imperfect competition multiple equilibria and unemployment policy this paper takes a simple imperfectly competitive macro model with increasing returns and shows how it can lead to nonexistence or multiplicity of equilibria the consequences for government policy toward unemployment are explored and shown to be very different from the traditional model it is argued that a multiple equilibrium model is an attractive possible explanation of the behavior of u k unemployment in the 1980s copyright 1990 by royal economic society

endogenous structures of association in oligopolies the formulation of associations of firms in an oligopoly with linear demand is analyzed as a two stage noncooperative game in the first stage firms form associations in order to decrease their costs and in the second stage they compete on the market examples of associations include r d joint ventures and groups of firms adopting common standards in equilibrium the associations formed exhibit two general features they are asymmetric and inefficient

business ethics in china first i briefly review the emergence and development of business ethics following three stages 1978 1984 1984 1994 1994 to the present and driven by four factors the inheritance of chinese traditional ethics the influence of marxist philosophy and ethics the reflections on the economic reform and the influence of business ethics from abroad then from a practical and a theoretical perspective i discuss the main challenges for business ethics in china issues of the economic system of corporate ethics and of management after commenting on the role of business ethics for the social development in china i offer some reflections about what china can contribute to and learn from other peoples

the effect of entry on r d networks we investigate the effect of potential entry on the formation and stability of r d networks considering farsighted firms we show that the presence of a potential entrant often alters the incentives of incumbent firms to establish an r d link in particular incumbent firms may choose to form an otherwise undesirable r d collaboration in order to deter the entry of a new firm moreover an incumbent firm may refrain from establishing an otherwise desirable r d collaboration expecting to form a more profitable r d link with the entrant finally potential entry may lead an inefficient incumbent to exit the market we also perform a welfare analysisand show that market and societal incentives are often misaligned

revenue management for operations with urgent orders this article is motivated by the case of a company manufacturing industrial equipment that faces two types of demand on the one hand there are the so called regular orders for installations or refurbishing of existing facilities these orders have a relatively long lead time on the other hand there are urgent orders mostly related to spare parts when a facility has a breakdown the delay in such case is much shorter but higher margins can be obtained we study the order acceptance problem for a firm that serves two classes of demand over an infinite horizon the firm has to decide whether to accept a regular order or equivalently how much capacity to set aside for urgent orders in order to maximize its profit we formulate this problem as a multi dimensional markovian decision process mdp we propose a family of approximate formulations to reduce the dimension of the state space via aggregation we show how our approach can be used to compute bounds on the profit associated with the optimal order acceptance policy finally we show that the value of revenue management is commensurate with the operational flexibility of the firm

networks of collaboration in oligopoly abstract in an oligopoly prior to competing in the market firms have an opportunity to form pair wise collaborative links with other firms these pair wise links involve a commitment of resources and lead to lower costs of production of the collaborating firms we study the incentives of firms to form links and the architecture of the resulting collaboration network we find that incentives to form links are intimately related to the nature of market competition our analysis also suggests that collaborations are used by firms to generate competitive advantage and that strategically stable networks are often asymmetric with some firms having many links while others have few links or are isolated specifically we show that networks with the dominant group architecture stars and inter linked stars are stable we also present some results on the architecture of socially efficient networks

harmful competition in insurance markets there is a general presumption that competition is a good thing in this paper we show that competition in the insurance markets can be bad and that adverse selection is in general worse under competition than under monopoly the reason is that monopoly can exploit its market power to relax incentive constraints by cross subsidization between different risk types cream skimming behavior on the contrary prevents competitive firms from using implicit transfers in effect monopoly is shown to provide better coverage to those buying insurance but at the cost of limiting participation to insurance performing simulation for different distributions of risk we find that monopoly in general performs much better than competition in terms of the realization of the gains from trade across all traders in equilibrium

too many mothers in law abstract developing countries with low tax capacity may rely on predation to finance government functions government predation in turn is often accused of imposing a choking effect on state owned enterprises soes contributing to the latter s poor performance we formalize this choking effect as a problem of inefficient predation that arises from time inconsistency and show that having multiple government bodies supervising the same soe may mitigate this problem our theory provides an efficiency rationale for the chinese style of decentralization before 1978 and challenges the wisdom of china s recent enterprise reform that attempted to consolidate supervisory power

