the public choice of superior sanctions this paper analyzes the public choice of specific forms of sanctions current sanctions are essentially quantity constraints q sanctions which are like quotas in that they might bestow benefits on certain special interest groups in the target country revenue sanctions r sanctions may be able to recapture such benefits in the form of sender government revenue which could either compensate for the costs of sanctions to the sending country or finance other sanction enhancing activities aimed at the target country hence r sanctions may be superior to q sanctions in general or on the basis of target efficiency however public choice analysis suggests that q sanctions will generally be chosen over r sanctions by democratic countries

political influence motives and the choice between tariffs and quotas abstract tariffs and quotas are not symmetric under a variety of circumstances this paper pursues the implications of one such circumstance domestic market power for the political choice of protectionist instrument in the context of a political support maximization model tariffs dominate quotas in the political model in the absence of revenue seeking motives in the presence of revenue seeking ambiguity arises but limits can be placed on the range of tariff or quota levels also some welfare implications emerge

on the robustness of equilibrium refinements abstract the philosophy of equilibrium refinements is that the analyst if he knows things about the structure of the game can reject some nash equilibria as unreasonable the word know in the preceding sentence deserves special emphasis if in a fixed game the analyst can reject a particular equilibrium outcome but he cannot do so for games arbitrarily close by then he may have second thoughts about rejecting the outcome we consider several notions of distance between games and we characterize their implications for the robustness of equilibrium refinements

commodity price shocks and civil conflict evidence from colombia how do income shocks aect armed con ict theory suggests two op posite eects if labor is used to appropriate resources violently higher wages may lower con ict by reducing labor supplied to appropriation this is the opportunity cost eect alternatively a rise in contestable income may increase violence by raising gains from appropriation this is the rapacity eect our paper exploits exogenous price shocks in inter national commodity markets and a rich dataset on civil war in colombia to assess how dierent income shocks aect con ict we examine changes in the price of agricultural goods which are labor intensive and natural resources which are capital intensive we focus on coee and oil the two largest exports we nd that a sharp fall in coee prices in the 1990s increased violence dierentially in regions growing more coee by lower ing wages and the opportunity cost of joining armed groups in contrast a rise in oil prices increased violence dierentially in the oil region by in creasing municipal revenue siphoned through rapacity this pattern holds in several other agricultural and natural resource sectors providing robust evidence that price shocks aect con ict in opposite directions depending on the factor intensity of the commodity

war peace and the size of countries this paper studies the relationship between international con ict and the size distribution of countries in a model in which both peaceful bargaining and non peaceful confrontations are possible we show how the size distribution of countries depends on the likelihood bene ts and costs of con ict and war we also study the role of international law and show how better de ned international property rights may lead to country breakup and more numerous local con icts

war and natural resource exploitation abstract we build a theoretical framework that allows for endogenous conflict behaviour i e fighting efforts and for endogenous natural resource exploitation i e speed ownership and investments while depletion is spread in a balanced hotelling fashion during peace the presence of conflict creates incentives for rapacious extraction as this lowers the stakes of future contest this voracious extraction depresses total oil revenue especially if world oil demand is relatively elastic and the government s weapon advantage is weak some of these political distortions can be overcome by bribing rebels or by government investment in weapons the shadow of conflict can also make less efficient nationalized oil extraction more attractive than private extraction as insecure property rights create a holdup problem for the private firm and lead to a lower license fee furthermore the government fights less intensely than the rebels under private exploitation which leads to more government turnover without credible commitment to future fighting efforts private oil depletion is only lucrative if the government s non oil office rents are large and weaponry powerful which guarantees the government a stronger grip on office and makes the holdup problem less severe

an equilibrium conflict model of land tenure in hunter gatherer societies i apply features of the economics of conflict and spatial competition in developing a model of the emergence of land ownership in hunter gatherer societies tenure regimes are the result of interactions between those seeking to defend claims to land and those seeking to infringe on those claims the model highlights the dependence of land ownership on ecological parameters such as resource density and predictability and allows for situational ownership in which the nature of ownership changes as realized ecological conditions change the paper concludes with a comparative assessment of tenure across a representative sample of hunter gatherer peoples

a sheriff two bullets and three problems this paper analyzes deterrence in international conflicts assume a strong country has several opponents and faces a military capacity constraint which is not exhausted after just one war two main effects are at work if the strong country is constrained then reputation is more expensive and may occur less often the problem is that the opponents may but need not be more aggressive compared to a world without a constraint it may be that an axis of evil does not exist before a war occurs but is implicitly formed even by moderate countries after the first war was waged a point of interest is whether the constrained strong country should obtain additional capacity given that the objective is to minimize the number of wars the analysis sheds some new light on the u s foreign policy the united nations and the axis of evil

from maize to haze agricultural shocks and the growth of the mexican drug sector understanding how economic incentives affect illegal drug production is essential for crafting policies in response to the international drug trade policymakers typically face a choice between two strategies targetingcriminalgroupsvialawenforcement andofferingproducersincentivestoengage in alternate activities yet little is known about how the returns to alternate legal activities affect drug supply we contribute to this literature by examining how shocks to legal commodity prices affect the drug trade in mexico our analysis exploits exogenous movements in the mexican maize price stemming from weather conditions in u s maize growing regions as well as exports of other major maize producers using data on over 2200 municipios spanning 1990 2010 we show that lower prices differentially increased the cultivation of both marijuana and opium poppies in municipios

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

efforts in two sided contests the degree of rent dissipation is studied in extended two sided contests that in volve two types of efforts while usual contestants expend resources in trying to win the contested prize potential recipients of the rent seeking efforts also participate in the con test this is due to uncertainty regarding the source of power in the contest that induces the bureaucrats to expend resources to increase their share in the rent seeking efforts by try ing to appear as the party controlling the allocation of the prize we show that the existing theoretical and empirical studies are incomplete and may underestimate the extent of rent dissipation

the costs of conflict abstract violent conflict destroys resources it generates destruction costs these costs have an important effect on individuals decisions to cooperate or conflict we develop two models of conflict one in which conflict s destruction costs are independent of individuals investments in arms the tools of conflict and another in which conflict s destruction costs depend on those investments our models demonstrate that when conflict s destruction costs are arms dependent conflict is more costly making cooperation more likely we test this prediction with a laboratory experiment in which subjects first choose how heavily to invest in arms and then choose whether to cooperate or conflict in an environment where interaction is repeated in one set of treatments conflict s destruction costs are arms independent in another they are arms dependent our experimental results support our models predictions compared to when conflict s destruction costs are arms independent when those costs are arms dependent cooperation increases by nearly a third

