when in rome how non domestic companies listed in the uk may not comply with accepted norms and principles of good corporate governance does home market culture explain these corporate behaviours and attitudes to compliance non domestic companies are increasingly present on the london stock exchange such companies have specific governance requirements they may seek to access capital in a more liquid market and to diversify ownership the reputational bonding coffee northwest univ law rev 93 641 708 1999 columbia law rev 102 1757 1831 2002 to a prestigious exchange should be a statement to the market of a propensity to disclosure and a willingness to protect minority shareholders yet many non domestic companies retain tightly controlled shareholding structures and are based in emerging regions where national culture norms differ to the uk we hypothesise that non domestic companies are likely to be less compliant with the principles of the uk corporate governance code and suggest a correlation between lower levels of compliance and non domestic companies from countries that demonstrate high power distance in the hofstede culture s consequences international differences in work related values 1980a cultural value framework we find some encouraging signs of compliance with the reigning governance code principles in board structures however we find only partial compliance in leadership and board effectiveness measures in those companies from cultures high on the power distance scale further we include analysis into ownership characteristics and find companies from emerging markets are dominated by a single or controlling group of shareholders which is likely to impact on attitudes to compliance and is particularly evidenced in terms of board structures with no executive directors or led by an executive chairman much of the prior research effort into the levels of compliance with the uk s comply or explain approach to governance has produced mixed results and focused on all companies in our exploratory approach to analysing only the non domestic subsample we report some evidence linking cultural distance to lower levels of compliance with the uk standards we develop a framework to guide future research into the context and cultural underpinnings of this sub sample of companies hypothesising that frequent market capitalisation induced index changes may divert attention away from any potential compliance issues on the one hand our evidence is encouraging for governance regimes based on voluntary compliance disclosures such as the uk and similar european and international markets as we report partial compliance with the principles of the current governance code our research may however be helpful in guiding future versions of the uk governance framework and other international governance regimes adopting the comply or explain approach and in setting policy to improve disclosure it contributes to the understanding of the specific context of non domestic companies and any cultural tendencies to non compliance by demonstrating evidence of lower levels of compliance with key principles of the code by non domestic companies we present a framework enabling lawmakers to further improve corporate governance codes

integration of spatial markets studies of spatial market integration draw their implications from a theory which assumes that there are no intraregional transport costs an alternative theory is offered based on the assumptions that buyers and sellers are spatially dispersed and intraregional transport costs are significant this implies that the market is a linked oligopoly or oligopsony and that market integration tests are tests of alternative oligopoly price formation processes for example collusive basing point pricing produces results typically assumed to imply efficiently integrated markets while competitive fob pricing does not the theoretical implications are illustrated with an analysis of hog prices in canada

risk allocation and the costs and benefits of public private partnerships we study the agency costs of delegated public service provision focusing on the link between organizational forms and uncertainty at project implementation we consider a dynamic multitask moral hazard environment where the mapping between efiort and performance is ex ante uncertain but new information may come along during operations our analysis points out at the e ciency gains that bundling planning and implementation as under public private partnerships can bring in terms of better project design and lower operational costs bundling also results in increasingly better performance as uncertainty is reduced by growing experience in the sector bundling should instead be viewed with caution when the private sector seeks to radically innovate on public service provision or to introduce new services but lacks the knowledge and expertise to anticipate the impact of the innovative design procedure technology on the cost of operations the compounding of asymmetric information ex post plus moral hazard and renegotiation may generate diseconomies of scope in agency costs which for high operational risk can make unbundling optimal in this context the use of private flnance can help re establishing the beneflt of bundling only if lenders have su cient expertise to help assessing project risks

the demise of the national union in italy lessons for comparative industrial relations theory using data collected during field research in italy on the reorganization of the auto industry the author analyzes recent changes in italian industrial relations based on this case study he argues for a new approach to comparative industrial relations research and theory instead of treating national systems as the basic unit of analysis and searching for macro institutional features as the key dimensions to use in constructing comparative typologies of industrial relations systems the author develops an approach focusing on micro level developments and the politics of strategic choice to explain variation within nations two factors appear to be crucial in explaining this variation local socioeconomic conditions that shape the strategies of unions and management in firms undergoing adjustment and the choices unions make in reallocating responsibilities between local and national structures

dynamic procurement under uncertainty optimal design and implications for incomplete contracts we characterize the optimal dynamic contract for a long term basic service when an uncertain add on is required later on introducing firm risk aversion has two impacts profits for the basic service can be backloaded to induce cheaper information revelation for this service an income effect which reduces output distortions the firm must also bear some risk to induce information revelation for the add on this risk effect reduces the level of the add on but hardens information revelation for the basic service the interaction between these effects has important implications for the dynamics of distortions contract renegotiation and the value of incomplete contracts

the bargaining system and performance a comparison of 18 oecd countries theoretical reasoning disagrees about what type of bargaining system performs best the authors have tested the explanatory power of three competing hypotheses neoliberalism corporatism and the hump shape hypothesis all of these hypotheses lack empirical support due to two main shortcomings first they ignore that wage restraint raises three distinct types of collective action problems second they do not consider qualitative differences among the national bargaining systems particularly the role of the state that do not allow analysis to construct such ordinal rankings of bargaining coordination as adopted by all previous empirical studies proceeding from a revised hypothesis and new measures of national bargaining systems the authors have found a nonlinear relationship between the bargaining system and economic performance in a way that economy wide wage coordination is superior only when the bargaining system is able to make local bargaining comply with coordination activities