farsighted r d networks we analyze the formation of bilateral r d collaborations in an oligopoly when each firm benefits from the research done by other firms it is connected to in contrast to myopic stability farsighted stability leads to r d networks consisting of two minimally connected components with the largest one comprising three quarters of firms

political decentralization and corruption evidence from around the world abstract how does political decentralization affect the frequency and costliness of bribe extraction by corrupt officials previous empirical studies using subjective indexes of perceived corruption and mostly fiscal indicators of decentralization have suggested conflicting conclusions in search of more precise findings we combine and explore two new data sources an original cross national data set on particular types of decentralization and the results of a firm level survey conducted in 80 countries about firms concrete experiences with bribery in countries with a larger number of government or administrative tiers and given local revenues a larger number of local public employees reported bribery was more frequent when local or central governments received a larger share of gdp in revenue bribery was less frequent overall the results suggest the danger of uncoordinated rent seeking as government structures become more complex

interjurisdictional capital mobility fiscal externality and a corrective subsidy abstract recent studies emphasize that local property taxation may result in inefficiently small amounts of local public spending this paper shows that the inefficiency can be traced to a fiscal externality when one jurisdiction increases its taxes it causes a flow of capital to other jurisdictions that increases their tax revenues the inefficiency can be corrected with a subsidy that internalizes the externality key empirical parameters determining the magnitude of the externality are identified illustrative calculations indicate that subsidy rates on the order of 40 might be required to achieve efficiency

insider power unemployment dynamics and multiple inflation equilibria this paper incorporates employment dynamics due to insider power into the barro gordon theory of inflation unlike in the static barro gordon case and even though our infinitehorizon model is linear quadratic there can be two markov perfect equilibria so that the same unemployment may correspond to either low or high inflation both equilibrium inflation rates measured per unit of the gap between the insiders and government s employment targets are higher than the corresponding rate in the static case the low inflation equilibrium has intuitive comparative statics properties in that inflation is increasing in insider power and the discount factor but the high inflation equilibrium behaves in the opposite way the highinflation equilibrium can be eliminated by a future precommitment to a fixed inflation regime e g erm but only if this precommitment can be made with certainty contrary to the static model inflation may be lower when the union puts a positive weight on a wage target than when it cares only about employment even when this wage target is consistent with a lower employment level than the employment target

r d networks we develop a model of strategic networks that captures two distinctive features of interfirm collaboration bilateral agreements and nonexclusive relationships our analysis highlights the relationship between market competition firms incentives to invest in r d and the architecture of collaboration networks in the absence of firm rivalry the complete network where each firm collaborates with all others is uniquely stable industry profit maximizing and efficient by contrast under strong market rivalry the complete network is stable but intermediate levels of collaboration and asymmetric networks are more attractive from a collective viewpoint this suggests that competing firms may have excessive incentives to form collaborative links

networks of knowledge among unionized firms we develop a model of strategic networks in order to analyze how trade unions will affect the stability of r d networks through which knowledge is transmitted in an oligopolistic industry whenever firms settle wages the partially connected network is likely to emerge in the long run if and only if knowledge spillovers are large enough however when unions settle wages the complete network is the unique stable network in other words the stronger the union bargaining power is the more symmetric stable r d networks will be in terms of network efficiency the partially connected network when firms settle wages does not pareto dominate the complete network when unions settle wages and vice versa