on the origins of property rights conflict and production in the state of nature i analyse the emergence of property rights in a model of conflict and production in the absence of institutions of enforcement the population of agents evolves dynamically through conflicts for possession of factor goods among pairs of randomly matched agents conflicts are incomplete information wars of attrition with an agent s type consisting of his or her independently drawn valuation of the prize and cost of competing for it i prove equilibrium existence and show that in the steady state of the game the population sorts into two stable groups resource haves and have nots in accordance with a known function of their primitive types

policy choice theory and evidence from commitment via international trade agreements abstract why do governments employ inefficient policies when more efficient ones are available for the same purpose we address this puzzle in the context of redistribution toward special interest groups sigs by focusing on a set of important policies tariffs and non tariff barriers ntbs in our policy choice model a government can gain by committing to constrain tariffs through international agreements even if this leads to the use of less efficient ntbs commitment has political value because it improves the bargaining position of a government that is weak relative to domestic sigs using detailed data we find support for several of the model s predictions including i tariff commitments in trade agreements increase the likelihood and restrictiveness of ntbs but not enough to offset the original tariff reductions ii tariff commitments are more likely to be adopted and more stringent when the government is weaker relative to a sig thus the results can explain the use of inefficient policies for redistribution and suggest that the bargaining motive is an important source of the political value of commitment in international agreements

redundant tariffs as rational endogenous protection i introduction in a competitive market tariff protection is redundant whenever the tariff exceeds the difference between the domestic autarky price and the world price with redundant protection domestic price rises by less than the full nominal tariff since a smaller tariff would be sufficient to generate prohibitive protection such excess protection is easily dismissed as economic ignorance on the part of lobby groups and or policy makers yet redundant tariff protection also called water in the tariff is a common feature of 19th and early 20th century u s tariff history more recently the developing nations penchant for redundant nominal tariffs has complicated world bank attempts to calculate effective rates of protection this paper develops political economy models in which the endogenous tariff may be redundant when the world price is uncertain even if agents themselves are risk neutral the possibility of world price declines or domestic cost increases creates positive expected benefits to producers from tariffs that are initially redundant these positive expected benefits provide the rationale or demand for redundant protection embedding this demand within simple political economy models generates endogenous tariffs that appear redundant to casual observation these political economy models also permit us to assess the comparative static effects of changes in the mean preserving spread of the world price an extensive literature explores the links between protection and world price uncertainty most authors address one or more of the following i the optimal choice of protective instrument ii risk aversion by private agents or iii protection as social insurance young and anderson 1980 show that the optimal policy to maximize expected consumer surplus given a constraint on expected imports on expected import expenditure is a specific an ad valorem tariff using the same constraint on expected imports they demonstrate 1982 that quantitative restraints dominate tariffs if consumers exhibit risk aversion toward real income fluctuations in the same vein but in a dynamic setting falvey and lloyd 1986 show that producers prefer non tariff barriers since they concentrate protection on down side risk cassing hillman and long 1986 examine trade policy as social insurance in a ricardo viner model given sufficient risk aversion both mobile and immobile factors exhibit an ex ante preference for reduced domestic price variability under terms of trade uncertainty these papers however do not address the empirically relevant case of above prohibitive protection an existing rationale for tariffs that exceed the prohibitive level is that they facilitate cartel formation fishelson and hillman 1979 show that a domestic monopoly benefits from tariff protection that exceeds the prohibitive level since the tariff that yields full monopoly profit and beyond which additional protection is redundant may exceed the tariff that drives imports to zero an interesting example of this is the formation in 1898 of the american tin plate company this trust was formed to exploit tariff protection that exceeded the prohibitive level the company sold stock whose par value was set at four to five times the cash price of the assets of other tin plate manufacturers that it acquired 1 the existence of potential domestic market power forces a distinction between prohibitive and redundant protection and in this example the above prohibitive tariff is clearly not redundant since domestic price rises by the full amount of the tariff 2 in the u s the 19th century protectionist weapon of choice was the specific tariff usually in the form of a minimum valuation proviso so that all products worth less than a certain amount were taxed as if they were worth the specified minimum specific tariffs generated high and often redundant levels of protection for domestic producers of the coarser grades of manufactures while allowing continued imports of the finer grades that were not produced domestically

sensitivity of job destruction to vintage and tenure effects matching models with endogenous job destruction typically deliver excessively volatile job destruction and moderate volatility of vacancies in our model vintage and tenure eects promote the creation of new matches that are temporarily more productive while reducing the survival of temporarily less productive matches this cleansing eect pro duces a counter cyclical in ow into unemployment removes the strong response of job destruction to productivity shocks and generates a downward sloping beveridge curve as in the data the model also generates more volatility in vacancies the job nding rate and labour market tightness

reputation and exogenous private learning abstract short run competitors in the chain store game receive noisy signals of the long run incumbent firm s type the history of signals which in the limit is fully revealing is observable to the competitors but possibly not to the incumbent as long as there is sufficient noise in the signals then in any equilibrium a patient weak incumbent obtains a payoff strictly higher than her minmax payoff

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

dissipation of contestable rents by small numbers of contenders the theory of rent seeking with its origins in the observations of gordon tullock 1967 or to use jagdish bhagwati s 1982 proposed term the theory of directly unproductive profit seeking activities is concerned with the potentially adverse effects on resource allocation of incentives to cap ture and defend artificially contrived rents and transfers the scope for so cial loss proposed by the theory derives from the relation between the value of a contestable prize and the value of the resources attracted into the con test to determine the beneficiary of the prize underlying this social loss is a specification of how rational behavior by optimizing agents links the value of the prize sought to the resources expended it has been traditional to assume competitive behavior in describing the activities of lobbying and influence seeking then if some further condi tions are satisfied l the total value of the resources expended precisely equals the value of the prize sought so dissipation is complete 2 conse quently the social cost associated with contestability of a rent can be in ferred from the value of the rent itself and the detailed and hard to come by information on individual outlays made in the course of the contest be comes unnecessary by basing their analyses on competitive dissipation contributors to the rent seeking literature see the review by robert tollison 1982 have been able to presume that the observed value of a contested rent is an exact measure of the associated social cost of monopoly power or regu lation similarly in the trade theoretic literature where the rights contested are to quota premia or revenues from trade taxes krueger 1974 bhagwati