on reform of the state and regulation of the market abstract this concluding paper reviews possible interrelationships between the economic and political dimensions of contemporary liberalizations in latin america and southern and eastern central europe after noting the absence of certain negative features impediments to a liberal economic and political order the paper proposes a more positive justification based on the examination of four possible interrelated linking mechanisms responses to chronic fiscal crisis the stabilization of popular expectations the strengthening of transparent and accountable institutions and external forms of reinforcement can all in principle contribute to the coordinated reinforcement of a more democratized state and a more liberalized market system without this implying a single uniform end result applicable to all situations this special issue has focused on some theoretical questions whether these possible linkages operate in practice requires empirical verification

private interest government beyond market and state market liberalism and state interventionism are both challenged as modes of democratic government by this book it suggests that the development of private interest governments might be a more viable policy alternative for the future it also questions whether the state could devolve certain public policy responsibilities to interest associations in specific economic sectors the book focuses specifically on interest associations in a disaggregated rather than global approach to economics and politics ten western industrialized countries are covered subjects ranging from advertising with self regulation private accountancy regulation and the british voluntary sector to four comparative papers on the corporatist arrangements in the governance of the dairy industry

contracting in the shadow of the law economic models of contract typically assume that courts enforce obligations based on verifiable events corresponding to the legal rule of specific performance as a matter of law this is not the case this leaves open the question of optimal contract design given the available remedies used by the courts this article shows that american standard form construction contracts can be viewed as an efficient mechanism for implementing building projects given existing legal rules it is shown that a central feature of these contracts is the inclusion of governance covenants that shape the scope of authority and regulate the ex post bargaining power of parties our model also implies that the legal remedies of mistake impossibility and the doctrine limiting damages for unforeseen events developed in the case of hadley v baxendale are efficient solutions to the problem of implementing complex exchange

the politics of liberalizing zambia s maize markets abstract this paper discusses the process of agricultural liberalization in zambia the central argument is that maize markets have been more quickly and fully liberalized than maize input markets because the perceived political risks of liberalizing input markets are greater than those of liberalizing maize markets and because economic interest groups benefited from maize liberalization while similar interests benefited from continued government interventions in input markets these finding imply that in order to understand the prospects for economic liberalization in new democracies we must disaggregate both civil society and markets

renegotiation of concession contracts in latin america evidence from the water and transport sectors abstract high rates of contract renegotiation have raised serious questions about the viability of the concession model to attract private participation in infrastructure in developing countries after extending in reduced form a standard regulation model in which renegotiation occurs due to the imperfect enforcement of concession contracts we use a unique data set of 307 concessions awarded in latin america from 1989 to 2000 covering the sectors of transport and water to analyze the determinants of this high incidence of renegotiations of infrastructure contracts we look in details at the impact on the probability of renegotiation of a concession of regulatory institutions institutional features economic shocks and of the characteristics of the concession contracts themselves we then derive some policy implications of our work

reconceptualizing the developmental state public savings and economic growth abstract developmental state theory suggests that rapid economic growth can be achieved when states allocate financial resources to strategic industrial sectors while not denying this mechanism i argue that an equally important component of state led growth is public sector efforts to mobilize financial resources for investment and growth i support this argument with crossnational statistical evidence and a brazilian case study both of which suggest that public savings substantially influence economic growth rates

monitoring moral hazard asymmetric information and risk sharing in procurement contracting this article characterizes the optimal procurement contract for a monopsonistic purchaser who contracts with a risk averse supplier with private information about his costs and who contributes an unobservable effort the costs incurred by the supplier may be uncertain and the purchaser has access to a monitor of costs that may be subject to noise that complicates risk sharing the purchaser prefers to respond to the observability problem with afixed price contract and to respond to the private information problem with a cost plus contract with uncertain costs and a perfect monitor the optimal contract relieves the supplier of some risk and the purchaser prefers that the effort of the supplier be subsidized with deterministic costs and a noisy monitor the optimal contract places risk on the supplier and the purchaser may prefer that the effort of the supplier be taxed procurement of goods and services is an important form of economic exchange that is often characterized by bargaining and contracting rather than by exchange in a competitive market the procurement setting analyzed here corresponds to the case in which the purchaser is a monopsonist who contracts with a single supplier as in the case of the department of defense contracting for the delivery of a military system in such a setting a principalagent model may be a reasonable representation of the relationship between the purchaser and the supplier and the economics of the procurement arrangement is then captured in the contract when the item procured is standardized the relevant information is likely to be common knowledge and risk may be minimal in such a case a fixed price contract may satisfactorily resolve the purchaser s contracting problem in contrast the model considered here is intended to represent the procurement of a nonstandardized item about which information is incomplete costs are uncertain and observability of supplier costs by the purchaser is limited procurement thus is complicated by the conjunction of adverse selection risk sharing and moral hazard problems