focusing the financial flow of supply chains an empirical investigation of financial supply chain management the objective of this paper is to establish a theoretical foundation for financial supply chain management fscm in order to strengthen managerial decisions concerning financial flows in supply chains although such decisions are made frequently and partial aspects of fscm are already understood in business practice empirical knowledge about fscm is in its early stages the study provides fundamental information derived from eight case studies based on 40 interviews the analysis extends previous studies of the interface between operations management and finance by i contributing to a mid range theory of fscm by exploring two distinct but not exclusive fscm categories their antecedents and performance effects ii empirically deriving a testable framework for fscm iii relating fscm to established theories in the field of scm and iv basing the analysis on transaction cost economics managerial insights reveal that weak working capital causes firms to focus on fscm more specifically the study identifies two fscm categories pre shipment fscm before invoice release and post shipment fscm after invoice release managers can improve upstream supply chain working capital with pre shipment fscm whereas post shipment fscm strengthens the buying firm s working capital position based on transaction cost economics we analyze how these improvements stem from risk reductions which are more effective if firms are integrated internally and externally

business ethics and finance in greater china synthesis and future directions in sustainability csr and fraud following the financial crisis and recent recession the center of gravity of global economic growth and competitiveness is shifting toward emerging economies as a leading and increasingly influential emerging economy china is currently attracting the attention of academics practitioners and policy makers there has been an increase in research interest in and publications on issues relating to china within high quality international academic journals we therefore organized a special issue conference in conjunction with the journal of business ethics jbe in lhasa tibet on may 19 20 2014 on business ethics in greater china past present and future the papers for the special issue focused on the intersection of ethics and finance and fit within one of the three themes environment and sustainability corporate social responsibility and fraud within these themes issues of intellectual capital protection gender equality political connections regional development investor protection corporate stewardship trust and corruption and corporate transparency each play a significant role in this paper we survey these studies and the related literature to provide a comprehensive coverage of business ethics and finance issues that affect china

modelling imperfectly appropriable r d via spillovers abstract we provide an extensive comparison of the well known r d models of d aspremont jacquemin and kamien muller zang exposing full or partial conflict in key conclusions and policy prescriptions using a mix of formal and or intuitive criteria we argue that the first model is of questionable validity for large spillover values the latter being characterized by jointly increasing returns to scale in the r d process an argument leading to equivalence between the two r d processes but not to agreement on some key conclusions is exposited in conclusion the models emerge as fundamentally different although a unilateral shift in the cost function of the first leads to agreement in all equilibrium outcomes

the new science of cities by michael batty the opinion of an economist cities are the cradle of a wide range of cultural social and technological innovations that are at the heart of modern economic growth and development half of humanity today lives in cities but until the last two decades economists have paid much less attention to cities than have other social scientists by contrast geographers have long studied the role of cities in human affairs michael batty a distinguished scholar in the field of human geography has recently written the new science of cities a synthesis of his work and of some other prominent urban geographers a review of his book is the first objective of this essay the second is to discuss and compare the tools and concepts developed by urban economists with those of urban geographers in the hope of triggering a fruitful debate between those two groups of social scientists

regulatory sanctions on independent directors and their consequences to the director labor market evidence from china we investigate the regulatory sanctions imposed on independent directors for their firms financial frauds in china these regulatory sanctions are prima facie evidence of significant lapses in business ethics during the period 2003 2010 302 person time independent directors were penalized by the regulator the china securities regulatory commission the csrc and the two stock exchanges we find that the independent directors with accounting experiences are more likely to be penalized by the csrc though they do not suffer more severe penalties than do the other sanctioned independent directors we also find that independent directors suffer less severe penalties than do the insider directors these results are consistent with the hypothesis that the sanctions on independent directors are tied to their assumed ethical and legal responsibilities following a regulatory sanction penalized independent directors experience a significant decline in the number of other board seats held however they can gain board seats in better quality firms we find that interlocked firms that share penalized independent directors with the fraud firm do not suffer from a valuation decline overall our results suggest that regulatory sanctions have not triggered further sanctions on the penalized directors in the labor market but they have instead created a disincentive for these directors to serve on the company boards of high risk firms

on the convergence to the nash bargaining solution for action dependent bargaining protocols we consider a non cooperative multilateral bargaining game and study an action dependent bargaining protocol that is the probability with which a player becomes the proposer in a round of bargaining depends on the identity of the player who previously rejected an important example is the frequently studied rejector becomes proposer protocol we focus on subgame perfect equilibria in stationary strategies which are shown to exist and to be efficient equilibrium proposals do not depend on the probability to propose conditional on the rejection by another player we consider the limit as the bargaining friction vanishes in case no player has a positive probability to propose conditional on his rejection each player receives his utopia payoff conditional on being recognized otherwise equilibrium proposals of all players converge to a weighted nash bargaining solution where the weights are determined by the probability to propose conditional on one s own rejection