capabilities perception and escalation the evolution of crises depends upon interpreting intentions under uncertainty we model crises as a game of two sided incomplete information players are uncertain about their own payoffs from war because of differences between observable and actual capabilities we derive four hypotheses testing them against crises in europe between 1815 and 1970 we show a nonmonotonic relationship between ex ante observable capabilities and the likelihood of violence in a crisis as well as the ex ante likelihood of a negotiated settlement we answer five questions 1 how do differences in observable capabilities between rivals influence the likelihood of a crisis and the escalation to violence 2 how do intangible capabilities alter the effects of observable capabilities on the likelihood of conflict and violence 3 what do national leaders learn from the responses of their adversaries in crises 4 under what conditions can deterrence succeed 5 under what conditions are the strong likely to give in to the weak or vice versa in a crisis

arming as a strategic investment in a cooperative equilibrium to develop a positive economic theory of military spending this analysis focuses on a game theoretic general equilibrium model of international conflict in which consumption peaceful investment and military spending are endogenously determined the analysis illustrates that when there is repeated interaction between nations a game of threats and punishments generally will not support a disarmament outcome and that fluctuations in military spending can be an endogenous result of fluctuations in aggregate economic activity furthermore the analysis shows how the relation between aggregate economic activity and military spending qualitatively depends on whether governments are acting opportunistically or cooperatively copyright 1990 by american economic association

a theory of ambiguity credibility and inflation under discretion and asymmetric information this paper develops a positive theory of credibility ambiguity and inflation under discretion and asymmetric information the monetary policymaker maximizes his own politically motivated objective function that is positively related to economic stimulation through monetary surprises and negatively related to monetary growth the relative importance he assigns to each target shifts stochastically through time his current preference trade off is known to him but not to the public when choosing the state contingent path of money growth for the present and the future the policymaker compares the benefits from current stimulation with the costs associated with higher future inflation expectations current monetary growth conveys information to the public about future money growth because there is persistence in the policymaker s objectives although expectations are rational information is imperfect because monetary control procedures are imprecise as a result the public cannot correctly distinguish persistent changes of emphasis on different policy objectives from transitory monetary control errors the public becomes aware of changes gradually by observing past monetary growth credibility is defined in terms of the speed with which the public recognizes changes in the objectives of the policymaker credibility is lower the noisier monetary control and the more stable the objectives of the policymaker looser monetary control and a higher degree of time preference on the part of the policymaker induce him to produce higher and more variable monetary growth when the policymaker is free to determine the accuracy of monetary control he does not always choose the most effective control available in spite of the fact that monetary surprises always have an expected value of zero the reason is that ambiguous control procedures enable the policymaker to generate positive surprises when he cares more than on average about economic stimulation he leaves the inevitable negative surprises for periods in which he cares more about inflation prevention this result provides an explanation for the fed s preference for ambiguity recently documented by goodfriend 1986 the policymaker is more likely to pick more ambiguous control procedures the more uncertain his objectives and the higher his time preference the paper also provides a theoretical underpinning for the well documented crosscountry positive correlation between the level and the variability of inflation

endogenous destruction in conflict theory and extensions this article develops a general equilibrium model of conflict to characterize the implications of endogenous destruction for bargaining and fighting specifically we consider the scenario where two contending parties engage in bargaining to avoid fighting when there are direct costs e g arms buildups and indirect costs e g destruction to consumable resources of conflict without imposing specific functional form restrictions on conflict production and destruction technologies we show their interactions in determining an optimal decision between fighting and bargaining we find that under the shadow of conflict bargaining is costly as the contending parties always allocate more resources to arming for guarding settlement through bargaining than in the event of fighting in contrast to conventional thinking that bargaining is pareto superior over fighting we show conditions under which fighting dominates bargaining as the nash equilibrium choice the positive analysis may help explain the general causes of fighting without resorting to the assumption of incomplete information or misperceptions jel d74 h56 c7

incremental protection and efficient political choice between tariffs and quotas this paper offers a new political economy explanation for the increasing use in recent years of quotas instead of or in combination with tariffs as a form of trade protection we show that under domestic monopoly the comparative efficiency of tariffs and quotas in achieving political objectives will vary depending on the nature of the mark et and the level of protection at high levels of protection quotas can become more politically efficient than tariffs we also show that at low levels of protection a price equivalent quota may not exist

external threat and collective action i introduction individuals with common interests usually attempt to further their welfare by acting collectively examples of collective action include the provision of a public good or collective good the establishment of clubs and the formation of alliances or political parties in his seminal work the logic of collective action olson 1965 uses the provision of collective goods as an example to discuss collective action problem or coordination failure in particular he analyzes how group size and the distribution of individual benefits of a collective good may affect the provision level of the good two of the most celebrated propositions from his book are the suboptimality proposition the larger the group the farther it will fall short of providing an optimal amount of a collective good p 35 and the exploitation proposition there is a systematic tendency for exploitation of the great by the small p 29 these propositions have generated a broad research effort in collective action problems in economics and political science many scholars have examined the validity of these propositions 1 a limitation of olson s theory is that he analyzed collective action problems as phenomena within a single group while assuming that external threat to a group either does not exist or is treated as a constant in many cases however two or more groups compete against each other in these situations a group s provision of collective goods might be affected by the configurations of its own group and the competing groups and relative strength of the groups to illustrate assume that two alliances of states say a and b are competing for supremacy an increase in a s military spending poses a greater threat to b s security in response to the heightened threat members of b might feel the need to increase their military spending which in turn could affect the military spending decisions of members of a bruce 1990 develops a model that endogenizes external threat in a three country model with two allies and one adversary interest group lobbying is another example to understand a group s lobbying behavior scholars often focus on the number and size of firms within the group and their geographical distribution however the configuration of a competing interest group and the two groups relative strengths should also figure into an individual firm s decision concerning the appropriate contribution to its group s lobbying efforts other examples include party discipline voter turnout ledyard 1981 1984 palfrey and rosenthal 1983 electoral coalitional politics tsebelis 1990 hausken 1995a b negative campaigning in primary elections newman and niou 2000 factional rivalry in civil wars and joint ventures for research and development in industrial organizations all these examples point to the importance of external threat in explaining the logic of collective action in this article to study simultaneously the way intergroup competition and intragroup collective action interact we develop a collective good model that endogenizes external threat in the context of competition between two groups a group can be either defensive or offensive in nature we define a group as defensive if its fighting capacity can be used only to defend its own resources a group is offensive if its fighting capacity can be used to expropriate resources from its rivals as well as protect its own resources we realize that empirically it is difficult to determine whether a group is offensive or defensive but theoretically it is useful to know how the offensive or defensive nature of a group can affect the collective action problem we analyze collective action problems when 1 one of the groups is offensive whereas the other is defensive and 2 both groups are offensive respectively also in group competition if conquests are economically profitable the way spoils of victory are divided among group members can also affect collective action