building and managing facilities for public services abstract we model alternative institutional arrangements for building and managing facilities for provision of public services including the use of the private finance initiative pfi by exploring the effects on innovative investment activity by providers the desirability of bundling the building and management operations is analyzed and it is considered whether it is optimal to allocate ownership to the public or the private sector we also examine how the case for pfi is affected by the voluntary or automatic transfer of ownership from the private to the public sector when the contract expires asset specificity and service demand risk play critical roles

regulatory risk vertical integration and upstream investment abstract we investigate the impact of regulatory risk on vertical integration and upstream investment by a regulated firm that provides an essential input to downstream competitors regulatory risk reflects uncertainty about the regulator s commitment to a regulatory policy that promotes the regulated firm s noncontractible investment we show that when the regulator sets the regulatory policy after the vertical industry structure has been established some degree of regulatory risk is ex ante socially beneficial regulatory risk makes vertical integration profitable and stimulates high upstream investment at a lower social cost this occurs for moderate costs of high investment and firms small risk aversion our analysis sheds new light on some relevant empirical patterns in vertically related markets

concessions of infrastructure in latin america government led renegotiation this paper analyzes government led renegotiations in infrastructure concession contracts in latin america based on the same sample used in guasch laffont and straub 2003 to examine firm led renegotiations after extending the theoretical framework to a multiple period context in which both pareto improving and rent shifting renegotiations at the initiative of the government can occur we develop an original instrumental variable strategy to address the issue of contract endogeneity and derive empirical results while some of the main insights concerning the importance of having a regulator in place when awarding concessions and the fragility of price cap regulatory schemes are unchanged significant differences arise with respect to the effect of investment and financing as well as the corruption variables we provide evidence that a good regulatory framework is especially important in contexts with weak governance and political opportunism copyright 2007 john wiley sons ltd

standard auctions with financially constrained bidders we develop a methodology for analyzing the revenue and efficiency performance of auctions when buyers have private information about their willingness to pay and ability to pay we then apply the framework to scenarios involving standard auction mechanisms in the simplest case where bidders face absolute spending limits first price auctions yield higher expected revenue and social surplus than second price auctions the revenue dominance of first price auctions over secondprice auctions carries over to the case where bidders have access to credit these rankings are explained by differences in the extent to which financial constraints bind in different auction formats

regulation of a risk averse firm abstract we extend the laffont tirole regulation model to the case of risk averse firms our main results are the impact of risk aversion is to shift the optimal contract toward a cost plus contract as compared with the risk neutral case distortions are greater and informational rents are smaller for high levels of risk aversion the optimal contract involves cost ceilings and the less efficient firms are bunched together journal of economic literature classification numbers d8 l5

bringing capital back in or social democracy reconsidered employer power cross class alliances and centralization of industrial relations in denmark and sweden the political domination of social democrats in denmark and sweden beginning in the 1930s was stabilized by the absence of intense opposition by capital to reformist programs aggressively opposed by business and the right elsewhere in the world this quiescence was not a symptom of weakness or dependency rather it was a product of a class intersecting cross class alliance behind institutions of centralized industrial relations that served mutual interests of sectoral groupings dominating both union and employer confederations well organized and militant and backed by social democrats employers in the two countries used offensive multi industry lockouts to force centralization on reluctant unions analysis of these cross class alliances and their pay distributional objectives is used to challenge a widely held view that centralization and social democratic electoral strength are sources of power against capital it also occasions a reassessment of conventional understandings of farmer labor coalitions and the decline of industrial conflict in scandinavia in the 1930s according to the alternative view presented here capital was included rather than excluded from these cross class alliances and industrial conflict subsided dramatically in part because employers achieved politically what they had previously tried to achieve with the lockout

insurance and taxation over the life cycle we consider a dynamic mirrlees economy in a life cycle context and study the optimal insurance arrangement individual productivity evolves as a markov process and is private information we use a first order approach in discrete and continuous time and obtain novel theoretical and numerical results our main contribution is a formula describing the dynamics for the labour income tax rate when productivity is an ar 1 our formula resembles an ar 1 with a trend where i the auto regressive coefficient equals that of productivity ii the trend term equals the covariance productivity with consumption growth divided by the frisch elasticity of labour and iii the innovations in the tax rate are the negative of consumption growth the last property implies a form of short run regressivity our simulations illustrate these results and deliver some novel insights the average labour tax rises from 0 to 37 over 40 years whereas the average tax on savings falls from 12 to 0 at retirement we compare the second best solution to simple history independent tax systems calibrated to mimic these average tax rates we find that age dependent taxes capture a sizable fraction of the welfare gains in this way our theoretical results provide insights into simple tax systems copyright 2013 oxford university press

efficient allocations in dynamic private information economies with persistent shocks a first order approach this article studies efficient allocations in a dynamic private information economy with a continuum of idiosyncratic shocks that are persistent i develop a first order approach for this environment and show that the problem has a simple recursive structure that relies on only a small number of state variables making the problem tractable i find sufficient conditions that guarantee that the first order approach is valid to illustrate the first order approach i numerically compute the efficient allocations in a mirrleesean economy with productivity shocks that follow a random walk and verify the validity of the first order approach i show that persistent shocks create a new trade off where the social planner decreases the informational rent of the agent today at the cost of providing higher insurance in the future copyright 2013 oxford university press