the success and failure of reforms in transition economies this paper argues that an important reason why russia s performance and china s performance under capitalism have differed dramatically is that different arrangements governing the determination of prices and work practices evolved during the transition process in russia the arrangement which conferred monopoly rights to industry groups leftover from socialism prevented the adoption of better technology in china the arrangement that evolved contained no such monopoly elements the key factor in determining which arrangement evolved was the strength of the central government we put forth a model that implements these ideas and provide evidence in support of this theory

contractual arrangements and enforcement in transition agriculture theory and evidence from china abstract this paper empirically investigates the relationship between contractual arrangements and their enforcement in chinese agriculture based on an analysis of a survey of 100 agribusiness firms engaged in contract farming in zhejiang province of china we find that private contract enforcement mechanisms play an important role in influencing smallholders decisions to breach or fulfill contracts contract arrangements such as floor pricing or requiring smallholders to make specific investments facilitate self enforcement and significantly improve the smallholder s contract fulfillment rate this is particularly important in chinese agriculture since the business environment is characterized by an absence of effective public enforcement institutions

do lenders favor politically connected firms rent provision in an emerging financial market corruption by the politically connected is often blamed for economic ills particularly in less developed economies using a loan level data set of more than 90 000 rms that represents the universe of corporate lending in pakistan between 1996 and 2002 we investigate rents to politically connected rms in banking classifying a rm as political if its director participates in an election we examine the extent nature and economic costs of political rent provision we nd that political rms borrow 45 percent more and have 50 percent higher default rates such preferential treatment occurs exclusively in government banks private banks provide no

federalism and the soft budget constraint the government s incentives to bail out inefficient projects are determined by the trade off between political benefits and economic costs the latter depending on the decentralization of government two effects of federalism are derived first fiscal competition among local governments under factor mobility increases the opportunity costs of bailout and thus serves as a commitment device the competition effect second monetary centralization together with fiscal decentralization induces a conflict of interests and thus may harden budget constraints and reduce inflation the checks and balance effect the authors analysis is used to interpret china s recent experience of transition to a market economy copyright 1998 by american economic association

imperfect competition underemployment equilibria and fiscal policy it is often claimed that the demand externality created by imperfect competition can provide an analytical basis for keynesian fiscal policy prescriptions here this demand externality is embedded in a model of monopolistic competition where saving and employment are determined by optimizing choices it turns out that underemployment equilibria do exist that there is scope for fiscal intervention but that keynesian fiscal prescriptions are turned on their head thus demand externalities among imperfect competitors do not provide a general theoretical basis for these prescriptions unless supplemented by other deviations from the walrasian standard in the labor or capital market copyright 1990 by royal economic society

tax rights in transition economies a tragedy of the commons abstract this paper develops the concept of tax rights to analyze the impact of fiscal institutions on economic development in transition economies a government s tax rights are poorly defined when it and other governments and agencies can unilaterally levy taxes on the same tax base existing evidence suggests that chinese local governments have gained more clearly defined tax rights than their russian counterparts using the big push model of industrialization murphy k shleifer a vishny r 1989 industrialization and the big push journal of political economy 95 1003 1026 within a common property resource framework we show that this difference in tax rights helps explain why china has been significantly more successful than russia

player and referee roles held jointly the effect of state ownership on china s regulatory enforcement against fraud this article examines the impact of the prevailing state ownership in the chinese stock market on corporate governance and the financial regulatory system respectively as the internal and external monitoring mechanisms to deter corporate fraud and protect investors in line with the literature that state ownership exaggerates the agency problem we find that the retained state ownership in privatised firms increases the incidence of regulatory enforcements against fraud for the state owned enterprises soes however larger state ownership is associated with a lower incidence of enforcement actions this is attributed to the mutual political affiliation of the fraudulent soes and the regulatory commission a new regulation solutions for listed firm checks promulgated in march 2001 has mitigated this effect by empowering the regulatory commission to increase the severity of regulatory conditions our evidence confirms the improvement in the regulatory environment and investor protection in the chinese stock market brought about by the regulatory reform and development

