the european court of justice national governments and legal integration in the european union we develop a game theoretic model of the conditions under which the european court of justice can be expected to take adverse judgments against european union member governments and when the governments are likely to abide by these decisions the model generates three hypotheses first the greater the clarity of eu case law precedent the lesser the likelihood that the court will tailor its decisions to the anticipated reactions of member governments second the greater the domestic costs of an ecj ruling to a litigant government the lesser the likelihood that the litigant government will abide by it and hence the lesser the likelihood that the court will make such a ruling third the greater the activism of the ecj and the larger the number of member governments adversely affected by it the greater the likelihood that responses by litigant governments will move from individual noncompliance to coordinated retaliation through new legislation or treaty revisions these hypotheses are tested against three broad lines of case law central to ecj jurisprudence bans on agricultural imports application of principles of equal treatment of the sexes to occupational pensions and state liability for violation of eu law the empirical analysis supports our view that though influenced by legal precedent the ecj also takes into account the anticipated reactions of member governments

policy rivalry among industrial states what can we learn from models of strategic trade policy the economic theory of international trade has changed dramatically over the last decade by admitting into its mainstream a body of literature that focuses on the implications of monopolistic and oligopolistic elements in international markets by applying the tools of the new industrial organization in an international context two new classes of models have emerged models of intra industry trade and models of strategic trade policy the policy implications of models of strategic trade policy were quite disturbing for the economics profession since these models demonstrated that the classical harmony between national and cosmopolitan welfare maximization does not exist if one assumes opportunities for strategic manipulation of oligopolistic international industries this article reviews two prominent models of strategic trade policy the brander spencer model and the krugman model and relates them to more familiar earlier concepts such as stackelberg s asymmetrical duopoly solution and the venerable infant industry argument for government intervention the primary purpose of this article however is to provide a synopsis of the large literature addressing the question of whether models of strategic trade policy can give guidance for government policy

less filling tastes great the realist neoliberal debate this essay examines and reformulates the realist neoliberal debate focusing initially on the issue of the attribution of goals to states we argue that not only are goals merely the epiphenomena of other things but also that their specification constitutes but a re description of strategic environments that is although an attribution of goals may contribute to our characterization of outcomes a discussion of them is not central to the development of a theory that explains and predicts the outbreak of conflict and the patterns of cooperation instead we argue that the realist neoliberal debate should be recast so that our central research agenda is the development of substantively specific models that allow us to ascertain how the equilibrium to a game in which states structure international affairs influences the types of issue specific subgames states play how countries coordinate to equilibria of different types how we can characterize the coordination problems associated with different equilibria how states can enhance the attractiveness of an equilibrium and how states can signal commitments to the strategies that are part of that equilibrium

the effects of competition on the r d portfolios of multiproduct firms we investigate the r d portfolio choices of multiproduct firms when a firm increases cost reducing r d investment in a given product its rivals will modify their entire r d portfolios by reducing r d investments in that particular product and increasing r d investments in other competing products our analysis demonstrates that r d portfolios will be more specialized when firms face greater competition which will be the case if products become closer substitutes a monopolist begins to face competition from a rival firm or firms compete on price rather than quantity r d cooperation allows firms to internalize the negative externalities of their r d investments in two ways by reducing such investments across all products and by increasingly focusing their r d portfolios on different products firms may completely shut down a subset of their r d projects under r d cooperation if the products concerned are sufficiently close substitutes

power politics and international trade r recent literature attributes the relative scarcity of open international markets to the prisoner s dilemma structure of state preferences with respect to trade we argue that the prisoner s dilemma representation does not reflect the most critical aspect of free trade agreements in an anarchic international system namely their security externalities we consider these external effects explicitly doing so leads us to two conclusions 1 free trade is more likely within rather than across political military alliances and 2 alliances are more likely to evolve into free trade coalitions if they are embedded in bipolar systems than in multipolar systems using data drawn from an 80 year period beginning in 1905 we test these hypotheses the results of the analysis make it clear that alliances do have a direct statistically significant and large impact on bilateral trade flows and that this relationship is stronger in bipolar rather than in multipolar systems in the early 1970s students of international relations began what would become a long and heated debate about the political correlates of open international markets recently however an important element of consensus has begun to emerge most contributors to this debate now seem to agree that the prisoner s dilemma structure of state preferences with respect to trade explains the relative dearth of open international markets here we argue that what has become the standard prisoner s dilemma representation neglects the most critical aspect of free trade agreements in the anarchic international system namely their security externalities we consider these external effects explicitly in order to do so we construct and analyze a simple game theoretic model the results of this analysis demonstrate that tariff games between allies differ systematically from those played between actual or potential adversaries these differences imply that free trade is more likely within rather than across political military alliances however our analysis also suggests that the evolutionary prospects of alliances vary those that are the products of bipolar systems are more likely to evolve into free trade coalitions than are their multipolar counterparts less credible exit threats and clearer responsibilities for alliance stability explain the advantage of a bipolar system we test this argument using data drawn from an 80 year period beginning in 1905 the empirical analysis supports our argument it demonstrates that alliances have a direct statistically significant and large effect upon bilateral trade moreover it shows that on average alliances have a much stronger effect on trade in a bipolar than in a multipolar world 2