signaling and the design of delegated management contracts for public utilities this article analyzes the shape of contracts between local governments and the contractors they hire to run public facilities on their behalf governments are privately informed about the quality of the facility while risk neutral contractors undertake a non verifiable operating eort the design of the contract signals the quality of the facility in such a way that the better this quality the greater the share of operating risk kept by the government this feature reduces the agent s marginal incentives creating a trade o between signaling and moral hazard we provide extensions of our framework in several directions allowing for risk aversion on the agent s side double moral hazard and political delegation the model is supported by some stylized facts from the water industry

evaluating the integration of contiguous discontinuous markets this paper applies the concepts of structural models of markets market integration and market discontinuity to show that discontinuous markets alter the integration characteristics of continuous markets when analyzing systems of contiguous markets some of which are discontinuous it appears that the continuous markets are less well integrated when the discontinuous markets are operating than when they are not operating

optimal multiperiod contracts and the gain from enduring relationships under private information informational asymmetries can play a key role in explaining the existence and nature of multiperiod contracts in an illustrative risk sharing model even relatively short two period contracts can be mutually beneficial if there is private information though one period contracts suffice otherwise further contracts which are pareto optimal relative to the environment and the information structure are defined and partially characterized an example illustrates how otherwise inefficient intertemporal tie ins can be used optimally to mitigate incentive problems the obvious borrowing lending schemes are not private information pareto optimal in these period by period actions are not sufficiently constrained discounting affects the form of the optimal contract but none of these qualitative conclusions

bidding for incomplete contracts an empirical analysis of adaptation costs abstract procurement contracts are often renegotiated because of changes that are required after their execution using highway paving contracts we show that renegotiation imposes significant adaptation costs reduced form regressions suggest that bidders respond strategically to contractual incompleteness and that adaptation costs are an important determinant of their bids a structural empirical model compares adaptation costs to bidder markups and shows that adaptation costs account for 7 5 14 percent of the winning bid markups from private information and market power the focus of much of the auctions literature are much smaller by comparison implications for government procurement are discussed jel d44 d82 d86 h57 l13 l74 r42

regulatory risk under optimal monopoly regulation i develop a tractable framework to study regulatory risk under optimal monopoly regulation it captures increasing regulatory risk as mean preserving spreads of two regulatory variables weights attached to profits and costs of public funds the regulator s reaction to regulatory risk depends on the curvature of demand for convex concave demand it yields a positive negative information rent effect that benefits hurts the firm consumers dislike a positive information rent effect but their risk preferences also depend on their tendency to dislike fluctuations in consumption risk preference of benevolent regulators may contradict both those of the firm and consumers

a variance components approach to food grain market integration in northern nigeria a variance components methodology is developed for joint tests on a sample of time series of prices for seasonal differences in the price integration of markets the approach requires a statistically adequate number of observations for each market within seasons characterized by constancy of transactions costs among markets the model is applied to eighteen months of weekly grain prices for twenty two villages in northern nigeria results suggest that markets are not well integrated in the six months covering the harvest period implications are drawn for research on market performance in the region

to build or not to build normative and positive theories of public private partnerships abstract this paper analyzes whether the two tasks of building infrastructures which are socially useful in providing public services and managing these assets should be bundled or not when performance contracts can be written both tasks should be performed altogether by the same firm if a better design of the infrastructure helps also to save on operating costs otherwise tasks should be kept apart and undertaken by different units in incomplete contracting environments we isolate conditions under which either the traditional form of public provision of services or the more fashionable public private partnership emerges optimally the latter dominates when there is a positive externality and the private benefits from owning assets are small enough finally we take a political economy perspective and study how incentive schemes are modified under the threat of capture of the decision makers much of the gains from bundling may be lost in this case

the causes of government expenditure growth a survey of the u s evidence abstract the growth of government budgets can be broken down into a institutional and institutional components the former component the familiar substitution income and population public goods tax sharing effects is estimated to contribute about two fifths of the growth of u s government spending the latter component rent seeking political redistributions bureaucracy and perceptual informational impedimentia is important too but an exact imputation cannot be asserted given the state of the art in empirical public choice theory the cross effects on spending of the growth of regulation and tax preferences or tax expenditures though interesting is not pursued

consistency of higher order risk preferences risk aversion a second order risk preference is a time proven concept in economic models of choice under risk more recently the higher order risk preferences of prudence third order and temperance fourth order also have been shown to be quite important while a majority of the population seems to exhibit both risk aversion and these higher order risk preferences a significant minority does not we show how both risk averse and risk loving behaviors might be generated by a simple type of basic lottery preference for either 1 combining good outcomes with bad ones or 2 combining good with good and bad with bad respectively we further show that this dichotomy is fairly robust at explaining higher order risk attitudes in the laboratory in addition to our own experimental evidence we take a second look at the extant laboratory experiments that measure higher order risk preferences and we find a fair amount of support for this dichotomy our own experiment also is the first to look beyond fourth order risk preferences and we examine risk attitudes at even higher orders

