enterprise performance and ownership the case of ukraine abstract in this paper we use a unique enterprise level random survey of 150 firms in ukraine to test hypotheses on the relationship between enterprise performance and ownership in transitional economies in particular we explore whether privatisation has yielded improved company performance and whether specific ownership forms insider manager worker and outsider have led to differentiated behaviour at the enterprise level our analysis also explores the determinants and ramifications of barter a widespread phenomenon across the former soviet union we refute the hypothesis that private ownership per se is associated with improved performance and try to isolate any positive performance effects from outsider ownership however we do isolate some clear ownership effects associated with insider ownership we find barter to be associated with lower profitability and to be less common in privatised firms

theoretical approaches to monetary disinflation abstract during the 1980s many countries adopted tight monetary policies to reduce high inflation rates which were the legacy of the 1970s as inflation threatens to rise at the beginning of this decade this paper provides a survey of the 1980s literature which sought to provide theoretical understandings of how monetary disinflation is achieved four models are presented monetarist neo keynesian new classical and post keynesian each model s explanation of the recession which accompanies the monetary disinflation is outlined as well as possible policy measures to reduce the extent of the recession and to hasten the return to full employment

oligarchic family control social economic outcomes and the quality of government wealthy families as opposed to small public shareholders characterize ownership of the large corporate sectors of many countries around the world this paper shows that greater oligarchic family control over large corporations is associated with worse social economic outcomes it also correlates with more bureaucratic and more interventionist governments and less developed financial markets further tests show that red tape price controls and the lack of shareholder rights protection are the paramount factors relating to the extent of family control of large firms these results are broadly consistent with olson and others who argue that economically entrenched wealthy insiders pursue rent seeking activities to preserve the status quo and that this increases corruption and impedes growth

expenditure taxes income taxes and time inconsistency abstract traditional welfare based comparisons of different tax structures implicitly assume that the government can precommit to its future optimal policy when optimal tax rates are time inconsistent however such comparisons may be misleading this paper uses a two period representative consumer optimal taxation model to study the implications of time consistency for the welfare rankings of expenditure and income taxation i show that the welfare rankings of optimal policies may not be preserved by time consistent ones

rules and discretion with noncoordinated monetary and fiscal policies the time inconsistency of optimal monetary policy is due to the effects of tax distortions thus the issue of how to improve upon the time consistent suboptimal monetary policy is related to that of the coordination of monetary and fiscal policy we present a model with three players the central bark the fiscal authority and wage setters in which distortionary taxes are explicitly modelled we show that binding commitments to monetary rules are not necessarily welfare improving if monetary and fiscal policy are not coordinated we also examine the effects of different degrees of independence of the central bank

public enterprise reform privatization and the world bank abstract the objectives of this paper are i to review the importance and performance of public enterprises in developing countries ii to examine the questions of whether and why performance improvements should result from privatization and iii to discuss in light of the preceding analysis the approach used by the world bank concerning privatization

privatization public offerings and political objectives this paper empirically analyses the political and economic objectives underlying privatization on the stock market particularly the factors of sips underpricing are explained and the study analyses whether the change of political parties in government play a role on the issue the paper has two main findings first larger initial returns occurred in the early stages of privatization second the change of government from left wing to right wing did not lead to significantly higher levels of underpricing the results show that governments are quite pragmatic with respect to underpricing maximizing proceeds from sips shows to be more important than ideological differences between parties in government

caste and tribe inequality evidence from india 1983 1999 abstract despite policies targeting scheduled castes sc and scheduled tribes st there remain large disparities of living standards between sc st and non sc st households in india the sc st households may be poorer because they possess lower human and physical capital but they may also earn lower returns to these assets this study finds that 30 50 of the welfare disparities are attributable to different returns such structural differences between the sc and the non sc st are partly because the sc earn lower returns to schooling a large part of the structural disparities between the st and the non sc st comes from the fact that the areas where the st live are different from those where the non sc st live in addition the st tend to earn lower returns even with controls for geographical conditions

incumbent employees resistance to implementing privatization policy abstract the recent anti privatization trend in latin america france and south africa is a reminder that employees resist privatization because pre privatization firms tend to be over manned and to pay excessive wages we study the effect of employees resistance on the successful implementation of privatization in a stylized model in which the government interacts with employees of an unknown type the analysis clarifies some of the difficulties associated with the implementation process furthermore although common sense dictates that the government negotiates with the employees before finding an outside buyer we show that sometimes it is better off contacting an investor first