contesting resources rent seeking conflict and the natural resource curse a growing empirical literature links natural resource abundance and pointiness to impeded economic growth and civil strife we develop rent seeking and conflict models that capture the most salient features of contests for resource rents and show how both resource abundance and geographical clustering can be associated with intense contests and sub optimal economic performance however we also show that these relationships are not necessarily monotonous pointiness can trigger more intense contests but can also facilitate the coordination on peaceful outcomes finally we show that contesting resources through violent conflict may yield superior outcomes from an economy wide perspective than contests through rent seeking

job matching and propagation in the u s labor market the vacancy unemployment ratio and employment react sluggishly to productivity shocks we show that the job matching model in its standard form cannot reproduce these patterns due to excessively rapid vacancy responses extending the model to incorporate sunk costs for vacancy creation yields highly realistic dynamics creation costs induce entrant firms to smooth the adjustment of new openings following a shock leading the stock of vacancies to react sluggishly

nation states vs united empire effects of political competition on economic growth is political fragmentation i e nation states more favorable to economic growth than political unification i e a united empire this study develops an endogenous growth model to analyze the growth effects of fragmentation versus unification under unification the economy is vulnerable to excessive leviathan taxation and possibly subject to the costs of unifying heterogeneous populations under fragmentation the competing rulers are constrained in taxation but spend excessively on military defense if capital mobility is above below a threshold then fragmentation unification would favor growth and this threshold is increasing in the degree of defense competition and decreasing in the costs of heterogeneity

historical legacies a model linking africa s past to its current underdevelopment abstract recent studies have found evidence linking africa s current under development to colonial rule and the slave trade given that these events ended long ago why do they continue to matter today i develop a model exhibiting path dependence which provides one explanation for why these past events may have lasting impacts the model has multiple equilibria one equilibrium with secure property rights and a high level of production and others with insecure property rights and low levels of production i show that external extraction when severe enough causes a society initially in the high production equilibrium to move to a low production equilibrium because of the stability of low production equilibria the society remains trapped in this suboptimal equilibrium even after the period of external extraction ends the model provides one explanation why africa s past events continue to matter today

the distribution of political power the costs of rent seeking and economic growth the ceo of the argentine firm is so busy he has no time to work 1 i introduction most of the recent growth literature has developed in a representative agent social planner framework with little role for political institutions this development is paralleled by a lack of appreciation of the role of the entrepreneur in most of neoclassical economics we believe that the poor growth performance of many societies can only be understood by reinstating a central role to political institutions and entrepreneurs in this paper we study the effect of some characteristics of political redistribution mechanisms a reduced form for a series of institutions on economic growth 2 we view and model the entrepreneur as the mainspring of economic growth schumpeter 1942 powell 1990 it is our contention that poor growth performance can be explained by the misallocation of entrepreneurial resources to activities that do not foster growth such as overgrown financial sectors in high inflation economies information gathering and influence activities the allocation of entrepreneurial resources responds to the incentives present in the institutional framework in our model we concentrate on the allocation of the entrepreneur s time between influence and growth enhancing activities 3 the importance of the misallocation of entrepreneurial time is described in de pablo and martinez 1989 who provide a stylized version of the typical day in the life of an argentine ceo he wakes up at 6 30 turns on the radio to listen to portions of three hour news and interview programs in these programs the news of the newspaper he is about to read are updated with telephone calls to key officials businessmen analysts etc while having breakfast he reads two general papers and two papers specializing in economics as soon as he arrives at the office he will check with his managers to confirm that he correctly understood what he read or heard and start his office day this typically will include a working luncheon to listen to a public official or a political or economic analyst plus meetings with ministers or high officials responsible for price exchange rate or wage controls authorizations for entry in a market or tax incentives for investments etc plus meetings with competitors to unify positions in a petition to authorities the phenomenon we describe is not at all new and its importance throughout history is well documented baumol 1990 describes political moneymaking in ancient rome corruption and confiscation of property in medieval china warring in the middle ages as well as rent seeking in more recent times 4 within this view that politics and institutions matter we concentrate on the effect on growth of the distribution of political power across pressure groups does an equal distribution of power among contenders for redistribution help or hurt economic progress the answer depends upon the nature of the redistributive conflict we find that horizontal inequality in which access to political favors differs across sectors of economic activity is beneficial for economic growth on the other hand vertical inequality in which bargaining power is unequal between insiders and outsiders of a particular economic sector is harmful for growth an even distribution of political power at the horizontal level is harmful for growth because it induces a shift in entrepreneurial time towards the pursuit of redistribution it is when each agent group perceives himself as having a chance that the incentives to seek transfers are highest when winners and losers are clearly defined the incentive to shift resources out of productive activities is much weaker argentina is a case in which the main redistributive conflict entails competition among sectors of economic activity 5 robinson 1985 this situation has led to a deadlock in which valuable entrepreneurial resources have been directed away from schumpeterian behavior

repeated games with long run and short run players this paper studies the set of equilibrium payoffs in repeated games with long and short run players and little discounting because the short run players are unconcerned about the future each equilibrium outcome is constrained to lie on their static reaction best response curves the natural extension of the folk theorem to games of this sort would simply include this constraint in the definitions of the feasible payoffs and minmax values in fact this extension does obtain under the assumption that each player s choice of a mixed strategy for the stage game is publicly observable but in contrast to standard repeated games the set of equilibrium payoffs is different if players can observe only their opponents realized actions

endogenous strength in conflicts in this paper we study a two period contest where the strength of players in the second period depends on the result of the contest in the first stage we show that in contrast to one shot contests in the same setting heterogeneous players exert different efforts in the first stage and rent dissipation in the first period may be large we study the conditions under which the discouragement effect holds in addition new issues emerge like the evolution of the strengths and the shares of the prize during the game