the gains debate framing state choice the theoretical bifurcation of international relations theory into neo realist and neo liberal camps has resulted in a gains debate that says little about an empirical world in which states exhibit both relative and absolute gains pursuit this article deploys prospect theory in an attempt to move beyond the gains debate the intent here is synthetic by bringing the predictions of both perspectives under a single theoretical umbrella we can model a broader set of state behavior the thesis developed demonstrates that states in a gains frame pursue absolute gains and are risk averse while states in a losses frame pursue relative gains and are risk acceptant this hypothesis is assessed against the behavior of the european community in the formation of the montreal protocol a regime intended to protect the earth s protective ozone shield the new model accurately predicts the timing and content of shifts in ec preferences suggesting that a synthesis of realist and liberal approaches is possible

entrenching the yoshida defense doctrine three techniques for institutionalization japan s level of defense expenditure relative to tbe size of its economy bas long been uniquely low among the major industrialized countries as of 1995 japan s expenditures stood at 0 96 percent of gross domestic product gdp even adding to this tbe approximately 0 3 percent of gdp devoted to pensions for retired personnel the level of spending is considerably less than that of major westem states such as tbe united states united kingdom france and germany as well as industrialized asian states such as south korea taiwan malaysia and singapore furthermore these relative magnitudes have remained reasonably stable over tbe past few decades see table 1 defense expenditure as a percentage of gdp or gnp gross national product often referred to simply as defense burden has over tbe past few decades become the standard benchmark for measuring a state s relative contribution to international security because of this tbe appropriateness and consequences of japan s relatively low expenditure of national wealth on defense bave been hotly debated botb in japan and abroad critics accuse japan of unfairly exploiting a defense free ride to build its economic success and others worry that japan s lack of military capabilities prevents it from becoming a normal state whose political role is commensurate

determinants of patent rights a cross national study abstract this paper presents an index of patent rights for 110 countries for the period 1960 1990 the index is used to examine what factors or characteristics of economies determine how strongly patent rights will be protected the evidence does indicate that more developed economies tend to provide stronger protection but the underlying factors which influence patent protection levels are the country s level of research and development r d activity market environment and international integration which are correlated with its level of development the results qualify however that r d activity influences patent protection levels after a nation s research sector reaches a critical size an implication of this is that to raise patent protection levels in weakly protecting countries it is important to foster a significant research base in those countries and thereby create incentives for protecting patent rights

an analysis of cooperative research and development i analyze the effects of cooperative research whereby member firms agree to share the costs andfruits of a research project before they undertake it in this model industrywide agreements tend to have socially beneficial effects when the degree ofproduct market competition is low when there are r d spillovers in the absence of cooperation when a high degree of sharing is technologically feasible and when the agreement concerns basic research rather than development activities i show that a royalty free cross licensing agreement among any number offirms lowers the equilibrium level of innovation even though it increases the efficiency of r d through sharing

patents and the global diffusion of new drugs analysis of the timing of launches of 642 new drugs in 76 countries during 1983 2002 shows that patent and price regulation regimes strongly affect how quickly new drugs become commercially available in different countries price regulation delays launch while longer and more extensive patent rights accelerate it health policy institutions and economic and demographic factors that make markets more profitable also speed up diffusion the estimated effects are generally robust to controlling for endogeneity of policy regimes with country fixed effects and instrumental variables the results highlight the important role of policy choices in driving the diffusion of new innovations