livelihoods and poverty the role of migration a critical review of the migration literature this review of the literature concludes that development studies have paid insufficient attention to labour migration and makes a plea to integrate analyses of migration within those of agricultural and rural development it emphasises that population mobility is much more common than is often assumed and that this has been so throughout human history in fact available material suggests that it is as likely that population mobility has decreased as that it has increased a review of empirical studies shows that it may not be possible to generalise about the characteristics of migrants or about the effects of migration on broader development inequality or poverty the review concludes that given the importance of migration for the rural livelihoods of many people policies should be supportive of population mobility and possibilities should be explored to enhance the positive effects of migration

monetary mystique secrecy and central banking abstract the paper contains a discussion of the role of secrecy in the implementation of monetary policy it documents the federal reserve s defense of secrecy as argued in a recent freedom of information act suit the federal reserve s arguments are evaluated on the basis of economic theory theoretical papers related to the secrecy issue are reviewed the discussion highlights a number of potential benefits and costs of central bank secrecy and identifies some conditions under which secrecy could be socially beneficial

balanced budget constraints and the time consistency of optimal policy in a non ricardian economy it has become increasingly apparent that some optimally determined monetary and fiscal policies may be time inconsistent if governments are allowed full discretion over time this is to say that at any point in time a government s announced commitment to a time path of its monetary and or fiscal instruments which seems optimal at the initial date may provide the government with the incentive to renege on the pre announced policy commitment upon re evaluation at a future date the often cited example 8 is of a government which inflates initially to minimize the current reliance on distortionary labour income taxes but promises reduced inflation in the future at a later date it finds it optimal to re evaluate the commitment and initiates a surprise inflation acquiring revenue in a relatively nondistortionary manner if the government s optimal policy is time inconsistent it will not likely be credible from the private sector s perspective as rogoff 16 has described some authors have suggested that the time inconsistency problem may be resolved if the private sector is able to impose reputational costs on the government for reneging on pre announced policies if the cost associated with the loss of reputation is sufficiently high the government may adopt consistent but sub optimal policies while consideration of reputational costs may yield a policy which is time consistent it may be a second best among the set of consistent policies for example a number of authors have suggested 2 3 16 optimal discretionary policies derived when the government is bound by a rule may be consistent and preferred to the optimal unconstrained discretionary policy imposition of the rule creates a pareto improvement since it alleviates the government s incentive to cheat and therefore reduces the social cost of the private sector s reputational enforcement the difficulty with this solution is to derive the appropriate rule the trivial solution is to commit the government to its optimal plan derived at the initial date however this type of rule relieves the government of any discretion after the policy is announced and it is unlikely that any government would restrict its discretionary powers to that extent a preferable rule would be one which restricts only

time consistent collection of optimal seigniorage a unifying framework this paper reviews the existing literature on the time consistency problem of seigniorage collection when monetary policy is determined by optimal taxation considerations it develops a unifying accounting framework and suggests a general measure for seigniorage which encompasses the standard measures employed in the literature in addition the ex ante optimal solution to the optimal taxation problem is derived and interpreted in relation to the ramsey principle we show that the different recommendations of the public finance literature i e the friedman rule of optimal deflation moderately positive inflation and seigniorage maximizing inflation are specific solutions to the optimal taxation problem the paper continues with a formal illustration of the time consistency problem of the ex ante optimal policy and the characterization of the time consistent solution under discretion as possible solutions to the time consistency problem we consider reputational forces institutional reforms that establish central bank independence and specific ways of asset and debt management in particular it is formally shown that a modified version of the asset and debt management scheme suggested by persson persson and svensson is not only necessary but also sufficient for optimality although this did not hold in their model

the forgotten history of domestic debt there is a rich scholarly literature on sovereign default on external debt comparatively little is known about sovereign default on domestic debt even today cross country data on domestic public debt remains curiously exotic particularly prior to the 1980s we have filled this gap in the literature by compiling a database on central government public debt external and domestic the data span 1914 to 2010 for most countries reaching back into the nineteenth century and earlier for many our findings here on debt sustainability sovereign defaults the temptation to inflate and the hierarchy of creditors only scratch the surface of what the domestic public debt data can reveal first domestic debt is big for the 64 countries for which we have long time series domestic debt accounts for almost two thirds of total public debt for most of the sample this debt carries a market determined interest rate except for the financial repression era between wwii and financial liberalization second the data go a long way toward explaining the puzzle of why countries so often default on their external debts at seemingly low debt thresholds third domestic debt has largely been ignored in the vast empirical work on inflation in fact domestic debt a significant portion of which is long term and nonindexed is often much larger than the monetary base in the run up to high inflation episodes last the widely held view that domestic residents are strictly junior to external creditors does not find broad support