maintaining a reputation against a long lived opponent we consider a game between a patient player 1 and a nonmyopic but less patient opponent player 2 as usual in reputation models we suppose that the patient player s type is private information and that he may be a commitment type who is locked into playing a particular strategy we investigate the extent to which an uncommitted or normal type of patient player can exploit his less patient opponent s uncertainty to maintain a reputation for playing like a commitment type

employment fluctuations with downward wage rigidity the role of moral hazard we study the cyclical dynamics of job creation and destruction when workers effort is not perfectly observable the no shirking constraint may amplify fluctuations in hiring by making firms surplus share procyclical and may cause a burst of inefficient firing when a downturn begins but quantitatively it mainly raises the cost of motivating marginal workers in booms since firms cannot commit to keep them in recessions and thereby strongly damps the countercyclical fluctuations in the separation rate this implies a robust beveridge curve but casts doubt on ramey and watson s 1997 contractual fragility mechanism and worsens shimer s 2005a volatility puzzle

endogenous timing in general rent seeking and conflict models we examine simultaneous versus sequential choice of effort in a two player contest the timing of moves determined in a preplay stage prior to the contest subgame as well as the value of the prize is allowed to be endogenous contrary to endogenous timing models with an exogenously fixed prize the present paper finds the following 1 players may decide to choose their effort simultaneously in the subgame perfect equilibrium spe of the extended game 2 the spe does not need to be unique in particular there is no unique spe with sequential moves if the direct costs of effort are zero 3 symmetry among players does not rule out incentives for precommitment to effort locally away from the cournot nash level 4 finally there may be no correlation between win probability and strategic incentives in our framework a finding most central in the analysis of fixed prize contests

war politics an economic rational voter framework the frequency of foreign conflict initiations in the united states is found to be significantly greater following the onset of recessions during a president s first term than in other periods the authors develop an economic theory of the political use of wars which links the election cycle war decisions and economic performance consistent with the observed relationships among these events an incumbent leader with an unfavorable economic performance record may initiate a war to force the learning of his war leadership abilities and thus salvage with some probability his reelection this obtains despite voter rationality and informational symmetry copyright 1995 by american economic association

domestic politics and international conflict this paper explores the interactions between domestic politics and international conflict the analysis shows that electoral uncertainty associated with competition between political parties each representing a specific group of the electorate imparts a negative bias on the nation s military spending given military spending by other nations in turn electoral uncertainty lowers other nations incentive to arm as well in this context democratic institutions can be thought of as a possible precommitment mechanism that reduces the severity of conflict between nations and thereby increases the amount of resources available globally for consumption copyright 1994 by american economic association

gambling reputation repeated bargaining with outside options we study the role of incomplete information and outside options in determining bargaining postures and surplus division in repeated bargaining between a long run player and a sequence of short run players the outside option is not only a disagreement point but reveals information privately held by the long run player in equilibrium the uninformed short run players offers do not always respond to changes in reputation and the informed long run player s payoffs are discontinuous the long run player invokes inefficient random outside options repeatedly to build reputation to a level where the subsequent short run players succumb to his extraction of a larger payoff but he also runs the risk of losing reputation and relinquishing bargaining power we investigate equilibrium properties when the discount factor goes to 1 and when the informativeness of outside options diffuses in both cases bargaining outcomes become more inefficient and the limit reputation building probabilities are interior publication abstract

maintaining a reputation when strategies are imperfectly observed this paper studies reputation effects in games with a single long run player whose choice of stage game strategy is imperfectly observed by his opponents we obtain lower and upper bounds on the long run player s payoff in any nash equilibrium of the game if the long run player s stage game strategy is statistically identified by the observed outcomes then for generic payoffs the upper and lower bounds both converge as the discount factor tends to 1 to the long run player s stackelberg payoff which is the most he could obtain by publicly committing himself to any strategy

nuclear deterrence counterforce strategies and the incentive to strike first i use the theory of games to investigate issues about how to understand the use of nuclear counterforce strategies by the united states and the soviet union during the cold war the function of the counterforce strategies i model is not to enable a state confidently to launch a nuclear attack but to convince its adversary that the probability that it might do so as a last resort is greater than zero the models allow one to investigate rational behavior when information is incomplete and there is an incentive to strike first and therefore provide a way to explore controversies about the effect of counterforce strategies on both the credibility of extended deterrence and the possibility of inadvertent nuclear war the models suggest contrary to the claims of a number of writers that the use of nuclear counterforce strategies is not necessarily inconsistent with rational behavior and provide some insight into the relation between counterforce strategies and brinkmanship models of deterrence

the slippery slope of concession we show that with common knowledge and a common rate of time preference the potential loser can always avoid wasteful conflict through a time consistent series of small concessions we examine how the failure of each of these assumptions may explain why conflicts arise we also debate which actions may be helpful in such unfortunate circumstances

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

predation reputation and entry deterrence abstract economists often argue that predatory practices are irrational since there exist cheaper or more certain means to gain or maintain a monopoly our gametheoretic equilibrium analysis suggests that if a firm is threatened by several potential entrants then predation may be rational against early entrants even if it is costly when viewed in isolation because it yields a reputation which deters other entrants asymmetric information plays a crucial role in our analysis since it provides the rationale for entrants to base their expectations of the firm s future behavior on its past actions the analysis also suggests methods to treat general reputational phenomena

effective property rights conflict and growth abstract this paper shows how the interaction between conflict and growth can give rise to a nonmonotone relationship between property rights and social welfare this interaction is illustrated in a model of endogenous growth in which equilibrium diversion of resources is the cost of securing effective property rights a symmetric equilibrium allocation associated with more secure property rights and faster growth can be pareto dominated by one associated with poorer property rights and slower growth faster growth can exacerbate the problem of diversion whenever property rights are sufficiently poor these results call for caution before a society decides to pursue economic growth independently of the institutional structure of property rights furthermore if this structure is inappropriate piecemeal reform might not be in the interest of society and a substantial reform might be necessary if it is to be welfare improving

unemployment fluctuations over the life cycle abstract in this paper we show that i the volatility of worker flows increases with age in us cps data and ii a search and matching model with life cycle features endogenous separation and search effort is well suited to explain this fact with a shorter horizon on the labor market older workers outside options become less responsive to new employment opportunities thereby making their wages less sensitive to the business cycle their job finding and separation rates are then more volatile along the business cycle the horizon effect cannot explain the significant differences between prime age and young workers as both age groups are far away from retirement a lower bargaining power on the youth labor market brings the model closer to the data