guns butter and anarchy a state in the international system implicit in realism must allocate its limited resources between satisfying its intrinsically valued ends and the means of military power i formalize this guns versus butter problem in a simple infinite horizon model in which two states must continually decide how to allocate their resources and whether to attack the other state the analysis establishes sufficient conditions to ensure the existence of an equilibrium in which neither state attacks shows that there is a strictly pareto dominant pair of peaceful equilibrium payoffs characterizes the unique peaceful markov perfect equilibrium that yields them and describes the comparative statics of the equilibrium allocations more broadly the analysis also suggests that the notion of anarchy has little if any substantive significance distinctively related to international politics and that the problem of absolute and relative gains is superfluous

do national patent laws stimulate domestic innovation in a global patenting environment a cross country analysis of pharmaceutical patent protection 1978 2002 this paper evaluates the effects of patent protection on phar maceutical innovations for 26 countries that established pharmaceutical patent laws during 1978 2002 controlling for country characteristics through matched sampling techniques to establish two proper comparison sets among 92 sampled countries and through country pair fixed effects regressions this study yields robust results national patent protection alone does not stimulate domestic innovation as estimated by changes in citation weighted u s patent awards domestic r d and pharmaceutical industry exports however domestic innovation accelerates in countries with higher levels of economic development educational attainment and economic freedom additionally there appears to be an optimal level of intellectual property rights regulation above which further enhancement reduces innovative activities

can tax loss selling explain the january effect a note the january effect remains an unexplained phenomenon in financial economics that the month of january has consistently shown higher mean stock returns than other months has been documented by several researchers beginning with rozeff and kinney 19 additional research by keim 14 showed that approximately half the annual size effect is attributable to abnormal returns in january 1 roll 18 confirmed keim s results as has subsequent research such as lakonishok and smidt 15 2 the most often advanced explanation for the january effect is tax motivated transactions 3 first proposed in 1942 by wachtel 21 the tax loss selling hypothesis is frequently advocated in the popular press as a major influence on stock price behavior essentially this hypothesis states that investors seek to reduce their taxes by realizing losses at year end thereby depressing stock prices stocks return to equilibrium levels after year end providing abnormally high returns in january despite the popularity of the tax loss selling hypothesis it is difficult to justify upon serious reflection justification requires acceptance of the proposition that speculators are prevented from purchasing tax loss candidates before year end with the intention to sell them after year end no theoretical justification has been presented for the hypothesis instead using both theoretical and empirical approaches constantinides 5 argues that such action cannot explain the january effect if the market is efficient 4 his results imply that empirical studies supporting the tax loss selling hypothesis provide evidence of market inefficiency as for the empirical evidence branch 3 dyl 8 roll 18 reinganum 17 and givoly and ovadia 10 have provided support for the tax loss selling hypothesis 5 recently schultz 20 tested the tax explanation by examining the

international patent protection 1960 2005 abstract this note provides an update to the index of patent protection published in this journal in 1997 the original paper presented the index for 1960 1990 for 110 countries the index has now been updated to 2005 and extended to 122 countries the adoption of stronger patent laws and the composition of patent rights vary across countries by level of economic development

the security dilemma revisited robert jervis s article cooperation under the security dilemma is among the most important works in international relations of the past few decades in it jervis develops two essential arguments first he explains that the security dilemma is the key to understanding how in an anarchic international system states with fundamentally compatible goals still end up in competition and at war the security dilemma exists when many of the means by which a state tries 1 to increase its security decrease the security of others it provides the rational foundation for what jervis termed the spiral model which describes how the interaction between states that are seeking only security can fuel competition and strain political relations 2 second jervis explains that the magnitude and nature of the security dilemma depend on two variables the offense defense balance and offense defense differentiation 3 as a result the security dilemma can vary across space and time although states exist in a condition of international anarchy that does not vary there can be significant variation in the attractiveness of cooperative or competitive means the prospects for achieving a high level of security and the probability of war

absolute and relative gains in international relations theory the problem of absolute and relative gains divides neoliberal institutionalism and structural realism the former assumes states focus primarily on their absolute gains and emphasizes the prospects for cooperation the latter supposes states are largely concerned with relative gains and emphasizes the prospects for conflict existing work in international relations theory generally traces the differences between these two theories to different assumptions about states preferences using a simple game theoretic model this essay offers a reformulation of the problem of absolute and relative gains that links changes in the states behavior the feasibility of cooperation and especially the states concern for relative versus absolute gains explicitly to changes in the constraints facing the states many of the differences between neoliberal institutionalism and structural realism appear as special cases of the model