from theory into practice restructuring and dynamism in transition economies this paper draws on microeconomic industry level and macroeconomic evidence to investigate the mecha nisms of enterprise restructuring in transition economies its outcomes in terms of industry level export perform ance and its interaction with macroeconomic policy and constraints the aim is to throw light on the process by which catch up is taking place in the leading transition economies we begin at the micro level and find that institutional changes have produced improvements in performance more or less in line with theoretical predic tions variation in the extent ofpolicy changes helps to account for cross country differences in restructuring behaviour in the leading transition countries where growth has been under way for a number of years many features of the enterprise sector differentiate it from that of an advanced market economy to measure the extent of catch up associated with the reforms use is made of detailed information about the quality of goods traded on the eu market in the final section the inclusion of macroeconomic constraints allows distinctive transition paths to catching up in the visegrad countries to be identified

cash vs in kind transfers indian data meets theory this paper uses qualitative and quantitative data from a survey of over 1200 rural households in nine indian states to explore the arguments for and against cash and in kind in this case food transfers when respondents were asked to think about argue and choose between the two two thirds of the respondents expressed a preference for food rather than the choice made by respondents the focus here is on understanding the reasons behind their choice as explained by beneficiaries themselves two main findings emerge first some arguments corroborate existing theory e g paternalism fungibility but others e g self control transition costs are not incorporated in existing theory on the advantages of in kind transfers second context is important most importantly respondents reported preferences were associated with the benefits they were experiencing under the status quo where the pds performed better at distributing food respondents were more likely to report preferring food to cash transfers the contention of traditional theory that cash is superior fails to factor in contextual concerns

the financial and operating performance of newly privatized firms an international empirical analysis this study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990 our results document strong performance improvements achieved surprisingly without sacrificing employment security specifically after being privatized firms increase real sales become more profitable increase their capital investment spending improve their operating efficiency and increase their work forces furthermore these companies significantly lower their debt levels and increase dividend payout finally we document significant changes in the size and composition of corporate boards of directors after privatization the last fifteen years have witnessed a significant global shift away from state socialism towards entrepreneurial capitalism one of the most important and visible aspects of this trend has been the enthusiasm with which governments of all political persuasions have sold their state owned enterprises soes to private investors in hopes that the generally unsatisfactory economic performance of these firms can be improved by the discipline of private ownership this denationalization process given its current title of privatization by the conservative government of margaret thatcher in

inflation and reputation with generic policy preferences this paper analyzes a reputational equilibrium for inflation under the generic assumption that monetary policy reflects proximate preferences for low expected inflation and positive unexpected inflation the paper stresses the qualitative implication that in a reputational equilibrium the policymaker behaves as if he is concerned about controlling inflation even though he does not have a direct preference for a low actual inflation rate the analysis also shows how the equilibrium inflation rate depends on a decision interval that reflects the underlying real objectives of monetary policy and that determines how fast private agents would react to opportunistic behavior by the policymaker copyright 1990 by ohio state university press

lessons from privatization in britain abstract the process of privatizing most of britain s major public enterprises yields interesting conclusions on the three related issues 1 a problem of policy assignment arose in the use of privatization and liberalization to achieve both allocative and productive efficiency 2 evidence on the behavior of the public enterprises is consistent with an organizational model of the relevant principal agent relationships predicting certain types of slack absorption 3 the privatization process entailed policy choices that bear on their future productive efficiency effectiveness of monitoring by the market for corporate control and allocative efficiency provision for regulation

on the existence of an optimal capital structure theory and evidence one of the most contentious issues in the theory of finance during the past quarter century has been the theory of capital structure the geneses of this controversy were the seminal contributions by modigliani and miller 18 19 the general academic view by the mid 1970s although not a consensus was that the optimal capital structure involves balancing the tax advantage of debt against the present value of bankruptcy costs no sooner did this general view become prevalent in the profession than miller 16 presented a new challenge by showing that under certain conditions the tax advantage of debt financing at the firm level is exactly offset by the tax disadvantage of debt at the personal level since then there has developed a burgeoning theoretical literature attempting to reconcile miller s model with the balancing theory of optimal capital structure e g deangelo and masulis 5 kim 12 and modigliani 17 the general result of this work is that if there are significant leverage related costs such as bankruptcy costs agency costs of debt and loss of non debt tax shields and if the income from equity is untaxed then the marginal bondholder s tax rate will be less than the corporate rate and there will be a positive net tax advantage to corporate debt financing the firm s optimal capital structure will involve the trade off between the tax advantage of debt and various leverage related costs the upshot of these extensions of miller s model is the recognition that the existence of an optimal capital structure is essentially an empirical issue as to whether or not the various leverage related costs are economically significant enough to influence the costs of corporate borrowing the miller model and its theoretical extensions have inspired several timeseries studies which provide evidence on the existence of leverage related costs trczinka 28 reports that from examining differences in average yields between taxable corporate bonds and tax exempt municipal bonds one cannot reject the miller hypothesis that the marginal bondholder s tax rate is not different from the corporate tax rate however trczinka is careful to point out that this finding does not necessarily imply that there is no tax advantage of corporate debt if the personal tax rate on equity is positive indeed buser and hess 1 using a longer time series of data and more sophisticated econometric techniques estimate that the average effective personal tax rate on equity is statistically positive and is not of a trivial magnitude more importantly they document evidence that is consistent with the existence of significant leverage related costs in the economy