the kennedy round evidence on the regulation of international trade in the united states the purpose of this paper is to analyze and provide empirical evidence regarding the regulation of international trade flows our goal is to provide an explanation of the changes in the interindustry pattern of trade restrictions which emerged from the kennedy round of tariff negotiations the principal conclusion of the analysis is that the pattern of protection which resulted from the kennedy round was shaped to minimize the domestic political disruption resulting from liberalization industries which faced significant import threats and whose characteristics enhanced their potential political influence were able to maintain tariff protection in the face of overall liberalization the potential impact of the agreed upon tariff reductions was partially undermined by the introduction of offsetting nontariff trade barriers ntbs in addition ntbs were introduced systematically in industries that were becom

war and conflict in economics theories applications and recent trends we review the main economic models of war and conflict these models vary in details but their implications are qualitatively consistent highlighting key commonalities across a variety of conflict settings recent empirical literature employing both laboratory and field data in many cases confirms the basic implications of conflict theory however this literature also presents important challenges to the way economists traditionally model conflict we finish our review by suggesting ways to address these challenges

screening and labor market flows in a model with heterogeneous workers we construct a monetary model in which workers are heterogeneous and productivity is worker specific resulting in time varying deviations between the average productivity of employed and unemployed workers we assume the worker specific component of productivity which we label as the worker s efficiency level is unobservable ex ante by firms and job search is nondirected by interviewing an unemployed worker firms can observe the worker s efficiency level workers with low overall productivity may be interviewed but not hired as firms screen these workers out during the interview process we show that screening amplifies the volatility of the exit rate from unemployment capturing the idea that firms become more selective in a recession reducing the vacancy yield relative to a model with homogeneous levels of efficiency following a negative productivity shock the

risk averse rent seekers and the social cost of monopoly power there is now quite general recognition that the social cost of monopoly power encompasses the resources expended by individuals seeking to become the beneficiaries of monopoly rents however since the activity of rent seeking is generally not observable direct estimates of resources expended in quests to acquire monopoly power are usually impossible to come by 1 as a consequence the indirect approach of taking the observed value of monopoly rents as indicative of the unobserved value of the resources expended in rent seeking is quite generally adopted in approaches to evaluation of the social cost of such activity

conflicts over property rights and natural resource exploitation at the frontier abstract competition for land at the frontier is analyzed by considering a game between a first settler and a contestant although the first settler is the legitimate owner of a plot of land his remoteness from the government s administrative center makes it difficult to prove it this creates incentives for a contestant to dispute his claims both contenders will expend resources in order to secure ownership due to transport costs the more remote a plot of land is the lower its output value this tends to discourage appropriative activities land degradation is sometimes used as a substitute to appropriative activities a lower discount rate may encourage land degradation

merging reputation and repeated games with incomplete information we relate and unify several results that appeared in the following domains merging of probabilities perturbed games and reputation phenomena and repeated games with incomplete information journal of economic literature classification numbers c72 d83

common value contests with asymmetric information abstract we consider two player perfectly discriminatory common value contests or all pay auctions in which one player knows the value of the contested object with certainty and the other knows only its prior distribution we show among other things that in equilibrium the players win with equal probability this contrasts with a large class of imperfectly discriminatory contests in which the uninformed player wins with a strictly greater probability than the informed player

endogenous timing in the presence of non monotonicities the aim of this paper is to generalize the endogenous timing game proposed by hamilton and slutsky games and economic behavior 1990 2 pp 29 46 by allowing the payoff or the marginal payoff of a player to become non monotonic with respect to the strategy of the opponent we propose a taxonomy of the subgame perfect nash equilibria based on the characteristics of the payoff functions proposed by eaton canadian journal of economics 2004 37 pp 805 29 we determine under which conditions of the initial payoff functions commitment has a social value and when the simultaneous move nash equilibrium is commitment robust and discuss its pareto efficiency

political economy of dynamic resource wars abstract the political economy of exhaustible resource extraction is analysed in three contexts first if an incumbent faces a threat of being removed once and for all by a rival faction extraction becomes more voracious if the factions do not share rents equally second perennial political conflict cycles are more inefficient if constitutional cohesiveness or the partisan in office bias is large and political instability is high third resource wars are more intense if constitutional cohesiveness is weak the incumbent has a partisan in office bias reserves of resources are high the wage is low governments can be less frequently removed from office and fighting technology has less decreasing returns to scale resource depletion in such wars is more rapacious if there is more government instability the political system is less cohesive and the partisan in office bias is smaller

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

collective versus unilateral responses to terrorism global terrorism presents collective action issues for targeted nations proactive measures e g preemptive strikes against terrorists create external benefits for all at risk nations in contrast defensive actions deflect attacks to softer targets thereby giving rise to external benefits to protected foreign residents and external costs to venues abroad coordinated antiterrorism measures are particularly difficult to achieve when many nations must participate and nonparticipants can undo the efforts of others thus freezing terrorists assets or abiding by a no negotiation pledge pose difficult collective action problems these same concerns do not plague decisive action against domestic terrorism

contest efforts in light of behavioural considerations this study shows that distortion of probabilities is a possible reason for rent under dissipation incontests with relatively small number of participants such distortion may also result however inover dissipation of the contested rent focusing on contests with homogeneous contestants and thecommonly studied contest success function our main results clarify under what circumstances i rents are more under dissipated relative to the standard situation where probabilities are notdistorted ii rents are under dissipated yet less intensely relative to the standard situation whereprobabilities are not distorted iii rents are over dissipated and iv the contest does not possess asymmetric interior equilibrium in pure strategies