when an importer s protection of ipr interacts with an exporter s level of technology comparing the impacts on the exports of the north and south using bilateral trade data of countries from 2000 to 2007 this paper contributes to the empirical literature on the role of intellectual property rights iprs in global trade the existing literature has focused on how iprs in the destination country affect exports from a source country in this paper we add an additional dimension the level of technology of the exporting country lt this is quite important for distinguishing the impact of iprs on the exports of developed and developing countries since the technology levels vary across countries at different stages of development and intellectual property rights better protect exports that are technologically advanced than exports that are imitative and potentially infringing by factoring in the level of technology lt our empirical analysis makes the case that iprs can act as a barrier to the exports from the south especially the rapidly catching up economies and thus be a source for the middle income trap phenomenon

rationalist explanations for war realist and other scholars commonly hold that rationally led states can and sometimes do fight when no peaceful bargains exist that both would prefer to war against this view i show that under very broad conditions there will exist negotiated settlements that genuinely rational states would mutually prefer to a risky and costly fight popular rationalist and realist explanations for war fail either to address or to explain adequately what would prevent leaders from locating a less costly bargain essentially just two mechanisms can resolve this puzzle on strictly rationalist terms the first turns on the fact that states have both private information about capabilities and resolve and the incentive to misrepresent it the second turns on the fact that in specific strategic contexts states may be unable credibly to commit to uphold a mutually preferable bargain historical examples suggest that both mechanisms are empirically plausible

the internationalization of inventive activity a gravity model using patent data this paper discusses the extent and the determinants of the internationalization of european inventive activity between 1990 and 2004 using an innovative method to treat the information contained in the european patent office s patstat database the observed level of internationalization of inventive activities while being rather low has steadily increased over time the amount of collaboration between actors residing in different countries is assessed by means of a gravity model as it is familiar in the literature on international trade the amount of bilateral collaboration is positively affected by the presence of a common language and a common border and by the common participation in the european union participation in the euro zone is also found to have a marginally negative effect international collaboration is negatively affected by distance with estimated elasticities that are significantly smaller than the ones that characterize international trade contrary to the rumors about the death of distance this effect has become stronger in recent years

intellectual property rights fdi r d and economic growth a cross country empirical analysis this paper aims to empirically examine how intellectual property rights iprs protection foreign direct investment fdi and research and development r d along with other possible variables may affect the economic growth of the host country using the panel data of 92 countries during 1970 2007 i conclude from the system generalised method of moments estimation that domestic investment share fdi r d capacity openness to trade human capital and iprs protection all have statistically significant and positive impacts on economic growth a further investigation of countries at different levels of development suggests two striking findings first besides the domestic investment openness human capital and iprs protection r d is the key to drive economic growth in the higher income countries while fdi is the engine of growth in both higher income and middle income countries second a positive and significant impact of iprs protection on economic growth is found in both higher income and lower income countries however such an impact is not detected in the middle income countries

scraps of paper agreements and the durability of peace in the aftermath of war what determines whether peace lasts or fighting resumes and what can be done to foster durable peace drawing on theories of cooperation i argue that belligerents can overcome the obstacles to peace by implementing measures that alter incentives reduce uncertainty about intentions and manage accidents a counterargument suggests that agreements are epiphenomenal merely reflecting the underlying probability of war resumption i test hypotheses about the durability of peace using hazard analysis controlling for factors including the decisiveness of victory the cost of war relative capabilities and others that affect the baseline prospects for peace i find that stronger agreements enhance the durability of peace in particular measures such as the creation of demilitarized zones explicit third party guarantees peacekeeping and joint commissions for dispute resolution affect the duration of peace agreements are not merely scraps of paper rather their content matters in the construction of peace that lasts

do intergovernmental organizations promote peace a basic debate in world politics involves the impact of intergovernmental organizations igos on international conflict liberals functionalists and others see igos as capable of transforming global anarchy while realists emphasize the essential irrelevance of igos in managing such fundamental processes as war and peace recent quantitative studies also yield disparate conclusions depending on particular econometric assumptions implying variously that igos foster pacific relations among states have no impact on dispute behavior or even increase dispute propensity at least part of the problem is a lack of theoretical and empirical specificity the authors apply bargaining theory to develop a middle path between the realist and liberal perspectives only some igos those with security mandates and the most sophisticated institutional structures are likely to influence dispute behavior the authors combine the theory with two improvements in research design first igos vary in capability mandate and cohesion the authors construct a dataset of igo institutional heterogeneity and member cohesiveness second states join igos for reasons that are not unrelated to why states fight the authors control for the level of international involvement among countries and find support for their arguments in initial tests