a strategic model of social and economic networks we study the stability and efficiency of social and economic networks when self interested individuals can form or sever links first for two stylized models we characterize the stable and efficient networks there does not always exist a stable network that is efficient next we show that this tension persists generally to assure that there exists a stable network that is efficient one is forced to allocate resources to nodes that are not responsible for any of the production we characterize one such allocation rule the equal split rule and another rule that arises naturally from bargaining of the players

political connections and the process of going public evidence from china abstract we examine how political connections impact the process of going public specifically we test how political connections impact the pricing of the newly offered shares the magnitude of underpricing and the fixed cost of going public based on the experience of the newly public firms from chinese security markets and using multiple measures of political connections we find robust evidence that the issuing firms with political connections reap significant preferential benefits in the process of going public to be specific we find that firms irrespective of their ownership status with greater political connections have relatively higher offering price lower underpricing and lower fixed costs during the going public process

multiple equilibria in the british labour market some empirical evidence abstract this paper takes a simple imperfectly competitive aggregate labour market model with increasing returns which can lead to non existence or multiplicity of equilibria the model is estimated using annual aggregate data for britain some evidence is found and recent british economic history is interpreted using the model

institutional investors political connections and the incidence of regulatory enforcement against corporate fraud we investigate two under explored factors in mitigating the risk of corporate fraud and regulatory enforcement against fraud namely institutional investors and political connections the role of institutional investors in the effective monitoring of a firm s management is well established in the literature we further observe that firms that have a large proportion of their shares held by institutional investors have a lower incidence of enforcement actions against corporate fraud the importance of political connections for enterprises whether in a developed market such as the united states or an emerging market such as china has been established by previous studies however we find evidence of another positive effect of political connections they may reduce the incidence of enforcement action against corporate fraud we also find that political connections play a more significant role in reducing regulatory enforcement incidents against non state owned enterprises and firms in weaker legal environments whereas institutional ownership plays a more important role in reducing regulatory enforcement incidents against state owned enterprises

bounded rationality and strategic complementarity in a macroeconomic model policy effects persistence and multipliers motivated by recent developments in the bounded rationality and strategic complementarity literatures we examine an intentionally simple and stylized aggregative economic model when the assumptions of fully rational expectations and no strategic interactions are relaxed we show that small deviations from rational expectations taken alone lead only to small deviations from classical policy ineffectiveness but that the situation can change dramatically when strategic complementarity is introduced strategic complementarity magnifies the effects of even small departures from rational expectations producing equilibria with policy effectiveness output persistence and multiplier effects

an optimal taxation approach to fiscal federalism in a federal system of government each unit of government decides independently how much of each type of public good to provide and what types of taxes and which tax rates to use in funding the public goods in this paper we explore what types of problems can arise from this decentralized form of decision making in particular we describe systematically the types of externalities that one unit of government can create for nonresidents through both its public goods decisions and its taxation decisions the paper also explores briefly what the central government might do to lessen the costs of decentralized decision making

regional institutions ownership transformation and migration of industrial leadership in china the case of the chinese synthetic dye industry 1978 2008 scholars have emphasized the gradual ownership transformation of enterprises as a key driver of the chinese economy s unprecedented growth however little work has been done on the issue of whether this transformation process takes place evenly across the various regions in china this article describes the important role of regional institutions in shaping the ownership based competitiveness of local enterprises and the migration of industries across regions in the case of the chinese synthetic dye industry the passing of leadership from state owned enterprises soes to collectively owned enterprises coes and then to private enterprises pes was accompanied by a concurrent leadership migration from one region to another the article contends that this simultaneous occurrence was not accidental four institutional constraints the degree of central supervision the local labor arrangements the local social welfare provision and the degree of ambiguity in property rights retarded the rise of new ownership forms in the previously dominant regions this gave other regions the opening to take over leadership positions by providing a more favorable institutional context for new ownership forms these findings are likely to apply to all of the chinese manufacturing industries that existed prior to 1978 and that subsequently did not experience significant technological changes and were not highly protected by the government