privatization in the united kingdom lessons from experience abstract although the reasons for privatization vary across countries in the united kingdom as in other countries it also reflects a renewed belief in market forces the search for policy options that emerges from this renewal however needs to be tempered by an understanding of market as well as regulatory failures although problems facing government enterprises in developed and developing countries may differ the objective of privatization should be to reconstruct these enterprises so as to create conditions that make private sector operations effective and efficient at the same time one should recognize that this may require continued public sector activity in the sector

loss of monetary discretion in a simple dynamic policy game abstract we analyze a simple policy game featuring monetary credibility problems and argue that loss of monetary discretion is not advantageous two elements form the basis of our analysis firstly we endogenize the source of credibility problems and secondly we consider a dynamic framework where credibility problems are not time invariant by doing this we are able to demonstrate that credibility problems are temporary and in steady state the government has removed these through sound policies a binding policy rule will only serve as an obstacle towards this steady state

time consistency of monetary policy in the open economy abstract this paper shows that in an open economy time consistency problems are created not only by nominal government debt but also by nominal private debt to foreigners given any external nominal debt inflation redistributes wealth between domestic residents and foreigners a government that cares about the welfare of its residents will be tempted to inflate whenever it or its residents have issued nominal debt to foreigners an analysis of the u s net investment position shows that these international considerations have become increasingly relevant for the united states because the recent external deficits have largely been financed in nominal terms

reform in eastern europe how can the new governments of eastern europe succeed in moving from centrally planned to freemarket economies this incisive report identifies and describes the major policy choices to be made and discusses what will work and what will not reform in eastern europe provides a comprehensive easily read statement of reform policy that stands in the mainstream of modern western economics based on their experience with stabilization policies in other countries the authors show how eastern europe can reduce unemployment during the painful adjustment process create effective and socially acceptable mechanisms to subject enterprises to market discipline and replace barter trade under cmea with market based international trade

inflationary finance under discrepion and rules inflationary finance involves first the tax on cash balances from expected inflation and second a capital levy from unexpected inflation from the standpoint of minimizing distortions these capital levies are attractive ex post to the policymaker in a full equilibrium two conditions hold 1 the monetary authority optimizes subject to people s expectations mechanisms and 2 people form expectations rationally given their knowledge of the policymaker s objectives the outcomes under discretionary policy are contrasted with those generated under rules in a purely discretionary regime the monetary authority can make no meaningful commitments about the future behavior of money and prices under an enforced rule it becomes possible to make some guarantees hence the links between monetary actions and inflationary expectations can be internalized there is a distinction between fully contingent rules and rules of simple form a simple rule allows the internalization of some connections between policy act ion and inflationary expectations but discretion permits some desirable flexibility of monetary growth this abstract was borrowed from another version of this item

the bond price support program as a change in policy regimes evidence from the term structure of interest rates recently mankiw miron and weil 1987 argued that a change in policy regimes generally affects the public s expectations of future interest rates to illustrate this influence they compare the operation of the gold standard with the post gold standard regime in the united states they find that nominal short term interest rates were mean reverting before 1914 but became nonstationary after the creation of the federal reserve system we extend mankiw miron and weil s analysis by noting that the period from 1914 to the present cannot be characterized as one uninterrupted episode of policy discretion the united states temporarily abandoned discretion for a rule in the 1940s the fed and treasury agreed in april 1942 that the fed would adjust federal reserve credit in a manner that would produce relatively low market rates on longterm securities in particular the fed committed itself to support twenty year government bond prices at a level consistent with a 2 5 percent interest rate ceiling we investigate the possibility that the bond price support program of the 1940s conditioned the behavior of short term interest rates in a predictable way according to the expectation theory of the term structure a binding long term interest rate ceiling implies that an increase in the current short rate must cause the sum of the innovation and the change in future expected rates to be zero otherwise the long rate rises above the ceiling and the public perceives a violation of the bond rate commitment placing a binding ceiling on long term interest rates tends to make short term interest rates mean reverting

