 million in contrast to regulation set through an international standard

agricultural export subsidies and domestic support reform under the wto system what does it mean for welfare in west africa this paper analyses the potential welfare impacts west africa tends to encounter from liberalising agricultural export subsidies and domestic support in developed and developing countries according to the reform proposals of the doha development agenda we base our analysis on the july framework scenario which considers a tiered formula that adopts a harbinson approach plus sensitive and special product provisions the results indicate that while the world prices of the major exportable commodities of the region will fall those of their imports will rise subsequently consumers of nearly all of the commodities analysed encounter potential welfare losses while almost all producers of these commodities experience potential welfare gains consumers are expected to encounter an aggregate loss of about 591 93 million while a net producer surplus of about 423 78 million is expected to be generated however because the gains by producers are insufficient to compensate consumers losses the fifteen west african nations considered in the analysis are expected to experience a net welfare loss of about 168 16 million on the contrary large developing countries such as brazil india and china as well as developed nations like the eu and japan are expected to enjoy net welfare gains the net losses accrued to the region imply more poverty and heightened food insecurity as all west african countries faced severe hunger situation in 2010 however even though these findings conform to other research results indicating net food importing countries will become losers from agricultural trade reform while net food exporters experience welfare gains concerns of data quality and reliability that are usually associated with macrolevel analysis render these results more indicative than definitive

determinants of productivity per employee an empirical estimation using panel data abstract over several panels of countries this article studies the determinants of per employee productivity first in growth rate using the generalised method of moments and focusing on the role of ict then in level using more structural determinants

a time varying natural rate of interest for the euro area abstract we estimate a time varying natural rate of interest tvnri for a synthetic euro area over the period 1979q1 2004q4 using a small macroeconomic model broadly following a methodology developed by laubach and williams 2003 measuring the natural rate of interest the review of economics and statistics 85 4 1063 1070 for the united states the kalman filter simultaneously estimates the output gap and the natural rate of interest our identifying assumptions include a close relationship between the tvnri and the low frequency fluctuations of potential output growth the difference between the real rate of interest and its estimated natural level offers valuable insights into the monetary policy stance over the last two decades and a half

optimal capacity in the banking sector and economic growth the paper investigates from the welfare and growth point of view the determination of the optimal capacity of the banking system for that purpose we consider an overlapping generation model with endogenous growth there is horizontal differentiation and imperfect competition in the banking sector macroeconomic shocks affect the return on capital and together with the expectations of depositors condition the stability of the banking sector we specify to what extent deposit insurance may reduce instability and increase the number of deposits welfare and growth we also characterize the conditions under which excess banking capacities may appear and how their reduction may improve welfare

ict diffusion and potential output growth abstract the diffusion of icts may increase potential output growth in the medium to long term via capital deepening effects and total factor productivity gains and in the short to medium term via the lagged adjustment of wages to productivity gains

an ethical and legal synthesis of dumping growing concerns in international marketing international law holds that a firm is dumping if its foreign price is either below its domestic price or below its marginal cost domestic firms often claim that a low cost foreign firm is engaged in a long run strategy to destroy the domestic industry and harm domestic consumers dumping is a permanent feature of marketing strategies of numerous companies and anti dumping complaints are increasingly resorted to as a defensive instrument to stop the challengers this article offers a synthesis of ethical and legal issues involved and relates them to marketing concerns in international operations what is the current state of dumping legislation what concern over personal ethics should a manager have using teleological and deontological philosophies of ethics the argument is made that the marketing manager who set very low prices for an international market is not behaving unethically

central bank reputation in a forward looking model this paper examines whether reputation concerns can induce the central bank to implement the time inconsistent optimal monetary policy in the standard new keynesian model interestingly the forward looking nature of this model enables us to account for the coordination of the private agents on the punishment length of their trigger strategy our results suggest that both the inflation bias and the stabilization bias can be overcome by a reputation concerned central bank for the calibrations used in the literature these results enable us to endogenize woodford s timeless perspective and tend to weaken the case for recent monetary policy delegation proposals

bidding for a group specific public good prize abstract we examine the equilibrium effort levels of individual players and groups in a contest in which two groups compete with each other to win a group specific public good prize the players choose their effort levels simultaneously and independently and the winning group is determined by the selection rule of all pay auctions we first prove nonexistence of a pure strategy nash equilibrium and then construct a mixed strategy nash equilibrium at the nash equilibrium the only active player in each group is a player whose valuation for the prize is the highest in that group all the other players expend zero effort and the equilibrium effort levels depend solely on two values the highest valuation for the prize in each group

preemption contests between groups we consider a preemption game between competing groups firms lobbying individually for their groups interests provide an empirical example among symmetric groups the first firm to take action bears an unobserved cost and wins the prize on behalf of its group in equilibrium the firm with the lowest cost takes action but with delay more competition and a smaller ratio of costs to benefits reduce delay firms in larger groups wait longer but group action can occur earlier as the probability of a low cost firm is higher asymmetries in group size or strength of externalities also matter

fairness in international trade negotiations developing countries in the gatt and wto does fairness matter in the hard bargaining and horse trading that is associated with trade negotiations this paper presents a positivist analysis of the particular concepts of fairness that developing countries have appealed to in their trade negotiations within the auspices of the gatt and wto how these notions have evolved and the impact that they have had on negotiated outcomes treating the concept of fairness as my central dependent variable i argue that the notion of fairness can only be understood in terms of the institutional context it is embedded in which includes institutional structure as well as the participatory processes that underlie it i advance three hypotheses on the relationship between institutional context the fairness discourse and the influence and manoeuvre that member countries can have in shaping that discourse focusing on the role of fairness in the negotiation positions of developing countries i explain its substance and evolution through learning and adaptation by these countries within the very particular institutions of the gatt and the wto and the coalitions they form a part of and interact within

profit sharing as a cure for unemployment some doubts abstract in this paper we argue that given that a wage system is preferred to profit sharing in an insider outsider model tax incentives to encourage profit sharing could be dissipated by the use of cosmetic schemes the same may also be true in models in which unions care about employment hence we should be cautious about accepting weitzman s claim that profit sharing will reduce unemployment