expropriation of multinational firms the role of domestic market conditions and domestic rivalries expropriation of multinational firms the role of domestic market conditions and domestic rivalries hamid mohtadi the causes of expropriation of multinational firms mnfs by their host governments are investigated based on social welfare analysis and also on public choice theory a key feature is the presence of cournot nash rivalry with domestic firms thus the likelihood of expropriation differs according to whether or not a domestic rival exists the likelihood also depends on the mnf s initial technological superiority over domestic technology the host country s demand structure the type of control to be exercised over the expopriated firm private vs state and the strategic behavior of the mnf ex anti when threat of expropriation i introduction evidence over the past thirty years points to widespread expropriation of multinational firms mnfs particularly by the less developed countries ldcs 1 yet expropriation has received far less attention than impediments to commodity trade tariffs quotas etc one exception is eaton and gersovitz 1984 eg who focus primarily on the impact of an expropriation threat on international capital mobility and the response of foreign capital to such a threat however even allowing for a strategic response to a threat of expropriation the issue of why governments engage in the actual expropriation of existing firms deserves attention 2 explaining expropriation of mnfs already in the host country is the task of this paper while the host government s motives for expropriation may vary as suggested by akinsanya 1980 this paper shall focus on economic motives based on social welfare analysis and on political economic motives based on public choice lobbying theory a key feature will be an emphasis on domestic vs foreign firm rivalry captured by a cournot nash duopoly mode which is aimed at highlighting the potential conflict of interest between the two firms and its effects on the host government s expropriation decision 3 to highlight the role of rivalry section 3 a simple monopoly model of expropriation will be developed in section 2 a second key feature will be to distinguish between the host government s expropriation and ownership decisions regarding the expropriated firm since chances of expropriation may depend on how the ownership issue is settled two cases will be distinguished a the expropriated firm is turned over to domestic residents and the firm continues to maximize profits sections 2 and 3 and b the state controls the expropriated firm i e nationalizes it section 4 4 in this case the government is likely to pursue an objective different from profit maximization see aharoni 1986 ch 4 following caves 1982 chs 1 7 the mnf will be assumed to possess technology superior to that domestically available because of access to intangible assets organizational and managerial know how specific technical knowledge etc not available to domestic firms 5 unlike physical capital intangible assets may be withdrawn in the event of an expropriation threat as in eg s model or actual expropriation as in the present model resulting in increased production costs to the expropriated firm 6 in this paper expropriation in the monopoly model will be motivated by the host country s desire to capture mnf profits otherwise repatriated to increase welfare but this welfare gain may be offset by a loss to consumers via the impact on costs and prices of the mnf s withdrawal of its technology under state ownership some of these results will be altered in the duopoly model the cost increase to the expropriated firm will raise the domestic rival s profits providing it with an incentive to lobby for expropriation this raises the opportunity cost of not lobbying and thus the incentive to lobby by other competing groups mnfs and consumers suggesting that expropriation may be the outcome of lobbying forces rather than of pure welfare considerations

combining rent seeking and public choice theory in the analysis of tariffs versus quotas economists continuing criticisms of protectionism make a valuable contribution to the general interest element of the forces which operate to keep propensities to protect somewhat in check mckenzie rightly warns however that proposals by economists for giving protection in more efficient forms run the danger of increasing the total supply of protection thus we agree that serious consideration should be given to the political economy responses which may be induced before one advocates ways of doing more efficiently what one believes should not be done in the first place it does not follow however that all such policies will have net negative unanticipated consequences in the case of tariffs versus quotas we do not believe that we have yet sufficient knowledge of all of the relevant political economy considerations to predict about the full effects of legislation which allowed trade protection to only take the form of tariffs we are doubtful however that such a measure would increase the total quantity of protection through the channels outlined by mckenzie we believe that the same type of basic public choice analysis of the individual incentives to lobby which suggests that consumer taxpayers will not force the political process to operate so as to maximize aggregate economic efficiency with respect to the level of protection also suggests that the net lobbying for quotas is likely to be higher on average than the net lobbying for tariffs political effectiveness and ability to overcome free riding on the part of tariff revenue seekers is likely to be low at the margin furthermore issues of visibility and institutional structure are likely to lessen the ability of anti protection forces to lobby against quotas placed within a broader framework public choice and rent seeking theory is consistent with the empirical evidence that where quotas are used protection is high

technology of military conflict military spending and war abstract this paper studies how the technology of military conflict affects the allocation of resources in military spending guns and productive investment butter we first identify the fundamental property of conflict technology which the two commonly used contest success functions the difference and ratio forms share using this property named the constant elasticity of augmentation we construct a new class of contest success functions hence generalizing the two forms we provide axiomatic and probabilistic characterizations of the new contest success function then adopting the new contest success function we study how the elasticity of augmentation affects the trade off between guns and butter and countries international policy to settle or wage a war finally we estimate the elasticity of augmentation using actual battle data including seventeenth century european battles and world war ii battles and explore the implications of the estimated parameters of military technology on military spending and the preference of settlement

arms races and arms control modeling the hawk perspective of the three major theories developed by post world war 11 american social science to explain arms races the repeated prisoner s dilemma the spiral model and the deterrence model the deterrence model has received the least attention from game theorists i present a model of this perspective and discuss its implications for arms racing and armscontrol theory arms races arise in the model when there is a conflict of interest between two states and uncertainty about the ability of at least one side to bear the strains of increased military spending the model provides support for two common critiques of arms control first arms control is difficult to achieve when it is most needed when there is a dispute accompanied by uncertainty that could lead to war second arms races though they occur in times of tension do not necessarily increase the likelihood of war and may even reduce it by reducing uncertainty about relative power

tariffs quotas and domestic content protection some political economy considerations in this paper we have focused our attention on the relation between the configuration of protection seeking and of rent seeking interests and the choice of the protection instruments in doing so we have abstracted from the problem of nonequivalence of tariffs and quotas recent writings on product differentiation rodriguez 1979 donnenfeld 1984 have thrown new light on this old issue it may well be that the discussion is of key importance to the understanding of industry s predilection for quantitative restraints we also failed to deal with the question on nonequivalence of restrictive measures under conditions of uncertainty finally we touched only peripherally on the interaction among state it is perhaps more realistic to regard trade barrier formation as a game among nations as in baldwin and clarke 1985 every player seeks at once to protect its import substituting industries and to promote its exports by putting up barriers and by demanding that others lower theirs this approach is more suited however to explain the severity of restraints than it is to explain the nature of restraints which is the problem at hand trade restrictions have a protective and a revenue effect in less developed countries with ineffectual internal revenue collecting systems revenue seeking governments may ally themselves with protection seeking emergent industries and institute high tariffs tariffs and quotas may coexist if the trade restriction seeking alliance includes traders voluntary export restraints the newest of the protective devices may be popular because they circumvent international treaties and short circuit cumbersome procedures associated with changes in tariffs or quotas but they also have the virtue of inviting foreign exporters to act like price setters the harm to the foreign exporters is thereby mitigated in fact exporters may be gainers hence the danger of retaliatory action on the part of foreign governments is lessened domestic content legislation is a unique device in that the same domestic factor benefits from protection and also collects the protection created revenue we show the formal identity between the south african situation in which the maximum black white worker ratio is a binding constraint and regulations requiring that a given percentage of the value of the product be domestically produced we also derive formally the maximum permissible foreign content ratio which is optimal from the point of view of the protected interests in our analysis we have said virtually nothing about the victims of protectionism a discussion of the impact of the various measures on those who bear the cost of protection would doubtless deepen our understanding of the problem we should thus consider the magnitude of the deadweight loss and of the income transfer and the concentration or dispersion of the losers last but not least we should consider the question of awareness thus the cost impact of a tariff is easier to perceive than that of a quota with the cost of a ver or of domestic import content rule the most difficult to calculate of all it may be that the principle of the hiding hand is as important to the new political economy as the benthamite principles were to the old