why do we have nominal government debt abstract we study the choice between nominal and indexed debt in a stochastic macroeconomic model with discretionary monetary and fiscal policy with distortionary taxes nominal debt provides valuable insurance against the budgetary effects of economic fluctuations we show that a welfare maximizing government always issues some nominal debt even though nominal debt increases inflation along the time consistent path of the economy the result is fairly robust with respect to changes in assumptions about policy constraints and about the macroeconomic setting

brokered livelihoods debt labour migration and development in tribal western india seasonal labour migration is an increasingly important aspect of rural livelihoods in tribal areas of western india such migration can no longer be viewed merely as an adjunct to an essentially agrarian way of life but has to be seen as integral to the coping survival and livelihood strategies of tribal farming families rural to urban migration is often viewed as a consequence of environmental crisis in which migrants as ecological refugees gadgil and guha 1995 are forcibly displaced by processes of deforestation soil erosion water scarcity land fragmentation declining agricultural productivity and population increase while increasing pressure on a fragile resource base has indeed contributed to widespread failure to meet subsistence needs among tribal households the research discussed in this study shows that the forces leading to migration are as much to do with the social relations of dependency and indebtedness which subsistence failure entails as with ecological decline the problem is

compensation and wealth transfers in the french nationalizations 1981 1982 abstract this paper studies the price reaction of french common stocks to the recent nationalization program and estimates the value that nationalized firms would have had if the nationalization program had not occurred it finds that expropriated holders of the nationalized portfolio received a government legislated takeover premium of about 20 percent premiums received for individual firms ranged from 3 to 44 percent industrial firm shareholders benefited most from the program the conditions surrounding the premium dispersion raise questions about equal treatment among expropriated shareholders

politicians and the ipo decision the impact of impending political promotions on ipo activity in china abstract this paper shows that incentives created by the impending turnover of local politicians can accelerate the pace of initial public offering ipo activity in certain politicized environments focusing on china we exploit a research setting where politicians are rewarded for capital market development firms rely on political connections for access to capital rent seeking behavior is rampant and the objectives of the state might not be to maximize capital market efficiency we find that the rate of exchange eligible firms engaging in an ipo temporarily increases in advance of impending political promotion events this effect holds for both state owned and non state owned entities for state owned firms the effect is strongest in those provinces where the politicians are more likely to be rewarded for market development activity for non state owned firms the temporary increase in ipo activity appears to be rationally opportunistic in nature with the effect stronger around events more likely to disrupt the firms political connections promotion period ipos underperform non promotion period ipos in terms of both future financial performance and long run stock returns have controlling shareholders who retain a larger fraction of the company and are more likely to divert proceeds away from their intended use after the offering

the mystery of the printing press monetary policy and self fulfilling debt crises we study the mechanism by which unconventional balance sheet monetary policy can rule out self fulfilling sovereign default in a model with optimizing but discretionary fiscal and monetary policymakers by purchasing sovereign debt the central bank e ectively swaps risky government paper for monetary liabilities only exposed to inflation risk thus yielding a lower interest rate we characterize a critical threshold for central bank purchases beyond which absent fundamental fiscal stress the government strictly prefers primary surplus adjustment to default since default may still occur for fundamental reasons however the central bank faces the risk of losses on sovereign debt holdings which may generate ine cient inflation this risk does not undermine the credibility of a backstop nor the ability of a central bank to pursue its inflation objectives when the latter enjoys fiscal backing or fiscal authorities are su ciently averse to inflation

endogenous contract structure and monetary policy abstract we analyze the co determination of monetary policy and the labor contracts chosen by members of the public who can either fix or index their nominal wages fixed nominal wages allow the central bank to offset productivity shocks while the public fix nominal wages in response to the central bank offsetting shocks so there is an equilibrium in which realistically nominal wages are fixed and shocks offset a result which holds in single as well as in multi period games in addition there may be equilibria in which agents index their nominal wages and the central bank optimally responds by stabilizing price in contrast to conventional models the ramsey rule may be implemented in a finitely repeated game the central bank does not deviate for fear that agents would change their labor contracts such that the central bank s least favored equilibrium will subsequently be played

optimal accommodation by strong policymakers under incomplete information abstract this paper examines the optimal behavior of a policymaker who is able to precommit labelled strong when the public entertains the possibility that he is either strong or weak unable to precommit the main result is that in the presence of doubts about their type it is optimal even for strong policymakers to partially accommodate inflationary expectations this contrasts with vickers 1986 who finds that when strength is conceived in terms of the relative concern for employment the strong policymaker inflates less under incomplete than under full information the paper also provides a theory of endogenous announcements