absorptive capacity coauthoring behavior and the organization of research in drug discovery we examine the interface between for profit and publicly funded research in pharmaceuticals firms access upstream basic research through investments in absorptive capacity in the form of in house basic research and pro publication internal incentives some firms also maintain extensive connections to the wider scientific community which we measure using data on coauthorship of scientific papers between pharmaceutical company scientists and publicly funded researchers connectedness is significantly correlated with firms internal organization as well as their performance in drug discovery the estimated impact of connectedness on private research productivity implies a substantial return to public investments in basic research

research bets and behavioral ir behavioral ir faces a fundamental challenge the actors in most ir models and theories are not individuals they are aggregates like states ministries interest groups political parties and rebel factions there are two broad approaches to attempting to integrate behavioral research about individuals the first a quasi behavioral approach makes nonstandard assumptions about the preferences beliefs or decision making processes of aggregate actors the second tries to build theories in which the key actors are individuals pursuing the former means that the assumptions about actors will be only weakly linked to the empirical findings propelling behavioral research the second approach faces formidable obstacles that international relations theory has confronted for a long time and for the most part has not overcome

does regulation drive international research cooperation evidence from the pharmaceutical sector to what extent is an increased stringency of the intellectual property rights ipr system apt to stimulate research cooperation between developed and emerging economies to address this question we empirically investigate how international joint research projects in the pharmaceutical sector are affected by the regime of ipr in force in the two countries involved in the collaboration looking at the joint signature of both patent documents and scientific articles by researchers located in developed and emerging markets our investigation indicates two opposite effects joint publications are fostered by stricter ipr rules whereas joint patents are discouraged a recently proposed theory provides a plausible rationale for this apparently contradicting result

endogenous spillovers and the performance of research joint ventures we present a model of r d with endogenous spillovers and demonstrate that noncooperation can produce maximal spillovers the only other noncooperative outcome is minimal spillovers when noncooperation achieves maximal spillovers so does an rjv whereas minimal noncooperative spillovers imply partial but not necessarily maximal spillovers by an rjv partial rjv spillovers are chosen for anti competitive reasons and an rjv may also close a lab for anti competitive reasons the possibility of anti competitive outcomes is precluded in the existing literature on rjvs which focuses on symmetric outcomes our model predicts when anti competitive behaviour by an rjv arises

relative gains and the pattern of international cooperation many political situations involve competitions where winning is more important than doing well in international politics this relative gains problem is widely argued to be a major impediment to cooperation under anarchy after discussing why states might seek relative gains i demonstrate that the hypothesis holds very different implications from those usually presumed relative gains do impede cooperation in the two actor case and provide an important justification for treating international anarchy as a prisoner s dilemma problem but if the initial absolute gains situation is not a prisoner s dilemma relative gains seeking is much less consequential its significance is even more attenuated with more than two competitors relative gains cannot prop up the realist critique of international cooperation theory but may affect the pattern of cooperation when a small number of states are the most central international actors

the relative gains problem for international cooperation modern realism claims that the fear that others will enjoy relatively greater benefits frequently impedes international cooperation recent articles in this review by duncan snidal and robert powell modeled conditions under which the impact of relative gains varied joseph grieco criticizes snidal s model as based on assumptions that allow him to avoid rather than confront the realist arguments he also argues that powell s model while constructive ignores important additional sources of sensitivity to relative gains in response powell discusses the value of alternative assumptions about preferences and constraints in international relations snidal defends his analysis and presents an additional proof to support the independence of his central result the diminishing impact of relative gains with increasing numbers of states from assumptions of concern to grieco both responders emphasize their work as contributing to a contextually rich theory of international politics that builds on elements of both realism and neo liberalism

power and interdependence revisited ten years ago we published power and interdependence 1 the passage of a decade makes this an appropriate time to reread and reevaluate that book and to take stock of the research program to which it contributed in doing this we hope to deepen and enrich scholarly understanding of the politics of interdependence and to stimulate reflection on directions for the field of international relations over the next decade 2 such a reappraisal seems particularly opportune given the changes in world politics and especially in american policy that have marked the intervening years stanley j michalak commented in 1979 that the authors may cringe from the analogy but power and interdependence may well become the politics among nations of the 1970s 3 but from the perspective of the late 1980s the world may look different while the 1970s were seen as the decade of interdependence many observers regard the use of force and concern for security as characteristic of the 1980s indeed the view is widespread in some circles that the 1980s resemble the 1950s more than the 1970s and that hans j morgenthau s work is more relevant to contemporary issues of world politics than power and interdependence