labor market volatility in matching models with endogenous separations the business cycle behavior of a matching model with endogenous separations is studied in this paper we show that whether aggregate productivity shocks have a larger effect on the vacancy unemployment ratio than in a model with exogenous separations depends on whether worker productivity stochastically increases with tenure the difference in the response is quantitatively small however we also show that the cleansing effect introduced by allowing for endogenous separations can help in reconciling the model with observed fluctuations in the unemployment rate but not with those in the vacancy rate

reputation and equilibrium selection in games with a patient player a single long run player plays a simultaneous move stage game against a sequence of opponents who play only once but observe all previous play let the stackelberg strategy be the pure strategy to which the long run player would most like to commit himself if there is positive prior probability that the long run player will always play the stackelberg strategy then his payoff in any nash equilibrium exceeds a bound that converges to the stackelberg payoff as his discount factor approaches one when the stage game is not simultaneous move this result must be modified to account for the possibility that distinct strategies of the long run player are observationally equivalent

a comparison of rent seeking models and economic models of conflict this paper provides a comparative analysis of the basic rent seeking model and a simple economic model of conflict each model is concerned with a game in which players invest resources in pursuit of a prize the purpose of the analysis is to elucidate structural differences between the two models and to analyse the consequent behavioral differences and equilibrium outcomes in the two cases a key finding is that where such comparisons are possible the conflict model tends to involve greater relative expenditure on wealth redistribution activities than does the rent seeking model

in defense of lawyers moral hazard as an aid to cooperation abstract this paper studies strategic delegation in two player contests for an indivisible prize as in e g litigation where one party s probability of winning is determined by the relative investments of both even though neither player stands to gain anything from precommitment both players ex ante prefer compulsory representation by agents e g lawyers whose efforts are unobservable this delegation equilibrium is unaffected by secret renegotiation opportunities equivalently it does not matter whether contracts are observable or not hence the paper points out a role for delegation with moral hazard in facilitating cooperation an effect quite separate from precommitment journal of economic literature classification numbers c72 d72 d82 k41

income inequality and the taste for revolution abstract although property rights are the cornerstone of market economies throughout history existing claims have been frequently overturned by revolutions one unsettled question is whether income inequality affects the likelihood of revolt this paper takes an approach different from previous studies by introducing data derived from two surveys of revolutionary preferences across a quarter million randomly sampled individuals more people are found to have a preference for revolt when inequality in their nation is high a 1 standard deviation increase in the gini coefficient explains up to 38 percent of the standard deviation in revolutionary support the results hold after controlling for a set of personal characteristics and country and year fixed effects since higher levels of income are found to have a negative impact on the taste for revolt the results suggest that either going for growth or implementing policies that reduce inequality can buy off those individuals with revolutionary preferences

payroll taxes social insurance and business cycles payroll taxes represent a major distortionary influence of governments on labor markets this paper examines the role of time varying payroll taxes and the social safety net for cyclical fluctuations in a nonmonetary economy with labor market frictions and unemployment insurance when the latter is only imperfectly related to search effort a balanced social insurance budget induces countercyclical payroll taxation renders gross wages more rigid over the cycle and strengthens the model s endogenous propagation mechanism for conventional calibrations the model generates a negatively sloped beveridge curve and countercyclical unemployment as well as substantial volatility and persistence of vacancies and unemployment

how organizational structure can reduce rent seeking in multi tiered organizations individuals can engage in unproductive rent seeking activities both within and between the divisions of the organization nevertheless a multi tiered organizational structure can induce efficiency gains by decreasing rent seeking we present a model of production and simultaneous internal and external rent seeking assuming a logistic contest success function in equilibrium there is generically either internal or external rent seeking but not both a multi tiered organization leads to less rent seeking and higher welfare even though the production technology gives no reason for any specific organizational structure our findings constitute a new efficiency rationale for multi tiered organizations

matching models under scrutiny an appraisal of the shimer puzzle abstract two papers have recently questioned the quantitative consistency of the search and matching model shimer has argued that a textbook matching model is unable to explain the cyclical variation of unemployment and vacancies in the us economy costain and reiter have found the existence of a trade off in the model s performance any attempt to change the calibrated values to improve the model s ability to predict the business cycle jeopardizes its predictions of the impact of unemployment benefits on unemployment in surveying the literature originating in these findings i distinguish three different avenues that have been followed to correct the model change in wage formation change in the calibration and changes in the model specification the last approach seems to achieve the best results both from a business cycle and from a microeconomic viewpoint

tariffs subsidies and welfare with endogenous policy abstract it is a well established proposition of trade theory that in the absence of directly trade related distortions or policy goals subsidies are superior to tariffs for achieving any economic or non economic objective this paper shows that once the endogeneity of the distortion or non economic objective is allowed for the welfare ranking of various policies can be reversed the particular model analyzed is one where the level of non economic objectives that have to be fulfilled itself depends on the policy tools considered to fulfill them with this arises from the public good nature of tariffs compared to subsidies

equilibrium structure in an economic model of conflict four different types of equilibrium are possible within a two player model of society where only armed self enforcement of property rights is possible the main underlying parameters are the total resource endowment and the initial distribution of this endowment between the players the parameter space is partitioned into regions in which the respective types of equilibrium occur the equilibrium types involve positive arms expenditure by respectively neither player the richer player and both players the latter case involves a sub type in which the poorer player s entire endowment is expended on arms jel d30 d72 d74