the advantage of tying one s hands ems discipline and central bank credibility abstract it is often argued that the ems is an effective disciplinary device for inflation prone countries in europe since it forces the respective policy makers to pursue more restrictive monetary policies than they would otherwise it is not clear however why these countries should submit themselves to such discipline this paper argues that to answer this question appropriately one must consider that ems membership brings potentially large credibility gains policy makers in inflation prone countries the reason is that not only it attaches an extra penalty to inflation in terms of real appreciation but makes the public aware that the policy maker is faced with such penalty and thus helps to overcome the inefficiency stemming from the public s mistrust of the authorities

privatization in theory and practice privatization george yarrow this paper examines the theoretical and empirical case for private versus public ownership privatization usually leads managers to place greater emphasis on the pursuit of profits however whether this is beneficial to society depends on the trade off between possible market failures due to a lack of competition and deficiencies in government control of public firms the competitive and regulatory environment is more important than the question of ownership per se in competitive markets there is a presumption in favour of private ownership where there is a natural monopoly vigorous regulatory action is required the evidence suggests that privatization has led to improved performance by firms such as the national freight corporation and cable and wireless which operate in a relatively competitive environment the benefits are less clear in the case of firms like bp britoil and british aerospace however the most worrying case is that of british telecom and the projected privatization of british gas where little thought has been given to limiting the abuse of monopoly power rather the regulatory environment has been tailored to the needs of the existing management and to ensuring a successful share flotation privatization is also advanced as a weapon for reducing trade union power encouraging wider share ownership redistributing wealth and improving the public finances however there are other policy instruments better suited to achieving these objectives the existing privatization programme has not led to a marked widening of share ownership and has resulted in windfall gains to a small group of investors at the expense of taxpayers in general

a policy game approach to the high inflation equilibrium abstract the high inflation equilibrium hie refers to a steady state solution where inflation is higher than the one which maximizes seigniorage i e inflation is on the falling segment of the laffer curve it has been claimed that the hie can be stable when the adjustment of expectation is fast however adjustment is fast because inflation is high so the argument is circular in this paper we rationalize the hie using the policy game approach which distinguishes between discretionary and precommitment regimes we expand and demonstrate rigorously using a technique developed by obstfeld barro s suggestion that a hie may result from a discretionary regime we show that this is not possible under precommitment in addition we demonstrate that a hie may result from non fiscal factors such as the motivation to reduce unemployment in a discretionary regime we conclude with a simple diagrammatic exposition of the difference between our approach and the previous one

full privatization through controlling rights transfer in china the extent of its success this article investigates the effect of the second step of privatization in china which is full privatization through controlling rights transfer after share issue partial privatization it finds that fully privatized firms perform worse than state controlled enterprises expropriation by private block shareholders is greater than that by state block shareholders furthermore increase in expropriation is negatively related to performance change the results suggest that full privatization may not yield the expected efficiency gains in transition economies with weak legal system they also emphasize the importance of preventing private block shareholders from exploiting minority shareholders in the process of full privatization

recent developments in the theory of rules versus discretion policymaker this perspective on rules versus discretion was changed by kydland and prescott 1977 who looked at rules as a form of commitment a commitment amounts to a binding contract which specifies in advance the actions that someone will take possibly contingent on some exogenous variables that everyone can observe in contrast under discretion a person promises only to take those future actions that will best further his objectives later on such promises are easy to keep thus discretion is the special case of a rule or contract in which none of today s provisions restrict a person s future actions in the area of private business dealings it is natural to think about optimal forms of contracts which would not usually be pure discretion similarly for public policy the perspective becomes the optimal form of rules or prior restrictions even the smart benevolent policymaker is likely to desire and use

reputation in a model of monetary policy with incomplete information abstract previous models of rules versus discretion are extended to include uncertainty about the policymaker s type when people observe low inflation they raise the possibility that the policymaker is committed to low inflation type 1 this enhancement of reputation gives the uncommitted policymaker type 2 an incentive to masquerade as the committed type in the equilibrium the policymaker of type 1 delivers surprisingly low inflation with corresponding costs to the economy over an extended interval the type 2 person mimics this outcome for awhile but shifts eventually to high inflation this high inflation is surprising initially but subsequently becomes anticipated