government partisanship labor organization and macroeconomic performance governments of the left and right have distinct partisan economic policies and objectives that they would prefer to pursue their propensity to do so however is constrained by their desire for reelection we argue that the ability of governments to further their partisan interests and preside over reelectable macroeconomic outcomes simultaneously is dependent on the organization of the domestic economy particularly the labor movement we hypothesize that there are two different paths to desirable macroeconomic performance in countries with densely and centrally organized labor movements leftist governments can promote economic growth and reduce inflation and unemployment conversely in countries with weak labor movements rightist governments can pursue their partisan preferred macroeconomic strategies and achieve similarly beneficial macroeconomic outcomes performance will be poorer in other cases these hypotheses are supported by analysis of pooled annual time series data for 16 advanced industrial democracies between 1967 and 1984

the new economics of regulation ten years after the new economics of regulation is an application of the principal agent methodology to the contractual relationship between regulators and regulated firms after a critique of the traditional paradigms of regulation from the point of view of information economics a canonical model of regulation under asymmetric information is developed a survey of the main results obtained in the new economics of regulation is then provided in particular concerning the implementation of optimal contracts by a menu of linear contracts the dichotomy between pricing and cost reimbursement rules the auctioning of incentive contracts the dynamics of contracting under limited commitment and the hierarchical problems in regulation empirical implications are then discussed and avenues of further research are described in the conclusion

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

conflicts interest groups and politics in structural reforms abstract the present study is to my knowledge the first to examine the balance of power among all players influencing the adoption of structural reforms politicians regulators and interest groups special attention is devoted to the effect of conflicts between regulators professional conflicts signal to politicians that there is a high level of risk in implementing a given reform thereby weakening their confidence in it conflicts also benefit interest groups increasing their effectiveness vis a vis politicians using a unique data set on 32 attempts to reform israel s financial market i find that the greater the extent of conflicts among regulators and the greater the intensity of the opposition of interest groups the lower the probability that a reform will be approved these conflicts together with the strength of interest groups have led to repeated attempts to introduce reforms so that it takes on average 10 years for a reform to be adopted

economic reforms and cycles of state intervention abstract this paper views recent programs of state shrinking within a long term cyclical perspective it argues that the recent crisis of the state in latin america and eastern europe is a product of the excessive and distorted pattern of state growth during the expansionary phase of the cycle the current phase is one of necessary reform and privatization but there will be no final minimal state as theorized by the neoliberals on the contrary the cyclical pattern will produce a reorganized state ready to intervene and grow again the paper discusses both the economic and the political forces at work in these cycles invoking not only kondratieff but also hirschman unless the present generation of reformers learn to recognize the cyclical context within which they are operating and to accept that a strong reformed state is required for the resumption of growth and the consolidation of democracy they risk promoting measures which may eventually prove harmful both to market oriented reform and to political liberty

information efficiency and welfare in agricultural markets information and communications technologies icts have spread rapidly in the developing world there has been considerable interest in the potential role icts particularly mobile phones have begun to play in the marketing of agricultural outputs in these countries in this article we discuss the potential impacts icts may have on welfare both in terms of potential efficiency gains via improved arbitrage and welfare transfers among agents in the supply chain via reduced informational asymmetries and market power we also review the recent empirical evidence for such effects

food aid and food markets lessons from mozambique abstract a consensus has emerged on food aid policy acknowledging the importance of short run relief considerations while emphasizing that such policy must be driven by a long run developmental perspective this requires explicit attention to the effects of food aid on food markets yet it has long been clear that short and long run objectives of food aid may conflict this tension stands in high relief in mozambique one of the most food aid dependent countries in the world this paper examines the factors determining the effects of yellow maize food aid on markets for yellow maize and white maize the staple crop in mozambique the paper finds that a food aid has helped fuel the growth of a competitive small scale milling industry and informal marketing system b yellow and white maize are substitutes in consumption and c continued availability of yellow maize food aid at prices well below import parity will depress incentives for producers and traders to invest in the white maize production and marketing system this paper presents recommendations for reforming the monetized food aid program and coordinating it more effectively with emergency aid

comparing capitalisms understanding institutional diversity and its implications for international business this paper examines the role of institutional analysis within the field of international business ib studies within ib institutions matter but the view of institutions tends to be thin utilizing summary indicators rather than detailed description and thus approaches institutions as unidimensional variables that impact on particular facets of business activity this paper argues that ib research would be usefully advanced by greater attention to comparing the topography of institutional landscapes and understanding their diversity a number of alternative case based approaches are outlined that draw on a growing comparative capitalisms literature in sociology and political science the paper develops a number of empirical examples to show the utility and limits of these approaches for ib scholars

the growth of government in the united states an economic historian s perspective abstract this paper first outlines the salient features of the growth of government in american history secondly it offers a neoclassical explanation of that history in which increasing specialization and division of labor brought on by the scientific technological revolution of the nineteenth century drastically altered the demand for and supply of government finally it argues that institutions matter and describes the way the particular structure of governments was important in the timing and pace of its growth