the effectiveness of public enforcement evidence from the resolution of tunneling in china this paper examines the effectiveness of public enforcement by studying the effects of regulatory intervention to curb tunneling through intercorporate loans in china specifically we explore whether public enforcement efforts in 2006 blacklisting and sanctions resulted in less tunneling and ultimately in increased performance for tunneling firms we show that tunneling is among the dominant factors increasing the likelihood of becoming blacklisted we also find that firms tunneling mechanisms decreased significantly after the regulatory shock and that their performance increased significantly compared to non tunneling firms after the regulatory shock finally we find a positive market reaction to the public announcement of tunneling both for firms that have been blacklisted and other tunneling firms that are not blacklisted collectively these results suggest that public enforcement in the presence of a credible threat succeeds in deterring the effect on tunneling behavior in china

mutual fund activism and market regulation during the pre ifrs period the case of earnings informativeness in china from an ethical perspective this paper investigates the emerging effect of mutual fund involvement on the agency problem between majority and minority shareholders during the pre ifrs period in china indicated by earnings informativeness from an ethical perspective we find that the presence of mutual fund hampers earnings informativeness implying that mutual funds in general at their early stage in china are not yet capable of serving as an effective monitor this finding is in sharp contrast to the role of institutional investors in mature markets as documented in the literature however mutual funds affiliated with banks have been found to be effective to improve earnings informativeness of chinese listed companies and the impact is more pronounced among those affiliated with joint equity banks compared to their counterparts affiliated with state owned banks

welfare improving debt policy under monopolistic competition abstract we analyse the effects of debt policy in an overlapping generations model with monopolistic competition debt crowds out capital and raises interest rates but unlike competitive models this is welfare improving for all generations if the elasticities of substitution in production are low in a non competitive model the social marginal product of capital could be negative while the rate of interest exceeds the population growth rate the latter two are non negative and profits exceed investment

federalism chinese style the political basis for economic success in china china s remarkable economic success rests on a foundation of political reform providing a considerable degree of credible commitment to markets this reform reflects a special type of institutionalized decentralization that the authors call federalism chinese style this form of decentralization has three consequences first it fosters competition not only in product markets but also among local governments for labor and foreign capital this competition in turn encourages local government experimentation and learning with new forms of enterprises regulation and economic relationships second it provides incentives for local governments to promote local economic prosperity finally it provides a significant amount of protection to local governments and their enterprises from political intrusion by the central government

government in transition abstract the speed of economic reforms is not the only important determinant of the success of the transition to a market economy the transition of government from a communist state to an institution supporting a market economy is as critical survey evidence shows that russia lags significantly behind poland in the transition of its government which may account for its inferior economic performance despite adopting similar economic reforms i argue that the lack of turnover of old communist politicians and the creation of inappropriate electoral and fiscal incentives for these politicians may account for the poor performance of the russian government and suggest some strategies for improving the situation

why do entrepreneurs enter politics evidence from china this article examines the determinants of the entrepreneur s political participation by employing a unique matched firm institution data set from china we find that the likelihood of an entrepreneur s participation can be explained by the underdevelopment of markets and market supporting institutions according to our estimates the probability of entering politics decreases by 8 20 from the mean when the institutional indices improve by one standard deviation our findings support the view that the institutional environment shapes the private entrepreneur s motivation to participate in politics they also provide an example of how private entrepreneurs respond to state market failure in developing and transition countries jel g1 h00 o10 p2 p3

time to enter and business cycles abstract this paper examines a model in which market entry forms a business cycle propagation mechanism during expansionary periods new firms enter previously monopolized markets creating efficiency gains that amplify the effect of technology and fiscal policy shocks on employment market entry is delayed creating a dynamic pattern to output growth closer to that observed in the us economy than the standard rbc model