transactions technology and the time consistency of optimal policy abstract in a perfect foresight continuous time model of the macro economy turnovsky and brock 1980 have demonstrated that the government s choice of an optimal policy will be time inconsistent only if it is bound by a k rule regarding the growth of nominal monetary balances this result is shown to be invalid when bonds bear a liquidity yield under such circumstances it is shown that all optimal policies are time inconsistent the conclusion is that the liquidity properties of the government s financing instruments play an important role in determining the consistency properties of its optimal policies

exchange rate management and macroeconomic policy a national perspective this paper reviews the literature on alternative exchange rate arrangements for a small economy it discusses exchange rate management for short run stabilization purposes and the choice of exchange rate regimes to foster policy discipline recent research has emphasized that the appropriate degree of exchange rate flexibility depends on the nature of disturbances exchange rate movements provide information about shocks and can serve as a basis for intervention rules empirically operational guidelines have not yet been provided floating rates are said to be desirable because they allow policy makers greater autonomy recent research has questioned the implicit assumption that autonomy is always useful rules that prevent discretionary policy may be preferable what role if any the exchange rate should play in such rules has not yet been resolved

the credibility of monetary reform new evidence the history of monetary policy is characterised by crisis and reform the paper is dedicated to an explanation of what makes monetary reforms successful a cross sectional econometric analysis is chosen to deal with this problem it is based on a standard macroeconomic model of commitment and credibility as the dependent variable we calculate a post reform inflation rate the exogenous variables are the degree of legal commitment the constraining influence of institutions and a new variable for ex ante credibility of the reform the paper allows for the conclusion that monetary commitment the consideration of institutional constraints and abstinence from the money press are crucial for the success of a monetary reform

leaving emu a real options perspective we examine the real option implicit in a country s decision of whether to leave an existing monetary union when there is uncertainty over the future benefits of this move our theoretical model is calibrated for the current euro 12 area by proxying policymakers inflation preferences with unemployment rates and debt to gdp ratios we observe a robust group of countries that would choose to remain within emu consisting of belgium finland greece and italy france and spain loosely also belong to this core only luxembourg would robustly want to leave emu ireland and the netherlands however complement that core closely

a duopoly theory of government money production the 1930s and 1940s abstract during the 1930s and 1940s the treasury and fed possessed significant monetary powers to explain the interaction of these agencies during this period i develop a theory of money production which assumes each party is interested in increasing the seigniorage associated with their production the theory implies that the two agencies will engage in specific forms of cooperation an examination of monetary policy procedures in the 1930s and 1940s indicates that the cooperation view of the fed and treasury relationship has more explanatory power than traditional views

jobs off the farm wealth human capital and social group in rural eastern india abstractthis study examines the effects of wealth human capital and social group on the occupational choice and income of farm households to gain an understanding of the mechanism underlying the

price and productivity change following deregulation the u s experience no real world market is likely to be perfectly contestable anymore than it is to be perfectly competitive yet like its predecessor the contestability benchmark proves highly useful as a framework for evaluating policies and outcomes under the contestability framework entry and price regulation is deemed inappropriate in industries which do not have system wide natural monopoly characteristics on this criterion brokerage airline trucking long distance telephone and terminal equipment should not be regulated true these industries may be characterised by some elements of scale economy such as economies of vehicle size so that at some level city pair routes only a few firms may serve but industry performance need not suffer in such an unregulated environment impediments to entry and exit not concentration or scale of operations may be the primary source of prices that are not welfare optimal even in the presence of natural monopoly characteristics it is important to isolate those markets which are not yet structurally competitive as in the case of coal shipments over which the railroads are judged to possess market dominance or in local telephone service it can be argued that the latter should continue to be overseen by regulators while markets which are controlled by competitive forces deriving from actual or potential competition or taking other indirect but effective forms should be free from traditional regulation thus unlike privatisation policy in the united kingdom described in the companion article by kay and thompson i985 us deregulatory policy can be construed as having a coherent rationale the nature and extent of deregulation match remarkably well with the policy prescription of the theory this paper analyses the consequences that have emerged under deregulation in terms of the following behavioural properties predicted by multi product competition and contestability theory a variety of products will emerge each of which will yield zero economic profit the revenues from any subset of the products must exceed the incremental costs of those products so that no cross subsidy can exist prices for each product will equal or exceed marginal costs and an equilibrium market structure will minimise costs for the industry see baumol

social capital as obstacle to development brokering land norms and trust in rural india summary based on a study of how rural land brokers mediate the arrival of a special economic zone in rural rajasthan this paper argues that theories of collective social capital cannot explain how networks norms and trust interact in a process of economic change it then reconstructs bourdieu s distinct theory of individual social capital by showing how better connected farmers are able to broker land and capture profits at the expense of fellow villagers undermining trust norms and collective action it argues that social capital is most plausibly seen as an aspect of social inequality that hinders inclusive development