the provision of incentives in firms i ncentives are the essence of economics despite many wide ranging claims about their supposed importance there has been little empirical assessment of incentive provision for workers the purpose of this paper is to critically overview existing work on the provision of incentives since the interests of workers and their employers are not always aligned a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm s interest this literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers these include piece rates options discretionary bonuses promotions profit sharing efficiency wages deferred compensation and so on my objective here is to evaluate this literature in the light of a growing empirical literature on compensation where possible i will address the literature from two perspectives first an underlying assumption of this literature is that individuals respond to contracts that reward performance accordingly i consider whether agents behave in this way and whether these responses are always in the firm s interest second i address whether firms write contracts with these responses in mind in other words do contracts look like the predictions of the theory incentives are provided to workers

short term contracts and long term agency relationships abstract long term contracts are valuable only if optimal contracting requires commitment to a plan today that would not otherwise be adopted tomorrow we show that commitments are unnecessary and hence short term contracts are sufficient if 1 all public information can be used in contracting 2 the agent can acess a bank on equal terms with the principal 3 recontracting takes place with common knowledge about technology and preferences and 4 the frontier of expected utility payoffs generated by the set of incentive compatible contracts is downward sloping at all times

market analysis methods are our enriched toolkits well suited to enlivened markets the past fifteen years have brought historic reduction of government intervention in agricultural markets in the developing world most economists and policy makers believe these reforms enliven markets previously fettered by excessive government authority nonetheless the impact of market oriented reforms on the spatial and intertemporal extent and the competitiveness of markets remains an inherently empirical question meanwhile there also have been major innovations in methods used to analyze markets and prices due largely to the rapidly emerging time series econometric literature agricultural economists toolkits have changed nearly as rapidly and dramatically as have developing economy markets but can these enriched toolkits answer the

limited liability and mechanism design in procurement in the presence of cost uncertainty limited liability introduces the possibility of default in procurement with its associated bankruptcy costs when nancial soundness is not perfectly observable we show that incentive compatibility implies that nancially less sound contractors are selected with higher probability in any feasible mechanism informational rents are associated with unsound nancial situations by selecting the nancially weakest contractor stronger price competition auctions may not only increase the probability of default but also expected rents thus weak conditions are su cient for auctions to be suboptimal in particular we show that pooling rms with higher assets may reduce the cost of procurement even when default is costless for the sponsor

procurement and predation dynamic sourcing from financially constrained suppliers abstract this paper studies the relationship between a financially constrained firm and a stronger opponent who is not cash constrained when these firms repeatedly compete in a procurement context we characterize and discuss the procurement agency s optimal strategy when faced with such asymmetric firms we highlight a trade off between the long run benefits from competition and the short run benefits from reduced costs finally we show that to reduce costs in the short run the financially weak firm should be favored in future procurement

optimal capital structure in agency relationships we analyze the optimal design of capital structure in agency relationships when a risk averse principal controls the agent s capital structure she awards a larger equity stake to outsiders the smaller the agent s productivity when she controls both the timing and the terms of the agent s financing the principal shifts to equityholders all risk associated with stochastic production and with the agent s unknown productivity when the principal dictates only the terms of financing only the former risk is borne by equityholders when the principal is sufficiently averse to risk she affords the agent no choice among incentive schemes

markets and states against minimalism abstract this paper argues against the currently fashionable case for state minimalism or laissez faire it not only argues for a strong state but also for an activist one though operating on a different basis from the many recently failed interventionist states the argument is developed via a critique of a series of overstated or one sided propositions that bolster the state minimalist position these include the notion of price distortions of inherently inefficient public enterprise of an unambiguous dividing line between the public and the private sectors and of statism as inherently rent seeking the paper seeks to rescue alternative perspectives from outside neoclassical political economy approach such as the importance of civil society and the need for a nonmaximizing theory of the state successful liberalization programs may require more intervention of a different kind at least for a transitional period a broad view of democracy is required allowing the possibility of state action guided by motives of public interest

dynamic managerial compensation a variational approach abstract we study the optimal dynamics of incentives for a manager whose ability to generate cash flows changes stochastically with time and is his private information we show that distortions aka wedges under optimal contracts may either increase or decrease over time in particular when the manager s risk aversion and ability persistence are small distortions decrease on average over time for sufficiently high degrees of risk aversion and ability persistence instead distortions increase on average with tenure our results follow from a novel variational approach that permits us to tackle directly the full program thus bypassing some of the difficulties of the first order approach encountered in the dynamic mechanism design literature

empirical investigation into spatial integration without direct trade comparative analysis before and after the establishment of the ethiopian commodity exchange this paper presents a comparative analysis of the spatial price cointegration of coffee markets in ethiopia in the pre and post ethiopian commodity exchange ecx era using the autoregressive distributed lag ardl cointegration framework the study takes into consideration a market condition in which government policy restricts arbitrage coffee trade between coffee producing areas using coffee price data from 1998 2013 and applying a bounds test approach and toda yamamoto granger causality test the study finds that the establishment of ecx has strengthened regional integration rather than a national harmony between producer markets we also find evidence that since the establishment of ecx an opportunity was created for high quality coffee to dominate price formation while also allowing lower quality coffee producing areas to establish themselves the study underlines the importance of market transparency and exchange of price information between producer markets

contracting with imperfect commitment and the revelation principle the single agent case this paper extends the revelation principle to environments in which the mechanism designer cannot fully commit to the outcome induced by the mechanism we show that he may optimally use a direct mechanism under which truthful revelation is an optimal strategy for the agent in contrast with the conventional revelation principle however the agent may not use this strategy with probability one our results apply to contracting problems between a principal and a single agent by reducing such problems to well defined programming problems they provide a basic tool for studying imperfect commitment

dynamic contracting with persistent shocks abstract in this paper we develop continuous time methods for solving dynamic principal agent problems in which the agent s privately observed productivity shocks are persistent over time we characterize the optimal contract as the solution to a system of ordinary differential equations and show that under this contract the agent s utility converges to its lower bound immiserization occurs unlike under risk neutrality the wedge between the marginal rate of transformation and a low productivity agent s marginal rate of substitution between consumption and leisure will not vanish permanently at her first high productivity report also the wedge increases with the duration of a low productivity report we apply the methods to numerically solve the mirrleesian dynamic taxation model and find that the wedge is significantly larger than that in the independently and identically distributed i i d shock case

monopolistic screening under learning by doing this article investigates the design of incentives in a dynamic adverse selection framework where agents production technologies display learning effects and agents learning rates are private knowledge in a simple two period model with full commitment available to the principal we show that whether learning effects are over or underexploited crucially depends on whether more effcient agents also learn faster so costs diverge through learning effects or whether it is the less effcient agents who learn faster so costs converge we further show that an overexploitation of learning effects can occur also if the full commitment assumption is relaxed

constructing the international foundations of e commerce the eu u s safe harbor arrangement much recent international relations scholarship has argued that states are unable to control e commerce so that private actors are coming to play a dominant role however this body of literature fails to account for emerging hybrid institutions in which states create general frameworks of rules which are then implemented by private actors this article examines a prominent example of such an institution the eu u s safe harbor arrangement in the field of privacy and sets out an alternative explanation of state private actor relations in the sphere of e commerce it shows how safe harbor had its origins in efforts by the european union eu and united states to mitigate problems of interdependence that threatened to undermine the principles of order on which their regulatory systems were based safe harbor reflects neither the eu nor u s approach but rather a novel blend of state and private regulation the article demonstrates the vital role of argument and persuasion in identifying safe harbor as a solution and in negotiating its particulars it finds that conventional game theoretic accounts of bargaining are unable to explain the negotiation of safe harbor and argues that constructivist approaches should pay more attention to how argument can disclose new possibilities of action

semiparametric estimation of first price auctions with risk averse bidders in view of the non identification of the first price auction model with risk averse bidders this paper proposes some parametric identifying restrictions and a semiparametric estimator for the risk aversion parameter s and the latent distribution of private values specifically we exploit heterogeneity across auctioned objects to establish semiparametric identification under a conditional quantile restriction of the bidders private value distribution and a parameterization of the bidders utility function we develop a multistep semiparametric method and we show that our semiparametric estimator of the utility function parameter s converges at the optimal rate which is slower than the parametric one but independent of the dimension of the exogenous variables thereby avoiding the curse of dimensionality we then consider various extensions including a binding reserve price affiliation among private values and asymmetric bidders the method is illustrated on u s forest service timber sales and bidders risk neutrality is rejected

political aspects of mne theory political behavior by mnes has usually been ignored downplayed or passively treated in dominant economic models of the multinational enterprise in order to remedy this lacuna dunning s eclectic paradigm is expanded to integrate political dimensions in the analysis of ownership internalization and location advantages

long term contracting with markovian consumers to study how a firm can capitalize on a long term customer relationship we characterize the optimal contract between a monopolist and a consumer whose preferences follow a markov process the optimal contract is nonstationary and has infinite memory but is described by a simple state variable under general conditions supply converges to the efficient level for any degree of persistence of the types and along any history though convergence is history dependent in contrast as with constant types the optimal contract can be renegotiation proof even with highly persistent types these properties provide insights into the optimal ownership structure of the production technology

prudence in bargaining the effect of uncertainty on bargaining outcomes abstract we investigate the outcome of bargaining when a player s pay off from agreement is risky we find that a risk averse player typically increases his equilibrium receipts when his pay off is made risky this is because the presence of risk makes individuals behave more patiently in bargaining strong analogies are drawn to the precautionary saving literature we show that the effect of risk on receipts can be sufficiently strong that a decreasingly risk averse player may be better off receiving a risky pay off than a certain pay off

market liberalization and integration of maize markets in malawi the paper studies the extent of market integration of maize markets in malawi in order to understand how it has been affected by market liberalization several measures of integration are introduced to analyze both the comovement of prices and the price adjustment process over time monthly retail prices of maize at eight main locations over the period january 1984 to december 1991 are considered the main conclusion is that liberalization has increased market integration

identifying price linkages a review of the literature and an application to the world market of cotton this paper reviews the literature of price linkages and examines the degree to which cotton prices are linked it also tests whether such linkages have improved over the last decade it concludes that the degree of linkage has improved over the last decade while the main source of this improvement appears to be a result of short run price transmission and to a lesser extent long run co movement