monetary financial and fiscal stability in the east african community ready for a monetary union we examine prospects for a monetary union in the east african community eac by developing a stylised model of policymakers decision problem that allows for uncertain benefits derived from monetary financial and fiscal stability and then calibrating the model for the eac for the period 2003 10 when policymakers properly allow for uncertainty none of the countries wants to pursue a monetary union based on either monetary or financial stability grounds and only rwanda might favour it on fiscal stability grounds we argue that robust institutional arrangements assuring substantial improvements in monetary financial and fiscal stability are needed to compensate

seigniorage inflation and reputation abstract this paper derives a reputational equilibrium for inflation in a model in which the sovereign obtains valuable seigniorage by issuing fiat money in exchange for real resources with contemporaneous perception of actual sovereign behavior and immediate adjustment of real cash balances to new information the friedman elasticity solution for maximal seigniorage is a reputational equilibrium more generally the objective of maximal seigniorage produces an equilibrium inflation rate equal either to a generalization of the friedman elasticity solution or to the rate at which the sovereign discounts future seigniorage adjusted for the growth rate whichever is larger the model formalizes the conjecture that inflation rates in excess of the friedman solution are attributable to high discount rates for future seigniorage

privatization not the only answer abstract governments in many developing countries created state owned enterprises soes to produce goods or provide services the private sector seemed unwilling or unable to offer in many cases soes have turned out to be problem children at best inefficient and at worst unable to fulfill their original functions now the recommended solution to the problem of state owned enterprises is privatization but privatization is no more a solution to the problems of soes than soes were a solution to the problems they were created to solve the problem of soes is not ownership but rather a lack of explicit goals and objectives and an absence of organization cultures and systems that support and encourage fulfillment of those goals and objectives in some circumstances privatization may aid in fulfillment of an enterprise s goals and objectives because of the culture and systems it fosters in other cases not

the price of government ownership a study of the domtar takeover abstract this paper presents an analysis of how government ownership of an enterprise may affect its profitability in august 1981 two quebec crown corporations announced that they had gained control of domtar a private canadian corporation upon receipt of this information the stock s market value dropped significantly over six trading days domtar s shareholders suffered cumulative abnormal returns of minus 25 percent which is equivalent to a reduction in market value of approximately 150 million much of this loss can be attributed to government control and the anticipated pursuit of non profit objectives

fiscal inconsistencies and high inflation abstract this paper presents a simple model of steady state inflationary financing the discrepancy between the target level of spending and a fixed taxing capacity indicates the degree of fiscal pressures this variable need not be monotonically related to the measured deficit since actual expenditures are endogenous large fiscal inconsistencies generate unique steady states located on the bad side of the inflation tax laffer curve there high inflation may coexist with low observed deficits and the revenue constraint results in repressed spending such situations correspond qualitatively with the loss of control over fiscal policies typical of high inflation economies

immigration and inequality immigration is often viewed as a proximate cause of the rising wage gap between highand low skilled workers nevertheless there is controversy over the appropriate theoretical and empirical framework for measuring the presumed effect and over the precise magnitudes involved this paper offers an overview and synthesis of existing knowledge on the relationship between immigration and inequality focusing on evidence from cross city comparisons in the u s while some researchers have claimed that a cross city research design is inherently flawed i argue that the evidence from cross city comparisons is remarkably consistent with recent findings based on aggregate time series data in particular cross city and aggregate time series comparisons provide support for three key conclusions 1 workers with below high school education are perfect substitutes for those with a high school education 2 high school equivalent and college equivalent workers are imperfect substitutes with an elasticity of substitution on the order of 2 3 within education groups immigrants and natives are imperfect substitutes together these results imply that the average impacts of recent immigrant inflows on the relative wages of u s natives are small the effects on overall wage inequality including natives and immigrants are larger reflecting the concentration of immigrants in the tails of the skill distribution and higher residual inequality among immigrants than natives even so immigration accounts for a small share 5 of the increase in u s wage inequality between 1980 and 2000

the relative efficiency of public and private firms in a regulated environment the case of u s electric utilities abstract the relative efficiency of privately owned and publicly owned electric utilities is investigated using theoretical and econometric models that allow for the effects of both ownership type and regulation the estimation results indicate that the two types of firms are equally cost inefficient in the united states the average effect of inefficiency is to increase the cost of production by 2 4 percent holding output constant inefficiency increases the average quantities demanded of capital and labor and decreases the average quantity demanded of fuel