learning by doing and dynamic regulation from experience regulated monopolists learn to employ cost reducing innovations we characterize the optimal regulation of an innovating monopolist with unknown costs regulatory policy is designed to minimize current costs of service while encouraging development of cost saving innovations we find that under optimal regulation i innovation is encouraged by light handed regulation allowing the monopolist to earn greater information rents while providing greater service ii innovation occurs in the absence of long term agreements when private information is recurring and iii innovation is more rapid in a durable franchise and the regulator prefers durable franchises for exploiting learning economies

dynamic regulation of quality we develop a dynamic regulation model of quality provision where maintenance efforts and quality shocks have a durable impact when the regulator contracts with a sequence of agents asymmetric information can lead to overprovision of quality reflecting a dynamic rent extraction effect when the regulator contracts with a single agent the efficiency of their relationship depends on the regulator s ability to transfer rents across periods hiring a single agent with unlimited liability is socially preferable to hiring a sequence of agents even when no commitment is feasible by contrast shorter franchises are socially preferable if the agent has limited liability

how integrated are world beef markets the case of australian and u s beef markets abstract the objective of the paper is to examine market integration between australian and u s beef prices at the farmgate level if these two prices are found to be integrated then it can be alleged that australian beef prices can be used as a world price in empirical analyses and or as a reference price to measure the level of support accorded the u s beef sector co integration analysis and a time varying parameter estimation procedure based on the kalman filter model are applied the paper distinguishes between steer and cow beef segments and it uses monthly data over the 1972 1 to 1993 2 period the results indicate that australian and u s beef prices are co integrated albeit not fully and that the degree of convergence between the various price pairs has not substantially increased over time the results also suggest that australian prices can not unequivocally be adopted as a world price in empirical analyses

what drives local food prices evidence from the tanzanian maize market this study quantifies the relationship between tanzanian and external maize markets while also accounting for domestic influences it concludes that external influences on domestic prices originate from regional rather than global markets it also shows that compared to external factors domestic factors exert a greater influence on tanzanian maize markets further the mechanisms through which trade policies influence maize markets involve interactions with both external market shocks and domestic weather shocks overall it provides evidence that the intermittent imposition of export bans in tanzania has had adverse impacts on its maize markets and consequently on the development of its agrarian economy

higher order risk attitudes demographics and financial decisions we conduct an experiment to study the prevalence of the higher order risk attitudes of prudence and temperance in a large demographically representative sample as well as in a sample of undergraduate students participants make pairwise choices between lotteries of the form proposed by eeckhoudt and schlesinger 2006 the choices in these lotteries isolate prudent from imprudent and temperate from intemperate behavior we relate individuals risk aversion prudence and temperance levels to demographics and financial decisions we observe that the majority of individuals decisions are consistent with risk aversion prudence and temperance in both the student and the demographically representative sample an individual s level of prudence is predictive of his wealth saving and borrowing behavior outside of the experiment while temperance predicts the riskiness of portfolio choices our findings suggest that the coefficient of relative prudence for a representative individual is approximately equal to two

income fluctuation and asymmetric information an example of a repeated principal agent problem we examine a simple repeated principal agent model with discounting there are a risk averse borrower with an unobservable random income and a risk neutral lender the efficient contract is characterized it tends to the first best constant consumption contract as the discount factor tends to one and the time horizon extends to infinity if the time horizon is infinite and the contract is legally enforceable the borrower s utility becomes arbitrarily negative with probability one if the borrower has constant absolute risk aversion consumption is transferred between any two states at a constant interest rate which is less than the rate of time preference

how to design infrastructure contracts in a warming world a critical appraisal of public private partnerships we analyze how long term uncertainty for example regarding future climate conditions affects the design of concession contracts and organizational forms in a principal agent context with dynamic moral hazard limited liability and irreversibility constraints the prospect of future uncertain productivity shocks on the returns on the firm s effort creates an option value of delaying efforts a course that exacerbates agency costs contracts and organizational forms are drafted to control this cost of delegated flexibility the possibility for the agent to delay investment in response to uncertainty and irreversibility also elicits preference for unbundling different stages of the project through short term contracts our analysis is relevant to infrastructure sectors that are sensitive to changing weather conditions and sheds a pessimistic light on the relevance of public private partnerships in this context

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

precautionary bidding in auctions we analyze bidding behavior in auctions when risk averse buyers bid for a good whose value is risky we show that when the risk in the valuations increases dara bidders will reduce their bids by more than the appropriate increase in the risk premium ceteris paribus buyers will be better off bidding for a more risky object in first price second price and english auctions with affiliated common interdependent values this precautionary bidding effect arises because the expected marginal utility of income increases with risk so buyers are reluctant to bid so highly we also show that precautionary bidding behavior can make dara bidders prefer bidding in a common values setting to bidding in a private values one when risk neutral or cara bidders would be indifferent thus the potential for a winner s curse can be a blessing for rational dara bidders

the korean system of innovation and the semiconductor industry a governance perspective1 this paper explores in detail the political institutional processes and governance aspects of the korean system of innovation it shows i how the specific form of corporate governance chaebol evolved out of korea s national political institutional arrangements such as the state firm relationship based on reciprocal subsidy and ii how the dramatic emergence of korean semiconductor firms in world memory chip markets resulted from the subtle and changing interactions of state world market conditions and chaebol governance copyright 1998 by oxford university press